Springfield Fire & Marine Ins. Co. v. Boon , 1917 Tex. App. LEXIS 446 ( 1917 )

That each of the stipulations avoiding the policy, set out in the statement above was violated was indisputably established by the testimony. That a violation during the life of the policy of either of the stipulations, on the election of plaintiff in error to so treat it, terminated the contract, was established by the authorities. 2 Cooley's Briefs on Law of Insurance, 1489 et seq., and authorities there cited; 19 Cyc. 712 et seq., and authorities there cited; Insurance Co. v. Griffin,59 Tex. 509; Assur. Society v. Ellis, 137 S.W. 184; Id., 105 Tex. 526,147 S.W. 1152, 152 S.W. 625; Insurance Co. v. Clayton,17 Tex. Civ. App. 644, 43 S.W. 910; Bank v. Insurance Co., 201 Mass. 350,87 N.E. 594, 23 L.R.A. (N. S.) 1147; McKinney v. Assur. Co., 97 Ky. 474,30 S.W. 1004; Insurance Co. v. Long, 51 Tex. 89; Insurance Co. v. Coghlan, 134 S.W. 266. It is plain, therefore, even if the contract was terminated by the devesting of the title in the insured (Stamps Co.) to the property, so as to relieve plaintiff in error of liability to defendant in error, without reference to the proven violation of the stipulations referred to, that the judgment is wrong, unless for some reason the law recognizes as sufficient plaintiff in error was not entitled to assert the violation of those stipulations as a defense against the recovery sought against it.

Defendant in error contended, and the trial court agreed, that such a reason appeared in testimony relied upon to prove that plaintiff in error was in the attitude of having waived its right to treat the contract as terminated by the violation by the insured of the stipulations. Plaintiff in error controverts this, insisting that the testimony wholly failed to show such waiver by it

In the view we take of the case such a question was not presented, unless it cannot be said that, independent of the stipulations, the contract was terminated by the devesting of the title in Stamps Co. to the property covered by the policy; for if it was so terminated there was no contract existing between the parties, and no stipulations to waive.

It is well settled that a contract of insurance like the one in question is one of indemnity, and that the existence in the insured of an interest in the property covered by it is indispensable to its continued validity. When the insured ceases to own the property and any interest in it, the policy ceases to be a valid obligation on the part of the insurer. 1 Cooley's Briefs on Law of Insurance, 134 et seq.; 19 Cyc. 583 et seq.; 14 R.C.L. 905 et seq.

It conclusively appeared from the testimony that Boon, by virtue of the trust deed to him, on February 2, 1915, sold, and on February 10, 1915, by a warranty deed conveyed, the property covered by the policy to the Moore Grocery Company. The legal effect of this conveyance was to devest Stamps Co., the insured, and Boon, as trustee, of all right, title, and interest theretofore held by them in and to the property. When that conveyance became effective on February 10, before the fire occurred on February 19, 1915, the insured, Stamps Co., ceased to have an "insurable interest" in the property, and the contract of insurance evidenced by the policy terminated. The only right, if any, remaining in Stamps Co. with reference to the policy, it never having been assigned or transferred by them to any one, was a right to demand and receive of plaintiff in error the unearned part of the premium paid by them for the policy. No right whatever under the contract remained in Boon, for he was a mere appointee to receive, in the event of a loss within the terms of the contract, the sum Stamps Co. were found to be entitled to, and hence his rights were wholly dependent upon the rights of Stamps Co. 2 Cooley's Briefs on Law of Insurance, 1520 et seq.

The rule and reasons for it were well stated by the Supreme Court of Iowa, in Davis v. Insurance Co., 154 Iowa 326, 134 N.W. 860, as follows:

"If any one proposition can be regarded as having been definitely settled by early adjudications, and as having remained definitely settled, notwithstanding constant modifications of the law on the subject of fire insurance by changes of view on the part of courts and of policy on the part of Legislatures, it is the proposition, made up of three distinct elements working together to one result, that the purchaser of the absolute title and right to property covered by a fire insurance policy is not entitled to the indemnity provided for in the policy on account of a damage to or destruction of the property subsequent to the transfers unless, by the consent of the insurer, the policy has been assigned to the purchaser by the former owner. The three elementary principles of fire insurance which, working together, bring about this inevitable result, are: First, that a policy of fire insurance is a contract of indemnity, and if, at the time of loss, the holder of the policy has no right, title, or interest to or in the property insured, he cannot recover anything under his contract of insurance, for the damage to or destruction of the property results in no injury to him; second, that the purchaser of the property, taking it prior to the loss, is not a party to any contract of insurance between the former owner and the insurer, and therefore is not entitled to recover under such contract; and, third, that the contract of fire insurance, being personal in its nature, cannot be transferred by the insured to another, save in accordance with provisions of the contract itself, involving the express or implied assent of the insurer, or a valid contract of the insurer that it shall become liable to the new owner. These elementary propositions are not dependent on any stipulations, conditions, or limitations of the contract itself, but result from the very nature of the contract, though of course, they may be superseded or waived by provisions in the contract, or by a new valid contract or agreement subsequently made."

It is plain from what has been said, we think, that at the time the fire occurred the policy issued to Stamps Co. was not a valid and subsisting contract on the part of plaintiff in error to indemnify defendant in error for the loss he thereby incurred, and that the court erred in rendering judgment in his favor, unless it can be said that it appeared from the testimony before him that plaintiff in error by a new and independent contract, based on a sufficient consideration, had undertaken to do so.

If there was such testimony, it consisted of the proof made by defendant in error to show, not the formation of a new contract between him and plaintiff in error, but a waiver of the breach of the stipulations in the one between Stamps Co. and plaintiff in error. Viewing that testimony in its aspect most favorable to defendant in error, it showed no more than that plaintiff in error's agent before the title in Stamps Co. had been devested by the conveyance to the Moore Grocery Company, and before the fire occurred, agreed, without consideration therefor paid or to be paid by any one, to make such changes in the policy as might be necessary to continue it in force as indemnity to the Moore Grocery Company and Boon, as trustee, against loss or injury to the property by fire; after the fire occurred recognized the policy as a subsisting contract; at Boon's request arranged with a carpenter to furnish him an estimate of the cost of rebuilding the destroyed houses, for use in making proof of loss to be furnished plaintiff in error; and that Boon paid carpenter $13.50 for such an estimate.

It is plain that what Boon and plaintiff in error's agent, Mathis, had in mind when the conversation between them occurred was that Mathis, as such agent, would do for plaintiff in error what it was necessary for it to do to continue the policy issued to Stamps Co. in force as indemnity to the purchaser at the sale made by Boon as trustee. The thing necessary for defendant in error to do to accomplish that was to consent to a transfer of the policy by Stamps Co. to such purchaser. If it appeared from the record that Stamps Co. at the time the sale was made by the trustee, or before the time when the trustee executed and delivered the deed conveying the property to the Moore Grocery Company, had transferred the policy to said grocery company, we are not prepared to say that the testimony in the record would not be sufficient to show that plaintiff in error consented to the transfer and was estopped from asserting that the contract did not continue in force, and from setting up as a defence to defendant in error's suit violations of the stipulations against foreclosure proceedings under the trust deed and a change in the title to the property.

It is also plain, we think, that in the correspondence between them both Boon and Mathis lost sight of the fact that (Stamps Co. having failed to transfer it at a time when they had an insurable interest in the property) the policy ceased to be a subsisting obligation on the part of plaintiff in error on the execution and delivery of the deed to the Moore Grocery Company, and dealt with each other on the supposition that it was still a valid and subsisting contract. That this is true appears from the fact that it seems never to have occurred to either of them that to bind plaintiff in error to indemnify defendant in error it was necessary that they should make an entirely new contract supported by a new consideration.

It appears, therefore, that to affirm the judgment this court must hold, and we think it should not, that the effect of what passed between Boon and Mathis was to create a new contract, as distinguished from a modification of the old one — a thing they plainly did not intend to do, and a thing they as plainly could not do so as to bind plaintiff in error, in the absence, as was the case, of a consideration therefor. To so hold in effect would be to make for the parties a contract they never contemplated making, and to compel plaintiff in error, without any consideration whatever to it for doing so, to indemnify Boon against the loss he incurred as trustee.

We are of the opinion, therefore, that the trial court erred, as contended by plaintiff in error, in not rendering judgment in its favor. Therefore the judgment will be reversed, and judgment will be here rendered that defendant in error take nothing by his suit.