Schwartzman v. London & Lancashire Fire Insurance

This is a suit in equity to set aside and cancel an appraisal had under the terms of a fire insurance policy issued by defendant to plaintiffs, covering the furnishings and contents of the Miller Hotel, in Minneapolis, Minnesota, and to recover the loss and damage resulting from a fire. The trial court set aside and canceled the appraisal, fixing the sound value of the contents of the hotel at $55,000 and the loss at $51,600. As the policy issued by defendant was one of a number aggregating $55,000, the trial court found defendant's proportion of the loss and damage to be $9381.82, with interest accrued thereon of $1295.56, rendering judgment for $10,587.38 in favor of plaintiffs, from which defendant appealed. The assignment of errors comprises two specifications: first, the court erred in canceling the appraisal and refusing to find for plaintiff in an amount equal to defendant's proportionate share of the award, and, second, the court erred in finding and fixing the loss and damage at $51,600 and in rendering judgment against defendant in an amount based on this finding. The facts develop that in August, 1920, plaintiffs purchased the Miller Hotel, paying for it, according to their evidence, the sum of $55,000, and receiving therefor a bill of sale which plaintiff failed or refused to offer in evidence or account for. We think we are justified from the evidence in stating that the purchase comprised the hotel as a going concern and included the good will, the lease and all appurtenances. The hotel comprised 158 bedrooms, the original furnishings of which in 1916 cost $14,085.67. Plaintiffs' insurance policies aggregated $55,000, of which the policy in suit, issued August 17, 1920, for $10,000, covered, according to the policy, the property described as follows: "The amount insured by this policy covers and applies on hotel and other furniture, furnishings and fixtures of every kind and descriptions; wall and ceiling decorations and other improvements and betterments to the building made by assured as tenants or made by former lessees of the herein described premises; printed books, family wearing apparel, silver and plated ware, pictures and paintings *Page 1095 (at not exceeding cost) and their frames, sculpture, tools, musical instruments, billiard and pool tables and their appurtenances, tools, utensils, fire extinguishing apparatus, electric fans, signs, awnings; fuel, and all other equipment, appliances, implements, articles, materials, supplies other than stock of merchandise and effects in any way used in or pertaining to the business of assured." The building, in which the business of the Miller Hotel was carried on, caught fire on February 13, 1921, about one A.M. Thereafter, in accordance with the terms of the insurance policies, the insurance companies subject to the risk and the plaintiffs provided a joint appraisal, the plaintiffs naming an appraiser as did the insurance companies, and the Minneapolis court appointing an umpire. The board of appraisers fixed the sound value of the property insured at $38,669.11, and the loss and damage at $30,000, the report being signed and assented to by the two appraisers and the umpire, acting as an appraisal board. Plaintiffs, dissatisfied with the damages awarded them, brought this suit to set aside the appraisal, averring that while plaintiffs' appraiser was disinterested and impartial, neither defendant's appraiser nor the umpire were disinterested and impartial and that defendant's appraiser was guilty of misconduct. Such other facts as are pertinent will later appear. I. The insurance policy sued on provides the appointment of competent, disinterested and impartial appraisers and an umpire. The evidence discloses in this regard that the umpire appointed by the court was treasurer, secretary, andInterested stockholder of the David C. Bell Investment Company,Appraiser. whose business consisted of real estate, loans, insurance and rentals. Under the Minnesota law a corporation is disqualified from acting as agent for an insurance company. While employees of the above company were appointed agents of various insurance companies, the earnings on the business involved went into the coffers of the Bell Investment Company. On February 13, 1921, no insurance company involved in fire loss sustained by plaintiffs was represented by said investment company or its officers or employees. The umpire, appointed about April 1, 1921, took oath as appraiser April 27, 1921. During the interval employees of the Bell Investment Company were appointed agents of the Firemen's Insurance Company of Newark, which company was a party to the arbitration. The umpire knew of the agency after his appointment and before he qualified as umpire, which fact he failed to divulge. As a stockholder of the Bell Investment Company he was entitled to receive dividends, which necessarily included earnings of the business brought to it by the Fireman's Insurance Company. He thus became interested, indirectly though it may be, as agent of the insurance company involved in the appraisal, and