CITIZENS'INS. CO. v. Bailey

• Decision Date: 16 August 1928
• Docket Number: No. 7863.,7863.
• Citation: 28 F.2d 272
• Parties: CITIZENS' INS. CO. OF MISSOURI v. BAILEY.
• Court: U.S. Court of Appeals — Eighth Circuit

28 F.2d 272 (1928)

CITIZENS' INS. CO. OF MISSOURI v. BAILEY.

No. 7863.

Circuit Court of Appeals, Eighth Circuit.

August 16, 1928.

C. J. Roberts, of Santa Fé, N. M. (Myers & Snerly, of Chicago, Ill., on the brief), for plaintiff in error.

W. C. Whatley, of Las Cruces, N. M. (E. L. Medler, of El Paso, Tex., on the brief), for defendant in error.

Before STONE and VAN VALKENBURGH, Circuit Judges, and PHILLIPS, District Judge.

PHILLIPS, District Judge.

Pearl H. Bailey brought this action against the Citizens' Insurance Company of Missouri to recover the sum of $15,000 for an alleged loss under a policy of hail insurance. The insurance policy insured a crop of cotton growing on a tract of 500 acres known as the Buffalo Valley Farms, located in Chaves county, New Mexico, against loss or damage from hail. The application was executed May 24, 1926. The policy was countersigned May 27, 1926. The policy contained, among other things, the following provisions:

"1. This policy of insurance is based upon the statements, representations and descriptions contained in the insured's application of even number herewith which is hereby made a part hereof."

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

The application contained, among others, the following statements:

"I hereby declare that the statement of the number of acres of each crop herein described is true; that I am the owner of the land herein described, with growing crops thereon; and my interest is as stated under the heading `Percentage Interest Must be Stated.'"

"Crop insured is a 100 per cent. interest."

The policy also contained, among other things, the following provisions:

"It being understood and agreed that the liability of this company shall in no event be held to exceed the actual proportionate interest of the insured in the crops described and insured hereunder."

"That this company shall not be bound by any act or statement made to or by its agents or representatives restricting its rights or waiving its written or printed contract unless inserted in this application."

"This policy is made and accepted subject to all of the stipulations and conditions printed herein and on the duplicate Application attached hereto and made a part hereof, which are hereby specially referred to and made a part of this policy, together with such other provisions, agreements, or conditions as may be endorsed hereon or added hereto; and no officer, agent, or other representative of this company shall have power to waive any provision or condition of this policy, except such as by the terms of this policy may be subject of agreement endorsed hereon or added hereto; and as to such provisions or conditions no officer, agent or representative shall have such power or be deemed or held to have waived such provisions or conditions unless such waiver, if any, shall be written upon or attached hereto."

The answer of the insurance company alleged that the plaintiff in his written application stated that he owned a 100 per cent. interest in the crop of cotton growing upon the land described in the application, and that he was the owner of such land with the growing crops thereon. It further alleged that at the time of the signing of such application and the issuance of the policy in question, P. G. Telles, Martin Espinoso, Jose Antobarias, Guadalupe Gardea, and Eliseo Arias, had valid and subsisting cropping contracts with the plaintiff, by which each of them became and were at such time an owner of an interest in the crop of cotton growing on such land, and at the time of the signing of the application and the issuance of the policy E. D. Anthony was the owner of an undivided one-half interest in the land on which the crop was growing, and was the owner of an undivided one-half interest in the crop of cotton, and that the interest of Anthony in such land and crop was in all things equal to the interest of plaintiff.

To the special defenses set up in the answer, the plaintiff alleged, among other things, the following in his reply:

"Plaintiff denies that the statement attributed to him in paragraph 9 of defendant's answer as to the ownership by him of a 100 per cent. interest in the 500 acres of cotton insured was untrue, * * * but avers that such is and was the fact, that is, that he is and was the sole owner of a one hundred per cent. interest in said crop of cotton at the time of his application for such insurance."

