Michels v. Western Underwriters' Ass'n

• Decision Date: 11 February 1902
• Citation: 129 Mich. 417,89 N.W. 56
• Parties: MICHELS et al. v. WESTERN UNDERWRITERS' ASS'N. MICHELS TRANSATLANTIC FIRE INS. CO.; MICHELS v. PRUSSIAN NAT. INS. CO.; MICHELS v. INTERNATIONAL INS. CO.
• Court: Michigan Supreme Court

89 N.W. 56

129 Mich. 417

MICHELS et al. v. WESTERN UNDERWRITERS' ASS'N.

MICHELS TRANSATLANTIC FIRE INS. CO.; MICHELS v. PRUSSIAN NAT. INS. CO.;

MICHELS v. INTERNATIONAL INS. CO.

Supreme Court of Michigan

February 11, 1902

Appeals from circuit court, Wayne county, in chancery; Robert E Frazer, Judge.

Suits by Jacob Michels and others against the Western Underwriters' Association and others to set aside an arbitrators' award of a fire insurance loss. From a decree in favor of plaintiffs, defendants appeal. Reversed.

Complainants were for many years prior to March, 1899, manufacturers of woodworking machinery, and conducted a general machine shop. At that time the defendant companies insured their property consisting of machinery, machine patterns, stock, fixtures etc. Some of their property (chiefly the patterns) was damaged by fire on June 21, 1899, and it is claimed that some weretotally destroyed. Upon receiving notice of the loss, the defendants sent their adjusters, who were unable to agree with the complainants as to the amount of the loss. The policies were of the Michigan standard form. In them was a provision that, in case of disagreement as to the amount of loss, the same should be ascertained by two competent and disinterested appraisers, each party to the contract to select one, and the two so chosen to select an umpire. The appraisers were then to estimate and appraise the loss stating separately sound value and damages, and, on failing to agree, to submit their differences to the umpire. The award in writing of any two was to be prima facie evidence of the amount of the loss. The property covered consisted of eight items, the two principal ones being the machinery etc., used in manufacturing, insured for $1,770, and patterns and materials for the same, insured for $3,000. An agreement of submission was executed June 28, 1899. It provided that the award should be binding upon both parties as to the amount of the loss. It further provided that in determining the sound value and loss or damage upon the property the appraisers should estimate the 'actual cash cost of replacing or repairing the same, or the actual cash value thereof at and immediately preceding the time of the fire, and, in case of depreciation of the property from use, age, condition, location, or otherwise, a proper deduction should be made therefor.' The loss was claimed upon four items mentioned in the articles of submission, viz.: (1) Stock and manufactured machinery, insured for $500; (2) engines, etc.; (3) patterns and materials for same; (4) office and shop furniture, etc., insured for $270. Complainants selected as their appraiser one Charles M. Caryl, a man 70 years of age, and of experience in the value of property such as was covered by the insurance. The defendants selected one Douglass, of Chicago, about 60 years of age; also a man of experience in such matters. The complainants and their foreman took the appraisers over the scene of the fire; furnished them a list of the property, which they used in checking up the property damaged or destroyed; showed them that which was damaged, and explained the damages. The award was made June 30th. The loss and damage were found as follows:

On stock of manufactured machinery .. $ 66 00

On machinery, belting, etc ............ 50 00

On patterns .......................... 594 75

On office fixtures, etc ............... 30 00

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Total ............................. $740 75