consequently disqualified and incompetent to *Page 1096 act as umpire. Even though the evidence tends to establish that no conscious or actual bias, prejudice, influence or fraud was disclosed on the part of the umpire, yet public policy and an unconscious predilection to favor one's interest renders an arbitrator, directly or indirectly interested in the result of the arbitration, partial, incompetent and disqualified. It is evident from what we have said that the appraisal was void and of no effect, thus obviating the necessity of considering the competency of defendant's appraiser. [Goodwin v. Ins. Co.,118 Iowa 601; Schoenich v. Ins. Co., 109 Minn. 388; Assurance Co. v. Hall, 143 Ala. 168; Railway Conductors' Benefit Assn. v. Robinson, 147 Ill. 159; Produce Refrigerating Co. v. Ins. Society, 91 Minn. 210; Hyeronimus v. Allison, 52 Mo. 102.] II. That, in an equity suit, the cause is triable de novo, thus constituting the appellate court the trier of fact as well as of equitable principles, is the generally accepted doctrine, adhered to in this State. [Harwood v. Toms, 130Equity Trial. Mo. 225, 32 S.W. 666; Canty v. Halpin, 294 Mo. 118, 242 S.W. 97.] III. We are thus brought to a review of the second specification of error. This relates to the action of the trial court in finding and fixing the loss and damage, suffered by plaintiffs, in the sum of $51,600. Plaintiffs, in arguing the soundness of the trial court's finding, state onExtent of the one hand that the trial court, sitting inTrial De Novo. equity, decreed the award canceled, and that, relative to that finding, this court is not, of course, bound. Conversely, they maintain that in fixing and ascertaining the value of the property, the amount of damage and the consequent recovery, the trial court was not sitting as a chancellor, but as a law court, deciding a strictly legal question resulting in a money judgment at law. Therefore, they assert, as there was substantial evidence upon which to base the finding of loss and damage, the action of the trial court is in that regard not open to review. The cause here litigated was cognizable in a court of equity and it was the duty of such court to refuse to enter a partial or incomplete decree. If plaintiffs maintained the equitable grounds for relief, then, in order to avoid a multiplicity of suits and render a full, complete, effectual and final decree adjusting the equities of the parties in interest, a court of chancery, having taken jurisdiction on any equitable ground, will reach out and determine all matters in controversy and will retain jurisdiction of the litigation connected with the subject of action until all matters involved are disposed of, even though it is thereby required to determine strictly legal questions or to grant legal remedies. [10 R.C.L. pp. 370-371; Martin v. Jones, 286 Mo. 574,228 S.W. 1051; Marston v. Catterlin, 290 Mo. 185, 234 S.W. 816; *Page 1097 Hurst Switch Signal Co. v. Trust Co., 291 Mo. 54, 236 S.W. 58; Jacobs v. Cauthorn, 293 Mo. 154, 238 S.W. 443; Gloyd v. Gloyd,293 Mo. 163, 239 S.W. 73; Canty v. Halpin, 294 Mo. 118,242 S.W. 97; Williamson v. Frazee, 294 Mo. 320, 242 S.W. 958; Brightwell v. McAfee, 249 Mo. 562, 155 S.W. 820.] Analyzing the question raised by plaintiff in the light of the above rule and authorities, if plaintiffs' equitable case was proved, then it was the duty of the trial court, sitting in equity, to render full, complete and effectual relief, including the determination of loss and damage to plaintiffs resulting from the fire. While the determination of loss and damage is a legal question, absent equitable jurisdiction, yet if plaintiff's case, relative to the cancellation of the appraisal, was proved, then the court was empowered to reach out and draw to itself within the limits of the pleadings all matters connected with the subject of action and to determine all legal and equitable questions litigated and involved. This ruling determines all matters, including otherwise legal matters, subject to equitable procedure, so that the cause in its entirety becomes triable in an appellate court de novo, authorizing and empowering such court to become the trier of fact. As trier of fact, it then becomes the duty of the court to determine the soundness of the award of loss and damage below, even though there was substantial evidence on which to base the finding. Due deference, however, should be accorded to the determination of the chancellor. IV. We are thus brought to the consideration of the soundness of the trial court's finding, with respect to the loss sustained. The illuminative fact is that the hotel furnishings cost in 1916, $14,085.67, purchased from Boutell Brothers of Minneapolis, as shown by the testimony of Morawetz, who made the sale. These furnishings comprised, among other things, beds, carpets, dressers, chairs, linens, towels, etc., although some articles, such as linens and towels, during the interval between the purchase and the fire, were replenished: Plaintiffs' evidence tended to show, through the testimony of plaintiff Rodenberg, that an itemized list of the articles