Royal Exch. Assur. of London v. Thrower

• Decision Date: 12 March 1917
• Docket Number: 1319.
• Citation: 240 F. 811
• Parties: ROYAL EXCH. ASSURANCE OF LONDON v. THROWER. [*]
• Court: U.S. District Court — Northern District of Georgia

240 F. 811

ROYAL EXCH. ASSURANCE OF LONDON v. THROWER. ^[*]

No. 1319.

United States District Court, N.D. Georgia.

March 12, 1917

King &amp Spalding, of Atlanta, Ga., for plaintiff.

Wimbish & Ellis, of Atlanta, Ga., for defendant.

NEWMAN District Judge.

This case arises in this way: On the 15th day of June, 1908 Marvin L. Thrower took a policy of insurance on a certain property described as 'a one-story frame, composition roof, building and additions thereto attached, occupied for warehouse and storage purposes, situated on Irwin street Samson street, and the Southern Railroad, in Atlanta Georgia,' for $5,000. Attached to the policy was the standard mortgage clause, which provided that:

'Loss or damage, if any, under this policy, shall be payable to Mrs. Caroline Hertzfeld, as mortgagee, as her interest may appear.'

In this mortgage clause was a provision that:

'Whenever this company shall pay the mortgagee any sum for loss or damage under this policy, and shall claim that, as to the mortgagor or owner, no liability therefor exists, this company shall, to the extent of such payment, be thereupon legally subrogated to all the rights of the party to whom such payment shall be made, under all securities held as collateral to the mortgage debt, or may, at its option, pay to the mortgagee the whole principal due or to grow due under the mortgage, with interest, and shall thereupon receive a full assignment and transfer of the mortgage and all of such other securities; but no subrogation shall impair the right of the mortgagee to recover the full amount of her claim.'

On the 12th day of June, 1909, the building covered by the policy was destroyed by fire and was a total loss. The insurer claims that the policy was void as to Thrower, the mortgagor, and the company paid to the mortgagee, Mrs. Hertzfeld, the amount of the mortgage, having the note and loan deed transferred to it, and instituted the proceeding here to foreclose the mortgage. The defendant, Thrower, set up in his answer, by way of defense, that the payment of the mortgage did not amount to a purchase of the note, but was a payment for his benefit under the policy of insurance issued to him, and that he is entitled to have the amount due him under the policy offset against the amount of the note. The contention of the company is that the policy has been rendered void by the insured by an increase of the hazard.

The question really presented here for determination, and the question about which evidence had been offered, and on which the case was argued and submitted, is whether there was a liability by the company on this policy issued by it to Thrower, or whether, by increasing the hazard, there had been a forfeiture of all rights under the policy, and there is no right of recovery, and has not been since the alleged increased hazard leading to the forfeiture.

The evidence shows that the property was insured as a building occupied for warehouse and storage purposes, and it was leased to the A. A. Smith Cotton Products Company, under a lease for 12 months, entered into on September 14, 1908. It is an established fact in the case, and not disputed, that the building was entirely destroyed by fire; it being a considerable conflagration, which originated over a block away, and involved, it seems, a lumber yard near the property in question here, and extended through that property to this building. The business carried on in the defendant's property, which was insured here, had nothing to do with the conflagration. The decision here comes under the provision in the insurance policy which provides that:

'This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void * * * if the hazard be increased by any means within the control or knowledge of the insured.'

It is claimed, on behalf of the insurance company, that this provision was violated by allowing this building to be occupied by the Cotton Products Company and by the business carried on by it therein, prior to and up to the date of the fire, not, as has been stated, that this in any way brought about the fire and the loss, but that there was a forfeiture of the policy, and the same became void, several months prior to the fire, by reason of the increase of the hazard.

It is probably true from the evidence that the hazard was increased by the use to which this building was put by the Cotton Products Company. It seems that there was some machinery in it, and that cotton was what is called 'reconditioned.' While it is unnecessary to determine it here, in the view I take of this case, it may be fairly assumed, for the purpose of determining the question involved, that the hazard was increased, and if Thrower, the insured, had been responsible himself for this increased hazard, the policy would have been forfeited and rendered void at the time the building was devoted to the use indicated. The policy provides, however, that it shall be void if the hazard be increased 'by any means within the control or knowledge of the insured. ' So that the question made here by counsel, and which clearly arises under the evidence, is whether Thrower had knowledge or control of the use to which this building was being put by the tenant.

M. L. Thrower, in his testimony before the court, made certain answers to questions put to him as follows:

'Q. The lease took effect on the 22d day of September, 1908, did it not? A. Yes, sir. Q. Did you lease it to anybody else after that, before the fire? A. No, sir. Q. Did you make any repairs or do any work on that building after you made this lease? A. None that I recall. Q. Didn't you put in an elevator? A. No; I think that was done about the time we leased it. Q. Wasn't it done at that time, in fact? A. I think so; there was one stipulation of the lease, when they leased it, they were to have an elevator. Q. What was the elevator put there for? A. To handle the goods, I guess. Q. Was there any specific reason given or assigned why the elevator should be put there? A. None that I know of. Q. What? A. Only for ordinary purposes; he had to have it to run his business. Q. Do you recall any reason why the elevator should be put there? A. Not especially. Q. Do you remember about any reason having been assigned for putting the elevator there? A. No, sir; I do not. Q. You do not-- did you have--

'The Court: An elevator to take the stuff from down in the stone part up on the other floor?

'The Witness: Yes, sir.

'Q. Were there any other tenants in this building between this time and the time of the fire? A. No; not that I know of. Q. Who did you deal with in regard to this property for the lease? A. I talked to Mr. Smith and Mr. Speer, who were then partners in it. Q. Who? A. Mr. Smith and Mr. Speer. Q. What building is your office in? A. Grant Building. Q. What building is the office of the Smith Cotton Products Company in? A. The same building. Q. What business do they conduct? A. They had a cotton business and fertilizer business. Q. What kind of a cotton business? A. Why, I never investigated that. Q. It says 'cotton products'; what do they mean by that? A. The handling of cotton. Q. What do they mean by 'cotton products?' A. I don't know, sir; I never saw their business; I never was out there in the building; I don't know what they were doing out there at all. Q. I am talking about what knowledge you had of the business they conducted-- the character of the business they were conducting? A. I never investigated anything about Mr. Smith's business. Q. You knew he was in the cotton products business? A. I supposed he was by the lease.'

He was again asked the further questions:

'Q. Did you know how they were using it at any time? A. No, sir I didn't know there was a piece of...