Creem v. Northwestern Mutual Fire Ass'n

56 P.2d 762, 56 Idaho 529, 1936 Ida. LEXIS 65

• Court: Idaho Supreme Court
• Decided: March 20, 1936
• Docket: No. 6176.
• Status: Published

Opinions

GIVENS, C. J.

Respondents brought suit on a policy of fire insurance covering the furniture, fixtures and stock of merchandise belonging to respondent Rambo, destroyed by fire. The principal defense was based upon the claimed violation of the italicized provisions of the policy as follows:

“This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void if the insured now has or shall hereafter make or procure any other contract of insurance, whether valid or not, on property covered in whole or in part by this policy; or if the subject of insurance be a manufacturing establishment and it be operated in whole or in part at night later than ten o’clock, or if it cease to be operated for more than ten consecutive days; or if the hazard be increased by any means within the control or knowledge of the insured; . ... or if the subject of insurance be personal property and be or become incumbered by a chattel mortgage; .... ”

because after the policy was issued, Rambo gave a chattel mortgage on certain equipment in the store to A. A. Seay, and on the stock of goods, furniture and fixtures to the Nampa-Weiser Company and George Shellhaas. During the course of the trial, respondents introduced evidence to the effect that the parties to the chattel mortgage given the Nampa-Weiser Company and George Shellhaas did not intend to thereby cover the stock of goods and argue that because the chattel mortgage clause in the insurance policy did not provide for forfeiture in case the subject matter of the insurance became mortgaged “in whole or in part” whereas other contingent forfeiture clauses did so provide, and since only a part and not all of the subject matter of said policy was so mortgaged, the chattel mortgage clause did not become operative to prevent recovery.

While there is authority to the contrary, the majority rule construing a policy of insurance worded as the one herein supports respondents ’ contention on this basis, either that the subject matter of the insurance, even though contained in the same policy, was divisible, that is, furniture and fixtures on the one hand and stock of merchandise on the other, as was said in Adler v. Germania Fire Ins. Co., 17 Misc. 347, 39 N. Y. Supp. 1070, at 1072:

“ .... In the Merrill Case, above stated [Merrill v. Insurance Co., 73 N. Y. 452, 29 Am. Rep. 184], the court of appeals says of a policy like the present, insuring different classes of goods for different sums:

‘ 1 ‘ The contract before us is not entire: it is divisible; and the breach of the condition made by the plaintiff applied only to the class of property insured, which was the immediate subject of the act of incumbrance which constituted that breach.’

“It is not within the power of the insurer to make a divisible contract an entire contract by calling it so, and we must seek an intention agreeable to the kind of contract which he was actually making; that is to say, a policy embracing more than one subject, and entire as to each subject. That intention, we think, is quite manifest. It will be observed that the provision in which the words ‘this entire contract’ occur refers to the ‘subject of insurance’ becoming incumbered by chattel mortgages. The ‘subject of insurance’, in a policy insuring separate risks, means the subject of each separate risk, as to each of which there is, under the cases, a divisible contract or policy; and the provision that the entire policy would be void if the subject of insurance becomes incumbered means that the whole insurance upon that particular subject or risk should be so affected .... As to each class of insurance the policy is entire, and not otherwise, and the insurer must be deemed to have had that legal distinction in view when employing the term under consideration.....”

26 C. J. 101, sec. 100, note 30; 26 C. J. 276, secs. 347-349; Manchester F. Assur. Co. v. Feibelman, 118 Ala. 308, 23 So. 759; Mitchell v. Mississippi Home Ins. Co., 72 Miss. 53, 18 So. 86, 48 Am. St. 535; German Ins. Co. v. Fairbank, 32 Neb. 750, 49 N. W. 711, 29 Am. St. 459; Tompkins v. Hartford Fire Ins. Co., 22 App. Div. 380, 49 N. Y. Supp. 184; American Artistic Gold Stamping Co. v. Glens Falls Ins. Co., 1 Misc. 114, 20 N. Y. Supp. 646; Sun Mutual Ins. Co. v. Tufts, 20 Tex. Civ. App. 147, 50 S. W. 180; German Ins. Co. v. Luckett, 12 Tex. Civ. App. 139, 34 S. W. 173; North British etc. Ins. Co. v. Freeman, (Tex. Civ. App.) 33 S. W. 1091; or the policy not making it a violation to mortgage “in whole or in part” is to be construed as meaning that all the property, not merely part thereof, must be mortgaged before the policy is void. Peterson v. Pacific Fire Ins. Co. of New York, (La. App.) 148 So. 283:

