Bowling v. The Cont'l Ins. Co.

Decision Date13 April 1920
Citation86 W.Va. 164
CourtWest Virginia Supreme Court
Parties.W. P. Bowling, Receiver, etc. v. The Continental Insurance Co.
1. Insurance Policy Filed With Declaration in Statutory Form Becomes Part of Pleading.

Where a declaration in an action to recover the amount of an insurance policy follows the form prescribed therefor by statute, the policy, if filed therewith, becomes part of the pleading for the purposes of the suit. (p. 166).

2. Same Appointment of Receiver Who Takes Possession is not a "Change of Title or Possession" Within Forfeiture Clause.

Where a fire insurance policy provides that if any change takes place "in the interest, title or possession of the subject of insurance (except change of occupants without increase of hazard), whether by legal process or judgment, or by the voluntary act of the insured, or otherwise," the policy shall be void, the judicial appointment of a receiver to administer the property, who takes actual possession of it, does not constitute a change of title or possession within the meaning of the forfeiture clause. In so far as the case of Bronson v. New York Fire Insurance Co., 64 W. Va. 494, asserts a contrary doctrine it is overruled. (p. 167).

3 Same Provision Avoiding Policy on "Change of Title or Possession" Refers to Change in Lawful Right of Possession. The change of possession contemplated by a provision of this character is a change in the lawful right of possession as dis languished, from mere occupancy, and refers to the insured's possessory right rather than to his physical occupancy of the premises. Changes of occupants without increase of hazard are expressly excepted by the policy, (p. 167).

4. Receivers Title to Property Remains in the Owner.

Where a receiver acting under judicial appointment and direction takes possession of property intrusted to his care and management, his custody is more that of a temporary occupant or caretaker representing the court, whose officer he is, than of one entitled as of right to the possession. The title and beneficial right remain in the owner. (p. 170).

5. Insurance Whether Receiver's Control Increased Hazard Within Policy Held Question of Fact.

"Whether the change of occupancy resulting from the receiver's assumption of control has increased the hazard is a question of fact to be determined in each case. (p. 170).

6. Same Forfeiture Clause Should be Construed Most Favorably to Insured.

If the language of a forfeiture clause in an insurance policy is susceptible of two constructions, the one more favorable to the insured is to be adopted. (p. 170).

7. Corporations Whether Reorganization Continues Original Cor-poration or Creates New Corporation Depends on Statute and Proceedings.

"Whether the reorganization of a corporation with the same ownership and management has the effect of creating a new and distinct corporate body, or merely continues the existence of the original company under a new name, but without change of identity, depends upon the terms of the statute under which the reorganization is effected, the provisions of the old and new charters, and the character of the proceedings attendant upon the reorganization. (p. 171).

8 Insurance Transfer of Assets to Reorganized Corporation is "Change of Title" Within Forfeiture Clause.

If a new and different corporate entity is created by the reorganization, the transfer of assets from the original to the new company, without the consent of the insurer, is a change of title within the meaning of the forfeiture clause of the policy. (p. 171).

Certified Questions from Circuit Court, Summers County. Action by W. P. Bowling, receiver, etc., against the Continen- tal Insurance Company. Demurrer to declaration overruled, and question certified.

Reversed and demurrer sustained.

Thos N. Read and R. F. Dunlap, for plaintiff. Morton & Mohler, for defendant.

Lynch, Judge:

