Carroll v. Hartford Fire Insurance

SULLIVAN, C. J. This action was brought to recover upon a $2,500 fire insurance policy which was given to the plaintiffs to insure them against the direct loss or damage by fire of 250,000 feet of lumber situated in Kootenai county. The answer denied the material allegations of the complaint and set up certain affirmative defenses. Upon the issues made the case was tried by the court with a jury and resulted in a verdict and judgment in favor of the plaintiffs for $2,500; with interest thereon. A motion for a new trial was denied, and this appeal is from the order denying the new trial. Numerous errors are assigned, but, as we view the matter, only a few of them need to be specifically reviewed in this opinion. It appears from the record that the plaintiffs had a mortgage on said lumber and that they had no greater or other interest than that of chattel mortgagees, but were in fact insured in the policy as sole owners of the property, and that being true, it is contended by counsel for appellant that piniutiffs cannot recover because of the following provision contained in said policy; — 473 — “The entire policy shall be void if the insured has concealed or misrepresented, in writing or otherwise, any material fact or circumstance concerning this insurance or the subject thereof; or if the interest of the insured in the property be not truly stated herein; or in case of any fraud or false swearing by the insured touching any matter relating to this insurance or the subject thereof, whether before or after a loss .... or if the interest of the insured be other than unconditional and sole ownership.” It is contended by counsel for appellant that those provisions voiding the policy in case of a chattel mortgage or in ease the insured is not the unconditional and sole owner are reasonable and ought to be enforced; while counsel for respondent contend that the appellant through its agent knew of the state of the title of the property in question before the policy was issued; that the insurance company knew before it issued the policy that the insured had only a mortgagee ’s interest in said property, and that said insurance was procured to protect said interest and for that reason appellant should be required to pay. As to whether the company, through its agent, had full knowledge of said facts, the evidence is conflicting. The evidence of the plaintiff shows that the agent fully understood the interest they had in said lumber as mortgagees, while the defendant’s witnesses testified to the contrary. The jury has passed upon this question and found in favor of the plaintiffs to the effect that the agent of the company, and the company, through its agent, had full knowledge of all those facts. In regard to these contentions, we have two lines of decisions, some of the courts holding that where a company, through its agent, issues a policy with knowledge of existing facts which under the terms of the policy would render it void, that they thereby waive those provisions; other courts holding that since the policy of insurance is a written contract, the parties having made and reduced their agreement to writing, to follow the rule permitting parol evidence to show a waiver of the terms would be no more nor less than — 474 — to permit parol evidence to vary the terms of a written instrument, and for that reason they refuse to subscribe to the doctrine that if an insurance company, through its agent, issues a policy with knowledge of existing facts which under the terms of the policy would render it void, the company thereby waives those provisions. In support of this latter contention, counsel for appellant cites Northern Assur. Co. v. Grand View Building Assn., 183 U. S. 308, 22 Sup. Ct. 133, 46 L. ed. 213, and the authorities therein cited. Mr. Justice Shiras, in delivering the opinion of the court in that case, quoted largely from the case of Dewees v. Manhattan Ins. Co., 35 N. J. L. 366, and prefaced his quotation with the statement that that opinion contains an able and sound statement of the law on the question there involved. A part of the quotation is as follows: “The assumption is, and must be, that the warranty, in its present form, was a mistake in the agent. But a mistake cannot be corrected, in conformity with our judicial system, in a court of law. No one can doubt that, in a proper case of this kind, an equitable remedy exists. ‘There cannot at the present day,’ says Mr. Justice Story, ‘be any serious doubt that a court of equity has authority to reform a contract, where there has been an omission of a material stipulation by mistake. And a policy of insurance is just as much within the reach of the principle as any other written contract.’ (Andrews v. Essex Fire & M. Ins. Co., 3 Mason, 6, 10, Fed. Cas. No. 374.) ” The court there holds that in a proper case of this kind an equitable remedy exists and that this right would unquestionably exist in a court of equity, but that it could not be administered under the federal jurisdiction in a court of law. That rule applies to a line of eases cited by counsel for appellant upon this.