Maryland Cas. Co. v. Delzer, 12482

Citation283 N.W.2d 244
Decision Date05 September 1979
Docket NumberNo. 12482,12482
PartiesMARYLAND CASUALTY COMPANY, a corporation, Plaintiff and Appellant, v. Melvin E. DELZER, d/b/a Delzer Construction Company, Defendant and Respondent.
CourtSupreme Court of South Dakota

David P. Olson, Rapid City, for plaintiff and appellant.

Edward C. Carpenter, of Costello, Porter, Hill, Nelson, Heisterkamp & Bushnell, Rapid City, for defendant and respondent.

MILLER, Circuit Judge.

This is an appeal from the trial court's order which granted defendant-respondent's motion for summary judgment and its order denying plaintiff-appellant's summary judgment motion. Plaintiff-appellant (Maryland Casualty Company) is the insurer of Rapid City Implement Company (not a party to the action). Defendant-respondent (Delzer Construction Company) was the lessee of equipment under a lease agreement with Rapid City Implement.

FACTS

Delzer and plaintiff's insured, Rapid City Implement, executed a lease agreement on October 19, 1973. The pertinent provisions INSURANCE: The Lessee further agrees to protect the Lessor on this contract with full insurance coverage, said insurance to cover loss or damage occasioned by fire, theft, flood, explosion, accident, act of God, or any other cause that may occur during the life of this lease, and to protect the Lessor by insurance in an amount satisfactory to Lessor against public liability of any and every kind.

of this lease contain the following language:

LOSS OR DAMAGE: The Lessee agrees to pay the Lessor for all loss and damages to the equipment arising from any cause whatsoever that may occur during the life of this lease, and until such equipment has been returned into the possession of the Lessor and accepted by it.

LIABILITY: Lessee shall be liable for all expenses, damages and claims arising out of its possession, operation, or transportation of the equipment herein described, and shall hold the Lessor and its assigns harmless therefrom.

LOSS AND DAMAGE: It is agreed by the parties hereto that the value as hereinbefore stated ($13,500) is hereby accepted as the true value and shall be used in case of arbitration or adjustment. In making such adjustment. . . . (I)t is understood that no rentals theretofore paid or due shall apply to the payment of such loss.

Pursuant to execution of this contract, the defendant took immediate possession of a paylogger and thereafter retained exclusive possession of it until June 5, 1974, when it was damaged by fire. The unrepaired paylogger was returned to Rapid City Implement immediately after the accident and plaintiff paid $8,216 under its insurance contract. In consideration of the proceeds, Rapid City Implement executed a proof of loss assigning its cause of action against defendant to plaintiff. On receipt of said proceeds, Rapid City Implement credited Delzer's account. Plaintiff took possession of the paylogger, made some repairs, and thereafter sold the same for a salvage bid of $1,200. Accordingly, plaintiff's net indemnification of its insured was $7,016.

Plaintiff filed its complaint in January, 1977, and on April 7, 1977, amended the same to include Rapid City Implement (the insured) as a party plaintiff. By its amended complaint, plaintiff contends that defendant breached the terms of the lease by failing to obtain insurance coverage for the leased paylogger. Defendant's answer denied plaintiff's allegations and further alleged that plaintiff was not entitled to recover on the grounds that:

(1) Defendant was, under the terms of the contract, entitled to a credit for the proceeds paid to the plaintiff's insured, and

(2) Plaintiff's payment of proceeds to the insured was a voluntary act thereby precluding plaintiff's subrogation to this cause of action.

Plaintiff moved the trial court for summary judgment on February 25, 1977. Hearing on that motion was held on March 21, 1977, and the matter was continued. Plaintiff filed its amended complaint adding the insured as a party plaintiff and its amended motion for summary judgment on April 7, 1977. Hearing on plaintiff's amended summary judgment motion was held on April 11, 1977. The trial court thereafter entered its August 3, 1977, order denying the same.

The parties stipulated that Rapid City Implement could be dismissed with prejudice. The trial court ruled at the November 2, 1977, pretrial conference that plaintiff was a beneficiary under the lease since the insured, by executing a proof of loss, assigned the cause of action to plaintiff.

On February 6, 1978, defendant filed a motion for summary judgment urging four grounds upon which it claimed summary judgment lay. Pursuant to the March 29, 1978 hearing, the trial court granted the motion, without specifying its reasons. Plaintiff thereafter made a request for formal decision, asking the trial court to specify which of defendant's grounds and reasons it had relied upon in granting summary judgment. The trial court, however, refused to enter a formal decision.

