U.S. Specialty Ins. Co. v. D S Avionics

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
10/26/2018 12:12 AM CDT
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Nebraska Supreme Court A dvance Sheets
301 Nebraska R eports
U.S. SPECIALTY INS. CO. v. D S AVIONICS
Cite as 301 Neb. 388U.S. Specialty Insurance Company,
a corporation, appellee, v.
D S Avionics Unlimited
LLC, appellant.
___ N.W.2d ___
Filed October 19, 2018. No. S-17-1101.
1. Summary Judgment: Appeal and Error. An appellate court will
affirm a lower court’s grant of summary judgment if the pleadings
and admitted evidence show that there is no genuine issue as to any
material facts or as to the ultimate inferences that may be drawn from
those facts and that the moving party is entitled to judgment as a matter
of law.
2. Declaratory Judgments. Whether to entertain an action for declaratory
judgment is within the discretion of the trial court.
3. Declaratory Judgments: Justiciable Issues. The existence of a jus-
ticiable issue is a fundamental requirement to a court’s exercise of its
discretion to grant declaratory relief.
4. Declaratory Judgments: Justiciable Issues: Words and Phrases. A
“justiciable issue” needed for declaratory judgment requires a present
substantial controversy between parties having adverse legal interests
susceptible to immediate resolution and capable of present judicial
enforcement.
5. Actions: Declaratory Judgments: Parties: Judges: Jurisdiction. A
declaratory judgment action will not be entertained if there is pending,
at the time of the commencement of the declaratory action, another
action or proceeding to which the same persons are parties, in which
are involved and may be adjudicated the same identical issues that are
involved in the declaratory action. A court abuses its discretion when
it entertains jurisdiction over a declaratory judgment action in such
a situation.
6. Summary Judgment. Summary judgment is proper when the plead-
ings and evidence admitted at the hearing disclose no genuine issue
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Nebraska Supreme Court A dvance Sheets
301 Nebraska R eports
U.S. SPECIALTY INS. CO. v. D S AVIONICS
Cite as 301 Neb. 388regarding any material fact or the ultimate inferences that may be drawn
from those facts and the moving party is entitled to judgment as a mat-
ter of law.
7. Summary Judgment: Appeal and Error. In reviewing a summary
judgment, an appellate court views the evidence in the light most
favorable to the party against whom the judgment is granted and gives
such party the benefit of all reasonable inferences deducible from
the evidence.
8. Declaratory Judgments. Declaratory judgment cannot be used to
decide the legal effect of a state of facts which are future, contingent, or
uncertain.
9. ____. A declaratory judgment action cannot be used to adjudicate hypo-
thetical or speculative situations which may never come to pass.
Appeal from the District Court for Douglas County: Shelly
R. Stratman, Judge. Reversed.
Thomas M. Locher, of Locher, Pavelka, Dostal, Braddy &
Hammes, L.L.C., for appellant.
Robert E. O’Connor, Jr., for appellee.
Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke, and
Papik, JJ., and Johnson, District Judge.
Johnson, District Judge.
D S Avionics Unlimited LLC (DSA) presented a theft claim
under the physical damage coverage of an aircraft policy. The
insurer denied coverage, then filed a declaratory judgment
action seeking a determination that DSA’s theft claim was not
covered under the policy. The district court granted summary
judgment in favor of the insurer, and DSA appeals. Because
we conclude the district court abused its discretion in issuing
declaratory relief on this record, we reverse.
BACKGROUND
At all relevant times, U.S. Specialty Insurance Company
(USSIC) insured a 1964 Piper PA-30 aircraft owned by DSA.
The agreed-upon value of the insured aircraft is $50,000. In
November 2014, George Babcock, an authorized agent of
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Nebraska Supreme Court A dvance Sheets
301 Nebraska R eports
U.S. SPECIALTY INS. CO. v. D S AVIONICS
Cite as 301 Neb. 388DSA, delivered the aircraft to Trey M. O’Daniel, a mechanic,
for maintenance. O’Daniel operated his business from an air-
port hangar in Omaha, Nebraska, rented from the airport’s
owner, Keith B. Edquist.
In late November 2014, O’Daniel was notified that the
­hangar would no longer be available to him as of December 1.
O’Daniel removed his belongings from the hangar, but DSA’s
aircraft remained in the hangar after December 1.
On December 2, 2014, O’Daniel returned to the hangar
to remove DSA’s aircraft and discovered the lock had been
changed. With the help of an adjacent property owner, O’Daniel
was able to access the hangar and move the aircraft onto the
tarmac. Because O’Daniel was not authorized to fly the air-
craft, he left it parked on the tarmac and advised Babcock
where the aircraft could be found.
