Heath v. Utah Home Fire Ins. Co.

• Decision Date: 06 October 1965
• Docket Number: No. 9639,9639
• Citation: 406 P.2d 341,89 Idaho 490
• Parties: Sydney V. HEATH and Florence Heath, husband and wife, Plaintiffs-Respondents, v. UTAH HOME FIRE INSURANCE COMPANY, Defendant-Appellant.
• Court: Idaho Supreme Court

Page 341

406 P.2d 341

89 Idaho 490

Sydney V. HEATH and Florence Heath, husband and wife, Plaintiffs-Respondents, v. UTAH HOME FIRE INSURANCE COMPANY, Defendant-Appellant.

No. 9639.

Supreme Court of Idaho.

Oct. 6, 1965.

Baum, Peterson & Kugler, Pocatello, for appellant.

George W. Hargraves, Gee, Hargraves & Armstrong, Pocatello, for respondents.

TAYLOR, Justice.

On the 14th day of June, 1963, a dwelling house in Pocatello, belonging to plaintiffs (respondents) and covered by an insurance policy issued by the defendant (appellant), was damaged by a severe hail storm. Plaintiffs were the owners of five other houses in the same area. The house involved in this case was rented to Dan and Elma Hopkins. The day after the storm the tenants left the house for the summer and it remained vacant until they returned late in August. Plaintiffs notified the defendant company that the house had been damaged by the storm. Thereafter, on June 18, 1963, one Stanley Rue, an adjuster for defendant from the General Adjustment Bureau, called upon plaintiffs and, with Mr. Heath, inspected the roof of the dwelling, and subsequently prepared a proof of loss which was executed by Mr. Heath. At the time of the inspection Mr. Heath did not think of asking the adjuster to inspect the interior of the house, and the adjuster did not mention or suggest an examination of the interior. As a result, only the roof and the exterior were examined. The Heaths had a key to the house at the time.

July 2, 1963, defendant issued its draft in the amount of $134 to plaintiffs for the loss as shown by the proof submitted. The total loss was stated at $184, less $50 deductible by the term of the policy. The draft which was accepted, endorsed and cashed by the plaintiff Heath, recited on its face:

'In full settlement for loss or damage which occurred on June 14, 1963, under Fire-Extended Coverage Policy No. DI 68467.'

and on its reverse side:

'Endorsement of this draft is acknowledgment of full payment and discharge of all claims and demands for loss and damage under the policy of insurance as set forth on the face of this draft, in consideration whereof the said policy is hereby: Reinstated subject to the terms and conditions of said policy.'

Mr. Heath was aware of this release when he endorsed the draft.

When the tenants returned in August they discovered that the interior of the house had been extensively damaged by the storm, and so advised plaintiffs. At plaintiffs' request Mr. Rue again came to the premises and examined the interior of the house. After obtaining bids for the repair of the damage to the interior, Mr. Rue prepared a supplemental proof of loss which was executed by Mr. Heath, showing an additional loss to the house in the amount of $360. In his supplmental report, the adjuster stated:

'The initial inspection was made with amount of $360. In his supplemental report, only. The tenants were gone for the summer so we had no access to the interior. The tenants came back two weeks ago and upon entering the house were faced with parts of the above ceilings laying on the floor and hanging from the ceiling joists. We have made a thorough re-inspection and have obtained figures from two contractors and believe this to be a fair and just claim, and recommend supplemental payment.'

In its letter rejecting the supplemental claim, the defendant stated:

'We received a supplemental report dated September 12, 1963 on a loss which happened June 14, 1963 in your town. We wish to advise you that we do not intend opening up these claims at this late date and cannot understand why your adjuster did not complete his inspection when he was at the property shortly after the loss.

'I do not know what kind of adjusters you have that would not anticipate or understand that with the roof being off that there would be damage to the interior of the building.

'If these adjusters you have are on the roll for the General Adjustment Bureau to adjust more claims in this area, if they cannot do the job properly, then you should advise us and we will send adjusters up there that can do the job correctly. We are returning these supplemental papers, proof of loss, and suggest your adjuster inform the assured.'

