Federated Mut. Ins. Co. v. Anderson

• Decision Date: 09 August 1996
• Docket Number: No. 95-569,95-569
• Citation: 277 Mont. 134,920 P.2d 97
• Parties: FEDERATED MUTUAL INSURANCE COMPANY, Plaintiff, v. Brent ANDERSON, d/b/a Conifer Logging, Defendant, Third-Party Plaintiff, and Respondent, v. JONES EQUIPMENT, INC., Third-Party Defendant, and John Deere Insurance Company, Third-Party Defendant and Appellant.
• Court: Montana Supreme Court

Page 97

920 P.2d 97

277 Mont. 134

FEDERATED MUTUAL INSURANCE COMPANY, Plaintiff, v. Brent ANDERSON, d/b/a Conifer Logging, Defendant, Third-Party Plaintiff, and Respondent, v. JONES EQUIPMENT, INC., Third-Party Defendant, and John Deere Insurance Company, Third-Party Defendant and Appellant.

No. 95-569.

Supreme Court of Montana.

Submitted on Briefs April 11, 1996.

Decided July 12, 1996.

Rehearing Denied Aug. 9, 1996.

Robert J. Phillips and Tammy Wyatt-Shaw, Phillips & Bohyer, Missoula, for Appellant.

Michael G. Alterowitz and Larry Howell, Connell, Beers & Alterowitz, Missoula, for Respondent.

TRIEWEILER, Justice.

Federated Mutual Insurance Company filed a complaint in the District Court for the Fourth Judicial District in Missoula County in which it sought to recover from Conifer Logging, Inc., amounts Federated had paid to its insured, Jones Equipment, Inc., for the The issue on appeal is whether the District Court correctly concluded that the newly acquired property provision in Conifer Logging's insurance policy with John Deere Insurance Company covered logging equipment which was destroyed by fire on July 17, 1991, while in Conifer's possession.

loss of logging equipment Jones had leased to Conifer. Conifer filed a third-party complaint against John Deere Insurance Company in which it sought indemnity for any amounts which it might owe Federated. John Deere moved the District Court for summary judgment. Conifer filed a cross-motion for summary judgment. After hearing oral arguments, the District Court entered an opinion and order in which it denied John Deere's motion for summary judgment and granted Conifer's cross-motion for summary judgment. John Deere appeals the District Court's order. We affirm the District Court and impose Rule 32 sanctions on John Deere for filing a frivolous appeal.

FACTUAL BACKGROUND

On May 29, 1991, Conifer Logging agreed to lease a 1987 Timberjack feller buncher from Jones Equipment Company. The feller buncher, which is a vehicle that cuts and stacks standing timber, was worth $130,000. The term of the lease was one to six months with an option to purchase the equipment. Before the lease began, Conifer was entitled to a free, one-week trial period without obligation or risk. The one-week trial period was reflected in the original option to purchase, which stated that although delivery was scheduled for June 10, the first rental payment was not due until June 17 and the six-month term of the lease did not expire until six months and one week after delivery on December 17, 1991.

Jones was unable to deliver the feller buncher to Conifer's logging site on June 10, and delayed delivery until June 17. As a result, Jones prepared a revised lease agreement and option to purchase and drafted an equipment rental agreement. The revised documents reflected the fact that Conifer was entitled to a one-week free trial period and stated that the delivery date was June 17, the first payment was due on June 24, and the option had to be exercised or the feller buncher returned to Jones by December 24, 1991.

During the one-week free trial period Conifer had no contractual obligations regarding the feller buncher, and did not assume the risk of loss. Jones was liable for any damage to the equipment during that period. Once the lease commenced, however, Conifer became responsible for any damage to the feller buncher and was obligated to provide insurance coverage for it. The lease commenced on June 24, 1991, when Conifer kept the feller buncher and made its first lease payment.

In June and early July 1991, Conifer discovered serious problems with the feller buncher and decided to terminate the lease. On July 16, 1991, Conifer contacted an equipment hauler to have the feller buncher shipped back to Jones. On July 17, 1991, however, the feller buncher caught on fire and was destroyed on Conifer's logging site. Conifer notified John Deere Insurance Company of the loss on July 18, 1991.

At the time of the lease, Conifer's logging equipment was insured by John Deere Insurance Company pursuant to the terms of a "contractor's inland marine policy." That policy included a "newly acquired property" provision which provided automatic coverage for any similar property acquired by Conifer during the term of its policy provided that Conifer reported the acquisition of such property and paid an additional premium on the property within thirty days from the date on which the property was acquired.

