Hillside Associates of Hollis, Inc. v. Maine Bonding & Cas. Co., 91-165

• Decision Date: 13 March 1992
• Docket Number: No. 91-165,91-165
• Citation: 135 N.H. 325,605 A.2d 1026
• Parties: HILLSIDE ASSOCIATES OF HOLLIS, INC., and another, v. MAINE BONDING & CASUALTY COMPANY.
• Court: New Hampshire Supreme Court

Page 1026

605 A.2d 1026

135 N.H. 325

HILLSIDE ASSOCIATES OF HOLLIS, INC., and another, v. MAINE BONDING & CASUALTY COMPANY.

No. 91-165.

Supreme Court of New Hampshire.

March 13, 1992.

As Modified on Denial of Rehearing

April 27, 1992.

Bouchard & Mallory, P.A., Manchester (Kenneth G. Bouchard, on the brief and orally), for plaintiff-intervenor New Hampshire Ins. Co.

Ouellette, Hallisey, Dibble & Tanguay, P.A., Dover (Stephen H. Roberts, on the brief and orally), for plaintiff-intervenor Raymond C. Brophy.

Upton, Sanders & Smith, Concord (Russell F. Hilliard and Gilbert Upton, on the brief, and Russell F. Hilliard, orally), for the defendant, Maine Bonding & Cas. Co., and for defendant-intervenor Reuben N. Hodge Ins. Agency.

BROCK, Chief Justice.

The defendant, Maine Bonding & Casualty Company (Maine Bonding), and the defendant-intervenor, Reuben N. Hodge Insurance Agency (Hodge Insurance), appeal the decision of the Superior Court (Temple, J.) finding the plaintiffs, Hillside associates of Hollis, Inc. (Hillside) and LandTree, Inc. (LandTree), and plaintiff-intervenor, Raymond C. Brophy, entitled to coverage under an insurance policy allegedly issued by Maine Bonding. Brophy cross-appeals on the issue of attorney's fees. Based on our finding of mutual mistake, we reverse the trial court's order granting coverage and affirm its decision not to award attorney's fees.

The facts of this case are as follows. Brophy hired Hillside as a general contractor to oversee demolition, repair, and construction of a boathouse on Brophy's Tuftonboro property. Hillside and LandTree are related companies, and we will hereinafter refer to them collectively as "Hillside." At all times relevant to this case, Hodge Insurance served as Hillside's insurance agent. Its manager, William Lamper, took responsibility for procuring insurance coverage for Hillside and for Brophy, who wished to be named as an additional insured on all of Hillside's insurance policies pertaining to the construction project.

In early 1986, Hillside held an insurance policy with Aetna Casualty & Surety (Aetna) covering the Brophy job until February 4, 1986. Sometime before the expiration date, Hillside asked Lamper to extend coverage until March 31, 1986, in order to synchronize Hillside's insurance policies with its fiscal year. Lamper did as he was asked, and Aetna issued an insurance policy in the amount of $500,000, covering the period February 4, 1986, to March 31, 1986, with Brophy listed as an additional insured.

Aetna then told Lamper that it would not reinsure Hillside after March 31, 1986. Lamper conveyed this information to Hillside and said that, effective April 1, 1986, it would be covered by an insurance policy issued by Maine Bonding. One of the parties' pre-trial stipulations reads: "[Hillside] expected to have [its] companies insured to the extent of $500,000.00, on April 1, 1986, and the identity of the carrier providing that coverage did not matter...."

On April 1, Aetna told Lamper that it would extend the Hillside policies until April 15 at no charge. The next day, Lamper wrote a certificate of insurance for Brophy, indicating that Maine Bonding had issued Hillside an insurance policy for the Brophy job in the amount of $500,000, effective March 31. On April 4, an employee of one of Hillside's contractors was severely injured while working on the boathouse. (The employee is not a party to this lawsuit.) Unaware of the accident, Lamper telephoned Brophy's office the same day and left a message that Hillside's insurance carrier had been changed to Maine Bonding, effective March 31, but that its insurance coverages and limits would remain the same. That evening, Lamper learned of the calamity.

Brophy received Lamper's April 2 certificate on April 7. The parties have stipulated that "Brophy expected to have liability coverage in the amount of $500,000 effective April 1, 1986, and the identity of the carrier was not material." Three days later, on April 10, Lamper wrote two additional certificates for Brophy, indicating that Aetna covered Hillside from February 4, 1986, until April 15, 1986, and that Maine Bonding's coverage became effective on April 15, 1986. Also on April 10, Lamper formally requested Maine Bonding, through a written application, to insure Hillside for the Brophy construction job. Coverage was requested in the amount of $500,000, effective April 15, 1986, until April 15, 1987. Maine Bonding later approved the application as written.

