Downey v. German Alliance Ins. Co.

• Citation: 252 F. 701
• Decision Date: 02 July 1918
• Docket Number: 1614.
• Parties: DOWNEY v. GERMAN ALLIANCE INS. CO. et al.
• Court: U.S. Court of Appeals — Fourth Circuit

252 F. 701

DOWNEY v. GERMAN ALLIANCE INS. CO. et al.

No. 1614.

United States Court of Appeals, Fourth Circuit.

July 2, 1918

John O Henson, of Martinsburg, W. Va., and Malcolm Jackson, of Charleston, W. Va., for plaintiff in error.

W Calvin Chestnut, of Baltimore, Md., and John W. Davis, of Clarksburg, W.Va. (Allen B. Noll, of Martinsburg, W. Va., on the brief), for defendants in error.

Before KNAPP and WOODS, Circuit Judges, and SMITH, District Judge.

KNAPP Circuit Judge.

For a detailed statement of facts reference is made to the opinion of this court in the kindred case of Hartford Fire Insurance Co. v. Downey, Receiver, 223 F. 707, 139 C.C.A.

237. On September 15, 1912, the factory and its contents of the Stewart Vehicle Company, of Martinsburg, W. Va., were destroyed by fire. The insurance in force was $21,500 on the building, $80,500 on the stock of merchandise, and $5,500 on the machinery, or a total of $107,500, which is approximately the amount at which the loss was adjusted. The policies were all of the New York standard from, prescribed also by the laws of West Virginia, and contained the following provision:

'This entire policy shall be void if * * * the subject of insurance be personal property and be or become incumbered by a chattel mortgage.'

Claiming that this provision had been violated, the insurance companies refused payment of the loss, and thereupon, in 1913, suits were brought against them by plaintiff in error, who had been appointed receiver of the vehicle company shortly after the fire. Some of the suits were brought in the state courts at Martinsburg, and others in the United States District Court for the Northern District of West Virginia. The first case tried was the one against the Hartford Fire Insurance Company, supra, whose policy covered merchandise only. The judgment for plaintiff in that case, entered upon a verdict of the jury, was reversed by this court on the ground that the undisputed evidence showed that the insured property had 'become incumbered by a chattel mortgage, ' which avoided the policy, and that therefore the trial court should have directed a verdict for the defendant. A petition for rehearing was considered and denied. In the meantime, and before the decision of this court, the case against the National Fire Insurance Company was tried in the state court, with the result of a verdict and judgment for plaintiff. That judgment was affirmed, some months after our decision in the Hartford Case was announced, by the Supreme Court of Appeals of West Virginia. Downey, Receiver, v. National Fire Insurance Co., 77 W.Va. 386, 87 S.E. 487. Thereupon the receiver applied to the Supreme Court of the United States for a certiorari in the Hartford Case, but the application was refused. 241 U.S. 671, 36 Sup.Ct. 722, 60 L.Ed. 1230.

The case against these defendants, tried in September, 1917, was submitted by stipulation of counsel on the proofs of record here in the Hartford Case, and consequently as regards the chattel mortgage the same facts precisely are again before us. The only difference is that the policy now under review was not on merchandise only, but partly on the building and partly on the merchandise, and this presents a question of law which did not arise in the former suit. The court below, following our decision in the Hartford Case, directed a verdict for defendant as to the entire policy, thereby holding in effect that it was an indivisible contract, which was wholly avoided by the breach of the chattel mortgage condition.

The elaborate argument of plaintiff in error for a reversal of our former decision is quite unconvincing. It seems for the most part to miss the point. There is no dispute as to the meaning of the policy, or of the statute which prescribes its form. All parties agree that a violation of the chattel mortgage provision avoids the policy; all agree that, if the bonds in question were actually pledged to the Trust Company, that pledge constituted a chattel mortgage within the meaning of the policy; and all agree that, if such a pledge was made, the plaintiff cannot recover for the personal property destroyed. As to that property the sole question is one of fact as to whether or not a pledge of the bonds had been consummated before the fire. We held in the Hartford Case that this question was improperly submitted to the jury, because the uncontradicted evidence showed beyond any reasonable doubt that the bonds had been completely and unconditionally pledged prior to the fire; and our reasons for so holding are stated at some length in the opinion above cited. It is enough to say that we adhere to that ruling, and with the more confidence because it seems to us, after studious re-examination, that fair-minded judgment can reach no other conclusion on the record here presented. In this court the question is not open to further discussion.

Is the policy in suit a divisible contract? It recites that the 'aggregate amount insured' is $9,000, the rate 1.25 and 1.50, and the premium $127.50. The insured property is described, in a typewritten statement pasted on the printed form, headed 'The Stewart Vehicle Company,' and containing two separate items or paragraphs, as follows:

'$3,000.00-- On their three story and basement brick building,' etc.

'$6,000.00-- On their buggies manufactured and in the process of manufacture, ' etc.

The aggregate premium is the 1.25 rate applied to $3,000, plus the 1.50 rate applied to $6,000. It will thus be seen that two distinct classes of property were insured, each for a separate and specified sum. Both classes were included in the mortgage given by the vehicle company, but concededly the giving of that mortgage affected in no wise a policy confined to the building. This being so, we find it difficult to see why a policy which insured the building for a stated amount and as a separate subject of insurance, should be held invalidated as to that insurance by the chattel mortgage provision in question, merely because the...