Sands v. Bankers' Fire Ins. Co

• Decision Date: 10 June 1937
• Citation: Sands v. Bankers' Fire Ins. Co, 168 Va. 645, 192 S.E. 617 (1937)
• Court: Virginia Supreme Court
• Parties: SANDS. v. BANKERS' FIRE INS. CO.

192 S.E. 617

SANDS.

v.BANKERS' FIRE INS. CO.

Supreme Court of Appeals of Virginia.

June 10, 1937.

Rehearing Denied Sept. 23, 1937.

Error to Law and Equity Court of City of Richmond; Robert N. Pollard, Judge.

Action by J. M. Livingston, J. S. Livingston, and another against the Bankers' Fire Insurance Company. During the pendency of the action, both J. M. Livingston and J. S. Livingston died, and the action was revived as to them in the name of Alexander H. Sands, Jr., who qualified as ancillary administrator of each. Judgment for defendant, and plaintiff brings error.

Judgment reversed, and judgment rendered.

Argued before CAMPBELL, C. J., and HOLT, HUDGINS, GREGORY, BROWNING, EGGLESTON, and SPRATLEY, JJ.

Alexander H. Sands and Alexander H. Sands, Jr., both of Richmond, for plaintiff in error.

Christian, Barton & Parker, of Richmond, and Theodore J. Breitwieser, of New York City, for defendant in error.

EGGLESTON, Justice.

This is an action to recover on a fire insurance policy issued by the Bankers' Fire Insurance Company, a North Carolina corporation, hereinafter called the Insurance Company, on a cotton gin owned by J. M. Livingston, the assured, and located near Tupelo, Miss. The policy carried indorsements making the loss thereunder payable to J. S. Livingston and C. E. Smith, as first and second mortgagees, as their respective interests might appear.

The gin having been destroyed by fire on May 12, 1934, suit was instituted in the court below by J. M. Livingston, J. S. Livingston, and C. E. Smith, as joint plaintiffs. Both J. M. Livingston and J. S. Livingston died during the pendency of the proceedings below and the suit was revived as to them in the name of Alexander H. Sands, Jr., who qualified as ancillary administrator of each.

The defense in the court below as shown by the special pleas and grounds of defense was:

(1) That there had been a breach of the warranty in the policy that the assured was the "sole and undisputed owner, absolutely in fee simple, of the land" on which the insured buildings stood; and that, contrary to the terms of the policy, the interest of the assured in the property was "other than unconditional and sole ownership."

(2) That at the time the policy was secured the assured had, in violation of its terms, concealed from the company the material fact that there was duly docketed against him a judgment in the sum of $12,616.76, which was a lien on said property.

(3) That at the time the policy was secured, and contrary to its terms, the property described therein was encumbered by a chattel mortgage in favor of J. S. Livingston and another in favor of C. E. Smith.

(4) That subsequent to the fire the assured, J. M. Livingston, had made certain false sworn statements in the proof of loss.

The case was heard in the court below by the learned judge without the intervention of a jury, partly on depositions and partly on testimony taken ore tenus before him. Without delivering any written opinion or assigning any specific reasons for its conclusions, the trial court entered a final judgment for the defendant, to review which this writ has been awarded.

The essential facts are not disputed. In 1928, J. M. Livingston erected the gin, at a cost of about $12,000, on a small tract of land, the title to which stood in the name of W. T. Livingston, his father. W. T. Livingston testified that he had orally given the land to the assured, had written a will confirming this gift, and had consented to the erection of the improvements.

In January, 1929, J. M. Livingston executed and delivered to his uncle, J. S. Livingston, a mortgage on the gin to secure a debt of $8,000. There is no question as to the good faith of this transaction.

Early in January, 1934, J. M. Livingston procured, through J. M. Savery, Inc., an insurance agency doing business in Tupelo, of which J. M. Savery was the president, insurance on the property in the total amount of $8,450, divided between four companies as follows: Liverpool & London & Globe Insurance Company, $2,500; Rhode Island Insurance Company, $2,500; Lloyds of London, $1,000; and Bankers' Fire Insurance Company, $2,450. About the middle of March of the same year the Liverpool & London & Globe Insurance Company and the Rhode Island Insurance Company canceled their two policies and J. M. Savery, Inc., replaced these by another in Lloyds of London for the sum of $5,000.

There is some dispute as to whether the policy written by the Bankers' Fire Insurance Company, and involved in this suit, was issued in January or subsequent to the cancellation of the two policies in March. We think the evidence sustains the contention of the Insurance Company that this policy was written and became effective on the date thereof, to wit, January 24, 1934. At any rate, when the fire occurred on May 12, 1934, the property was covered by three policies as follows: Bankers' Fire Insurance Company, $2,450; Lloyds of London, $5,000; and Lloyds of London, $1,000.

On behalf of the Bankers' Fire Insurance Company, an adjuster investigated the fire and agreed that that company's proportion of the loss, assuming it to be liable on the policy, was $2,209.08.

The defendant company, however, declined to pay the loss, and this suit was brought in Virginia, wherein it had a statutory agent on whom process could be served. There was none in Mississippi as the company was not licensed to do business in that state.

Although the Insurance Company had no agent in Mississippi authorized to sign policies on its behalf, it insured property therein through Arthur F. Houts & Co., insurance brokers of New York. The manner in which this policy was placed is typical of the method by which the Insurance Company did business in Mississippi.

In making up the desired amount of insurance on this property Savery, Inc., sought the assistance of these brokers. The latter arranged with the defendant Insurance Company for the issuance of the policy here involved. It seems to have been made out on one of the forms signed in blank at the home office of the company, delivered to an agent at Seagirt, N. J., filled out by him, transmitted to Houts & Co., and by the latter to Savery, Inc., which, in turn, delivered it to the assured. The premium was duly paid.

Although one of the principal defenses is that the assured made statements to the Insurance Company, which were material and false, on the basis of which the policy was issued, and concealed from it other material matters which should have been disclosed, the record fails to show just what information was in fact furnished. No written application was required of the assured as a prerequisite to the issuance of the policy. Savery says he wrote a letter to Houts & Co. giving the necessary data on which the policy was written. Certainly this information must have been passed on to the Insurance Company before the policy was issued, and yet it was not produced.

Where an insurance company defends liability on the ground that the policy was issued on the basis of material misstatements or misinformation, the burden is on the company to prove such misstatements or misinformation. The defense is an affirmative one. Palmetto Fire Ins. Co. v. Fansler, 143 Va. 884, 891, 129 S.E. 727; Aetna Ins. Co. v. Aston, 123 Va. 327, 336, 96 S.E. 772; Virginia F. & M. Ins. Co. v. Hogue, 105 Va. 355, 360, 361, 54 S.E. 8; 3 Cooley's Briefs on Insurance (2d Ed.) pp. 1929, 1930.

Instead of producing the original letter from Savery, Inc., to Houts & Co., containing the information on the basis of which the policy was issued, the Insurance Company sought to supply this missing data in the following manner: It proved that at the time the assured made application to Savery, Inc., for the full amount of the insurance desired on the property, $8,450, he signed and filed with the Liverpool & London & Globe Insurance Company and the Rhode Island Insurance Company written applications for policies (which were subsequently canceled as aforesaid) containing some of the alleged information (or misinformation) here relied on. It is argued that it should be inferred from Savery's testimony that Savery, Inc., passed on to Houts & Co. this, and only this, information.

Assuming, but not deciding, that this was sufficient proof of what information was furnished, let us examine it and the effect thereof on the policy here involved.

1. The title to and ownership of the property. There is no statement in the written applications, either to the Liverpool & London & Globe Insurance Company or to the Rhode Island Insurance Company, that the fee-simple title to the land on which the gin was located stood in the name of the assured, or that he was the sole and unconditional owner thereof. Nor is there any testimony that Saveryor the assured made any such statement to the defendant company.

On the contrary both Savery and the assured testified that the latter disclosed to Savery the exact status of the title to and the ownership of the property--that it stood in the name of the father of the assured, who had made an oral gift thereof to the assured and had written his will devising the property to him. Savery said that he thought this was a sufficient compliance with the fee-simple title warranty and unconditional and sole ownership statement in the policy. But whether Savery be right or wrong in his interpretation of the policy, he certainly had knowledge of the status of the title to and the ownership of the property.

2. The judgment lien. While the assured did not tell Savery of the judgment of $12,616.76 in favor of the local bank against him, Savery testified that he knew of it, that it was a matter of common knowledge among the business people of the community.

Savery further testified that he did not think that this was an "encumbrance" or "lien" to be reported to the Insurance Company in applying for the policy.

Whether a judgment lien is an incumbrance within the meaning of a fire insurance policy is a...