Cook Motors Corp. v. Casualty Ass'n of America , 239 Mich. 362 ( 1927 )

In 1923 the plaintiff was engaged in the manufacture and sale of motor trucks at Kankakee, Illinois. The City Cartage Company was organized to operate a line of motor trucks between Detroit and near-by cities. On July 6, 1923, an agreement in writing was made between these companies, in which the motors corporation agreed to sell to the cartage company 10 trucks at the price of $3,600 each, payable in monthly installments of $200, for which promissory notes bearing 7 per cent. interest should be given. The cartage company agreed "to execute a chattel mortgage upon each of said trucks as collateral security for the payment" of said notes. It also agreed to insure the trucks against loss by fire, theft, and collision "for the joint protection of both parties hereto as their interests shall appear," and to deposit the policies in a bank in Detroit unless otherwise agreed in writing. There are many other provisions, of no seeming importance in the consideration of the questions presented. Eight trucks were delivered under this contract. On their arrival at Detroit, policies of insurance against loss or damage by fire, theft or collision were issued to the cartage company by the defendant. On October 15, 1923, these several policies were surrendered and a new blanket policy was issued, insuring all of the trucks and some trailers the cartage company was using.

Prior to the issuance of this policy, an accident occurred, in which one truck was damaged, and the jury found that the loss occasioned thereby was $1,882.92. Damage by collision and fire after October 15th resulted in a loss, as claimed by plaintiff, of $4,030.14. From this amount certain deductions should be made for unpaid premium. This action is brought to recover for such loss. Plaintiff claims by assignment to it of the claim of the cartage company. It had verdict and judgment for $5,827.76. Defendant reviews by writ of error.

1. Jurisdiction. Suit was begun by summons served on defendant's secretary. The act under which defendant was organized (Act No. 256, Pub. Acts 1917 [Comp. Laws Supp. 1922, § 9100 (205)]) provides that service may be made on the insurance commissioner. Defendant appeared by its attorney, and demanded a copy of the declaration. Its default for not pleading was entered, but set aside by stipulation. It then pleaded the general issue, and gave notice of special defenses. After several witnesses had been examined, its counsel sought to raise the question of a lack of due service. The attorney who appeared for it participated in the trial, and is acting for it on review in this court. The trial court was clearly right in declining to consider whether service had been legally made.

The defendant was correctly named in the summons, and in the opening paragraph of the declaration. In the several counts which followed it was said to be a corporation. On attention being called to this fact during the trial, the plaintiff was permitted to amend by eliminating such statement. The amendment was properly allowed.

2. Validity of Policy. Several sections of the act under which the defendant is organized (chapter 2 of part 5) prescribe the manner in which the exchange of reciprocal or inter-insurance contracts shall be effected. It is claimed that no sufficient instrument in writing was executed by the cartage company appointing the Michigan Casualty Corporation as its attorney in fact to exchange the policies in question with the other subscribers to the defendant company. The instrument executed when the first policy was issued was signed, "City Cartage Co., Inc., Subscriber. By A.G. Nadell," and that executed when what is spoken of as the blanket policy was issued was signed, "City Cartage Co., Subscriber." Both signatures were witnessed by H.D. Southworth, who was at such times a soliciting agent for the defendant. It is claimed that Nadell had no authority to sign on behalf of the cartage company. The policy first issued was canceled at the time the blanket one was issued. The defendant accepted the execution of these instruments as a sufficient compliance with the statute and issued its policies to the cartage company based thereon. It accepted payments of premium on such policies, and, after the losses had occurred, negotiated with the officials of the plaintiff and the cartage company for a settlement thereof. It is clearly now estopped from denying liability for the reason stated.

3. Representations. Each of the policies provided that it should be void —

"If the interest of the assured in the subject of this insurance be other than unconditional and sole ownership."

We find no provision in the written agreement under which title in the plaintiff was retained. It provides that the cartage company shall execute notes for the purchase price, and contains an agreement on its part "to execute a chattel mortgage upon each of said trucks as collateral security" for the payment thereof. It does not appear that any mortgage was executed. So far as this record discloses, the cartage company was the owner of the trucks free and clear of incumbrance at the time the policies were issued We have not overlooked the testimony of Thomas Van Tuyl, plaintiff's manager at the time the agreement was entered into, who stated that "the trucks all belonged to the Cook Motors Corporation." He apparently overlooked the legal effect of the agreement of sale by which their rights must be determined.

Both policies contained a "schedule of statements," signed by the insured. In statement 8, under appropriate headings, the insured was required to state the date of his purchase, its actual cost, and whether the property insured was fully paid for or mortgaged or incumbered in any way. In the policy first issued, this statement was not filled in, but was marked with a rubber stamp "This Clause Void." In the blanket policy, under the headings which appear in the statement, there was typewritten, "See Indorsement Attached. No exceptions." Our attention is not called to the indorsement referred to. No clash is made that the attention of the insured was called to this statement at the time the policy was delivered. The schedule is doubtless designed to take the place of an application for insurance.

There is no dispute about the fact that Southworth, who solicited the insurance and delivered the policies, was authorized to do so by the defendant. Its then secretary as a witness admitted such employment by it at the time the policies were issued. While he idenied any knowledge of the manner in which the cartage company had procured the trucks, he wrote a letter to the plaintiff on November 24, 1923, before any liability accrued under the blanket policy, in which he said that the defendant had given the cartage company "a line of credit of $715," and that they had "met their payments fairly and promptly." It also appears that Mr. Van Tuyl, at that time plaintiff's manager, negotiated with Mr. Henry, defendant's claim agent and present attorney, about the settlement for the damage done to the truck in September, and that Henry then asked him about the contract with the cartage company, and was told that the company had a copy and he could examine it. The attention of defendant having been then called to the fact that the cartage company had paid nothing on the trucks, it was its duty to cancel the policies if it did not wish to continue to carry the insurance under the circumstances. It also appears that there was much negotiation looking to a settlement of the losses which later occurred and no suggestion of denial of liability on the part of the defendant because of the misrepresentations made in the schedule as to the title. Under our decisions, the right to rely on this defense was clearly waived. Simpson v. Insurance Co., 184 Mich. 547; Marx v. Insurance Co., 192 Mich. 497; Blake v. Insurance Co.,194 Mich. 589; Gordon v. Insurance Co., 197 Mich. 226 (L. R. A. 1918E, 402); Crossman v. Insurance Co., 198 Mich. 304 (L. R. A. 1918A, 390); Baker v. Assurance Co., 214 Mich. 540.

4. Damages. It is urged that the cartage company did not own the trucks at the time the policies were issued nor at the time of the damage to them, and therefore it sustained no loss and no valid claim passed to plaintiff under its assignment from that company. The trucks were delivered to the cartage company under the contract before referred to. The record does not disclose that this contract was abrogated or in any way changed until after the right of action of the cartage company under its policies had accrued. That the plaintiff afterwards saw fit to enter into a new contract with this company, wherein the purchase price of the trucks was reduced, in no way affects the liability of the defendant under its policies. In our opinion the issues presented were fairly submitted to the jury, and the verdict rendered was fully warranted by the proof.

The judgment is affirmed.

BIRD, SNOW, STEERE, FELLOWS, WIEST, CLARK, and McDONALD, JJ., concurred.