Katze v. Randolph & Scott Mut. Fire Ins. Co., 81-1073

• Decision Date: 19 January 1983
• Docket Number: No. 81-1073,81-1073
• Citation: 111 Wis.2d 326,330 N.W.2d 232
• Parties: Harry KATZE, Plaintiff-Appellant, v. RANDOLPH & SCOTT MUTUAL FIRE INSURANCE COMPANY, a/k/a Randolph-Scott-Westford Insurance Company, Defendant-Respondent.
• Court: Wisconsin Court of Appeals

Page 232

330 N.W.2d 232

111 Wis.2d 326

Harry KATZE, Plaintiff-Appellant, v. RANDOLPH & SCOTT MUTUAL FIRE INSURANCE COMPANY, a/k/a

Randolph-Scott-Westford Insurance Company,

Defendant-Respondent.

No. 81-1073.

Court of Appeals of Wisconsin.

Argued Jan. 8, 1982.

Opinion Released Jan. 19, 1983.

Opinion Filed Jan. 19, 1983.

Review Granted.

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

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

Before, GARTZKE, P.J., and BABLITCH and DYKMAN, JJ.

BABLITCH, Judge.

Harry Katze brought this action under the theft provisions of his farmowner's insurance policy to recover the value of cattle he sold in exchange for a worthless check. The action was tried to a jury, which rendered a verdict in his favor. Katze appeals from a judgment dismissing his complaint on post-trial motions notwithstanding the verdict. The trial court found, as a matter of law, that Katze suffered no loss by "theft" within the meaning of the policy. We reverse.

The material facts are not in dispute. Katze is a farmer whose primary occupation is buying and selling cattle. Since 1973 he has bought and sold an average of 1,100 cattle per year, at prices of between $450 and $800 per head, for an annual gross of $700-800,000.

His 180 acre farm is set up as a dairy operation. At any given time there may be anywhere from zero to sixty head of cattle on the farm, awaiting sale. These he feeds and cares for with farm crops and produce which he raises with the help of his son. The cows are milked and the milk is sold. An average of thirty cows are maintained on his premises. Since 1973 he has kept no cattle on his farm which were not held for sale to the public.

Since 1973 Katze has had a farmowner's insurance policy issued by the respondent. This policy was renewed in 1977 after discussions between Katze and one of respondent's agents. The agent testified that when he filled out the renewal application he was fully aware that Katze was using his farm for cattle dealing and that Katze had fully disclosed the nature of its operation. The agent said he "purposely" filled in the renewal application to indicate that Katze was a livestock dealer in response to the form question: "What business, if any, does the applicant conduct on the above premises other than farming?"

The agent testified that he and Katze specifically discussed coverage for the cattle. The agent was aware Katze wanted his cattle covered and had told Katze that they would be covered while they were on his land. The schedules of farm personal property attached to the application and to the policy each list thirty dairy cows, valued at a total of $18,000 ($600 per cow) as a part of the blanket coverage. This increased by $3,000 the value of the cows stated in Katze's former policy and resulted in a slight increase in his premium, which was charged at a rate of $2.80 per each one thousand dollars of covered property.

The policy insured against loss of covered property by "theft," which the policy defined as "any act of stealing." The policy excluded theft loss "(a) if committed by an insured; (b) in or to a building, material or supplies therefor; (c) by inventory shortages; (d) by wrongful conversion and embezzlement; (e) by escape; or (f) by mysterious disappearance." Covered property was specified as "farm personal property usual and incidental to the operation of a farm."

While the policy was in effect one Phillip Laeske contacted Katze in order to purchase some cattle. He represented to Katze that he was about to commence a dairy operation on his mother's farm in Juneau, Wisconsin, and that he was obtaining financing from an uncle in Chicago. He agreed to purchase fifty head of cattle and to pay Katze on delivery. Katze delivered these over the course of three days to three separate locations specified by Laeske. Laeske was not present at the farm where the final delivery was made, although he had agreed to be.

The day after the final delivery of the fifty head Laeske called Katze to order an additional twenty-two head. Katze insisted he pay for the cattle previously delivered. The following day Laeske gave Katze a check for all seventy-two cattle in the amount of $58,325. The check was not certified. Katze delivered the additional twenty-two cattle and, subsequently, an additional twelve for a total of eighty-four head sold to Laeske. After the final delivery, Laeske's check bounced. For several subsequent days Laeske stalled Katze and Katze's attorney by claiming that the money would soon be deposited in his account. During that time, Laeske sold most of the cattle. Katze eventually recovered twenty-one head; he lost sixty-three head.

