Fenter v. General Acc. Fire & Life Assur. Corp.

• Decision Date: 28 April 1971
• Parties: Lee FENTER, Appellant, v. GENERAL ACCIDENT FIRE AND LIFE ASSURANCE CORPORATION Ltd., Respondent.
• Court: Oregon Supreme Court

Page 310

484 P.2d 310

258 Or. 545

Lee FENTER, Appellant, v. GENERAL ACCIDENT FIRE AND LIFE ASSURANCE CORPORATION Ltd., Respondent.

Supreme Court of Oregon.

Argued and Submitted April 6, 1971.

Decided April 28, 1971.

Michael O. Whitty, Coos Bay, argued the cause and filed a brief for appellant.

Paul L. Roess, Coos Bay, argued the cause for respondent. On the brief were McKeown, Newhouse & Johansen and John Foss, Coos Bay.

Before McALLISTER, P.J., and DENECKE, HOLMAN, TONGUE, HOWELL and BRYSON, JJ.

McALLISTER, Justice.

This is an action on a policy of fire insurance. The trial court sustained a demurrer to the complaint and, when plaintiff failed to plead further, entered judgment for defendant. Plaintiff appeals. The only issue is whether the complaint adequately alleged that plaintiff had an insurable interest in the insured property on the date of the fire.

The following facts were alleged in the complaint and admitted by the demurrer. Prior to August 7, 1967, plaintiff was the owner of certain real property in Curry County. On August 7, 1967, the tax collector of Curry County foreclosed on the property for nonpayment of real property taxes. On September 12, 1968, the defendant issued to plaintiff its standard fire insurance policy covering the improvements on the property. On September 17, 1968, the tax collector deeded the property to Curry County. ¹

Defendant contends that the complaint did not state a cause of action because it failed to allege that the plaintiff had an insurable interest in the property on July 21, 1969, the date of the fire. ² The complaint alleges that on that date the property had been foreclosed for nonpayment of taxes, the statutory redemption period of one year prescribed by ORS 312.120 had expired and that the property had been deeded to Curry County.

Defendant relies on ORS 312.200, which provides that all rights of redemption to properties not redeemed within the one-year period prescribed by ORS 312.120 shall terminate on the execution of the deed to the county. ³ Defendant further relies on Bursell v. Brusco, 203 Or. 37, 40, 275 P.2d 873 (1954), in which we held that a deed from the former owner, delivered after the period of redemption from a tax foreclosure had expired and the tax collector's deed to the county had been delivered, conveyed nothing.

Plaintiff claims that he had an insurable interest on the date of the fire because of ORS 275.180, which provides:

'(1) Any county court may at any time, without the publication of any notice, sell and convey* * * to the record owner or his assigns, any property acquired by the county for delinquent taxes, for not less than the amount of taxes and interest accrued and charged against such property at the time of purchase by the county with interest thereon at the rate of six percent per annum from the date of such purchase. * * *' In the Bursell case, relied on by defendant, the parties did not raise the possibility that the deed might operate as an assignment of the former owner's rights under ORS 275.180. We had no occasion there to consider the effect of ORS 275.180 and the decision in that case does not help us here. We must examine the nature of the former owner's relationship to the property under the statute, and determine whether it can constitute an insurable interest.

In Chaney v. Coos County, 168 Or. 390, 123 P.2d 192 (1942) this court held that ORS 275.180 is permissive only, and does not give the former owner any right to demand a reconveyance from the county upon payment of the minimum price provided for in the statute or for any other price. The court said that the legislature intended:

'* * * merely to confer a power which they (the county court or board of county commissioners) could exercise or not, as they saw fit to do, the only limitation upon such power being that, if they did make such sale, the price should not be less than that provided by the statute and left to their determination how much greater the price should be. * * *' 168 Or. at 392, 123 P.2d at 193.

However, in Jaquith v. Hartley, 243 Or. 27, 30, 411 P.2d 274 (1966), where it appeared that a majority of the county commissioners intended to reconvey the property to its former owners if the court held they had the power to do so, we said the former owners had

'* * * a legal interest which will blossom into legal title to the property if this court decides in plaintiffs' favor.'

We held the plaintiffs' interest sufficient to entitle them to litigate the issue of the county's power to reconvey the property, even though they could not have compelled the reconveyance.

