Hartford Fire Ins. Co. v. Mutual Sav. & Loan Co.

• Decision Date: 21 January 1952
• Docket Number: No. 3852,3852
• Citation: 68 S.E.2d 541,193 Va. 269,31 A.L.R.2d 1191
• Court: Virginia Supreme Court
• Parties: , 31 A.L.R.2d 1191 HARTFORD FIRE INSURANCE COMPANY v. MUTUAL SAVINGS AND LOAN COMPANY, INCORPORATED, &C. Record

Page 541

68 S.E.2d 541

193 Va. 269, 31 A.L.R.2d 1191

HARTFORD FIRE INSURANCE COMPANY v. MUTUAL SAVINGS AND LOAN COMPANY, INCORPORATED, &C.

Record No. 3852.

Supreme Court of Appeals of Virginia

January 21, 1952.

Rixey & Rixey, for the plaintiff in error.

Herbert & Bohannon, for the defendant in error.

JUDGE: HUDGINS

HUDGINS, C.J., delivered the opinion of the court.

On September 19, 1949, M. E. Ferguson purchased from the Seven Star Garage, of Carlisle, Pennsylvania, a Buick automobile and registered the same in his name under the laws of Pennsylvania. At the same time he purchased a combination indemnity and fire insurance policy on the automobile from the Hartford Accident and Indemnity Company and the Hartford Fire Insurance Company (hereinafter designated 'Hartford') through J. Rodney Fickel, agent for Hartford, at Carlisle, Pennsylvania. It was stated in the policy that the automobile was not subject to a lien or other encumbrance. A few days later, on request of the purchaser, a rider was attached to the policy indicating that the automobile was owned by M. E. and Jane K. Ferguson. No other rider or endorsement was attached to the policy.

On October 26, 1949, M. E. and Jane K. Ferguson borrowed from the Mutual Savings and Loan Company, Inc., of Norfolk, Virginia, (hereinafter designated 'Mutual') $1,000, for which they gave their note, and, as security for its payment, executed a deed of trust conveying the automobile to Wiley W. Wood, trustee. The Pennsylvania certificate of title to the automobile and the insurance policy issued thereon were delivered to Mutual, and the certificate of title, the note and the deed of trust were sent to the Division of Motor Vehicles of Virginia and there a Virginia certificate of title, on which Mutual's lien was endorsed, was issued. On the same day (October 26, 1949) Mutual mailed a letter to J. Rodney Fickel, agent for Hartford, at Carlisle, Pennsylvania, stating that it held a lien for $1,000 on the automobile and requesting that its lien be noted on a rider to be attached to the policy.

On October 28, 1949, two days after the loan was consummated, the automobile was partially destroyed by fire in Stafford County, Virginia. M. E. and Jane K. Ferguson, the named insured, promptly made claim against Hartford for the loss. They filed proof of loss in the form of an affidavit, stating that the certificate of title and insurance policy were in the automobile and burned; that they were the sole owners of, and no other person had an interest in, the automobile, and there were no liens or other encumbrances on it. The adjuster for Hartford accepted these statements as true and agreed to pay the insured the sum of $2140.50 in full settlement of the loss and permitted them to retain the damaged automobile.

On November 22, 1949, Hartford, at its home office in Hartford, Connecticut, issued its draft in the sum of $2140.50, payable to M. E. and Jane K. Ferguson, and mailed it to them in Norfolk, Virginia. The payees endorsed the draft and cashed it at the Seaboard Citizens National Bank of Norfolk.

On November 23, 1949, M. E. Ferguson telephoned Mutual that the automobile had been damaged by fire on October 28th, near Fredericksburg, Virginia, and that he had left it in its damaged condition with Klotz Auto Parts at Fredericksburg, subject to the order of Mutual; that he had collected the amount of the loss from Hartford and bought a new automobile.

On November 25th, Mutual talked with Fickel's secretary at Carlisle, Pennsylvania, and on the same day telephoned Hartford at its home office, demanding that the amount of its chattel mortgage be paid out of the proceeds of the policy. Thereupon, Hartford stopped payment on the draft.

