Midland Motor Co. v. Norwich Union Fire Ins. Soc.

• Decision Date: 23 March 1925
• Docket Number: 5561.
• Citation: 234 P. 482,72 Mont. 583
• Parties: MIDLAND MOTOR CO. v. NORWICH UNION FIRE INS. SOC., Limited, et al.
• Court: Montana Supreme Court

234 P. 482

72 Mont. 583

MIDLAND MOTOR CO. v. NORWICH UNION FIRE INS. SOC., Limited, et al.

No. 5561.

Supreme Court of Montana

March 23, 1925

Appeal from District Court, Yellowstone County; Robert C. Stong Judge.

Action by the Midland Motor Company against the Norwich Union Fire Insurance Society, Limited, and another. Judgment for plaintiff, and defendants appeal. Affirmed.

Brice Toole and T. J. Davis, both of Butte, for appellants.

Grimstad & Brown, of Billings, and Gunn, Rasch & Hall, of Helena, for respondent.

John S Coke, of Portland, Or., and T. A. Mapes, of Helena, amici curiæ.

STARK J.

On November 25, 1920, Charles R. Ross purchased from the plaintiff one Cole Aero Eight seven-passenger touring car for the sum of $3,650, under a conditional sale contract by which the title to the automobile remained in the vendor as security for an unpaid balance of the purchase price, amounting to $2,433.30. On the same day the defendants, in consideration of a premium of $36.30 issued to the purchaser, Ross, their policy No. 25044 for $3,300, insuring said automobile against loss from fire, theft, or robbery, or damages sustained in transportation. In this policy the automobile is described as a new 1920 model, seven-passenger touring car. For an additional premium of $5, by an indorsement on the policy, defendants insured the plaintiff against all direct loss or damage which it might sustain by reason of the fraudulent concealment or disposal of the automobile by the vendee, Ross, and in consideration of a further premium of $2 attached to said policy a confiscation clause, by which it further insured the plaintiff against all direct loss or damage which it might sustain "caused by the confiscation of said automobile by reason of the violation (otherwise than by the said vendor) of the provisions of the 'National Prohibition Act,' or other laws of the United States relating to the transportation of intoxicating liquors or other articles subject to restricted sale, not exceeding the amount named in the said policy, nor the actual cash value of the said automobile at the time of the said confiscation, nor exceeding two-thirds (2/3) of the contract purchase price thereof, and in no event to exceed the amount of the unpaid installments of the purchase price of said automobile, exclusive of any interest thereon."

Claiming that after the issuance of this policy, and while it was in full force, the automobile described therein was taken from the possession of the vendee, Ross, confiscated, and ordered sold for a violation of the laws of the United States of America relating to transportation of liquors, and that thereby the defendants had become liable to it for the sum of $2,433.30, which they had refused to pay, the plaintiff brought this action to recover judgment against them for that amount. A copy of the insurance policy with the indorsements is attached to and made a part of the complaint.

After a general demurrer to the complaint had been overruled, the defendants filed their answer, in which they admitted the purchase of the automobile by Ross in the manner and under the conditions above recited, and also the issuance of the policy of insurance together with the above-mentioned indorsements. They also admitted that after the issuance of the policy the automobile was taken from the possession of Ross, and in due time, in the manner provided by law, by order of the District Court of the United States for the District of Montana, confiscated and ordered sold.

In addition to the general admissions and denials contained in their answer, the defendants set up several separate and affirmative defenses. In the second affirmative defense the following clause of the policy is set out:

" Misrepresentation and Fraud.-This entire policy shall be void if the assured or his agent has concealed or misrepresented in writing or otherwise any material fact or circumstance concerning this insurance or the subject thereof, or if the assured or his agent shall make any attempt to defraud this company whether before or after loss."

It is then alleged that plaintiff's rights as vendor under the conditional sale contract arise under the conditional sale contract indorsement upon the policy of insurance, and subject thereto; that when the policy was issued Ross informed the agent of the defendants that the automobile described in the policy was a 1920 model, when as a matter of fact it was a 1919 model; that defendants relied upon this statement and were deceived thereby; that such misrepresentation was of a material character, and by reason thereof the claim of plaintiff is null and void.

The third affirmative defense is similar to the second, except that it is therein alleged that the insured, Ross, represented to the defendants that said automobile was new at the time of the issuance of the policy, while as a matter of fact it was secondhand, and that by reason of that fact the policy is null and void.

The fourth, sixth, and seventh affirmative defenses are based upon the alleged failure of the plaintiff to give notice of the confiscation of the automobile and to furnish proof of loss as required by the policy. In the fifth and eighth affirmative defenses it is alleged that the automobile was not confiscated under the laws of the United States relative to the illegal transportation of intoxicating liquors, but was in fact confiscated under the laws relative to internal revenue, being specifically section 3450, United States Revised Statutes (U. S. Comp. St. § 6352); that the plaintiff having voluntarily placed Ross in charge of said automobile, under that section the automobile itself became an actor in the violation of the law; and "that if said policy is construed to extend protection to the plaintiff for a confiscation of the automobile after violation of the provisions of section 3450 of the Revised Statutes of the United States," said policy and confiscation clause are void and unenforceable as being against public policy.

Issue was joined upon the affirmative defenses by plaintiff's reply. The cause was tried to a jury. At the close of all of the evidence, plaintiff and defendants each made a motion for a directed verdict. The ruling of the court upon these motions was as follows:

"By the Court: Let the record show in this case that the motion of the defendants is denied, and the motion of the plaintiff is granted except as to the value of the car. Upon the return of the verdict by the jury, the court will grant plaintiff's motion in its entirety, except that it will insert in lieu of the value of the car at $2,433.30, the amount so found by the jury, and will render judgment accordingly."

Thereupon the court instructed the jury as follows:

"Gentlemen of the jury, the court instructs you that the only issue for you to determine in this case is the value of the automobile in question," which was followed by other instructions for the guidance of the jury in determining the value.

The jury returned a verdict in effect finding that the value of the automobile was $2,433.30, and on January 16, 1924, the court entered judgment in favor of the plaintiff and against the defendants for the value of the car as found by the jury, together with interest thereon from August 7, 1922, amounting in all to $2,715. Defendants made a motion for a new trial, which was denied, and they have appealed from the judgment.

Attention will first be directed to the contention of counsel that the plaintiff is not entitled to recover for the reason that the policy of insurance and the confiscation clause attached thereto are void and unenforceable, for the reason that they are against public policy.

Basing their argument upon the statement that section 3450, United States Revised Statutes (Comp. Stat. § 6352), which had been on the statute books since the year 1866, and which provides "Whenever any * * * commodities for or in respect whereof any tax is or shall be imposed, * * * are removed * * * with intent to defraud the United States of such tax, * * * all such goods and commodities, * * * carriage, or * * * conveyance * * * shall be forfeited," was in force and applicable to the facts in this case, and the decision of the Supreme Court in Goldsmith v. United States, 254 U.S. 505, 41 S.Ct. 189, 65 L.Ed. 376, in which it was held that an automobile used in aid of the violation of the provisions of section 3450 itself becomes the offender without regard to the criminal connection of the individual owning it, counsel contend that the effect of the confiscation clause is to insure against the effect of a criminal offense by the offender itself, and so militates against the public welfare, contravenes the established interests of society, and is void....