Maier Brewing Co. v. Pacific Nat. Fire Ins. Co.

• Decision Date: 05 August 1963
• Court: California Court of Appeals Court of Appeals
• Parties: MAIER BREWING COMPANY, Plaintiff and Respondent, v. PACIFIC NATIONAL FIRE INSURANCE COMPANY, Defendant and Appellant. Civ. 26755.

Page 67

33 Cal.Rptr. 67

218 Cal.App.2d 869

MAIER BREWING COMPANY, Plaintiff and Respondent, v. PACIFIC NATIONAL FIRE INSURANCE COMPANY, Defendant and Appellant.

Civ. 26755.

District Court of Appeal, Second District, Division 1, California.

Aug. 5, 1963.

Rehearing Denied Aug. 29, 1963.

Hearing Denied Oct. 1, 1963.

Herbert Z. Ehrmann, Los Angeles, William L. Stein, Beverly Hills, and Long & Levit, Los Angeles, for appellant.

Betts & Loomis, Los Angeles, for respondent.

LILLIE, Justice.

Defendant appeals from a final judgment decreeing reformation of a fire insurance policy issued to plaintiff, and further decreeing that plaintiff recover from defendant certain sums representing the loss sustained by the subject fire plus interest from July 26, 1957 (the date on which defendant formally denied liability under the policy.) The amount of loss was determined by the trial court at a hearing subsequent to the entry of the interlocutory judgment, which ordered reformation of the policy, and upon remand by this court following dismissal of defendant's attempted appeal from such interlocutory judgment. (194 Cal.App.2d 494, 15 Cal.Rptr. 177.) Despite the dismissal of the prior appeal, and the parties having so stipulated, we have also undertaken to consider the several points therein briefed and argued which are adopted in the present proceeding by reference; they relate, of course, to the issue whether the evidence justified a reformation of the policy in the first instance.

The background facts are summarized in the opinion on the prior appeal. (194 Cal.App.2d 494, 495, 15 Cal.Rptr. 177): 'Maier owned and operated a brewery in Los Angeles. The buildings and equipment were insured against loss by fire by two policies issued by Home Fire and Marine Insurance Company, one effective December 8, 1952 to December 8, 1955, and the other effective January 22, 1953 to January 22, 1956, and a third policy issued by Union Insurance Society effective January 13, 1953 to January 13, 1956. Maier's property included a large lot known as the Gas Company property on which it stored equipment of the value of $318,000. The Home policies covered the equipment on the Gas Company property.

'About October 19, 1955 Pacific National, through Behrendt-Levy Insurance Agency, issued to Maier a fire insurance policy effective for a term of five years from December 8, 1955 to replace the Home and Union Policies. As the coverage under the Home and Union Policies did not expire on the same date, endorsements were included on the Pacific National policy increasing the coverage afforded to replace the coverage of the old policies as they expired. The Pacific National policy, as written, did not cover the equipment on the Gas Company property.

'About June 30, 1957 a fire occurred on the Gas Company property, damaging and destroying some of the equipment located thereon. Maier, without delay, gave notice of the loss to Pacific National. On July 26, 1957 Pacific National denied liability and gave as its reason that the property damaged and destroyed by the fire was not insured by the policy it had issued to Maier.

'Maier then instituted this suit for reformation of the Pacific National policy 'to add to the description of the premises covered by said policy 'former Gas Company property near Macy Street', or such other description as the court may deem proper.''

The trial court reformed the policy as prayed for by plaintiff. It found that plaintiff and defendant (through its agent Behrendt-Levy) intended and agreed that the former Gas Company property was also covered by the policy; that the personal property damaged and destroyed was located on said property; and that, by reason of the parties' mutual mistake, a specific description of the area in question was inadvertently omitted from the contract of insurance. (The judgment, as was proper, provided for the payment of additional premiums by plaintiff to compensate for the additional coverage decreed.)

Defendant advances two grounds for reversal. ¹ It challenges the sufficiency of the evidence and findings to support the determination that the contract be reformed; it also contends that certain evidence supporting such determination, and timely objected to, should not have been admitted. A second specification of error relates to the award of interest by the trial court at the further hearing to fix the amount of plaintiff's loss. We have concluded that none of these claims is sustainable and that the judgment should be affirmed.

