Katze v. Randolph & Scott Mut. Fire Ins. Co.

Decision Date04 January 1984
Docket NumberNo. 81-1073,81-1073
Citation116 Wis.2d 206,341 N.W.2d 689
PartiesHarry KATZE, Plaintiff-Appellant, v. RANDOLPH & SCOTT MUTUAL FIRE INSURANCE COMPANY, a/k/a Randolph-Scott-Westford Insurance Company, Defendant-Respondent-Petitioner.
CourtWisconsin Supreme Court

Clyde C. Cross, Baraboo (argued), for defendant-respondent-petitioner; Cross, Mercer & Maffei, Baraboo, on brief.

John R. Miller, Portage (argued), for plaintiff-appellant; Miller & Miller, Portage, on brief.

Arnold P. Anderson and Carroll, Parroni, Postlewaite, Anderson & Graham, S.C., Eau Claire, for the Wis. Ass'n of Town Mut. Ins. Companies amicus curiae.

STEINMETZ, Justice.

The issues in this case are whether the transaction of sale of cattle by an insured to a person purchasing them under a fraudulent scheme is a theft under this insurance policy and whether it is a direct loss of the cattle.

The plaintiff, Harry Katze, started suit in Columbia county circuit court, the Honorable Howard Latton, to recover under the theft provisions of defendant's, Randolph & Scott Mutual Fire Insurance Company, insurance policy. The case was submitted to a jury which made findings favorable to the plaintiff on the insurance coverage issues. On motions after verdict, the trial judge granted defendant's motions and judgment was entered dismissing plaintiff's complaint. The court of appeals reversed and remanded the case for entry of judgment for $18,000 for the plaintiff.

Harry Katze is a farmer in Cambria, Wisconsin. He is in the business of farming and buying and selling cattle. All cattle located on his farm are brought there with the intention of being sold as part of the operation. How long he keeps a particular cow depends on market conditions; it may be part of a day or several months. In his farming operation, he keeps an average of 30 cows on his farm and has an average turnover of 1,100 head of cattle a year. While the cattle are on his farm, they are pastured in his fields, milked and housed in his barn, fed with crops raised in his fields and cared for by Katze and his son.

In late September, 1978, Philip Laeseke made arrangements with Katze to purchase 50 head of cattle. All of these cattle were handled through Katze's farm and were owned by him when delivered. Laeseke told Katze he would be paid when the cattle were delivered. Six were delivered to a farm in Dane county, the rest were delivered to two farms in Juneau county. When the final delivery of those 50 head was completed, Laeseke was not present. The next day Laeseke called Katze and arranged to purchase additional cattle. Katze stated he would have to be paid for the cattle already delivered before any additional cattle were purchased. Laeseke paid by check for the 50 head already delivered and for the additional 22 cattle he was ordering. The 22 head were delivered to one of the two Juneau county farms. Another load of 12 head was subsequently delivered but those cattle were all recovered and are not a part of this lawsuit. After all the deliveries had been completed, Katze was notified by his bank that the check Laeseke had issued was an insufficient funds check (NSF). Katze recovered 21 head of cattle out of the total of 84 delivered.

It was subsequently determined that Laeseke had obtained the cattle with the sole design of defrauding Katze. His intent was to promptly sell the cattle and use the proceeds to pay off creditors who were "on his back in Dane County." Laeseke never intended to pay for any of the cattle. Laeseke was subsequently prosecuted for issuing a worthless check under sec. 943.24, Stats. 1

The jury held the actions of Laeseke in obtaining the cattle constituted "theft" under the terms of the insurance policy. The trial court on motions after verdict ruled that the meaning of the policy as to theft coverage was an issue of law and that the facts of this fraudulent scheme did not constitute theft under the policy coverage. The court of appeals, in Katze v. Randolph & Scott Mut. Fire Ins., 111 Wis.2d 326, 330 N.W.2d 232 (Ct.App.1983), disagreed and reversed.

In the policy, the dairy cows were valued at $600 a head and 30 cows were covered for a total exposure of $18,000, if the loss of the cows is covered under the policy.

The word "theft" is defined in the policy in paragraph 9 of the "Perils Insured Against" section as:

"Theft, meaning any act of stealing or attempt thereat and, as to Coverage C (on premises), including theft of property covered from within any bank, trust or safe deposit company, public warehouse or occupied dwelling not owned or occupied by or rented to an Insured, in which the property covered has been placed for safekeeping.

