Coleman Furniture Corporation v. Home Ins. Co.

• Decision Date: 03 October 1933
• Docket Number: No. 3520.,3520.
• Citation: 67 F.2d 347
• Parties: COLEMAN FURNITURE CORPORATION v. HOME INS. CO. OF NEW YORK.
• Court: U.S. Court of Appeals — Fourth Circuit

67 F.2d 347 (1933)

COLEMAN FURNITURE CORPORATION v. HOME INS. CO. OF NEW YORK.

No. 3520.

Circuit Court of Appeals, Fourth Circuit.

October 3, 1933.

T. X. Parsons, of Roanoke, Va., and John S. Draper, of Pulaski, Va. (John W. B. Deeds, of Pulaski, Va., and Showalter, Parsons, Kuyk & Coleman, of Roanoke, Va., on the brief), for appellant.

Alexander H. Sands, Jr., and Alexander H. Sands, both of Richmond, Va. (Gilmer, Wysor & Gilmer, of Pulaski, Va., on the brief), for appellee.

Before PARKER, and NORTHCOTT, Circuit Judges, and WATKINS, District Judge.

NORTHCOTT, Circuit Judge.

This is an action at law instituted in the circuit court of Pulaski county, Va., by the appellant, herein referred to as the furniture corporation, against the appellee, herein referred to as the insurance company, in September, 1932. The cause was, on petition of the insurance company, removed to the District Court of the United States for the Western District of Virginia and tried at Roanoke, Va., in January, 1933. The trial judge directed a verdict for the defendant upon which verdict a judgment was entered. From this action of the court below this appeal was brought.

The furniture corporation was engaged in the manufacture of furniture in Pulaski, Va., and obtained from the insurance company a contract of insurance generally known as "Sprinkler Leakage Insurance" or insurance against loss or damage suffered by sprinkler leakage, unaccompanied by fire. Other hazards than sprinkler leakage, including fire, were directly and explicitly excluded from coverage by the terms of the policy. The policy carried, among other provisions, the following: "In consideration of the reduced rate at which this policy is written it is expressly stipulated and made a condition of this policy that the insured shall maintain in so far as it is under his control or supervision approved watchman and clock and approved outside water motor gong operated by sprinkler alarm."

There is little, if any, dispute as to the facts. The warehouse of the furniture corporation where the loss occurred was equipped with a sprinkler fire prevention system. The loss occurred March 25, 1932, and was occasioned by the forceful knocking off of a head from the sprinkler system in the upper part of the warehouse. This allowed the water to escape from the pipes, and the furniture stored in the warehouse was damaged. It was agreed that the loss was $62,500.

The unavoidable conclusion from the evidence is that some one entered the warehouse and knocked off the sprinkler head. The furniture corporation had had some previous labor trouble. At the conclusion of the evidence a motion for a directed verdict was made on behalf of both the plaintiff and the defendant, and in passing on this motion the trial court found as a fact that at the time of the loss, and for some time prior thereto, the furniture corporation had maintained no adequate watchman service and that the insurance company had no knowledge of this fact. On these points the trial judge said: "While there may be a difference of opinion as to what is to be an approved watchman service, there can be no difference in opinion that no service at all does not come within the terms of the policy; and there is no evidence at all to warrant the contention that the defendant company had any knowledge of the fact that prior to the loss, no visits were being made to any of the watch stations in the storage building and that it was at no time being entered by the watchman."

It is contended on behalf of the plaintiff: That the clause in the policy promising that the insured should maintain "approved watchman and clock and approved outside water motor gong" was not a warranty but merely a representation; that even if construed as a promissory warranty, substantial compliance therewith was sufficient; and that if it were a warranty and a breach had occurred, the insurance company must show that the loss was the proximate result of the breach.

