North River Ins. Co. v. Golden Rule Const., Inc.

• Decision Date: 01 October 1980
• Docket Number: No. 12898,12898
• Citation: 296 N.W.2d 910
• Parties: NORTH RIVER INSURANCE COMPANY, Plaintiff and Appellant, v. GOLDEN RULE CONSTRUCTION, INC., Defendant and Appellee.
• Court: South Dakota Supreme Court

Page 910

296 N.W.2d 910

NORTH RIVER INSURANCE COMPANY, Plaintiff and Appellant, v. GOLDEN RULE CONSTRUCTION, INC., Defendant and Appellee.

No. 12898.

Supreme Court of South Dakota.

Argued May 27, 1980.

Decided Oct. 1, 1980.

Edwin E. Evans of Davenport, Evans, Hurwitz & Smith, Sioux Falls, for plaintiff and appellant.

Stuart L. Tiede of Woods, Fuller, Shultz & Smith, Sioux Falls, for defendant and appellee; Merle A. Johnson of Woods, Fuller, Schultz & Smith, Sioux Falls, on brief.

MORGAN, Justice.

A Minnehaha County jury found for the defendant-appellee, Golden Rule Construction (Golden Rule), on all issues in a declaratory judgment action to determine and declare the rights of the parties under an insurance contract issued by plaintiff-appellant, North River Insurance Company (North River), to Golden Rule. After the general jury verdict the trial court granted North River's motion for summary judgment on Golden Rule's counterclaim, denied North River's motion for judgment n. o. v., awarded Golden Rule prejudgment interest from the date of the jury verdict to the date of the judgment, and refused to award Golden Rule attorney fees. North River appeals, and Golden Rule filed a notice of review. We affirm in part, reverse in part, and remand.

Golden Rule, a South Dakota corporation primarily engaged in the construction of small commercial structures, purchased Builders' Risk insurance policies from North River through Robert Johnson, an officer and employee of Edmison-Johnson Agency, Inc. (agency), which had an agency-company agreement with North River to sell its insurance.

In 1973 Golden Rule decided to change types of policies from the type whereby an individual policy was purchased for each individual structure, to a "blanket" type whereby one policy was purchased to cover all structures. Golden Rule compared rates of different companies and, after talking with Jerry Roth, North River's Sioux Falls Service Office fieldman, decided to purchase the policy offered by North River through agency.

The policy became effective in June 1973. Per instructions apparently from Johnson who received them from Roth, an employee of Golden Rule filled out the monthly reports each month thereafter by reporting the value of work completed for that month on each project. Golden Rule so reported and filed its monthly reports for four and one-half years. At least two or three separate offices of North River received the reports, and its underwriters periodically reviewed the policy itself.

During that four and one-half year time period, the policy was changed once to reflect an increase in the amount of the annual deposit and an increase in the deductible. Three minor claims, all of which were amounts less than the last monthly reported amounts, were made by Golden Rule and paid by North River. North River never questioned Golden Rule's method of reporting before, after, or at the time it paid those claims.

On January 6, 1978, a fire destroyed the Married Student Housing Project at Sioux Falls College, one of appellee's construction projects. Golden Rule filed with North River a claim for the full loss of $218,761.85. Although the question of reporting came up within a matter of days, North River did not advise Golden Rule of its denial of coverage until May 17, 1978. Golden Rule had received partial payments amounting to $68,825, the amount that Golden Rule last reported on that project in December 1977 for November 1977 construction. North River thereafter refused to make any further payments.

North River contends that Golden Rule was to make monthly reports of the entire value of work done to date per project, while Golden Rule contends that it only had to make monthly reportings of the amount of work completed during the previous month. The amount of the insurance premium due each month was based on the monthly report. The premiums would have been substantially larger if Golden Rule had reported as North River now says it should have.

On May 19, 1978, North River drafted, and on May 26, 1978, filed a declaratory judgment action to determine just what the rights and obligations of the parties were under the contract. Golden Rule counterclaimed for the remaining amount due from the fire loss, consequential damages, punitive damages, attorney fees, prejudgment interest, and costs and disbursements. The trial court bifurcated the complaint and the counterclaim, ordering that two separate trials be held.

