Fidelity Phenix Fire Ins. Co. of New York v. Raper , 242 Ala. 440 ( 1941 )

This case was put on rehearing by the writer when it was discovered that some of my brothers were doubtful about the seventh headnote, contained in the printed opinion (Fidelity Phenix Fire Ins. Co. of New York v. Raper), and which is a correct statement of the opinion to that effect rendered on original hearing.

The basis of that holding was the cases of National Liberty Ins. Co. of America v. Spharler et al., 172 Ark. 715,290 S.W. 594, 596; Mishiloff v. American Cent. Ins. Co., 102 Conn. 370,128 A. 33; Virginia Fire Marine Ins. Co. v. Lennon et ux.,140 Va. 766, 125 S.E. 801, 806, 38 A.L.R. 186, 194.

The annotations of the Virginia case, supra, contain a note by the editor that the general rule throughout the courts is that announced in the Virginia case to the effect that a vendee of chattels under a conditional sale contract is not the sole and unconditional owner thereof within a policy of insurance thereon making it void in the absence of such ownership. This is the effect of Brown v. Commercial Fire Ins. Co., 86 Ala. 189,5 So. 500; Phoenix Ins. Co. v. Public Parks Amusement Co.,63 Ark. 187, 37 S.W. 959; Hartford Fire Ins. Co. v. Enoch,72 Ark. 47, 77 S.W. 899; Mishiloff v. American Cent. Ins. Co., supra; Dumas v. Northwestern Nat. Ins. Co., 12 App.D.C. 245, 40 L.R.A. 358; Conyers v. Yorkshire Ins. Co., 30 Ga. App. 6,117 S.E. 102; Geiss v. Franklin Ins. Co., 123 Ind. 173, 24 N.E. 99, 18 Am.St.Rep. 324; Westchester Fire Ins. Co. v. Weaver,70 Md. 536, 17 A. 401, 18 A. 1034, 5 L.R.A. 478; Ballard v. Globe Rutgers Fire Ins. Co., 237 Mass. 34, 129 N.E. 290; Phoenix Ins. Co. v. Quinette, 36 Okl. 384, 128 P. 722; Dow v. National Assur. Co., 26 R.I. 379, 58 A. 999, 67 L.R.A. 479, 106 Am. St. Rep. 728; McWilliams v. Cascade Fire Marine Ins. Co., 7 Wn. 48,34 P. 140; Cooper v. Ins. Co. of Pennsylvania, 96 Wis. 362,71 N.W. 606. There are many other decisions in the annotations to like effect.

In Brown v. Commercial Fire Ins. Co., 86 Ala. 189, 192,5 So. 500, 501, it was held: "* * * By express stipulation the parties make it material, and the validity of the contract dependent on a compliance with the condition. The assured, by accepting a policy in which such condition is incorporated, becomes bound thereby, and when he claims to enforce the contract, and receive its benefits, he is estopped from denying his assent to the stipulation. Lasher v. [St. Joseph Fire Marine] Ins. Co.,86 N.Y. 423; Mers v. [Franklin] Ins. Co., 68 Mo. 127; Swan v. [Watertown] Ins. Co., 96 Pa. 37; Adema v. [LaFayette Fire] Ins. Co., 36 La. Ann. 660; [Alabama Gold Life] Ins. Co. v. Johnston,80 Ala. 467, 2 So. 125, [59 Am. Rep. 816]."

In Aetna Ins. Co. v. Kacharos, 226 Ala. 504, 147 So. 438,439, 91 A.L.R. 1432, it was declared on the many authorities cited that there was no liability under the terms of the policy for the reason insured was not the unconditional and sole owner, but that, "On the contrary, the case of Gaylord v. Lamar Fire Ins. Co., 40 Mo. 13, 93 Am. Dec. 289, supporting the contrary view, is a case much in point, cited and quoted by this court in Loventhal v. Home Ins. Co., 112 Ala. 108,20 So. 419, 423, 33 L.R.A. 258, 57 Am.St.Rep. 17. A consideration of underlying principles leads to a like conclusion." The court continued: "Forfeiture clauses of this character in policies of insurance are to be strictly construed against the insurer, and always with reference to their legitimate effect, that is, the protection of the insurer against risks that are materially different from those which he has undertaken. * * *"

The Kacharos case, supra, was dealing with the effect of the right of redemption that had not expired at the time of the issuance of the policy of insurance, and not a conditional sales contract as here under consideration.

It will be noted that the terms of the policy thus dealt with in the last cited authority are materially different from those contained in the instant policy.

In addition to the provisions of the policy set out in the original opinion are the further conditions: "It is understood and agreed * * * that, the three-fourth value clause, * * * the electric light, heat and power permit, * * * the standard time clause * * *, the powder and kerosene permit * * *, the lightning and electrical apparatus clause * * *", are made a part thereof and further that "this entire policy shall be void if the insured has concealed or misrepresented, in writing or otherwise, any material fact or circumstance concerning this insurance or the subject thereof; or if the interest of the insured in the property be not truly stated herein; * * * or if the interest of the insured be other than unconditional and sole ownership; or if the subject of insurance be personal property and be or become incumbered by a chattel mortgage; * * * or 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; * * *."

