Melcher v. Insurance Co. , 97 Me. 512 ( 1903 )

Wiswell, C. J.

By a policy of insurance dated January 13, 1897, the defendant company insured one Simon P. Baker against loss-by fire upon his dwelling-house, for a period of three years from that date, in the sum of five hundred dollars. By the same policy the furniture therein was also insured. At that time Baker was the owner of the property, real and personal, covered by the insurance, but the real estate was subject to a mortgage to one Caldwell. The policy contained a provision to the effect that it should become void if the property insured be conveyed without the assent in writing of the insurer. January 7, 1898, while the policy was in force, Baber conveyed the real estate to his wife, Dorothy A. Baker, but the policy was never assigned, and no notice was given to the insurance company or its agent, of this' conveyance. On January 8, 1898, Mrs. Baker mortgaged the premises to Richmond L. Melcher, the plaintiff, and on August 2, 1899, during the period of time covered by the insurance policy, the dwelling-house was entirely destroyed by fire.

At the time of the fire, therefore, Baker had an unexpired policy of insurance, but had entirely parted with his title to the property insured; Mrs. Baker owned the property, subject to a mortgage, and the plaintiff held a mortgage upon the property given by Mrs. Baker after the conveyance from her husband to her.

It is clear, from the foregoing statement, that the policy of insurance, so far as it covered the dwelling-house, had become void prior to the loss by the conveyance of the property without the knowledge or consent of the insurance company, and without the assignment of the policy. Neither the husband, the wife, nor the mortgagee could maintain an action upon the contract of insurance to recover for the loss of the property insured, because the person with whom the contract of insurance was made had ceased to own the property, while the owner and the mortgagee were not insured. Richmond v. Phoenix Assurance Company, 88 Maine, 105. And the policy was equally avoided although the conveyance by the insured was to his wife. Clark v. Dwelling-House Insurance Co., 81 Maine, 373.

But this action is not brought by the insured, nor by the owner of the equity of redemption, upon the policy, but by Meleher, the mortgagee, to recover upon a promise alleged to have been made by the defendant corporation, to pay him the sum of $400 made after the destruction of the buildings by fire, and, to quote from the declaration, “after due investigation of the plaintiff’s claim, in order to settle and compromise the same, and to avoid litigation, and in consideration of the said plaintiff’s promise to forbear to sue, and to forever relinquish and release to the said defendant company all his right of action by reason of the same.” "Which offer, it is alleged, was accepted by the plaintiff, who thereafter forebore to commence an action upon the policy.

The case comes to the law court upon report. It appears from the testimony that shortly after the fire the plaintiff wrote a letter to the defendant’s agent, notifying him of the loss by fire, and saying: “Now I hold a mortgage on the place and Baker wishes the insurance to be paid to me. I simply write you so that you can act accordingly.” The agent replied to this, acknowledging the receipt of the letter, and said: “This loss will not be paid until the mortgagee joins in the receipt for the insurance. I will see that you are protected in it.” It is evident that, at the time this letter was written, the agent had no knowledge of the transfer of the property from the insured to his wife, nor of the mortgage from the latter to the plaintiff. On September 4, 1899, the agent replied to another letter of the plaintiff, in which reply he said: “When I went to settle this loss I found that Mr. Baker had deeded the property to his 'wife a year ago last January, and she in turn had mortgaged it to you, without transferring the policy from Mr. Baker, or making the policy payable to you in case of loss. Now this left Mr. Baker without any insurance except on his personal property. The conveyance of this property to his wife, of course vitiates the policy without transferring it.” He goes on in this letter to say that he had submitted the facts to the company and asked to be allowed to settle the loss, and said that he had no doubt that his request would be granted. On September 25, 1899, the agent again wrote the plaintiff, saying: “I have received word from the company that insured Mr. Baker’s building, that, under the circumstances, they would pay what they considered the actual cash value of these buildings at the time of the fire, that is, that the actual cash (value of the) buildings at the time of the fire was $400 and they will pay that on the building. If this is satisfactory to you pleasé advise me and I will come to Andover and close it up. The company denied any liability under the circumstances, but I made the suggestion to them that they should protect your mortgage and they have decided to do it, which I think myself is very liberal.” Further correspondence and communication, orally and by telephone, followed between the plaintiff and the agent of the insurance company, from which it appears that the plaintiff sought to have the company pay the remaining one hundred dollars, and that the agent was making efforts to have the company assent to this. Later the matter was put into the hands of counsel by Mr. and Mrs. Baker and by the plaintiff, with full authority to adjust this matter in any way that seemed best to him, and on October 11, 1899, this counsel saw the insurance agent and unconditionally accepted the offer to pay $400. But subsequently the offer was withdrawn.

