Munford v. Lee Servicing Co.

• Citation: 999 P.2d 23,2000 Utah Ct. App. 108
• Decision Date: 20 April 2000
• Docket Number: No. 990188-CA.,990188-CA.
• Parties: Antenette MUNFORD and Jon Badger, Plaintiffs and Appellants, v. LEE SERVICING COMPANY, Defendant and Appellee.
• Court: Court of Appeals of Utah

999 P.2d 23

2000 Utah Ct. App. 108

Antenette MUNFORD and Jon Badger, Plaintiffs and Appellants, v. LEE SERVICING COMPANY, Defendant and Appellee.

No. 990188-CA.

Court of Appeals of Utah.

April 20, 2000.

David K. Smith, Midvale, for Appellants.

Judy Jorgensen and J. Scott Lundberg, Salt Lake City, for Appellee.

Before JACKSON, Associate P.J., GARFF, Senior J.,¹ and ORME, J.

AMENDED OPINION²

GARFF, Senior Judge:

¶1 Antenette Munford and Jon Badger (Appellants) appeal the trial court's grant of summary judgment in favor of Lee Servicing Company (Lee). Appellants contend the court erred in concluding the insurance policy at issue was not in effect at the time a fire damaged their home. We reverse.

BACKGROUND

¶2 Appellants owned a home in Salt Lake City. They placed two encumbrances on the home. The first lien holder was Zions Bank; the second lien holder was Alliance Funding Corporation. Both liens were evidenced in trust deeds and promissory notes. Alliance's loan was monitored and serviced by Lee on behalf of Alliance.

¶3 Appellants carried insurance on the property through Farmer's Insurance. However, the Farmer's Insurance policy was canceled on October 15, 1996. Under the terms of the second trust deed, Appellants had to maintain insurance on the property to protect the interests of Lee's principal. If Appellants failed to maintain such insurance, Lee had the right to order a "force-placed" policy, i.e., Lee could obtain the insurance and charge the premium back to Appellants.

¶4 Lee was aware of the Farmer's insurance cancellation. Lee notified Appellants that they must maintain insurance on the property, and that failure to do so would result in Lee obtaining the required insurance. Lee asserts it received no notice before December 20, 1996 that Appellants had obtained a new insurance policy on the property, and therefore ordered an insurance policy on the property as permitted under the terms of the trust deed.³ This force-placed policy was issued under Lee's master policy provided by Cigna Insurance (Cigna). The policy was made effective as of October 15, 1996 — thus providing continuous coverage from the cancellation date of the Farmer's policy — and listed an expiration date of October 15, 1997.

¶5 Appellants were notified of the force-placed policy by two letters sent together, one from Lee and one from Cigna. The Cigna document, dated December 20, 1996, and titled "Mortgagor's Evidence of Insurance Coverage Placed," notified Appellants that their mortgage lender had ordered an insurance policy. The letter noted the effective date of October 15, 1996, the expiration date of October 15, 1997, policy coverage for the amount secured by the second trust deed, and the premium cost. The letter also noted that "[c]overage as described hereon is excess over any other valid and collectible insurance."

¶6 Lee sent Appellants Cigna's evidence of insurance along with a letter from Lee dated December 22, 1996, regarding the Cigna policy. The letter explained that Lee ordered the Cigna policy to protect its interests in the absence of evidence from Appellants of continuing insurance on the property. The letter emphasized that the coverage of the policy was limited to the balance of the Alliance loan and would not be enough to cover all losses. It also demanded payment of $157 for the premium costs.⁴ Finally, the letter stated Appellants should provide evidence of insurance to Lee "[s]hould you wish to provide us with an acceptable replacement policy."

¶7 Although Lee insured the property at some point between October 15 and December 20, Appellants had told Lee sometime before December 14 that they had obtained a replacement insurance policy.⁵ Appellants bought insurance from Phoenix Insurance, with a retroactive effective date of October 15, 1996, thus providing continuous coverage for the property. On the record before this court, it is not clear when the Phoenix insurance was bought, though the insurance application is dated in September of 1996.⁶

¶8 On December 14, 1996, a fire damaged the property, resulting in almost total loss. The Phoenix insurance policy reimbursed Appellants for the depreciated value of the home plus its contents. After paying the premium to Lee for the Cigna policy, Appellants demanded payment under that policy for excess damages not paid for by Phoenix. Appellants argue that the Cigna policy provided coverage for such excess damages by its terms.

