Cuetara Hermanos v. Royal Exchange Assur. Co.

• Decision Date: 27 December 1927
• Docket Number: No. 2156.,2156.
• Citation: 23 F.2d 270
• Parties: CUETARA HERMANOS et al. v. ROYAL EXCHANGE ASSUR. CO.
• Court: U.S. Court of Appeals — First Circuit

23 F.2d 270 (1927)

CUETARA HERMANOS et al. v. ROYAL EXCHANGE ASSUR. CO.

No. 2156.

Circuit Court of Appeals, First Circuit.

December 27, 1927.

Henry G. Molina, of San Juan, Porto Rico, for plaintiffs in error.

Carroll G. Walter, of New York City (Henri Brown, of San Juan, Porto Rico, on the brief), for defendant in error.

Before BINGHAM, JOHNSON, and ANDERSON, Circuit Judges.

BINGHAM, Circuit Judge.

This is an action upon a policy of fire insurance covering plaintiff's stock of shoes, in which they seek to recover the sum of $20,954.75, with interest; that being the sum claimed to be due them under the policy, after deducting its proportion of the net value of the property salvaged. The action was brought in the federal District Court for Porto Rico. The plaintiffs are a partnership, subjects of the king of Spain, residing in Porto Rico. The defendant is a corporation organized under the laws of England, where it is domiciled. The amount involved exceeds the sum of $3,000, exclusive of interest and costs. The plaintiffs on the 5th day of August, 1925, procured from the defendant the policy insuring them against loss or damage by fire in the sum of $25,000 upon their stock of shoes located in a two-story building in San Juan, Porto Rico. The policy was to run from August 5, 1925, to 4 p. m. of August 5, 1926. In addition to this insurance, they had other insurance upon the same stock of shoes, amounting to $40,000. In their complaint the plaintiffs allege, among other things, that on November 18, 1925, their stock of goods was destroyed by fire, except as to the portion salvaged, of the net value of $8,090.51, and that the loss sustained by the fire was at least $71,822.45, less the net value of the salvage ($8,090.51), or $63,731.94.

The defendant admitted the making of the contract and that on November 18, 1925, while the policy was in force, a part of the stock of shoes was destroyed, and a part damaged, and that the net value of the part salvaged was $8,090.51, but denied that the proximate cause of the loss and damage was fire. It alleged that the loss and damage was caused by an explosion of some fluid or gas, other than gas for illuminating purposes or domestic use, and that a loss or damage due to such an explosion was a cause excepted as a risk insured against by article 7 of the policy. It denied that the true and actual value of the stock insured and the damage sustained was $71,822.45, less the net value of the merchandise salvaged.

After admitting that the plaintiffs had additional insurance aggregating $40,000, that they seasonably notified the defendant of the loss, and, within the time prescribed by the policy, filed with the defendant their proof of loss, the defendant denied that the plaintiffs complied with the other conditions of the policy to be by them performed and that, on the contrary, they had failed to comply with certain of the conditions, undertakings, and warranties contained in the policy, and alleged (a) that at the time of taking out the policy they misrepresented the value of the stock of shoes insured, by representing it to be in excess of $55,000, when the true value was less than one-half that sum, in violation of condition No. 1 of the policy; (b) that on November 18, 1925, when the loss and damage occurred, there was a quantity of highly inflammable explosive chemicals stored, with plaintiff's consent, in the upper story of the building where the greater part of the stock of shoes was stored; that defendant had no knowledge that the chemicals were in the building until after November 18, 1925; that plaintiffs at no time informed the defendant of this, and did not obtain the defendant's consent to store the chemicals there, although the risk of loss by fire was greatly enhanced by their presence; that, if the chemicals were stored in the building prior to the date of issuance of the policy, the failure of the plaintiffs to notify the defendant of that fact constituted a violation of condition No. 1 of the policy; and if they were stored there after the issuance of the policy the plaintiffs, in allowing them to be stored there without the defendant's knowledge and permission, violated article 8 of the conditions of the policy; (c) that the plaintiffs failed to comply with the covenant and warranty contained in the iron safe clause of the policy, by failing to keep a set of books containing a complete record of the business transacted by them, particularly a book showing sales and disposition of merchandise and to produce such books for inspection by the defendant, and, by reason thereof, that the policy became null and void; and (d) that, in the proof of claim filed with the defendant, the plaintiffs stated that on November 18, 1925, the stock of shoes insured was worth in excess of $55,000, less $4,000; that said proof of claim was fraudulent, in that the true value of the stock of shoes at that time did not exceed $25,479.72, and that plaintiff's total loss did not exceed $12,389.21, and its proportional loss not in excess of $5,631.50, instead of $25,000 as claimed; that said false and fraudulent claim was in violation of article 13 of the conditions of the policy, and worked a forfeiture of all benefit under the policy.

There was a trial by...