The question is as to whether or not there was any consideration for this promise. The plaintiff’s contention is as shown by his declaration, that the offer was made and accepted as a compromise of the plaintiff's claim against the company. It is abundantly well settled that the compromise of a doubtful claim is a sufficient and valid consideration for a promise to pay money for the settlement of such claim. It is immaterial upon which side the right ultimately proves to be, provided the parties believe, at the time of the compromise, that there is a doubtful question involved, and, for the purpose of settling the dispute and of preventing litigation, one of the parties to the controversy promises to pay a sum of money in compromise of such doubtful claim, which offer is accepted by the other party.

But in order for such a compromise to constitute a sufficient consideration for the promise, it is necessary that the parties should at least have supposed, at the time of the compromise, that the validity of the claim made was doubtful, either because of a question as to what facts might be susceptible of proof, or of a doubt as to the law applicable thereto. The claim must be one that is made in good faith, with a belief by the claimant that there is some chance of its successful enforcement. The surrender of a mere groundless claim, which is known by both parties to be unenforceable, is not a sufficient consideration. This limitation of the rule is recognized by all the decisions upon the subject, a few of which only we cite. Allis v. Billings, 2 Cush. 25; Kidder v. Blake, 45 N. H. 330; Pitkin v. Noyes, 48 N. H. 294, 97 Am. Dec. 615; Bellows v. Sowles, 55 Vt. 391, 45 Am. Rep. 621; Smith v. Farra, 21 Oregon 395, 20 L. R. A. 115.

In this case we do not think that the offer relied upon by the plaintiff was made for the purpose of effecting a compromise, or that there was any doubt whatever as to the claim made by the plaintiff against the insurance company, if he made any claim. The plaintiff could not have supposed that he had any chance of successfully maintaining a suit against the company upon the contract of insurance. It cannot be believed that, under the circumstances of this case, he Avould have.commenced any action against this company, if the offer had not been made. We do not think that he made any claim to recover the insurance, as a matter of legal right. He simply sought a gratuity from the company because of the fact of the previous insurance. Nor could the insurance company have supposed in making this offer, that it was attempting to settle a doubtful claim. The company and its agent must have known that no claim could be enforced against it, and that there was no danger of its being involved in litigation. The first letter of the agent to the plaintiff, after he had become aware of the fact of the transfer of the property clearly states the fact, about which there was no question, that “the conveyance of this property to his wife, of course, vitiates the policy without transferring it.” There is no suggestion in any of the correspondence that this was an offer of a compromise. Upon the contrary, the whole correspondence shows that the agent was endeavoring to get the company to pay, notwithstanding that there was no liability, and the offer made by the company, through its agent, was not to pay a sum of money for the sake of settling a claim about which there was any question or doubt, but to pay the full cash value of the property destroyed, according to its estimate of such value. The case does not come within the limitation to the rule, above stated, that the parties must at least have believed that there was some doubt as to the validity of the claim.

Under these circumstances, we are forced to the conclusion that the promise sued in the plaintiff’s writ was' not a binding and enforceable one, because it was made without any consideration whatever. According to the stipulation of the report, the entry will be,

Judgment for defendant.