This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (1998).





Allan D. Saunders, et al.,


Lowell Saunders, et al.,


Filed August 8, 2000


Randall, Judge


Yellow Medicine County District Court

File No. C6-98-207



Ronald R. Frauenshuh, Jr., 129 Northwest Second Street, Ortonville, MN 56278 (for appellants)


Boyd A. Beccue, P.O. Box 1126, Willmar, MN 56201 (for respondents)


            Considered and decided by Toussaint, Chief Judge, Randall, Judge, and Parker, Judge.*

U N P U B L I S H E D  O P I N I O N



Appellants challenge the district court’s determination that respondents were entitled to keep flood-insurance proceeds from a policy purchased by respondents that covered property respondents co-owned with appellants.  Appellants argue respondents breached an implied term in their rental agreement by failing to include all co-owners as named insureds, and that, therefore, the insurance contract must be reformed.  We affirm.


            On May 8, 1987, Agnes M. Saunders conveyed a house and 14 acres to her daughter, Jeannette Faye Enstad, reserving a life estate for herself.  Agnes Saunders died on October 9, 1993, making Enstad the sole owner of the property.

            Respondents Lowell and Karen Saunders, husband and wife, had moved into the home while Agnes was still alive.  They made an oral agreement with Enstad, Lowell Saunders’s sister, to rent the property.  At the time of the rental agreement, the property was subject to a mortgage.  In March 1994, under an “Extension of Repayment Agreement” with the finance agency, respondents agreed to pay the remaining mortgage balance of approximately $7,500.

            Respondents’ obligation under the mortgage was part of their rental agreement.  Lowell Saunders testified that the terms of the rental agreement required them to pay the mortgage, maintain insurance on the house, and pay the real estate taxes.  Enstad testified to the same terms.  She said that flood insurance was never discussed at the time of the rental agreement and that the home had never been insured for flood damage.  She said respondents were required to maintain the existing insurance, which provided fire and liability protection. 

            On June 29, 1994, Enstad conveyed the property to herself and her seven siblings, including Lowell Saunders, as joint tenants.  These siblings also included appellants Allan D. Saunders, Herbert E. Saunders, John R. Saunders, Merlin W. Sanders, Elaine M. Hull, and Connie M. Leenerts.  Enstad, who is not a party to this action, testified that the terms of the oral rental agreement did not change when she conveyed the property to all siblings as joint tenants.  She said that her siblings never discussed the terms of the lease with her.

            As tenants, respondents built an addition onto the home.  Trial testimony did not clearly establish the value of the home, but the 1997 estimated market value of the entire property for property tax purposes was $17,300 with a building value of approximately $10,900, including $4,800 for new improvements.

            In the spring of 1997, respondents became aware that the property was subject to a serious flood risk.  Lowell Saunders testified that initially he did not want flood insurance, but his wife insisted.  He intended to insure all of his and his wife’s property, but learned that flood insurance would cover only the structure of the home.  He purchased the minimum policy available, which insured the home for $40,000.  Shortly thereafter the home was destroyed by a flood. 

            Respondents received the flood-insurance proceeds and intended to rebuild the home on the same site, but zoning restrictions for the flood plain prevented them from doing so.  Therefore, they used the bulk of the proceeds to rebuild on another site.[1]  Appellants brought suit, claiming respondents had converted the insurance proceeds, the real estate, and the personal property, and had defrauded appellants of their share of these assets.

            After trial, the district court issued findings of fact and judgment in favor of respondents.  In its findings, the court stated:

The record does not indicate nor did testimony establish that the alleged verbal rental agreement between the parties included an agreement to provide insurance coverage above and beyond fire and casualty insurance.  [Respondent Lowell Saunders] purchased the minimum flood coverage available in order to provide for his personal insurance needs.


