McAnarney v. Newark Fire Ins. Co.

• Decision Date: 10 January 1928
• Citation: 247 N.Y. 176,159 N.E. 902
• Parties: McANARNEY v. NEWARK FIRE INS. CO. et al.
• Court: New York Court of Appeals Court of Appeals

247 N.Y. 176

159 N.E. 902

McANARNEY

v.NEWARK FIRE INS. CO. et al.

Court of Appeals of New York.

Jan. 10, 1928.

Action by Thomas W. McAnarney against the Newark Fire Insurance Company and another. A judgment for plaintiff was affirmed by the Appellate Division (221 App. Div. 818, 224 N. Y. S. 844), and the named defendant appeals.

Reversed, and new trial granted.

Appeal from Supreme Court, Appellate Division, Third Department.

Robert P. Schur, of New York City, Ross M. Lovell, of Elmira, and Royal H. Weller, of New York City, for appellant.

James M. E. O'Grady, of Rochester, E. W. Personius, of Elmira, and Leo Waxman, of Rochester, for respondent.

KELLOGG, J.

The plaintiff was the vendee of certain real estate, purchased in the year 1919 from the defendant Lembeck & Betz Eagle Brewing Company, under written contract, for the sum of $8,000. Seven large buildings, designed for the manufacture of malt, stood upon the premises. Malt had been extensively manufactured therein prior to the year 1918. Owing to the passage of the National Prohibition Act (27 USCA) its manufacture was discontinued in March of that year and thereafter the buildings ceased to be employed for any useful purpose. In January, 1920, policies of insurance insuring the plaintiff and the Lembeck & Betz Eagle Brewing Company, as their interest might appear, against loss of the buildings by fire, in the aggregate sum of $42,750, were taken out. In April, 1920, the buildings were destroyed by fire. Subsequently the plaintiff served proofs of loss wherein he valued the buildings at approximately $60,000 and made claim for the total amount of the insurance. The defendant Newark Fire Insurance Company was one of the insuring companies. It had issued a policy insuring the plaintiff and the defendant Lembeck & Betz Eagle Brewing Company against fire loss in the amount of $2,500. The plaintiff demanded payment from it and, upon its refusal, brought this action to recover the sum of $2,500 promised by its policy. The Lembeck & Betz Eagle Brewing Company had refused to unite with the plaintiff in bringing suit. It was therefore made a party defendant. The action was tried before a jury, to which the trial judge submitted the written question, ‘What was the intrinsic or depreciated structural value of the buildings burned?’ The jury returned a verdict specifying the value to have been $55,000. The trial court, having ascertained that the plaintiff had paid to the Lembeck & Betz Eagle Brewing Company the full purchase price for the property, directed judgment in favor of the plaintiff against the Newark Fire Insurance Company for the amount of its policy, with interest.

Complaint is made that the trial court in the course of the trial committed a variety of errors in ruling upon the admissibility of proof offered by the defendant. It refused to receive proof that the plaintiff, when a director of the Lembeck & Betz Company, in the year 1919 reported to that company that he had been unable to obtain a purchaser for the property; that in the same year the corporation had directed the plaintiff to erect a sign upon the premises advertising the property for sale for the sum of $12,000. It refused to receive in evidence an affidavit made by the plaintiff in the year 1919 which was filed with the local board of assessors. In this affidavit the plaintiff had stated that the property had no value except for the production of malt; that the production of malt upon the premises had entirely ceased; that the owners would accept for the property the sum of $15,000; that the best offer which had been received was $6,000. To the rulings made, excluding such proof and proof of a similar nature, the defendant duly excepted. Complaint is also made of the court's charge to the jury and of its refusals to charge. The court said to the jury:

‘Your answer shall not be the market value-shall not be the sum that the buildings would sell for, but what it cost to build them-what it cost to build the structures, less depreciation proven in the case.’

It charged that the fact that the buildings, because of the passage of the National Prohibition Act, could no longer be used for the manufacture of malt, and the fact that the buildings could no longer be employed for any useful purpose, were wholly immaterial. It further charged that the value of the buildings destroyed was to be measured solely by the cost of replacement less deductions for physical deterioration. The defendant duly excepted to the charges made. It requested the court to charge several propositions of law which were the direct converse of the charges thus made, and, to its refusal, duly excepted.