"Upon knowledge of loss under this peril or of an occurrence which may give rise to a claim for such loss, the insured shall give notice as soon as practicable to this Company or any of its authorized agents and also to the police.

"General exclusions to theft: This policy does not apply as respects this peril to loss (a) if committed by an Insured; (b) in or to a building, materials or supplies therefor; (c) by inventory shortages; (d) by wrongful conversion and embezzlement; (e) by escape; or (f) by mysterious disappearance."

"Theft" generally is a broad term that includes a variety of wrongful acts aimed at depriving a person of his property. In this case, a fraudulent scheme was involved. The wrongful act by Laeseke was for the purpose of depriving Katze of his cows. Therefore, the policy provisions must be considered to determine the use of the word "theft." The company defined "theft" in the policy provisions broadly as "any act of stealing" and then set forth exclusions to the meaning of "theft." The exclusions from "theft" are acts:

(1) committed by an insured,

(2) in or to a building, materials or supplies, therefor,

(3) by inventory shortages,

(4) by wrongful conversion and embezzlement,

(5) by escape,

(6) by mysterious disappearance.

As the term "theft" is used in the policy, it has an ambiguous meaning. It is defined as any act of stealing; however, that does not eliminate ambiguity, but rather adds to it. This court has held theft to be coextensive in meaning with larceny. Heinen v. Home Mut. Casualty Co., 5 Wis.2d 282, 288, 92 N.W.2d 836 (1958). Some dictionaries hold stealing as a synonym of theft. With no further definition in the policy, "theft" is an ambiguous word.

The meaning of the word "theft" in the policy creates an issue of law for the court. In Bauman v. Midland Union Ins. Co., 261 Wis. 449, 451, 53 N.W.2d 529 (1952), we held as follows: "The general rule is that the construction of words and clauses used in an insurance policy, where such construction does not depend upon extrinsic facts, presents a question of law for the court to decide, and is not for the jury." In Bauman, "No extrinsic evidence was offered as to what the parties to the two insurance policies, upon which plaintiffs grounded their action, intended by use of the word 'explosion' ...." Id. at 452, 53 N.W.2d 529. Similarly, in the instant case no extrinsic evidence was offered as to the meaning of the word "theft" or "stealing" and as in Bauman, if such evidence were offered, it is doubtful whether it would have been admissible.

We have held consistently since Bauman that the construction of the words and clauses in an insurance policy is a question of law for the court. Westerman v. Richardson, 43 Wis.2d 587, 591, 168 N.W.2d 951 (1969); Rabinovitz v. Travelers Ins. Co., 11 Wis.2d 545, 549, 105 N.W.2d 807 (1960). For an early history of this rule, see Thurston v. Burnett & Beaver Dam Farmers' Mutual Fire Ins. Co., 98 Wis. 476, 478, 74 N.W. 131 (1898); Ganson v. Madigan, 15 Wis. 158 (*144) (1862).

The court of appeals identified this insurance policy as a contract of adhesion. We disavow that categorization of the policy. This court has not labeled insurance policies as contracts of adhesion which have been defined as form contracts submitted on a "take it or leave it" basis. For a general discussion of adhesion contracts, see 6A Corbin on Contracts, sec. 1446 at 490 (1962); Ehrenzweig, Adhesion Contracts in the Conflicts of Laws, 53 Colum.L.Rev. 1072 (1953). Although adhesion contracts are generally standard form contracts, the two should be distinguished. Not all standard form contracts are contracts of adhesion, since in some cases the parties may add special clauses or alter the form. See Wilson, Freedom of Contract and Adhesion Contracts, 14 International and Comparative L.U. 172 (1965).

An adhesion contract is based on inequity of bargaining between two parties and greater use of the modern commercial contracts. A buyer may, in effect, have no choice but to accept the contract if the organization offering the contract has little or no competition, or the buyer does not have an opportunity for comparative shopping. See Anderson, Life Insurance Conditional Receipts and Judicial Intervention, 63 Marq.L.Rev. 593, 602 (1980).

The rules of insurance policy interpretation have developed gradually and when necessary for law development. To sweep out in a single labeling of adhesion contract the well-established case law used in the interpretation of insurance contracts would not be of service to the public. We do not superimpose the case law of other jurisdictions regarding contracts of adhesion on this insurance policy. There are sufficient rules of interpretation of the policy and its...

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