Ex parte St. Paul Fire & Marine Ins. Co. of St. Paul, Minn.

• Decision Date: 16 June 1938
• Docket Number: 6 Div. 345.
• Parties: EX PARTE ST. PAUL FIRE & MARINE INS. CO. OF ST. PAUL, MINN.
• Court: Alabama Supreme Court

184 So. 267

236 Ala. 543

EX PARTE ST. PAUL FIRE & MARINE INS. CO. OF ST. PAUL, MINN.

6 Div. 345.

Supreme Court of Alabama

June 16, 1938

Rehearing Denied Oct. 6, 1938.

Certiorari to Court of Appeals.

Petition of the St. Paul Fire & Marine Insurance Company of St. Paul Minn., for certiorari to the Court of Appeals to review and revise the judgment and decision of that court in the case of Ex parte St. Paul Fire & Marine Ins. Co., 184 So. 265, on petition for mandamus.

Writ awarded; reversed and remanded.

Coleman Spain, Stewart & Davies, of Birmingham, for the motion.

J. L Drennen, of Birmingham, opposed.

FOSTER Justice.

The opinion of the Court of Appeals here sought to be reviewed shows that in a suit for loss from fire, in which the insurer is sued, and defendant pleads the breach of a clause respecting the ownership by insured of the personal property covered, in that though insured had a bill of sale to the property with no defeasance clause expressed, it was by parol agreement of the parties to it intended to operate as a mortgage to secure a debt, and that by it plaintiff was not the sole and unconditional owner, for the reason that a mortgagee is not that sort of owner. Westchester Fire Ins. Co. v. Green, 223 Ala. 121, 134 So. 881.

But assuming that such defense is available only in equity, defendant sought to remove the cause there under the statute. The assumption is predicated upon an application of two principles. One is that it is only in equity where it may be shown that a bill of sale, absolute on its face, was agreed between the parties to it to be a mortgage.

We find that defendant is correct in the statement of that principle, certainly when the controversy is between the parties to the alleged contract. North River Ins. Co. v. Waddell, 216 Ala. 55, 112 So. 336, 52 A.L.R. 838; Shriner v. Meyer, 171 Ala. 112, 55 So. 156, Ann.Cas.1913A, 1103; Bates v. Crowell, 122 Ala. 611, 25 So. 217; Bragg v. Massie's Adm'r, 38 Ala. 89, 106, 79 Am.Dec. 82; Parish v. Gates, 29 Ala. 254, 261; Jones v. Trawick's Adm'r, 31 Ala. 253; Robinson v. Farrelly, 16 Ala. 472.

So much is conceded, but plaintiff contends that the rule which limits parol evidence in this connection to equity does not apply to third persons on the principle that only parties to the contract are thus limited or their privies. And such is the rule often thus broadly stated. Lehman v. Howze, 73 Ala. 302; Jones v. First National Bank, 206 Ala. 203, 89 So. 437; Peters v. Pilcher, 211 Ala. 548, 100 So. 902.

And defendant's second contention is that third persons are not thus excepted unless their rights are independent of the contract sought to be given an equitable effect at law, and did not originate in the relation established by it, nor are founded upon it. And so the authorities hold. Minneapolis, St. P. & S. S. M. R. Co. v. Home Ins. Co., 55 Minn. 236, 56 N.W. 815, 22 L.R.A. 390; State Bank v. Burke, 53 N.D. 777, 208 N.W. 115; 10 R.C.L. p. 1021; 22 Corpus Juris 1294; 3 Jones on Evidence (2d ed.) p. 2710, section 1488.

It is said in 10 R.C.L. 1021, that "Where one, although not a party to the instrument, bases his claim upon it, and seeks to render it effective in his favor as against the other party to the action, by enforcing a right originating in the relation established by it, or which is founded upon it, the parol evidence rule applies." This language is also used in Jones on Evidence, supra, adding to it: "Even in respect to strangers, the writing itself is the best evidence of its contents and must if possible be produced." Then follows section 1489, which we quote:

"The purpose of the exception to the parol evidence rule in favor of strangers is to prevent a fraudulent operation of the instrument upon their rights. Therefore, creditors of one of the parties may introduce parol evidence for the purpose of showing the fraudulent intent which accompanied and characterized the giving of an instrument. Similarly a person who is suing one of the parties to a sealed instrument upon a cause of action not arising out of the instrument may show that the instrument was in fact a mere device concocted to mislead outsiders dealing with one or the other of the parties to it, and that it did not truly represent the relations between those parties. And when the debt secured by a mortgage is incorrectly described or the relation of the parties incorrectly stated, such facts may also be shown by parol as against a stranger to the instrument. Moreover it has been held admissible to show, as between those not parties to the instrument, a mistake in the language of the instrument, or that lands described in a conveyance as in one parish were in fact situated in another. Or this principle, in an action on an insurance policy the plaintiff may show that another policy which comes in question does not cover the property insured, although so purporting on its face."

The case of Minneapolis, St. P. & S. S. M. R. Co. v. Home Ins Co., supra, was based on an insurance policy. Insured had coverage as a carrier and warehouseman to the extent of its liability to the shippers. The bills of lading stipulated against...