contained in each room was made, which was offered and showed in three columns, the "Cost New, Actual Value, and Loss and Damage." He then testified that the list showed in detail all the items and their value as of February 12, 1921. This list placed the actual value of the property in the hotel at $99,106.20, and the damage thereto at $77,532.40, a difference between sound value and damage of nearly $22,000. He further testified that the salvage was sold after the fire for $3400. All the other evidence of witnesses for plaintiffs as to value was submitted in depositions. One Brecher, a furniture dealer in Minneapolis, stated that he checked the items on the list, placing a valuation on them of $63,477, and estimating the loss at $51,938.08; that *Page 1098 he arrived at the damage by deducting the salvage value of the property as he appraised it, but that he figured the salvage too high and that it was not worth over $5,000, bringing the loss and damage in his opinion to $58,000. There was also offered in connection with his testimony a list similar to the list offered by plaintiff Rodenberg. Witness Mack for plaintiff stated that for a considerable length of time he was in the employ of the New England Furniture Company, a Minneapolis furniture concern. He, too, furnished a list and constructed his estimate in a similar manner to that of Rodenberg, estimating the loss at $60,261.74. Witness Teslow, a furniture salesman of seven years' experience, offered a likewise similar list, stating that he estimated the damage at $50,650.59. Witness Chisholm, offering a similar list of items, placed a sound value of $72,102.04 on the property and estimated the loss and damage at $54,070.83. Edward Lamb, plaintiffs' witness, testified to the loss and damage to the heating and plumbing equipment, but as it is evident from the testimony that such equipment was owned by the fee-holder of the building, such testimony will be disregarded in estimating the loss and damage. Defendant's evidence tended to show, through witness Morawetz, in charge of the hotel furnishing department of Boutell Brothers, that he sold for his company in 1916 the furnishings to the owner of the hotel for $14,085.67. That he had been in the furniture business for about forty years, in the hotel furnishing business for about eighteen years, and was familiar with the furnishings involved, producing at the trial the original contract under which the goods were sold. He testified that the articles listed in the bill of sale were almost identical with the articles listed in plaintiffs' schedules; and that he was familiar with such items as well as the reasonable value of same, at the date of the fire. The replacement cost, at the time of the fire, of the articles listed in plaintiffs' schedules was about $35,000. This sum represented the new cost on a time-payment basis, but the cash value of the furnishings was ten or fifteen per cent less, that is, not exceeding $31,500. That the actual value of the property within five years would depreciate forty per cent. The evidence further showed that there were sixty-six bedrooms in the main building, fifty-six of which were furnished exactly as Room 116, and ten of them exactly as Room 100. In the Annex all of the rooms were furnished exactly as Room 132. Witness Morawetz was asked to give the new cost of each item in these different rooms, which was done. We herewith set out the result of his testimony in the following table, the first column of which contains the new cost of the furnishings as estimated by plaintiffs, *Page 1099 and the second column showing the new cost according to Morawetz, who originally sold the furniture damaged by the fire. The blanks in defendant's "New Cost" column indicate items that Morawetz refused to testify concerning, because he did not know the value of the items. The item and costs as contained in Rooms 100, 116 and 132 are as follows: Room 100 — Main Building. Plaintiffs' Defendant's "New Cost" "New Cost" 1 Holland window shade ................. $ 2.10 2 Marquisette sash curtains ............ 4.50 4 rods and fixtures, 45 cents, ......... 1.80 1 dresser cover ........................ .75 30 yards W.V. carpets .................. 205.50 $85.00 1 mah. dresser ......................... 110.00 68.00 1 tapestry uph. rocker ................. 50.00 18.00 1 tapestry uph. arm chair .............. 40.00 18.00 1 wood-seat chair ...................... 12.50 3.25 1 mah. finish table .................... 30.00 12.50 1 mah. finish wardrobe ................. 60.00 26.25 1 mah. Adam period bed ................. 65.00 45.00 1 felt mattress ........................ 16.20 8.00 2 pillows, 6 pounds .................... 4.50 3.00 2 pillow slips, 46 cents, .............. .92 .60 2 sheets, $1.85 ........................ 3.70 3.50 1 bed spread ........................... 3.00 2.85 1 matt. pad ............................ 3.00 3.25 2 wool and cotton blankets, $4.75 ...... 9.50 4.60 1 tray ................................. .20 1 pitcher .............................. .60 2 glasses .............................. .40 1 cuspidor ............................. .90 1 waste basket ......................... 