“The meaning of the clause ‘if the subject of insurance . ... be or become encumbered’ is important. Is it intended that any mortgage for any amount on any part of the insured property shall work • a forfeiture, or that only such mortgage as incumbers the entire amount of the property insured shall have that effect? The latter is, undoubtedly, the proper interpretation, in view of the other provisions of the policy working a forfeiture, which are careful to provide that the policy shall be void under the conditions mentioned when the insured property is affected ‘in whole or in part.’ For example: ‘This entire policy .... shall be void if the insured now has or shall hereafter make or procure any other contract of insurance, whether valid or not, on property covered in whole or in part by this policy; or if the subject of insurance be a manufacturing establishment and it be operated in whole or in part at night later than ten o’clock’ ....

“In Western Assurance Co. v. Bronstein, 77 Colo. 408, 236 Pac. 1013, 1015, the identical clause was under consideration. The court there pointed out the difference in the forfeiture clauses, saying: ‘It will be observed that the clause against additional insurance makes the entire policy void, if the property covered by the policy, either in whole or in part shall be reinsured, while the clause against an incumbrance by a chattel mortgage makes the policy void only if “the subject of insurance,” not merely a part of it, is incumbered' and held that an incumbrance of a part of the insured property was not an incumbrance of ‘the subject of insurance, not all of it.’ ”

26 C. J. 185, see. 226; Northern Assur. Co. v. Case, 12 Fed. (2d) 551; Ransom v. Potomac Ins. Co., 226 Mo. App. 664, 45 S. W. (2d) 95; Fitzgibbons v. Merchants’ & Bankers’ Mut. Fire Ins. Co., 126 Iowa, 52, 101 N. W. 454, 70 L. R. A. 243; Western Assur. Co. v. Bronstein, 77 Colo. 408, 236 Pac. 1013; Merchants Mut. Fire Ins. Co. v. Harris, 51 Colo. 95, 116 Pac. 143; Sullivan v. Mercantile Town Mut. Ins. Co., 20 Okl. 460, 94 Pac. 676, 129 Am. St. 761; Mecca Fire Ins. Co. v. Wilderspin, (Tex. Civ. App.) 118 S. W. 1131; Fritzley v. Germania Farmers Mut. Fire Ins. Co., 19 Ont L. 49, 14 Ont. W. R. 18; Phenix Ins. Co. v. Lorenz, 7 Ind. App. 266, 33 N. E. 444, 34 N. E. 495; Born v. Home Ins. Co., 110 Iowa, 379, 81 N. W. 676, 80 Am. St. 300.

As against the contention that the policy was divisible appellant urges that since the merchandise was contained in the fixtures and the fixtures were mortgaged, there was such unity of risk as to avoid the policy as to the stock of goods, and that the court erred in giving the instruction that the giving of the mortgages on the furniture and fixtures did not affect the right of recovery for the loss of the merchandise. Some courts have held that under such circumstances the hazard is so increased as a matter of law as to avoid the policy. Lee v. Agricultural Ins. Co., 79 Iowa, 379, 44 N. W. 683:

“ .... There is no question in this case. The giving of' the chattel mortgage is, beyond question, an increase of the risk, and a decrease of the defendant’s security, because thereby the assured lessened his interest in the insured property. It makes no difference that a right of action had not accrued upon the mortgage. It was a depletion of the assured’s interest in the property, to the extent thereof, from its execution and delivery.”

