Bawden v. American Ins. Co.

• Citation: 153 Va. 416
• Parties: J. H. BAWDEN v. AMERICAN CENTRAL INSURANCE COMPANY, A CORPORATION.
• Decision Date: 14 November 1929
• Court: Virginia Supreme Court

Page 416

153 Va. 416

J. H. BAWDEN v. AMERICAN CENTRAL INSURANCE COMPANY, A CORPORATION.

Supreme Court of Virginia, Richmond.

November 14, 1929.

1. FIRE INSURANCE — Construction of Policy — Foreclosure Proceedings and Notice of Sale of Property Insured — Sufficiency of Knowledge — Case at Bar. — The instant case was a motion to recover upon a fire insurance policy. The defense was that the policy had been avoided by the knowledge of assured that notice had been given of sale of the property under a deed of trust. Plaintiff contended that, as policies of insurance are construed most strongly against the insurer and in favor of the assured, the knowledge of the assured that notice of the sale has been given must be actual knowledge — information so very minute and circumstantial that the assured receiving it thereby acquires complete and real knowledge. But such a meticulous construction of the provision would merely cancel the provision as the assured is seldom in possession of such complete information.

2. FIRE INSURANCE — Foreclosure Proceedings and Notice of Sale of Property Insured — Knowledge of the Assured — Case at Bar. — The instant case was a motion to recover upon a fire insurance policy. The policy contained a provision that it should be void "if, with the knowledge of the insured, foreclosure proceedings be commenced or notice given of sale of any property insured thereunder by reason of any mortgage or trust deed." In the instant case it appeared that there were two deeds of trust upon the property and that the assured was in default on both as to principal and interest. One of these deeds of trust was controlled by a lawyer and his partner was trustee in the other deed. His wife notified assured that the property was advertised for sale and from a letter to the lawyer in question it was manifest that assured knew that it was advertised for sale under one or the other of these deeds of trust. The only fact which he did not know was which trustee had advertised it.

Held: That the policy did not require that assured should have knowledge of the advertisement under any particular deed of trust where there was more than one. It was only necessary that he should know that the insured property has been advertised under any deed of trust.

3. INSURANCE — Construction of Policy in Favor of Assured — Qualifications of the Rule. — The Supreme Court of Appeals of Virginia has gone as far as any court in enforcing insurance policies in favor of the assured, and resolving all fair doubts in favor of the assured in such cases, but this proper rule cannot be so extended as to disregard valid provisions of the contract.

4. FIRE INSURANCE — Provision that Policy shall be Void in Case of Foreclosure Proceedings or Notice of Sale of Property Insured — Validity of the Provision. — A provision in a fire insurance policy, that the policy shall be void if with the knowledge of the assured foreclosure proceedings be commenced or notice given of sale of the property insured by reason of any mortgage or deed of trust, is valid, wise in purpose, clear in meaning, in the interest of the public, and expresses and constitutes the contract.

5. FIRE INSURANCE — Foreclosure Proceedings and Notice of Sale of Property Insured — Knowledge of the Assured — Case at Bar. — The instant case was a motion to recover upon a policy of fire insurance. The policy contained a clause to the effect that it should be void if the property insured was advertised for sale under a deed of trust or mortgage. It appeared that there were two deeds of trust upon the property; that assured was notified by his wife that the property had been advertised for sale, and that he must have known it was advertised under one or the other of these deeds of trust.

Held: That the trial court rightly determined under this evidence that assured had knowledge that his property had been advertised for sale under a deed of trust and this knowledge, by the express terms of the policy, avoided it.

Error to a judgment of the Circuit Court of Augusta county, in a proceeding by motion to recover upon a policy of fire insurance. Judgment for defendant. Plaintiff assigns error.

The opinion states the case.

J. M. Perry and Timberlake & Nelson, for the plaintiff in error.

Sands, Williams & Lightfoot and Chas. J. Churchman, for the defendant in error.

PRENTIS, C.J., delivered the opinion of the court.

This is a motion to recover upon a policy of fire insurance, in which there was a verdict for the plaintiff, Bawden, which the trial court set aside and entered judgment for the defendant company.

