Seal v. Hart

LAVERN SEAL. db:a NATlON,.\L, AIJCTION
& SALE MAX~cthS . Honaker. Honaker L.aw Finll, Billings, Montana
(For Respoildent TUT Harl)

Gregory G. Murphy, Mo~ilton. Bellingl~arn, P.C:., Uilli!?gs.
Longo & kla~hcr,
Montana (For Respondent Jail Sicveilsj

Suhmittcd on Briefs: February 14, 2002
Justicc Jim Regnicr delivered the Opinion of ihc Court.

Ij! Appellant La\,'crn Seal, doing business as Xaiional iiuciion atid Sales blanagerncni,

tjled a complaint against Respondents Tut Hart and Jan Stevens in the Ihirteenth Judicial

I>isrrict.Yellowstone (.;ounty, which sought relief for breach of contract and breach of a duty

to procure insurance. The District Court entered judgment against Hart in the amount of

$30,000 but dismissed the claim against Stevens for lack of personal jurisdiction. Scal

appcals that poi-tion oithe judgment which disnlissed Stevens. lVc affirm in part and rcvcrse

in part the order of the District Court.

:2
! Wc addrcss the following issues on appeal:

73 1. Did thc District Court e n when it concluded that it did not have personal

jurisdiction ox-er Stevens'!

1
'4 2. Did the District Court err when it concluded that no relationship existed bctwecn

Seal and Stevens which would give rise to a duty on Stevens' part to procure insurance for

Seal?

BACKGROUND

5 In March 1995, LLaVcrn Scal, doing b~tsinessas Xational Auction and Sales

hlanagcnient in Montana and Idaho, sold approximately 100 saddles and tack to Tut Hart for

SS3,315.86. Hart paid S13,3 15.86 as a down payment and agreed to remit tlic remainder

follo~ving goods' sale at a Ca!ifomia auction. The transaction called for delivery of the
the

goads to Hart in Billings, Montana. From Billings, Hart was to transport the goods to

California for resale. Seal did not pr-ocure a lien or other scccrrity interest on the property.

2
tiowevcr, beforc Seal 5t.ould relinquish the merchandise, i-iar-iwas to obtain insurance on the

goods i o protect against casualry loss and theft.

1
'6 i-tart, a resident of South Dakota, contacted his South Dakota insurance agent about

insuring the goods. The insurance agent, Jan Stevens, obtained and conveyed several

insurance bids to Hart. Subsequently, Hart submitted an application for commercial motor

vehicle liability insurance and motor truck cargo insurance to the Canal Insurance Company

(-'Canal"), which provides insurance for conltnon carriers hauling cargo owned by others.

Tile applications did not identify Seal as an additional insured or loss payee, tiowever, Hart

did list Seal as a certificate holder on the motor truck cargo application.

77 On April 24, 1995, Canal issued the policies to Hart as requested in the applications.

.4s a cond~tronto the transaction. Seal requested that Hart proLlde proof of the goods'

insurance. ,herefore, at Hart's request, Stelens faxed Seal a copy of the applieat~onfor

insurance and a certificate of insurance establishing that the goods were insured, subject to

the conditions of the policies.

f8 On the same day the policies were issued, Hart rented a Ryder truck in Billings and

loaded it with thc merchandise. Hart's driver departed fiom Billings and arrived in Dotvney,

Idaho, on the evening of April 25, 1995. The follocviiig morning the driver phoned the local

authorities to report the truck and cargo missing. The local sheriff's department located the

truck but the cargo was never recovered.

0 Following thc incident, Hart submitted a claim to Canal for coverage on the stolen

mcrchandise. After an investigation. Canal denied Ilart's claim on the grounds that (1 j Mart

3
was not a ""common carrier" and ( 2 )Hart owned the property and, therefore, was not hauling

the property ofanother. Consequently, Seal and I-iarijointly filed a negligence and bad faith

suit against Canal in thc United States District Court for thc District of Montana.

yi10 The United States District Court dismissed I-Tart from the action pursuant to Rule

37(b)(2)(C)>Fcd.R.Civ.P. Further, the Court concluded that Seal was not in privity of

contract with Canal, was not a third-pai-ty beneficiary to the contract, and did not maintain

an insurable interest in the property. Therefore, the Court held that Seal did not have

standing to enforce the insurance contract against Canal and entered suinmary judgment

accordtngly. Kcither Seal nor Hart appealed the Court's judgment.