¶9 Lee moved for summary judgment, arguing that the Cigna policy was not in effect on the date of the fire, and thus was not available for any claim against it. Lee argued that the Cigna policy was void at its inception because Appellants had obtained insurance coverage retroactively effective as of October 15, thereby nullifying the Cigna policy under its express terms. The trial court granted summary judgment, finding that the policy was not in effect on the date of the fire.

ISSUE AND STANDARD OF REVIEW

¶10 The issue is whether the trial court erred in granting summary judgment to Lee after concluding that the Cigna policy was not in effect on the date of the fire. "Summary judgment is proper only when `there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law.'" Nyman v. McDonald, 966 P.2d 1210, 1212 (Utah Ct. App.1998) (quoting Utah R. Civ. P. 56(c)) (omission in original). Furthermore, "`we view the facts and inferences to be drawn therefrom in the light most favorable to the losing party.'" Id. (citation omitted). Thus, "`we review the factual submissions to the trial court in a light most favorable to finding a material issue of fact.'" Id. (citation omitted). We review the court's conclusions of law for correctness, with no deference granted to the trial court's ruling. See id.

¶11 Moreover, interpretation of a contract is a matter of law. See Nova Cas. Co. v. Able Constr., Inc., 1999 UT 69, ¶ 6, 983 P.2d 575

. The existence of ambiguity in a contract is likewise a question of law. See Village Inn Apartments v. State Farm Fire & Cas. Co., 790 P.2d 581, 582 (Utah Ct.App. 1990). If a contract is unambiguous, the interpretation of its terms is also a matter of law, see id., which we review nondeferentially for correctness. See Nova Cas. Co.,

1999 UT 69 at ¶ 6, 983 P.2d 575.

ANALYSIS

I. Issues of Fact

¶12 Appellants first argue that summary judgment was inappropriate because there were disputed issues of material fact. Both Lee and Appellants characterize the trial court's determination that the insurance policy was canceled as a factual matter. To conclude that the Cigna policy was not in effect on the date of the fire, the court relied on facts such as the date Lee received notice the Farmer's policy was canceled and replaced with the Phoenix policy, the date of payment by Appellants of the Cigna premium, and the full refund of the Cigna premium to Lee.

¶13 However, from the record here, there appears to be several material factual issues that remain unresolved. The core dispute is whether the Cigna policy was in effect on the date of the fire. The court determined that it was not. In doing so, the court weighed competing facts and assumed the role of fact finder, rather than accepting the facts in the most favorable light for the nonmoving party. Cf. Nyman, 966 P.2d at 1212-13

.

¶14 For example, although Lee denies it, Appellants contend that they talked with a Lee agent about the Phoenix replacement policy sometime before the fire, but after the cancellation of the Farmer's policy. Viewing this in the light most favorable to Appellants, if notice had indeed been provided to Lee, and yet it later demanded reimbursement for the Cigna premium, the implication is that regardless of notice, the Cigna policy was still in effect. If the policy was not in effect, there would be no reason to demand payment of the premium. Furthermore, Appellants argue the Cigna policy was not canceled until March 10, 1997, when Cigna refunded the premium to Lee. This is in contrast to Lee's argument that the policy was canceled when the Phoenix policy was purchased, as alleged in an affidavit. Moreover, there is no conclusive evidence in the record of the sequence of events regarding the issuance or cancellation of the Phoenix and Cigna policies. Rather, these issues are in dispute, or are simply unknown,⁷ thus making this matter inappropriate for summary judgment.

¶15 Instead of recognizing these unresolved issues as genuine issues of material fact, the court concluded that the Cigna policy was not in effect on the date of the fire. To reach this conclusion, the court had to evaluate factual matters and weigh the evidence. Summary judgment is appropriate only when there are no disputed material facts. See id. at 1212. Here, the effective date of the Cigna policy was a highly contested and disputed fact, and thus inappropriate for the court to determine as a factual matter.

II. Contract Interpretation

¶16 Appellants also argue that the trial court erred in determining that the Cigna policy was canceled as of October 15, 1996 by its own terms. Although not clear from the court's findings of fact and conclusions of law, the court concluded the policy was canceled before the fire in part because of the court's interpretation of the contract terms.

A. Lee's Version of the Insurance Policy

¶17 Lee introduced a version of the Cigna master policy that included an "other insurance" clause stating: "If the insurance provided by this policy is also provided by other insurance, the coverage under this policy will terminate as of the effective date of the other insurance and the applicable premium refunded." Lee argues that this clause controls the effective dates of the Cigna policy, and leads to the conclusion that the Cigna policy was void at its inception because the Phoenix policy was retroactively effective as of October 15. The court apparently accepted this argument,...