It is further contended on behalf of the plaintiff that the question whether the watchman clause had been complied with was a question that should have been submitted to the jury. We cannot agree with this contention. When both sides submit motions for a directed verdict, and do nothing more, the effect is to waive a jury trial and submit all questions of fact as well as of law to the judge, and his finding has the same weight as the verdict of a jury.¹ As was said by Judge Parker in the case of Swift & Co. v. Columbia Ry., Gas & Electric Co. (C. C. A.) 17 F.(2d) 46, 49, 51 A. L. R. 983: "In considering this question, we are confronted with the fact that on this branch of the case both sides moved for a directed verdict. The effect of this was to waive a jury trial and submit all questions of fact as well as of law to the judge. He has found in favor of the plaintiff, and we are powerless to review his finding, unless satisfied, after viewing the evidence in the light most favorable to plaintiff and resolving all controverted questions in its favor, that there was no evidence upon which the finding can be sustained; in other words, unless we think that upon the evidence a verdict should have been directed for the defendant as a matter of law. Lawton v. Carpenter (C. C. A. 4th) 195 F. 362; Sena v. American Turquoise Co., 220 U. S. 497, 501, 31 S. Ct. 488, 55 L. Ed. 559; Beuttell v. Magone, 157 U. S. 154, 15 S. Ct. 566, 39 L. Ed. 654."

Here the trial judge found as a fact that there was no substantial compliance with the contract in the policy as to the watchman service, and his holding on that point is binding upon us, if there is substantial evidence to support it. We do not think it necessary to go into detail with regard to the evidence upon which the trial judge based his finding as to whether the watchman service was maintained. An examination of the testimony convinces us not only that there was substantial evidence to support the judge's finding, but that his finding was clearly right.

On the question as to whether the "watchman clause" in the policy is a warranty or merely a representation, the judge below held as a matter of law that it was a warranty, and in this we concur. Certainly the terms of this clause as quoted above are clear and unambiguous. Indeed, it would be hard to conceive how the language could be more explicit. The insured solemnly contracted to do certain things, in consideration of a reduced rate. These things it did not do and the whole system of insurance would be destroyed if agreements of this character were to be held to be immaterial and of no force. This court said in Walters v. Mutual Life Insurance Company, 64 F.(2d) 178, 182: "Insurance contracts should be and are as sacred and binding as any contracts made in the course of other commercial business, and in the absence of any ambiguity the plain and ordinary meaning of simple words should be given effect."

Again in the case of Fidelity & Casualty Company v. Phelps, 64 F.(2d) 233, 236, we held that: "The right of an insurance company to contract and to have the contract, once made, enforced, is unquestioned."

As was said by Mr. Justice Sutherland in Bergholm v. Peoria Life Insurance Company, 284 U. S. 489, 52 S. Ct. 230, 231, 76 L. Ed. 416:

"It is true that where the terms of a policy are of doubtful meaning, that construction most favorable to the insured will be adopted. Mutual Life Ins. Co. v. Hurni Co., 263 U. S. 167, 174, 44 S. Ct. 90, 68 L. Ed. 235, 31 A. L. R. 102; Stipcich v. Insurance Co., 277 U. S. 311, 322, 48 S. Ct. 512, 72 L. Ed. 895. This canon of construction is both reasonable and just, since the words of the policy are chosen by the insurance company; but it furnishes no warrant for avoiding hard consequences by importing into a contract an ambiguity which otherwise would not exist, or, under the guise of construction, by forcing from plain words unusual and unnatural meanings.

"Contracts of insurance, like other contracts, must be construed according to the terms which the parties have used, to be taken and understood, in the absence of ambiguity, in their plain, ordinary, and popular sense. * * *

"And to discharge the insured from the legal consequences of a failure to comply with an explicitly stipulated requirement of the policy, constituting a condition precedent to the granting of such relief by the insurer, would be to vary the plain terms of a contract in utter disregard of long-settled principles."

Certainly a clause with regard to maintaining a watchman for a furniture storage warehouse, to guard against sprinkler loss, is a warranty and a material warranty which, if breached, prevents recovery on the part of the insured.

On the question as to what constitutes a warranty and what constitutes a representation, we have examined a number of authorities² but have found none where an agreement of this character has been held to be immaterial. Such an agreement would seem to be especially material with respect to the kind of insurance here under consideration.

It was contended that the insurance company had at least some knowledge of the conditions existing at the plant, at the time of the loss, and was therefore estopped from setting up the defense of a breach as to the watchman service. On this point the judge below held against the plaintiff and said: "The fact remains that even after the inspector acquired this knowledge in January, 1932, the plaintiff, without informing the defendant and without the defendant being in any way in possession of the knowledge, discontinued all watchman service within the storage building. The service up until that time had not been complete and had not complied with what the defendant's witnesses have stated did constitute an approved watchman service; but,...