71 I
1 On June 2, 1998, Seal filed a eomplatnt in the present actlon against Liart and Stetcns

which sought relief for breach of contract and breach of a duty to procure insurance. Stevens

subsequently filed a motion to dismiss for lack of personal jurisdiction. The District Court

denied Stevens' motion based on Seal's representation that he spoke with Stevens and

requested that he be l~sted the loss p a y e on the Insurance pol~eies.
as

712 On 'Llarch 9,2001, the case proceeded to a uon-jury trial. I:ollowing tr~al, March
on

15, 2001, tiart movcd the District Court to amend the pleadings to include a cross-claim

against Stevens for breach of contract and professional negligence in order to conform the

pleadings to the evidence presented, without objection, at trial. On Marcli 29, 2001>the

District Court issued its findings offact, conclusions of law, and order. The District Court:

(1) dismissed Scal's claim against Stevens, with prejudice, for lack of personal jt~risdiction;

(2) derrrecl klart's niotlon to amend thepleadlngs and drsn11ssed~'1!arr'spurportcdcross-ciaim

4
against Ms. Stevcns . . . with prejudice based on the Coun's lack of personal jurisdiction ober

Ms. Stevens;" and (3)entrred judgrnenr b r Seal against Hart in rhc alncturrt o f $40,000, plus

interest. Seal appeals that portion of the District Court's order which dismissed his cause of

actlon agalnst Ste~cns.'

STAIIDARD OF REVIEW

$13 L e review a district court's findings of fact to ascertain whether they are clearly
V

erroneous. 1)nine.s v. Ktzig1zt ( 1 995), 269 Mont. 320, 325, 888 P.2d 904, 906. A finding is

clearly erroneous if it is not supported by substantial evidence, if the trial court

misapprehended t l ~ e
effect of the evidence, or if our review of tlie rccord co~lvinces that
us

the district court made a mistake. Koiji~rik Kovnrik, 1998 MT 33, J' 20,287 Mont. 350, T
v. i

20, 954 P.2d 1147, 1' 20. A district court's determination that it lacks jurisdiction is a

conclusion of law which \ve review to determine whether the court's interpretation of the law

is correct. Threlkeld v. Coloru(lo. 2000 MT 369, '1/ 7,303 Mont. 432,'1/ 7, 16 P.3d 359, :/ 7.

DISCUSSION

ISSUE ONE

7114 Did the Ilistrict Coun err when it concluded that it did not have personal jurisdiction

over Stevens'?

"eal's appeal does not challenge that portion of the judgment which pertains to
[--[an.Further, Hart did not file a notice of appeal from the judgment rendered against
him. Veverthelcss, Hart filed a response brief in the instant appeal. Consequentlyl as he
is not a party to this appeal, we will not consider those arguments presented by Hart.
"i
;j Sea! argues that the "!t]cstirnuny showed iltat Stevens was aware tbai thc cargo i o bc

origina~ed Montana, and that she sent two faxes to Seai at his Billings, .kloiltaine
i~~surcd in

office." Seal contends that this contact was sufficient to exercise general personal

jurisdiction over Stevens. Alternatively, Scal insists that Stevens contracted to insure

property located in bfoiltana at the time of contracting. Tllerefore, pursuant to Rule 4B(1)(d);

M.R.Civ.P., Seal maintains that the District Court had specific personal jurisdiction over

Stevens.

716 This Court applies a two-part test to determine whether a Montana court can exercise

personal jurisdiction over a nonresident dcfendant. First, we dctetnline whether personal

jut-isdiction exists pursuant to Rule 3B(1), M.R.Cir.P. Tlzrelkeld, i/ 9. Second, we determine

whcther exercising personal jurisdiction comports with traditional notions of fair play and

substantial justice embodied in the due process clause. Rir-d t7. Hiller (1995): 270 Mont. 467,

470, 892 P.2d 93 1, 933.