The declaration held sufficient on demurrer and certified here substantially presents the following case for adjudication: The Hinton Hardware Company, a corporation engaged in a wholesale and retail hardware business in the City of Hinton, procured from defendant February 8, 1915, a three-year policy of insurance, against damage or destruction by fire on a two-story metal roof frame building in Hinton in which it conducted such business. Sometime in the month of August of that year the directors and stockholders decided to and by a resolution did effect a reorganization of the Hinton Hardware Company under the name of the New Biver Hardware Company, for which purpose they obtained in the regular way a new charter and reorganized and thereafter transacted the same character of business carried on by them or for their use and benefit under the, former corporate name. The Hinton Hardware Company, in consideration of the assumption of its indebtedness by the reorganized company, transferred to the latter its assets, including the insured building, the stockholders and their respective shares and interests in the old and new companies being identical in every particular. On April 21, 1917, about ten months before the, expiration date of the insurance policy, the circuit court of Summers County appointed W. P. Bowling receiver of the assets and business of the New Biver Hardware Company, and Bowling qualified and entered upon the discharge of the duties incident to such office, and took into his possession the stock of hardware wihin the building and necessarily the building itself, and as such sued to recover the amount of the policy, the building having been totally destroyed by fire three days before the expiration of the three-year insurance term.

The ground of challenge against the sufficiency of the declaration is the avoidance of the policy, which follows the usual standard form, by reason of the reorganization of the corpora- tion for whose security against loss or damage the policy was purchased and in whose, name it was procured and written, and the change wrought in the possession of the property insured as effected by the judicial appointment of plaintiff as such receiver, both, according to the claims of defendant, having been effected contrary to the express terms of the policy and without the consent of the insurer in writing first obtained. As the declaration follows the form prescribed by statute for cases of this sort (section 61, ch. 125, Code 1918), the contract of insurance, when filed therewith, becomes part of the pleading for the purposes of the, suit. Staats v. Georgia Home Ins. Co., 57 W. Va. 571, 4 Ann. Cas. 541; Hubbard v. Equitable Life Assurance Soc, 81 W. Va 663, 667, 4 A. L. R. 886.

The provision of the policy relied on as the main ground of demurrer reads thus: "This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void * * * if any change, other than by the death of an insured, take place in the interest, title or possession of the, subject of insurance (except change of occupants without increase of hazard), whether by legal process or judgment, or by the voluntary act of the insured, or otherwise; or if this policy be assigned before a loss." Subject to these and other like and similar conditions the contract was made by defendant and accepted by Hinton Hardware Company according to the terms of the policy, and each of the parties thereto is bound and controlled by the terms, conditions and stipulations. The declaration apparently warrants the assumption that plaintiff took immediate, complete and exclusive possession and supervision of the assets of New River Hardware Company, including the building insured. If the change in the possession of the property thus wrought by him in the exercise of the powers so conferred contravened the express provision of the insurance contract, it is decisive of the issue.

One of the vital questions upon demurrer, therefore, is, Did plaintiff's possession and occupancy of the building effect the change forbidden by the policy and thereby excuse defendant from the liability conditionally imposed by the contract of insurance? Unle, ss disapproved, the decision in Brorison v. New York Fire Ins. Co., 64 W. Va. 494, 19 L. R, A. (N. S.) 643, 16 Ann. Cas. 868, is decisive of the question because of the similarity of the facts and circumstances of the two cases. The syllabus furnishes a reasonably comprehensive statement of the extent and purport of the decision. It reads: "A fire insurance policy on personal property provides that if any change takes place in the interest, title or possession of the property, 'whether by legal process of (or) judgment, or otherwise, ' the policy shall be wholly void. The appointment of a receiver in a suit to take possession and control of the property, who takes actual possession of it, prevents recovery of loss under it." That the character of the property insured was personalty in the one case and realty in the other is not material as each policy contains the same provision respecting possession.

A re-examination of the facts and circumstances of that case and the authorities cited in support of the argument on which the decision rests raises a serious doubt as to the correctness of the principles asserted by it. It seems to be against the weight of authority and finds but little support anywhere. Two cases directly in point because of the analogy of the facts involved are Southern Pants Co. v. Rochester German Ins. Co., 159 N. C. 78, and Lancashire Ins. Co. v. Boardman, 58 Kans. 339. These cases differ vitally from the Bronson case in principle and holding. They assert the proposition, which we believe to be sound, that a receiver acting under appointment of a court, who takes and holds possession of property intrusted to his care and management, does not thereby effect such a change of possession as falls within the meaning of the forfeiture clause of fire insurance policies, but that the possession is that of the, court...

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