According to the record, DSA did not attempt to recover the
aircraft until December 11, 2014. On that day, Babcock told
O’Daniel to prepare the aircraft for flight on December 12.
When O’Daniel went to the airport to verify the airworthiness
of the aircraft, he discovered Edquist’s plow truck was parked
in front of the aircraft, blocking it. Edquist told O’Daniel he
would not allow the airplane to be moved unless O’Daniel
paid him a specified sum of money. It is clear that parking the
truck in front of the aircraft was done intentionally to block
its removal.
On December 12, 2014, after learning the aircraft was
blocked by Edquist’s truck and could not be flown away,
Babcock met with a deputy from the Douglas County sheriff’s
office. The deputy told Babcock it would be lawful to hire
a tow truck to move Edquist’s truck, but advised that doing
so might create the potential for a “violent breach of peace.”
Babcock decided not to hire a tow truck, and left the aircraft
on the tarmac blocked by Edquist’s truck. At some point
between December 12 and 17, Edquist moved the aircraft from
the tarmac into a hangar at the Omaha airport. Babcock was
advised of this.
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U.S. SPECIALTY INS. CO. v. D S AVIONICS
Cite as 301 Neb. 388On December 17, 2014, Babcock reported the aircraft sto-
len. The same day, Babcock sent a letter to Edquist demand-
ing that the aircraft be released. When contacted by law
enforcement, Edquist said the aircraft would be released only
if he was paid $1,750. Babcock refused to pay. Later that
day, Edquist’s attorney told law enforcement and Babcock
that Edquist would release the aircraft if paid $340, which
he claimed pursuant to Neb. Rev. Stat. § 52-601.01 (Reissue
2010). That statute applies to persons who “shall perform
work or labor, or exert care or diligence, or who shall advance
money or material upon personal property under a contract,
expressed or implied.”1 After reviewing § 52-601.01, Babcock
refused to make payment.
On December 18, 2014, law enforcement concluded no crime
had been committed and advised Babcock the issues involv-
ing the aircraft were “civil” in nature. Later that day, Edquist
told O’Daniel he would release the aircraft if paid $1,760. On
December 20, Edquist again told Babcock the aircraft would
be released if an unspecified amount of money were paid. On
January 12, 2015, Edquist told O’Daniel he would release the
aircraft for a $500 storage fee if paid by January 13 and for a
$600 storage fee if paid at a later date.
On February 12, 2015, Edquist told Babcock the aircraft
was being moved from the hangar and would be placed out-
side. Edquist demanded a sum of money, which Babcock
refused to pay. On February 14, Edquist made another demand
for payment of the “storage” bill, and Babcock again refused
to pay.
USSIC Denies Claim
On February 18, 2015, on DSA’s behalf, Babcock submitted
a sworn “Proof of Loss” to USSIC, reporting that “[a] theft
loss occurred on or about the 11th day of December, 2014.”
1
§ 52-601.01.
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U.S. SPECIALTY INS. CO. v. D S AVIONICS
Cite as 301 Neb. 388Babcock claimed the loss was caused by the “unlawful seizure,
distraint, conversion, and theft of the aircraft.” He claimed
the amount of the loss was $50,000—the full insured value of
the aircraft.
USSIC investigated DSA’s theft claim and, in a letter dated
April 21, 2015, denied coverage, explaining:
You know where the plane is, who has it, and why they
have it. There has been no damage to the aircraft, it sits
in a hanger [sic]. Apparently law enforcement in Douglas
County has determined that it is a civil matter. Yet, you
have taken no action against O’Daniel.
The facts as you have described them in your claim
and claim summary, are not covered by your policy of
insurance. Specifically your policy contains the following
provisions applicable to your claim:
1. What We Cover
a. Coverage F covers direct physical loss of or damage
to your aircraft caused by an accident while the aircraft is
not in motion.
l. Accident means a sudden event during the pol-
icy period, neither expected nor intended by you, that
involves your aircraft and causes physical damage to or
loss of the aircraft during the policy period.
....
4. What We Will Not Pay
We will not pay for physical loss of or damage to your
aircraft:
....
h. Embezzlement, Conversion or Secretion
If anyone to whom you relinquish possession of the
aircraft embezzles, converts or secretes [sic] the aircraft.
We also will not pay for depreciation, loss of use, loss
of profits, loss of guaranty or warranty, or any other eco-
nomic or consequential damage of any kind.
