National Surety Co. v. Petersen

Tolman, J. This is an action on a promissory note, tried to the court sitting without a jury, resulting in a judgment in favor of the plaintiff for the full amount demanded, from which judgment the defendants have appealed. The evidence is .without substantial conflict, and shows rather conclusively that appellant W. E. Peter *114 sen purchased from the Sands Motor Company a Studebaker automobile, making a cash payment, in part, and, for the balance of the purchase price, gave a promissory note for $1,824.60 secured by chattel mortgage upon the car purchased. The mortgage, by its terms, required the mortgagor to keep the automobile insured against fire, collision and theft in an amount equal to the balance due the mortgagee, with loss payable to the mortgagee and the policies to be deposited with it. It was further provided that, in the event of the failure of the mortgagor to so insure, the mortgagee might procure such insurance, add the cost thereof to the principal sum of the note secured by the mortgage, which added amount should become immediately due and payable. Although there was no provision in the mortgage with reference to confiscation insurance, by agreement between the parties, or at least with the consent of the mortgagors, the Sands Motor Company, at the time of the execution of the note and mortgage, secured a policy of insurance against confiscation from the National Surety Company. The premium on this policy was added to the price of the car and was covered either by the cash payment then made by the appellant or was made a part of the note evidencing the balance to be paid. Some time thereafter, the automobile was confiscated, and the National Surety Company paid to the Sands Motor Company on the policy against confiscation the sum of $1,083.40, which amount was credited on the ledger of the Motor Company to the Petersen account and which paid that account pro tanto. Thereupon, the Sands Motor Company assigned the note and mortgage to the National Surety Company, and this action was instituted on the note to collect, according to its terms, without any credit for the amount paid under the policy against confiscation. *115 Respondent insists that, under the peculiar conditions here involved, the pleadings are of unusual importance, and bases considerable of its argument upon the pleadings. Under our liberal rule with reference to amending to conform to the proof and considering as amended to conform to the proof, we think the facts admitted by the pleadings and those established by the evidence are of equal importance. The complaint was in the usual form, alleging the execution and nonpayment of the -note and its assignment to respondent. The execution was not denied, the assignment was denied by answer and a special defense was pleaded which, in effect, was a plea of payment. We think it must be conceded that the Sands Motor Company procured the insurance against confiscation with the consent of Petersen; that Petersen paid the premium on the policy; that respondent knew that the premium was so paid by Petersen; that the proceeds of the confiscation policy, when paid to the Sands Motor Company, were credited to Petersen’s account; and, if credited upon the note, left a balance due thereon at that time of $274.60, and no more. No evidence appears in the record offered by either side as to why or under what conditions the automobile was confiscated, and in the final analysis, the only question here at issue is, was the burden of proof upon the respondent to establish that the automobile was confiscated because of some wrong on the part of Petersen, or, was the burden of proof upon appellants to establish that the confiscation took place without their fault? Appellant relies upon the well-settled rule of law that, where insurance is taken out at the expense of, and for the benefit of, the mortgagor, he, the mortgagor, has the right, in case of loss, to have the pro *116 ceeds of the policy applied for Ms benefit toward the discharge of the debt, citing Stebbins v. Westchester Fire Insurance Co., 115 Wash. 623, 197 Pac. 913, 14 R. C. L. 1367; Robbins v. Milwaukee Mechanics Insurance Co., 102 Wash. 539, 173 Pac. 634; and many cases from other jurisdictions among which are Leyden v. Lawrence, 79 N. J. Eq. 113, 81 Atl. 121; Commercial Credit Co. v. Eisenhour, 28 Ariz. 112, 236 Pac. 126; Pendleton v. Elliott, 67 Mich. 496, 35 N. W. 97; Waring v. Loder, 53 N. Y. 581; Traders’ Insurance Co. v. Race, 142 Ill. 338, 31 N. E. 392; and Burton-Lingo Co. v. Patton, 15 N. M. 304, 107 Pac. 679, 27 L. R. A. (N. S.) 420. Eespondent does not dispute tMs rule of law, but, aside from its argument based upon the pleadings, seems to assert that, under a policy against confiscation, the fault of the owner or the one entitled to possession must be presumed in all cases where confiscation has taken place, or, in any event, that the burden is upon him to establish by competent proof that he was without fault. Confiscation insurance does not differ in principle from other insurance, and one seeMng the benefit of such insurance after loss, if he caused the loss, cannot recover. But notMng in the policy or in the law applicable thereto is called to our attention which in any wise changes the well-settled general rule that wrongdoing is never presumed, but must always be established by proof. So here, if confiscation might take place without wrongdoing or fault on the part of appellants, in the absence of any proof, the law will presume that it did so take place. The Federal statute treats the thing as the offender, and if the thing is used unlawfully without the knowledge of the owner, it may be confiscated, notwithstanding the owner is without fault. Goldsmith-Grant Co. *117 v. United States, 254 U. S. 505; United States v. Stowell, 133 U. S. 1; United States v. Mincey, 254 Fed. 287; Logan v. United States, 260 Fed. 746, and United States v. One Saxon Automobile, 257 Fed. 251. A reading of these cases reveals sufficient instances of confiscation without wrongdoing or knowledge of wrongdoing on the part of the owner, and no further demonstration seems necessary. We conclude that the burden was on respondent to prove by competent evidence that the confiscation took place by reason of some act or fault on the part of the appellants, and no such proof having been offered, the judgment should have been for $274.60 with interest thereon, only. The judgment is reversed with directions to enter a judgment in harmony with the views herein expressed. Parker, Beals, French, and Millard, JJ., concur.