Aetna Ins. Co. v. Itule

• Citation: 25 Ariz. 446,218 P. 990
• Decision Date: 15 October 1923
• Docket Number: Civil 2078
• Parties: AETNA INSURANCE COMPANY, a Corporation, Appellant, v. FRANK ITULE and WAKEEN ABRAHAM, Doing Business Under the Style and Firm Name of ITULE & ABRAHAM, Copartners, and FEDWAY ABRAHAM, Appellees
• Court: Supreme Court of Arizona

218 P. 990

25 Ariz. 446

AETNA INSURANCE COMPANY, a Corporation, Appellant, v. FRANK ITULE and WAKEEN ABRAHAM, Doing Business Under the Style and Firm Name of ITULE & ABRAHAM, Copartners, and FEDWAY ABRAHAM, Appellees

Civil No. 2078

Supreme Court of Arizona

October 15, 1923

APPEAL from a judgment of the Superior Court of the County of Santa Cruz. W. A. O'Connor, Judge. Reversed.

Mr Duane Bird and Mr. W. W. Hindman, for Appellant.

Mr Leslie C. Hardy and Messrs. Winter, McBroom & Scott, for Appellees.

OPINION

LYMAN, J.

This is an action by Frank Itule and Wakeen Abraham and Fedway Abraham to recover on account of loss by fire, damaging the furniture and fixtures of a motion picture theater. This property at the time of the fire was covered by six policies of fire insurance, all written in the month of December 1918. One of these policies, written by Etna Insurance Company, the appellant herein, is made the basis of this action. Separate actions were instituted upon all the other policies. The six cases were consolidated and tried together, resulting in judgments for the plaintiffs in all instances for the full amounts of the insurance, aggregating the sum of $11,000, with 15 per cent penalty, and attorney fees in the aggregate of $3,000. From all these judgments, except one, appeals were taken to this court, and were all argued and submitted together.

It does not appear from any of the policies of insurance that the appellees were other than the absolute owners, without encumbrance, of the property insured. The fire occurred in February, 1919. All the insurers joined in the appointment of an agent to adjust the loss. A few days after the fire the agent visited the locality, met the appellees, and furnished them with printed forms upon which to make proof of loss. Such proofs were submitted in the month of March following. To these proofs the agent objected, upon the ground that they were not sufficiently explicit. His letter stating these objections disclaimed that he waived any defense of the insurers to the claims of appellees. In the month of April following further proofs of loss were made by the appellees. In the month of June the adjusting agent asked permission to examine appellees under oath in reference to all matters pertaining to their loss. This request explicitly reserved to the insurers all right of forfeitures which might exist under the policies of insurance. In compliance with this request appellees submitted to examination, and their testimony was finally completed and submitted in the following August.

From this examination it appears, what was not disclosed either in the policies of insurance or proofs of loss, that the insured property was much of it held by appellees under contracts of conditional sale, by the terms of which title to the property was vested, not in the appellees, but in the vendors, and that between the time of writing of the policies and the fire all of the insured property had been encumbered by at least one chattel mortgage to one Wardy. These loans amounted to about $10,000. The highest estimate of the value of property covered by the insurance was fixed at $15,000. The insurers declined to pay the loss, upon the ground that appellees had violated their contract of insurance by encumbering the insured property by a chattel mortgage to one Wardy, which remained uncancelled at the time of the loss, and by failure to disclose the existence of this chattel mortgage and the nature of their interest in the insured property in their proof of loss.

These contracts of insurance were written in accordance with the standard form prescribed by the statutes of this state. Paragraph 3440, Civ. Code Ariz. 1913. By this requirement of the statute the provisions of the contract become a part of the law of the state. Two of the provisions of that contract are:

"This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void . . . if the subject of insurance be personal property, and be or become encumbered by a chattel mortgage."

"This entire policy shall be void if the insured has concealed or misrepresented, in writing or otherwise, any material fact or circumstance concerning this insurance or the subject thereof, or if the interest of the insured in the property be not truly stated herein, or in case of any fraud or false swearing by the insured touching any matter relating to this insurance or the subject thereof, whether before or after a loss."

Appellees do not seriously question the fatal effect of this chattel mortgage, and the false statement with reference to it, and to the title of the insured property at the time of loss, contained in their proof of loss. Aside from the ipse dixit of the statute that such means shall work a forfeiture of the contract, it is perhaps worth noting that these provisions are not based upon the mere arbitrary whim of the lawgivers, but have their source in sound reason, and are based upon the necessities of the insurance business.

"The purpose of these provisions is to prevent a party who holds an undivided, or contingent, but insurable, interest in property from appropriating to his own use the proceeds of a policy taken upon the valuation of the entire and unconditional title, as if he were the sole owner, and to remove from him the temptation to perpetrate fraud and crime." Groce v. Phoenix Ins. Co., 94 Miss. 201, 48 So. 298.

This objection is met by the...