(Emphasis omitted.)
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Nebraska Supreme Court A dvance Sheets
301 Nebraska R eports
U.S. SPECIALTY INS. CO. v. D S AVIONICS
Cite as 301 Neb. 388USSIC Files Declaratory
Judgment Action
In August 2015, USSIC filed a declaratory judgment
action against DSA in the district court for Douglas County,
Nebraska, seeking a declaration of noncoverage. DSA counter-
claimed, seeking a declaration of coverage and alleging breach
of contract and bad faith. Both parties moved for summary
judgment.
A hearing was held, and during the presentation of evi-
dence and argument, the court reserved ruling on objections to
numerous exhibits. After the hearing, the court entered an order
granting summary judgment in favor of USSIC on the cover-
age question and denying DSA’s summary judgment motion.
Summarized, the district court concluded DSA’s claim was not
covered under the physical damage coverage of the applicable
policy. The court found that the undisputed evidence showed
the aircraft was “being held by . . . Edquist under demand of
payment” and that thus, there had been no “accident” within
the meaning of the policy. The court also found the conversion
exclusion applied.
Thereafter, DSA filed a motion to alter or amend the judg-
ment. DSA asked the court to include in the judgment its rul-
ings on exhibits on which the court previously had reserved
ruling. DSA also asked the court to reverse its decision and
instead enter summary judgment in favor of DSA. The district
court granted DSA’s first request and made express evidentiary
rulings on the exhibits, but denied DSA’s request to reverse the
summary judgment rulings.
DSA timely appealed, and we moved the case to our docket
on our own motion.2
ASSIGNMENTS OF ERROR
DSA assigns, combined and restated, that the district court
erred in (1) sustaining USSIC’s motion for summary judgment,
2
See Neb. Rev. Stat. § 24-1106(3) (Supp. 2017).
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U.S. SPECIALTY INS. CO. v. D S AVIONICS
Cite as 301 Neb. 388(2) overruling DSA’s motion for summary judgment, and (3)
admitting and excluding certain evidence and argument at the
summary judgment hearing.
STANDARD OF REVIEW
[1] An appellate court will affirm a lower court’s grant of
summary judgment if the pleadings and admitted evidence
show that there is no genuine issue as to any material facts
or as to the ultimate inferences that may be drawn from those
facts and that the moving party is entitled to judgment as a
matter of law.3
[2] Whether to entertain an action for declaratory judgment
is within the discretion of the trial court.4
ANALYSIS
The procedural posture of this case affects the resolution
of the appeal. Here, the district court (1) entertained USSIC’s
action for declaratory relief and (2) granted summary judgment
in favor of USSIC.
[3,4] The existence of a justiciable issue is a fundamental
requirement to a court’s exercise of its discretion to grant
declaratory relief.5 A “justiciable issue” needed for declaratory
judgment requires a present substantial controversy between
parties having adverse legal interests susceptible to immediate
resolution and capable of present judicial enforcement.6
[5] A declaratory judgment action will not be entertained
if there is pending, at the time of the commencement of the
declaratory action, another action or proceeding to which the
same persons are parties, in which are involved and may be
adjudicated the same identical issues that are involved in the
3
Freeman v. Hoffman-La Roche, Inc., 300 Neb. 47, 911 N.W.2d 591 (2018).
4
Mansuetta v. Mansuetta, 295 Neb. 667, 890 N.W.2d 485 (2017).
5
City of Fremont v. Kotas, 279 Neb. 720, 781 N.W.2d 456 (2010), abrogated
on other grounds, City of North Platte v. Tilgner, 282 Neb. 328, 803
N.W.2d 469 (2011).
6
See id.- 395 -
Nebraska Supreme Court A dvance Sheets
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U.S. SPECIALTY INS. CO. v. D S AVIONICS
Cite as 301 Neb. 388declaratory action.7 A court abuses its discretion when it enter-
tains jurisdiction over a declaratory judgment action in such
a situation.8
[6,7] Summary judgment is proper when the pleadings and
evidence admitted at the hearing disclose no genuine issue
regarding any material fact or the ultimate inferences that may
be drawn from those facts and the moving party is entitled to
judgment as a matter of law.9 In reviewing a summary judg-
ment, an appellate court views the evidence in the light most
favorable to the party against whom the judgment is granted
and gives such party the benefit of all reasonable inferences
deducible from the evidence.10
Much of the parties’ briefing is devoted to arguing whether
Edquist’s conditional detention of the aircraft pending payment
of a storage fee amounts to theft or tortious conversion, or at
least whether a genuine issue of material fact exists on that
issue. As we explain below, this record does not permit that
question to be answered at this time in a declaratory judgment
action. We conclude the district court abused its discretion in
entertaining the declaratory action and express no opinion on
the propriety of the summary judgment ruling.
