Scammon v. Commercial Union Ins.

McAllister, P. J. There were but two points of objection to a recovery relied upon by the defendant below on the trial, and the same are insisted upon here on its behalf as appellee. They are (1) that the sale by the United States Mortgage Company, under the power of its mortgage and the conveyance thereunder, made March 31,1874, some three months and fourteen days before the fife, constituted a breach of the condition in. the policy against alienation, which rendered the policy void, and that at all events the plaintiff, for that reason, had no insurable interest in the property at the time of the loss; (2) that the plaintiff failed to seasonably furnish defendant with proofs of loss as required by the policy. It is indisputable that, as respects every other matter, the plaintiff’s cause of action was clearly made out, so that, upon this appeal, the only questions demanding consideration are those arising upon the above stated grounds of defense, and they are mixed questions of law and fact. All the material facts are, however, established by undisputed evidence. If, when the law is properly applied to the facts, either or both of said grounds of defense shall be found tenable, the judgment below should be affirmed; but if found untenable as to both, then it should be reversed. First, then, as to the alleged breach of condition of the policy against alienation. What is to be taken as the true meaning when the different clauses are construed together ? All the authorities agree that such conditions must receive a strict construction, the court having in view the object of the insurance company in inserting them. The language in which the condition in question is expressed is as follows: “If the property be sold or transferred, or any change takes place in title or possession, whether by legal process or judicial decree or voluntary transfer or conveyance, * * in every such case this policy shall be void. When property has been sold and delivered or otherwise disposed of, so that all interest or liability on the part of the assured herein named has ceased, this insurance on said property shall immediately terminate.” When both the above clauses are considered together in the light of the rules to which we have adverted, it appears to us that the last clause was intended to explain and qualify the meaning of the words of the former, and define what sort or nature of transfer or conveyance of the property and change of title was contemplated and provided against. The character so given and intended was such a sale or disposition of the property as caused all interest of the insured in or control over the property to cease. That was the construction given to causes in the same language by the Court of Appeals of New York, in Browning v. Home Ins. Co., 71 New York R. 513. In Ayers v. Hartford Ins. Co., 17 Iowa, 176, the court, in discussing what -transfer or change of title would avoid the policy, held to the following sensible views : “ The object of the insurance company by this clause is, that the interest shall not change so that the insured shall have a greater temptation or motive to burn the property, or less interest or watchfulness in guarding and protecting it from destruction by fire. Any change in or transfer of the interest in the property, of a nature calculated to have this effect, is in violation of the policy. But if the real ownership remain the same—if there is no change in tiiefact of a title, but only in the evidence of it, and this latter change is merely nom'nal and not of a nature calculated to increase the motive to burn or diminish the motive to guard the property from loss by fire, the policy is not violated.” Lay v. Home Ins. Co., 24 Minn. 315, supports the same doctrine, and many other cases of the same import might he cited. The case of The Orrell v. Hampden Fire Ins. Co., 13 Gray, 431, is in harmony with the same principles, for it holds that to constitute a breach of the condition of insurance relating to the conveyance of the property, there must have been an actual sale or transfer of the property, valid as between the parties. There is a vein of the same doctrine in Daily v. Westchester Fire Ins. Co., 131 Mass. 113; May on Ins., § 273. The question is, were the sale and conveyance made by the mortgage company under the power in its mortgage, and under the circumstances of that sale, an actual sale, and valid as between the plaintiff below and said mortgage company ? Let us premise our answer to that question by the statement that the defendant below, having set up that sale as a defense, it has thereby voluntarily assumed the attitude of privity with said mortgage company, by which it .stands affected by every fact and circumstance legitimately bearing upon the question of the validity of that sale. Stephens v. Ill. Mut. F. Ins. Co., 43 Ill. 327. Mow what are the circumstances legitimately bearing upon the validity of that sale ? In making it the mortgage company was acting under a power contained in its mortgage, given by the plaintiff, constituting the former the agent and trustee of plaintiff, and authorizing only an ordinary sale, at public auction, upon a certain contingency. But the mortgage company, in making the sale under that power, made it to itself. In violation of its duty as trustee, it became the purchaser at its own sale, and for a stun less than a fourth of the fair value of the property. The evidence shows that arrangements were made by the mortgage company, before said sale and without the knowledge of plaintiff, to sell the property under said power. That such sale was fraudulent, all the authorities agree ; and it is unnecessary to cite more than one case. In that the principal authorities are cited. Michaud v. Girod, 4 How. (U. S. ) 552; approved in 43 Ill. 126. That sale and the conveyance under it were undoubtedly fraudulent, illegal and voidable, as to the plaintiff, at his election. And it appears that he promptly elected to repudiate and disaffirm it, and gave notice to that effect to the said mortgage company, the purchaser, some two months before the loss, and that he should continue to retain possession of the premises, which he did. Mot only that, but plaintiff brought a bill in equity to have said sale annulled, and obtained a decree of annulment before the trial below, and introduced the same in evidence. That decree being conclusive between the parties to the suit in which it was rendered, and the said mortgage company being a party, it must follow from the attitude of privity with said mortgage company as respects said sale, which the defendant in this present suit had voluntarily assumed by setting up said sale as a defense, that if said decree, though rendered after the issues in the present case were made up, would have been conclusive between the parties to it, of which there is no doubt, it was, for the reasons stated, admissible in evidence in this present suit, and equally conclusive as to the defendant herein. Dow v. McMichaels, 6 Paige, 139 ; Sheldon v. Patterson, 55 Ill. 507. So that such sale having been annulled by a court of competent jurisdiction, it is to be regarded as if never made. But aside from the decree, the sale having been fraudulent and voidable as to plaintiff, at his election, and he having elected to avoid it, his actual ownership of the equity of redemption was unaffected thereby. Ross v. Demoss, 45 Ill. 452; Roberts v. Fleming, 53 Ill. 196. Plaintiff’s open and visible possession alone was good against a title acquired by fraud. Niles v. Anderson, 5 How. (Miss.), 365 ; Flint v. Lewis, 61 Ill. 229. From the whole case, it is clear that there was no actual sale or transfer ; that plaintiff’s interest in and control over the property were not divested. He continued in possession down to the time of the fire, claiming ownership of the equity of redemption, as in fact he had a right to ; he had the same motive for that reason to guard and preserve the property from destruction by fire after said supposed sale, as he had before, and when said policy issued. We think, therefore, that the first ground of defense was untenable. We are of the opinion that the second is also untenable, because it appears that the defendant, before a reasonable time had elapsed for furnishing proofs of loss, determined on its own part that it was in no event liable for said loss, and that it would not pay it, and gave plaintiff notice to that effect. That being the case, the question whether such proofs were furnished in seasonable time was wholly immaterial. Peoria, etc., Ins. Co. v. Whitehill, 25 Ill. 470 ; Williamsburg, etc., Ins. Co. v. Cary, 83 Ill. 453. We have considered the objection of res adjudicaba, upon a former appeal, and think that also untenable. The judgment should be reversed and cause remanded. Judgment reversed.