Creem v. Northwestern Mutual Fire Association of Seattle, Washington

• Decision Date: 20 March 1936
• Docket Number: 6176
• Citation: 56 Idaho 529,56 P.2d 762
• Parties: SAMUEL CREEM, Trustee for the Creditors of CHARLES A. RAMBO, and CHARLES A. RAMBO, Respondents, v. NORTHWESTERN MUTUAL FIRE ASSOCIATION OF SEATTLE, WASHINGTON, a Corporation, Appellant
• Court: Idaho Supreme Court

56 P.2d 762

56 Idaho 529

SAMUEL CREEM, Trustee for the Creditors of CHARLES A. RAMBO, and CHARLES A. RAMBO, Respondents, v. NORTHWESTERN MUTUAL FIRE ASSOCIATION OF SEATTLE, WASHINGTON, a Corporation, Appellant

No. 6176

Supreme Court of Idaho

March 20, 1936

INSURANCE-POLICY CONSTRUCTION OF-MORTGAGE CLAUSE-MORTGAGE COVERING PART OF INSURED PROPERTY-INCREASE OF HAZARD-QUESTION FOR JURY-CONTRACTS-MUTUAL MISTAKE-EVIDENCE.

1. Provision for forfeiture of fire insurance policy, covering furniture, fixtures, and stock of merchandise, if subject of insurance were encumbered by chattel mortgage, did not prevent recovery thereon by insured giving mortgage on furniture and fixtures only.

2. Whether insured so increased hazard by giving mortgages on insured furniture and fixtures as to avoid fire policy, also covering stock of merchandise, and bar recovery thereon for loss of merchandise, held fact question for jury.

3. To establish mutual mistake, through which written contract failed to express parties' true intent, evidence must be clear and convincing and show that all parties intended instrument to provide otherwise than it stated.

APPEAL from the District Court of the Seventh Judicial District, for Washington County. Hon. John C. Rice, Judge.

Action on an insurance policy. Judgment for plaintiffs. Reversed and remanded for new trial.

Judgment reversed and cause remanded for a new trial. Costs to appellant.

Martin & Martin, for Appellant.

Oral evidence cannot be received to vary or change the terms of a written contract, or to explain the terms when it is free from ambiguity. (Milner v. Earl Fruit Co., 40 Idaho 339, at 346, 232 P. 581; Davis v. Idaho Minerals Co., 40 Idaho 64, at 66, 231 P. 712; Gardiner v Gardiner, 36 Idaho 664, at 670, 214 P. 219.)

The contract of insurance sued upon covered the stock of goods consisting of groceries and meats for $ 2,200 and the furniture and fixtures in the store for $ 1,800, but the two items covered were both in the same storeroom. The consideration paid by the insured was a single gross premium. The risk on the stock of meats and groceries and the risk on the furniture and fixtures was common. This property was so situate that the risk on the furniture and fixtures could not be increased without increasing the risk on the groceries and meats. Therefore, the contract must be regarded as an entire contract, and a mortgage on the furniture and fixtures rendered the entire policy void. (Goorberg v. Western Assur. Co., 150 Cal. 510, 89 P. 130, 119 Am. St. 246, 11 Ann. Cas. 801, 10 L. R. A., N. S., 876; Capps v. National Union Fire Ins. Co., 318 Ill. 350, 149 N.E. 247; Bezich v. Columbia Ins. Co., 168 Wash. 379, 12 P.2d 413.)

Ed. R Coulter and George Donart, for Respondents.

Under the statute, all affirmative matter in the answer in a civil case is deemed denied and it is permissible to show mutual mistake in the inclusion of certain personal property in a chattel mortgage pleaded by defendant as a defense to action on an insurance policy on property destroyed by fire. (Sec. 5-812, I. C. A.; Mabee v. Continental Casualty Co., 37 Idaho 667, 219 P. 598, 37 A. L. R. 348; Hammitt v. Virginia Mining Co., 32 Idaho 245, 181 P. 336.)

The term "subject of insurance" as used in a provision in an insurance policy providing that "if the subject of insurance be personal property and be or become encumbered by a chattel mortgage without the consent of the insurer the policy shall become void," refers to all of the property insured; and a mortgage on only a part of same does not violate this provision of the policy. (Sec. 2255, Joyce on Insurance, 2d ed.; Western Assur. Co. v. Bronstein, 77 Colo. 408, 236 P. 1013; 26 C. J., p. 185 et seq.; Mecca Fire Ins. Co. v. Wilderspin, (Tex. Civ. App.) 118 S.W. 1131; Merchants Mut. Fire Ins. Co. v. Harris, 51 Colo. 95, 116 P. 143; Sullivan v. Mercantile Town Mut. Ins. Co., 20 Okla. 460, 94 P. 676, 129 Am. St. 761.)

GIVENS, C. J. Budge and Ailshie, JJ., concur. MORGAN, J., Justice Holden, Dissenting.