After the destruction of the feller buncher, Federated Mutual Insurance Company paid Jones Equipment for the loss and then sued Conifer Logging for indemnification. In turn, Conifer filed a third-party complaint against John Deere Insurance Company in which it alleged that the feller buncher was insured pursuant to its policy with John Deere. Conifer maintained that pursuant to the newly acquired property provision in that policy John Deere was required to indemnify Conifer for the full amount of any judgment recovered by Federated.

John Deere moved for summary judgment on January 31, 1995. In support of its motion, it maintained that the feller buncher was never insured by John Deere because the loss occurred before Conifer had notified John Deere of its acquisition of the property and after the thirty-day notice requirement of the "newly acquired property" provision had expired. Conifer filed a cross-motion for summary judgment in which it asserted three grounds for coverage First, Conifer maintained that using the usual methods of computation of time, the thirty-day grace period began on June 18, the day after Conifer's receipt of the equipment, and that therefore the fire on July 17 occurred within the thirty-day automatic coverage period. Second, Conifer maintained that because it had a one-week free trial period without obligation or risk, Conifer did not "acquire" the feller buncher pursuant to the newly acquired property clause until June 24, 1991, and its loss on July 17, 1991, was well within the thirty-day period for automatic coverage. Finally, Conifer maintained that John Deere's inconsistent interpretation of the language of its own newly acquired property clause established the provisions' ambiguity and required the court to interpret the clause in favor of coverage as a matter of law.

On May 30, 1995, the Fourth Judicial District Court issued an opinion and order. In its order, the court denied John Deere's motion for summary judgment and granted Conifer's cross-motion for summary judgment. The court concluded that the feller buncher "was covered by [John] Deere's policy under each of Conifer's theories."

I.

Subsequent to appeal, Conifer Logging filed with this Court a motion to strike a portion of John Deere's reply brief which Conifer maintains is objectionable because "it refers to alleged evidence that is not part of the record, and also contradicts John Deere's previous 'judicial admission' on a key fact." It is well-established that this Court will not consider any evidence not contained in the record on appeal. Johnson v. Killingsworth (1995), 271 Mont. 1, 3, 894 P.2d 272, 273. Because we hold that the objectionable passage is purely speculative and is not supported by the record, Conifer's motion is granted and that portion of John Deere's brief is stricken.

II.

Did the District Court correctly conclude that the newly acquired property provision of Conifer Logging's insurance policy with John Deere Insurance Company covered logging equipment which was destroyed by fire on July 17, 1991, while in Conifer's possession?

This Court reviews a district court's order of summary judgment pursuant to Rule 56, M.R.Civ.P., based on the same criteria applied by the district court. Brinkman & Lenon v. P & D Land Enter. (1994), 263 Mont. 238, 241, 867 P.2d 1112, 1114. We will uphold the court's grant of summary judgment if there is no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law. Rule 56(c), M.R.Civ.P.; State Farm Fire & Casualty Co. v. Powell (1995), 275 Mont. 92, 95, 906 P.2d 198, 200.

On appeal, John Deere maintains that it had not provided insurance coverage for the feller buncher pursuant to the newly acquired property provision of its insurance policy with Conifer because the loss occurred before Conifer notified John Deere of its acquisition of the feller buncher and after the thirty-day notice provision of the newly acquired property provision of that policy had expired. The newly acquired property provision of Conifer's policy with John Deere provides:

If the insured acquires during the term of this policy other similar property the provisions of this policy shall apply thereto for the actual cash value of other similar property not exceeding 25% of the aggregate amount of the schedule, PROVIDED the insured reports such additional similar property within 30 days from the date acquired and pays additional premium thereon from the date acquired.

Conifer took possession of the feller buncher pursuant to the terms of its lease with Jones Equipment Company on June 17, 1991. At that time, Conifer was entitled to a free, one-week trial period without obligation or risk. The trial period was reflected in both the original and revised lease agreement and option to purchase documents and in the equipment rental agreement executed by Jones Equipment. Those documents provided that the first lease payment was not due until seven days after delivery of the machine and that the six-month term of the lease did not expire until six months and one week after delivery.

In an affidavit submitted by William Jones, president of Jones Equipment, Jones stated that during the one-week free trial period Conifer had no contractual obligations regarding the feller buncher, that Conifer did not assume risk of loss until after that trial period, and that Jones was liable for any damage to the equipment during that period.

Furthermore, although ...