"* * * That plaintiff further states that he made application for the insurance herein sued for to one Merrill C. Martin who at such time was the duly appointed, qualified and acting agent of the said defendant company in Roswell, New Mexico, with jurisdiction extending over the vicinity of and including the Buffalo Valley Farm upon which the cotton insured was growing, and that at and prior to the making and signing of such application he apprised the said agent of each and every fact in connection with said crop of cotton and the ownership thereof and explained to him in detail the exact relation existing between said plaintiff and said E. D. Anthony and said plaintiff and said P. G. Telles, Martin Espinoso, Jose Antobarias, Guadalupe Gardea, and Eliseo Arias, and of their connection with said farm and the cotton growing thereon and in said application sought to be insured; (that said Anthony and said others were mere croppers and had no interest except in the proceeds after the same were harvested and all indebtedness accruing thereon paid;)" "and plaintiff therefore avers that at and before the time of the issuance of said policy of insurance in suit said defendant company had full notice and knowledge of all and every fact connected with the said cotton crop and the ownership thereof, including present vested interests, contingent interests and expectant interests; and said application was in fact prepared by the special agent, Martin."

The portion of the reply above quoted inclosed in parenthesis was added as a trial amendment.

A stipulation in writing waiving a jury was filed, and the cause came on for trial before the court.

The evidence disclosed that at the time the application was made plaintiff had entered into oral agreements with the five persons, Telles, Espinoso, Antobarias, Gardea, and Arias, to work the land on a share or crop basis. Plaintiff was to furnish them with provisions and clothing, was to sell the crops at maturity, and pay to the croppers one-half of the proceeds of such sale, less the amount of advances made by plaintiff to the croppers for their expenses.

The record further discloses that on February 17, 1926, plaintiff entered into a contract with E. D. Anthony by which plaintiff agreed to sell and Anthony agreed to purchase an undivided one-half interest in the Buffalo Valley Farms, and all personal property, equipment, and machinery, for a consideration of $30,000. The contract, after providing the terms, time, and manner of payments to be made by Anthony, and reciting the indorsement and delivery, as collateral for certain payments, of two promissory notes made by R. C. Sparks and payable to Anthony for the sum of $5,000 each, contained the following provisions:

"6. As to any and all sums and expenditures necessary and to become necessary in operating said farm from and after this date and all sums for the proper conduct thereof from and after this date the purchaser becomes responsible and liable for one-half thereof and agrees also to devote his time and attention to the management and conduct of said business and farming operations, and out of the net proceeds derived from the crops raised upon said farm said purchaser, the party of the second part herein, shall be entitled to receive for his services in managing and looking after said farm compensation at the rate of $100 per month; and that as to all other sums derived from the crops, the same, after payment of the indebtedness, as may be mutually agreed upon from time to time, are to be divided share and share alike."

"7. Party of the first part, the seller, agrees that he will hold for the use and benefit of the purchaser an undivided one-half interest in the said Buffalo Valley Farm property, described as aforesaid, together with the equipment, pumping plant and appurtenances thereto, and will when the purchase money note maturing January 6, 1927, is paid, make, execute, and deliver to him, his heirs, executors, administrators and assigns, good and sufficient warranty deed, conveying good and merchantable title in and to such undivided one-half interest in said property to said party of the second part. * * *"

"9. It is further understood between said seller and purchaser that they are to be tenants in common and co-owners in the operation of said property and partners only to the extent that they may become liable for any debts incurred on account of the operation of said farm."

To avoid the defenses set up in the answer, plaintiff relied upon two propositions: First, that plaintiff, at the time of the making of the application, was the owner of a 100 per cent. interest in the growing crop of cotton and in the farm; and, second, if he was not the owner of 100 per cent. interest, he made full and true disclosure of all material facts to Martin, the agent of the insurance company, that Martin prepared the written application, and upon the facts disclosed wrote into the application that plaintiff was the owner of the lands upon which the cotton crop was growing, and of a 100 per cent. interest in such crop, and that because thereof the defendant was estopped to...