The Seaboard Citizens National Bank of Norfolk instituted this action against Hartford, alleging that it had purchased for value the draft from M. E. and Jane K. Ferguson, without notice of any defects or adverse claims thereto, and was a holder of the negotiable instrument in due course. Hartford filed in the action an affidavit, under Code, sec. 8-226, disclaiming any interest in the subject-matter, and alleging that Mutual had asserted a claim against it on the insurance policy and praying that Mutual be made a party to the action. Mutual filed its answer and cross-claim asserting against Hartford a claim for $1,000. On these issues the jury returned a verdict for $2140.50 in favor of the bank, and $1,000 in favor of Mutual on its cross-claim. Hartford interposed no objection to the verdict against it in favor of the bank, but moved that the verdict for Mutual be set aside. This motion was overruled and judgments were entered on the verdicts. Hartford then moved to set aside the judgment entered against it for Mutual. This motion was overruled. From the latter judgment Hartford obtained this writ of error.

The contest in this court is between Mutual and Hartford. Each relies upon the terms, conditions and stipulations set forth in the contract of insurance. Hartford contends that when it paid the amount of the loss to the insured it had no notice that Mutual held the policy as collateral security for the payment of the debt the insureds owed it.

The evidence tending to prove Hartford received such notice is the testimony of A. W. McGlauhon, secretary and treasurer of Mutual, who stated that on the same day (October 26, 1949) Mutual made the loan to Ferguson, he wrote a letter to J. Rodney Fickel (a copy of which was retained) as follows:

'October 26, 1949

Affirmed.

'Mr. J. Rodney Fickel

'General Insurance

'264 W. Pomfret Street

'Carlisle, Pa.

'Dear Sir:

'Will you kindly place an endorsement on Policy Number HC-323043, Hartford Accident & Indemnity Company, in the name of M. E. Ferguson, Carlisle, Pa. covering a 1950 Buick 4 D Sed. M#55973474, showing loss payable to the Mutual Savings & Loan Co., Inc., 106 E. Plume Street, Norfolk, Va. Our lien is in the amount of $1000.00, payable in twelve months at the rate of $84.00 per month.

Very truly yours,

A. W. McGlauhon, Sec'y-Treas.'

The original of the foregoing letter was placed in an envelope, addressed to J. Rodney Fickel, Carlisle, Pennsylvania, and deposited in the United States mail on October 26, 1949, in Norfolk, Virginia, in the ordinary course of business. The envelope carried the return address of Mutual, but was never returned.

The testimony of J. Rodney Fickel and his wife, who acted as his secretary, was taken in the form of depositions. This testimony was to the effect that no such letter was received at Fickel's office, and that nothing was known about the claim of Mutual until this controversy arose.

All authorities hold that mailing a letter, properly addressed and stamped, raises a presumption of its receipt by the addressee. Some authorities hold that the positive denial by the addressee of the receipt of such letter is sufficient to overcome the presumption. However, Virginia's decisions are in line with the majority rule to the effect that a denial of receipt of such a letter raises an issue of fact to be determined by the jury. It is said in Yanago v. Aetna Life Ins. Co., 164 Va. 258, 178 S.E. 904, that 'Strictly speaking, there is no necessary conflict between the testimony of a witness who says that he mailed a letter and that of an addressee who says that it was not received, for letters do miscarry, but their number, relatively speaking, is small indeed. And so the weight of authority is to the effect that their receipt is a jury question, and this is the law in Virginia. ' Adams v. Plaza Theatre, Inc., 186 Va. 403, 43 S.E. (2d) 47.

The verdict of the jury on this issue compels us to consider the case as though J. Rodney Fickel, as agent of Hartford, received the letter, and hence Hartford had notice of Mutual's lien.

Hartford's second contention is that the automobile was not insured at the time it was damaged by fire. This contention is based upon the following terms and conditions set forth in the insurance contract:

The policy named M. E. and Jane K. Ferguson as the insured, and declared that the automobile was unencumbered, and any loss by fire 'is payable as interest may appear to the Named Insured and None.'

In the paragraph of the policy designated 'Exclusions,' among the risks not assumed is the following:

'This policy does not apply:

* * *

'(h) under Coverages * * * F (loss by fire) * * * while the automobile is subject to any bailment lease, conditional sale, mortgage or other encumbrance not specifically declared and described in this policy.'

It is conceded that at the time the automobile was destroyed it was subject to a chattel mortgage that was not specifically declared and described in the policy, and that Hartford had not endorsed on the policy its consent to the assignment of the insured's interest to Mutual.

The contract of insurance was between Hartford and the insured, not between Hartford and Mutual. The provision excluding coverage while the automobile was encumbered, unless such encumbrance was described in the policy, is not unreasonable or against public policy. It was inserted in the policy for the benefit of Hartford and could be waived by it. Hartford could have refused payment...