Aachen & Munich Fire Ins. Co. v. Morton

• Decision Date: 15 November 1907
• Docket Number: 1,683.
• Citation: 156 F. 654
• Parties: AACHEN & MUNICH FIRE INS. CO. v. MORTON.
• Court: U.S. Court of Appeals — Sixth Circuit

156 F. 654

AACHEN & MUNICH FIRE INS. CO. v. MORTON.

No. 1,683.

United States Court of Appeals, Sixth Circuit.

November 15, 1907

The Aachen & Munich Fire Insurance Company, a foreign corporation doing business in Michigan, insured against loss by fire a certain hotel building and furniture therein situated in that state, and owned by a Michigan corporation known as the 'St. Joseph Hotel Company.' This contract of insurance bore date of July 17, 1897, and covered the risk for one year, unless sooner terminated by cancellation, as provided by the policy. Attached to the policy was a slip providing 'loss, if any, payable to Andrew Crawford and John H. Graham, as their interest may appear. ' These persons were at the time mortgagees and stockholders. February 28, 1898, notice was given to the hotel company and to said Crawford and Graham of an intention to cancel the policy. On March 3, 1898, the unearned part of the premium was accordingly returned to the hotel company, but the policy was not actually delivered up, because it had been lost or misplaced. In consequence of this fact an agreement in the following words and figures was made and delivered to the insurer:

'Policy No. 61,251.

Return Premium, $17.75.

'Agency at Benton Harbor, State of Michigan.

'In consideration of seventeen and 75-100 dollars to us paid, the receipt whereof is hereby acknowledged, we hereby surrender release and relinquish all our rights, title and interest in policy No. 61,251 of the Aachen and Munich Insurance Company of Aix-la-Chappelle, issued at its Benton Harbor Agency, and all advantages to be derived therefrom and the said policy having been lost or mislaid, we agree to make no claim whatever for any loss or damage on which the said company would be liable under said policy, and to return said policy (if the same should be found) to the said company forthwith and without further compensation and we certify that said policy has not been assigned or transferred in any manner whatsoever.

'Dated March 3, 1898.

Hotel St. Joseph Company,

'Per S. J. Morton, Assured.

'J. H. Graham,

'A. Crawford,

'Mortgagees.'

On or about July 10, 1898, the hotel was destroyed by fire. On January 13, 1898, the policy, which in the meantime had been found, was assigned by the hotel company and by Crawford and Graham to one H. G. Stone, a citizen of Illinois. On January 15, 1898, Stone, the assignee, brought suit in a circuit court of the state of Illinois against the insurer in the name of Crawford and Graham for the use of said Stone. The insurance company appeared and set up the cancellation of the policy as a defense, and upon a trial there was a judgment for the defendant. The cause was thereupon taken by appeal prayed and allowed the said Graham, Crawford having died, to the Appellate Court of the First District of the state of Illinois, which court reversed the judgment of the circuit court and entered judgment against the insurance company for the full amount, with interest and costs. This judgment was affirmed by the Supreme Court of the state of Illinois on October 25, 1902. The judgment was thereupon paid, together with costs and the expenses of the litigation. On January 17, 1906, this suit was started against the said Graham, assignee of the said policy and plaintiff in the said Illinois suit, to recover from him the amount of the said Illinois judgment, together with costs, interests, and expenses of the said litigation. The opinions of both the Illinois courts, by agreement, are made a part of each count in the declaration. Graham meantime died, and the suit was revived against his administrator. A demurrer to the plaintiff's amended declaration was sustained and judgment rendered for the defendant. From this judgment, the insurance company has sued out this writ of error.

Arthur Webster and Willard Kingsley, for plaintiff in error.

G. M. Valentine, for defendant in error.

Before LURTON, SEVERENS, and RICHARDS, Circuit Judges.

LURTON Circuit Judge (after stating the facts as above).

Two questions have been argued as defenses arising under the demurrer to the plaintiff's declaration: First, the effect of the judgment of the Illinois court as res adjudicata; and, second, the Michigan statute limiting personal actions to six years. These in their order.

The policy of insurance upon which Graham's suit for the use of Stone was brought contained the usual provision that 'this policy shall be canceled at any time at the request of the insured, or by the company, by giving five days' notice of such cancellation,' etc. The defense made to the Illinois suit was that the policy had been effectually canceled before any loss had occurred. The Illinois Appellate Court found as a fact that both Graham and Crawford had an insurable interest in the property insured as the property of the St. Joseph Hotel Company, both as mortgagees and as stockholders, and that their interest in the policy as stockholders had not been canceled or surrendered, but had been effectually transferred after loss to Stone, the beneficial plaintiff in that suit. Upon this finding that court gave judgment against the insurance company for the full amount of the policy with interest and costs. Upon a writ of error to the Supreme Court this judgment was affirmed. This affirmance, from the opinion of that court, appears to have been based upon the fact that findings of the Appellate Court had been made a part of the judgment of that court, thereby leaving open for review no question except whether upon the facts so made a part of the judgment the law had been correctly applied. Upon the record, as made up, that court also held that no propositions of law had been saved under the practice of the court which would enable it to question the propositions of law held by the Appellate Court in behalf of the plaintiffs in the lower court. Thus finding its hands tied, the Supreme Court affirmed the judgment of the Appellate Court against the present plaintiff in error, the Aachen & Munich Fire Insurance Company. Aachen & Munich Fire Ins. Co. v. Crawford, 199 Ill. 367, 65 N.E. 134. Unless the plaintiff in error can escape the effect of this Illinois judgment as an adjudication, it is clear that the insurance company cannot recompense itself by a recovery against Graham's administrator in an action which is necessarily grounded upon the proposition that the recovery in the Illinois court against it was wrongful and erroneous. In short, it was adjudged in that action, it being one in which Graham was an actor on one side and the insurance company upon the other, that Graham's interest in the hotel as a stockholder was insured, and that the cancellation agreement did not effectually cancel the policy as to that interest. The present action is in direct contravention of that adjudication.

But the learned attorneys who now represent the insurance company say that the judgment in that case is not conclusive here under the averments of the amended declaration, which, they say, sets forth a state of facts in respect to the cancellation agreement which make an issue which was not presented by the pleadings in the Illinois case, and thus not then adjudged. These new facts are, in substance, that the parties intended that the stockholder's interest of Graham and Crawford should be canceled and surrendered, and that if the cancellation agreement, called the 'Lost policy receipt,' did not plainly express this intent, it is because it is defective in form and fullness. It is now averred that Graham actively undertook to fully cancel and effectually surrender any benefit under said policy in every character, and that he affirmed and represented that the receipt given for the lost policy 'was in manner and form a good, valid, and efficient surrender, discharge, and cancellation of said policy and loss slip attached thereto. ' It is further alleged that that contract or receipt was delivered by him to the company 'with the intent to cancel and release all the interests which he had or claimed to have' in the policy or lost slip.

Assuming as we must, for the purposes of this case, that the 'lost policy receipt' did not operate in terms as a cancellation and surrender of the policy in so far as that policy protected Mr. Graham's interest as a stockholder, a very grave question is presented as to whether it can be varied or contradicted by parol evidence of the intent and purpose of the parties or their antecedent declarations; its execution and delivery not being denied. Assurance Company v. Building Association, 183 U.S. 308, 349, 361, 22 Sup.Ct. 133, 46 L.Ed. 213, has greatly narrowed the limits within which such evidence is available when the written instrument is unambiguous and actual fraud in the execution or delivery is not relied upon. But, passing the question without...