New Hampshire Fire Ins. Co. v. Murray, 6780.

• Decision Date: 13 June 1939
• Docket Number: No. 6780.,6780.
• Citation: 105 F.2d 212
• Parties: NEW HAMPSHIRE FIRE INS. CO. v. MURRAY, Mayor, et al.
• Court: U.S. Court of Appeals — Seventh Circuit

105 F.2d 212 (1939)

NEW HAMPSHIRE FIRE INS. CO. v. MURRAY, Mayor, et al.

No. 6780.

Circuit Court of Appeals, Seventh Circuit.

June 13, 1939.

Emmett McCarthy, of Chicago, Ill., and Charles F. Kuchenberg, of Marinette, Wis., for appellants.

Hubert O. Wolfe and Francis J. Hart, both of Milwaukee, Wis., for appellee.

Before SPARKS, TREANOR, and KERNER, Circuit Judges.

KERNER, Circuit Judge.

Defendants appeal from a decree of the district court enjoining them from enforcing a resolution of the common council of the city of Marinette, Wisconsin. The resolution adopted the report of the appraisal committee that the building in question was a nuisance under the fire ordinance and directed that the building be torn down. The plaintiff, insurer of the building, brought a bill in equity in the district court to enjoin the enforcement of the abatement order on the ground that the physical condition of the building did not warrant the condemnation finding. The court decreed that the common council acted beyond the sphere of its jurisdiction and that consequently the order to abate amounted to taking property without due process of law.

The defendant Drefahl, owner of the building in question, carried $14,000 insurance against loss by fire. In this regard the plaintiff had issued two policies to the defendant in the sum of $5,000. These policies, of course, were on the standard statutory form. Secs. 203.01, 203.06, Stats. Wis., 1937. For this reason the plaintiff had an interest in this matter which was materially affected by the abatement order. The law is clear in Wisconsin that the extent of the insurer's liability is determined not by the actual fire loss or by the amount of fire damage found by the common council. In these cases, where the building after a partial fire destruction is ordered destroyed pursuant to a fire ordinance, the insurer's liability is measured by the face value of the policy as for total fire destruction. Sec. 203.21, Stats.Wis., 1937; City of New York Fire Insurance Co. v. Chapman, 7 Cir., 76 F.2d 76. Accordingly, after the order to abate was made, Drefahl made a claim against the plaintiff for $5,000, basing his claim on Section 203.21 supra.

The insured structure was a three-story frame building which was located within the fire limits of the city. A fire occurred in the property on March 14, 1936, doing considerable damage. The fire ordinance of the city provided that wooden buildings within the fire limits, which were damaged to the extent of 50 percent or more of their value, should not be repaired but demolished upon the order of the common council. The ordinance provided further that the extent of the damage should be determined by three disinterested residents, one to be chosen by the owner of the building, another by the mayor, and the two so chosen to select the third. In addition, the ordinance stated that their finding shall be final and conclusive.

On April 16, 1936, without notice to the plaintiff, the appraisal committee was duly appointed. On one afternoon this committee inspected the damaged building and then made its report to the council to the effect that "the building is damaged to the extent of 80% of its value and should under no circumstances be rebuilt, as it presents an absolute hazard and menace to the adjoining property and to the City." The council accepted the report, which constitutes the basis of the order to abate.

Learning of the contemplated abatement through the publication of the resolution, the plaintiff requested to be heard before the council in order to demonstrate that the damage to the building did not justify its condemnation under the ordinance. Receiving no reply, the plaintiff filed its bill in equity to enjoin the enforcement of the demolition order on the ground of arbitrary, unreasonable, and confiscatory action by the council. After all the evidence had been adduced, the court granted an injunction, concluding that the appraisal report was "without foundation in fact," that the damage was considerably less than the statutory requirement of 50 percent, and that the damaged condition of the building was not dangerous to life and property. From the decree of the court this appeal was prosecuted.

It is undisputed that on the day prior to the fire the building was in good physical condition. It was then being used for combined business and residence purposes. In fact, defendants' expert witness, Sundstrom, testified that the building "gave every indication of being in very good condition and newly decorated before the fire." On this phase of the evidence, both sides fixed the value of the building as of the day prior to the fire at a figure over $10,000 and less than $11,000.