The policy in suit contained the standard clause, applicable alike to fire losses whether of chattels or buildings, reading as follows:

‘The insurance company does insure * * * and legal representatives to the extent of the actual cash value (ascertained with proper deductions for depreciation) of the property at the time of loss or damage, but not exceeding the amount which it would cost to repair or replace the same with material of like kind and quality within a reasonable time after such loss or damage.’

We cannot agree with the defendant that, under this clause, the market value of the buildings destroyed was the exclusive measure of the plaintiff's loss. Insurance is thereby limited to ‘actual cash value (ascertained with proper deductions for depreciation) of the property at the time of loss or damage.’ Value ascertained by market price is necessarily expressive of a suitable deduction for depreciation. If ‘actual cash value’ were synonymous with ‘market value,’ the words in parenthesis, to have force, would require depreciation to be twice subtracted. No such anomalous result could have been intended. In order that the parenthetical words should have force, therefore, ‘actual cash value’ must be interpreted as having a broader significance than ‘market value.’ Moreover, if market value were the rule, property, for which there was no market, would possess no insurable value, a proposition which is clearly untenable. We think it manifest that the clause was not intended to restrict a recovery for this insurance loss to the market value of the insured buildings. We interpret ‘actual cash value’ to have no other significance than ‘actual value’ expressed in terms of money. For methods by which actual value may be ascertained, we must look beyond the terms of the policy to general principles of the law of damages.

No principle, obtaining in the law of damages, requires that the recovery be restricted to the market value of the buildings. True it is that articles of commerce destined for sale must be appraised, to measure loss through coversion or breach of contract, by the market prices at which such articles are bought and sold. The reason for the rule is this: The loser of the article, if awarded the prevailing price therefor, may enter the market and, with the sum awarded, replace the article lost with a substitute identical in kind and quality. Replacement in kind necessarily accomplishes complete indemnity. However, the rule presupposes the existence of a broad market with frequent trading in articles of an identical character with the article lost. Starkey v. Kelly, 50 N. Y. 676;Dana v. Fiedler, 12 N. Y. 40, 62 Am. Dec. 130;Messmore v. N. Y. Shot & Lead Co., 40 N. Y. 422;Wehle v. Haviland, 69 N. Y. 448;Todd v. Gamble, 148 N. Y. 382, 42 N. E. 982,52 L. R. A. 225;Saxe v. Penokee Lumber Co., 159 N. Y. 371, 54 N. E. 14. It must be a market in which the loser ‘could have replaced the goods.’ Wehle v. Haviland, supra. It must show ‘what would be the value to a party if he wanted to get the same articles again.’ Starkey v. Kelly, supra. It must enable the loser to ‘supply himself with this article by going into the market and making his purchase at such price.’ Messmore v. N. Y. Shot & Lead Co., supra. It has been said that value does not inhere in the thing to be valued; that it is a subjective conception; that identity of belief, on the part of many traders, as indicated in a market, causes the conception to assume the objective quality of an established fact. Sedgwick on Damages, § 242. ‘Market value,’ as an exclusive measure of damages, necessarily involves identity of concept as disclosed by frequency of sale. ‘Proof of a single sale is not enough to establish a market value.’ Sedgwick, § 244. Clearly, where no sales have been made, the opinion of an expert that the property in question ‘will sell’ for a given sum does not establish ‘market value,’ in the sense of an exclusive criterion of value. ‘There cannot be an established market value for barges, boats, and other articles of that description, as in cases of grain, cotton, or stock. The value of such a boat depends upon the accidents of its form, age, and materials; and as these differ in each individual there could be no established market value.’ The Granite State, 3 Wall. 310, at p. 314 (18 L. Ed. 179). A luxurious private yacht of large dimensions, though marketable in the sense that she can be sold, in the true sense of the term has no market value. ‘She does not fall within the class of articles which are sold from day to day, so that frequent current market...