Easton v. Washington County Insurance ( 1957 )

Opinion by

Mr. Justice Cohen,

Plaintiffs were the owners of a certain property in Washington County. On October 1, 1951, there stood on this property a two-story concrete block and frame building with a basement and sub-basement. Because, of the grade of the land the basement and sub-basement at the back of the building were exposed above the ground. The sub-basement extended under the building to a depth of approximately 20 feet and was divided into four separate rooms. One side of each room was unenclosed, and the rooms could be entered only from the unenclosed sides. Finished lumber and building materials were stored in these rooms and in the rear of the basement which was partitioned from the rest of the basement. In front of the building, along a railroad siding, plaintiffs had stored some lumber. To the rear were open yards in which plaintiffs had stored their less valuable lumber.

In the open yards was a small building commonly called a shed, open on all sides and roofed with tar paper, used to store gutters and some lumber.

Prior to October 1, 1951, the property Avas protected under insurance policies “[o]n the two story concrete block building . . . occupied for living apartments, offices, and warehouse for lumber and builders’ supplies. . . .

“And on . . . lumber in open yard adjacent to the above described warehouse.

“Privilege granted to finish and complete.” (Emphasis supplied).

On October 1, 1951, the original policies to the value, of .$100,000 were cancelled at the request of the assured because the buildings carried an excessively high rate; and insurance in the amount of $60,000 (divided equally among six companies) was placed only “on stock of lumber and builders’ supplies in open yards and sheds at the rear of assured’s warehouse at Washington County, Pa.” (emphasis supplied). After the new policies totaling $60,000 Avere issued, plaintiffs constructed additional sheds in the open yards and stored -lumber therein. These policies were renewed until October 1, 1954.

A fire completely destroyed plaintiffs’ building, including the lumber and building supplies which were stored therein, on March 15, 1954. The lumber in the open yards and at the railroad siding, however, was not damaged by the fire.

Plaintiffs sought to recover on the insurance for their losses, maintaining that the partitioned basement and rooms in the sub-basement were “sheds” within the meaning of the policies and that the contents — lumber and builders’ supplies — were thus insured. All the companies refused their claim. Plaintiffs on March 11, 1955, instituted separate suits, (consolidated for trial), against the several insurance companies in the Court of Common Pleas of Washington County. The cases were tried on the following theories: (1) that the word “sheds” is broad enough to encompass within its meaning the basement structures at the bottom of the concrete block and frame building; (2) that though the contracts of insurance are apparently clear, when an attempt is made to apply their terms to the existing situation an ambiguity arises in that the word “sheds” could apply equally to the basement structures or to the small building in the open yard or to both; that a latent ambiguity having thus developed, evidence is admissible to denote the exact reference intended by the parties to be attributed to the word “sheds”; (3) that through fraud, accident or mistake coverage of the materials in the basements was not included in the insurance contracts and that, therefore, the contracts should be reformed to include such coverage.

The trial judge rejected the plaintiffs’ first theory— that the basement structures were sheds. However, he determined that the word “sheds” in the insurance policies was latently'ambiguous. He therefore admitted evidence to establish the exact reference intended by the parties when using the word “sheds” and submitted this question to the jury.

Additionally, the trial judge admitted evidence to determine whether the parties, pursuant to an oral agreement made with the defendants’ agent, intended to insure the basement structures but failed to include their understanding in the policies because of fraud, accident or mistake. This issue was also submitted to the jury-

The jury returned a verdict in favor of the plaintiffs, and the defendants moved for judgment n.o.v. and for a new trial. From the refusal of their motions by the court en banc, (the trial judge dissenting), and the entry of judgment upon the verdict, the defendants have brought these appeals.

