National Fire Ins. Co. of Baltimore v. Crane

• Decision Date: 28 June 1860
• Parties: NATIONAL FIRE INSURANCE COMPANY OF BALTIMORE v. WM. CRANE.
• Court: Maryland Court of Appeals

16 Md. 260

NATIONAL FIRE INSURANCE COMPANY OF BALTIMORE v. WM. CRANE.

Court of Appeals of Maryland.

June 28, 1860

Where a court of equity is asked to reform a written contract, on the ground of mistake, the mistake charged must be proved in the most clear and unequivocal manner; the proof must be free of all reasonable doubt, almost, if not quite incontrovertible, and clear and overwhelming.

An insurance policy, insuring A and making " the loss if any, payable to " B, is to be regarded as having been, at its inception, assigned to B with the assent of the company, and he is entitled to its benefit without procuring a transfer of the policy from A assented to by the company as in ordinary cases.

Courts of justice must regard all the parts of a transaction, and impute to the parties a motive for doing or saying what the case discloses; every fact and declaration must be considered as the result of design or agreement, and the intent of the parties should have effect, if it can be done consistently with established rules.

A release to qualify a witness, must be given before the testimony is closed, or it comes too late; but, if the trial is not over, the court will permit the witness to be re-examined after he is released, and it will generally be sufficient to ask him if his testimony, already given, is true, the circumstances under which it was given going only to his credibility.

The fact that a party transferred his interest for the purpose of becoming a witness, does not disqualify him, however it may affect his credibility.

The president and secretary of an insurance company, not being stockholders therein, are competent witnesses for the company in an action upon a policy executed by the company.

Where the fact of a prior insurance was notified to the company at the time the policy was issued, the want of the endorsement of such prior insurance on the policy cannot be urged in a court of equity, in a cause otherwise free from objection, whatever effect it may have at law.

The endorsement of a prior insurance on the policy could only have been made by the company, and if omitted, the assured is not at fault, if he has notified the company of the existence of such prior insurance.

There is a distinction in cases where the preparation of an instrument belongs to the party to become liable under it; he ought to be dealt with more strictly, and insurance contracts are within this principle.

Equity will interpose not only in cases of fraud but also of mistake, where a policy is drawn up in a form different from the application, or any thing is omitted which it was the duty of the company to insert or endorse on the instrument.

APPEAL from the Circuit Court for Baltimore City.

The bill in this case was filed, on the 29th of June 1855, by the appellee, against the appellant and one Jas. L. Gray, surviving partner of the firm of " " J. L. Gray & Brother," composed of the said Jas. L. Gray and George P. Gray, praying that the appellant may be compelled, by decree, to pay to the complainant the sum of $2000, with interest, the amount for which a policy of insurance, issued by the appellant, was renewed and continued, and that this policy, and the endorsement thereon, may be altered and reformed, if need be, so as to represent the true agreement between the parties, as set forth in the bill, and that the mistakes, alleged and charged in the bill, may be corrected, and for general relief.

The original policy, dated the 14th of January 1854, states, that the company " Have agreed to insure, and do hereby insure, J. L. Gray & Brother against loss or damage by fire, to the amount of $4000:--on brick steam mill situated in Carpenter's Alley, between Eutaw and Paca streets, $1000; on steam engine and whiting machinery, $1000; --on Sumac, ground and unground, in said mill, $2000. Loss, if any, payable to W. Crane & Co. --as per application." It was to continue for one year, and contains in its body, among others, this stipulation: " And provided also, that in case the assured shall have already any other insurance made on the hereby insured premises, he shall notify the same to this corporation before or at the time of executing this policy, and cause the same to be endorsed thereon; otherwise this insurance shall be void and of none effect." The fourth of the conditions accompanying the policy, and subject to which it was made, provides that: " The person for whose interest the insurance is made, must be declared and named therein; nor can any policy, or interest therein, be assigned but by the consent of the company, expressed by endorsement made thereon. " It was endorsed thus: " " " National Fire Insurance Company, office No. 13 South street. Policy No. 859-- To J. L. Gray & Brother. Dolls. 4000.--Premium $80.--Five per cent. discount as Fireman, $80.--Policy 1, $81. Date January 14th, 1854. For one year.-- Terminates January 14th, 1855." Ou the 13th of January 1855, it was renewed by the following endorsement thereon: " Payment of the premium for continuing the insurance by this policy is acknowledged to have been received as follows: Date of receipt, January 13th, 1855.--Premium received, $40.--Sum insured $2000; that is, $1000 on engine and machinery, $1000 on building, as described. Secretary's signature,--Jno. R. Magruder."

