Girard v. Vt. Mut. Fire Ins. Co.

Citation154 A. 666
PartiesGIRARD et ux. v. VERMONT MUT. FIRE INS. CO.
Decision Date05 May 1931
CourtUnited States State Supreme Court of Vermont

Exceptions from Franklin County Court; Allen R. Sturtevant, Judge.

Action by Louis Glrard and wife against the Vermont Mutual Fire Insurance Company. Judgment for plaintiffs, and defendant brings exceptions.

Reversed and remanded.

Argued before POWERS. C. J., and SLACK, MOULTON, WILLCOX, and THOMPSON, JJ.

P. L. Shangraw, of Richford, F. L. Webster, of Swantott, and M. H. Alexander, of St. Albans, for plaintiffs.

Fred L. Laird, of Montpelier, and George M. Hogan, of St. Albans, for defendant.

POWERS, C. J.

This is an action on a fire insurance policy brought by the assured for the use and benefit of a mortgagee of the property covered. It appeared that Louis Glrard and his wife, Cora, owned and occupied a farm in Berkshire, which they had mortgaged to the Richford Savings Bank & Trust Company for the sum of $8,000. The buildings on the place were insured by the defendant by a policy which contained a provision that any loss on the real estate should be payable to the bank aforesaid as its interest might appear. The buildings burned, the company refused to pay, and this suit was brought. The defense is based upon the claim that the Girards or one of them burned the buildings to defraud the insurer. The trial below resulted in a verdict for the plaintiff, and the defendant excepted.

The rights of the parties here contending depend largely upon the clause in the policy making the loss payable to the bank. This clause is what is called the "open mortgage clause," or the "loss payable clause." It merely provides that any loss shall be payable to the mortgagee as its interest may appear. Under such a provision, a mortgagee stands as an appointee, and not as an assignee. The contract is between the insurer and the mortgagor; the insurance is on the property of the mortgagor as owner; it is not on the interest of the mortgagee. So a suit on the policy is well brought in the name of the mortgagor for the use and benefit of the mortgagee. Powers v. New England F. Ins. Co., 69 Vt. 494, 495, 38 A. 148. The rights of the latter in case of loss are wholly derivative, and cannot exceed those of the former. These propositions are well established. Home Loan & Finance Co. v. Fireman's Fund Ins. Co., 221 Ala. 529, 129 So. 470, 471; Grosvenor v. Atlantic Fire Ins. Co., 17 N. Y. 391; Warbasse v. Sussex County Mut. Ins. Co., 42 N. J. Law, 203; Brunswick Sav. Inst. v. Commercial Union Ins. Co., 68 Me. 313, 315, 28 Am. Rep. 56; Brecht v. Law, Union & C. Ins. Co. (C.C. A.) 160 F. 399, 18 L. R. A. (N. S.) 197, 206; Collinsville Sav. Soc. v. Boston Ins. Co., 77 Conn. 676, 60 A. 647, 69 L. R. A. 924, 925; Fitchburg Sav. Bank v. Amazon Ins. Co., 125 Mass. 431, 434; State Sav. Bank v. Shible Mut. Fire Ins. Co., 172 Minn. 122, 214 N. W. 926, 927. So it is that any defense that can be made by the insurer to a suit brought on the policy by a mortgagor for his own benefit is equally available to it in a suit brought in behalf of the mortgagee. And, since a mortgagor who willfully burns the property insured can take no benefit under his policy, Renta-Car Co. v. Globe & Rutgers Ins. Co., 158 Md. 169, 148 A. 252, 256, it follows that a mortgagee, whose only rights are what are afforded by the "open mortgage clause," can take nothing in such circumstances. Hocking v. Virginia F. & M. Ins. Co., 99 Tenn. 729, 42 S. W. 451, 39 L. R. A. 148, 63 Am. St. Rep. 862; Ford v. Iowa State Ins. Co., 317 Mo. 1144, 298 S. W. 741, 56 A. L. R. 842; Westmacott v. Hanley, 22 Grant Ch. (U. C.) 382; Smith v. Germania F. Ins. Co., 102 Or. 569, 202 P. 1088, 19 A. L. R. 1444. If, then, the Girards willfully burned the buildings covered by the defendants' policy, there can be no recovery here, though the bank be entirely innocent of any wrong.

Subject to the defendants' exception, the plaintiff was allowed to show that the bank, at some time long before the policy in question was issued, gave the company a written guaranty covering all assessments which might accrue on any policy insuring property on which the bank held mortgages, and that thereunder it had paid one assessment on this very policy. This evidence was not relevant to any issue in the case, and therefore inadmissible. It was offered and received as tending to show a contractual relation between the company and the bank, based upon a sufficient consideration. But, as was objected to it, it was wholly outside the pleadings, and did not and could not affect the rights of the parties in any way. It was well calculated to impress the jury as a fact giving the bank a special advantage in the action on trial.