Section 3399 of the Civil Code provides that reformation may be had '[w]hen, through fraud or a mutual mistake of the parties, or a mistake of one party, which the other at the time knew or suspected, a written contract does not truly express the intention of the parties * * *.' (Italics added.) The evidence discloses that in late 1954, or in the early part of 1955, Maier's insurance business was solicited by Mr. De La Soto of the Behrendt-Levy firm; his meetings were with Mr. Alef, Maier's representative. Subsequently, Alef turned the three expiring policies over to De La Soto in three separate envelopes; he also testified that before their delivery to De La Soto, the envelopes contained the endorsements with the description of the Gas Company property thereon. ² According to Alef, he told De La Soto that he wanted the coverage 'to be broad as or broader' than the expiring policies provided for. De La Soto corroborated this statement. He further testified that he then delivered the policies to Mr. Barsaloux, a fire insurance specialist employed by Behrendt-Levy, stating to Barsaloux: 'Here are the policies from Maier Brewing Company, do as good a job as you can, David, I want to see if we can improve the coverage.' ³ On October 29, 1955, De La Soto mailed Alef a policy of insurance written by defendant; the letter of transmittal read as follows: 'We are happy to enclose the captioned insurance policy covering all property at various locations as listed therein. While the policy has been written in the amount of $75,000, it has been increased by endorsements to a total amount of $1,080,000, thereby picking up coverage as it expires on existing policies.' Although it does not appear to be disputed that the policy called for the payment of a premium based upon the same valuation as did the previous policies, defendant's contract made no reference to the area where the fire subsequently occurred. The above evidence, in substance, is plaintiff's case for reformation.

Defendant, on the other hand, contends that any agreement between the parties could properly be reformed only if there had first been a meeting of the minds on the properties to be insured; stated otherwise, for a valid contract to exist the consent of the parties must be free, mutual and communicated by each to the other, and consent is not mutual unless all parties agree upon the same thing in the same sense. (Civ.Code, §§ 1565, 1580.) In this connection it has been said that courts are not interested in the subjective intent of the parties, but only in their objective intent--that is, what would a reasonable man believe from the outward manifestations of consent. (Brant v. California Dairies, Inc., 4 Cal.2d 128, 48 P.2d 13.) Defendant points to certain testimony that plaintiff never advised, Behrendt-Levy prior to the fire that it had equipment stored on the Gas Company property or that it wanted coverage of that area; reference is also made to testimony that neither defendant nor any of its agents had any knowledge (or should have known) that plaintiff owned the subject property or used it for storage purposes--the property, it appears, was located some 800 feet from the nearest Maier building. Significantly enough, however, defendant concedes that there was some evidence, although 'weak and conflicting,' tending to show that Maier brought its ownership of the Gas Company property to the attention of Behrendt-Levy when the envelopes containing the pertinent endorsements were turned over to De La Soto in the fall of 1955. Although it is well settled that the quantum of evidence is for the trier of fact, defendant also contends that the above adverse testimony is not of the 'clear and convincing' character necessary to establish plaintiff's right to reformation. But even if the endorsements were in the envelopes, says defendant, they were not seen by Behrendt-Levy prior to the fire, and accordingly neither defendant or any of its agents had the property in mind prior to the fire 'and there could not have been a 'meeting of the minds' with respect thereto.' This conclusion, however, can only be reached if the trier of fact accorded more weight to defendant's evidence--which obviously was not done

Notwithstanding defendant's extensive critique, we are of the view that plaintiff has brought itself within the principle of law codified by section 3399, Civil Code, that under specified conditions a written contract which does not truly express 'the intention of the parties' may be revised so as to set forth 'that intention.' As pointed out in Bailard v. Marden, 36 Cal.2d 703, 708, 227 P.2d 10, 13, this language refers to 'a single intention which is entertained by both of the parties.' Measured by the objective standard mentioned earlier, the basic question at bar is whether there is any substantial evidence to support the determination below that both parties mutually intended that the Gas Company property be covered by defendant's policy. Defendant, unquestionably, is arguing that the Alef-De La Soto meetings were simply in the nature of preliminary negotiations; apropos, therefore, is comment (a) to section 25 of the Restatement of Contracts (approved in California): 'It is often difficult to draw an exact line between offers and negotiations preliminary thereto. It is common for one who wishes to make a bargain to induce the other party to the intended transaction to make the definite offer,...