Northwestern Nat. Ins. Co. v. McFarlane

• Decision Date: 01 June 1931
• Docket Number: No. 6377.,6377.
• Citation: 50 F.2d 539
• Parties: NORTHWESTERN NAT. INS. CO. v. McFARLANE.
• Court: U.S. Court of Appeals — Ninth Circuit

50 F.2d 539 (1931)

NORTHWESTERN NAT. INS. CO. v. McFARLANE.

No. 6377.

Circuit Court of Appeals, Ninth Circuit.

June 1, 1931.

R. W. Palmer and Orrick, Palmer & Dahlquist, all of San Francisco, Cal., for appellant.

W. M. Conley, Philip Conley, Matthew Conley, and Conley, Conley & Conley, all of Fresno, Cal., for appellee.

Before WILBUR and SAWTELLE, Circuit Judges, and NETERER, District Judge.

WILBUR, Circuit Judge.

This is an action brought to recover on a policy of fire insurance. At the time the building covered by the insurance policy was burned the property was vacant and had been vacant for several months, from March, 1929, to August 11, 1929, the date of the fire. The policy, a statutory standard form used in California (Stat. of Cal. 1909, p. 404), provided as follows: "Matters suspending insurance. Unless otherwise provided by agreement endorsed hereon or added hereto this company shall not be liable for loss or damage occurring * * * (f) while a building herein described whether intended for occupation by owner or tenant is vacant or unoccupied beyond the period of ten (10) consecutive days. * * * Such suspension shall not extend the term of this policy nor create any right for refund of the whole or any portion of premium, nor affect the respective rights of cancellation." Id. 406.

The question presented by the record is whether or not the occurrences at the time of an assignment of this policy from the previous owner to the appellee, who had purchased the property, and of the indorsement upon the policy of a rider recognizing such transfer and assignment, constitute a waiver of such provision in the policy or raise an estoppel against the appellant which preclude it from taking advantage of the fact that no vacancy permit was indorsed upon the policy.

It is also contended that the provision of the policy with reference to the vacancy of the premises was waived, by reason of the fact that more than ten days after the building became vacant a small fire loss occurred, and the appellant settled the loss without taking advantage of the fact that the building was vacant.

The case was tried before a jury and the error presented here by the appellant for our consideration is the denial of appellant's motion to instruct the jury to return a verdict for the appellant Insurance Company.

The testimony as to the occurrences involved is conflicting, but the action of the court in refusing to instruct the jury as requested must be determined from the viewpoint of the evidence most favorable to the plaintiff-appellee. Plaintiff testified that at the time of the transfer of the property to him he took the fire insurance policy, theretofore issued to the vendor, to Mrs. Johnson, a local agent of the appellant Insurance Company, residing at Clovis, Cal., and asked her to place an indorsement upon the policy recognizing transfer of ownership. This was done. He testified that at that time he told the agent that Mr. Rough, the previous owner, intended to move out of the building soon; that his daughter was sick and could not be moved then, but that the building would soon become vacant; that he then asked her if there was any necessity of attaching anything to that policy to keep it in force. She said, "No, not in an incorporated town with fire protection." Shortly thereafter, on March 18, 1929, the property became vacant; that he did not make an application for a vacancy permit, "Because she told me it was not necessary to have a vacancy clause on there. I knew at that time that Clovis was an incorporated city and had fire protection." The witness stated that he was familiar with the terms of the policy above referred to.

The effect of the indorsement of the assignment on the policy by the agent of the Insurance Company was to create a new contract between the Insurance Company and the appellee. Lee Blackmore, Inc., v. Lewelling (C. C. A.) 281 F. 952; Wilms v. N. H. Fire Ins. Co., 194 Mich. 656, 161 N. W. 940. It will be observed that the oral agreement between the parties, as testified to by the appellant, is in direct conflict with the express terms of the written policy. The policy provided that the insurance was suspended and not in force if the building were vacant more than ten days, while the oral agreement was to the effect that the policy was not suspended but continued in force during a longer vacancy. The action is brought not upon the policy as written, but upon the verbal agreement or understanding between the agent of the company and the owner of the property insured at the time the written contract became effective as between them, as constituting a waiver of the written agreement, or as raising an estoppel against enforcing its provisions. Some contention is made in the briefs concerning the claim that the conversation referred to occurred after the indorsement of the assignment had been made upon the policy, and that therefore the subsequent conversation amounted to a waiver of the condition in the policy as theretofore issued. But we think that the evidence shows that the written and oral agreements were contemporaneous and should be considered as one transaction, regardless of whether the physical possession of the policy had passed from the agent to the appellee. It is conceded that a written agreement cannot be modified or affected by a contemporaneous oral agreement between the parties, conflicting with the terms of the writing, and this is the statutory law in California. (Cal. Code of Civ. Proc., § 1856.) That section is as follows: "An agreement reduced to writing deemed the whole. When the terms of an agreement have been reduced to writing by the parties, it is to be considered as containing all those terms, and therefore there can be between the parties and their representatives, or successors in interest, no evidence of the terms of the agreement other than the contents of the writing, except in the following cases. * * *" (The exceptions have no relation to the matter now under consideration.)