Plaintiffs brought this action for recovery of the principal amount of the supplemental claim with interest, and for attorney's fees, as provided by I.C. § 41-1839. The cause was tried to the court sitting without a jury.

Defendant brought this appeal from judgment for the plaintiffs for the amount of the supplemental claim and $250 attorney's fees and costs.

Defendant assigns as error the following findings of the trial court:

'4. At the time of the first visit of the adjuster neither the plaintiff nor the adjuster had any reason to anticipate damage to the interior of the building.'

Appellant contends that this was not supported by the evidence, since the damage was shown to have been so heavy that respondent should have anticipated damage to the interior.

'7. Plaintiffs cooperated fully with the defendant's agents and fulfilled all obligations required of them under the policy.'

Appellant contends that this finding is in error because it was the obligation of respondents to call to the adjuster's attention all damages suffered on their premises before signing a proof of loss and before accepting a draft in full payment which contained a full release.

'8. Plaintiffs executed a release for payments for the exterior damage, but at the time the release was given a substantial injury existed which was unknown to both parties and not within the contemplation of the parties.'

The finding is objected to for the reason that the interior damage to the premises should have been anticipated and respondents should not have accepted the draft, executed the release, without determining the extent of the damage to the entire property, including the interior.

Defendant also assigns as error the court's conclusion of law No. 1, reading as follows:

'1. The release was given under a mutual mistake of a material fact, and the release is therefore avoided and set aside.'

Defendant contends that the release, having been obtained without fraud or misrepresentation, is conclusive, even though the parties did not have in mind the wrongs complained of or which were not disclosed or known when the release was signed.

Defendant also assigns as error the failure of the court to hold that plaintiffs could not maintain the action without tendering restitution of the amount paid to them on the original proof of loss, as a condition precedent.

Defendant's basic contention is that the trial court erred in allowing plaintiffs to avoid the release on the ground of mutual mistake.

With exceptions therein noted the general rule governing avoidance of contract on the ground of mutual mistake is stated in 2 Restatment of Contracts (1932), § 502, as follows:

'* * * where parties on entering into a transaction that affects their contractual relations are both under a mistake regarding a fact assumed by them as the basis on which they entered into the transaction it is voidable by either party if enforement of it would be materially more onerous to him than it would have been had the fact been as the parties believed it to be, * * *.'

Both parties cite Parish v. Page, 50 Idaho 87, 293 P. 979 (1930). In that case the plaintiff (purchaser) brought the action for damages alleged to have resulted from defendant's (seller's) fraudulent misrepresentation as to the number of acres of land in the tract sold. The purchaser went into possession in the fall of 1917 when the contract was executed. The contract was modified in March, 1923, liberalizing the terms of the original agreement in favor of the purchaser; the parties joined in a lease of the premises to a third party in 1924; the land was sold by the sellers to a third party purchaser in 1925; and thereafter in October, 1925, the parties entered into a contract rescinding their previous contracts. This last agreement contained a mutual general release by each to the other of all claims arising out of the mentioned transactions. Concerning release, the court said:

'Conceding the rule to be that 'a general release ordinarily includes all claims and demands then due and within the contemplation of the parties' (34 Cyc. p. 1090), and 'consequently a demand of which the parties were ignorant when the release was given is not as a rule embraced therein' (34 Cyc. p. 1092), cited by appellant, we read further from the same authority:

"If, however, a demand falls within the fair terms of the release it is discharged thereby, whether or not it was contemplated by the parties, and whether or not they were aware of its existence.' 34 Cyc. p. 1092.

'There is no contention that the release was procured by fraud or misrepresentation. Looking to the release itself and the facts and circumstances surrounding it, the claim upon which the present action is based falls within its terms (Shannon v. Prall, 115 Wash. 106, 196 P. 635), and, in the absence of fraud in obtaining such general release, it will be sustained, even though the parties did not have in mind the alleged wrongs complained of (Willett v. Herrick, 258 Mass. 585, 155 N.E. 589, 593), or which were not disclosed or known (Houston v. Trower [10 Cir.] 297 F. 558) when the release was signed. The finding to the effect that the present claim is barred by the release is therefore correct.' 50 Idaho at 94 and 95, 293 P. at 982....