Boston Ins. v. Hudson

RUDKIN, Circuit Judge.

This was an action on a California standard form fire in surance policy, containing the familiar pro visions that the policy shall be void if the interest of the insured be other than unconditional and sole ownership, or if the subject of insurance be a building on ground not owned by the insured in fee simple, and that no officer, agent, or other representative of the company shall have power to waive any of the provisions or conditions of the policy, except by writing indorsed thereon or added thereto. No testimony was offered by the defendant below, and there is no controversy over the facts. The policy was issued in the name of one Miura, the term of insurance was three years from and after January 1, 1923, and the subject of the insurance was a dwelling house, household furniture, and other property. The dwelling house and household furniture were totally destroyed by fire on September 25, 1923. The former was insured for the sum of $3,500, and the latter for $1,000. Inasmuch as the other items of property were neither damaged nor destroyed by the fire, further reference thereto is not deemed material.

At the time of the issuance of the policy, and at the time of the fire, Miura was the owner of the household furniture; but the title to the land upon which the dwelling house stood was in the name of one Hudson, the plaintiff below. Hudson had contracted to sell the land to the Rosedale Vineyard Company, a corporation of which Miura was at one time president, and the corporation was in possession under its contract of purchase. At the time of the issuance of the policy, no statement or representation in reference to the title was made by Miura, and the agent writing the policy made no inquiry concerning it. About ten days before the destruction of the property by fire, however, Miura again consulted the agent in reference to some changes in the policy or contract of insurance. He desired to reduce the amount of insurance on the dwelling from $3,500 to $3,000, the amount of insurance on the household furniture from $1,000 to $900, and to add two new items, the first being a quantity of hay to the amount of $300, and the second a tank and motor to the amount of $600. In the course of this conversation the true state of the title to the property was revealed for the first time. The agent made a notation of the proposed changes on the records of his office, and directed the First National Bank of Sanger to return the policy to him, stating that Miura wished to make some changes in the insurance. The policy was never returned, as it was in the possession of Miura at the time, although that fact was apparently unknown until some time after the fire.

While the foregoing facts appear from the testimony, they do not all appear from the pleadings, or even from the amended complaint, filed after the trial to conform to the proof. The amended complaint set forth the true state of the title to the property, and alleged that prior to the date of the destruction of the building and furniture by fire the defendant and its dgent knew that Miura was not the owner of the land and building; knew that he was an officer of the Rosedale Vineyard Company, the corporation purchasing the property under contract from the plaintiff; knew that the ownership and legal title to the real property and building were vested in the plaintiff, and that an equitable interest therein was vested in the Rosedale Vineyard Company, as purchaser under a contract of sale; and knew that Miura was the owner of the household furniture and personal effects.

The ease was tried by the court below without a jury by written stipulation of the parties filed with the clerk. At the close of the testimony the defendant challenged its sufficiency to support a finding and judgment in favor of the plaintiff, but the challenge was denied. Findings and judgment for the plaintiff followed, and that judgment is now before us for review. The sufficiency of the testimony to support the judgment is the only question presented for our consideration.

The rule is well settled that a stipulation in an insurance policy that the policy shall be void if the interest of the insured loe olher than unconditional and sole ownership, or if the subject of the insurance be a building on ground not owned by the insured in fee simple, is valid, and that a breach of that stipulation or condition is a complete defense to an action on the policy. Imperial Fire Ins. Co. v. Coos County, 14 S. Ct. 379, 151 U. S. 452, 38 L. Ed. 231; Assurance Co. v. Building Association, 22 S. Ct. 133, 183 U. S. 308, 46 L. Ed. 213.

It is equally well settled that the mere fact that the insurance company or its agent has notice of the breach before a loss will not avail the insured, or constitute a waiver of the breach, or work an estoppel. Kentucky Vermillion M. & C. Co. v. Norwich U. F. Ins. Soc., 146 F. 695, 77 C. C. A. 121; Neil Bros. Grain Co. v. Hartford Fire Ins. Co. (C. C. A.) 1 F.(2d) 904; Lumber Underwriters v. Rife, 35 S. Ct. 717, 237 U. S. 605, 59 L. Ed. 1140.

In the Norwich Insurance Case the policy provided that it should become void if the property insured remain idle for more than 30 days at any one time, unless the insured gave notice to the company and obtained permission to leave it idle for a longer period, by having the permission indorsed on the policy. The plaintiff offered to prove on the trial that the defendant had notice that the property was idle during the life of the policy, but this court held that such proof was of no avail, that a waiver could not be inferred from mere silence or inaction on the part of the insurer, and that it might wait until a claim was made under the policy and then claim a forfeiture by way of defense.

In the Neil Bros. Grain Co. Case the policy provided that it should be void if, with the knowledge of the insured, foreclosure proceedings were commenced or notice given of the sale of any property covered by the policy by virtue of any mortgage or trust deed, and it was contended that the insurance company was estopped to claim a forfeiture by reason of the commencement of foreclosure proceedings, because it had knowledge of the commencement of such proceedings, after the same were commenced and before the loss. This court ruled otherwise, however, holding that the mere fact that insurance company had notice of the foreclosure proceedings did not constitute a waiver of the breach of the condition or estop the company from interposing it as a defense.

In Rife v. Lumber Underwriters, 204 F. 32, 122 C. C. A. 346, the policy contained a warranty that “a continuous clear space of 100 feet shall at all times be maintained between the property hereby insured and any woodworking or manufacturing establishment.” There was a breach of this warranty, and because thereof the trial court directed a verdict in favor of the defendant. On writ of error the Circuit Court of Appeals for the Sixth Circuit reversed the judgment, holding that evidence tending to show that the insurance company issued the policy and retained the premium with knowledge that there was a breach of the clear space warranty, and that such breach would continue during the life of the policy, was competent to raise an estoppel against the right of the insurance company to insist on a breach of the clear space provision, notwithstanding the provision of the policy that no agent or representative of the underwriters should have power to waive any provision or condition of the policy, except such as by its terms might be the subject of agreement indorsed thereon or attached thereto, and as to such provisions they could not be waived, unless in writing indorsed on or attached to the policy. But in Lumber Underwriters v. Rife, supra, the judgment of the Circuit Court of Appeals was reversed, the Supreme Court holding that a provision in a policy of insurance prescribing an express condition cannot be varied by parol evidence to the effect that the insurer knew that the condition was being violated, and had been violated during the existence of a prior policy, of which the existing policy purported to be a renewal.

From these authorities it would seem clear that the amended complaint states no cause of action against the plaintiff in error. It shows upon its face a breach of the warranty as to title, and the only claim of waiver or estoppel is the allegation that the company and its agent had notice of the true state of the title before the loss. For reasons already stated that fact was not material.

But, if we look beyond the amended complaint, and consider the facts disclosed at the trial, it will not avail the defendant in error. Some ten days before the fire Miura and the agent of the company had some negotiations for a change in the policy. Whether this change was to be made by a change in the existing policy, or by a new policy, is not material. The negotiation contemplated a new and different contract to say the least. It may be claimed that these negotiations amounted to a contract to insure; but, if we concede this, no such contract was pleaded, no such contract was assigned to the defendant in error, and at that time Miura had no authority to contract in behalf of the Rose-dale Vineyard Company, so far as the record discloses, because he had ceased to be either an officer or agent of that company. For these reasons, the amended complaint states no cause of action, and the findings and judgment are not supported by the testimony.

The judgment of the court below must be reversed; and it is so ordered.