Kumor v. Scottish Union & N. I. Co.

• Decision Date: 19 June 1934
• Docket Number: 1845
• Citation: 33 P.2d 916,47 Wyo. 174
• Parties: KUMOR v. THE SCOTTISH UNION & N. I. CO
• Court: Wyoming Supreme Court

33 P.2d 916

47 Wyo. 174

KUMOR v. THE SCOTTISH UNION & N. I. CO

No. 1845

Supreme Court of Wyoming

June 19, 1934

APPEAL from the District Court of Sheridan County; JAMES H. BURGESS Judge.

Action by Ed. Kumor against The Scottish Union and National Insurance Company and J. F. Magoon, to recover upon a fire insurance policy for loss of property included in a fire contract between plaintiff as vendor and Magoon as vendee. From a judgment for plaintiff, the defendant Insurance Company appeals.

Affirmed.

The cause was submitted for the defendant and appellant on the brief of S. M. True of Denver, Colorado and John G. Hutton and Roy Bedford of Sheridan, Wyoming.

The policy stipulates that the company shall not be liable for loss or damage occurring while the hazard is increased by any means within the control or knowledge of the insured, and there is a warranty that the premises are and shall be occupied as a dwelling. It was established by the evidence that at the time of the fire Magoon used the insured premises as a bootlegging establishment, and that such use increased the hazard. This operated as a forfeiture of the policy. 26 C. J. 225; 14 R. C. L. 1145. There was a contract of sale clause annexed to the policy, which bound vendor and vendee to all terms of the insurance contract. The vendee having violated the policy, the vendor could not recover. Brecht v. Law, U. & C. I. Co., 160 F. 399; 18 L. R. A. (N. S.) 199; Grosvenor v. Atlantic Fire Insurance Company, 17 N.Y. 391; Smith v. Insurance Company, 202 P 1099; Stamey v. Royal Exchange Co. (Kan.) 150 P 227; Royal Insurance Company v. Walker Lumber Company, 24 Wyo. 59; Burns v. Insurance Company, 176 P. 985. An adjustment agreement between vendee and the insurer fixed the value of the property at $ 1,028.89, but the court gave judgment for a larger sum. Kumor as mortgagee was bound by this adjustment agreement. 14 R. C. L. 1365; 38 A. L. R. 387; Collinsville Soc. v. Boston Insurance Company (Conn.) 60 A. 647. The trial court was without jurisdiction of the person of Magoon, and in entering its judgment determining his rights, the service upon him being by publication. Section 89-817, R. S. 1931 does not warrant the procedure.

For the plaintiff and respondent, the cause was submitted on the brief of R. E. McNally and Maurice L. Cone of Sheridan.

There was no proof that the hazard was increased by any act of the insured. 26 C. J. 500. Mr. Edwards was incompetent on that subject. 26 C. J. 200, 206, 536 and 558. The trial court found that the hazard had not been increased, and its finding will not be disturbed on appeal. Jackson v. Mull, 6 Wyo. 55; Patterson v. Company, 7 Wyo. 410; Kimball Company v. Payne, 9 Wyo. 441; Slothower v. Hunter, 15 Wyo. 189; City of Rawlins v. Horton, 19 Wyo. 238; Ragley v. Insurance Company (Wash.) 276 P. 537. The contract of sale clause bound vendor and vendee to all terms of the policy. 10 L. R. A. (N. S.) 199. The vendee entered into an agreement with the insurance company as to the value of the property. This agreement was binding upon Kumor who stood in the relation of a mortgagee. Some authority may be found to support said proposition, i.e. Erie Brewing Company v. Farmers' Company, 25 L. R. A. (N. S.) 740. There is a considerable array of authorities against the rule. Scottish Union v. Field (Colo.) 70 P. 149; Hartford Ins. Co. v. Olcott, 97 Ill. 459, and cases cited therein. The rule quoted in 14 R. C. L. 1365 is expressly repudiated by the case note reported with it. In fact the weight of authority is the other way, 38 A. L. R. 383; Bergman v. Company (Ky.) 18 S.W. 122, and other authorities cited in the note to 38 A. L. R. 383. The ruling in the case of Erie Brewing Company v. Insurance Company, supra, has been so completely discredited that it seems unnecessary to do more than to state the fact. The more modern rule is set forth in 26 C. J. 425. The next point in appellant's brief is the question of jurisdiction because of constructive service had upon Magoon. This point seems unworthy of notice. See Clarke v. Lumber Company, 31 Wyo. 205; Morgan v. Insurance Company, 189 N.Y. R. 447.