A civil suit against Laeske, which came to trial prior to the present action, resulted in a money judgment against him. Only $6,200 was recovered from Laeske, through garnishment. Laeske was also convicted of issuing a worthless check under sec. 943.24, Stats. The district attorney testified that she brought that charge against him rather than charging theft by fraud under sec. 943.20(1)(d), ¹ because she thought the latter charge would require more investigation than her understaffed office could immediately provide. Laeske testified in the present action that he had never intended to commence dairy farming; that he had never intended to pay Katze for the cattle, or to return them; and that he had deliberately defrauded Katze in order to raise money to pay creditors who were pressuring him.

In a special verdict the jury determined that Katze sustained a direct loss of sixty-three dairy cows by theft within the meaning of the policy; that a reasonable person in Katze's position would understand that fifty cows were covered by the policy; and that such a reasonable person would understand that the maximum coverage limit under the policy was $18,000.

The trial court had reserved ruling on motions by both parties to answer the verdict questions as a matter of law at the conclusion of the testimony. After the verdict, the trial court issued a memorandum decision determining as a matter of law that the policy provided no coverage for Katze's loss. It found nothing in the policy to indicate that it covered Katze's livestock dealer operations, as opposed to his farming. It also concluded that the term "theft" did not encompass theft by fraud or "swindling," and that no reasonable person could have assumed that the policy covered unsuccessful credit transactions abetted by a "lack of prudence" such as Katze displayed in not demanding a certified check.

This court owes no deference to the trial court's resolution of issues of law. First Nat. Leasing Corp. v. Madison, 81 Wis.2d 205, 208, 260 N.W.2d 251, 253 (1977). The interpretation of an unambiguous contract is a matter of law to be determined from the words of the contract, without resort to extrinsic evidence. In construing an insurance contract, words are to be given their common meaning as they would have in the mind of an ordinary person. Hochgurtel v. San Felippo, 78 Wis.2d 70, 79, 253 N.W.2d 526, 530 (1977). Any ambiguity in the contract is to be construed against the insurance company which drafted the contract. Stanhope v. Brown County, 90 Wis.2d 823, 849, 280 N.W.2d 711, 722 (1979). Words are ambiguous when they are reasonably susceptible of more than one construction. Garriguenc v. Love, 67 Wis.2d 130, 135, 226 N.W.2d 414, 417 (1975). Where a provision is ambiguous and there is no extrinsic evidence bearing on the meaning intended by the parties, the proper interpretation is to be determined by the court as a question of law. Bauman v. Midland Union Ins. Co., 261 Wis. 449, 452, 53 N.W.2d 529, 530 (1952).

No extrinsic evidence was offered in this case as to what the parties intended by the theft provision. The term "theft" is ambiguous. It is reasonably capable of being understood in its broadest sense as any wrongful or unlawful taking of another person's property, including theft by fraudulent procurement of that property. It is also reasonably understood in the narrower sense of taking property without the owner's consent. Both broad and narrow definitions can be found in reputable dictionaries. ² The Wisconsin theft statute, sec. 943.20, Stats., separately identifies theft by fraud in subsec. 943.20(1)(d), thus distinguishing it from other types of theft. All forms of theft identified by the statute are subject to identical penalties under sec. 943.20(3), however.

We find no Wisconsin case construing the term "theft" in the context of an insurance risk. Courts in several other jurisdictions have addressed this question, however, and most of them have decided in favor of coverage. Steinbach v. Continental Western Ins. Co., 237 N.W.2d 780, 782 (Iowa 1976), is directly on point with this case. The Iowa Supreme Court held that an insured who sold cattle in exchange for a forged check had suffered a covered "theft" under a policy provision almost identical to the provision here at issue. It reasoned that when the term "theft" is not adequately defined by the policy, the term " 'has its meaning as a word of general and broad connotation covering any wrongful appropriation of another's property to the use of the taker,' " quoting Long v. Glidden Mutual Insurance Association, 215 N.W.2d 271, 273 (Iowa 1974).

Similarly, the Nebraska Supreme Court has held that a farmowner's policy insuring livestock against "theft" covers unlawful appropriation as well as larceny, and could extend to "pilferage, swindling, embezzlement, conversion, and other unlawful appropriations." Raff v. Farm Bureau Insurance Co. of Nebraska, 181 Neb. 444, 149 N.W.2d 52, 55 (Neb.1967). Accord: Gomez v. Security Insurance Company of Hartford, 314 So.2d 747, 749 (La.App.1975) ("theft" includes "a taking by fraudulent conduct under circumstances which evidence an intent to...