Camden Fire Ins. Ass'n v. Sutherland

• Decision Date: 09 June 1926
• Docket Number: (No. 663-4543.)
• Citation: 284 S.W. 927
• Parties: CAMDEN FIRE INS. ASS'N v. SUTHERLAND.
• Court: Texas Supreme Court

284 S.W. 927

CAMDEN FIRE INS. ASS'N v. SUTHERLAND.

(No. 663-4543.)

Commission of Appeals of Texas, Section B.

June 9, 1926.

Error to Court of Civil Appeals of Eighth Supreme Judicial District.

Action by W. A. Sutherland against the Camden Fire Insurance Association. Judgment for plaintiff was affirmed by the Court of Civil Appeals (278 S. W. 907), and defendant brings error. Reformed, and, as reformed, affirmed.

Senter, Strong & Tester, of Dallas, for plaintiff in error.

Lea, McGrady, Thomason & Edwards, of El Paso, for defendant in error.

POWELL, P. J.

On July 2, 1924, the Murray Company of Dallas, manufacturers of cotton gins and appurtenant machinery, sold to defendant in error certain machinery of that kind, retaining a mortgage lien on the same for a large portion of the purchase money. On the date above mentioned, the sellers wrote Sutherland as follows:

"The Murray Company,

"Manufacturers of Cotton Ginning, Cotton Seed Oil Mill Machinery and Mill Supplies.

"Contracts #13850-1.

                              "Dallas, Texas, July 2, 1924
                

"Mr. W. A. Sutherland, Las Cruces, New Mex. — Dear Sir: Shipments of machinery for Canutillo, Texas, and Vinton, Texas, as shown by the inclosed invoices and as represented by the above numbered contracts left Dallas on Jun. 30th. * * *

"Please refer to the attached letter of this date addressed to you and which is self-explanatory as to the insurance referred to therein. We have instructed Cornwall & Stevens to issue three binders each in the amounts of $7,750.00 to cover our mortgage interest in each of your three plants above referred to and to become effective when machinery ceases to be covered by bill of lading. If you desire to secure insurance direct and will furnish us with policies with loss clause in our favor, we will on receipt of acceptable policies cancel the insurance with Cornwall & Stevens as of the date your insurance becomes effective. In either event, it is necessary that we advise the insurance company as to the dates on which shipments ceased to be covered by bills of lading. Please, therefore, use the inclosed cards in giving us the information thereon desired.

"Again thanking you for these contracts and trusting shipments reach destination in due time, we are,

                  "Yours very truly
                                 "Collection Department."
                

Sutherland admitted receipt of this letter in due course of mail, but made no reply thereto.

On July 9, 1924, defendant in error executed a chattel mortgage, dated July 2, 1924, on this machinery and in favor of the Murray Company. The mortgage was filed for registration by the mortgagee on July 17, 1924. One of the clauses in that mortgage reads as follows:

"Until the indebtedness herein secured is paid for the said mortgagor agrees to keep the above-described property insured against loss or damage by fire to the full amount obtainable or for the amount of the indebtedness of the Murray Company in some insurance company or companies satisfactory to the trustee named or his successor, and will continue said insurance until the indebtedness herein secured is fully paid, with loss, if any, payable to the Murray Company, or to Bruce Thomas, trustee, as it or his interest may appear and deliver said policy or policies to said trustee, and in case the said mortgagor fails so to do, the said Bruce Thomas, trustee, or the Murray Company, may take out such insurance at expense of said mortgagor."

With the Lloyd's policy in the sum of $7,750 still in force, the defendant in error, on October 8, 1924, secured a policy from plaintiff in error in the sum of $10,500. Of this amount, the sum of $500 was upon cotton in the process of being ginned. That amount was paid and is no longer in suit. Of the remaining $10,000 covered by the policy in suit, the sum of $2,000 was on the one-story ironclad building, with metal roof, occupied by the cotton gin purchased as aforesaid. It is admitted that the building had an actual cash value of $4,000. The remaining $8,000 in this policy was upon the gin, appurtenant machinery, etc. It is the same property covered by the Lloyd's policy aforesaid. In other words, Sutherland had a total insurance of $15,750 against property which he claimed to have an actual total cash value of $14,000. It will be observed that, if he be permitted to recover the full amount of both policies, the fire would have been profitable to him in a substantial amount.