2.90 1 sagless spring ....................... 9.60 7.50 1 costumer ............................. 5.00 1 three-light ceiling fixture .......... 18.00 Room 132 — Annex. Plaintiffs' Defendant's "New Cost" "New Cost" 1 window shade ......................... $ 2.10 1 walnut finish V.M. bed ............... 19.25 $12.75 1 sagless spring ....................... 9.60 7.50 1 mattress ............................. 16.20 8.00 2 pillows, 6 pounds .................... 4.00 3.00 1 mah. finish dresser .................. 48.50 24.00 *Page 1100 1 chair ................................ 12.50 3.25 1 W.E. mirror .......................... 4.50 1 ceiling light fixture ................ 2.50 1 mattress pad ......................... 3.00 3.25 2 sheets, $1.85 ........................ 3.70 3.50 2 pillow slips ......................... .92 .60 1 bed spread ........................... 3.75 2.85 1 pr. C. W. blankets ................. 4.50 3.00 1 tray ................................. .20 2 glasses .............................. .40 1 pitcher .............................. .60 1 jar .................................. 2.95 1 waste basket ......................... 2.90 1 cuspidor ............................. .90 3 yards floor runner, $3.50 ............ 10.50 Room 116 — Main Building. Plaintiffs' Defendant's "New Cost" "New Cost" 2 Marq. curtains ....................... $ 4.50 $ 2.85 4 rods and fixtures, 45 cents, ......... 1.80 1.80 25 yards carpet, $6.25 ................. 156.25 71.25 1 mah. finish dresser .................. 60.00 29.00 1 mah. finish table .................... 30.00 12.50 1 rocker, lea. seat .................... 21.00 1 chair ................................ 12.50 3.25 1 mah. wardrobe ........................ 60.00 26.25 1 ceiling light fixture ................ 5.25 1 W.E. Mirror .......................... 4.50 1 walnut finish V.B. bed ............... 19.25 12.75 1 sagless spring ....................... 9.60 7.50 1 mattress ............................. 16.20 8.00 2 pillows, 2 pounds .................... 4.50 3.00 2 sheets, $1.85 ........................ 3.70 3.50 2 pr. C. W. blankets ................. 9.00 4.60 1 bed spread ........................... 3.75 2.85 1 towel rack ........................... .70 2 towel racks .......................... .48 1 tray ................................. .20 1 pitcher .............................. .60 1 glass ................................ .20 1 jar .................................. 2.95 1 waste basket ......................... 2.90 1.75 Witness Keith for defendant testified that he had been in the furniture business for thirty-five years; that in 1916 he bid on the furniture to go in the hotel; that he subsequently visited the hotel *Page 1101 and inspected the furniture both before and after the fire; that it was the same furniture sold the hotel by witness Morawetz. That the cost of the furniture new would be, on a cash basis, $38,241.55. That after the fire he went over the property and checked it off, room for room, on the schedules furnished him. That he arrived at the actual value of the property by taking the new cost and then deducting thirty to thirty-three and a third per cent for depreciation for the five years' use. This witness appeared at the hearing before the appraisers and there testified that the actual value of the property before the fire was $26,552.64 and the loss and damage $15,834.85. Witness Tergen for defendant testified that he had been in the furniture manufacturing business for about twenty-five years, and that he put in seven days inspecting the property after the fire. That the new cost listed on plaintiffs' schedule was on an average seventy-five per cent higher than the actual new cost of the articles. That the replacement value of this property immediately before the fire, in his opinion, was $32,631.99, and the sound value $21,886.55. Witness Mansfield, the appraiser appointed by plaintiffs, testified that he considered $30,000 as the fair value of the loss suffered by plaintiffs, and that he was not interested in any of the insurance companies. The evidence further shows that appraiser Mansfield, in connection with the other appraiser and umpire, signed the award for $30,000. The evidence further tends to show that retail selling price of furniture was from fifty to eighty per cent higher than selling price of furniture for hotels. The decisive question involves the weight of the evidence. As plaintiffs were charged with the affirmative, that of demonstrating the amount of the loss, the burden of proof establishing the value of the furnishings rests on plaintiffs and remains there until the end. Hence, it was incumbent on plaintiffs to show the amount of the loss by the greater weight of the evidence. The weight of the evidence does not necessarily involve the number of witnesses testifying, but rather considers the probability of the verity of the testimony in the light of all the surrounding facts and circumstances in evidence. We thus approach the question. Examining plaintiffs' evidence, we find that plaintiff Rodenberg, although he had