What we called in Jaquith a 'legal interest' is a special position, not enjoyed by others, in which the former owner is placed with relation to the property. The county governing body may, if it chooses, sell him the property for the amount of the accrued taxes plus interest, regardless of its actual value. The county can make the sale authorized by ORS 275.180 only to the record owner or his assigns. In all other sales the statutes require an initial public offering and a sale to the highest and best bidder. Only if the public offering does not result in a sale may the county sell the property privately, and then only at a price not less than the largest amount bid at the public offering, or, if no bids were received, at a price the county governing body deems 'reasonable.' ORS 275.110--275.160; 275.190--275.200.

Defendant relies heavily on the argument that because the statute does not give the former owner an enforceable right to a conveyance of the property, it cannot create an insurable interest. In Higgins v. Insurance Co. of N. America, supra, note 2, 469 P.2d at 771, we found it unnecessary to decide whether an unenforceable land sale contract could ever give rise to an insurable interest in the land. We have never held that an interest in property, to be insurable, must be legally enforceable. We seem to have inquired only whether the insured hada direct pecuniary interest in the preservation of the insured property. In Bird v. Central Manufacturers Mut. Ins. Co., 168 Or. 1, 6, 120 P.2d 753, 755 (1942), we said

'* * * It is well settled that any one has an insurable interest in property who derives a benefit from its existence or would suffer loss from its destruction. It is sufficient to constitute an insurable interest in property that the insured is so situated with reference to the property that he would be liable to loss should it be injured or destroyed by the peril against which it is insured. * * *'

In that case the plaintiff was held to have an insurable interest in an automobile which he had borrowed from his employer on condition that he would be personally liable for any damage while it was in his possession. His liability to financial loss in the event of damage to the car was obvious in that case, and that was all the court required.

In other cases we have found an insurable interest under various circumstances: Higgins v. Insurance Co. of N. America, supra note 2 (contract purchaser of real property); Yoshida v. Security Ins. Co., supra note 2 (month-to-month tenant of real property); Pacific States F. Ins. Co. v. C. Rowan M. Co., 122 Or. 665, 260 P. 441 (1927) (vendee under conditional sales contract or, alternatively, trustee in possession of personalty).

Where there was no showing whatsoever that the insured would suffer a loss by damage to the insured property, we have said there was no insurable interest: Price v. United Pac. Cas. Ins. Co., 153 Or. 259, 58 P.2d 116 (1936) (husband insured ring belonging to his estranged wife); Oatman v. Bankers' Fire Relief Ass'n, note 2 supra (dictum) (husband insured property in which his wife owned fractional interest).

In Armbrust v. Travelers Insurance Co., note 2 supra, where the evidence about the relationship of the insured to the damaged property was fragmentary and unclear, we upheld the trial court's finding that the burden of proving an insurable interest had not been met. ⁴

In none of these cases except Bird did we attempt to define an insurable interest, but all of the decisions are consistent with the reasons for requiring an insurable interest as a condition precedent to recovery. Those reasons are to prevent wagering policies and reduce the temptation of the insured to destroy the insured property. Hardwick v. State Insurance Co., supra note 2, 20 Or. at 549, 26 p. 840; Vukowich, op. cit. supra note 2, at 6 et seq.

A wagering policy has been defined as one in which the insured party has no interest whatever in the matter insured, but only an interest in its loss or destruction. Conn. Mut. Life Ins. Co. v. Schaefer, 94 U.S. 457, 24 L.Ed. 251 (1876). ⁵ And in Riggs v. Commercial Mut. Ins. Co., 125 N.Y. 7, 25 N.E. 1058, 1060, 10 L.R.A. 684, 21 Am.St.Rep. 716 (1890), a leading case holding that a shareholder has an insurable interest in the assets of the corporation, the court said:

'* * * It is not necessary, to constitute an insurable interest, that the interest is such that the event insured against would necessarily subject the insured to loss. It is sufficient that it might do so, and that pecuniary injury would be the natural consequence. * * *'

These observations are two sides of the same coin. If there is a real possibility that destruction of property will cause the insured to suffer a loss, then he has an interest in its preservation, and a policy of insurance to protect against that loss is not a pure wager.

In the present case there was, at the time of the fire, a possibility that the damage it caused would result in financial injury to plaintiff. We cannot, from the allegations of the complaint, measure the probability that there was an actual loss. That depends upon such...