SHUNGA PLAZA

45, 650

206 Kan. 16 (1970) | Cited 3 times | Supreme Court of Kansas | November 7, 1970

The opinion of the court was delivered by

This appeal involves the effectiveness of an endorsement to beattached to an insurance policy for the purpose of deleting anitem of property from the insurance coverage.

The appeal was first heard in January, 1970, and on March 7,1970, the opinion affirming the judgment in the lower court wasfiled. (Shunga Plaza, Inc. v. American Employers' Ins. Co.,204 Kan. 790, 465 P.2d 987.)

A rehearing was granted and the case was reargued at theOctober, 1970, session.

Upon further consideration of the case a majority of the courtis now of the opinion that the former decision is incorrect andthat the majority opinion, as filed, should be and is herebywithdrawn, vacated and set aside.

[206 Kan. 17]

The result is that the dissenting opinion of the minority nowbecomes the controlling opinion of the majority and is herebyadopted as such. We would, however, add a few additional remarks.

We find no fault with the law as expressed in the first fourparagraphs of the syllabus but we are now of the opinion that thelaw as stated in paragraph three has no application to the factsand circumstances of this case.

Although we will look to the former opinion for the factswithout repeating them herein, it will be necessary that we setout the endorsement and the letter of transmittal in support ofour limited presentation. In the language of the former opinion,an endorsement, standard in form, was mailed by Robert Gucker onbehalf of the appellee to Robert J. Bernica, secretary of theappellant, Shunga Plaza, Inc., to be attached to the policy ofinsurance. The endorsement is too cumbersome to be presented infull. It was headed: "ENDORSEMENT (To be attached to policy)" It stated: "Attached to and forming of Policy No. A 22-10385-62 "Effective Date of Endorsement 2-23-66" The endorsement gave the amount of the return premium — $20.00. The following was typed at the bottom of the printed form: "In consideration of return premium of $20.00. It is understood and agreed that item No. 1 is deleted from this policy. Signed and accepted X ____________" Written in the blank space following the X was: "Shunga Plaza, Inc. By: Robert J. Bernica"

The endorsement with copies were mailed to Robert J. Bernicawith a letter of transmittal, which read:

"Please sign and return all copies where the X is indicated. Please be sure and sign Shunga Plaza, Inc., by you. Please find enclosed a stamped, self addressed envelope and return promptly. "A check for the return premium will be sent to you when we receive confirmation from company." (Emphasis supplied.)

In the former opinion we applied the rule that there is nobasis for construction where the language of a contract is clearand unambiguous and where a contract is not ambiguous it is thefunction of a court to enforce it as made. This was the languagecontained in paragraph three of the syllabus in the formeropinion which we now hold not to be applicable.

[206 Kan. 18]

Although the endorsement does not state when the "returnpremium" of $20.00 would be paid, it cannot be said that theendorsement is incomplete or ambiguous as the law will implypayment within a reasonable time. (Leis v. Sinclair,67 Kan. 748, 74 P. 261; 17A C.J.S., Contracts, § 482, p. 682.) However,the endorsement being silent as to the method, time and terms the"consideration of a return premium of $20.00" was to be paid, theletter transmitting the endorsement having definitely fixed themethod, time and terms of the payment, the necessity for animplication is eliminated. The time and condition of paymentbecomes definitely fixed by the letter of transmittal.

The letter of transmittal makes it quite clear that the agentdid not have authority to approve the endorsement but theapproval must come from his company.

The letter stated that "a check for the return premium will besent to you when we receive confirmation from company."Confirmation of what? It had to mean either the confirmation ofthe endorsement or the "return premium" or both. If there was noconfirmation by the company, the consideration mentioned in theendorsement failed. The check would not be mailed until there wasconfirmation by the company.

This court has never passed on the effect of a covering ortransmittal letter. However, we see no reason why it should nothave the same force and effect as any other annexed writing whereit is bound to come to the attention of the party.

We find the following statement in Corpus Juris Secundum: "Where a contract is made by correspondence, the intent of the parties is to be gathered from the whole thereof. So, where the parties by correspondence agree to a change in a prior written contract, the agreement will be gathered from the written contract and the correspondence considered as a whole. ". . . Thus, a memorandum on a written contract qualifying or restraining its operation, or indorsed thereon contemporaneously with the execution of the instrument, forms a part of the contract and binds the parties to the same extent as though it had been embodied in the instrument." (17A C.J.S., Contracts, § 298, p. 135.) Again in 17A C.J.S., Contracts, § 299, p. 136, it is stated:

"Writings which are made a part of a contract by annexation or reference will be so construed; so, it is a general rule that where a contract refers to, and incorporates the provisions of, another instrument, they shall be construed together.

[206 Kan. 19]

"Where, however, the reference to another writing is made for a particular and specified purpose, such other writing becomes a part of the contract only for such specified purpose and to the extent of the reference."

The effect of two contemporaneous writings was considered inRodriguez v. Secretary of Treasury of Puerto Rico, 276 F.2d 344,where it was stated:

". . . Where an offeror presents two contemporaneous writings, even though one is formal and complete on its face, and the other informal, the offer is both. The other party is free to reject both. But it cannot accept the one, and disregard the other. Bond v. Wiegardt, 1950, 36 Wn.2d 41, 216 P.2d 196; V-1 Oil Co. v. Anchor Petroleum Co., 1959, 8 Utah 2d 349, 334 P.2d 760. . . ." (p. 349.)

We find the rule stated where there are two contemporaneouswritings but one is silent as to a particular provision:

". . . Moreover it is a settled rule that documents executed at the same time, with one referring to the other, are to be construed as a single instrument. (Civ. Code, § 1642; 12 Cal. Jur.2d, § 123, p. 333.) Of course, the express promise of the one instrument must prevail over the silence of the other. . . ." (Cheminol Corp. v. Ohlsson, 133 C.A.2d 223, 228, 283 P.2d 773.)

A covering or transmittal letter may have the effect ofdelaying or staying the operation of a contract and knowledge ofits contents cannot be disclaimed.

In Gateway Company, Inc. v. Charlotte Theatres, Inc.,297 F.2d 483, it was said: ". . . But the covering letter creates a more serious problem. Valley could not disclaim knowledge of its contents. A covering letter may be part of the total agreement. Rodriguez v. Secretary of the Treasury of Puerto Rico, 1 Cir., 1960, 276 F.2d 344. The advice of Wm. Randolph Hearst, `Throw [it] in the wastebasket. Every letter answers itself in a couple of weeks,' Koenigsberg, King News, 273 (1941), is not a safe legal principle." (p. 486. Emphasis supplied.)

We are inclined to believe that the "effective date" mentionedin the endorsement referred to the date as of which theendorsement would be effective after it was confirmed by thecompany. As there was no check received by the insured, and nonotice of confirmation, the policy of insurance remained in fullforce and effect.

An insurance company cannot wait until a building is destroyedand then confirm an endorsement deleting the item of propertyfrom coverage under the policy.

The judgment of the district court is reversed withinstructions to render judgment for the plaintiff in the amountdue under the

[206 Kan. 20]

     original insurance policy covering the building at 1122 VanBuren, Topeka, Kansas.

APPROVED BY THE COURT.

PRICE, C.J., dissenting.

The opinion of the court was delivered by

This appeal involves the effectiveness of an endorsement to beattached to an insurance policy for the purpose of deleting anitem of property from the insurance coverage.

The appeal was first heard in January, 1970, and on March 7,1970, the opinion affirming the judgment in the lower court wasfiled. (Shunga Plaza, Inc. v. American Employers' Ins. Co.,204 Kan. 790, 465 P.2d 987.)

A rehearing was granted and the case was reargued at theOctober, 1970, session.

Upon further consideration of the case a majority of the courtis now of the opinion that the former decision is incorrect andthat the majority opinion, as filed, should be and is herebywithdrawn, vacated and set aside.

[206 Kan. 17]

The result is that the dissenting opinion of the minority nowbecomes the controlling opinion of the majority and is herebyadopted as such. We would, however, add a few additional remarks.

We find no fault with the law as expressed in the first fourparagraphs of the syllabus but we are now of the opinion that thelaw as stated in paragraph three has no application to the factsand circumstances of this case.

Although we will look to the former opinion for the factswithout repeating them herein, it will be necessary that we setout the endorsement and the letter of transmittal in support ofour limited presentation. In the language of the former opinion,an endorsement, standard in form, was mailed by Robert Gucker onbehalf of the appellee to Robert J. Bernica, secretary of theappellant, Shunga Plaza, Inc., to be attached to the policy ofinsurance. The endorsement is too cumbersome to be presented infull. It was headed: "ENDORSEMENT (To be attached to policy)" It stated: "Attached to and forming of Policy No. A 22-10385-62 "Effective Date of Endorsement 2-23-66" The endorsement gave the amount of the return premium — $20.00. The following was typed at the bottom of the printed form: "In consideration of return premium of $20.00. It is understood and agreed that item No. 1 is deleted from this policy. Signed and accepted X ____________" Written in the blank space following the X was: "Shunga Plaza, Inc. By: Robert J. Bernica"

The endorsement with copies were mailed to Robert J. Bernicawith a letter of transmittal, which read:

"Please sign and return all copies where the X is indicated. Please be sure and sign Shunga Plaza, Inc., by you. Please find enclosed a stamped, self addressed envelope and return promptly. "A check for the return premium will be sent to you when we receive confirmation from company." (Emphasis supplied.)

