N.W. Amusement Co. v. Aetna Co.

• Decision Date: 13 November 1940
• Citation: 107 P.2d 110,165 Or. 284
• Parties: NORTHWEST AMUSEMENT CO., INC., <I>v.</I> AETNA CASUALTY & SURETY CO.
• Court: Oregon Supreme Court

165 Or. 284

107 P.2d 110

NORTHWEST AMUSEMENT CO., INC.,v.

AETNA CASUALTY & SURETY CO.

Supreme Court of Oregon.

Argued October 15, 1940.

Affirmed November 13, 1940.

Estoppel — Insurance — Pleading

1. Where company sued on mercantile burglary policy in which president of company was named assured, and insurer set up as defense that action was not maintainable by company as president and not company was the named assured, and reply only alleged facts because of which insurer ought not to be permitted to prove policy was not issued to company, company could not recover, since facts relied upon by company as an estoppel, being pleaded only in the reply, were not available to company.

Insurance — Contracts

2. The parties to a contract of insurance are presumed to have knowledge of valid city ordinances or local laws, and ordinances and local laws become an integral part of policies upon property within the limits to which they apply.

Contracts — Illegal agreement

3. The rule of public policy which prevents a recovery upon an illegal agreement is not based upon impropriety of compelling a defendant to comply with his contract, but rather because plaintiff is a wrongdoer.

Contracts — Performance

4. Mere fact that one of parties to an agreement capable of being performed in legal manner intended to perform contract in illegal manner does not preclude enforcement of contract by other party.

Contracts — Illegal agreement

5. The tests in determining whether a recovery should be permitted on a contract challenged as illegal are whether contracts aid or attempt to aid a result possible of attainment only by an unlawful act or one contrary to public policy; whether plaintiff can establish his case without reference to, or reliance upon the illegal act or transaction; whether contract is a new contract based upon separate legal consideration; and what is the evil apprehended if the contract is enforced.

Insurance — Slot machines

6. A mercantile burglary policy covering slot machines, the possession of which was forbidden by ordinance, was illegal, and no recovery could be had thereon.

                  See 12 Am. Jur. 769
                  32 C.J., Insurance, § 274
                

In Banc.

Appeal from Circuit Court, Multnomah County.

JOHN P. WINTER, Judge.

Action by the Northwest Amusement Company, Inc., against the Aetna Casualty & Surety Company on a mercantile burglary policy against theft of personal property issued by the defendant to Ben Levin, doing business as the Northwest Amusement Company. From a judgment of involuntary nonsuit, the plaintiff appeals.

AFFIRMED.

Stephen W. Matthieu, of Portland (John F. Logan, of Portland, on the brief), for appellant.

Frank S. Senn, of Portland (Seen & Recken, of Portland, on the brief), for respondent.

KELLY, J.

The defendant issued a mercantile burglary policy of insurance for direct loss by burglary of merchandise usual to assured's business, being that of "Premium Store" at 106 Northeast Oregon street, for a period of twelve months beginning at noon on the 19th day of November, 1935, and ending at noon on the 19th day of November, 1936. The name appearing in the application for said policy, and which is incorporated in said policy as that of the assured is, "Ben Levin dba Northwest Amusement Co."; and it is stated in said application and policy that the assured is an individual.

It is alleged in plaintiff's second amended complaint, and testimony was introduced tending to prove that on or about the 28th day of May, 1936, some person or persons unknown to plaintiff broke into plaintiff's premises and stole therefrom twenty-seven slot machines.

It is alleged in defendant's answer, and the evidence discloses that, at the time of the execution of said policy and at the time of the alleged theft, said slot machines were gambling devices.

In plaintiff's second amended complaint, which is the last amended complaint filed by plaintiff herein, there is no allegation of any fact whereby or because of which defendant ought not to be permitted to allege and prove that said policy was not issued to plaintiff corporation but only to Ben Levin, an individual, or that the insured was not the owner of the property covered by the policy.

In plaintiff's reply to defendant's answer, it is alleged:

"That any inaccuracy in describing the plaintiff as the insured was due to the mistake and inaccuracy of the defendant and its agents. That said policy was ordered solely on behalf of the plaintiff, and the plaintiff paid the premium thereon. That payment of such premium was made with the knowledge and consent of the defendant and accepted as premium paid by the plaintiff."