The plaintiffs’ contention that the basement storage areas are “sheds” cannot be sustained. Simple words of common usage in a policy of insurance will be construed in their natural, plain and ordinary sense. Blue Anchor Overall Co. v. Pennsylvania Lumbermens Mutual Ins. Co., 385 Pa. 394, 397, 123 A. 2d 413 (1956). It has not been suggested that the word “sheds” is a word of art or that it is not a simple word of common usage. We therefore construe it in its natural, plain and ordinary sense. The trial judge in his charge to the jury, quoting from numerous standard dictionaries,¹ stated: “the word ‘shed’, is defined as ‘a slight structure built for shelter or storage; ... a lean-to, or separate building open in front, an outbuilding, a hut, as a wagon shed.’ ... ‘A small building slightly constructed and of simple form, usually one story high, and often with front or front and sides open; also a lean-to, as a wagon- shed.’ ... ‘A slight or temporary building; a large open structure for temporary storage of goods, as a shed on a wharf, a railway shed, a sheep shed, cattle shed.’” (Emphasis supplied). The dictionary’s definition is consistent with the general usage of the word “sheds” and both are denotive of an unsubstantial structure created for a temporary purpose. Such a definition is wholly inapplicable to the basements of a permanent concrete block and frame two-story warehoiise. Aside from the literal definition the word “sheds” is in no sense suggestive of the basements of a concrete and frame building even though the basements may be open on one side.

The meaning of the word “sheds” is plain, and there has been no suggestion that it was used in a special or technical sense. While the facts surrounding the making of a contract are admissible in evidence to help explain the meaning of language used in a contract,^{2 3}if the meaning is plain® and the circumstances do not show that the language was used in a special or technical sense,⁴ no such evidence can be submitted to a jury. See Restatement, Contracts §§230, 235(a), (b), (d)., and comments (1932); 9 Wigmore, Evidence §§2460: 2462 (3rd ed. 1940) (particularly note pp. 190-194); 3 Williston, Contracts §§609, 618, 629 (2nd ed. 1936). Accordingly, the trial judge was correct in rejecting the plaintiffs first theory.

The second theory of the plaintiffs is that the insurance contracts contain a latent ambiguity arising from the fact that while the original policies issued in 1951 used the plural “sheds” there, in fact, existed at that time only one shed in the open yard. From this circumstance the plaintiffs contend that the court below properly admitted evidence showing whether the word “sheds” was intended by the parties to cover the basement store rooms and correctly submitted this issue to the jury.

We are unable to agree. A latent ambiguity arises from extraneous or collateral facts which make the meaning of a written instrument uncertain although the language thereof be clear and unambiguous. Metzger’s Estate, 222 Pa. 276, 71 Atl. 96 (1908). The usual instance of a latent ambiguity is one in which a writing refers to a particular person or a thing and is thus apparently clear on its face, but upon application to external objects is found to fit two or more. of them equally. See Lycoming Mutual Insurance Co. v. Sailer, 67 Pa. 108 (1870) (insurance policy covered a “hay house”; there were two “hay houses”); Koplin v. Franklin Fire Insurance Co., 158 Pa. Super. 301, 44 A. 2d 877 (1945) .(plaintiff’s two chicken houses were insured for different amounts; which was chicken house #1 and which was #2 within the designation of the policy?) See also 9 Wigmore, op. cit. supra, §2472.

Whether evidence of extrinsic circumstances is sufficient to create a latent ambiguity in a contract is a matter of law for the court. Only after the court is satisfied that a latent ambiguity exists is the question of what the parties intended by language used in the contract — taking into consideration the extrinsic facts and circumstances — an issue to be submitted to the jury. Waldman v. Shoemaker, 367 Pa. 587, 592, 80 A. 2d 776 (1951) ; Lycoming Mutual Insurance Co. v. Sailer, 67 Pa. 108, 113 (1870). See also 3 Williston op. cit. supra, §616.

The mere fact that the plural “sheds” was used in the present policies when only one such structure existed in 1951 does not create an ambiguity. The effect of the policies is simply to insure the one existing shed and, further, to cover any other sheds which might be erected during the life of the policies to a total value of $60,000. If a policy of insurance were drawn to cover “horses” and the insured had but one horse at the time, certainly no such ambiguity would arise as would permit testimony that the policy was meant to cover the insured’s cow as well. Simply because the plural “sheds” was used when- only one shed existed is not a sufficient reason for permitting evidence to be introduced in order to show that a structure which is clearly not a shed is a shed within the meaning of the contract on the theory that latent ambiguity exists.