'117 Rule 4B(1), M.R.CIV.P.,incorporates the principles of both general and specific

jurisdiction. Montana courts can exercise general jurisdiction over "[all1 persons found

within the state of Montana. . . ." Rule 3B(1), M.R.Civ.P. In Sztiln~olzsOl G r p . v. Hol[~s
i

C'orp (190O), 243 Mont. 75, 83. 796 P 2d 189. 191, fie stated:

X party is "found within" the state if he or she is physically present in the statc
or if his or her contacts with the state are so pervasive that he or she may be
deemcd to be physically present there. A nonresident defendant that maintains
.'substantialw or "contii~uousand systematic" contacts with the forum state is
found within the state and may be subject to that state's jurisdiction even if the
cause of action is unrelated to the dcfendant's activities within the forum.

6
lil8 Conver~eiy~ tho~igila dcfcndant lnaintairis minimal contacts bvith thc ibrurn.
weii

'\lantana courts may exercisc specific iong-arm jurisdiction over ihai JeTcndar:r if tlic

plaintifys cause of action arises from any of the activities enumerated in Kulc 3B(l),

M.R.Ci\-.P., and the exercise ofjurisdiction does not offend due process. Ialnzo. & Cizj.. Iric. (Plla. l986), 501 So.2d 459, 402, the Alabama

Supremc Court held that Alabama courts could exercise personal jurisdiction over an out-of-

stare insurance agent pursuant to its long-arm jurisdiction provision, which is virtually

identical to Rule 4B(l j(d), h4.R.Civ.P. Similarly, in Cot.nel1 & Co. v. ffonze Ifis. Cos.

8
IE.D.Pa. 1995j, i99fiWi.. 46618, 3 , in contcrnpiating whether Pennsylvania courts could

cxcrcise pcrsonal jurisdiction over an our-of-state insuiance broker, ihc United States District

Court concluded: "It follo\vs that snlce [the insurance broker] was supposed to obta~n

Insurance for 'property or r ~ s klocated urthin th[c] Cominonuealth at rlic tlme of

contracting,' jurisdict~o~~ properly be ma~nta~ned . ." We agree m ~ t h conclusions
can .. the

reached by these courts and, h a ~ i n gfound no authority to thc contrary, hold that Rule

4B(l)(d), M.R.Civ.P., applies to insurance agents as well as insurance companies. We will

now proceed to examine whether Rule 4B(l)(d), iLI.R.Civ.P., applies to the case at bar

'122 ln analyzing whether it maintained specific personal jurisdiction over Stevens,

pursuant ro Rulc 4B(l)(d), M.R.Ci\ .P., thc District Court concluded:

11. Mr. Seal was not shown as a loss payee either on the application for
insurance signed by Mr. Hart or on the Certificate of Insurance sent by Ms.
Stevens to Mr. Seal. Ms. Stevens did not act as an insurance agent for Mr.
Seal and no relationship developed between the two of them that would give
rise to a duty on her part to procure insurance for Mr. Seal. Therefore, Ms.
Stevens did not contract with Mr. Seal to insure any person, property or risk
located in Montana.

12. Mr. Seal failed to prove by a preponderance of the evidence the iiecessary
relationship between him and Ms. Stevens that would give rise to the duties of
an insurance agent to a client.

14. Mr. Seal failed to prow by a preponderance of the evidcnce that Ms.
Stevens maintains minimal contacts with Montana as delineated by Rule
4B(1), M.R.Ciy.P., to subject her to the jurisdiction of this Court. This Court
docs not have specific jurisdiction over Ms. Stevens.
72
13 Gencraiiy, a court sho~tld
determine jurisdiction only on the necessary jurisdiciionai

facts and not on the merits of rhc casc. See 21 G.J.S. C'OUCILI).~.~ $ 87 j 1990). From what we iais

deducc, following a non-jury trial on the merits, the District Court rejected Seal's Rule