It is true that this theory was not submitted to the jury as a basis of recovery or as affecting the rights of the parties in any way; but it was not alluded to in the charge of the court, nor in any way withdrawn or warned against. In these circumstances, and in view of the character of the evidence, we think it must have been prejudicial, and this exception must be sustained. This disposes of exceptions numbered from 1 to 8, inclusive.

Exceptions 9 to 14 relate to the exclusion of certain circumstantial evidence, consisting of acts and sayings of the Girards, together with certain conditions and circumstances tending, it was claimed, to establish the fraudulent character of the fire. As we have often said, when fraud is the issue, the evidence necessarily takes a wide range. Niles v. Danforth, 97 Vt. 88, 95, 122 A. 498; Downing v. Wimble, 97 Vt. 390, 394, 123 A. 433; Land Finance Corp. v. Sherwin Elec. Co., 102 Vt. 73, 80, 146 A. 72. So here, though the fraud in its ultimate aspect was the burning of the buildings, any fact or circumstance, before or after that event, which in any way indicated a purpose to accomplish that fraudulent result, was admissible. Indeed, that ultimate fact might be wholly established by circumstantial evidence. Raithel v. Hall, 99 Vt. 65, 72, 130 A. 749. And, when such evidence is resorted to, objections to testimony on the ground of irrelevancy are not favored, because the force and effect of circumstantial facts depend largely upon their relation to each other; and acts and circumstances, although wholly unconclusive when separately considered, may by their number and joint operation be entirely sufficient to establish the factum probandum. Castle v. Bullard, 23 How. 172, 16 L. Ed. 424, 425. Nevertheless, each act and circumstance, either by itself or in connection with other evidence admitted or offered in that connection, must contribute something to that result. If, when so considered, they are as consistent with innocence as with guilt, they should be rejected. They would not then afford a rational basis for inferring the ultimate fact; so would not be "fit to be considered." Smith v. Martin, 93 Vt. Ill, 129, 106 A. 666, 674. Then, too, such acts and circumstances stand in the law of evidence like representations alleged to be fraudulent; if they are fairly susceptible of two constructions, the one that frees them from the imputation of fraud must be accepted. Moncion v. Bertrand, 98 Vt. 332, 334, 127 A. 371. How far into these matters the testimony shall be allowed to go is, of necessity, left somewhat to the discretion of the trial court. Townsend v. Felthousen, 156 N. Y. 618, 51 N. E. 279, 281; Thomas v. Miller, 202 Mich. 43, 167 N. W. 859, 860; First Nat. Bank v. Harvey, 29 S. D. 284, 137 N. W. 365, 369.

The offer to show what Girard said after the fire about his plans, and the offer to show what was said when Girard paid his assessment, came within the rule just stated, and we cannot say that they were not properly excluded as a matter of discretion.

The defendant offered to show by the witness Wilder that he went to the Girard farm late in the afternoon before the fire to serve a writ of attachment, and that he searched the barn and could find no calves there to attach. This was excluded, and the defendant excepted. In view of the nature of the defense, evidence that the plaintiffs were being pressed by creditors was a relevant fact. Commonwealth v. Haddad, 250 Mass. 391, 145 N. E. 561, 563; State v. Rosenswieg, 168 Minn. 459, 210 N. W. 403, 405; State v. Gates, 197 Iowa, 777, 197 N. W. 908, 909. If Wilder was then to serve a writ as stated, this fact should have been admitted. But, so far as this feature of the offer goes, it does not appear that any harm resulted from its exclusion; for the financial condition of the Girards was sufficiently shown. The search for calves, if made, bore on another question. But its importance depended upon the further fact that the plaintiffs claimed insurance on calves in their proof of loss. If they did, this search would have a tendency to prove one of the steps in the general scheme to defraud the company. But the plaintiff objected on the ground that there was then no evidence in the case that such insurance was claimed, stating that the proof of loss, Plaintiffs' Exhibit 4, was admitted only to show the claim for loss on the real estate; and the transcript sustains this claim. So when this offer was made it was inadmissible; for the rule is that, to secure a reversal for the exclusion of evidence, it must be shown that it was admissible in the then present aspect of the case. State v. Lapan, 101 Vt. 124, 132, 141 A. 686.

Evidence was introduced by the defendant tending to show that, prior to the fire Girard had caused six truck loads of furniture and other personal property, including stanchions from the barn, to be transported to a farm in Georgia some 30 or 35 miles away, and there stored, that these loads went in the night, and that the last one went the night before the fire. This line of evidence also tended to show that this property was taken out...

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