St. Paul Fire & Marine Ins. Co. v. Jones, 8658.

• Decision Date: 31 August 1938
• Docket Number: No. 8658.,8658.
• Citation: 98 F.2d 448
• Parties: ST. PAUL FIRE & MARINE INS. CO. v. JONES. JONES v. ST. PAUL FIRE & MARINE INS. CO.
• Court: U.S. Court of Appeals — Fifth Circuit

98 F.2d 448 (1938)

ST. PAUL FIRE & MARINE INS. CO. v. JONES.

JONES v. ST. PAUL FIRE & MARINE INS. CO.

No. 8658.

Circuit Court of Appeals, Fifth Circuit.

July 8, 1938.

Rehearing Denied August 31, 1938.

Lloyd E. Elliott, of Dallas, Tex., and W. L. Kemper, of Houston, Tex., for appellant and cross-appellee.

Austin Y. Bryan, Jr., of Houston, Tex., C. W. Kennedy, Jr., of Crockett, Tex., and Dan MacDougald, of Atlanta, Ga., for appellee and cross-appellant.

Before FOSTER, SIBLEY, and HUTCHESON, Circuit Judges.

HUTCHESON, Circuit Judge.

The suit was to reform for mutual mistake, and to recover on as reformed, a policy of insurance for $50,000, insuring cotton in bales at a named location, against loss or damage by fire. The claim for reformation was that the policy misdescribed the location of the cotton insured. The claim for recovery was that 798 bales of insured cotton, of the value of $47,458.28, had been totally destroyed by fire. The prayer was for reformation of the policy, and for judgment on it as reformed for the full amount of plaintiff's loss.

The defense to the claimed reformation was not that the policy ought not to be reformed as to the misdescribed, so as to cover as to the correct, location. It was that it should be reformed for a coverage not of $50,000, but of $40,000, the amount of coverage at the location of the fire carried in the policy in renewal of which the one sued on was issued.

The defenses to the recovery were: A denial that there were 798 bales of cotton destroyed, a denial that the weight, grade, staple and value of the destroyed cotton was as claimed; a claim that the policy in suit was "other insurance", and a claim that defendant had breached two promissory warranties. One of these was the reporting warranty: "It is warranted that when this policy becomes effective assured shall report to this company the number of bales on hand at each location, and thereafter shall report not later than Tuesday of each week the number of bales of cotton at such location at the close of each day of the preceding week."

The other was the record warranty: "Warranted by the assured (a) That he will make and at all times preserve an accurate record of all cotton received and shipped, showing the weight, classification and identity of each bale, its location and change of location, and the dates of all such transactions, which record should be open at all times for the inspection of any authorized representative of the company upon request."

To the pleading of violation of recording and reporting warranties plaintiff, by supplemental replication, pleaded estoppel and waiver.

The District Judge rejected all of the defenses, to reform the policy as contended for by plaintiff, and to find for plaintiff on it as reformed, not, however, for $47,458.28 for the 798 bales of cotton destroyed as claimed by plaintiff, but for $43,485.71, for 731 bales, the amount of cotton plaintiff had reported. The claim for 67 bales was rejected, because of the failure of insured to report them as on hand.

Appellant makes two points against the decree, appellee by cross appeal makes two. Appellant's points are (1) that there is no evidence of a meeting of the minds of the parties on the policy upon which recovery was allowed; and (2) that there was a breach of the record warranty clause of the policy sued on.

Appellee's points are (1) that the finding, that the 67 bales disallowed for were not reported to defendant, was erroneous; (2) that if they were not so reported, it was the fault, not of plaintiff, but of defendant's agent, and it was error not to reform the reports as prayed.

We dispose of these points and of the cross appeal by saying merely that we agree with the District Judge that the 67 bales were not reported, and that no case for reforming the reports was made out. We turn then to the points appellant makes.

Its first point is that since the policy sued on was issued upon the request of plaintiff for a renewal of the then existing policy, which, though mistaken in its description of the precise location, covered plaintiff's two locations for $75,000, apportioned $40,000 to the one in question here, and $35,000 to the other, the policy in question should be reformed to conform to the one it renewed. The argument here is that since plaintiff had not asked for, and defendant therefore had not intended to issue, one policy for a single coverage on the two locations, to reform it as to the description of one location, leaving it to stand for full coverage thereon, and without any coverage at all as to the other, is not to reform the contract to correct the mutual mistake of the parties, and to conform to their mutual intent. It is to make a contract which neither of them had intended to make or made. In short, appellant arguing that the reformation prayed for and allowed makes a contract which neither insured nor insurer intended, protecting the insured at one location to the extent of $50,000, and not at all at the other, insists that the policy must be reformed as of the date of its issuance, to speak the then mutual intent of the parties, and thus reformed, it must provide coverage for the two locations, in the same proportions, indeed, in the same amounts, as the policy it renewed.

The point made on the breach of the record warranty is that though that warranty specifically required plaintiff to make and preserve an accurate record of all cotton received and shipped, showing the weight, classification and identity of each bale, its location and change of location, and the date of all such transactions, no such record was kept.

From the facts found by the District Judge and others in the record, as to which there is no dispute, it appears that plaintiff, having a policy upon cotton at two locations, mistakenly misdescribed in the policy, with a total coverage of $75,000, apportioned $40,000 to the location in suit here, and $35,000 to the other, made request for a renewal. This request was communicated to and acted upon by the general agency, where, upon the wholly mistaken view that one of the plaintiff's locations had been cancelled out, and upon the belief, based upon the cotton reported during the preceding year, that $50,000 would be sufficient coverage, a new policy for $50,000 was written on one location, itself misdescribed. This policy was then sent back to the local agent for delivery, with the explanation of the change from $75,000 to $50,000 that the latter amount seemed sufficient, and the statement that the policy had been written in an endeavor to conform to plaintiff's request, and that if it did not do so, it would be made to. Plaintiff received the policy, filed it away without reading it, and did not know, until after the fire, either the amount of it, or that it covered only one location and misdescribed that. He supposed that he had obtained the coverage that he had asked for.

We have been cited to numerous text books and decisions upon relief by reformation. We find no inharmony or discord in them upon the general principles which control here. These are thus summed up and stated in Hayes v. Travelers Insurance Company, 10 Cir., 93 F.2d 568, 570:¹ "Where an agreement has been reached by the parties as to the terms of a contract, but either through the mutual mistake of the parties, or through mistake upon the part of one and fraud or inequitable conduct on the part of the other, the written instrument drafted to evidence the contract fails to express the real agreement and intention of the parties, equity may grant reformation. However, there must be an antecedent agreement which the written instrument evidences, and the mistake must have been in the drafting of the instrument and not in the making of the contract which it evidences. And absent fraud or inequitable conduct on the part of one, the mistake must be mutual. Russell v. Shell Petroleum Corp. (C.C.A. 10) 66 F.2d 864, 867."

It is the application of these principles, rather than their statement, which makes the difficulty here.

All of us agree that the policy should be reformed as to the misdescribed location. We are not in agreement as to whether the District Judge was right in reforming it so as to make it effective for $50,000 on the location in suit, or whether it should have been reformed to cover, as the old policy did, $75,000 on the two locations, apportioned $40,000 on the one in suit, and $35,000 on the other. The writer thinks the facts detailed show that plaintiff requested, and defendant intended to issue to plaintiff, not a policy which would insure for $50,000 on one location, and leave the other uninsured, but one which would give him as to each location, the coverage for the new year he had in the old. He thinks that the mistake of defendant's agent in...