4B(l jjd), M,R.Civ.P,,jurisdictional assertion because Stevens did not contract with Seal to

insure property and, therefore, Stevens owed Seal no duty of care. However, Rule 4B(I)(d),

M.R.Civ.P., does not require that a plaintiff establish the substatltive elements of a contract

or a duty of care before a court may exercise personal jurisdiction over a particular par-ty. To

assert personal jurisdiction over a prospective party, Rule 4B(l)(d), M.R.Civ.P., simply

requires that the claim for relief arise out of the contracting to insure any person, property,

or risk located mithin Montana at the timc of contracting. "Arising from," within this

context, has been defined as a direct affiliation; nexus, or substantial connection between the

basis for the cause of action and the act which falls within the long-ann statute. See

Shippirig v. Sver-igesilrzgfar~~~gs Dist. Ct. App. 20001, 791 So.2d 3, 10.
C;lo~~egold (Fla.

1124 In his con~plaint,
Seal alleged that Stevens had a contractual duty to insure the goods

against loss or damage, Stetens breached her dut) to procure the respectwe insurance. and

he suffered a loss as a result of Stebens' breach. At t h c ~ r
core, the allegat~onsin the

complaint derived from the allcged act. As to the alleged jurisdictio~~al Stevens admitted
act,

the following at trial:

Q:You also knew that the cargo that was to be covered by the policy was
located in Billings, Montana, at Mr. Seal's warehouse at the time that thc
policy was ivrittcn't

A: Yes
Therefore, for the foregoing reasons, we conclude that Seal's claim fbr relief arose out of

Stcvcns' contracting to insure property located within Montana at the time of conuaciing.

y2
j5 The District Corrr-t should not have ventured into the duty arena for purposcs of
. ~

determining personal jurisdiction. Whether Stevens owed Seal a duty of care goes to the

viability of his theory for recovery in the underlying action. 'To dismiss a claim for lack of

persoital jurisdiction on thc grounds that one party did not o\lie the opposition a duty of care

would cornpel an analysis of the claim's merits prior to the threshold jurisdictional inquiry.

2 Consequently, we hold that Stevens was subject to the jurisdiction of the courts of

Montana pursuant to Rule 4B(l)(d), M.R.Civ.P., and the District Court erred when it

concluded otherwise. Ordinarily, as alluded above, we would at this point have to determine

whether exercising personal jurisdiction over Stevens would comport with the notions

unbodied in the due process clause. However, as the parties did not argue the due process

issue beforc the District Court and havc not raised it on appeal, we must proceed under the

assumption that Rule 4B( l)(d), ILf.K.Civ.P., complies with the principles of due process. As

such, we have simply been charged with determining whether Rule 4B(l )(d), bl.R.Civ.P.,

applies to the facts of this case such that Montana courts can assert personal jurisdiction ovcr

Stevens. Thereforc, we reverse that portion of the District Court's order which dismissed

Seal's claim against Stevens for lack of personal jurisdiction.

12
17 ?'?-pically, in a case such as this where we reverse a district court's dismissal for lack

of personal jt~risdietinn, would remand the matter for fdrther proceedings. I-towever, the
we
District Coiirt'siudgrncnt lvas nor entered until after the non-jury trial. cvnere each respcctivc

party had the opportunity to present their case in fu1i. As pan oftlie judgmenr. the District

Court effectively addressed the nicrits of the case when it concluded that Stevens owed Seal

no duty ofcarc. As there is sufficient evidence in the record regarding the viability of Seal's

substantive claim against Stc\:ens, ive need not remand the matter for further proceedings.

ISSUE TWO

728 Did the District Court err when it concluded that no relationship existed between Seal

and Stevens which would give rise to a duty on Steveils' part to procure insurance for Seal?

2 Seal's position regarding this issue on appeal is somewhat difficult to ascertain. Seal

apparently maintains that Stevens knew of his interest in procuring insurance for the

merchandise in question. Yet, according to Seal, Stevens failed to name hi111 as the loss

payee in the insurance contract. Further, according to Seal, the insurance policy that Stevens

procured ultimately proved "worthless" as Hart was not a cominon carrier ha~tlingthe

property of atiotlter, as required in the policy. Seal insists that Stevens "had a duty to provide

. . . insurance [on the cargo] for whatever reason Scal may have had to require the insurance."

