Patriotic Ins. Co. of America v. Franciscus, 9170.

• Citation: 55 F.2d 844
• Decision Date: 23 January 1932
• Docket Number: No. 9170.,9170.
• Parties: PATRIOTIC INS. CO. OF AMERICA v. FRANCISCUS.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

55 F.2d 844 (1932)

PATRIOTIC INS. CO. OF AMERICA v. FRANCISCUS.

No. 9170.

Circuit Court of Appeals, Eighth Circuit.

January 23, 1932.

George C. Willson, of St. Louis, Mo. (J. H. Cunningham, Jr., and Taylor, Chasnoff & Willson, all of St. Louis, Mo., on the brief), for appellant.

Everett Paul Griffin, of St. Louis, Mo. (Allen C. Orrick, Dwight D. Ingamells, and Nagel, Kirby & Shepley, all of St. Louis, Mo., on the brief), for appellee.

Before VAN VALKENBURGH, BOOTH, and GARDNER, Circuit Judges.

VAN VALKENBURGH, Circuit Judge.

Appellee, as surviving trustee under the will of Jane Lindsay, deceased, was the holder of the legal title to a two-story brick building, with a connecting one-story brick building in the rear, located at 4432-34 Olive street in St. Louis, Mo. The buildings were insured in the total sum of $16,500, evidenced by several policies, that of appellant being for the sum of $3,500. May 31, 1927, the property was leased to Mark and Jean White, passing, August 20, 1928, by mesne assignments, with the consent of the lessor, to one Wells Alexander, who was the lessee and occupant of the premises thereafter, and on the 24th day of December, 1929.

Appellant's policy of fire insurance was issued February 19, 1929, and was to expire one year from that date. It was therefore in force December 24, 1929, on which date a fire occurred, resulting in the damages which are the subject-matter of this litigation. After the fire there was found in the basement a large concrete tank or vat, containing a large quantity of mash, copper coils, etc., forming component parts of an alcohol distilling plant. A sample of this mash was examined by the city chemist and found to contain 8.8 per cent. alcohol and 2 per cent. reducing sugar. The chemist testifies that this mash could have been distilled into alcohol, and "could have had no other purpose than to be run through a still and alcohol produced from it."

The premises insured are thus described in the policy: "The brick, stone, and iron (and additions) building, including foundations, plumbing, electric wiring and stationary heating, lighting, and ventilating apparatus and fixtures therein; also all permanent fixtures, stationary scales and elevators belonging to and constituting a part of said building, occupied as a garage and repair shop, situated at 4432-34 Olive Street in the City of St. Louis, State of Missouri."

It was a condition of the policy contract "that if there be other fire insurance upon the property covered, this company shall be liable only for such proportion of any direct loss or damage caused by fire or by lightning as the amount of this policy bears to the whole amount of fire insurance applying, whether such other insurance contains a similar clause or not"; also, that the entire policy should be void "if the hazard be increased by any means within the control or knowledge of the insured."

The suit upon the policy, originally brought in the circuit court of the city of St. Louis, was duly removed to the District Court for the Eastern District of Missouri. On trial appellee recovered the full amount of the policy in suit, as for a total loss of the buildings insured.

The errors urged and relied upon are the following:

1. The language of the policy describing the premises, as "occupied as a garage and repair shop," constitutes a continuing and absolute warranty, which was breached by the operation of an illicit alcohol still in the insured premises.

2. The breach of such warranty is fatal to the policy, although the assured had no knowledge of the matter constituting the breach.

3. A landlord is bound by acts of his tenant violative of the provisions of his policy. Whether the landlord had knowledge of such acts is immaterial.

4. The unlawful operation of the still in the insured premises was an increase of hazard by means within the control of the insured, where the lease provides that lessor or his personal representatives may at all reasonable hours enter upon said premises for the purpose of examining the condition thereof.

5. "Where a substantial portion of a building remains standing after a fire and is used, useful, and valuable in repairing the building, such building has not lost its identity and specific character as a building and cannot be said to be a total loss by fire."

6. "In a suit on a fire insurance policy the measure of damages to a building damaged by fire is the difference between the value of the building immediately before the fire, and the value of the building immediately after the fire; and not the amount expended in repairing the building."

7. "The action of the court in refusing defendant the right to further cross-examine plaintiff's expert witness, Daniel H. Kremer, relative to the value of the building immediately after the fire, irreparably prejudiced defendant's rights where said witness had made conflicting and confusing statements as to such value, and after a dispute had arisen between appellant's counsel and the court in the presence of the jury as to what said witness had stated about the matter."

8. Certain language of the court in reprimanding counsel for appellant in the presence of the jury.

9 and 10. Certain portions of the charge of the court.

