Day v. Charter Oak F. & M. Insurance , 51 Me. 91 ( 1862 )

The opinion of the Court was drawn up by

Walton, J.

The plaintiff’s right to indemnity under his policy is not absolute but conditional. One of the conditions is, that "property held in trust,” — which term, as therein used and explained, includes " property held as collateral security,” — must be insured as such; otherwise, the policy will not cover it; and one of the questions presented is, whether any portion of the property included in the plaintiff’s policy was thus held by him at the time ho obtained his insurance.

On the 17th of March, 1859, Josiah E. Day conveyed to the plaintiff certain real estate, including a portion of the property covered by the plaintiff’s policy, and, on the 12th of April following, took from the plaintiff a writing, in which he says : — "said conveyance was made to me with the intent and purpose of indemnifying and securing me for sundry advances heretofore made and hereafter to be made by me to the said Josiah E. Day, and to protect and save me harmless from all liability on any negotiable paper to which I have heretofore or may hereafter become a party, at the instance and for the accommodation of the said J osiah E. Day. Now, therefore, I do hereby acknowledge and declare that I hold said property as security aforesaid.” He then promises and agrees that, upon payment of such sums as he shall have thus advanced, or paid on account of the notes, &c., he will reconvey the premises to said Josiah F. Day, or to such other person as he may appoint. It is not denied that the facts are correctly stated in this writing, nor is it pretended that the plaintiff held the property by any other title than as therein stated at the time he obtained his insurance.

The deed conveying this property to the plaintiff being upon its face absolute, the Court might not admit parol evidence to show that the property was held as security merely; but here is a writing signed by the plaintiff, in which he acknowledges and declares that the property is so hold by him; and, if he should be indemnified against the negotiable paper referred to, and his debt paid, without recourse to the property thus held, he would then hold the property as a mere naked trustee, without consideration; and, if applied to for the purpose, this Court would be obliged to take notice of the fact, and compel him to reconvey it to J osiah F. Day, or such person as he might appoint, according to the agreement. The fact is legally established by the writing, and it seems impossible to escape the conclusion that tills property was held by the plaintiff as collateral security ; and was therefore " held in trust,” within the meaning in which that term is used and explained in the third article of the conditions which were annexed to and made part of the plaintiff’s policy. The last clause in that article is as follows : — "Note. — By 'property held in trust,’ is intended, property held under a díred of trust, or under the appointment of a court of law or equity, or property held as collateral security; in v:hich latter case this company shall be liable only to the extent of the interest of the assured in such propertyand the fourteenth article provides for an assignment to the company of the interest of the insured in property so held, in certain cases, if required, together with the debt or payment secured thereby. Therefore the fact, that the plaintiff held this property as collateral security, was important to the defendants, and should have been stated in the plaintiff’s application.

It is admitted that a considerable portion of the property included in the plaintiff’s policy was not owned by him; and another question presented is, whether he can recover for such portions of it as he did own, and was valued separately in the policy.

It is a well settled principle that, when required by the terms of the policy, the insured is bound to show that he has stated truly and accurately the nature and extent of his interest, or his policy will be void. One reason for this, in respect to mutual companies, is, that they have a lien on the property to secure the premium notes; but this is not the only reason, and the principle has been applied to cases where no such lien existed; and to cases where the policy covered different parcels of properly, valued separately, and the omission to state the true title and interest of the insured applied only as to part of the parcels. It is always material to the insurer to know what the interest of the insured is; for if valid policies could be obtained without interest, or for an amount far exceeding the interest of the insured, without disclosing the fact, such risks would be extremely hazardous by reason of the temptation which such policies would hold out to a wilful burning of the property.

Besides; insurers have a right to determine for themselves what facts are material to be disclosed, and .upon what terms and conditions they will insure property; and when a risk has been assumed upon the express condition that the title or. interest of the insured has been truly and accurately stated in the application, it would not only be in Violation of well settled rules of law, but contrary to the plainest dictates of an enlightened morality, for the Court to disregard the condition and extend the liability of the insurers to a risk which they never agreed to assume.

The third article of the conditions which are annexed to and made part of the policy now under consideration, requires " the true title of the insured and the extent of his interest” to be represented to th.e company and so expressed in the policy, in writing, otherwise the insurance shall be void; and the fifteenth article provides that, " in any suit or action, the plaintiff must show the truth of all statements, and performance of all terms, conditions and warranties, before he can recover.” These, by the express terms of the policy, are conditions precedent to the plaintiff’s right to recover, and yet they have not been performed. The plaintiff did not represent his true title and the extent of his interest to the company as required, and has not, therefore, shown a "performance of all terms, conditions and warranties” necessary to entitle him to recover. One portion of the property included in his policy, (the' bleach room and building attached,) of the estimated value of three hundred dollars, was held by the plaintiff as collateral security, but was not so represented to the defendants, or insured as such; and another portion of the property included in his policy, (the press cutter, gearing, belting and shafting; steam pipe and fixtures for warming the mill; fire pumps and hose and gearing,) of. the estimated value of three hundred and fifty dollars, the plaintiff had no interest in. These omissions are fatal to the plaintiff’s right to recover for any portion of the property included in his policy. Battles v. Ins. Co., 41 Maine, 217; Lovejoy v. Ins. Co., 45 Maine, 472; Richardson v. Ins. Co., 46 Maine, 394; Gould v. Ins. Co., 47 Maine, 403; Davenport v. Ins. Co., 6 Cush., 340; Smith v. Ins. Co., 25 Barb., 497; Patten v. Ins. Co., 38 N. H., 338.

Exceptions sustained— Verdict set aside and JVew Trial granted.

Rice, Cutting, Davis, Kent and Dickerson, JJ., concurred.