The policy in suit contained the following condition:

"It is agreed that any loss or damage ascertained and proven to be due the assured under the policy shall be held payable to the Murray Company as interest may appear; subject, however, to all the terms and conditions of the policy."

On December 4, 1924, the property was totally destroyed by fire. At that time both policies were in force.

It was agreed by and between the parties hereto that:

"After the destruction of the above-described gin plant by fire, Lloyd's, New York, paid to the Murray Company on the policy which was issued to it as mortgagee covering only its mortgagee interest the sum of $7,364.49, and said Murray Company released its mortgage on said property and now makes no claim under the policy sued on."

On the other hand, plaintiff in error, as per the agreement of the parties, took the following action:

"After loss plaintiff made demand on defendant during the month of December, 1924, for payment of the amount provided in said policy, to wit, $10,500, which defendant refused to pay, and on January 23, 1925, defendant denied all liability on the policy on which this suit is brought, and tendered to plaintiff its check for $220 as an offer to return the premium originally paid by plaintiff, which check plaintiff refused to accept and returned same to defendant."

In an effort to collect on the latter policy, Sutherland instituted suit in the District Court at El Paso, where judgment was rendered in his favor for $10,000, the face value of the policy, with legal interest thereon. That judgment was affirmed by the Court of Civil Appeals. See 278 S. W. 907. Sutherland gave notice of appeal from the judgment of the district court, but did not perfect it. Nor did he file any application for writ of error here. He has accepted the judgments of the lower courts.

The policy in suit contained the following provisions:

(1) "$10,500 total concurrent insurance permitted, including this policy."

(2) "This entire policy, unless otherwise provided by agreement indorsed hereon, or added hereto, shall be void if the insured now has or shall hereafter make or procure any other contract of insurance, whether valid or not, on property covered in whole or in part by this policy."

As we have already shown, Sutherland had insurance largely in excess of the concurrent insurance allowed by the policy in suit, and, under the provision last quoted, the policy in suit would be absolutely void but for the fact that the plaintiff in error had knowledge of the Lloyd's policy in such a way as to be now estopped from setting up this provision of the contract. The Court of Civil Appeals correctly decides this question, after outlining the facts, in the following language:

"The first contention that the policy is void because of false representations is answered by the proposition that appellee notified appellant's agents, who had full authority to issue the policy, as to the condition of the Lloyd's insurance, so that this agency knew as much as appellee did, and not only this, but this agency promised to ascertain the full condition of the Lloyd's policy. Therefore, under our decisions, such a contention is clearly without merit. Wagner v. Ins. Co., 92 Tex. 549, 50 S. W. 569; Morrison v. Ins. Co., 69 Tex. 353, 6 S. W. 605, 5 Am. St. Rep. 63; Ins. Co. v. Ende, 65 Tex. 123.

"Upon this phase of the case appellant strongly relies upon Insurance Co. v. Richbourg, * * * 257 S. W. 1089, by the Commission of Appeals, but that case is not in point for the reason, among others, that the local agent did not have the general authority possessed by the agents who in the present case acted for appellant with respect to the contract sued upon.

"Under the two cases first above cited, and the agreed facts as to the authority of appellant's local agents, such agents stand in the place of the appellant itself and whatever knowledge they possessed with respect to the additional insurance was the knowledge of the appellee.

"These agents were advised by Sutherland that the Murray Company had taken out some character of insurance upon the machinery but he did not know its exact nature or whether it was still in force, and at the agent's own suggestion the application was signed in blank; the agents undertaking to ascertain the true facts and fill in the application in accordance therewith. They made no pretense of complying with their agreement to ascertain the true facts, but returned to their office and made the answers to the questions upon which the appellant now seeks to avoid the policy. In our opinion the cases cited clearly establish that under these circumstances the appellant cannot repudiate its liability under the policy by reason of the incorrectness of the representation and warranty against other insurance."

Our Supreme Court decisions cited by the Court of Civil Appeals are in point and clearly decisive of this issue. The local agents of plaintiff in error in El Paso had authority to issue and deliver the policy itself and bind the company accordingly. Therefore, under our decisions aforesaid, notice to agents with such authority is notice to the company itself. This was not the situation in the Richbourg Case mentioned by the Court of Civil Appeals and also urged by plaintiff in error.

Consequently, it must be held that the policy in suit was in force and effect. But we now come to a proper enforcement of the policy as written. There is one provision of the contract which we think should be considered in this...