On the original hearing and now we treated the conditional sale contract of the personal properties in question placed in the house with other properties belonging to Mrs. Yalock as property under a chattel mortgage. The evidence shows that these purchases were made by Mrs. Yalock and she said that she conveyed her interest in such to the assured Raper. The evidence fails to show any such transfer was made to Raper either before or after the issuance of the policy and further fails to show that defendant company or its agent had any knowledge of such condition of the title.

The writer was and is now of the opinion that the rule announced in Loventhal v. Home Ins. Co., 112 Ala. 108,20 So. 419, 33 L.R.A. 258, 57 Am.St.Rep. 17; Boulden v. Phoenix Ins. Co., 112 Ala. 422, 20 So. 587; Aetna Ins. Co. v. Kacharos, supra, 226 Ala. 504, 147 So. 438, 91 A.L.R. 1432, does not obtain in the instant case.

In Gunn v. Palatine Ins. Co., Ltd., of London, England,217 Ala. 89, 91, 114 So. 690, 691, the now Chief Justice made the following observations:

"The case of Loventhal v. Home Ins. Co., 112 Ala. 108,20 So. 419, 33 L.R.A. 258, 57 Am.St.Rep. 17, contains much discussion of the question here involved, with numerous citations of authorities. Among those cited and quoted approvingly is that of Imperial Fire Ins. Co. v. Dunham, 117 Pa. 460, 12 A. 668, 2 Am.St.Rep. 686, from which the following quotation is taken:

" 'This provision of the policy does not necessarily distinguish between the legal and the equitable estate. If the title is conditional or contingent, if it is for years only, or for life, or in common, it is not the entire, unconditional and sole ownership; but, whether the title be legal or equitable, the interest of the assured is the same, so far as it affects the contract of insurance. The purpose of the provision is to prevent a party who had an undivided or contingent, but insurable, interest in property, from appropriating to his own use the proceeds of a policy, taken upon the valuation of the entire and unconditional title, as if he were the sole owner, and to remove him from the temptation to perpetrate fraud and crime; for without this a person might thus be enabled to exceed the measure of an actual indemnity.'

"The recent case of New Brunswick Fire Ins. Co. v. Nichols,210 Ala. 63, 97 So. 82, deals with the stipulation here involved, and, in holding that there was a breach of the provision of the policy as to ownership in fee simple by the insured of the lot on which the building was located, came in conflict with the decision in Commercial Union Assur. Co. v. Ryalls, 169 Ala. 517, 53 So. 754, which latter case was there overruled."

In Girard Fire Marine Ins. Co. et al. v. Gunn, 221 Ala. 654,659, 130 So. 180, 183, a like observation was made, as follows:

"In view of the positive pronouncements made by this court in Gunn v. Palatine Ins. Co. et al., 217 Ala. 89, 114 So. 690, that the defect presented 'was not a mere question of defect of title, but extent of ownership,' and that on this question defendants were entitled to the general affirmative instruction. * * *"

The decisions of this court upon the question of whether or not a conditional purchaser of property is a sole and unconditional owner in fee simple within the terms of an insurance policy have been with reference to real estate. The rule adopted by the majority of courts is that a vendee of chattels under a conditional sales contract whereby the vendor reserves title to himself until the payment of the purchase price in full is not the sole and unconditional owner within the meaning of a policy requiring such ownership; "and this is the rule notwithstanding delivery of possession to the vendee and part payment by him." 29 Am.Jur. p. 490, § 606.

This is the first time this question seems to have been presented in this state with reference to conditional purchase of chattels. It is particularly to be emphasized for the reason that it is recognized in this state that a conditional seller of chattels shall sustain all loss with respect to them by fire or otherwise.

In Perkins v. Skates et al., 220 Ala. 216, 218, 124 So. 514,515, it is declared: "The relation of conditional vendor and vendee, and of mortgagee and mortgagor, cannot subsist as to the same property at the same time. The state of the title and the incidents thereto are different. For example, in case of destruction of the property by fire without fault of the conditional vendee, the loss falls on the vendor; but, in the case of a mortgage, it falls on the mortgagor. American Soda Fountain Co. v. Blue, 146 Ala. 682, 40 So. 218; Bishop v. Minderhout, 128 Ala. 162, 29 So. 11, 52 L.R.A. 395, 86 Am.St.Rep. 134. * * *"

To the same effect are the cases of Bishop v. Minderhout,128 Ala. 162, 29 So. 11, 52 L.R.A. 395, 86 Am.St.Rep. 134; Commercial Inv. Trust Inc. v. East, 217 Ala. 626, 629,117 So. 160; General Motors Acceptance Corp. v. Crumpton, 220 Ala. 297,124 So. 870; Alexander v. Mobile Auto Co., 200 Ala. 586,76 So. 944.

It results that the views expressed in the seventh headnote of the opinion having reference to a conditional purchase of chattels and not of real estate were correct.

Application for rehearing overruled.

All the Justices concur, except KNIGHT, J., not sitting.