See 26 C. J. 193, sec. 235; 26 C. J. 277, secs. 347-349; Weddington v. Piedmont Fire Ins. Co., 141 N. C. 234, 54 S. E. 271, 8 Ann. Cas. 497; Goorberg v. Western Assur. Co., 150 Cal. 510, 89 Pac. 130, 119 Am. St. 246, 11 Ann. Cas. 801, 10 L. R. A., N. S., 876; McWilliams v. Cascade Fire Marine Ins. Co., 7 Wash. 48, 34 Pac. 140; Ohio Valley Fire & Marine Ins. Co.’s Receiver v. Skaggs, 216 Ky. 535, 287 S. W. 969; McKernan v. North River Ins. Co., 206 Fed. 984; Baldwin v. Hartford Fire Ins. Co., 60 N. H. 422, 49 Am. Rep. 324; McGowan v. Peoples Mut. Fire Ins. Co., 54 Vt. 211, 41 Am. Rep. 843; Coggins v. Aetna Ins. Co., 144 N. C. 7, 56 S. E. 506, 119 Am. St. 924, 8 L. R. A., N. S., 839; Republic County Mut. Fire Ins. Co. v. Johnson, 69 Kan. 146, 76 Pac. 419, 109 Am. St. 157, 2 Ann. Cas. 20; Capps v. National Union Fire Ins. Co., 318 Ill. 350, 149 N. E. 247.

Others directly to the contrary. Taylor v. Anchor Mut. Fire Ins. Co., 116 Iowa, 625, 88 N. W. 807, at 809, 93 Am. St. 261, 57 L. R. A. 328:

“ .... We therefore hold on this question as involved in the case before us, that entirety of premium does not necessarily prove that the contract is indivisible, and that where it appears from the terms of the policy that distinct items or classes of property were separately insured the policy may be valid as to one item or class, although it is invalid as to another item or class by reason of breach of conditions of the policy with reference thereto, provided it appears, also, that the risk which it was intended to exclude by the condition which is broken does not apply to the other items or classes of property. In this case a chattel mortgage on the cows and horses could not in any way affect the nature of the risk as to the dwelling house and contents, and therefore we find that a breach of a condition in the policy as to the one class of property did not invalidate the insurance as to the other.”

Loomis v. Rockford Ins. Co., 77 Wis. 87, 45 N. W. 813, 20 Am. St. 96, 8 L. R. A. 834; Downey v. German Alliance Ins. Co., 252 Fed. 701; Manchester Fire Assur. Co. v. Glenn, 13 Ind. App. 365, 40 N. E. 926; Fisher v. Sun Ins. Co., 74 W. Va. 694, 83 S. E. 729, L. R. A. 1915C, 619; Hanover Fire Ins. Co. v. Crawford, 121 Ala. 258, 25 So. 912, 77 Am. St. 55; Benham v. Farmers Mut. Fire Ins. Co., 165 Mich. 406, 131 N. W. 87, Ann. Cas. 1912C, 983, L. R. A. 1915D, 736; Jones v. American Eagle Ins. Co., 91 Fla. 565, 108 So. 165; Jack v. Farm Property Mut. Ins. Assn., 205 Iowa, 1294, 217 N. W. 816; Raulet v. Northwestern Nat. Ins. Co., 157 Cal. 213, 107 Pac. 292; Miller v. Delaware Ins. Co., 14 Old. 81, 75 Pac. 1121, 2 Ann. Cas. 17, 65 L. R. A. 173; 26 C. J. 278, sec. 349.

A third line of authorities is to the effect that it is a question of fact, which we believe is the correct rule. King v. Hartford Fire Ins. Co. of Hartford, Conn., 133 Minn 322, 158 N. W. 435, at 436, Ann. Cas. 1916D, 861:

“We are unable to hold that as a matter of law the risk was materially increased by giving the bill of sale, or chattel mortgage, or that the finding of the jury on this question is not supported by the evidence. Increase of risk is always a question for the jury, unless in a particular case the evidence is so conclusive that reasonable minds cannot differ.” Crittenden v. Springfield Fire & Marine Ins. Co., 85 Iowa, 652, 52 N. W. 548, 39 Am. St. 321; Petranek v. Bohemian Farmers Mut. Ins. Co., 44 S. D. 550, 184 N. W. 798; Niagara Fire Ins. Co. v. Layne, 162 Ky. 665, 172 S. W. 1090, citing with approval Provident Savings Life Assur. Co. v. Whane, 131 Ky. 84, 93 S. W. 1049, 29 Ky. Law Rep. 160, and Penn Mutual Life Ins. Co. v. Mechanics Savings Bank, 72 Fed. 413, 19 C. C. A. 296, 38 L. R. A. 33; Zeitler v. Concordia Fire Ins. Co., 169 Mich. 555, 135 N. W. 332; Collins v. Merchants & Bankers Mut. Ins. Co., 95 Iowa, 540, 64 N. W. 602, 58 Am. St. 438; Russell v. Cedar Rapids Ins. Co., 71 Iowa, 69, 32 N. W. 95, 42 N. W. 655; Godfrey v. Security Ins. Co., (La. App.) 147 So. 101; Knowles v. Dixie Fire Ins. Co., 177 La. 941, 149 So. 528. It was error, therefore, for the court to instruct the jury as it did. 1 Some 24 specific articles, not merchandise, were concededly never mortgaged, and the same rule would apply to these articles, i. e., if mortgaging the furniture and fixtures tended to increase the risk on these 24 articles recovery could not be had; otherwise it could be.

This court has held that where a written instrument through mutual mistake of the parties thereto does not express their true intent the introduction of oral testimony does not violate the parol evidence rule when responsive to proper allegations of the complaint or answer, but that to establish an asserted mutual mistake the evidence must be clear and convincing and show that all parties intended the instrument to provide other than it stated. Exum v. Portneuf-Marsh Valley Irr. Co., 38 Ida. 155, 220 Pac. 112:

“A deed or other written contract may be reformed when it is shown by evidence clear and satisfactory that owing to a mutual mistake of the parties it does not express the intention of such parties, (Udelavitz v. Ketchen et al., 33 Ida. 165, 190 Pac. 1029; Bowers v. Bennett, 30 Ida. 188, 164 Pac. 93; Panhandle Lumber Co. v. Rancour, 24 Ida. 603, 135 Pac. 558.) The above decisions of this court also hold that parol evidence is admissible to prove that by reason of a mutual mistake of the parties a written instrument does not truly express their intention. Cases almost without number from the highest courts of other states might be cited to the same effect on both of these points.”

Houser v. Austin, 2 Ida. 204, 10 Pac. 37; Udelavitz v. Ketchen, 33 Ida. 165, 190 Pac. 1029; Hayes v. Flesher, 34 Ida. 13, 198 Pac. 678; Gould v. Frazier, 48 Ida. 798, 285 Pac. 673; recognized in Ehlinger v. Washburn-Wilson Seed Co., 51 Ida. 17, 1 Pac. (2d) 188, and the jury should be so instructed, Morrison v. Pierce, 47 Ida. 430, 276 Pac. 306; Molyneux v. Twin Falls Canal Co., 54 Ida. 619, 35 Pac. (2d) 651, 94 A. L. R. 1264.

The evidence herein is insufficient to prove that the merchandise was included in the chattel mortgage by mutual mistake.

The other assignments of error touching on the admissibility of evidence were either not prejudicial or are sufficiently covered by the above conclusions.

Judgment reversed and the cause remanded for a new trial. Costs to appellant.

Budge and Ailshie, JJ., concur.

Petition for rehearing denied.

1 “.Instruction No. 5.

You are instructed that the evidence and admissions in this ease leave the fact uncontradieted that a chattel mortgage was given on or about the 6th day of May, 1932, covering the business furniture, fixtures and equipment which were insured under the policy in question in this ease, and that the defendant had no notice or knowledge that said chattel mortgage had been given thereon until after the same were destroyed by fire. You are instructed, therefore, that if you find for the plaintiffs, in determining the amount of their damage, you will not include the value of such business furniture, fixtures and equipment but will base your verdict as to the amount of damages, if any, suffered by the plaintiffs by reason of such fire loss upon the value of the stock of meats and groceries only.”