OPINION

GIVENS, C. J.

Respondents brought suit on a policy of fire insurance covering the furniture, fixtures and stock of merchandise belonging to respondent Rambo, destroyed by fire. The principal defense was based upon the claimed violation of the italicized provisions of the policy as follows:

"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; or if the subject of insurance be a manufacturing establishment and it be operated in whole or in part at night later than ten o'clock, or if it cease to be operated for more than ten consecutive days; or if the hazard be increased by any means within the control or knowledge of the insured; . . . . or if the subject of insurance be personal property and be or become incumbered by a chattel mortgage; . . . ."

because after the policy was issued, Rambo gave a chattel mortgage on certain equipment in the store to A. A. Seay, and on the stock of goods, furniture and fixtures to the Nampa-Weiser Company and George Shellhaas. During the course of the trial, respondents introduced evidence to the effect that the parties to the chattel mortgage given the Nampa-Weiser Company and George Shellhaas did not intend to thereby cover the stock of goods and argue that because the chattel mortgage clause in the insurance policy did not provide for forfeiture in case the subject matter of the insurance became mortgaged "in whole or in part" whereas other contingent forfeiture clauses did so provide, and since only a part and not all of the subject matter of said policy was so mortgaged, the chattel mortgage clause did not become operative to prevent recovery.

While there is authority to the contrary, the majority rule construing a policy of insurance worded as the one herein supports respondents' contention on this basis, either that the subject matter of the insurance, even though contained in the same policy, was divisible, that is, furniture and fixtures on the one hand and stock of merchandise on the other, as was said in Adler v. Germania Fire Ins. Co., 17 Misc. 347, 39 N.Y.S. 1070, at 1072:

". . . . In the Merrill Case, above stated [Merrill v. Insurance Co., 73 N.Y. 452, 29 Am. Rep. 184], the court of appeals says of a policy like the present, insuring different classes of goods for different sums:

"'The contract before us is not entire: it is divisible; and the breach of the condition made by the plaintiff applied only to the class of property insured, which was the immediate subject of the act of incumbrance which constituted that breach.'

"It is not within the power of the insurer to make a divisible contract an entire contract by calling it so, and we must seek an intention agreeable to the kind of contract which he was actually making; that is to say, a policy embracing more than one subject, and entire as to each subject. That intention, we think, is quite manifest. It will be observed that the provision in which the words 'this entire contract' occur refers to the 'subject of insurance' becoming incumbered by chattel mortgages. The 'subject of insurance', in a policy insuring separate risks, means the subject of each separate risk, as to each of which there is, under the cases, a divisible contract or policy; and the provision that the entire policy would be void if the subject of insurance becomes incumbered means that the whole insurance upon that particular subject or risk should be so affected . . . . As to each class of insurance the policy is entire, and not otherwise, and the insurer must be deemed to have had that legal distinction in view when employing the term under consideration. . . ." 26 C. J. 101, sec. 100, note 30; 26 C. J. 276, secs. 347-349; Manchester F. Assur. Co. v. Feibelman, 118 Ala. 308, 23 So. 759; Mitchell v. Mississippi Home Ins. Co., 72 Miss. 53, 18 So. 86, 48 Am. St. 535; German Ins. Co. v. Fairbank, 32 Neb. 750, 49 N.W. 711, 29 Am. St. 459; Tompkins v. Hartford Fire Ins. Co., 22 A.D. 380, 49 N.Y.S. 184; American Artistic Gold Stamping Co. v. Glens Falls Ins. Co., 1 Misc. 114, 20 N.Y.S. 646; Sun Mutual Ins. Co. v. Tufts, 20 Tex. Civ. App. 147, 50 S.W. 180; German Ins. Co. v. Luckett, 12 Tex. Civ. App. 139, 34 S.W. 173; North British etc. Ins. Co. v. Freeman, (Tex. Civ. App.) 33 S.W. 1091; or the policy not making it a violation to mortgage "in whole or in part" is to be construed as meaning that all the property, not merely part thereof, must be mortgaged before the policy is void. Peterson v. Pacific Fire Ins. Co. of New York, (La. App.) 148 So. 283:

"The meaning of the clause 'if the subject of insurance . . . . be or become encumbered' is important. Is it intended that any mortgage for any amount on any part of the insured property shall work a forfeiture, or that only such mortgage as incumbers the entire amount of the property insured shall have that effect? The latter is, undoubtedly, the proper interpretation, in view of the other provisions of the policy working a forfeiture, which are careful to provide that the policy shall be void under the conditions mentioned when the insured property is affected 'in whole or in part.' For example: 'This entire policy . . . . 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; or if the subject of insurance be a manufacturing establishment and it be operated in whole or in part at night later than ten o'clock' . . . .

"In Western Assurance Co. v. Bronstein, 77 Colo. 408 236...