Lumber & Wood Products, Inc. v. New Hampshire Ins. Co.

• Decision Date: 14 January 1987
• Docket Number: No. 86-5025,86-5025
• Parties: LUMBER & WOOD PRODUCTS, INC., Plaintiff-Appellee, v. NEW HAMPSHIRE INSURANCE COMPANY, etc., Defendant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 916

807 F.2d 916

1987 A.M.C. 1244

LUMBER & WOOD PRODUCTS, INC., Plaintiff-Appellee, v. NEW HAMPSHIRE INSURANCE COMPANY, etc., Defendant-Appellant.

No. 86-5025.

United States Court of Appeals, Eleventh Circuit.

Jan. 14, 1987.

Smathers & Thompson, Henry Bolz, III, Miami, Fla., for defendant-appellant.

Jack M. Coe, Lee, Schultz, Murphy & Coe, Thomas J. Schulte, Coral Gables, Fla., for plaintiff-appellee.

Appeal From the United States District Court for the Southern District of Florida.

Before JOHNSON and ANDERSON, Circuit Judges, and GARZA ^*, Senior Circuit Judge.

GARZA, Senior Circuit Judge:

On September 13, 1979, Hurricane Frederic struck Chickasaw, Alabama and caused substantial damage to certain lumber stored on a shipping dock. Plaintiff-Appellee, Lumber & Wood Products, Incorporated ("Lumber & Wood"), filed a claim against Defendant-Appellant, New Hampshire Insurance Company ("New Hampshire"), seeking recovery for the loss. New Hampshire denied the claim. Consequently, Lumber & Wood filed a complaint against New Hampshire to have coverage determined and damages assessed. The district court judge entered a final judgment in favor of Lumber & Wood on December 11, 1985, reasoning that the cargo was still "in transit" because its placement on the consignee's dock was not intended as a final resting place for the cargo. We must reverse the district court's judgment because the policy's coverage expired prior to Hurricane Frederic's rampage in Chickasaw.

Lumber & Wood is in the business of purchasing lumber from various sources in South America and selling the lumber to various purchasers in the United States and elsewhere. Delta Hardwood Corporation ("Delta Hardwood") is in the business of purchasing shipments of lumber from Lumber & Wood and, thereafter, reselling the lumber in smaller lots to buyers in the Mobile, Alabama area. In June of 1974, New Hampshire issued a master Marine Open Cargo Policy to Lumber & Wood to insure shipments of lumber while being transported from South America to the United States. Certificate of Insurance No. 44, dated June 15, 1979, was issued to cover a shipment of bundled lumber aboard the M/V "Gina Star" from Brazil to Delta Hardwood's dock in Chickasaw.

The subject cargo was loaded aboard the M/V "Gina Star" and transported to Chickasaw without incident. The lumber, in good order and condition, was off-loaded and completely discharged onto Delta Hardwood's private dock on August 11, 1979. Delta Hardwood, the consignee, was the private owner of the contiguous berth, dock space and warehouse facilities at Chicasaw. The lumber had to be moved approximately ninety feet to be placed in Delta Hardwood's warehouse. Moreover, Delta Hardwood had overall responsibility concerning the grading, inspecting and movement of the lumber once off-loaded from the vessel. Delta Hardwood, in the past, had sold some lumber directly from the dock to purchasers. On August 12, upon receiving notice that the lumber had arrived at Chickasaw, Lumber & Wood issued an invoice to Delta Hardwood for the entire shipment and created an account receivable for the invoiced amount.

There was a conflict in the testimony given regarding several phone conversations that took place just before Hurricane Frederic struck. Apparently, a Delta Hardwood agent contacted a Lumber & Wood agent about a delay in storing the subject lumber in the warehouse due to a previous shipment which occupied a portion of the warehouse. The agent for Lumber & Wood testified that she was assured by New Hampshire that the insurance was in full force and effect as long as the lumber in question was out of the insured's control.

On September 13, 1979, Hurricane Frederic caused $63,025.23 worth of damage to the lumber which had remained on the dock. Approximately 10% of the subject lumber was still on the dock at the time of the destruction. Thirty-two days had elapsed from the delivery of the lumber at Delta Hardwood's facilities on August 11, until the arrival of Hurricane Frederic on September 13. After the commencement of legal action, Delta Hardwood and Lumber & Wood executed an assignment of Delta Hardwood's claim back over to Lumber & Wood.