On June 6, 1979, a jury trial began to try the issues raised under North River's complaint. In a general verdict the jury found for Golden Rule on all issues, after which the trial court entered an interlocutory judgment in favor of Golden Rule for the balance due under the insurance policy for the loss in the sum of $149,936.85, together with interest for that period of time from the jury verdict to the date of judgment, less premiums due to North River from Golden Rule for the time period from June 18, 1977, through June 17, 1978, in the sum of $7,650. The trial court then granted North River's motion for summary judgment on all the counts contained in Golden Rule's counterclaim.

North River appealed from certain trial court determinations, and Golden Rule filed a notice of review of other issues pursuant to SDCL 15-26A-10. In addition, Golden Rule made application for attorney fees, which was deferred until oral arguments.

North River argues that the trial court erred in ruling that parol evidence was admissible to explain the "completed value reporting clause" ¹ contained in the insurance policy. The trial court allowed into evidence testimony concerning certain conversations between Johnson and one of Golden Rule's employees, which were had explaining the reporting method and directing that the reports be submitted in the manner utilized by Golden Rule. Although North River objected to the evidence based on the parol evidence rule, the trial court apparently allowed it in because the reporting clause was ambiguous.

"Whether the language of a contract is ambiguous is ordinarily a question of law for the court." Jensen v. Pure Plant Food Intern., Ltd., 274 N.W.2d 261, 264 (S.D.1979). Although we are unable to find exactly where in the record the trial court determined that the contract was ambiguous, it evidently did so, ² even though the trial court instructed the jury that it was for them to decide if the contract was ambiguous. "The law is quite clear that the effects and terms of a contract are questions of law for the court to determine alone. However . . . when there is an ambiguous contract, evidence must be introduced to determine what the intentions of the parties were and . . . such evidence creates a question of fact, which must be resolved by the jury." Delzer Const. Co. v. South Dakota State Bd., 275 N.W.2d 352, 355 (S.D.1979).

In reviewing the trial court's determination, this court "can read the (contract) for (itself) without the presumption in favor of the trial court's determination." Teigen Const. v. Pavement Specialists, Inc., 267 N.W.2d 574, 577 (S.D.1978); Williams v. American Casualty Co. of Reading, Pa., 6 Cal.3d 266, 98 Cal.Rptr. 814, 491 P.2d 398 (1971).

In determining whether an ambiguity exists, this court has quoted the Supreme Court of Iowa, Boyer v. Iowa High School Athletic Association, 260 Iowa 1061, 152 N.W.2d 293 (1967), in saying that " '(a) contract is ambiguous when, after application of pertinent rules of interpretation to the face of the instrument, a genuine uncertainty exists as to which of two or more meanings is the proper one.' " Jensen v. Pure Plant Food Intern., Ltd., 274 N.W.2d at 264.

After reading the insurance policy, in particular the portion relating to the method of reporting, we conclude that there is a genuine uncertainty as to what exactly is to be reported. It is unclear whether Golden Rule is to report each month's completed value, after which North River will combine the totals in order to figure the correct premium amount due, or whether Golden Rule is to add each month's completed value to the previous ones and report that amount upon which North River will then figure the correct premium amount due.

When a contract is ambiguous, parol evidence is admissible.

Parol or extrinsic evidence may not be admitted to vary the terms of a written instrument or to add to or detract from the writing. When the writing is uncertain or ambiguous, however, such evidence is admissible to explain the instrument. 'In other words, evidence is resorted to where the ambiguity may be dispelled to show what they meant by what they said, but not to show that the parties meant something other than what they said.'

Jensen, 274 N.W.2d at 263-264 (citations omitted). The trial court, therefore, was correct in allowing the introduction of parol evidence.

Since the policy is ambiguous, the doctrines of waiver and estoppel, as urged by North River, are not applicable under the circumstances presented in the instant case.

After the jury verdict but before the trial court entered judgment, North River made a motion asking the trial court to award it any and all past due premiums due and owing by Golden Rule to North River under the insurance policy at issue. Golden Rule's objection to such a request and award seems to stem from the fact that North River did not specifically request such an award in its prayer for relief. North River's prayer for relief reads as follows:

WHEREFORE, (North River) prays that the Court take and retain jurisdiction of the controversy between (North River) and (Golden Rule), determine, fix and declare the rights, status, duties, obligations, and legal relations of the parties and enter a judgment herein determining that (North River) has fulfilled its obligations under said written contract and has no further obligation to (Golden Rule) . . . and that ...