"That the Ben Levin described in defendant's answer was at all times the president of the plaintiff, acting solely on its behalf and as its agent. That prior to the issuance of said policy, the specific property upon which plaintiff's claim is based was pointed out to the defendant as and for the property of plaintiff and was part of the property which defendant agreed to insure under its aforesaid policy."

At the time of the issuance of said policy of insurance, there was, and at all times since there has been, in effect an ordinance of the city of Portland, providing, among other things, that —

"It shall be unlawful to set up, keep or have in possession or to manufacture, sell or distribute within the City of Portland any nickle-in-the-slot or other money slot machine or similar device adapted, devised or designed for the purpose of playing any game of chance for money or property, and it shall be unlawful for any person to have in possession any operating part capable of being assembled or used in any such machine or device." Section 13-1, Ordinance No. 32928, City of Portland.

Among other things, said ordinance also provides that it shall be the duty of the chief of police to seize any such money, slot machine or operating part found in the possession of any person in the city of Portland in violation of the above quoted section of said ordinance; and that whenever it shall appear to the municipal court that such machine or devices so seized were used or kept within the city of Portland in violation of said ordinance, the municipal court, in addition to the penalties prescribed by this ordinance, may adjudge forfeiture thereof, and shall order the chief of police to destroy the same. Said ordinance also provides that the chief of police shall make a return to the court showing that he has complied with such order.

Defendant urges that the order of involuntary nonsuit should be affirmed on the ground that as Ben Levin, an individual, is the assured, the action is not maintainable by plaintiff, a corporation; on the further ground that because possession of slot machines is forbidden by ordinance, their loss by burglary cannot be made the basis of recovery upon the burglary policy of insurance herein; and on the further ground that, being gambling devices, the possession of which is forbidden, the slot machines were valueless.

1. The first reason thus given by defendant is supported by a former decision of this court. In that case, an action was brought by Mary I. Mercer on a policy of fire insurance issued in favor of A.G. Mercer. The facts relied upon as estoppel by waiver were pleaded in the reply. It was there held that, inasumch as the complaint failed to allege facts by reason of which defendant should not be permitted to urge that the insured A.G. Mercer did not own the insured property; and that hence the policy was void because of the provision therein to the effect that such policy would be void if the interest of the insured be other than sole and unconditional ownership of the property covered. Mercer v. Germania Insurance Co., 88 Or. 410, 171 P. 412. The doctrine of that case is controlling here.

2. The ordinance, above mentioned, has been upheld by this court, Enloe v. Lawson, 146 Or. 621, 31 P. (2d) 171.

"The parties to a contract of insurance are presumed to have knowledge of valid city ordinances or local laws, and they become an integral part of policies upon property within the limits to which they apply." Vol. 1, Couch's Cyclopedia of Insurance Law, p. 296, § 149.

Plaintiff's possession of the slot machines was a continuing violation of the ordinance in question. The contract of insurance had for its object the indemnification of plaintiff from damage by reason of the loss of such possession by burglary. We think that such a contract should not be enforced by the court.

Where an insurance company issues a policy of insurance on a building, which is wholly devoted to the illegal sale of liquor, such policy is invalid. Vol. 2, Restatement of the Law, Contracts, pp. 1108, 1109, § 597, Illustration 1. The possession of slot machines in Portland is illegal in its entirety.

3. The rule of public policy, which prevents a recovery in court upon such an agreement, is not based upon the impropriety of compelling the defendant to comply with his contract. That in itself would generally be a desirable thing. Relief is denied, because plaintiff is a wrongdoer.

"Courts do not wish to aid a man who founds his cause of action upon his own immoral or illegal act. * * * The court's refusal is not for the sake of the defendant, but because it will not aid such a plaintiff." Ibid, p. 1110.

The distinction between the case at bar and Brown v. New Jersey Insurance Co., 140 Or. 547, 14 P. (2d) 272, is that in the instant case the possession of the slot machines was prohibited by an ordinance which, under the authority above cited, is an integral part of the insurance policy, while in Brown v. New Jersey Insurance Co., supra, the possession of the insured goods was not prohibited by any law.

In the case of Insurance Company of North America v. Evans, 64 Kan. 770, 68 P. 623, it is stated that under the Kansas constitution and statutes, liquors may be lawfully kept and for some purposes they may be legally sold. The holding in that...