R elevant Policy Provisions
Some additional background is necessary in order to frame
the analysis. The aircraft policy’s physical damage coverage
provides in pertinent part:
1. What We Cover
a. Coverage F covers direct physical loss of or damage
to your aircraft caused by an accident while the aircraft
is not In motion.
7
See Mansuetta, supra note 4.
8
Id.9
Jordan v. LSF8 Master Participation Trust, 300 Neb. 523, 915 N.W.2d 399(2018).
10
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Nebraska Supreme Court A dvance Sheets
301 Nebraska R eports
U.S. SPECIALTY INS. CO. v. D S AVIONICS
Cite as 301 Neb. 388....
2. What You Must Pay or Bear (Deductible)
When we pay for loss of or damage to your aircraft,
you must first pay or bear one of the following amounts
unless no deductible applies:
....
c. No Deductible
We will not subtract either deductible amount if the
loss or damage is caused by:
(1) Fire, lightning, explosion, theft or vandalism;
....
3. What We Will Pay (Less Deductible)
a. Destroyed Aircraft
If the cost of repair when added to the value of the
aircraft after it is damaged and prior to repairs equals or
exceeds the agreed value it is a destroyed aircraft.
If your aircraft is destroyed, we will pay the agreed
value of the aircraft less the applicable deductible. We
will take the destroyed aircraft.
b. Damaged Aircraft
If your aircraft is damaged and not destroyed, we
will pay the reasonable cost of repair after the aircraft is
repaired, but we will not pay more than the agreed value
less the applicable deductible.
....
If the estimated cost of repair . . . is more than the
agreed value of the aircraft, we will pay the agreed
value less the applicable deductible and we will take the
damaged aircraft.
....
4. What We Will Not Pay
We will not pay for physical loss or damage to your
aircraft:
....
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Nebraska Supreme Court A dvance Sheets
301 Nebraska R eports
U.S. SPECIALTY INS. CO. v. D S AVIONICS
Cite as 301 Neb. 388h. Embezzlement, Conversion or Secretion
If anyone to whom you relinquish possession of the
aircraft embezzles, converts or secretes [sic] the aircraft.
We also will not pay for depreciation, loss of use, loss
of profits, loss of guaranty or warranty, or any other eco-
nomic or consequential damage of any kind.
....
7. Theft
If your aircraft or any part of it is stolen and recov-
ered before we have paid for it, we may return it to you
along with payment for any physical damage to it.
“Accident” is defined in the policy as a “sudden event
during the policy period, neither expected nor intended by
[the insured], that involves [the aircraft] and causes physical
damage to or loss of the aircraft during the policy period.”
(Emphasis omitted.)
Parties’ Coverage
A rguments
The policy’s physical damage coverage “covers direct physi-
cal loss of or damage to [the aircraft] caused by an accident
while the aircraft is not [i]n motion.” (Emphasis omitted.) DSA
makes no claim that the aircraft sustained any physical dam-
age while in the possession of either Edquist or O’Daniel. The
threshold coverage question thus turns on whether the undis-
puted evidence shows there has been no “direct physical loss”
of the aircraft.
DSA argues there has been a “‘direct physical loss’” of the
aircraft because Edquist has either stolen the aircraft or converted
it.11 DSA claims that after it delivered the aircraft to O’Daniel,
Edquist exercised “self-help” to unlawfully evict O’Daniel and
seize the aircraft.12 DSA claims that because Edquist has “no
11
Reply brief for appellant at 26 (emphasis omitted).
12
Id. at 13.
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Nebraska Supreme Court A dvance Sheets
301 Nebraska R eports
U.S. SPECIALTY INS. CO. v. D S AVIONICS
Cite as 301 Neb. 388lien or right to withhold the plane,” his continued possession
of the aircraft pending payment of storage fees is unlawful and
amounts to either theft or tortious conversion.13
USSIC responds that Edquist’s detention of the aircraft is
lawful. USSIC contends that after O’Daniel was evicted from
the hangar, the aircraft was made available to be flown away,
but DSA left the aircraft on the tarmac for more than a week
before attempting to fly it away. USSIC argues that Edquist
is therefore entitled to storage fees and is lawfully refusing to
release the aircraft until such fees are paid.
