Connecticut Fire Insurance Company v. Wigginton

• Decision Date: 22 April 1918
• Docket Number: 319
• Citation: 203 S.W. 844,134 Ark. 152
• Parties: CONNECTICUT FIRE INSURANCE COMPANY v. WIGGINTON
• Court: Arkansas Supreme Court

203 S.W. 844

134 Ark. 152

CONNECTICUT FIRE INSURANCE COMPANY v. WIGGINTON

No. 319

Supreme Court of Arkansas

April 22, 1918

Appeal from Poinsett Chancery Court; Archer Wheatley, Chancellor affirmed.

Decree affirmed.

J. A Watkins, for appellant.

It was error to decree a reformation of the policy. A mutual mistake is not proven by that clear, decisive and convincing evidence required by courts of chancery. It is not proven that it was intended to attach the "standard mortgage clause" instead of the loss payable clause. 6 L. R. A. 200; 97 U.S 624; 73 Wis. 203; 61 L. R. A. 137; 38 S.W. 214; 2 Clements Fire Ins. 600; 82 Ark. 226, 234; 91 Id. 171; 71 Id. 614; 111 Id. 205; 108 Id. 103; 105 Id. 455; 85 Id. 62; 151 U.S. 452, etc.

Hawthorne & Hawthorne, for appellees.

The testimony is clear and convincing of a mutual mistake and sustains the reformation of the contract. 76 Ark. 180; 28 L. R. A. (N. S.) 785, 831; 67 N.Y. 283; 77 Am. Dec. 289; 39 N.J.Eq. 66; 127 S.W. 283; 9 A. 248; 2 Curt. C. C. 277; 67 S.E. 45; 29 Mo.App. 666; 20 N.E. 77; 93 U.S. 756; 40 F. 717; 17 Id. 568; 75 Id. 338. See also 55 L. R. A. 165; 36 Id. 673; 70 P. 131; 61 L. R. A. 131; 186 U.S. 423.

HUMPHREYS J. McCULLOCH, C. J., dissenting. Mr. Justice HART concurs in these views.

OPINION

HUMPHREYS, J.

Appellees instituted suit in the Poinsett Chancery Court to reform a policy of insurance issued by appellant to J. R. Wigginton on the 4th day of February, 1913, securing him and his mortgagee, the Marked Tree Bank & Trust Company, against loss which might be occasioned by fire to a two-story frame dwelling situated on lot 1, block 3, Ritter's Third Addition to the town of Marked Tree, Arkansas; and to recover the amount of the policy. It was alleged that through mistake a loss payable clause, in favor of the Marked Tree Bank & Trust Company, was attached to the policy as a part thereof, instead of a standard mortgage clause; that the loss payable clause was subject to the conditions in the policy, and one condition was that no recovery could be had in case foreclosure proceedings were instituted, whereas the standard mortgage clause contained an exemption from that condition in the policy.

Appellant answered, denying that it agreed to attach a standard mortgage clause to the policy and that its failure to attach said clause was a mistake, and set up as a defense that foreclosure proceedings were commenced on the 6th of March by the Marked Tree Bank & Trust Company against J. R. Wigginton before the building was destroyed by fire, which suit, under the contract, voided the policy.

The court heard the cause upon the pleadings and evidence, reformed the policy and rendered judgment for $ 2,000 and interest in favor of appellee against appellant.

From that decree an appeal has been prosecuted to this court.

It is contended by appellant that the evidence is not sufficient to establish the fact that it was the intention of the parties to the contract to make the standard mortgage clause a part of the policy. Courts will not reform instruments of writing for mistake unless the mistake is mutual and established by evidence which is "clear, unequivocal and decisive." Parker v. Carter, 91 Ark. 162, 120 S.W. 836; Hoffman v. Rice Stix D. G. Co., 111 Ark. 205, 163 S.W. 520; Eureka Stone Co. v. Roach, 120 Ark. 326, 179 S.W. 499. As to whether the court was correct in reforming the policy must depend on whether the evidence clearly shows a mutual mistake was made in attaching a loss payable clause to the policy instead of a mortgage clause. The policy sued on was issued by appellant to appellee Wigginton on the 4th day of February, 1913, and provided that appellant would pay not to exceed $ 2,000 to appellee Wigginton in case his dwelling situated on lot 1, block 3, Ritter's Third Addition to the town of Marked Tree, Arkansas, should be destroyed by fire within three years after the date of the policy. The loss payable clause contained in the policy was set out in the proof of loss.