Two years afterward, on June 22, 1988, Lamper produced the April 2, 1986 certificate and the two April 10, 1986 certificates at the request of the injured employee's attorney. Lamper explained that the April 2 certificate, listing Maine Bonding as the insurer as of March 31, 1986, "was done in error." Lamper died a few months later. One of his co-workers at Hodge Insurance, Rita Buker, testified at a deposition that she assumed Lamper acted as he did "[b]ecause he was human and he made a mistake." She also denounced Brophy's attorney's suggestion that Lamper tried to cancel coverage after the accident took place.

Hillside then instituted this declaratory judgment action, and the parties submitted their cases on the record, which consisted of several factual stipulations, exhibits, and depositions. The trial court rejected Maine Bonding's argument that Lamper made a mistake, stating: "The court finds no merit or credibility in defendant's contention that Lamper merely made an 'error' three times...." Finding that Lamper possessed ample authority to bind Maine Bonding to an insurance contract, and that an oral contract was indeed consummated, the court ruled in favor of Hillside on the issue of coverage, but denied its request for attorney's fees. Aetna has conceded an obligation to provide coverage for the April 4, 1986, accident, and thus the lower court's order in effect entitles Hillside to $1,000,000 worth of coverage. The injured employee's lawsuit was settled for an amount greater than $500,000.

On appeal, Maine Bonding and Hodge Insurance first argue that RSA 491:22-a, placing the burden of proof on the insurance carrier in a declaratory judgment action, does not apply to this case, and that therefore Brophy and New Hampshire Insurance Company (NH Insurance), plaintiff-intervenors in this case, must carry the burden of proof. (NH Insurance issued Brophy a homeowner's policy for the period relevant to this lawsuit; its liability apparently depends in part on our decision today.) Second, Maine Bonding and Hodge Insurance contend that no oral insurance contract was formed between the construction companies and Maine Bonding, and that the trial court in essence allowed a reformation of the written insurance contract. Third, Maine Bonding and Hodge Insurance maintain that even if an oral insurance contract does exist, it should be rescinded on the basis of either mutual mistake or unilateral mistake.

Brophy and NH Insurance disagree with each of Maine Bonding and Hodge Insurance's contentions, and, in addition, argue that Maine Bonding and Hodge Insurance failed to properly raise the issue of burden of proof either below or in their notice of appeal; NH Insurance makes the same argument with regard to the issues of mistake. Brophy also asserts that he is entitled to attorney's fees.

We will focus our discussion on the issue of mutual mistake, and base our decision on its resolution. Maine Bonding and Hodge Insurance have the burden of proof on this issue; even assuming they are correct in their contention that RSA 491:22-a does not apply here, they still bear the burden of proving their defense of mutual mistake. See 13 W. Jaeger, Williston on Contracts § 1597, at 595 (3d ed. 1970) (person asserting mutual mistake bears the burden of proof). Because our decision on the issue of mutual mistake is dispositive of this case, we do not address the issues of contract formation, unilateral mistake, and attorney's fees.

Two preliminary issues, however, must be dealt with. First, NH Insurance contended in oral argument that the issue of mutual mistake is not properly before us. In support of this assertion, NH Insurance pointed to a paragraph in Hodge Insurance's pre-trial reply memorandum, stating that the issue of mutual mistake is a "straw man" which the other parties set up only to knock down. The memorandum does not delve into the doctrine of mutual mistake, or argue its application, but simply states: "There being no contract created by the certificate, there is nothing to rescind."

As NH Insurance observed, this paragraph is the only pre-trial treatment Hodge Insurance gave to the issue of mutual mistake. However, Hodge Insurance adequately argued the issue in its motion for reconsideration, and Maine Bonding asserted mutual mistake in its pre-trial memorandum. More importantly, the trial court acknowledged that mutual mistake was an issue before the court, and addressed it in its ruling. We therefore conclude that this issue was properly raised below. Cf. State v. Stratton, 132 N.H. 451, 456, 567 A.2d 986, 989 (1989) ("grounds of objection not brought to the attention of the trial court will not be considered for appellate relief").

NH Insurance also maintains that a question pertaining to mutual mistake was not set forth in Maine Bonding and Hodge Insurance's notice of appeal, and that therefore these parties are prohibited from arguing the issue before this...