Cherokee Foundries, Inc. v. Imperial Assur. Co.

• Decision Date: 11 March 1949
• Citation: 219 S.W.2d 203,188 Tenn. 349
• Parties: CHEROKEE FOUNDRIES, Inc. v. IMPERIAL ASSUR. CO.
• Court: Tennessee Supreme Court

219 S.W.2d 203

188 Tenn. 349

CHEROKEE FOUNDRIES, Inc. v. IMPERIAL ASSUR. CO.

Supreme Court of Tennessee.

March 11, 1949

Error to Circuit Court, Hamilton County; Fred B. Ballard, Judge.

Action by Fry and Stewart, trading as Cherokee Foundries, Inc. against Imperial Assurance Company, on an alleged contract insuring against fire damage to an iron foundry. To review a decision of the Court of Appeals affirming the judgment of the circuit court directing a verdict for defendant at close of plaintiffs' evidence, plaintiffs bring certiorari.

Certiorari denied.

Goins & Gammon and P. H. Thach, both of Chattanooga, for plaintiff in error.

Sizer & Cameron, of Chattanooga, for defendant in error.

TOMLINSON Justice.

Fry and Stewart, trading as Cherokee Foundries, Inc., sued Imperial Assurance Company for $12,000.00 on an alleged insurance contract for damages done to an iron foundry by a fire of unknown origin on the night of April 30--May 1, 1946. The Court of Appeals affirmed the judgment of the Circuit Court directing a verdict for defendant at the close of plaintiffs' evidence. By its petition for certiorari Cherokee Foundries insists that this was error.

Cherokee Foundries entered into an oral contract of purchase of this foundry from its owners, Jones Machinery & Foundry Company for a cash consideration of $25,000.00. For the purpose of paying the cash purchase price, Cherokee Foundries arranged through the American Trust and Banking Company of Chattanooga for an R.F.C. loan of $20,000.00. The foundry consisted of a lot with appropriate building and equipment for the operation of the foundry therein. The loan in question was to be evidenced by a note, payment of which was to be secured by a deed of trust creating a first lien on this property, real and personal.

The deed of conveyance from Jones Machinery & Foundry Company to Cherokee Foundries, the deed of trust and the note to be executed by the latter and opinion on title, were all prepared during the day of April 30, 1946 and placed in the keeping of American Trust and Banking Company. The parties were to meet at this bank on the morning of May 1 for the purpose of executing and delivery of these various instruments and payment of the purchase price, thereby completing the transaction.

During the afternoon of April 30, Cherokee Foundries, acting through Stewart, called at the office of L. W. Rhodes, who was the agent in Chattanooga for Imperial Assurance Company, for the purpose of procuring fire insurance of $12,000.00 upon the building and equipment of this foundry. Rhodes issued on that date an invoice wherein it was recited that fire insurance policy in the amount of $12,000.00 of Imperial Assurance Company covered 'building and contents of foundry, the policy to expire '4-30-47'. This invoice was placed in the mail and received by Cherokee Foundries in due course on May 1, 1946. The policy was never issued and premium therefor was never paid, though tendered and refused some days later. The policy which would have been issued did not contain a clause providing for sole and unconditional ownership of the property by the insured.

At the close of the work day at the foundry on April 30, key to the place was turned over to Cherokee Foundries. The employees were assembled and told by Cherokee Foundries that their employment would continue except that commencing the next morning (May 1) their employer would be Cherokee Foundries.

Some time during that night the foundry building and its contents were almost completely destroyed by the aforesaid fire. The deed, note and deed of trust heretofore mentioned were never executed. Jones Machinery and Foundry Company collected fire insurance in an unknown amount on a policy or policies which it carried. About three weeks later it conveyed the real estate upon which the foundry had been located and the damaged equipment to Cherokee Foundries for a consideration of $5,500.00.

When the Circuit Judge directed a verdict in favor of the Insurance Company at the close of the plaintiffs' evidence he said this:

'These parties didn't buy this property until after the fire, and that they had no insurable interest in the property at the time the fire occurred'.

The Court of Appeals, in affirming the judgment of the Circuit Court, said:

'It is apparent that none of the parties to the original agreement considered it as binding because no effort was made by any of the parties thereto to enforce it. We have therefore concluded from the proof that plaintiff did not have an insurable interest in the foundry when the fire occurred.'

The question made is whether Cherokee Foundries had an insurable interest in the property damaged or destroyed by the fire. It is elementary that it cannot recover if it did not have such interest. Our search has failed to find any case of our own deciding this question on the facts which we have here.

Baird v. Fidelity-Phenix Fire Ins. Co., 178 Tenn. 653, 663, 667, 162 S.W.2d 384, 390, 140 A.L.R. 1226, by quotation from Aetna Ins. Co. v. Miers, 37 Tenn. 139, 141, said:

"What is an insurable interest in property, is not very clearly and distinctly settled in the books. It is said that it may be proved, without the evidence of any legal or equitable title to the property insured. * * * any interest in the subject matter, or property insured, is sufficient to sustain an insurance of real estate."

Undoubtedly, the majority rule, and possibly the unanimous rule, by which it is to be determined whether the insured had an insurable interest in the destroyed property is that stated by the decision in 1896 of the U.S. Supreme Court in Harrison v. Fortlage, 161 U.S. 57, 16 S.Ct. 488, 490, 40 L.Ed. 616, 619, as follows:

'It is well settled that any person...