-point which were determined by courts in states where the distinction between actions at law and suits in equity and the forms of all such actions and suits were not prohibited. But under the provisions of see. 1, art. 5 of our state constitution, the distinction between actions at law and suits in equity is prohibited, and it is there provided — 475 — that there shall be in this state bnt one form of action for the enforcement or protection of private rights or the redress of private wrongs, which proceeding shall be denominated a civil action. In Bates v. Capital State Bank, 21 Ida, 141, 121 Pac. 561, this court in construing said see. 1, art. 5, and sec. 4168, Rev. Codes, held that under those provisions the technicalities of the common law in regard to pleadings have been dispensed with, and that the plaintiff need only state his cause in ordinary and concise language, without regard to the ancient forms of pleading, and where that is done, the plaintiff is entitled to any relief, either at law or in equity, that his proof may warrant. In Coleman v. Joggers, 12 Ida. 125, 118 Am. St. 207, 85 Pac. 894, this court held that one of the objects of our practice act and the provisions of our state constitution in abolishing all distinctions between actions at law and suits in equity, and giving our district courts full and complete jurisdiction both at law and in equity, was to rid our system of a multiplicity of suits and a vexatious and cumbersome procedure, and to give litigants full and complete relief in a single action, where under the old practice several suits were necessary to accomplish that result. We have no serious doubt but that courts of general jurisdiction of this state have authority to reform a contract, and a policy of insurance is just as much within the reach of that principle as any other written contract. Counsel for appellant lays particular stress upon what he contends is the vice of the complaint in this case, in that it mingles legal and equitable causes of action, and this was the basis both of his motion in the lower court to require plaintiffs to separately state their causes of action, and of his demurrer upon the ground, among other things that “said complaint neither stated the form nor the substance of the agreement alleged to have been made between plaintiff and defendant.” And in his brief he says: “He sued upon a written instrument and in his complaint alleged that — 476 — that was not the agreement of the parties, bnt did not set up the agreement which he alleged had been made. ’ ’ An inspection of the complaint discloses that plaintiffs made therein a concise and complete statement of the facts constituting their causes of action, including representations claimed to have been made by them to the agent concerning the property to be insured, and the mistakes claimed to have been made by the agent in writing the policy. They also attached to their complaint and made a part thereof a copy of the policy actually issued to them. We cannot conceive how the defendant corporation could have been in any way misled by the allegations of this complaint or misinformed as to the relief sought. It was incumbent upon plaintiffs to allege and prove the facts as to the contract which was actually made and as to the mistake on the part of the agent in reducing it to writing. Having done this, if the evidence warrants it, they are entitled to a judgment in accordance with the true contract thus shown, for the recovery of their insurance money. The only question before us is whether or not plaintiffs had a valid insurance contract with the defendant company. Under our practice and the decisions of this court, they may plead and prove any state of facts which entitles them to judgment, either at law or equity. The lower court did not err in denying defendant’s motion to require plaintiffs to separately state their causes of action, or in overruling the demurrer to the complaint. As we have already stated, this policy contained a provision that it should be void under certain conditions, among which are specified “if the interest of the insured in the property be not truly stated herein,” and “if the interest of the insured be other than unconditional and sole ownership.” In 1913 the legislature of this state enacted an insurance law, (Sess. L. 1913, p. 593), sec. 13 of which is as follows: “On and after the first day of January, 1914, no fire insurance company, except county mutuals, shall issue any fire insurance policy covering on property or interest therein in this state, other than on the form known as the New Tork — 477 — standard, as now or may be hereafter constituted, except.as follows: . . . . ” Counsel for appellant contends that by this act the New York standard-form of policy was made the standard insurance policy in this state just as effectively as if it had been set out in haec verba in the act, and that being the law of the state, plaintiffs in this case must be presumed to have known its contents, even before they received the policy, including the provisions that under certain conditions the policy would be void, and that this provision could not be waived, as the law itself prescribing a standard policy so provided. Counsel for respondent, on the other hand, contends that the act in question does not effectively provide a statutory form of insurance policy for this state, because the act itself does not set forth any form, or refer to any form, which is a matter of public record anywhere in this state, and that the legislature of this state cannot, merely by referring in a general way to some form of policy that has been adopted in another state, make it a part of the laws of this state, at least without requiring a form to be accessible to our citizens in some public record of the state, so they may be able to determine what the law is. Counsel for appellant cites as leading cases in support of his contention, State v. Brian, 96 Neb. 278, 147 N. W. 689, and Oatman v. Bankers’ Fire Relief Assn. 66 Or. 388, 133 Pac. 1183, 134 Pac. 1033. An examination of these cases discloses that in the Nebraska case the law providing for a statutory form was more definite than the Idaho statute, in that it provided that the