Beals v. . the Home Insurance Co.

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] The motion to nonsuit the plaintiff was based upon several grounds. Grave questions are presented upon many positions urged by the parties. I shall consider one only, which, in my view of it, is sufficient to decide the case.

The action was upon a policy of insurance to the amount of $4000, upon the plaintiff's "brick Franklin House block, in the village of Canandaigua." By the terms of the policy, the defendant undertook "to make good to the insured" his loss to the amount mentioned. By another clause, it was agreed that "the loss or damage was to be estimated according to the true and actual cash value of the property, and to be paid within sixty days, after due notice and proof thereof, made by the assured, in conformity to the conditions annexed to the policy." It was further provided, that the policy was made and accepted in reference to the terms and conditions thereto annexed, "which are to be used and resorted to in order to explain the rights and obligations of the parties in all cases not herein otherwise specially provided for." Number ten of the conditions provided that, "in case of any loss on, or damage to, the property insured, it shall be optional with the company to replace the articles lost or damaged, with others of the same kind and quality, and to rebuild or repair the building or buildings within a reasonable time, giving notice of their intention to do so, within thirty days after having received the preliminary proofs of loss required by the ninth article of these conditions." Immediately after the occurrence of the loss, without giving the defendant an opportunity to exercise the option afforded by this provision, the plaintiff laid his foundation and proceeded in the erection of a new and different kind of building from the one destroyed. Within thirty days, the defendants gave notice that they should avail themselves of the option, which reserved to them the right of rebuilding the structure which had been destroyed. The plaintiff refused to permit them to rebuild, and proceeded to the completion of the building he had himself commenced.

In the recent case of Morrell v. The Irving Fire InsuranceCompany (33 N.Y., 429), this court held that the exercise of the option by the company, under condition ten, above quoted, converted the contract of insurance into a building contract; that when the insurer, after giving such notice, only partially performed the contract to rebuild, the rule of damages was the amount it would take to complete the building, by making it substantially like the one destroyed, in addition to what had already been expended thereon, and that after the notice of election, the amount named in the policy ceased to be a rule of damages.

Applying to the present case the reasoning there put forth, we have this result: That, after the giving of notice by the defendants that they would avail themselves of their rights under the tenth condition of the policy, they ceased to be insurers, and their liability was no longer measured by the policy, but they became parties to a contract, by which they agreed to erect for the plaintiff a building substantially like that destroyed, and for which the consideration had been paid to them in advance. Upon such a contract, it would be quite plain that the plaintiff could recover nothing from the defendants, as damages for non-performance, when he has himself refused to permit the erection of the building by the defendants. To this view of the case the plaintiff makes various objections, some of which I will now consider.

The plaintiff argues that the condition is not a part of the policy, but is only to be resorted to for explanation of obscurity or ambiguity in the policy itself; that there is no obscurity in the clause respecting the terms of payment where it is provided that the same is to be paid in cash within sixty days after notice of the loss, and that the terms of the tenth condition are inapplicable to the case before us.

I understand the provisions of the policy and the terms of the condition, to constitute together one instrument, and I see no conflict between them. The substance of the whole agreement is an undertaking to indemnify the plaintiff against loss by fire, to the extent of $4,000 upon the property designated. This amount, if needed for indemnity, the defendants agree to pay to the plaintiff, and they reserve to themselves the right to pay it in money, or by the erection of another building. They do not agree in the body of the policy to pay the amount in cash or in money even, but simply to pay. Standing alone, no doubt this would mean a payment in money, but it can not be deemed to create a conflict between the policy and the condition. The provisions are entirely in harmony. (Tolman v. Manufacturers' Insurance Company, 1 Cush., 73, 76.) In that case, the policy contained a proviso allowing the defendants, instead of paying in money, to replace the property lost with other of the like kind and quality at the option of the defendants. After a loss the insured indorsed on the policy, "Pay the loss under the within policy to Joseph Tolman," to which the defendants assented in writing. The plaintiff claimed that the defendants had thereby lost their option and must pay in money. The court held otherwise, saying: "To pay, is defined by lexicographers, to discharge a debt, to deliver a creditor the value of a debt, either in money or in goods, to his acceptance, by which the debt is discharged. We consider the effect of this indorsement to be as if written out in this manner: "Pay or discharge the obligation arising from the loss under the policy to Joseph A. Tolman." It was held that the company still retained the right to pay the money or to replace in kind, at their option. In the present case, by its just construction, the contract reserves to the defendants the right to pay the loss in money or to indemnify the party by furnishing him with a building of like character and of equal value with the one destroyed.

