Zuraff v. Empire Fire & Marine Ins. Co.

• Decision Date: 01 April 1977
• Docket Number: No. 9276,9276
• Citation: 252 N.W.2d 302
• Parties: Dean R. ZURAFF, Plaintiff and Appellee, v. EMPIRE FIRE AND MARINE INSURANCE COMPANY, Defendant and Appellant. Civ.
• Court: North Dakota Supreme Court

Page 302

252 N.W.2d 302

Dean R. ZURAFF, Plaintiff and Appellee, v. EMPIRE FIRE AND MARINE INSURANCE COMPANY, Defendant and Appellant.

Civ. No. 9276.

Supreme Court of North Dakota.

April 1, 1977.

As Amended April 5, 1977.

Rehearing Denied April 25, 1977.

Syllabus by the Court

1. The Rule allowing for summary judgment on less than the whole case does not determine what constitutes finality for purposes of appeal, and only those partial adjudications otherwise made appealable by statute may be appealed. Rule 56(d), NDRCivP.

2. Every fire insurance policy covering real property entered into in this State is considered to be a valued policy, and total loss by fire will result in payment of the face value of the policy. § 26-18-08, NDCC.

3. The valued policy statute does not prevent the insurer from setting up the fraudulent conduct of the insured as a defense, including fraudulent conduct in procuring the insurance. § 26-18-08, NDCC.

4. Summary judgment should be granted only when there is no dispute as to material fact or to inferences deducible from the material facts, and where the moving party is entitled to judgment as a matter of law.

5. Actual fraud cannot exist unless there is intention to deceive, and the existence of actual fraud is always a question of fact. §§ 9-03-08, 9-03-10, NDCC.

6. In an action under the valued policy law, evidence of the actual value of the property insured is immaterial unless fraud is involved.

Mackoff, Kellogg, Kirby & Kloster, P. C., Dickinson, for defendant and appellant; argued by Ward M. Kirby, Dickinson.

William R. Mills, Bismarck, for plaintiff and appellee.

SAND, Justice.

Empire Fire and Marine Insurance Company appealed from a summary judgment entered in favor of the insured, Dean Zuraff, for the sum of $60,000.00 on a fire insurance claim for certain real property. Claims for insurance on personal property and for loss of business and punitive damages were continued for trial.

In early February of 1975, Zuraff purchased a tavern in Medora known as the Cave Bar. On 26 February 1975 an insurance policy was issued to him by the defendant Empire Fire and Marine Insurance Company (hereinafter insurer) which included coverage for fire loss on the building of $60,000 and fire loss of personal property contained in the building of $20,000. The purchase contract for the property entered into by Zuraff was claimed to be for the amount of $50,000, with an agreement to provide adequate insurance for the premises included as a condition of sale. On 26 March 1975 the building and personal property were destroyed by fire. Some time thereafter investigations were conducted by the insurer, the State Fire Marshal, and the State Electrical Board.

No payment was made by the insurer to Zuraff after several demands were made, and Zuraff commenced an action against the insurer to recover for the fire loss, loss of business, and punitive damages for oppressive conduct and refusal to pay. The insurer's Answer contained an allegation that Zuraff obtained insurance coverage through fraud and misrepresentation concerning the value of the building and personal property to be insured, and the insurer raised as an affirmative defense the allegation that the policy was null and void by reason of Zuraff's fraud and misrepresentation and that Zuraff knew at the time the insurance was obtained that the building was worth only $15,000, rather than $60,000.

The second affirmative defense raised was that Zuraff did not have a full interest in the property and could not, at any rate, recover more than the amount of his interest. The insurer also counterclaimed for dismissal of Zuraff's complaint and cancellation of the insurance policy based on fraud and misrepresentation or mutual mistake.

On 2 June 1976 Zuraff moved for a summary judgment in the district court of Burleigh County under Rule 56, North Dakota Rules of Civil Procedure, on that portion of the claim relating to insurance on the real property. The matter was submitted to the court on briefs by both parties, and summary judgment in Zuraff's favor was granted in the amount of $60,000. Judgment was entered, although the issues of personal property loss, business loss, and punitive damages remained for trial. Zuraff sought and obtained a writ of execution and attempted to levy upon the insurer's property. The insurer then took this appeal, raising the sole issue whether or not judgment on a portion of the issues was properly granted. We hold that it was not, and therefore reverse and remand to the district court for trial on all issues.