form should be prepared by a state insurance board, on the basis of the New York standard form. At the same time the court held that that provision of the Nebraska statute providing that the New York form should be used as a standard as “it may be hereafter constituted” was invalid, because its effect would be to control the powers and duties of Nebraska officials by the future action of the legislature of New York. In the Oregon case cited, it appears that the prescribed conditions to be inserted in the- standard insurance policy of — 478 — Oregon, were specifically set forth in the statute itself. These cases are therefore not exactly in point construing sec. 13 of our 1913 statute, which appears to be unique in insurance legislation. However, we do not believe it was the intention of our legislature in seeking to enforce a standard form of policy in this state, to withdraw from the insured any protection theretofore afforded them under the law of contracts, or to confer upon insurance companies any immunity for the carelessness or negligence of their agents which they had not before enjoyed. Sec. 18 of art. 3 of our constitution prohibits the amendment of existing laws of this state by reference to their title, and .commands that such sections as are amended be set forth at length in the new statute, and in view of this constitutional provision it would seem somewhat anomalous if the legislature could nevertheless adopt the law of another state by reference, not to its title even, but to something still more indefinite, namely, “the New York standard, as now or may be hereafter constituted.” From these considerations we conclude that the plaintiffs in this case cannot be held to have had the constructive notice of the contents of their policy which appellant seeks to fasten upon them under the law in question, and that their contractual rights' were in no way abridged by the 1913 statute. Much has been said in the briefs of counsel in this case with reference to the legal principle of mutual mistake, waiver and estoppel, and their applicability to the facts of this case. As we view the matter, the conduct of the insurance company’s agent in writing a policy of insurance which did not disclose the true title or interest of plaintiffs, although they had stated the nature of that interest to the agent, knowledge of which therefore is imputed to the company, followed by the acceptance of premium on such policy by the company and the reliance of plaintiffs on its validity, effectually estops the insurance company from setting up the defense that the policy is void because the plaintiffs were not in fact sole owners of the property insured. — 479 — In the case of Allen v. Phoenix Assur. Co., 12 Ida. 653, 88 Pac. 245, 8 L. R. A., N. S., 903, 10 Ann. Cas. 328, some of the facts were similar to those in the case at bar, and the court there said: “In this case it does not definitely appear whether the insured made a written application for insurance or simply had a parol understanding with the agent who solicited the risk. If the title disclosed were held to be short of the requirement contained in the policy, still it would not defeat the right to recovery, if it could be shown that the insured, by their written application truly and correctly represented the state and condition of the title to this property. In such case the insurer could not insert a contrary provision in the policy with knowledge of the true condition of the title, and thereby bind the insured and defeat his right of recovery in case of loss.” (Citing authorities.) "We particularly call attention to the last sentence of the above quotation, which seems in point under the facts of this case. We are aware that there is a considerable divergence among the reported cases as to the legal principle to be applied in cases of this kind. This is quite apparent from an examination of the eases cited by counsel. Some of them take the view that such action on the part of the agent in mistakenly reducing the insurance contract to writing should be considered as a mutual mistake between the parties, and that only the remedy appropriate to that class of cases should be applied. Others go further and consider the conduct of the agent a waiver of the right of the company to declare the policy void under specific conditions. A third class of cases goes still further, and holds that the insurance company is estopped by such conduct on the part of its agent; that is to say, that it cannot assume one attitude as to known facts for the purpose of making the contract, and then be permitted to assume another and inconsistent attitude in order to avoid it. Owing to the great variety of facts and circumstances which might be shown in cases of this kind, it is apparent that some of them might properly fall in one class and some in another. In the case at bar, the follow — 480 — ing excerpt from the opinion of the New York court of Appeals in the ease of Robbins v. Springfield Fire & Marine Ins. Co., 149 N. Y. 477, 44 N. E. 159, appears to us to be in point: “The rule that an insurance company will not be permitted to defeat a recovery upon a policy issued by it, by proving the existence of facts which would render it void, where it had full knowledge of them when the policy was issued, is too well established by the authorities in this state to require further discussion.....Whether the decisions in this class of cases proceed upon the charitable theory that the insurance company by mistake omitted to make the required indorsement, or intended to waive the provisions regarding it, or upon the idea that its purpose was to defraud the insured, and is for that reason