Shoucair v. North British & Mercantile Insurance

OPINION OF THE COURT. M’FIE, J. 1 The judgment sought to he reversed in this ease was rendered on the pleadings in the court below. While the issues were substantially made up, the motion to find for the defendant company upon the admissions in the reply of the plaintiff, reduces the case in this court to the single issue raised by the motion and upon which the judgment was rendered. It may he observed at the outset, that there is a long line of decisions of the state courts apparently at variance with the law which we feel compelled to hold in this jurisdiction, hut we find that the decisions of the state courts are quite frequently based upon state laws enacted to change the rule of law laid down by the federal courts in insurance cases. Counsel for appellant in his able brief has called the court’s attention to a large number of cases decided in the state courts in support of his contention, but, while conceding the strength of his argument in cases governed by statute in a state court, this jurisdiction is still within a territory wherein the decisions of the federal courts have a peculiarly binding force in the absence of statutory law. By the pleadings we are informed that the suit is brought by the plaintiff to recover damages for the destruction of personal property by fire upon an insurance policy issued by the company to him. The issuance of the policy is admitted, hut the liability of the company for loss under its terms, is denied. The policy sued on contains, among many others, the following clause: “This entire policy shall be void if the insured has concealed or misrepresented, in writing or otherwise, aim material fact or circumstance concerning this insurance or the subject thereof; or if the interest of the insured in the property he not truly stated; or, in ease of any fraud or false swearing by the insured touching any matter relating to tbis insurance ox the subject thereof, whether' before or after loss.” Also the following: “This entire policy, unless otherwise provided by agreement endorsed hereon or added hereto, shall be void * * * * if the interest of the insured he other than unconditional and sole ownership * * * or if the subject of insurance be personal property and be or become encumbered by a chattel mortgage.” Paragraph nine of the answer bq.ses the non-liability of the company upon these provisions of the policy, either of which, as the policy provides, renders the policy void unless complied with. The plaintiff, in his reply to paragraph nine, admits that at the time the policy was issued the insured property was encumbered by a chattel mortgage and then proceeds to allege a number of things by way of the avoidance of the effect of the existence of the mortgage and its nondisclosure to the company or its agent, all of which allegations would necessarily be established by parole evidence of transactions occurring, if at all, prior to the issuance of the policy. The motion interposed by the defendant for judgment on the pleadings raises but one issue and that is the admission that at the time the policy was issued upon this personal property, there was a valid chattel mortgage upon it and that the same was recorded. This, then, is a case where insurance was obtained upon personal property having an existing chattel mortgage upon it at the time the insurance was obtained, with ho attempt of the' insured to 'inform the company or its agent of that fact. This was in plain violation of at least' two provisions of the policy, each of which rendered the policy void according to its terms. The provisions of this policy are similar to those of insurance policies generally, and the Federal courts have not only sustained their validity, but have repeatedly held that parole evidence cannot be heard as to occurrences prior to the issuance of the policy. In the case of Imperial Fire Insurance Company v. Coos County, 151 U. S. 452, 462, the court said: “Contracts of insurance are contracts of indemnity upon the terms and conditions specified in the policy or policies embodying the agreement of the parties. For a comparatively small consideration the insurer undertakes to guaranty the insured against loss or damage upon the terms and conditions agreed upon, and upon no other; and when called upon to pay, in case of loss, the insurer, therefore, may justly insist upon the fulfilment of these terms. If the insured cannot bring himself within the conditions of the policy, lie is not entitled to recover for the loss. The terms .of the policy constitute the measure of the insurer’s liability, and, in order to recover, the assured must show himself within those terms; and if it appears that the contract has been terminated by the violation on the part of the assured' of its conditions, then there can be no right of recovery. The compliance of the assured with the terms of the contract is a condition precedent to the right of recovery, if the assured has violated or failed to perform the conditions of the contract, and such violation or want of performance has not been waived by the insurer, then the'assured cannot recover. It is immaterial to consider the reasons for the conditions or provisions on which the contract is made to terminate or any other provision of the policy which has been accepted and agreed upon. It is, enough that the parties have made certain terms,, conditions on which their contract shall continue or terminate. The courts may not make a contract for the parties. Their function and duty consists simply in enforcing _ and carrying out the one actually made.” Atlas Reduction Co. v. New Zealand Ins. Co., 138 Fed. 497; Jeffries v. Life Insurance Co, 22 Wall. 47; Aetna Life Insurance Co. v. France, 91 U. S. 510; Phœnix Life Insurance Co. v. Raddin, 120 U. S. 183. “Stipulations such as are contained in this policy have frequently been subjected to consideration in the courts, and their validity is not open to question.” Atlas Reduction Works v. New Zealand Ins. Co., 137 Fed. 497; Carpenter v. Providence Washington Ins. Co., 16 Pet. 495; Northern Assurance Co. v. Grand View Bldg. Asso., 183 U. S. 308; Imperial Fire Ins. Co. v. Coos, 151 U. S. 452; Hunt v. Springfield Fire & Marine Ins. Co.; 196 U. S. 47. In the case of Northern Assurance Co. v. Grand View Building Association, the court gives the following cogent reasons for sustaining the validity of these provisions of .insurance policies and rejecting parole evidence concerning them: “It should not escape observation that preserving written contracts from change or alteration by verbal testimony of what took place prior to and at the time the parties put their agreements into that form is for the benefit of both parties. Tn the present case, if the witnesses on whom the plaintiff relied to prove notice to the agent had died, or had forgotten the circumstances, he would thus, if he had depended to prove his contract by evidence extrinsic to the written instrument, have found himself unable to do so. So, on the other side, if the agent had died, or his memory had failed, the defendant company might have been at the mercy of unscrupulous and interested witnesses. It is not an answer to say that such difficulties attend other transactions and negotiations, for it is the knowledge of the inconveniences that attend oral evidence that has led to the custom of putting important agreements in writing, and to the legal doctrine that protects them when so expressed, and when no fraud or mutual mistake exists, from being changed or modified by the testimony of witnesses as to conversations and negotiations that may never have taken place, or the real nature and meaning of which may have faded from recollection. Besides the importance of such considerations to the parties immediately concerned in business transactions, the community at large have a deep interest in the welfare and prosperity of such beneficial institutions as fire insurance companies. It would be very unfortunate if prudent men should be deterred from investing capital in such companies by having reason to fear that conditions which have been found reasonable and necessary io put into policies to protect the companies irom faithless agents and from dishonest insurers are liable to be nullified by verdicts based on verbal testimony/’ The case of Hunt v. Springfield Fire and Marine Ins. Co., is substantially identical with the present case, except that instead of being a chattel mortgage there were, two trust deeds upon the property. The court thus states the issue in that case: “The sole question presented by the record in this case is whether the provision in the policy for the unconditional ownership of the property by the plaintiff, and for the non-existence of any chattel mortgage thereon, was broken by ceitain trust deeds to secure the payment of money in each case.” The court, after holding that the effect of the instruments was the same, concluded by holding that “the conditions' of the policy in that case were broken by the trust deeds,” and affirmed the judgment of the court below. 2 Counsel for the plaintiff contends that it was the duty of the company to ascertain whether or not there were incumbrances on the property, either by interrogation of the assured, or by examination of the record, and, failing to do this, there was a waiver for which the giving of a chattel mortgage would not bar a recovery by the plaintiff. In view of the law as laid down in the cases above referred to, this contention is not well founded. The policy contains another provision which it seems to us disposes of this contention, as there is no claim of intentional waiver, nor is any such waiver or agreement indorsed on the policy. '“This policy is made and accepted subject to the stipulations and conditions printed herewith together with such other provisions, agreements or conditions as may be endorsed hereon or added hereto and no. officer, agent, or other' representative of this company shall have the power to waive any provision or condition of this policy except such as by the terms of this policy may be the subject of agreement endorsed hereon or added hereto, and as to such provisions and conditions no officer, agent, or representative shall have such power or be deemed or hold to have waived such provisions or .conditions unless such waiver, if any, shall be written upon or attached hereto. In the case of Penman v. St. Paul Insurance Co., 216 U. S. 311, there was a clause in the policy substantially identical with the above provision. In passing upon its purpose and effort the court used the following decisive language: “IVe think also that the policy furnishes the onN way by which its terms can be waived. It provides against modifications by the usage or custom of trade or manufacture. »Tt guards against any acts of waiver of its conditions or a change of them by agents. It provides that such waiver or change 'shall be written upon or attached’ to the policy. The company could have used no words which would have been more explicit. There is no ambiguity about them. Parole testimony was not needed nor admissible to interpret them. They constituted the contract between the company and the insured. No .agent had power to change or modify that contract except in the manner provided. This was decided in Northern Assurance Co. v. Building Association, supra. Any other ruling would take from contracts the certain evidence of their written words and turn them over for meaning to the disputes of parole testimony.” 3 The plaintiff’s admission in his pleading that there was an undisclosed chattel mortgage upon the insured property at the time the policy sued on was issued, as was said in the case of Hunt v. Springfield Fire & Marine Ins. Co., the conditions of the policy were broken by the chattel mortgage. The effect of the breach, as declared by the policy, was that it became void, and if void, no recovery could lie had upon it in any event. In this view of the case, the court below was clearly within the law in granting defendant’s motion and entering judgment for the defendant upon the pleadings; therefore the judgment of the court below will be affirmed with costs. It is so ordered.