Since the court should have, in the first instance, determined that there was no latent ambiguity in the contracts, it follows that the admission of evidence on the question whether the parties used the word “sheds” to include the basement storeroom, and the submission of this issue to the jury, was error.

The final theory of the plaintiffs is that they are entitled because of fraud, accident or mistake to have the policy reformed in order to carry out the full intent and agreement of the parties. They would have the coverage of the policy changed to read as follows: “On Stock of lumber and builders supplies in open yards and in a shed in the open yards; and in a shed or sheds consisting of (a) stalls in the sub-basement of the assured’s main building and basement warehouse, and (b) in the storage room in the rear of the basement warehouse, both being classified as storage shed or sheds although being part of the assured’s building; and along Railroad siding about 300 yards South of assured’s main building on Washington Road . . . .”

In support of this position Samuel Easton testified that the defendants’ authorized agent agreed that the fire insurance policies when issued were to cover the lumber and builders’ supplies which the plaintiffs had stored in the basement and sub-basement of their building with the understanding and agreement that they would construct a Avail partitioning off the rear portion of the basement warehouse in such a manner that there would be no direct communication between the basement storage areas and any other part of the building. In addition, Easton testified that the agent agreed that after the construction of the partition the basement storage rooms would be classified as “sheds”.

In order to obtain the reformation of a contract in equity, or a variance of the terms of a contract at Iuav, the moving party is required to show by clear, precise and indubitable evidence either fraud or mutual mistake. Brandolini v. Grand Lodge of Pennsylvania, 358 Pa. 303, 305, 56 A. 2d 662 (1948); Broida v. Travelers Insurance Co., 316 Pa. 444, 447, 175 Atl. 493 (1934) ; Gianni v. Russell & Co., 281 Pa. 320, 325, 126 Atl. 791 (1934). The meaning of this requirement is that [plaintiffs’] “Avitnesses must be found to be credible, that the facts to which they testify are distinctly remembered and the details thereof narrated exactly and in due order, and that their testimony is so clear, direct; weighty and convincing as to enable the jury to come to a clear conviction, Avithout hesitancy, of the truth of the precise facts in issue.” Broida v. Travelers Insurance Co., supra, 316 Pa. at 448. Furthermore, the evidence must be established by two witnesses or by one witness and corroborating circumstances. Brandolini v. Grand Lodge of Pennsylvania, supra, 358 Pa. at 305; Broida v. Travelers Insurance Co., supra, 316 Pa. at 448. Whether the plaintiffs’ evidence met this standard and so justified the submission of their case to the jury is again a question of law for the court. Gerfin v. Colonial Smelting & Refining Co., 374 Pa. 66, 68, 97 A. 2d 71 (1953); Brandolini v. Grand Lodge of Pennsylvania, supra, 358 Pa. at 305; Broida v. Travelers Insurance Co., supra, 316 Pa. at 447.

Reviewing the evidence presented' in the case before us, we find that the plaintiffs’ evidence does not fulfill the standard of proof required to warrant submission of their claim to the jury.

Samuel Easton was the only witness to testify to the alleged fraud or mistake.⁵ It is undenied that he knew that the building and its contents had been rated as a high risk by the insurance companies because of lack of fire protection. The evidence- shows that the plaintiffs had argued strenuously with the insurance representatives for a lower rate without success. Under these circumstances it seems less than credible that the plaintiffs, by the addition of a wall separating the storage areas from the remainder of the building, thought that they could obtain on them the same lower fire insurance rate which applied to the materials stored in the open yards and in the open shed for which adequate fire protection was available.⁶

We hold, in conclusion, that neither the issue of a latent ambiguity nor the question of mutual mistake or fraud should have been submitted to the jury and that, therefore, the defendants are entitled to judgments n.o.v.⁷

The judgments of the Court of Common Pleas of Washington County are reversed and here entered in favor of the several defendants.

1 Webster’s New International Dictionary (1950 ed.) ; Funk & Wagnall’s New Standard Dictionary; Tbe Century Dictionary; Webster’s Twentieth Century Dictionary.