The controlling facts are: The defendant issued its policy to Bawden in the sum of $2,000.00. The gross amount of such insurance pleaced upon the property at the same time was $17,500.00. The property covered was the buildings known as the Mt. Elliott Springs, or old Variety Springs, hotel, in Augusta county, together with the furniture therein. The assured, with one Mrs. F. L. Mehnert, had purchased the entire real and personal property from J. Miller Porter in 1923, at the price of $10,000.00. Each contributed $500.00, and for the balance of the purchase money, $9,000.00, assumed an existing lien, spoken of as the "Crockett" or "Timberlake" trust, for the approximate sum of $2,000.00, and executed a new deed of trust to R. E. R. Nelson, trustee, to secure $7,000.00, the amount of deferred purchase money due to their vendor, J. Miller Porter. The vendees thereupon operated the property as a summer hotel, but in 1925 Mrs. Mehnert sold her interest to Bawden at the approximate price of $1,000.00.

After Bawden became the owner of the entire property, the hotel was operated as a summer hotel by his wife, the assured being an office manager employed in a department store in Roanoke, Va. During the summer of 1927, Bawden became acquainted with Mr. J. Francis Porter (who should be distinguished from J. Miller Porter, the former owner of the property) manager of the insurance department of the Roanoke Securities Corporation, which conducted both a loan and an insurance agency business, and endeavored to procure a loan of $12,500.00 upon the Mt. Elliott property, real and personal. According to this Mr. Porter, Bawden represented to him that with repairs, additions and improvements the property had actually cost between $18,000.00 and $20,000.00, and had been appraised at $24,000.00. The fire insurance policies thereon amounting to about $20,000.00 were then about to expire, and as an inducement to Porter to make the loan, Bawden offered to place the insurance thereon through the Roanoke Securities Corporation agency. Porter did not succeed in placing the loan, but having visited and examined the property was satisfied to issue this and other fire insurance policies thereon, aggregating $17,500.00. On December 13, about 8 o'clock in the morning, fire, the origin of which is unknown, destroyed the insured buildings and furniture. At this time the principal of the debts to which we have referred was past due, and instalments of interest thereon due November 1st was likewise in arrears. Bawden had been notified by Porter that he was unable to secure the desired loan, and Bawden having failed to pay the insurance premiums due upon the insurance policies so placed, was by the agent extended time for such payment until November 15th, and having failed to pay on that date had been advised that unless the premiums were paid on or before December 15th all the policies would be cancelled.

On Saturday, December 11th, Mrs. Bawden, having closed the Mt. Elliott hotel in September and returned to Staunton, was informed by a Mrs. Argenbright that the Mt. Elliott Springs property had been advertised for sale; whereupon she called her husband by telephone at Roanoke, and was told by him to see Mr. S. D. Timberlake, he as executor being the holder of the Crockett debt of $2,000.00, and also the copartner in the practice of law of Mr. Nelson, the trustee in the second or J. Miller Porter $7,000.00 deed of trust. On the following day, Bawden wrote this letter:

"Roanoke Va., December 12, 1926. "Mr. S. D. Timberlake, Jr., "Staunton, Va. "Dear Mr. Timberlake:

"In a `phone conversation with Mrs. Bawden yesterday she advised me that the Mt. Elliott Springs hotel property has been advertised for sale in the Staunton paper. This is considerable of a shock to me and also to her, as neither of us have had any word from any source that such action was contemplated, and as you understand the circumstances under which we have labored during the past year, I am writing to inquire if there is not some way in which this can be fixed up and a new contract written, as per our last conversation relative thereto, I shall appreciate your writing me the particulars and giving any helpful suggestions. As you know, I have tied up quite a bit of cash in the property and it means a decided loss to me to put this property up for sale at this time of the year.

"Thanking you kindly for your past favors and feeling assured that you will do what you can in the matter, I am

"Yours very truly,

"J. H. BAWDEN.

"P.S. — Will be in position to take care of balance of interest due you inside next two weeks.

"B."

The policy provided: "Notice accepted of lien, and loss, if any, shall be held payable to R. E. R. Nelson, trustee, as per mortgage clause attached," and recognizing the validity of this provision and their obligations, the $7,000.00 lien was satisfied by the insurance companies who had written the policies upon the property, but they declined to pay the additional amount claimed thereunder by the assured, Bawden.

The policy also had this provision: "Existing lien on building and furniture...