The complainants ignored the award, and brought suit against each of the defendants upon the policies, claiming damages of $4,416.30. To these suits pleas were interposed setting up the appraisal and award as final and binding. One of the suits came on for trial, and the court held, when the facts were developed, that the award was binding, and could only be set aside in a court of chancery. A juror was then withdrawn, and complainants then brought suit in chancery against each of these defendants to set aside the award. Upon objection being made to the first suit in equity, when brought on for hearing, that the other insurance companies parties to that award should be made parties in the same suit, the court ordered all the cases to be consolidated and heard as one. The grounds set up in the bill for setting aside the award are: (1) That the agreement to submit to arbitration was not in accordance with the terms of the policy; that it was 'false and fraudulent; was not, in fact, agreed to by your orators, and was imposed upon them by fraud, and by taking advantage of your orators' lack of knowledge of their rights, and of the particular terms of said agreement for submission.' (2) That the award 'was false, fraudulent, corrupt, and void, because the amount was grossly disproportionate to the actual loss; because the appraisers did not conduct their investigations judiciously, honestly, fairly, or impartially; because they held no regular sessions at which parties might be heard; because they refused to hear evidence or statements which complainants desired to make; because they appointed a time and place for listening to proofs, and then executed and signed said award without awaiting the time so appointed; because said appraisers undertook to decide that certain items of personal property, climed to have been destroyed by fire, were not in the fire, and were not damaged or destroyed by said fire.' Proofs were taken in open court, and the award set aside, because: (1) The submission was not in accordance with the terms of the policy; and (2) that the method adopted in the determination of the amount of loss by the appraisers was not such as was contemplated by the terms of the submission.

A court of equity in passing on questions of fact should not submit its conscience to what a jury might do under like circumstances.

Moore & Goff, for appellants.

Maybury & Lucking, for appellees.

GRANT, J. (after stating the facts).

1. It was insisted upon the hearing in the court below that all the insurance companies who were parties to the arbitration should have been made parties to one suit brought to set it aside, and that, therefore, the bill should be dismissed for lack of indispensable parties. The contention is sound, and, if this objection had not been waived, it should prevail. The learned circuit judge recognized the rule, but held that the same object could be accomplished by a consolidation of the cases. Whether that opinion be sound we need not determine. The bill set up all the facts in regard to the agreement of submission, and showed that all the companies now defendant were parties to that submission. The necessity of such parties, therefore, appeared upon the face of the bill, and, under the holding in Powers v. Hibbard, 114 Mich. 533, 72 N.W. 339, this objection should have been raised by demurrer. It was too late to raise it upon the hearing.

2. Complainants were permitted to testify to conversations with one Smitha, who was the agent and general adjuster for the defendants. Smitha had died long before the hearing. A third party was present at those conversations. Counsel for complainants admit that the testimony should have been excluded under section 10,212, Comp. Laws, prohibiting parties from testifying to facts equally within the knowledge of the deceased if a third party had not been present. The admission of such testimony would be in plain violation of the statute. The third person is the only one competent to testify to what passed between the parties, one of whom is dead. This was expressly decided in Taylor v. Bunker, 68 Mich. 258, 36 N.W. 66. Although this is a chancery case, the circuit judge was under no obligation to admit such evidence, and should have excluded it.

3. It is next urged that complainants are not in position to raise the question of fraud in procuring the submission contrary to the terms of the policy, because their letters and those of their attorneys made no such claim, and no such claim was made until the bill was filed. Several authorities are cited, which seem to support this proposition, but it is unnecessary to pass upon it. The contract of submission can be set aside only for fraud or mistake. We find no evidence of fraud on the part of the agents of the defendants who executed it, and no mistake is claimed. The agreement was very short, and both complainants had it in their possession and signed it. Aside from the description of the property on which the loss was to be determined, it does not fill a page of the record, and entire it fills only two pages. Both appraisers, who were disinterested, and one Loeb, an adjuster for the defendants testified that complainants read it. They had ample opportunity to read it, and it was their own fault if they did not. The only basis for setting aside the submission is that the complainants did not choose to read it, but supposed it was in accordance with the policy. Mr. Michels testified that he knew there was a provision for arbitration, but did not know its terms. Contracts cannot be set aside simply because one of the parties thereto did not choose to read them over. If complainants had prepared the submission, and submitted it to the defendants for their approval and execution, and the defendants had been dissatisfied with the award and complainants satisfied, would these defendants be permitted to say, 'The award is fraudulent, because our agents signed it without choosing to read it?' A contract of submission between an insurer and its insured is governed by the same rules as a similar contract between any other parties. The circuit judge found there was no actual fraud, but that there was a legal fraud upon the complainants, in that they were not informed by defendants...