not been in the furniture business for ten years, valued the furnishings on the day of the fire at $66,318.14 and the loss at $53,230.28. Other than his prior knowledge of the business, the witness discloses nothing on his part tending to show knowledge of value at the time of the loss or the verity of his testimony. Such testimony is relatively of little probative value. Witnesses Brecher, Mack, Teslow and Chisholm placed the actual value of the furnishings from $63,000 to $72,000, and the loss from $50,000 to over $60,000. Viewed in the light that sales of furniture at retail ranged from fifty to eighty per cent higher than furniture *Page 1102 sold in quantities to hotels, we infer, from a study of the evidence, that the value placed by these witnesses on the furnishings contemplated sales at retail rather than to hotels. Other facts, however, depreciate the probative force of plaintiffs' testimony. The record is without evidence that any of plaintiffs' expert witnesses on value, save Rodenberg, ever saw the furniture other than in a damaged condition after the fire. Without the benefit of visualizing the furnishing except in a damaged state, the witnesses in fixing values were affected and persuaded, we infer, by plaintiffs' evidence and suggestions tending to puff and magnify the quality, as shown by the testimony that a portion of the furniture was solid mahogany and that the carpets were worth $6.85 a square yard. By analyzing plaintiffs' evidence, we further find that the average sound value placed by their witnesses on the furnishings was something over four and one-half times the cost price in 1916. The evidence and common knowledge of conditions persuades us, especially in the light of the usage of the furniture for five years in a hotel, that values were by these witnesses puffed and magnified out of all reason, so as to render their testimony of little value. On the other hand, we think defendant's position is sustained by the greater weight of the evidence. This is demonstrated by a series of facts. First, Boutell Brothers' salesman, who negotiated the sale, produced the original contract of sale, showing an initial cost of $14,085.67. He therefore knew the actual furnishings, the condition and quality, and the initial value. With these facts in mind, together with his knowledge of values, he could with probable verity estimate the value preceding the fire and the subsequent loss. Second, the same salesman placed the new cost price of the furnishings, as of the day of the fire, at $35,000 on time-payment and $31,500 on cash basis. From his non-interest in the controversy, his experience, his knowledge of furniture, the business, the original furnishings and values, and his means of knowledge, this testimony imports verity, and is in accord with common knowledge on the subject. Third, support is given this evidence by witness Keith, who bid on the original furnishings, also an employee of a large and responsible firm, and without interest in the controversy. Keith observed the furnishings both before and after the fire, recognizing them as practically identical articles sold by Boutell Brothers to the hotel. His experience, means of knowledge and non-interest in the result justifies confidence in his estimate that the furnishings could be replaced new for about $38,000. Fourth, witness Tergen fixed the replacement value, that is, the new cost of the furnishings immediately before the fire, at $32,631.99. Fifth, witness Mansfield, a lawyer, plaintiffs' appraiser, denominated in the petition disinterested and impartial, after a full hearing lasting about twenty days, fixed the loss at $30,000. Sixth, the use of the furnishings from 1916 to 1921 in the hotel, a period *Page 1103 of five years, depreciated the value from thirty to forty per cent, according to the evidence. The insurance policy covered the actual loss only, that is, the value of the furnishings in the condition found, including depreciation, immediately preceding the fire. According to plaintiffs the benefit of any doubt relative to value, we think the furniture could have been replaced new for $38,000, which is more than two and one-half times the original cost. Allowing a depreciation of thirty per cent, we fix the sound value of the furnishings immediately preceding the fire at $26,600. This, however, does not include items covered by the policy, such as paintings and papering, signs, ice boxes, screens, phone installations, etc., placed, affixed and installed in the building by plaintiffs between August, 1920, and February, 1921, which items plaintiffs are allowed. These items total slightly less than $9400. Deducting the item of $3400 salvage received by plaintiffs from the aggregate of the $36,000 actual value, we fix plaintiffs' loss and damage at the sum of $32,600, and reverse the judgment and remand the cause with directions to the trial court to enter judgment for plaintiffs for ten fifty-fifths of $32,600, to-wit, $5929.09, together with interest thereon at the rate of six per cent per annum from April 13, 1921, to the date of entering judgment. Higbee, C., dissents.