C & J Fertilizer, Inc. v. Allied Mut. Ins. Co.

• Decision Date: 19 March 1975
• Docket Number: No. 2--56355,2--56355
• Citation: 227 N.W.2d 169
• Parties: C & J FERTILIZER, INC., Appellant, v. ALLIED MUTUAL INSURANCE COMPANY, Appellee.
• Court: Iowa Supreme Court

Page 169

227 N.W.2d 169

86 A.L.R.3d 839

C & J FERTILIZER, INC., Appellant, v. ALLIED MUTUAL INSURANCE COMPANY, Appellee.

No. 2--56355.

Supreme Court of Iowa.

March 19, 1975.

Rehearing Denied May 16, 1975.

Livingston, Day, Kehoe, Meeker & Bates, Washington, for appellant.

Bradshaw, Fowler, Proctor & Fairgrave, Des Moines, for appellee.

Considered en banc.

REYNOLDSON, Justice.

This action to recover for burglary loss under two separate insurance policies was tried to the court, resulting in a finding plaintiff had failed to establish a burglary within the policy definitions. Plaintiff appeals from judgment entered for defendant. We reverse and remand.

Trial court made certain findings of fact in support of its conclusion reached. Plaintiff operated a fertilizer plant in Olds, Iowa. At time of loss, plaintiff was insured under policies issued by defendant and titled 'BROAD FORM STOREKEEPERS POLICY' and 'MERCANTILE BURGLARY AND ROBBERY POLICY.' Each policy defined 'burglary' as meaning,

'* * * the felonious abstraction of insured property (1) from within the premises by a person making felonious entry therein by actual force and violence, of which force and violence there are visible marks made by tools, explosives, electricity or chemicals upon, or physical damage to, the exterior of the premises at the place of such entry * * *.'

On Saturday, April 18, 1970, all exterior doors to the building were locked when plaintiff's employees left the premises at the end of the business day. The following day, Sunday, April 19, 1970, one of plaintiff's employees was at the plant and found all doors locked and secure. On Monday, April 20, 1970, when the employees reported for work, the exterior doors were locked, but the front office door was unlocked.

There were truck tire tread marks visible in the mud in the driveway leading to and from the plexiglas door entrance to the warehouse. It was demonstrated this door could be forced open without leaving visible marks or physical damage.

There were no visible marks on the exterior of the building made by tools, explosives, electricity or chemicals, and there was no physical damage to the exterior of the building to evidence felonious entry into the building by force and violence.

Chemicals had been stored in an interior room of the warehouse. The door to this room, which had been locked, was physically damaged and carried visible marks made by tools. Chemicals had been taken at a net loss to plaintiff in the sum of $9,582. Office and shop equipment valued at $400.30 was also taken from the building.

Trial court held that policy definition of 'burglary' was unambiguous, there was nothing in the record 'upon which to base a finding that the door to plaintiff's place of business was entered feloniously, by actual force and violence,' and, applying the policy language, found for defendant.

Certain other facts in the record were apparently deemed irrelevant by trial court because of its view the applicable law required it to enforce he policy provision. Because we conclude different rules of law apply, we also consider those facts.

The 'BROAD FORM STOREKEEPERS POLICY' was issued April 14, 1969; the 'MERCANTILE BURGLARY AND ROBBERY POLICY' on April 14, 1970. Those policies are in evidence. Prior policies apparently were first purchased in 1968. The agent, who had power to bind insurance coverage for defendant, was told plaintiff would be handling farm chemicals. After inspecting the building then used by plaintiff for storage he made certain suggestions regarding security. There ensued a conversation in which he pointed out there had to be visible evidence of burglary. There was no testimony by anyone that plaintiff was then or thereafter informed the policy to be delivered would define burglary to require 'visible marks made by tools, explosives, electricity or chemicals upon, or physical damage to, the exterior of the premises at the place of * * * entry.'

The import of this conversation with defendant's agent when the coverage was sold is best confirmed by the agent's complete and vocally-expressed surprise when defendant denied coverage. From what the agent saw (tire tracks and marks on the interior of the building) and his contacts with the investigating officers '* * * the thought didn't enter my mind that it wasn't covered * * *.' From the trial testimony it was obvious the only understanding was that there should be some hard evidence of a third-party burglary vis-a-vis an 'inside job.' The latter was in this instance effectively ruled out when the thief was required to break an interior door lock to gain access to the chemicals.