In a recent case before the Supreme Court (Lumber Underwriters v. Rife, 237 U. S. 605, 35 S. Ct. 717, 59 L. Ed. 1140) it had occasion to consider an alleged waiver of a warranty in the policy requiring a clear space of 100 feet around the lumber which had been insured, arising from the knowledge of the agent of the insurance company that such space did not exist. In dealing with that subject, the Supreme Court, speaking through Mr. Justice Holmes, stated the rule as follows: "When a policy of insurance is issued, the import of the transaction, as everyone understands, is that the document embodies the contract. It is the dominant, as it purports to be the only and entire, expression of the parties' intent. In the present case this fact was put in words by the proviso for the indorsement of any change of terms. Therefore when, by its written stipulation, the document gave notice that a certain term was insisted upon, it would be contrary to the fundamental theory of the legal relations established to allow parol proof that at the very moment when the policy was delivered that term was waived. It is the established doctrine of this court that such proof cannot be received. Northern Assur. Co. v. Grand View Bldg. Ass'n, 183 U. S. 308, 22 S. Ct. 133, 46 L. Ed. 213; Northern Assur. Co. v. Grand View Bldg. Ass'n, 203 U. S. 106, 107, 27 S. Ct. 27, 51 L. Ed. 109, 111; Conn. Fire Ins. Co. v. Buchanan, 141 F. 877, 883, 73 C. C. A. 111, 4 L. R. A. (N. S.) 758. See Penman v. St. Paul Fire & Marine Ins. Co., 216 U. S. 311, 30 S. Ct. 312, 54 L. Ed. 493; Aetna Life Ins. Co. v. Moore, 231 U. S. 543, 559, 34 S. Ct. 186, 58 L. Ed. 356, 366. There is no hardship in this rule. No rational theory of contract can be made that does not hold the assured to know the contents of the instrument to which he seeks to hold the other party. The assured also knows better than the insurers the condition of his premises, even if the insurers have been notified of the facts. If he brings to the making of his contract the modest intelligence of the prudent man, he will perceive the incompatibility between the requirement of 100 feet clear space and the possibilities of his yard, in a case like this, and will make a different contract, either by striking out the clause or shortening the distance or otherwise, as may be agreed. The distance of 100 feet that was written into this policy was not a fixed, conventional formula that there would be trouble in changing, if the insured would pay what more, if anything, it might cost. Of course, if the insured can prove that he made a different contract from that expressed in the writing, he may have it reformed in equity. What he cannot do is to take a policy without reading it, and then, when he comes to sue at law upon the instrument, ask to have it enforced otherwise than according to its terms. The court is not at liberty to introduce a short cut to reformation by letting the jury strike out a clause."

The decision of the Supreme Court in this case cites with approval our decision in Kentucky Vermillion M. & C. Co. v. Norwich Union Fire Ins. Co., 146 F. 695, 700, wherein this court refused to consider evidence that the insurance company knew that the property was idle at the time the policy was issued, as a basis for the contention that the provision of the policy with reference to the plant being idle for more than thirty days was waived. It is clear from a consideration of this late decision by the Supreme Court, and a consideration of the decision of the Circuit Court of Appeals overruled by it (Rife v. Lumber Underwriters, 204 F. 32), and the decision cited in support thereof (Kentucky Vermillion M. & C. Co. v. Norwich Union Fire Ins. Co., 146 F. 695, supra), that the Supreme Court is definitely committed to the proposition that mere knowledge by the insurance company of conditions which would constitute a breach and forfeiture thereof at the time of its issuance, does...