At the time this policy was issued, the Grays held the property, under a bond of conveyance from E. H. and F. Stabler, and the firm of Wm. Crane & Co., composed of the complainant, and James C. and Andrew F. Crane, had made large advances of money to the Grays, a large part of which was expended in building the factory, and supplying it with proper machinery, and this money was advanced in consideration that the Grays would assign to the Cranes, as security therefor, the property and premises which they held. On the 3rd of October 1854, the Grays executed to Wm. Crane & Co., a deed of assignment of all their interest in the property. On the 1st of January 1855, the partnership of Wm. Crane & Co. was dissolved, James C. Crane retiring from the firm, and assigning by deed all his interest in the partnership, and particularly in the property insured, to his two co-partners, who continued business under the firm of W. Crane & Son, as the successors of Wm. Crane & Co. And on the 17th of February 1855, the Stablers executed a deed conveying to W. Crane & Son, the legal title to the property, the equitable title whereof had been previously assigned by the Grays to Wm. Crane & Co.

A fire occurred on the 23rd of March 1855, by which the factory, & c., was totally destroyed, and the loss incurred exceeded the amount of the insurance, and the company refused to pay this loss, upon the grounds:

1st. That J. L. Gray & Brother were the parties insured, and, before the fire occurred, they had parted with all interest in the property insured, and the policy was never assigned to W. Crane & Co., or Wm. Crane & Son, as required by the fourth condition thereof.

2nd. That at the time the policy was issued, there was a prior outstanding insurance in the Firemen's Insurance Company, which was not notified to the company, and endorsed on the policy, and therefore the policy never attached.

Andrew F. Crane, then, by an endorsement on the policy, under his hand and seal, dated the 30th of April 1855, " for value received," assigned all his " title and interest in this policy, and all advantages to be derived therefrom," to William Crane, who, on the 29th of June following, filed the bill in this case.

The bill alleges and charges, among other things, that the defendant, the National Fire Insurance Company, was fully notified of the equitable and substantial interest of Wm Crane & Co., in the property insured, at the time the policy was issued,--of its standing as security for money loaned by them to the Grays, and expended thereon,--and of their purpose to be secured therein by the insurance, and that the insurers meant to insure the interest of Wm. Crane & Co. in the property, and executed and delivered the policy for that object and with that view, and made the loss, if any, payable to Wm. Crane & Co., with full knowledge of their interest, and for the purpose of protecting them; that the defendant also knew of the outstanding insurance in the Firemen's Insurance Company, having been informed thereof both by A. F. Crane and J. L. Gray, and that the defendant's policy was issued with notice of that previous insurance, and its non-endorsement on the policy was the neglect and default of the defendant and its agents, and not of the complainant, or of Wm. Crane & Co.; that the policy was received, and the premium paid, in good faith, by A. F. Crane, without particular scrutiny, as it was believed to be what it should have been as to its contents and endorsements, Wm. Crane & Co., having relied upon the defendant and its officers to do the duties required of them by their regulations, as they had furnished them, in good faith, with all necessary information preliminary to the issuing of the policy; that if the policy was informal and incorrect, it was accepted through mistake, and in the belief that it was properly made out in all respects, so as to embody the wishes and objects, and to secure the interest, of Wm. Crane & Co., and if the policy was not properly made out, as well with reference to its contents as to the endorsement relative to the prior insurance in the Firemen's Company, Wm. Crane & Co. were deceived and misled, and mistaken in paying the premium therefor, and that it should be reformed and corrected, so as to embrace the provisions and endorsements sufficient to express the intentions, and secure the interests, which Wm. Crane & Co. designed should be expressed and secured...