Therefore, Seal concludes that Stevens "failed in her duty to Scal. and that negligence caused

Scal's loss.n

(j30 It is important to note that Scal pursued titis cause of action against Stevens uncier rhc

theories of brcaeh of contract and breach oftlte duty to procure insurance. Presumably, as

in
a result of the adverse ntli~lg the United States District C o ~ ~ r t , chci not assert a claim
Scal

for relicf in the present action based on third-party beneficiary law. Further, Seal has never

12
alleged fraud. misrepresentation, or the like. ceordingly, as indicated above, the District

Cour? concluded that Sea! did not contract witit Stevens to insurc any person, property: or

risk locatcd i n Montana. Since the District Court deteanlined that no relationship existed

between Seal and Steiens, it concluded that Ste\cns rncurred no duty to procure insurance

on Seal's behalf.

'3 1 The question of duty is a problem of the relation between individuals which imposes

upon osle a legal obligation for the benefit of the other. Ltri-sutz-~Z./~~rplrJ,~
v. Steirzer., 2000 MT

334,q 3 1,303 Mont. 96,v 3 1 , 1 5 P.3d 1205,131 (citation omitted). In other words, in order

for Seal to prevail against Stevens, he had to establish some relationship between thc parties

which obliged Stevens to a particular standard of conduct.

7132 In L11-.4n-L)o,I m . v. Kloots (Ohio Ct. App. 1999), 721 N.E.2d 507, the Ohio Court

of .Appeals examined a case strikingly similar to the one at bar. There, the plaintiff

negotiated the sale of hss restaurant 1\1tlt a prospectlye buyer 'The two entered into a

purchase agreemeitt with the stipulation that the buyer would secure and maintain insurance

coverage on the building and the personal property contained therein as the plaintiff retained

a mortgage interest ~n the real property and a security snterest in the personal property. With

the aid of an insurance agency, the buyer subsequently obtained a polic) for the restaurant.

The policy listed thc plaintiff as a mortgagee for ihc real property but did not name him as

a loss payee irr the provisions covering the personal property. The plaintiff did rcceive a

certificate of insurance hut not a copy of the insurance policy itself The plaintiff never

contacted the insurance agency i n regard to the insurance policy,

13
7.33 hpproximalcly two years fol'iowing the coverage's effective date, the restaurant

sustained damage in a fire. The insurance company yaid plaintifrs claim undcr the property

rnsurance pol~cy h ~ loss as a mortgagee but denled hrs pcrsonal property cla1n1as he \\as
for s

not listed as a loss payee in rhe relevant personal property provisions. The plainriff

subsequently filed suit agalnst the bujer, the Insurance agency, an employee of the insurance

agency, and the insurance company. The defendants filed a joint motion for summary

judgment ~ h i c h tr~al
the couil granted on the grounds that the defendants oned no duty to

the plaintiff.

3 4 On appeal, the Ohio Court of Appeals affimicd the trial court. The Court did so, in

part, for the follow~ng
reasons:

This court finds that, as a matter of law, the issuance of a Certificate of
Insurance to a certificate holder who is not the customer ofthe insurance agent
issuing the certificate, fails to create a duty from the certificate issuer to the
certificate holder.

t\n insurance agency has a duty to exercise good faith and reasonable
diligence in providing insurance requested by its customer. An insurance
agent, however, owes no duty to ensure that a party is named as an insured on
a policy when there was no 01-al or written agreement to obtain iiisurance
coverage between the party and the agent and M hen the party never contacted
the agent or any other Insurance agent about procuring coverage. . . . [I]n this
matter, [pla~nt~ffl no agreement with [the insurance agency] regardtng the
had
procurement of insurance coverage. Nor did [plai~itiffl make a request of [the
insurance agency] to be named as an insured or as m additional insured under
the subject policy. 'She only conversations regarding insurance coverage took
place bet\\-een [the insurance agency] and [the bi1yei.j. Morcolcr, any contract
for tlre provision of insurance was between [the insurance agency] and [the
buyer] . . . . [Citations omitted.]
i ~ 1 - A t z - l l ) ~ i721
. K.E.2d at 510. iVc note that tli-,-ii?-i>:idocs continue t examine the
o

plaintiff's cause of action pursuant to his misrepresentation claim and his third-party

beneficiary status. Howcver, as mentioned above, Seal did not allege misrepresentation or

any theory invoking third-party beneficiary treatment in the present cause of action. iZs such

we will not examine tliose issues.

