Western States Land & Cattle Co., Inc. v. Lexington Ins. Co.

• Decision Date: 23 April 1990
• Docket Number: No. 16902,16902
• Citation: 459 N.W.2d 429
• Parties: WESTERN STATES LAND & CATTLE CO., INC. d/b/a Business Insurors, Plaintiff and Appellant, v. LEXINGTON INSURANCE COMPANY and Action Carrier, Inc., Defendants and Appellees. . Considered on Briefs
• Court: South Dakota Supreme Court

Page 429

459 N.W.2d 429

WESTERN STATES LAND & CATTLE CO., INC. d/b/a Business

Insurors, Plaintiff and Appellant, v. LEXINGTON INSURANCE COMPANY and Action Carrier, Inc.,

Defendants and Appellees.

No. 16902.

Supreme Court of South Dakota.

Considered on Briefs April 23, 1990.

Decided July 18, 1990.

William A. Moore of Samp Law Offices Sioux Falls, for plaintiff and appellant.

Timothy M. Gebhart of Davenport, Evans, Hurwitz & Smith, Sioux Falls, for defendant and appellee Lexington Ins. Co.

Gary P. Thimsen of Woods, Fuller, Shultz & Smith, Sioux Falls, for defendant and appellee Action Carrier, Inc.; Sara L. Burnette of Woods, Fuller, Shultz & Smith, Sioux Falls, on brief.

MORGAN, Justice.

Western States Land & Cattle Company (Broker) appeals grants of summary judgment in favor of Lexington Insurance Company (Insurer) and Action Carrier, Inc. (Insured) in an action for declaratory judgment. We affirm in part and reverse and remand in part.

In June, 1986, Insurer issued a $4 million excess liability insurance policy for Insured. The insurance was procured by Broker through a surplus lines brokerage agreement it had with Insurer. ¹

On June 9, 1986, Insurer informed Broker it was issuing the policy that day, setting forth the policy limits and premium. A Cover Note was issued the next day, likewise setting forth the policy limits and premium. The Cover Note contained a box in the upper right-hand corner labeled "IMPORTANT" that stated: "EARNED PREMIUM MUST BE PAID FOR THE TIME INSURANCE HAS BEEN IN FORCE." The Cover Note also stated: "In the event of cancellation, the earned premium will be computed short rate if cancelled by the insured unless ... subject to minimum earned premium, and pro rata if cancelled by Company." Similarly, Endorsement 5 to the policy stated: "If the Insured cancels this policy, earned premiums will be computed in accordance with the customary short-rate table and procedure, or the Minimum Earned Premium stated herein, whichever is greater."

On June 20, 1986, Insured entered into a premium finance agreement with Cananwill Consumer Discount Company (Financier). Curtis Volz (Volz) of Broker signed the agreement on behalf of Insured, after discussing the policy limits and premium with an officer of Insured. Under that agreement, the bulk of the premium set forth in the fax and Cover Note was paid by Financier, and Insured was to repay Financier in nine installments. Paragraph 2 of that agreement provided that Insured "irrevocably appoints Cananwill, Attorney-In-Fact, and in the event of default and after proper notice has been given as required by law, grants to Cananwill authority to effect cancellation of the policy[.]" After the premium finance agreement was executed, Financier informed Insurer of the agreement and of the fact it had been "irrevocably appointed lawful attorney for the insured to take any action specified in the terms of the agreement."

In August, 1986, Financier directed Insurer to cancel the policy because Insured had failed to make any payment on the premium finance agreement. The cancellation was not made at the direction or request of Insurer. The policy was in full force and effect between its issuance in early June and the cancellation in August. Following the cancellation, Insurer calculated the earned premium according to the customary short-rate tables, pursuant to Endorsement 5. That figure was greater than the minimum earned premium and, pursuant to the policy, was considered the earned premium. After calculating the earned premium, Insurer refunded the balance of the payments received to Financier.

In the meantime, however, Broker computed the amount of earned premium on a pro rata basis and settled its account with Insured accordingly. It assumed Insurer would also compute the amount of earned premium on a pro rata basis. The difference between the short-rate and the pro rata method of computation amounted to $31,600. Broker sought this sum from Insured as part of its claim for declaratory relief.

Before proceeding to Broker's issues, we must answer the contentions of Insurer and Insured that this court lacks jurisdiction to consider Broker's appeal.

JURISDICTION

Both Insurer and Insured argue the lack of jurisdiction of Broker's appeal because Broker failed to file a statement of issues within the ten days required by SDCL 15-26A-50. ² Broker counters that Insured provided no authority for its argument, thereby waiving it. We have held that failure to timely file and serve the notice of appeal is jurisdictionally fatal to the validity of an appeal, but Broker notes that under SDCL 15-26A-4, failure to take other steps does not affect the appeal's validity and does not necessarily require dismissal.