Again, it is insisted by the plaintiff, that the refusal to permit the defendants to rebuild, subjects the plaintiff to the loss of interest only, and that he cannot thereby be deprived of all remedy upon the policy. In the case of a tender in payment of an admitted debt, this view would be correct. This is, however, in its present aspect, a building contract simply. Upon the case of Morrell v. Irving Insurance Co., it is as if there had never been an insurance between the parties or any loss of a building by fire, but the plaintiff being the owner of the ground had received a contract from the defendants to erect thereon a building like the Franklin Hotel, and had paid them $4,000 as the consideration therefor. The case has none of the elements of a tender. It is a contract to build simply, and no default can attach to the proposed builder, nor can damages be recovered from him, so long as he is ready and able to perform the work on his part. If this rule subjects the plaintiff to a loss, it results from his own acts. If he refused to accept satisfaction in the mode provided by the contract, and put it out of the power of the defendants so to perform, it is not the fault of the defendants. The plaintiff alone is responsible for the result.

It is further insisted, that no injury can accrue to the defendants in compelling them to pay the amount of the insurance money, provided they are allowed to show on the trial that they could have rebuilt for less than that amount, and thus have the damages reduced to the smaller sum. Such was not the contract of the parties, and the evidence in the present case shows the fallacy of the argument. The plaintiff claimed and proved that the buildings burned, were worth $20,000. The defendants proved, or offered to prove, that they had entered into a contract with responsible mechanics to replace them for the sum of $10,000. Which of these statements was correct, or was the truth to be found at an intermediate point? As claimed by the plaintiff, this question would be answered by the jury. If the defendants are correct in their construction of the contract, they could answer the question themselves. They preferred to settle the question in their own manner, by rebuilding, to leaving it to the jury. Such was the agreement between the parties, and it was to guard against overestimates, the hazard of a jury trial, where the sympathies of the jurors might be in favor of their own friends who had met with misfortune, and against a nonresident or a rich corporation, that this provision was probably inserted. Whatever may have been the cause of its insertion, it is there, and forms a part of the contract, and, when insisted upon, the defendants are entitled to have it enforced. This argument in effect destroys the condition. In no event, is the insured entitled to recover more than the cash value of the property, and to say that the insurer is not entitled to rebuild, under the condition, if the insured shall only call on him for the cash value, or the cost of rebuilding as found by a jury, is simply to annul the condition number ten.

It is said also that, regarding the policy and the election under it as a building contract, it is so indefinite and uncertain it cannot be enforced. If the plaintiff had accepted the offer this question might have arisen. It is now a sufficient answer to it that the plaintiff positively refused to the defendants all rights in any form under the condition referred to, and proceeded in his own building arrangements. I do not, however, consider the objection a formidable one. The plaintiff's hotel building was destroyed by fire, and the defendants contract to replace the same. This involves an agreement to erect a building of the same general character, as to materials, size and form as the one destroyed, and within a reasonable time. This would be sufficiently definite to answer the requirements of the law. In practice, there would be no difficulty. Negotiation and mutual self-interest would prescribe the details and accommodate the building to the wishes of the owner.

I see no room for raising a question of the good faith of the offer to rebuild. It was a question of contract simply. The defendants made the offer, and if it was within the terms of the agreement no question of motive or good faith can arise. It is a simple exercise of a right given by the terms of his contract.

The notice of election was served by the agent of the company and was signed by their vice-president, Wilmarth, and has throughout been adopted and acted upon by the defendants, and has been set up as their defense in this action. No question was made of the authority at the time of serving the notice, and the plaintiff based his refusal to accept the offer on other grounds. No objection was made at the trial to Mr. Wilmarth's authority to give the notice. That seems to have been assumed, while the right of Mr. Salisbury to make the service of the notice was contested. There was no ruling and no exception taken at the trial on this branch of the case, and it cannot now be presented.

I am of opinion that the refusal of the plaintiff to allow the defendants to rebuild, when they had in due time given notice of their election so to do, and his proceeding himself to erect a building on the same premises, justified the nonsuit, and that the judgment should be affirmed.

All concur, except WRIGHT and PORTER, JJ.

Affirmed.