M. W. Hazel, the vice president of the bank, testified that upon authority obtained from Wigginton he applied to Paul Leatherwood, appellant's local agent, for the policy, paid him the premium of $ 50 and requested him to attach a mortgage clause in favor of the bank; that the agent delivered the policy to the bank; that he never read it; that it remained in the possession of the bank until after the fire; that he passed upon loans, and the cashier and loan board looked over the papers securing loans; that Mr. Leatherwood had his office in the bank and wrote all the policies for the bank which protected its loans; that after the fire he got the policy and directed the cashier to attend to making the proof and collecting the insurance; that he was not present at the time the proof of loss was made and knew nothing about its contents; that he first learned of the kind of protection the bank had from his attorney after the policy was delivered to the attorney for collection.

J. C. Hawthorne testified that he prepared the proof of loss, but did not know a mistake had been made in attaching the loss payable clause instead of the mortgage clause until after he had a talk with Mr. Hazel subsequent to March 6, 1916.

Mr. J. A. Watkins, attorney for appellant, wrote to Hawthorne & Hawthorne, attorneys for appellees, on February 12, 1916, denying liability and calling their attention to an authority which he contended sustained his position and that firm replied on March 6 to the effect that they would test the matter in the courts unless a compromise could be effected. The mistake contended for was not called to the attention of Mr. Watkins by Hawthorne & Hawthorne in their letter to him of date March 6, 1916.

Paul Leatherwood testified on two different occasions. The first time, the substance of his evidence was as follows: That he was in the insurance business and wrote the policy in question but did not remember at whose instance; that he did not remember whether any one told him how to write the policy but that he wrote it according to custom; that he did not know why he placed the loss payable clause instead of the mortgage clause on the policy; that all he remembered was that the bank had a mortgage from Wigginton on the property and paid the premium; that his idea was to protect the bank; that he did not particularly know the difference between the clauses at that time; that he kept a daily report in triplicate, pasted one on the policy, one on daily record book and sent one to the company; that the daily record of this transaction contained the loss payable clause; that he had no recollection of ever placing a mortgage clause on any policy; that his records would show; that Mr. DuBard succeeded him in business and had the records; that he had both kinds of clauses.

The second time his evidence was in substance as follows: That he solicited the insurance from Wigginton, and, while he did not remember about the loss payable clause and mortgage clause, still, if he knew about the mortgage, it was evidently his intention at the time to place a mortgage clause on the policy.

J. R. Wigginton testified in substance that the officers of the bank wanted to make the collateral as strong as possible; that he went to Paul Leatherwood and told him that he wanted to give the bank a mortgage on the policy and asked him what he should do in order to effect that purpose; that he was informed the company furnished blanks and the agent agreed to fill out and attach it to the policy; that in speaking of placing a mortgage on the policy he had reference to a mortgage clause; at the time he did not know the difference between the two clauses.

J. D. DuBard testified, in substance, that he was cashier of the bank and received the policy; that Wigginton owed the bank $ 2,600 in notes, with W. M. Hazel as endorser on some of them; when the policy was secured Hazel was relieved as endorser on the notes; that he never read the policy; that the stockholders met annually and the directors monthly and examined the affairs and securities of the bank; that he presumed none of the directors read the policy in question; that at the time he received the policy he had every reason to believe that he knew it had a loss payable clause but was not positive about it; that he remembered some policies held by the bank as security had the loss payable clause on them and that he had no recollection of any that contained the mortgage clause; that, at the time, he regarded the loss payable clause the character of protection the bank desired, or that the insurance should be made payable to the bank in case of loss during the life of the mortgage; that he was not sure he knew at the time a foreclosure of the mortgage would void the policy, and, if he had known it and the matter had been left to him, perhaps he would not have accepted the policy with the loss payable clause attached.

The following admission was made by appellant in the course of the trial:

"It is admitted that T. J. Sharum, N. J. Hazel, M. W. Hazel, C. A. Dawson, C. M. Lutterloh, and the other directors of the bank, if present, would testify that they did not examine or read the insurance policy sued on and did not know that it had a loss payable clause on it instead of a mortgage clause."

It is conceded by learned counsel for appellant in his splendid brief, that recovery may be had on the policy in case it was the intention of all parties to the contract at the time the policy was written to make a part of it a standard mortgage clause. At the time of making the contract, the insurance company was represented by Paul Leatherwood, and Wigginton and the Marked Tree Bank by M. W. Hazel. The testimony of M W. Hazel and J. R. Wigginton is certain...