735 The evidence at trial in this case presented a factual scenario comparable to that

referenced above. At trial, Seal testified lo the following:

Q. Ha\ e you ever met Jan Stevens'?

A. No.

Q. And she is not your agcnt, is she'!

A. No.

Q. [Tlhe conversation yo11 had with Jan Stevens that you say you had was
subsequent to the events that give rise to your claim; is that right'!

A. When I didn't get paid, yes

Q. But she never spoke with you in person or by telephone prior to the saddles
and tack being loaded on the truck: is that right?

24. That's right.

Q. Did yon ever present any application for insurance to her'?

3 . No.

Q. Did you ever request her assistance to obtain insurance'!
 A. No.

Q. You never communicated to Jan Stevens that you wanted to be a loss payec
on the insurance, did you'?

A. Yes --- \veil, no. I told that to 'Put Hart.

Q. But Jan Stevens wasn't part of the negotlatlons betueen you and 'Put Hart,
mas she?

A. No

Further. Stevens testified as follows.

Q. Have you e\er spoken w i t h LaVen~
Scal?

A. No.

Q. Are you quite certain of that?

A. Yes

Q. Even after the loss mas reported by Mr. Hart, Tut Hart. did Mr. Seal ever
call you'?

A. No.

Q. Did you h a ~ any correspondence with h4r. Seal?
e

A.No. Other than faxing, by request ofTur, I faxed B cer-tificate of it~suranee,
I fixed some stuff to him.

Finally, Hart testified that he informed Stevens that Scal was to be listed as the loss payee

011 the insurance policy. t-io~vever,
Stevens denied receiving such a request.
T36 Generally, a certificate of insurance is rncrcly evidence of the existence o f tan

insurancc poiicy. i3it Appleinax, I:rszii~~rnce and I'ri~tice 8 7530 jig76 land Strpp.
Law

1097). A certificate of insurance alone docs not constitute a contract lo procure insurancc

or imposc a duty upon the ccrtiticate Issuer to procurc the same. See K.H (it-ovet-,Inc v.

Fljitn lizs Co. (1989), 238 hfont, 278,284,777 P.2d 338.341. This principle mas reaffirmed

by the certificate itself. At trial, Seal acknouledged that the ccrt~ficate
read:

This Certificate is issued as a matter of information only and confers no rights
upon the certificate holder. This ccrtificatc does not amend, extend or alter the
coverage afforded by the policies below.

1/37 Moreover, as in Lzc-An-Do, the testimony at trial in the instant case

conclusively revealed that Seal never contacted Stevens about procuring insurance

cox erage on the merchandise. 'The only conbersatlons regarding the procurement of

insurance occurred between Hart and Ste\ ens. \Vhrle there mas conflrct~ng
testimony

regarding the request for the loss payee des~gnation, cannot conclude that the
me

Distr~ct
Court misapprehended the effcct of the eb idence or made a m~stake.As there

is sufficient evidence in the record to support the District Court's firtdings, we hold

that the District Corirt did not err ~ : h c n concludetl that no relationship existed
it

between Seal and Stevens that uould glve rise to a corresponding duty. While it \%as

not proper to dismiss the con~plaint
against Stevens for lack of personal jurisdiction,

the District Coui-t would have been justified in dismissing the complaint, with

prcjudicc, against Stcvens on the grounds that no relationship existed between Seal

and Stevens such that Seal cot~ld
recover on his claim for relief.
4;3i: Accordingly, the judgment of rhi District Court is affirmed in pr,
at rexicrsed

in part, and remanded for entry of judgment consistent with this Opinion.

We Concur: