St. Paul Fire & Marine Ins. Co. v. Eldracher

• Decision Date: 03 July 1929
• Docket Number: No. 8367.,8367.
• Parties: ST. PAUL FIRE & MARINE INS. CO. v. ELDRACHER et al.
• Court: U.S. Court of Appeals — Eighth Circuit

33 F.2d 675 (1929)

ST. PAUL FIRE & MARINE INS. CO. v. ELDRACHER et al.^*

No. 8367.

Circuit Court of Appeals, Eighth Circuit.

July 3, 1929.

William R. Gilbert and Henry Davis, both of St. Louis, Mo. (Bryan, Williams & Cave, and Anderson, Gilbert & Wolfort, all of St. Louis, Mo., on the brief), for appellant.

P. H. Cullen and Raymond S. Davis, both of St. Louis, Mo. (Abbott, Fauntleroy, Cullen & Edwards, of St. Louis, Mo., on the brief), for appellees.

Before LEWIS, Circuit Judge, and WOODROUGH and McDERMOTT, District Judges.

LEWIS, Circuit Judge.

This action was brought August 27, 1926, by Rudolph and Anna Maria Eldracher to recover the full amounts named in three fire insurance policies, $20,000. The policies were issued by defendant, appellant here, to Drozda Real Estate Co., a Missouri corporation, on property which that company owned in the City of St. Louis, to wit:

"The two and three story composition roof brick building, including foundations, plumbing, electrical wiring and stationary heating, lighting and ventilating apparatus and fixtures therein; also all permanent fixtures, stationary scales and elevators, belonging to and constituting a part of said building; occupied as hotel, mercantile and dwelling building situated 4101-09 Manchester Ave., and 4100-12 Chouteau Ave., City of St. Louis, Missouri."

The policies bound the insurer to indemnify the insured, to the extent of the actual cash value of the property, against all direct loss and damage by fire. Each policy contained a coinsurance clause "that the assured shall at all times maintain insurance on each item of property insured by this policy to the extent of at least one hundred per cent. (100%) of the actual cash value thereof, and that failing to do so, the assured shall be a coinsurer to the extent of such deficit, and in that event shall bear his, her, or their proportion of the loss." Each policy also contained a clause to the effect that if the insured and insurer should fail to agree as to the amount of loss or damage, each should appoint an appraiser, they should select an umpire, and the appraisers should then appraise the loss and damage, stating separately sound value and loss or damage, and failing to agree, submit their differences only to the umpire; and that an award in writing so itemized of any two should determine the amount of sound value and loss or damage. On March 1, 1926, the Drozda Company conveyed the property insured to the Eldrachers and the policies were assigned to them with the insurer's consent. A fire occurred nine days thereafter which appellees claim caused a total loss.

The complaint contains three counts, one on each policy, and each count alleges that on March 9, 1926, the insured property was damaged or destroyed by fire, that the amount of direct loss and damage by said fire to said building and articles described in said policy amounted in the aggregate to $70,000; that the actual cash value of said building and articles covered by said insurance policy amounted at the time of said loss to $70,000; that plaintiffs were permitted to carry, under the terms of said policy, and did carry other fire insurance upon said property in the aggregate of $70,000, as the face value of such total insurance; that said policy of insurance provided, among other things, that defendant should not be liable under said policy for a greater proportion of any loss on the property described therein than the amount thereby insured should bear to the whole insurance covering such property. Defendant admitted in its answer that the property was damaged by fire on March 9, 1926, but denied that the building was destroyed; admitted that the amount of damage by fire was $70,000 but denied that the actual cash value of the property covered was $70,000 and stated that its actual cash value at the time of loss was at least $100,000. Under the Missouri valued policy statute defendant could not deny the property was worth as much as the total insurance on it. The answer further pleaded compliance with the Missouri statute in issuing the policies with coinsurance clauses and that on account thereof the insured was given a reduced premium charge, as the statutes required, and that insured voluntarily chose the policies with the coinsurance clause on account of the reduced rate and obtained the benefit of said rate. It alleged that after the fire the plaintiffs applied to the proper city authorities in compliance with the city ordinances for a permit to reconstruct said building, with alterations, and to use the foundation, standing brick walls, and a large part of the iron and steel that was in the building at the time of the fire; that they obtained the permit and used the foundation, walls, and other materials which was in good and safe condition and proper to be used in said alteration and reconstruction, and that their value exceeded the sum of $30,000. Thereon it is alleged plaintiffs are estoppel to claim the parts used were not in good and sound condition for use in reconstruction. The answer also set up the appointment of two appraisers, one by each of the parties, on March 13, 1926, that this insurer, and all other insurers of the property, made written demand for appraisers and therein notified the insured that they had selected Bertram Amber as their appraiser and requested insured to appoint their appraiser, and the latter selected C. B. McCormack. These two selected and in writing appointed an umpire. According to these writings the appraisers were to state separately sound value and damage. Later and on June 15, 1926, the two appraisers made their award in writing as follows:

"Award

"To the parties in interest:

"We have carefully examined the premises and remains of the property involved, in accordance with our appointment, and have determined the sound value and loss and damage to be as follows:

"Sound value $100,000 Loss and damage $74,127.43

"Witness our hands this 15th day of June, 1926. Bertram Amber,

"Ghas. B. McCormack "Appraisers."

And this award so made is pleaded in bar.

Plaintiffs replied to the plea, challenging the validity of the award. The reply alleged favoritism of both appraisers to the insurer, appointments of both appraisers in many other cases by insurers for the rendition of like services, misrepresentations to insured by McCormack for the purpose of obtaining his appointment, misconduct on the part of the appraisers in making the appraisement, a serious mistake of fact on which the award was in part based, and that the award did not express the judgment of the appraisers, but was made solely for the purpose and in the belief that it would be acceptable to both parties as a basis for settlement. This equitable issue was heard and determined by the court without a jury, and on the facts adduced the court vacated and set aside the award. The conclusion of the court, amply sustained by the testimony, was that the appraisers were not able to agree on either item in their report and arbitrarily fixed those sums as the basis on which the loss could be settled, in the belief that both parties would be satisfied. Over defendant's objection and exception the court permitted plaintiffs to use McCormack as a witness to sustain their allegations that the award was void. This ruling is assigned as error, and counsel contend that an arbitrator is prohibited from impeaching his award and that on principle the same rule must be applied to appraisers. 5 C. J. p. 243. There is, of course, a marked difference between arbitration and appraisement, in scope of the submission and in the procedure. City of Omaha v. Omaha Water Co., 218 U. S. 180, 30 S. Ct. 615, 54 L. Ed. 991, 48 L. R. A. (N. S.) 1084; Id. (C. C. A.) 162 F. 225, 233, 15 Ann. Cas. 498; Dworkin v. Caledonian Ins. Co., 285 Mo. 342, 226 S. W. 846. The authorization of both is binding as contractual. Here the policy provided for the appointment of appraisers and that the parties would accept and be bound by the award. When an award has been made, in apparent compliance with the terms of the submission, every reasonable presumption in its favor must be indulged, and judicial finding of its invalidity cannot be made without indubitable proof from qualified witnesses that the award "was made without authority, or was the result of fraud or mistake, or of the misfeasance or malfeasance of the appraisers." Barnard v. Ins. Co. (C. C. A.) 101 F. 36, 37; Phœnix Ins. Co. v. Everfresh Food Co. (C. C. A.) 294 F. 51. Arbitrators are said to act both as court and jury, determining the right of a controversy as well as the quantum of relief, while appraisers act ministerially in fixing values. But the rule as to the qualification of an arbitrator as a witness is not as rigid as counsel supposes it to be. An arbitrator or appraiser has no power to act outside the scope of the submission. In the present case the only power delegated to Amber and McCormack as appraisers was to state separately the sound value of the property and the damage thereto caused by the fire. They could do nothing else. They could decide upon nothing except the matters submitted to them. If they went beyond the submission, their award to that extent would be void, and if they wholly failed to pass upon the matters included within the submission their award, whatever it might be, would be wholly void. The true rule on the subject is stated, we think, by Blackburn, J., in Duke of Buccleuch v. Metropolitan Board, L. R., 5 Exch. 221, from which extensive excerpts and comments thereon may be found in Wigmore on Evidence (2d Ed.) § 2358. The learned judge said:

"Now, in cases where an award is good on its face, but the arbitrator has made a mistake either of law or fact, if that mistake has been as to a matter within the arbitrator's authority, then, in as much as there is no court of appeal from the arbitrator, the mistake cannot be remedied; nor can the court, even in the exercise of its...