The district court judge ruled that coverage existed because the cargo was "in transit" as it sat on Delta Hardwood's dock. The court reasoned that the premiums charged by New Hampshire did not contemplate the dock as a final resting place, but rather a warehouse to warehouse arrangement was intended and such should be strictly enforced pursuant to the agreement. Final judgment was entered in favor of Lumber & Wood in the principal sum of $63,025.63. The court also ordered New Hampshire to pay pre-judgment interest on the damages at a rate of 10% per annum from October 10, 1979, until the date of judgment, totalling an additional $38,886.12. Further, New Hampshire was ordered to pay Lumber & Wood its reasonable attorneys' fees in the amount of $25,000, for a total of $126,911.75, upon which interest would accrue at a rate of 7.87%, pursuant to 28 U.S.C. Sec. 1961.

It is the district court's statement in its fifth Conclusion of Law, "the goods were in transit until they had been inspected and accepted in the buyer's warehouse," that forms the basis for this appeal. As such the clearly erroneous standard is inapplicable, but rather a de novo review is appropriate because a construction of this policy of insurance involves a mixed question of law and fact, and therefore we are free to substitute our judgment for that of the district court. See Chevron U.S.A., Inc. v. Belco Petroleum Corp., 755 F.2d 1151, 1153-54 (5th Cir.) ("The facial interpretation of the contract is a question of law not subject to the clearly erroneous standard"), cert. denied, --- U.S. ----, 106 S.Ct. 140, 88 L.Ed.2d 116 (1985); Washington v. Watkins, 655 F.2d 1346, 1352-53 (5th Cir.1981) ("Mixed questions of fact and law are not, as a general matter, reviewable under the clearly erroneous standard"), cert. denied, 456 U.S. 949, 102 S.Ct. 2021, 72 L.Ed.2d 474 (1982). The fundamental issue in this case focuses on the construction of the Warehouse to Warehouse and Marine Extension Clauses ¹ of the Marine Open Cargo Policy as to whether the lumber was "in transit" within the meaning of those clauses.

On August 11, all lumber was safely discharged from the M/V "Gina Star" and delivered to Delta Hardwood. On August 12, Lumber & Wood invoiced Delta Hardwood for all the lumber. The assignment of title back to Lumber & Wood after the legal action was commenced clearly establishes that Delta Hardwood not only had possession on the date of loss, September 13, but also had ownership.

Coverage ceases, according to the policy, upon the occurrence of either a delivery to the final warehouse, August 11, or the expiration of fifteen days after discharge, August 26. Clearly, the lumber, having sat idly on Delta Hardwood's dock for thirty-two days after delivery, was not "in transit" within the intent and meaning of the Marine Open Cargo Policy when it was damaged by Hurricane Frederic on September 13. The trial court made a Finding of Fact that the contract of insurance was entered into in the State of Florida. Under Florida law, if the terms of an insurance policy are clear and unambiguous, they are to be taken and understood in the plain, ordinary and popular sense. Peninsular Life Ins. Co. v. Rosin, 104 So.2d 792, 795 (Fla.Dist.Ct.App.1958). According to the clauses in the policy, once this cargo was delivered to the consignee and once it exercised dominion and control over the cargo, treating it as its stock in trade, the final warehouse had been reached.

As the Ninth Circuit declared in an early case dealing with a warehouse to warehouse clause: "The warehouse to warehouse clause was evidently intended to cover the goods after being discharged at port of destination while in the ordinary course of transit to the consignee's warehouse, or some other equivalent place of storage where the goods are held for the consignee." Ocean Marine Ins. Co. v. Lindo, 30 F.2d 782, 784 (9th Cir.1929). More recently, in Budco Associates, Inc. v. Royal Exchange Assurance of America, 53 A.D.2d 568, 384 N.Y.S.2d 819 (1976), the question of whether post-delivery fire loss was covered by the transit policy turned on whether the consignee had "exercised dominion over the goods so that it might be said that delivery had occurred." 384 N.Y.S.2d at 820.

Delta Hardwood, as a past practice, sold lumber directly from its dock. It had the exclusive right to make all decisions concerning the lumber after off-loading. Once Delta Hardwood exercised dominion and control over the lumber in storing and processing on its dock, coverage under the policy expired. Moreover, the dock was used by Delta Hardwood as an "equivalent place of storage" for the lumber, and therefore the final warehouse had been reached upon off-loading from the vessel.

In First American Artificial Flowers, Inc. v. AFIA Worldwide Ins., 1977 Am.Mar.Cas. 376 (N.Y.Sup.Ct.1976), the court was called upon to determine whether coverage existed, in a warehouse to warehouse clause, during the ordinary course of transit until "delivery to the Consignee's or other final warehouse or place of storage at the...