Insured did cite authority in the form of the statutory language requiring filing of a statement of issues found in SDCL 15-26A-50. Supporting authority is not necessarily confined to just case law but appropriate statutory law may be acceptable as well. Thus, we consider Insured's argument to be preserved.

On the merits, Broker is correct that only failure to timely serve and file the notice of appeal is jurisdictionally fatal to an appeal's validity, ³ while lesser omissions may be subject to sanctions. To decide whether dismissal is an appropriate sanction in this case, we look to the intent behind SDCL 15-26A-50. As Broker points out, the purpose of the requirement that a statement of issues be prepared is to allow an appellee the opportunity to order additional parts of the transcript when the appellant has failed to order a complete transcript. SDCL 15-26A-4. Here, there was no transcript made of the summary judgment hearings, so we fail to see how Insurer or Insured were prejudiced.

Furthermore, unlike the appellants in State Highway Commission v. Olson, 81 S.D. 237, 132 N.W.2d 927 (1965), and Meade Education Association v. Meade School District 46-1, 399 N.W.2d 885 (S.D.1987), Broker did file a statement of issues, although somewhat belatedly. This court's concern in both Olson and Meade ⁴ was that the failure to file the statement of issues precluded the court from making a meaningful review of the issues.

Therefore, since Insurer and Insured were not prejudiced and the statement of issues was filed, we see no reason for imposing the drastic remedy of dismissing Broker's appeal.

ISSUES

Broker raises two issues:

(1) Whether the trial court erred in granting summary judgment in favor of Insurer on the grounds that Insured's policy was cancelled by its attorney-in-fact.

(2) Whether the trial court erred in granting summary judgment in favor of Insured on the grounds that the insurance contract was void due to mutual mistake.

We once again reiterate our standard of review for granting or denying summary judgment:

In reviewing a grant or a denial of summary judgment under SDCL 15-6-56(c), we must determine whether the moving party demonstrated the absence of any genuine issue of material fact and showed entitlement to judgment on the merits as a matter of law. Groseth Intern., Inc. v. Tenneco, Inc., 410 N.W.2d 159, 164 (S.D.1987). The evidence must be viewed most favorably to the nonmoving party and reasonable doubts should be resolved against the moving party. Wilson v. Great Northern Ry. Co., 83 S.D. 207, 212, 157 N.W.2d 19, 21 (1968). The nonmoving party, however, must present specific facts showing that a genuine, material issue for trial exists. Ruane v. Murray, 380 N.W.2d 362, 364 (S.D.1986). Our task on appeal is to determine only whether a genuine issue of material fact exists and whether the law was correctly applied. If there exists any basis which supports the ruling of the trial court, affirmance of a summary judgment is proper. Weatherwax v. Hiland Potato Chip Co., 372 N.W.2d 118, 120 (S.D.1985); Ruple v. Weinaug, 328 N.W.2d 857, 859-60 (S.D.1983).

Pickering v. Pickering, 434 N.W.2d 758, 760-61 (S.D.1989). More importantly, "construction of a written contract is a question of law for this court to consider." Dirks v. Sioux Valley Empire Elec. Ass'n, 450 N.W.2d 426, 427-28 (S.D.1990) (citing Delzer Const. Co. v. South Dakota State Bd. of Transp., 275 N.W.2d 352 (S.D.1979)).

SUMMARY JUDGMENT FOR INSURER

Broker claims the trial court made two errors in its decision to grant summary judgment: (1) it improperly construed the word "insured" in the policy to include Financier, Insured's attorney-in-fact, and (2) the word "insured" was ambiguous, thus necessitating the need for parol evidence on usage and customs. We will examine each theory in that order.

First, Broker argues that because Financier was not specifically named in the policy as the "insured," there was no cancellation of the policy by Insured. This overly literal reading of the contract ignores long held authority that cancellation of a policy by an insured can be effected through the insured's agents. 43 Am.Jur.2d Insurance Sec. 410 (1982); 6A A.J. Appelman, Insurance Law & Practice Sec. 4224 (1972). This rule has been applied for years in cases involving premium finance agreements.

For example, in Angelo v. Traviglia, 7 Ohio Op.2d 383, 155 N.E.2d 717 (1957), the insured purchased an automobile insurance policy through an agent who retained the policy and gave the insured thirty days to pay the premium. When the insured failed to pay the full premium within that time, the agent returned the policy to the insurer marked "cancelled." Similar to Paragraph X of Insurer policy, this policy provided that it could be cancelled "by the named insured" by surrendering the policy. 155 N.E.2d at 720. The court held:

This surrender in the opinion of this Court may be made by the named insured, in person, or by his duly authorized agent. Generally, cancellation ... by the insured is not an act so personal in its nature that it cannot be delegated in the absence of statutory prohibition of such delegation.

Id.

In reaching this conclusion, the court relied on Chamberlain...