Pursuant to the trial court's denial of plaintiff's summary judgment motion and the granting of defendant's summary judgment motion, plaintiff brought this appeal.

ISSUES
I.

Whether the trial court erred in granting defendant's motion for summary judgment? We hold it did.

II.

Whether the trial court erred in not granting plaintiff's motion for summary judgment on both questions of liability and damages? We hold that it did.

DECISION

The trial court granted defendant's motion for summary judgment without formal decision. In spite of plaintiff's demands, the record is deficient as to any specific grounds or reasons for the trial court's ruling. We are, therefore, forced to scrutinize each of defendant's four grounds for summary judgment and decide which, if any, would entitle defendant to summary judgment.

Defendant first contends that under the terms of the lease it is entitled to a credit for the insured's issuing the credit memo and that as a result thereof it has been released of all liability. We do not agree.

The following provision of the lease is pertinent in regard to the credit issue.

It is further understood and agreed that in making any adjustment for loss or damages to equipment, Lessee shall be credited with the amount of insurance payment received by Lessor under insurance policies, if an insurance recovery is effected thereunder.

The only other terms of the contract addressing insurance are those which require that defendant obtain the necessary insurance coverage. The interpretation of a single contract clause requires the contract be construed as a whole. See, Ponderosa-Nevada, Inc. v. Venners, 243 N.W.2d 801 (S.D.1976); Dail v. Vodicka, 89 S.D. 600, 237 N.W.2d 7 (1975); Jones v. American Oil Company, 87 S.D. 384, 209 N.W.2d 1 (1973); Eberle v. McKeown, 83 S.D. 345, 159 N.W.2d 391 (1968). In view of the entire contract, we find that defendant agreed (1) to obtain insurance to cover damage by fire, (2) to pay the insured for all damage arising from any cause whatsoever, and (3) to be liable for all damages while the paylogger was in its possession.

Read together, the provisions of the contract anticipate that any credit adjustment on defendant's account is contingent on defendant having been the purchaser of insurance coverage. We find these provisions as a whole leave little or no question that defendant was to be liable for any damage to the paylogger. To now construe the damage clause in a manner which renders the lessor liable would be contrary to what the contract provisions were obviously intended to do. We therefore hold that the benefit of the above insurance clause could only pertain to payments made by the insurer to plaintiff's insured Under a policy the defendant was required to purchase. We need not determine whether it was defendant's breach that now deprives it of the benefit of this clause since we find the contract was never intended to give defendant credit Unless it was the purchaser of the insurance coverage.

Secondly, defendant contends that plaintiff acted as a Volunteer by paying proceeds to the insured with full knowledge that defendant did not have insurance of its own. Defendant argues that plaintiff could have elected not to pay the insured under the following policy provisions:

IMPAIRMENT OF RECOVERY RIGHTS: Any act or agreement by the insured before or after loss or damage whereby any right of the insured to recover in whole or in part for loss or damage to property covered hereunder against any carrier, bailee or other party liable therefor, is released, impaired or lost, shall render this policy null and void, . . . .

Defendant contends that plaintiff's insured released defendant by issuing the credit memo and that any payment by plaintiff was that of a volunteer. Defendant's contention is of course contingent on the assumption that the credit memo issued by Rapid City Implement was indeed a valid and intended release. We therefore address defendant's release and volunteer arguments jointly.

SDCL 20-7-10 provides that an obligation may be released upon new consideration or in writing, with or without new consideration. A written release is nothing more than a contract by which the parties consent to a release of obligation. Erck v. Bachand, 69 S.D. 330, 10 N.W.2d 518 (1943). Since a release is of a contractual nature, however, the intentions of the parties must govern. See Auto-Owners Insurance Company v. Higby, 57 Mich.App. 604, 226 N.W.2d 580 (1975); Bruns v. Light, 74 S.D. 418, 54 N.W.2d 99 (1952); Krenz v. Medical Protective Co. of Fort Wayne, Ind., 57 Wis.2d 387, 204 N.W.2d 663 (1973); 66 Am.Jur.2d Release § 30 (1973). The burden lies with defendant to make a clear showing that Rapid City Implement knowingly intended to release defendant from liability. We are not convinced that the evidence supports a determination that a release was intended, especially where affidavits by plaintiff's insured specifically deny such...

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