Assuming, without deciding, that proof of either a theft
or a conversion of the aircraft would be sufficient under the
policy to demonstrate “direct physical loss of or damage to
[the aircraft] caused by an accident while the aircraft is not
[i]n motion” (emphasis omitted), we must nevertheless con-
clude that a judicial determination of noncoverage, premised
on such a theory, is not possible on this record.
Declaratory Judgment
Was Premature
Here, determination of the coverage dispute turns, in large
part, on whether Edquist’s possession of the aircraft is lawful
(as USSIC claims) or whether Edquist has stolen or converted
the aircraft (as DSA claims). The evidence on lawfulness is
controverted and lies at the center of what appears, from the
record, to be an ongoing and unresolved civil dispute between
Edquist, O’Daniel, and DSA. Although USSIC and DSA in this
declaratory judgment action seek a judicial determination on
the legality of Edquist’s conditional possession of the aircraft
pending payment of storage fees, neither Edquist nor O’Daniel
were made parties to this action.14
13
Brief for appellant at 15.
14
See Neb. Rev. Stat. § 25-21,159 (Reissue 2016) (when declaratory relief is
sought, “all persons shall be made parties who have or claim any interest
which would be affected by the declaration”).
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Nebraska Supreme Court A dvance Sheets
301 Nebraska R eports
U.S. SPECIALTY INS. CO. v. D S AVIONICS
Cite as 301 Neb. 388It is unclear from the record whether DSA has pursued
direct legal action against either Edquist or O’Daniel. The
briefs and motions filed with this court do conclusively show,
however, that there is ongoing civil litigation between Edquist
and O’Daniel, in which DSA has intervened. Importantly, the
district court was aware of this litigation (although not of
the intervention) at the time the declaratory judgment action
was filed, as the lawsuit was clearly referenced in documents
attached to USSIC’s pleadings. It is a settled principle of law
that relief via declaratory judgment should not be entertained
if there is pending, at the commencement of the declara-
tory judgment action, another action or proceeding to which
the same persons are parties and in which are involved, and
may be adjudicated, the same issues involved in the declara-
tory action.15
[8,9] Further, the existence of a justiciable issue is a fun-
damental requirement to a court’s exercise of its discretion
to grant declaratory relief.16 This court has long held that
declaratory judgment cannot be used to decide the legal effect
of a state of facts which are future, contingent, or uncertain.17
Nor is a declaratory judgment action to be used to adjudicate
hypothetical or speculative situations which may never come
to pass.18
We conclude the unresolved civil dispute between Edquist,
O’Daniel, and DSA over the legality of the aircraft’s continued
detention and Edquist’s demand for storage fees renders the
district court’s declaration regarding the availability of insur-
ance coverage premised on theft or conversion premature and
thus an abuse of discretion.
15
Polk Cty. Rec. Assn. v. Susquehanna Patriot Leasing, 273 Neb. 1026, 734
N.W.2d 750 (2007).
16
Kotas, supra note 5.
17
See Allstate Ins. Co. v. Novak, 210 Neb. 184, 313 N.W.2d 636 (1981).
18
Ryder Truck Rental v. Rollins, 246 Neb. 250, 518 N.W.2d 124 (1994).
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Nebraska Supreme Court A dvance Sheets
301 Nebraska R eports
U.S. SPECIALTY INS. CO. v. D S AVIONICS
Cite as 301 Neb. 388We reach this conclusion because there are too many facts
and issues that remain contingent and uncertain to enter a
declaratory judgment regarding insurance coverage. There has
been no determination of whether the aircraft is being lawfully
detained, and the parties did not present the trial court with
sufficient evidence, or the necessary parties, to allow for such
a determination. The record also indicates that issues involved
in this determination are being litigated in another forum and
are thus not properly addressed in a declaratory action. And we
cannot ignore the possibility that once the legality of Edquist’s
possession is determined, the aircraft may be returned to
DSA, an outcome which could conceivably affect the cover-
age analysis.
We therefore conclude that the district court’s order decided
the legal effect of a state of facts which are future, contingent,
or uncertain19 and resulted in a declaratory judgment adjudi-
cating hypothetical or speculative situations which may never
come to pass.20 As such, the court abused its discretion in
entering declaratory relief, and we must reverse.
CONCLUSION
For the reasons set forth above, we reverse the district
court’s order granting declaratory relief.
R eversed.
19
See Novak, supra note 17.
20
See Rollins, supra note 18.