estopped, is of but little consequence, as any one of these theories is sufficient to avoid th^ defense relied upon in this case.” One of the defenses of the defendant corporation in this case was that plaintiffs had been guilty of falsely swearing in their proof of loss, thereby making their policy void. The record shows that the plaintiff Carroll made affidavit in the proof of loss that no other person but himself and Ward had any interest in the lumber which had been destroyed. The evidence shows that the company’s adjuster wrote the proof of loss himself, and that Carroll, who was an unlettered man and not familiar with business of that sort, signed and swore to it without question, relying upon the adjuster for its correctness. Appellant assigns as error the instructions given by the court to the effect that before they could find for the defendant they must not only find that plaintiffs swore falsely in their proof of loss, but that such false swearing was knowingly and wilfully done for the purpose of deceiving defendant and was done by them with a fraudulent intent. These instructions were not erroneous under sec. 8 of the insurance law of 1913 (Sess. L. 1913, p. 597), the language of which is: “Any person who, knowing it to be such, presents or causes to be presented, a false or fraudulent claim, or any proof in support of such a claim, for the payment of a loss upon a — 481 — contract of insurance, or who prepares, makes or subscribes false or fraudulent account, certificate, affidavit, or proof of loss, or other document in writing, with intent that the same be presented or used in support of such a claim, shall be guilty of a misdemeanor.” Under this statute the intent is an essential element in the offense of false swearing, and it does not appear from the evidence that the false statement in the proof of loss was knowingly made by plaintiff. Appellant also assigns as error the giving of instruction No. 10, wherein the court instructed the jury that in arriving at the amount of loss under the policy they should “determine the same by ascertaining the cash value of the lumber in the mill-yard, and then deducting therefrom fifteen per cent of the manufacturers’ net market value of similar stock in like quantity at the time and place of the fire, as the policy provides that fifteen per cent shall be deducted from the cash price in arriving at the amount to be paid under the policy.” It is contended that the court erred in this instruction in specifying “the cash value of the lumber in the mill-yard” as the measure of loss, when the true measure was the cash value of the lumber destroyed. It is obvious that the court’s instruction in this respect might tend to mislead the jury, but it had been shown by the evidence that at the time of the fire there was about 256,000 feet of lumber in the yard, all but 4020 feet of which was destroyed. The policy covered 250,000 feet. It is also shown by the evidence that the cash value of this lumber, taken as a whole, was “between $11 and $12 per thousand.” In view of this evidence, we-do not think the jury was prejudicially misled by this instruction or that reversible error was committed in giving it, although the language used by the court was inexact. Appellant assigns as error the giving of a number of other instructions and the refusal to give certain instructions offered on behalf of defendant. We have carefully examined the instructions given by the court, as well as the ones refused, and are of the opinion that the instructions, taken as a whole, fairly and fully state the law applicable to the facts of this case, and that no reversible error was committed by — 482 — the court iu giving or refusing to give the instructions last above referred to. Appellant contends that the court erred in denying its motion for subrogation. In passing upon that motion the court said: “It is by the court ordered that the motion of the defendant for subrogation to the rights of plaintiffs under said mortgage in proportion to the amount of the verdict of the jury be, and the same hereby is, deferred until such time as defendant shall pay to the plaintiffs the amount of said verdict and judgment rendered thereon, or pay said amount into court for the use and benefit of said plaintiffs.” It thus appears that the trial court did not definitely determine the question of subrogation. Clearly, under the law the appellant is not entitled to subrogation, in any event, until it has paid or offered to pay the judgment in this case. Counsel for respondent contend that there is no subrogation clause in the policy and therefore it must be covered by the common-law rule, and cite 1 Clement on Fire Insurance, p. 378, where the author says: “Where the insurance is not sufficient to cover the mortgage debt, the company takes nothing by subrogation and assignment until the mortgage is paid or tendered in full, both principal and interest. ’ ’ However, the trial court did not deny the motion to subrogate, but simply held the matter in abeyance until such time as the company would make or tender payment of said judgment in full, at which time it reserves the right to take up and decide said question. There is nothing iu the contention of. appellant that the court erred in denying said motion for subrogation. Some other questions were raised on the motion for a new trial, one in particular in regard to newly discovered evidence. We assume that the appellant does not rely upon that, since counsel have not referred to it in their brief. We therefore conclude that the judgment of the trial court must be affirmed, and it is so ordered, with costs in favor of respondent. Budge and Morgan, JJ., concur.