First Nat. Bank of Elida v. Hartford Fire Ins. Co. of Hartford

• Decision Date: 07 November 1912
• Citation: 127 P. 1115,17 N.M. 334
• Parties: FIRST NAT. BANK OF ELIDAv.HARTFORD FIRE INS. CO. OF HARTFORD, CONN.
• Court: New Mexico Supreme Court

17 N.M. 334

127 P. 1115

FIRST NAT. BANK OF ELIDA

v.HARTFORD FIRE INS. CO. OF HARTFORD, CONN.

Supreme Court of New Mexico.

Nov. 7, 1912.

Syllabus by the Court.

It is a well-settled principle, not in conflict with the rule as to admission of parol evidence, that the reformation of written contracts for fraud or mistake is an ordinary head of equity jurisdiction.

The party alleging the mistake must show exactly in what it consists, and the correction that should be made. The evidence must be such as to leave no reasonable doubt upon the mind of the court as to either of those points. The mistake must be mutual and common to both parties to the instrument. It must appear that both have done what neither intended.

Appeal from District Court, Roosevelt County; before Justice W. H. Pope.

Action by the First National Bank of Elida against the Hartford Fire Insurance Company of Hartford, Conn. Judgment for plaintiff, and defendant appeals. Affirmed.

This action was commenced by appellee to recover the sum of $600 on account of a certain fire insurance policy issued by the appellant on the 19th day of October, 1908, insuring for the period of one year the property described in said policy, which property was destroyed by fire on the 26th day of May, 1909. The policy was issued in the name of John Hamlett in the sum of $600.

At the time the said insurance was written, the owner, John Hamlett, had given the First National Bank of Elida, appellee, a mortgage upon the property insured to secure an indebtedness in the sum of $1,133.25; and it also appears that, prior to the execution of said mortgage, the owner of said property had given a mortgage upon the same property to the Farmers' Savings Bank of Elida to secure a debt of $1,113.

The first mortgage, above referred to, was dated September 12, 1908, and duly recorded 10 days later. The second was undated, but was acknowledged November 8, 1907, and not recorded until September 17, 1908. The testimony of the officers of the First National Bank is that the last-mentioned note and mortgage was purchased by said bank on October 1, 1908, possession of the note being acquired at that time; but a written transfer or assignment of the obligation was not made until February 24, 1909.

The application for insurance was made to the local agents, Cain & Osborn, of the appellant by the First National Bank, as mortgagee, and the premium was paid to the agents by said bank. When the insurance policy was delivered to the First National Bank by Mr. Cain, one of the agents, there was attached to said policy a loss payable clause in the short form, as follows: “Policy No. 20015. Assured, John Hamlett. Loss, if any, payable to the First National Bank of Elida, New Mexico, mortgagee, as his interest may appear.”

The evidence discloses that the policy of insurance was returned to the agent, Mr. Cain, with the advice that the loss clause was not the one desired, and that a “subrogation mortgage clause” was desired; that a few days later the policy was again returned to the bank with the following clause attached, to wit: “Loss Clause. Loss, if any, under this policy to be adjusted with the assured herein named and payable to the First National Bank of Elida, New Mexico, as their interests may appear, subject to all terms and conditions of this policy.”

It appears that the policy was not again examined by officers of the bank, and that the fact that the standard subrogation mortgage clause was not attached to the policy did not appear until after the fire. It developed at the trial that both forms of the loss payable clause, quoted above, had been attached to the insurance policy.

The appellee, by its complaint, sought to have the policy of insurance reformed, so that a standard mortgage clause, with subrogation, would appear as a part of the insurance contract in place of the loss payable clauses herein set forth. The evidence discloses that the form of mortgage clauses, described by the bank, was carefully explained to the agent by one of the officers of the bank, who had previously been engaged in the insurance business; that the owners' whereabouts were unknown at the time the insurance was applied for.

The appellant in its answer admitted the execution of policy in favor of Hamlett, but denied any misunderstanding between the parties with reference to the attaching of a standard mortgage clause, with subrogation in favor of appellee, and alleged that it had no knowledge of the existence of the mortgage given by Hamlett to the Farmers' Savings Bank, that the proof of loss furnished by appellee was defective, in that it did not set forth any reason or excuse why the assured, John Hamlett, did not furnish the necessary proof of loss, together with numerous other allegations not necessary to consider in this opinion.

The case was set for hearing March 16, 1911, but, on account of other matters before the court, the case was continued, by agreement, until March 30, 1911. On March 30th counsel for appellant asked for a continuance, upon the ground that he was unavoidably detained in Denver, but the continuance was refused, and the cause heard without the presence of counsel for appellant, and judgment was rendered by the court, jury having...