11. "Ex parte written estimates of repair cost prepared by a contractor are not admissible in evidence for the purpose of supporting and corroborating such witness' testimony in connection with the damages caused to the building by fire."

12. The court's action in overruling appellant's motion for judgment on the pleadings.

The first three specifications may be considered together. Specification No. 1 is based upon the contention that the quoted language, "occupied as a garage and repair shop," constitutes an absolute warranty that the building should be so occupied and not otherwise, as a condition to the acceptance and continuance of the insurance risk. When such a warranty exists, it is fatal to the policy if breached, and the insured landlord is bound as stated in specifications 2 and 3. Connecticut Fire Ins. Co. v. Buchanan (C. C. A. 8) 141 F. 877, 881, 4 L. R. A. (N. S.) 758; Allen v. Home Insurance Co., 133 Cal. 29, 65 P. 138; Appleby v. Firemen's Fund Ins. Co., 45 Barb. (N. Y.) 454; Kelly v. Worcester Mutual Fire Ins. Co., 97 Mass. 284; Edwards v. Insurance Association, 128 Ga. 353, 57 S. E. 707, 12 L. R. A. (N. S.) 484, 119 Am. St. Rep. 385, 10 Ann. Cas. 1036; Wetherell v. City Fire Ins. Co., 16 Gray (82 Mass.) 276; Leonard v. Northwestern Nat. Ins. Co., 53 App. D. C. 343, 290 F. 318; Liverpool & London Ins. Co. v. Gunther, 116 U. S. 113, 6 S. Ct. 306, 29 L. Ed. 575; Imperial Fire Ins. Co. v. Coos County, 151 U. S. 452, 14 S. Ct. 379, 38 L. Ed. 231.

But such a result is based upon an express provision of the policy that it should become void upon putting the property to a prohibited use, or by introducing expressly prohibited articles, such as gasoline or other inflammable materials, which increase the hazard of fire. For example, in Connecticut Fire Insurance Co. v. Buchanan, first above cited, there were two policies in suit. One insured a building "as a `normal school and dwelling'"; the other insured it, "occupied and only while occupied as a normal school and dwelling." Both policies contained the following declaration: "If the occupants should be changed, except change of occupants without increase of hazard, or if the use be changed, * * * it shall be held to be an election on the part of the insured to cancel said policy, and the said policy shall stand canceled."

It was further provided that the policy should be void if the building became vacant and unoccupied. The provision in the policy in suit is entirely different. The language used is a mere recital in connection with the description of the insured premises. There is contained no provision that the policy shall be void upon change of occupancy or use. The recital of present occupancy in this case is descriptive merely. We find in it no warranty such as urged by appellant, and no basis for the application of the rules invoked by specifications two and three.

The contention respecting increase of hazard flows from another provision of the policy, which leads to the consideration of specification of error No. 4.

4. It must be conceded that the operation of an alcohol still in the insured premises was an increase of hazard. Whether it was brought about "by means within the control or knowledge" of the assured is the question at issue. This precise language, and language of similar import, has been considered in text-books and digests, and by courts, state and federal, in a great many cases, and the overwhelming weight of authority is that the landlord is not an insurer against the introduction of increased hazard, but that his liability depends upon his knowledge, or upon circumstances which, by the exercise of ordinary care and diligence, would result in such knowledge. Joyce on Insurance (2d Ed.) vol. 4, ß 2222; Couch Cyc. of Insurance Law, vol. 4, ß 960c; 26 C. J. par. 239 and 268; Merrill v. Insurance Co. of North America (C. C.) 23 F. 245; Royal Exch. Assurance Co. v. Thrower (D. C. Ga.) 240 F. 811; Id. (C. C. A. 5) 246 F. 768; Hartford Fire Ins. Co. v. Morris (C. C. A. 6) 27 F. (2d) 508; Miller v. Union Assurance Soc. (C. C. A. 8) 39 F.(2d) 25; St. Paul Fire & Marine Ins. Co. v. Bachmann (C. C. A. 4) 49 F.(2d) 158; Bitonti v. National Liberty Ins. Co., 96 Pa. Super. Ct. 521; Mercantile Ins. Co. v. Union Stock Yards Co., 120 Ky. 465, 87 S. W. 285; Nebraska & I. Ins. Co. v. Christiensen, 29 Neb. 572, 45 N. W. 924, 26 Am. St. Rep. 407; Taverna et al. v. Palatine Ins. Co., 228 App. Div. 33, 238 N. Y. S. 389; Joslin et al. v. National Reserve Ins. Co., 201 Wis. 506, 230 N. W. 711; Schaffer v. Hampton Farmers' Mutual Fire Ins. Co., 183 Minn. 101, 235 N. W. 618, 236 N. W. 327; Fayle v. Camden Fire Ins. Ass'n, 85 Mont. 248, 278 P. 509; Colker v. Connecticut Fire...