Firemen's Insurance v. Larey , 125 Ark. 93 ( 1916 )

Hart. J.

R. L. Larey sued The Firemen’s Insurance Company to recover upon a policy of fire insurance. The facts material to a determination of the issues raised by the appeal are as follows:

C. M. Blocker and R. L. Larey were tenants in common of certain lots in the town of Fouke, Miller County, Arkansas, each owning an undivided one-half interest therein. There were two store buildings located on the lots. On the 1st day of April, 1915, C. M. Blocker applied to the Firemen’s Insurance Company for a policy on said buildings in the sum of $600 for the period of one year. The policy was issued to C. M. Blocker and R. L. Larey and among other conditions provided that the policy should be void “If any change, other than by the death of an insured, take place in the interest, title, or possession of the subject of insurance (except change of occupants without increase of hazard) whether by legal process or judgment or by voluntary act of the insured, or otherwise, etc.” Blocker had no authority from Larey to insure his interest in the property but as soon as Larey found that the insurance had been taken on the property, he ratified the act of Blocker and agreed to pay his part of the premium. The policy was issued on a credit but the agent who issued it had authority to issue policies on a credit and both Blocker and Larey were well known to him. Blocker sold his interest in the property to Mrs. F. L. Duke and on the 15th day of May, 1915, the agent cancelled the policy. The property was destroyed by fire on June 12, 1915. Larey did not know that Blocker had sold his interest in the property until after the fire oceurrred and had not authorized him to make a sale thereof.

The court directed the jury to return a verdict for Larey in the sum of $300 being one-half of the policy and from the judgment rendered the insurance company has appealed.

It is contended by counsel for the defendant that the contract for insurance was an indivisible one and that the policy became void when Blocker sold his interest to Mrs. Duke. They claim that this act violated the provision of the policy quoted in the statement of facts against a sale or change of title of the subject of the insurance. In .the the first place they contend that this necessarily results from the principles laid down in McQueeny v. Phoenix Ins. Co. 52 Ark. 257, and Phoenix Ins. Co. v. The Public Parks Amusement Co. 63 Ark. 187. In the first mentioned case the policy was issued upon a residence and frame house which was used for rental property. A gross sum was named in the policy as the premium and the amount of the policy was apportioned as follows: $600 upon the residence and $400 upon the frame house held to let. The same person owned both houses. The court held that the contract was entire and that the effect of the apportionment of the amount of insurance on the different subjects insured was to limit the extent of the insurers’ risk, upon each item, to the amount named. In the last case the policy stipulated for a single premium and covered the contents of a livery stable. The insurance was separately apportioned to three classes, the horses, the vehicles, and the harness, etc. It was held that the contract was entire, the contract and risk being indivisible, and that if the policy was rendered void as to part of the carriages by reason of the insured’s misrepresentation of his title, the entire policy was avoided. We do not think the rule laid down in those cases is controlling here. In giving effect to language, regard must be had to its purposes. The generality of the language employed must be restricted to the reason and object of its use by the parties. In the cases referred to the same person owned all the property insured. The premium was gross and there was not only no apportionment between the different items of property insured but the title to the insured property was in the same person. The two houses in the McQueeny case were situated at a distance from each other and a separate valuation of the houses was placed in the policy to apportion the loss in case one of the houses burned and the other did not during the life of the policy.

The title to tenants in common in lands is separate. There is no unity in title but only unity of possession. In the instant case it is conceded that the agent who wrote the policy had the authority to issue policies and to issue them on a credit. He lived in the same county with Blocker and Larey and knew them both personally. The policy was not issued to Blocker and Larey as partners but as tenants in common. Hence the agent must have known that they did not occupy the premises themselves but were renting them out. ' The contract was one in its nature and purpose susceptible of apportionment and when the intention of the parties as gathered from the language of the contract and the subject matter of the insurance is considered, we think there is nothing in the nature or the terms of the contract which makes it Indivisible. There is considerable conflict of authority as to the question whether the change in the personnel of a' partnership, or the assignment of one partner’s interest, is within the meaning of fire insurance policies which provide that the policy shall be void in case of any sale or transfer of the property, or change of title or possession. A much greater number of the decisions hold that the transfer by one partner of his interest in the property insured to another member of the firm, is not such a change in the title thereto as would violate conditions in a policy against transfer, change, or alienation of the property or interests therein. See ease note to 21 L. R. A. (N. S.) 422; Pierce v. The Nashua Fire Ins. Co. 50 N. H. 297; Lockwood v. Middlesex Mutual Assurance Co., 47 Conn. 553; Hoffman v. Aetna Fire Insurance Co., 32 N. Y. 405. The reason given is that such a condition is inserted in the policy for the benefit and protection of the company against the risks of having careless or improvident persons substituted in the place of the original parties with whom they contracted. An assignment by one partner to another is obviously not within the principle or motive on which the condition is founded. Such a change does not affect the risk because no new party is brought in contractual relations with the insurers. The rule is different where a sale is made by one partner to a third person. In such cases a new person is brought into contractual relation with the insurance company. This is so because every partner owns the whole partnership property subject to the equal ownership of every other partner. When one partner sells his. interest to a third person such purchaser does not become a tenant in common with the other partners in any specific goods but acquires only the interest his vendor had, which is his share of the residue after the affairs of the firm are settled and the debts paid, including debts due from the firm- to a partner. 30 Cyc. 605. Again the same author says that the interest of a partner in the firm’s assets is not that of a tenant in common, or of a joint tenant at common law. It is the share to which he is entitled under the partnership contract, after the firm’s debts and the partners equities are adjudged. 30 Cyc. 444. See also Parsons on Partnership, 4th Ed. p. 137. Tenants in common are such as hold by several and distinct titles, but by unity of possession; because none knoweth his own severalty and therefore they all occupy promiscuously. Cooley’s Blackstone, 4th Ed., Vol. 1, Book 2, * p. 191. On the other hand as Lord Hardwicke said, each member of a partnership is seized per my et per tout of the common stock and effects.

It follows that when one partner sells his interest to a third person, a new party with whom the insurance company did not contract is introduced. Such a change affects the risk because a new party is brought into contractual relations with the insurance company. In the case of a sale by a tenant in common of his interest to a stranger, the contract of insurance as to him or his vendee is at an end. Under a contract of insurance containing a provision like the one in question as to change of title, the contract as to the remaining tenant in common however, is not affected by the sale. This is so because under the sale no stranger is brought into contractual relation with the company. There is no unity of title whatever between tenants in common and a contract made by an insurance company with them is necessarily subject to apportionment and is therefore a divisible contract. We think this rule is in accordance with reason and justice. To illustrate: in the present case, Blocker sold his interest in the property insured to Mrs. Duke. Under the clause of the policy under consideration there was a change in his title to the property and the contract was ended as to him. Mrs. Duke could not be brought into contractual relationship with the company without its consent and under the clause in question there was not only no consent but the insurance was avoided as- to her. All this, however, had nothing to do with the contract in regard to the interest of Larey. His interest was not in any way affected by the sale of Blocker’s interest to Mrs. Duke. In case of a loss by fire, neither he nor Mrs. Duke could share with Larey in the insurance collected by him. There would be no temptation to Mrs. Duke to destroy the property, not only because she could not share in any recovery had by Larey but she also lost her undivided one-half interest in the property insured.

The judgment will be affirmed.