In this connection it is to be noted that the appraisal report found only one figure, namely, that the damage was 80 percent of the value. It is true, however, that the two appraisers testifying in the district court explained that they had valued the building prior to the fire at a figure over $10,000 and less than $11,000.

On the other hand, coming now to the figures on the extent of the damage, that is, the cost of replacing the building in all respects as it was before the fire, it is significant that a striking variance appears. Experts Lemke, Fromm, and Messmer (called by the plaintiff) testified that the damage was less than $4,000 and hence less than 40 percent of the value as of the day prior to the fire. As against this, the appraisal report fixed the damage at 80 percent. As was noted above, the report did not disclose the basic figures of damage and value. However, at the trial, appraisers Bentley and Rettke stated that they had set the value between $10,000 and $11,000, which means that using the reported 80 percent the damage was around $8,700.

Three other experts took the witness stand on the important question of damage. The defendants called expert Sundstrom, who placed the damage on the day he inspected the building around $5,700. It might be added that Sundstrom made his inspection nine months after the fire, which made it impossible for him to determine the damage as of the time of the appraisal report. In fact, Sundstrom admitted that there had been weather damage subsequent to the appraisal report and prior to the time of his inspection, but that he was not in position to give separate estimates on the antecedent and subsequent damages.

In addition, the plaintiff called one Cowdin, an insurance adjuster, who had been hired by owner Drefahl to assist him in establishing the fire loss. Cowdin testified that he had inspected the building and had estimated a loss of less than $4,000, which was approved and accepted by Drefahl. The plaintiff also called expert Klaver, who fixed the damage around $4,300 but who did not testify as to the value of the building prior to the fire.

At this time it might be well to discuss, as far as the record discloses, the activity of the appraisal committee. Hartberg was an insurance agent, Rettke a restaurant owner, and Bentley a building contractor. Rettke testified that "I never figured the cost of erecting a building. I have figured the cost of making repairs of a building in my mind. I never got into detail. When I say I have had Mr. Klaver fix the building for me, I mean I have him give me an estimate of the cost." He also said as to Hartberg, who represented the owner Drefahl but who did not testify, that "he didn't offer any objections to an eighty percent loss * * * and didn't offer any argument to the effect that he thought it was his duty to have the building preserved or kept for the owner." Bentley testified that at the inspection he had made notes (which he could not produce at the trial) and that prior to his appointment as appraiser he had been hired by Drefahl's attorney to make an estimate of the damage, which he had done.

With all these facts before it, the district court concluded that the common council (which based its directive order on the findings of the appraisal committee) had acted beyond the sphere of its jurisdiction in finding that the damaged building came within the statutory class of 50 percent and that as a consequence thereof it constituted a nuisance. The court decreed, therefore, that the abatement order was not a proper and reasonable exercise of the police power and hence deprived the parties affected thereby of property without due process of law.

It is contended that the court erred on the extent of damage. In particular, the argument is that the damage contemplated by the ordinance includes age, weather elements, and faulty construction as well as fire damage. It follows, therefore, so the argument goes, that since the evidence adduced by the plaintiff was confined to the fire damage that the trial court was not in position to judge that the council had acted beyond its statutory sphere of jurisdiction.

We have considered defendants' contention seriously, and we agree that the damage contemplated by the ordinance is not restricted to damage caused by the fire. However, we disagree, and the record bears us out, that the plaintiff's evidence was limited to fire damage alone. This argument, on the other hand, might very well be made against the defendants themselves. At any rate, as far as appraiser Rettke was concerned, he stated that "we (the appraisal committee) found the building to be destroyed 80 per cent of the value by fire."

It is true that appraiser Bentley placed reliance on the faulty construction element, which he stated was part of the damage caused by the fire. Yet, defendants' own expert Sundstrom testified that any faulty construction element to be considered was not caused by the fire at all. Moreover, as far as the condition of the building prior to the fire was concerned, Sundstrom testified that the building "gave every indication of being in very good condition and newly decorated." On this point, of course, Sundstrom was supported by the...