The court concluded that (1) as co-owners, respondents had an insurable interest in the property that supported a policy taken out on their own behalf; (2) it was not established that the lease included an agreement about respondent providing flood insurance; (3) providing flood insurance was neither an implied term of the agreement nor indispensable to effectuate the parties’ intent; (4) respondents had no contractual obligation to the other co-owners to carry flood insurance; (5) caselaw established that an insurance policy is personal to the contracting party and does not run with the land; and (6) respondents committed no conversion or fraud against appellants and were entitled to keep the flood insurance proceeds of $39,371.34. 


            Appellants argue that they are entitled to share in the flood insurance proceeds and that the insurance contract must be reformed to include them as insured parties.  They claim this result is warranted because respondent Lowell Saunders (a) was supposed to buy flood insurance for all owners of the home under the lease agreement and (b) had intended to benefit all co-owners when he purchased the flood insurance. 

            Appellants attack both the district court’s findings and its application of the law.  A district court’s findings of fact will not be disturbed unless they are clearly erroneous.  Robinson v. State, 567 N.W.2d 491, 495 (Minn. 1997).  “[D]ue regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses.”  Minn. R. Civ. P. 52.01.  Whether the findings of fact support the conclusions of law and judgment is a question of law.  Donovan v. Dixon, 261 Minn. 455, 460, 113 N.W.2d 432, 435 (1962). 

            The record supports the district court’s finding that no agreement about flood insurance was reached as part of the oral lease.  A contract is to be interpreted to give effect to the parties’ mutual intention at time of contracting.  Carl Bolander & Sons Co. v. United Stockyards Corp., 298 Minn. 428, 433, 215 N.W.2d 473, 476 (1974).  The record does not show that respondent Lowell Saunders had any obligation to purchase flood insurance for the home.  Rather, it shows that he agreed to maintain the existing insurance, which did not include flood insurance.  This is supported both by Lowell Saunders’s testimony and that of the other party to the oral lease, Jeanette Enstad. 

            The record contains testimony that Lowell Saunders sought flood insurance at his wife’s insistence in hopes of covering the house and all of his and his wife’s property inside the house.  This evidence supports the district court’s finding that he purchased flood insurance to provide for his personal insurance needs.

            Appellants have failed to produce sufficient evidence to permit reformation of the insurance contract.  A written instrument may be reformed if (1) there was a valid agreement between the parties expressing their real intentions, (2) the written instrument failed to express the parties’ real intentions, and (3) this failure was due to the parties’ mutual mistake or a unilateral mistake accompanied by fraud or inequitable conduct by the other party.  Nichols v. Shelard Nat’l Bank, 294 N.W.2d 730, 734 (Minn. 1980).  They have produced no clear evidence that Lowell Saunders intended to insure the interests of all co-owners or committed any fraud in applying for the flood-insurance coverage.  The facts of this case do not permit reformation of the insurance contract.

            Appellants also argue that Lowell Saunders bound them to the flood-insurance contract as their agent.  This court will generally not consider matters not argued and considered in the district court.  Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1998).    Because this argument was not raised before the district court, it is not properly before us.  Moreover, appellant has not alleged, and the record does not contain, sufficient facts to establish that Lowell Saunders had, or was acting on, authority to bind appellants.

            Finally, we are not persuaded by appellants’ argument that finding for respondents “would allow and encourage destruction of property where the value of the property is greater than the insurable interest.”  There is no “windfall” to anybody.  Appellants retain their interests, as before, in the land. 

            We conclude that the district court properly applied the law.  Insurance policies are personal contracts with the insured.  Closuit v. Mitby, 238 Minn. 274, 279, 56 N.W.2d 428, 431 (1953); Cetkowski v. Knutson, 163 Minn. 492, 494, 204 N.W. 528, 529 (1925).  Lowell Saunders purchased the minimum amount of flood-insurance coverage available.  That the amount of coverage may have exceeded the monetary value of the Lowell Saunders’s ownership interest in the property does not mean the other owners, whose interests remained uninsured, are entitled to share in the proceeds.  Because the policy was personal to Lowell Saunders, respondents are entitled to retain the proceeds.


* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.

[1]  A separate flood-insurance check was applied to pay off the remaining balance on the mortgage.