Brian A. K. Reynolds v. Gregory S. Shoemaker and Allstate Insurance Company

Brian A. K. Reynolds appeals from the district court's grant of summary judgment and
dismissal of his action against Allstate Insurance. We affirm.

I.

FACTUAL AND PROCEDURAL SUMMARY

Gregory S. Shoemaker executed a promissory note in the amount of $35,000 to purchase
from Brian Reynolds real property that had been improved with a dwelling and a shed. The note
was secured by a first priority deed of trust. The loan transaction was handled by Reynolds'
father, David Reynolds (hereafter "Dave"), who holds a general power of attorney on behalf of

his son. Shoemaker purchased an Allstate Insurance Company Residential Fire Policy in order
to meet an insurance requirement upon which Reynolds had conditioned the loan.

The policy
named Shoemaker as the insured, and designated Reynolds as the Mortgagee.
Less than a month after the purchase, a fire caused extensive damage and loss to
Shoemaker's home. After Shoemaker filed a claim, Allstate drew a check in the sum of
$28,500.53 payable to the order of Greg Shoemaker and "Mortg." Brian Reynolds. This check
was delivered to Shoemaker at his mailing address. Shoemaker met Dave at a local cafe to
discuss how the check was to be divided. Dave told Shoemaker that he wanted enough of the
proceeds to pay the balance due on the promissory note ($36,425) down to the assessed value of
the lot ($12,500), despite understanding that Reynolds was entitled to the entire amount of the
check. Shoemaker hoped to instead apply only $10,000 to the note. Dave suggested that
Shoemaker attempt to renegotiate the amount of the check with Allstate, and Shoemaker gave
the check to Dave to hold. Pursuant to Shoemaker's later instruction, Dave returned the check to
Allstate. Shoemaker then sent a letter to Allstate arguing that:
Brain or Dave Reynolds has no legal right to have their name on my check for the
loss of my home. Also my insurance shows the Gregory Shoemaker is the
insured party & by law the only. So please male or sind all future corrspondence
to Me & Me olny. (sic; underscores added).

Allstate chose to not increase the amount of the proceeds and re-delivered the same
jointly payable check to Shoemaker. Shoemaker attempted to use the check to re-finance the
note on the property. Dave, alerted to Shoemaker's attempt to re-finance, was asked to come
down and sign the check but declined to do so. Shoemaker was told that the new loan could not
go through as the State of Montana held a lien on the insurance proceeds because of child
support debts owed there by Shoemaker. Shoemaker thereafter embarked on an extended period
of constant inebriation and drug abuse, during which time he claims he went to Dave's house,
check in hand. Dave says he did not see Shoemaker or the check. Shoemaker says that he
"thought [Dave] signed it, and we sent it to child support." Either way, the check was sent to
Helena, Montana, where it was cashed over Shoemaker's signature and an alleged forgery of
Brian Reynolds' signature. Reynolds' signature identified him as "Brain" as opposed to "Brian,"
an error Shoemaker had made in his earlier letter to Allstate, and a mistake that Dave, who
"named that kid thirty-nine years ago," would be unlikely to make.

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Reynolds then filed a complaint against Allstate to collect on the check issued as payment
under the insurance policy; Reynolds also named Shoemaker as a defendant for allegedly forging
Reynolds' signature. Allstate filed an answer and a cross-claim against Shoemaker, and filed a
motion for summary judgment that was granted by the district court. Reynolds appeals.

II.

ANALYSIS

Reynolds argues that he alone is entitled to the policy proceeds because his interest in the
property exceeded the amount of the loss, and that Allstate did not satisfy its contractual
obligation to issue and deliver a check to Reynolds. Allstate does not dispute Reynolds' claim to
the insurance proceeds, but argues that delivery of a check jointly payable to Reynolds and
Shoemaker fulfilled its obligation under the terms of the insurance contract.

The standard of review on appeal from an order granting summary judgment is the same
as the standard used by the district court in passing judgment on that motion. Harwood v.
Talbert, 136 Idaho 672, 677, 39 P.3d 612, 617 (2001). When assessing a motion for summary
judgment, all controverted facts are to be liberally construed in favor of the nonmoving party.

Furthermore, the trial court must draw all reasonable inferences in favor of the party resisting the
motion. G & M Farms v. Funk Irrigation Co., 119 Idaho 514, 517, 808 P.2d 851, 854 (1991);
Sanders v. Kuna Joint School Dist., 125 Idaho 872, 874, 876 P.2d 154, 156 (Ct. App. 1994).

The party moving for summary judgment initially carries the burden to establish that there is no
genuine issue of material fact and that he or she is entitled to judgment as a matter of law.

Eliopulos v. Knox, 123 Idaho 400, 404, 848 P.2d 984, 988 (Ct. App. 1992).

Because Allstate concedes that Reynolds is entitled to the entire proceeds of the
insurance check, the resolution of this appeal turns on whether the language of the insurance
contract imposes a duty on Allstate to make the insurance proceeds payable solely to Reynolds.