In the former opinion we applied the rule that there is nobasis for construction where the language of a contract is clearand unambiguous and where a contract is not ambiguous it is thefunction of a court to enforce it as made. This was the languagecontained in paragraph three of the syllabus in the formeropinion which we now hold not to be applicable.

[206 Kan. 18]

Although the endorsement does not state when the "returnpremium" of $20.00 would be paid, it cannot be said that theendorsement is incomplete or ambiguous as the law will implypayment within a reasonable time. (Leis v. Sinclair,67 Kan. 748, 74 P. 261; 17A C.J.S., Contracts, § 482, p. 682.) However,the endorsement being silent as to the method, time and terms the"consideration of a return premium of $20.00" was to be paid, theletter transmitting the endorsement having definitely fixed themethod, time and terms of the payment, the necessity for animplication is eliminated. The time and condition of paymentbecomes definitely fixed by the letter of transmittal.

The letter of transmittal makes it quite clear that the agentdid not have authority to approve the endorsement but theapproval must come from his company.

The letter stated that "a check for the return premium will besent to you when we receive confirmation from company."Confirmation of what? It had to mean either the confirmation ofthe endorsement or the "return premium" or both. If there was noconfirmation by the company, the consideration mentioned in theendorsement failed. The check would not be mailed until there wasconfirmation by the company.

This court has never passed on the effect of a covering ortransmittal letter. However, we see no reason why it should nothave the same force and effect as any other annexed writing whereit is bound to come to the attention of the party.

We find the following statement in Corpus Juris Secundum: "Where a contract is made by correspondence, the intent of the parties is to be gathered from the whole thereof. So, where the parties by correspondence agree to a change in a prior written contract, the agreement will be gathered from the written contract and the correspondence considered as a whole. ". . . Thus, a memorandum on a written contract qualifying or restraining its operation, or indorsed thereon contemporaneously with the execution of the instrument, forms a part of the contract and binds the parties to the same extent as though it had been embodied in the instrument." (17A C.J.S., Contracts, § 298, p. 135.) Again in 17A C.J.S., Contracts, § 299, p. 136, it is stated:

"Writings which are made a part of a contract by annexation or reference will be so construed; so, it is a general rule that where a contract refers to, and incorporates the provisions of, another instrument, they shall be construed together.

[206 Kan. 19]

"Where, however, the reference to another writing is made for a particular and specified purpose, such other writing becomes a part of the contract only for such specified purpose and to the extent of the reference."

The effect of two contemporaneous writings was considered inRodriguez v. Secretary of Treasury of Puerto Rico, 276 F.2d 344,where it was stated:

". . . Where an offeror presents two contemporaneous writings, even though one is formal and complete on its face, and the other informal, the offer is both. The other party is free to reject both. But it cannot accept the one, and disregard the other. Bond v. Wiegardt, 1950, 36 Wn.2d 41, 216 P.2d 196; V-1 Oil Co. v. Anchor Petroleum Co., 1959, 8 Utah 2d 349, 334 P.2d 760. . . ." (p. 349.)

We find the rule stated where there are two contemporaneouswritings but one is silent as to a particular provision:

". . . Moreover it is a settled rule that documents executed at the same time, with one referring to the other, are to be construed as a single instrument. (Civ. Code, § 1642; 12 Cal. Jur.2d, § 123, p. 333.) Of course, the express promise of the one instrument must prevail over the silence of the other. . . ." (Cheminol Corp. v. Ohlsson, 133 C.A.2d 223, 228, 283 P.2d 773.)

A covering or transmittal letter may have the effect ofdelaying or staying the operation of a contract and knowledge ofits contents cannot be disclaimed.

In Gateway Company, Inc. v. Charlotte Theatres, Inc.,297 F.2d 483, it was said: ". . . But the covering letter creates a more serious problem. Valley could not disclaim knowledge of its contents. A covering letter may be part of the total agreement. Rodriguez v. Secretary of the Treasury of Puerto Rico, 1 Cir., 1960, 276 F.2d 344. The advice of Wm. Randolph Hearst, `Throw [it] in the wastebasket. Every letter answers itself in a couple of weeks,' Koenigsberg, King News, 273 (1941), is not a safe legal principle." (p. 486. Emphasis supplied.)

We are inclined to believe that the "effective date" mentionedin the endorsement referred to the date as of which theendorsement would be effective after it was confirmed by thecompany. As there was no check received by the insured, and nonotice of confirmation, the policy of insurance remained in fullforce and effect.

An insurance company cannot wait until a building is destroyedand then confirm an endorsement deleting the item of propertyfrom coverage under the policy.

The judgment of the district court is reversed withinstructions to render judgment for the plaintiff in the amountdue under the

[206 Kan. 20]

     original insurance policy covering the building at 1122 VanBuren, Topeka, Kansas.

APPROVED BY THE COURT.

PRICE, C.J., dissenting.

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