S. M. True, John G. Hutton and Roy Bedford in reply.

The property was purchased, and used throughout, and at the time of the fire, as a bootleg joint, and the risk and hazard were greatly increased by that use. The adjustment agreement was binding upon Kumor. Smith v. Insurance Company, 19 A. L. R. 1444; 56 A. L. R. 850; Company v. Ruddy, 299 F. 189--a case from the Eighth Circuit where the entire question is fully reviewed in an able opinion by Judge Kenyon.

RINER, Justice. KIMBALL, C. J., and BLUME, J., concur.

OPINION

RINER, Justice.

In this case, review by direct appeal is sought of a judgment of the District Court of Sheridan County, which allowed a recovery for a fire loss under an insurance policy issued by the defendant and appellant, The Scottish Union and National Insurance Company, a corporation, which will be hereinafter generally designated as the "insurer." John F. Magoon, named in this policy as the "insured," will usually be mentioned as the "vendee," and Ed Kumor, the plaintiff and respondent, as the "vendor."

The record discloses the following facts: The insurer is a foreign corporation authorized to conduct the business of insuring property in this state against loss or damage by fire. Under date of June 18, 1928, the vendor agreed, by written contract, to convey to the vendee, through sufficient warranty deed, Lots 11, 12 and 13, in Block 28, of Suburban Homes Company Addition to the City of Sheridan, Wyoming, together with the improvements thereon, upon the vendee's paying the purchase price of $ 1346.90, in certain specified payments. The contract contained the following clause:

"The party of the second part agrees to keep the buildings on said premises insured in a sum not less than present amount, in favor of and payable to party of the first part, as his interests may appear."

The party of the second part thus nominated was the vendee of the property.

On May 11, 1931, the insurer, through its Sheridan, Wyoming, agency, issued to the vendee its policy insuring him against all direct loss and damage by fire, in the sum of $ 1200, on the one and one-half story, frame building, situated on Lots 11 and 12, aforesaid. There was attached to the policy a "Contract of Sale Clause," to be described more in detail later, wherein Magoon was designated as "vendee," and Kumor as "vendor."

While the policy, aforesaid, was in force, and on April 23, 1932, the insured building was completely destroyed by fire. The insurer, having declined to pay the loss, the vendor brought action against it, in the District Court of Sheridan County, to enforce his alleged rights under the contract of insurance, making Magoon, also, a defendant.

After the issues were made up, a trial to the court without a jury resulted in a general finding in favor of the plaintiff and against the defendants, together with the finding that, on the date when the fire occurred, the balance unpaid on the contract of sale, aforesaid, was $ 1350.17, a sum which exceeded the face value of the policy, and that, hence, Magoon, on said date and also on the date of the judgment, had no interest in or claim to the proceeds of said policy. Judgment was, accordingly, entered for the vendor against the insurer, for the sum of $ 1279.33 and costs, and Magoon was adjudged to have no interest at all in the policy proceeds.

In criticism of this judgment, the insurer directs our attention to certain provisions appearing in the issued policy, as follows: "This entire policy shall be void if the insured has concealed or misrepresented any material fact or circumstances concerning this insurance or the subject thereof;" also, "Unless otherwise provided by agreement in writing added hereto this Company shall not be liable for loss or damage occurring * * * (b) while the hazard is increased by any means within the control or knowledge of the insured;" and, referring to the insured building, that it is "occupied and to be occupied only for dwelling purposes."

In connection with these provisions, the "Contract of Sale Clause," attached to the policy, as aforesaid, is relied on, that clause, so far as material here, being:

"If this policy be not payable to a mortgagee, trustee or beneficiary under deed of trust, the proceeds of this policy, subject to all its terms and conditions, shall be payable to said vendor and/or said vendee as follows:

"FIRST: To said Vendor, to an amount not exceeding the balance unpaid, at the time of loss, upon the contract of sale above referred to; and

"SECOND: The balance, if any, to said Vendee."

The argument advanced for the insurer upon these contract stipulations and the record, as we understand it, is that the vendor, under the Contract of Sale Clause, was bound by all the "terms and conditions" of the insurance contract to the same extent as the vendee, and that, if the latter violated any of them so as to cause a forfeiture of the policy, then the insurer is not liable to the vendor, in consequence. With this position, it seems that counsel for the vendor agree. We, too, are inclined to think it correct, for the terms of the Contract of Sales Clause, as we read them, accomplish exactly what is generally said by the authorities to be the legal effect of the simple loss-payable or open-mortgage clause. In Howrey v. Star Insurance Company of America, 46 Wyo. 409, 28 P.2d 477, quoting from 5 Couch on Insurance 4426, § 1215a, it was said:

"The courts are practically agreed that, under a simple loss-payable or open-mortgage clause, which unlike the standard mortgage clause, contains no provision regarding the rights of the mortgagee in...