Our standard of review when faced with interpretation of an insurance contract depends on
whether the contract is ambiguous. Western Heritage Ins. Co. v. Green, 137 Idaho 832, 835, 54
P.3d 948, 951 (2002). If the terms of a contract are clear and unambiguous, then interpretation
of that contract is a question of law. City of Idaho Falls v. Home Indem. Co., 126 Idaho 604,
607, 888 P.2d 383, 386 (1995). The meaning of an unambiguous contract must be determined
from the plain meaning of the contract's own words. Id.

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According to Reynolds, the language of the insurance contract expressly mandates the
insurance proceeds be made payable solely to him because the amount of Reynolds' first priority
deed of trust was an amount in excess of the loss payment. In support of this contention
Reynolds cites the entire contract, including endorsements, in general and as a whole. However,
we conclude that there is no express provision in the contract that mandates the insurance
proceeds be made payable in Reynolds' name alone. In the absence of an express provision,
Reynolds nevertheless argues that the insurance contract imposes an affirmative duty upon
Allstate to make the insurance proceeds payable to Reynolds alone. Such a duty does not exist
within the four corners of the insurance contract.

The insurance contract expressly provides that Allstate will settle any covered loss with
"you." Reynolds contends the definition of "you" refers to the mortgagee.

However, the
definitions section of the contract defines "you" as the policyholder named on the declarations
page of the contract. Although the declarations page does not contain the term "policyholder,"
Shoemaker is clearly identified as the "named insured." Furthermore, the insurance contract
consistently uses the term "you" to refer to the named insured in terms of the insured's rights and
responsibilities. For example, "the insurance contract is an agreement with ‘you'"; "if ‘you' die,
coverage will continue until the end of the premium period"; "Allstate will give ‘you' notice of
cancellation; in the event of a loss, ‘you' must promptly provide notice"; ‘"you' must pay the
premium." In contrast, the insurance contract refers to the mortgagee as "the mortgagee."
Likewise, the lender is referred to as "the lender."

The insurance contract does require Allstate to pay compensation in the event of loss to
the mortgagee "to the extent of [the mortgagee's] interest." However, the mortgagee clause does
not require Allstate to determine the extent of that interest. In fact, the plain language of the
contract places that burden first on the insured and second on the mortgagee. By the terms of the
insurance contract, if the named insured has failed to provide a signed, sworn proof of loss
within sixty days that includes information about the interest held by the named insured and
others, the mortgagee has sixty days after their notice of the loss within which to furnish Allstate
with that information. There is no evidence that Reynolds ever alerted Allstate as to the extent of
his interest until well after sixty days had passed. Reynolds also argues that the lender's loss
clause, which was apparently an addendum to the original contract, mandates payment of the
entire claim to him. Again, as with the mortgagee clause, the lender's loss clause does not

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impose a duty on Allstate to determine the extent of the lender's interest or that insurance
proceeds payment be made solely to the lender.

Had this matter gone to trial, Reynolds would have been required to establish that
Allstate did not comply with its contract of insurance by issuing a jointly payable check. In other
words, Reynolds would have had to prove that Allstate had a duty to issue the check to Reynolds
alone. We are unable to read such a duty into the insurance contract, or find any ambiguity that
could support this proposition by implication. Reynolds cites Foremost Insurance Co. v. Putzier,
102 Idaho 138, 144, 627 P.2d 317, 323 (1981) to argue that efforts to limit or exclude coverage
are construed against the insurer, but fails to acknowledge that Allstate has not tried to limit or
exclude coverage. Rather, Allstate delivered a claim check jointly payable to Reynolds and
Shoemaker in the amount of $28,500.53, an amount uncontested by Reynolds. The check
endorsed by Shoemaker and bearing an alleged forgery of Reynolds' signature was cashed by the
drawee bank. The rule is well established that a "debtor's liability is discharged when a check
payable to the creditor is wrongfully indorsed by the creditor's agent and is paid by the drawee
bank and the proceeds converted by the agent." Fara, Inc. v. Gouvis, 666 N.Y.S.2d 703, 705
(A.D. 2 Dept. 1997). Comment 1 to I.C. § 28-3-420 provides, in part, that delivery to an agent is
delivery to the payee; Comment 1 also provides that where a check is payable to more than one
payee, delivery to one of the payees is deemed delivery to all. As joint payee, Shoemaker served
as Reynolds' agent for purposes of the check. See Bank of America Nat. Trust and Sav. Ass'n v.
Allstate Ins. Co., 29 F. Supp.2d 1129, 1141 (C.D.Cal. 1998). As such, delivery to Shoemaker
was proper. We therefore conclude that the delivery of the check made payable jointly to
Shoemaker and Reynolds in an appropriate amount discharged Allstate's obligation on the
underlying contract. Allstate's liability on the draft was then discharged when that draft was
accepted by the Montana bank. I.C. § 28-3-414(3).
Reynolds requests attorney fees on appeal under I.C. § 41-1839 and Idaho Appellate Rule
41. Idaho Code § 41-1839 provides for attorney fees when an insurance company does not pay a
claim, per the terms of a policy, within thirty days after proof of loss. The statute does not
provide for attorney fees when a "tender of the full amount justly due" is made before the
commencement of the action, as here. Therefore, Reynolds is not entitled to attorney fees on
appeal.

Accordingly, we
affirm the order of the district court granting summary judgment and dismissing the action
against Allstate. Allstate, as the prevailing party on appeal, is granted costs pursuant to I.A.R.
40.