2 Betterman v. The American Stores Co., 367 Pa. 193, 203-204, 80 A. 2d 66 (1951) ; United States National Bank v. Campbell, 354 Pa. 483, 487-488, 47 A. 2d 697 (Í946) ; Swarthmore Boro. v. Phil adelphia Rapid Transit Co., 280 Pa. 79, 84, 124 Atl. 343 (1924) ; McMillin v. Titus, 222 Pa. 500, 503, 509, 72 Atl. 240 (1909).

3 Atlantic Refining Co. v. Wyoming Nat’l Bank of Wilkes-Barre, 356 Pa. 226, 233, 51 A. 2d 719 (1947) ; Anstead v. Cook, 291 Pa. 335, 337, 140 Atl. 139 (1927). Cf. State Line & Sullivan R. R. Co. v. Lehigh Valley R. R. Co., 277 Pa. 227, 233, 120 Atl. 829 (1923).

4 Electric Reduction Co. v. Colonial Steel Co., 276 Pa. 181, 187-190, 120 Atl. 116 (1923). Cf. D’Orazio v. Masciantonio, 345 Pa. 428, 432, 29 A. 2d 43 (1942) ; Lehigh & Wilkes-Barre Coal Co. v. Wright; 177 Pa. 387, 35 Atl. 919 (1896).

5 In view of our disposition of the case it is not necessary for us to determine whether the defendants would be bound by the alleged representations of their agent.

6 In view of our determination of the case we are not called upon to weigh the evidence presented on the issue of fraud or mistake. Were we so to do, however, we should find the following Jetter (which needs no comment) most persuasive in negating plaintiffs’ contentions:

“November 5, 1951

Easton Lumber & Builders Supply Co.

R. D. #2 Canonsburg, Pa.

Attention: Mrs. Samuel Easton

Dear Mrs. Easton:

Confirming our phone conversation regarding your account we will try to explain it as follows:

On November 2, 1950 a policy was written on the new building and contents under Washington County Policy #37-654-0522. An additional $10,000.00 was added December 8, 1950 under Pennsylvania Millers Policy #396863. On February 3, 1951, $15,000.00 additional was added under Berkshire PoUcy #649973. This made a total amount of $40,000.00 and the bill was sent to you February 9 in the amount of $484.70. It was paid in full by your office March 1, 1951.

The policy written in the Washington County effective November 2 was reduced from $15,000.00 to $10,000.00 on March 2, 1951. This was because the company did not want to carry more than $10,000.00 after they made an inspection. This policy was then reduced to $10,000.00 and a policy was written in the Millers Mutual #B 46745 and was billed to you March 5, 1951, in the amount of $30.33. This was paid in full by your office May 9, 1951.

' March 19, 1951 we were out to see Mr. Easton and he asked us to increase'the insurance to $100,000.00 making $50,000.00 on the building and $50,000.00 on contents including the lumber in the open yards. We forwarded binders to your office subject to the Middle Department making rates on same. We had considerable difficulty with the Middle Department in getting them to rate your new building. When they finally did rate it, it was very high. We then fought with them for a long time in attempts to get the rates reduced, but were unsuccessful.

We then discussed the matter uñth Mr. Bastón on October 1 and he requested us to eliminate the' coverage entirely oh the hew building and cover $60,000.00 On all stock outside of the building. This bill was sent to you October 12, 1951, premium being $319.60. At the same time we sent you a credit for $175.67 which was the total return premium on the original bill of $484.70, paid by your office March 1, 1951.

The binder charges from March 19 to, October 1 for the $60,-000.00 netted $322.01. There was never a bill sent to you on the binders until Oct. 15, 1951.

We. hope we have made, ourselvés clear on. the matter of these bills ánd if there is any further question, do not hesitate to call us.

Yours very truly, - •

Mutual Insurance Agency KMY, Jr. :dg” (Emphasis supplied)

7 A court may not, on motion for judgment n.o.v., eliminate evidence improperly received at trial and then dispose of the case on the basis of the diminished record when there is an issue of fact to be determined. Cherry v. Mitosky, Admr., 353 Pa. 401, 404, 45 A. 2d 23 (1946). But when the issue has itself been withdrawn from the, consideration of the fact, finder, the rule does not obtain.