Thiel Industries, Inc. v. Western Fire Ins. Co., 9666
| Decision Date | 04 March 1980 |
| Docket Number | No. 9666,9666 |
| Citation | 289 N.W.2d 786 |
| Parties | THIEL INDUSTRIES, INC., a North Dakota Corporation, Plaintiff and Appellee, v. The WESTERN FIRE INSURANCE COMPANY, Defendant and Appellant. Civ. |
| Court | North Dakota Supreme Court |
Kelsch, Kelsch & Tudor, Mandan, for plaintiff and appellee; argued by William C. Kelsch.
Pearce, Anderson, Thames & Durick, Bismarck, for defendant and appellant; argued by B. Timothy Durick, Bismarck.
This is an appeal from a judgment entered after a trial to the court without a jury. The judgment requires Western Fire Insurance Company to pay Thiel Industries, Inc., for the costs to replace a damaged underground electrical distribution system under the terms of an All Risk Construction and Installation Floater policy. The judgment is reversed.
Western's appeal challenges none of the findings of fact which were prepared as required by Rule 52(a), N.D.R.Civ.P., but argues that, as a matter of law, the trial court misconstrued the terms of the policy in concluding that the property was covered by insurance at the time it was damaged. We agree.
In December 1971, Thiel contracted to install, by April 1972, an underground electrical distribution system to service 33 buildings in a housing development at Cavalier. The contract recited a lump sum consideration of $13,861.00, but authorized partial payments "for lineal feet, for quantity in place." The contract documents in the record do not show unit prices; however Thiel testified that the installation was completed before the contract completion date; that he submitted a bill showing unit bid prices; and that he was paid in full $15,077.97. He further testified that, without any additional contract or amendment, Thiel did "other work" that "snowballed" to approximately $100,000, approximately $20,000 has not been paid, and the matter is tied up in bankruptcy proceedings.
The contract, which was on a preprinted form, among other things provided that: "No payment on account shall operate as an approval and acceptance for the work done or materials furnished, or any part thereof." Another attached typewritten provision specified that the owner had the right to take possession of and use the completed portions of the work before the time for completion but that "such taking possession and use shall not be deemed an acceptance of the work not completed in accordance with the Contract Documents." (Emphasis added.)
Also, as an attached, additional typewritten term is the requirement that Thiel "shall warrant all equipment furnished and work performed by him for a period of one year from the date of written acceptance of the work."
A pertinent provision of the preprinted policy provides that coverage of property shall continue "until formally accepted by the owner . . . ." Provision is also made for a computation of the monthly premium due, based upon reports showing, as of the last day of each month, "the total completed value of all construction contracts insured . . . ." On a typewritten endorsement attached to the policy is the following amendment:
Because Western has not challenged the findings of fact made by the trial court, and neither Western nor Thiel has argued that there should have been additional or different findings made, we will apply the law to the following critical facts that were found:
(1) Thiel completed construction and installation of the underground electrical distribution system in March 1972.
(2) The owner took possession of the system and began using it in November 1972.
(3) The system was destroyed because of misuse by the owner in February 1973.
(4) The work was never "formally accepted." 1
We view the critical legal issue to be whether or not the insurance contract was ambiguous as to the property covered and, if so, whether the terms of the insurance contract should be construed against Western, the insurer.
The question as to the existence or nonexistence of an ambiguity in a contract is a question of law and, "When good arguments can be made for either of two contrary positions as to the meaning of a term in a document, an ambiguity exists." In Re Estate of Johnson, 214 N.W.2d 112 (N.D.1973), Syllabus 2.
From remarks in the record at the conclusion of the trial, it is apparent that the trial court concluded that the insurance contract was ambiguous because it provided, at one place, that the property is covered by insurance until the owner formally accepts the work and, at another place, that the property is covered only while it is in the care, custody and control of the insured.
Our examination of the insurance contract discloses that the typewritten, added provision which states that the property is covered only while it is in the care, custody and control of the insured is clearly identified as an "amendment" of the preprinted insurance contract. The conflict between the words in a contract provision and the words in an amendment to that contract provision cannot supply the basis for a conclusion that the contract is ambiguous. Even in cases where one of the provisions is not labeled an "amendment," the general rule requires that typewritten additions to preprinted documents shall control. See § 9-07-16, NDCC, and our recent decision in Olson v. Peterson, 288 N.W.2d 294 (N.D.1980).
Another general rule that prevents us from agreeing that Thiel was in "constructive custody" of the system in February 1973 when it was destroyed is discussed in 63 Am.Jur.2d Property, § 39, which states, in part:
"One may have possession of a chattel, even in the absence of actual personal custody, if the chattel is under his control and in a place where it must have been put by his act or in his behalf, or where the chattel is within his power in such a sense that he can and does command its use."
There is no evidence to show that Thiel had any command over the use of the electrical distribution system after its completion in March 1972.
This leads us to a further examination of the terms of the construction contract itself. Certainly, the terms thereof require an acceptance by the owner as quoted hereinabove. Thiel has argued that neither payment for the system nor taking possession and use by the owner shall be deemed acceptance. We agree with his interpretation that payment under the contract shall not operate as acceptance, but payment was not made in this case pursuant to the contract. The contract required partial progress payments and payment of the balance only after approval of the work. This is a standard method of payment on construction contracts. Payment was made in this instance, lump sum after all work had been completed and without any apparent determination that the work was acceptable.
Secondly, we think Thiel misreads the contract when he argues that possession and use shall not operate as acceptance. First of all, the clause applies, by its own terms, only to possession and use of completed portions before the time for completion. Here, the possession and use by the owner of the system was after the entire system had been completed. In addition, also by its very terms, possession and use shall not be deemed an acceptance of the work that does not comply with the contract specifications. The only evidence on that matter indicates that the work was all done in accordance with the specifications.
Finally, no claim was made against Thiel that the damaged property would have to be replaced at his cost only that "the issues remain unsolved." To the contrary, the system was...
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