A question was raised initially regarding the appealability of the order. Summary judgment on a portion of the issues is provided for in Rule 56(d), NDRCivP, which reads:

"If on motion under this rule judgment is not rendered upon the whole case or for all the relief asked and a trial is necessary, the court at the hearing of the motion, by examining the pleadings and the evidence before it and by interrogating counsel, shall if practicable ascertain what material facts exist without substantial controversy and what material facts are actually and in good faith controverted. It shall thereupon make an order specifying the facts that appear without substantial controversy, including the extent to which the amount of damages or other relief is not in controversy, and directing such further proceedings in the action as are just. Upon the trial of the action the facts so specified shall be deemed established, and the trial shall be conducted accordingly."

This Rule, however, does not determine what constitutes finality for purposes of appeal, and when partial adjudication is made under the Rule it is not appealable unless otherwise so provided by statute. 6 Moore's Federal Practice, Part 2, (2d ed.) P 56.20 (3.1) (3.3). Because this case involves more than one claim and includes a counterclaim, reference was also made to Rule 54(b), NDRCivP. That rule says:

"When more than one claim for relief is presented in an action, whether as a claim, counterclaim, cross-claim, or third-party claim, or when multiple parties are involved, the court may direct the entry of a final judgment as to one or more but fewer than all of the claims or parties only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment. In the absence of such determination and direction, any order or other form of decision, however designated, which adjudicates fewer than all of the claims or the rights and liabilities of fewer than all the parties shall not terminate the action as to any of the claims or parties, and the order or other form of decision is subject to revision at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties."

The parties do not dispute that neither the express determination nor the express direction required by the Rule were made by the trial court, although the judgment was apparently treated as final as evidenced by the issuance of a writ of execution to Zuraff. However, after oral argument to this court stipulation was entered into by both parties through their counsel that any noncompliance with Rule 54(b) be waived and that this court reach the merits of the appeal regarding propriety of summary judgment. We need not, therefore, determine the issue of appealability and by stipulation of the parties we proceed to the merits of the appeal.

The principal contention by Zuraff is that North Dakota law on fire insurance for real property requires payment of the face value of the policy in case of total loss by fire, and that the insurer cannot contest or refuse payment after the loss by claiming that the property was overvalued at the time the policy was issued. The summary judgment was granted on this basis. Although that general principle is correct, the pertinent statute contains an exception based on fraud, which, according to the pleading, needs to be considered in the circumstances of this case. The statute under consideration is § 26-18-08, North Dakota Century Code, known as the Valued Policy Act, which reads:

"Whenever any policy of insurance shall be written to insure any real property in this state against loss by fire and the insured property shall be destroyed by fire without fraud on the part of the insured or his assigns, the stated amount of the insurance written in such policy shall be taken conclusively to be the true value of the property insured."

A "valued policy" is further defined in § 26-03-03(2), NDCC as follows:

"2. A valued policy is one which expresses on its face an agreement that the thing insured shall be valued at a specified sum; . . ."

The Valued Policy Act, § 26-18-08, NDCC gives to fire insurance policies, to the extent they apply to real property, the effect of a valued policy. Total loss of the real property results in full payment of the face value of the property without further evidence of actual loss. This provision becomes a part of every fire insurance contract entered into in the State covering real property, the same as if it were expressly incorporated into the policy. Any policy provisions conflicting with it are void since the benefits of the statute cannot be waived. 15 Couch on Insurance Second, § 54.111; 45 C.J.S. Insurance § 916.

Many states have similar provisions and such valued policy laws are founded on sound public policy. Their dual purpose is (1) to relieve the insured from the burden of proving the value of his property after its total destruction, and (2) to prevent overinsurance by discouraging insurance companies from collecting premiums on overvalued property, but then contesting value, and hence liability, when it becomes to their advantage to do so. See, Hight v. Maryland Insurance Co., 69 S.D. 320, 10 N.W.2d 285 (1943); McMahon Bros. Realty Co. v. United States Fidelity & Guaranty Co., 217 F.Supp. 567 (D.Del....