Court Opinion

ID: 9664145
Source: CourtListenerOpinion
Date Created: 2023-08-24 00:04:29.134889+00
Date Added: 2024-06-11T18:15:02.594536
License: Public Domain

PAULSON, Justice
(dissents).
The majority opinion has briefly stated its reasons in support of a reversal of the judgment of the district court of Morton County.
Thiel entered into a contract to install an underground electrical system with Triangle Construction Company, a subsidiary of Endeco. Endeco was in the process of constructing a housing complex and had entered into a long-term lease with Western Electric. Thiel at all times since the year 1949 had been insured with Western Fire Insurance Company to pay Thiel under the terms of an all risk construction and installation floater policy.
Thiel, pursuant to the contract with En-deco, constructed a primary distribution system which was designed by another company. This particular portion of the contract totaled approximately $14,000. Thiel, at the request of Endeco, performed additional work which, under the continuing contract, totaled nearly $100,000.
The primary electrical cables which led from the power lines to the transformers were installed and completed approximately five months after entering into the contract. In February of 1973 there was a major failure in the electric system because of an overloading of the secondary cable system which ran from the transformers to the various apartment complex units. The failure occurred because of an overload which was not the fault of Thiel, according to the engineer’s report.
Thiel, as mentioned, completed all of the electrical work because of the additions and changes which were requested by Endeco from time to time.
In 1973, at the time of the failure of the underground electrical system, Endeco still owed Thiel a balance of slightly in excess of $30,000. Endeco then forwarded Thiel a letter dated May 23, 1973, enclosing a check for $10,000, which letter stated, in pertinent part:
“Enclosed is our check in the amount of $10,000.00 to be applied to our account. “This payment is not to be considered as recognition of exoneration in the matter of the power system failure at the Cavalier project, as the issues remain unresolved.”
The contract which was entered into between Thiel and Western Fire Insurance Company provided, in pertinent part:
*790“No payment on account shall operate as an approval and acceptance for the work done or material furnished or any part thereof.” (Contract § 4, A-12)
“Upon complete performance of this subcontract by the subcontractor, and approval, acceptance and payment for the subcontractor’s materials and work by the owner, the Contractor shall make final payment to the subcontractor of the balance due the subcontractor . .”
(Contract § 4, A-12)
“The subcontractor shall warrant all equipment furnished and work performed by him for a period of one year from the date of written acceptance of the work.” (Contract § 13, A-13)
The majority opinion concedes that Western did not challenge any of the findings of fact of the trial judge.
One of the determinative issues, in this case is whether or not there was ever a formal acceptance by Endeco. Whether or not there was acceptance is a question of fact. Rule 52(a), N.D.R.Civ.P. The letter dated May 23, 1973, and forwarded by En-deco to Thiel is most revealing in that it states that “This payment is not to be considered as recognition of exoneration in the matter of the power system failure at the Cavalier project, as the issues remain unresolved.” However, following the failure of the underground electrical system, Thiel submitted a bid for the corrective work specified by the engineers and which bid was in the sum of $19,950. The district court found this sum to be a reasonable one. Thereafter Endeco filed for bankruptcy and Thiel filed a claim with Western Fire Insurance Company. I refer to Endeco’s letter of May 23, 1973, supra, which supports the finding of fact that there was never any formal acceptance of the contract by Ende-co.
The majority opinion concludes that there was a constructive acceptance of Thiel’s work and that, therefore, Thiel was not in “constructive custody” of the system. I agree with the statement in the majority opinion that typewritten additions control over preprinted portions of an insurance contract. I cannot agree with the holding that command over the use of the electrical distribution system should determine when it is in the custody of a party. It is an every day occurrence in the construction field, especially in the building trades, to find people occupying the building before formal acceptance of the job. The majority opinion concludes that payment was made in a lump sum without any apparent determination that the work was acceptable. However, the .majority opinion then proceeds to list several factors upon which it bases its conclusion that there was constructive acceptance. This strikes me as a strained interpretation of the policy.
The policy is an “All Risk Construction and Installation Floater” policy, designed to cover the contractor until such time as he no longer has an insurable interest1 in the work. Thiel still maintained a right to payment of part of its account from Endeco. Therefore, Thiel would still have a right to a mechanic’s lien on the property of Endeco to secure its contract balance due. The trial court concluded that Thiel still maintained an insurable interest in materials and labor which comprised the electrical distribution system. I agree. Until such time as the work was formally accepted by Endeco pursuant to the contract or until such time as it was no longer in the “constructive custody” of Thiel, as I interpret that term, the policy remains in force.
The term “constructive custody”, as I interpret it, means that the property is in the custody of the insured until such time as he relinquishes every right or interest which he has in the property. Given the nature of the construction industry, the fact that pos*791session was in Endeco or that payment had been made is not enough. There must also be shown a formal acceptance by Endeco or a formal relinquishment of the interests and rights of Thiel. Trade practices of the building industry and the uncontested findings of the district court indicate that there was no acceptance of Thiel’s work, constructive or otherwise.
Accordingly, I would affirm the judgment of the district court.

. For a discussion of the term “insurable interest” as it has been defined in North Dakota, see Reishus v. Implement Mutual Dealers Insurance Company, 118 N.W.2d 673, 682 (N.D. 1962). See § 26-02-06, N.D.C.C. In the instant case, the interest which Thiel had is even greater than the interest involved in Reishus, supra, because Thiel arguably has a mechanic’s lien; and in Reishus the holding was that even perfection of a mechanic’s lien was not required in order to have an “insurable interest”.