The agent testified the insurance was purchased and 'the policy was sent out afterwards.' The president of plaintiff corporation, a 37-year-old farmer with a high school education, looked at that portion of the policy setting out coverages, including coverage for burglary loss, the amounts of insurance, and the 'location and description.' He could not recall reading the fine print defining 'burglary' on page three of the policy.

Trial court's 'findings' must be examined in light of our applicable rules. Ordinarily in a law action tried to the court its findings of fact having adequate evidentiary support shall not be set aside unless induced by an erroneous view of the law. It follows, the rule does not preclude inquiry into the question whether, conceding the truth of a finding of fact, the trial court applied erroneous rules of law which materially affected the decision. Beneficial Finance Company of Waterloo v. Lamos, 179 N.W.2d 573, 578 (Iowa 1970) and citations.

Extrinsic evidence that throws light on the situation of the parties, the antecedent negotiations, the attendant circumstances and the objects they were thereby striving to attain is necessarily to be regarded as relevant to ascertain the actual significance and proper legal meaning of the agreement. Hamilton v. Wosepka, 261 Iowa 299, 306, 154 N.W.2d 164, 168 (1967); 3 Corbin on Contracts, 1971 pocket part § 543AA, pp. 91--95.

The question of Interpretation, i.e., the meaning to be given contractual words, is one to be determined by the court unless the interpretation depends on extrinsic evidence or on a choice among reasonable inferences to be drawn from extrinsic evidence. See Restatement (Second) of Contracts § 238, p. 543 (Student Ed., Tent. Drafts Nos. 1--7, 1973). Construction of a contract means determination of its legal operation--its effect upon the action of the courts. Porter v. Iowa Power and Light Company, 217 N.W.2d 221, 228 (Iowa 1974); Boyer v. Iowa High School Athletic Association, 260 Iowa 1061, 1069, 152 N.W.2d 293, 298 (1967); 3 Corbin on Contracts § 534, pp. 7--9; 4 Williston on Contracts § 602, p. 320. '(C)onstruction (of a contract) is always a matter of law for the court.' 3 Corbin on Contracts § 554, p. 227. '(C)ourts in construing and applying a standardized contract seek to effectuate the reasonable expectations of the average member of the public who accepts it.' Restatement (Second) of Contracts, supra, § 237, comment E, p. 540.

Trial court in the case Sub judice, concentrating on the policy 'definition' of burglary, limited its consideration of the facts to the issue whether there was evidence which satisfied that provision. Thus we find the language '* * * There was no physical damage to the exterior of the building to evidence felonious entry to the building By force and violence;' 'There is nothing in the record upon which to base a finding that the door to plaintiff's place of business was entered feloniously, By actual force and violence;' 'The evidence in this case is just as consistent with a theory that an employee entered the building with a key as it is to a theory that the building was entered By force and violence.' (Emphasis supplied.).

Trial court never made a finding there was or was not a burglary. We have noted its examination of the evidence was tailored to fit the policy 'definition' of burglary: "Burglary' means the felonious abstraction of insured property (1) from within the premises by a person making Felonious entry therein by actual force and violence, of which force and violence there are visible marks * * *.' (Emphasis supplied.).

Nor did trial court consider the evidence in light of the layman's concept of burglary (who might well consider a stealing intruder in his home or business premises as a burglar, whether or not the door was entered by force and violence) or the legal definition of burglary, hereinafter referred to. Trial court made no determination regarding burglary in those contexts.

Insofar as trial court was construing the policy--that being a matter of law for the court--we are not bound by its conclusions. See Farmers Insurance Group v. Merryweather, 214 N.W.2d 184, 187 (Iowa 1974); E. Patterson, The Interpretation and Construction of Contracts, 64 Colum.L.Rev. 833, 836--37 (1964). Neither are we bound by trial court's rule this case is controlled by the fineprint 'definition' of burglary, if that rule was erroneously applied below. Beneficial Finance Company of Waterloo v. Lamos, supra.

Trial court did find '(T)here does not appear to have been a discussion of the policy provisions between the parties at the time the policy was secured * * *.' That finding is well supported: there is no evidence plaintiff knew of the definition of burglary contained in the policy until after the event. But both parties agree there was conversation concerning the type of insurance and the property to be insured. While plaintiff's president's testimony is ambivalent as to whether it occurred before or after the predecessor policies were issued, the defendant's agent was clear the conversation occurred before any policies were delivered.

There is nothing about trial court's factual findings which precludes this court from construing said contract to arrive at a proper determination of its legal...