State Securities Co. v. Federated Mut. Imp. & Hard. Ins. Co., Civ. No. 30-L.

• Court: United States District Courts. 8th Circuit. United States District Court of Nebraska
• Writing for the Court: DELEHANT
• Citation: 204 F. Supp. 207
• Parties: STATE SECURITIES COMPANY, a corporation organized under the laws of the State of Nebraska, Plaintiff, v. FEDERATED MUTUAL IMPLEMENT AND HARDWARE INSURANCE COMPANY, a corporation organized under the laws of the State of Minnesota and admitted to do business in the State of Nebraska, Defendant.
• Docket Number: Civ. No. 30-L.
• Decision Date: 13 September 1960

204 F. Supp. 207

STATE SECURITIES COMPANY, a corporation organized under the laws of the State of Nebraska, Plaintiff,
v.
FEDERATED MUTUAL IMPLEMENT AND HARDWARE INSURANCE COMPANY, a corporation organized under the laws of the State of Minnesota and admitted to do business in the State of Nebraska, Defendant.

Civ. No. 30-L.

United States District Court D. Nebraska.

September 13, 1960.

204 F. Supp. 208

Sterling F. Mutz, Lincoln, Neb., for plaintiff.

F. B. Baylor, Baylor, Evnen, Baylor & Urbom, Lincoln, Neb., for defendant.

DELEHANT, District Judge.

Instituted in the District Court of Lancaster County, Nebraska, this action was removed to this court. Jurisdiction unquestionably exists under Title 28 U.S. C. § 1332(a) (1). Removal was in order, Title 28 U.S.C. § 1441, and the procedure therefor, Title 28 U.S.C. § 1446, was duly pursued. No jurisdictional question is presented to the Court or actually exists.

In its petition¹ the plaintiff prays for judgment against the defendant for the sum of $13,117.86, with interest thereon at the rate of nine percent per annum from September 1, 1955, for an attorney's fee to be taxed as costs, and for the costs of the action. Without exhaustive analysis, which, in the light of the findings of fact shortly hereinafter announced, the court regards as both unnecessary and calculated to initiate indefensible repetition, plaintiff's petition alleges the making by plaintiff on December 7, 1954 of a loan, in the sum of $14,680.00, to one Bert R. Hamm, doing business as the Hamm Motor & Implement Company; the giving by the borrower as security for the loan of "a mortgage on the following described real estate and improvements² and stock of merchandise, to-wit on stock in the one story brick tiled building on Lots eleven (11) to Fourteen (14), both inclusive, Block nine (9) R.B. 552 in the city of Scribner, Dodge County, Nebraska," which mortgage required the mortgagor to purchase and pay for insurance against fire and other hazards upon the improvements² on such property in amount equal to the loan, insuring plaintiff against loss by fire to the extent of the plaintiff's interest in such loan; the procurement thereafter by Bert R. Hamm from defendant of a policy of insurance for the sum of $22,500.00, with an eighty percent coinsurance clause, "insuring the stock of merchandise and the improvements on said real estate"² against direct loss by fire (among other casualties), and the issuance by defendant of a "memorandum of insurance," in connection with which, on December 29, 1954, the defendant forwarded to plaintiff a loss payable clause to attach to such policy (or memorandum) of insurance;³ Bert R. Hamm's making of payments, and the allowance of certain credits on the mortgage debt in amounts adequate to reduce such debt to $13,117.86 as of September 1, 1955, which, with interest thereon at

204 F. Supp. 209

the rate of nine percent per annum, from September 1, 1955, remains unpaid; the destruction by fire on June 14, 1955 of "the improvements on the aforesaid real estate,⁴ the prompt communication of notice of loss to defendant, and defendant's denial of liability to plaintiff; and the indebtedness of defendant to plaintiff in the sum of $13,117.86, with interest thereon from September 1, 1955 at the rate of nine percent per annum

Answering, defendant admits the purchase and procurement by Bert R. Hamm from defendant, and its issuance and delivery to Bert R. Hamm, of a policy of fire insurance, of which the answer sets out a copy, and of which defendant also issued the "memorandum of insurance" set out by plaintiff in its petition; the destruction by fire "to some extent" of the property thus insured; its denial of liability to plaintiff under the policy; and the issuance by defendant of a "loss payable clause" in the language alleged by plaintiff. Otherwise, defendant denies the allegations of plaintiff in its petition. And it alleges that the premium for its policy of fire insurance was paid by Bert R. Hamm; that on or about June 13, 1955, Bert R. Hamm, (then being the owner of the insured property) voluntarily, intentionally and willfully set and caused the fire by which the insured property was partially destroyed; that theretofore the "loss payable clause" had been issued and attached to, and was a part of, the policy; and that the right, if any, of plaintiff under the policy of insurance is only by appointment and derivative through Bert R. Hamm, and that plaintiff is not the real party in interest. And defendant prays for the dismissal of the action, and the recovery of its costs.

Trial of the action was had to the court without a jury. Beyond areas of agreement in the pleadings, supra, which the court accepts as factually determinative, the proofs consisted principally of certain discovery proceedings disclosed in the files and records, some stipulations, depositions of Bert R. Hamm and his wife, and very brief oral evidence.

The facts, as found to exist, are now set down.

Plaintiff is, and at all times material herein has been, a corporation organized under the laws of Nebraska, with its principal place of business in Lincoln, Nebraska, and engaged in the business of loaning money.

Defendant is, and at all times material herein has been, a corporation organized under the laws of Minnesota, with its principal place of business at Owatonna, Minnesota, engaged in the business of fire insurance, and authorized by the Insurance Department of the State of Nebraska to write within such state fire, and other allied, policies of insurance.

At the times material herein during 1954 and 1955, at Scribner, in Dodge County, Nebraska, one Bert R. Hamm, as an individual, under the name and style of "Hamm Motor & Implement Company," was engaged in business both as a farm implement dealer and as an automobile dealer, in the latter of which ventures he sold automobile parts, and provided automobile service. In part, at least, he conducted his business in a building located on lots eleven (11) to fourteen (14), both inclusive, Block nine (9), R.B. 552 Scribner, Dodge County, Nebraska. However, during such interval, Bert R. Hamm sold and withdrew from his farm implement business, and thereafter continued to be engaged in the automobile business under the name and style of Hamm Motor Company.

On November 18, 1954, Bert R. Hamm, doing business as Hamm Motor & Implement Company, purchased from defendant, and defendant issued and delivered

204 F. Supp. 210

to him, upon an annual premium payment basis, defendant's policy of fire insurance, numbered 441,881, whereby, for the term of five years from December 13, 1954, at noon, Standard Time, to December 13, 1959, at noon, Standard Time, at the location last described, to an amount not exceeding $22,500.00, it insured "Bert R. Hamm, doing business as Hamm Motor and Implement Company and legal representatives, to the extent of the actual cash value at the time of loss, but not exceeding the amount which it would cost to repair or replace the property with material of like kind and quality within a reasonable time after such loss ........... nor in any event for more than the interest of the insured, against all direct loss by fire, lightning and by removal from premises endangered by the perils insured against in this policy, except as hereinafter provided, to the property described hereinafter while located or contained as described in this policy

DESCRIPTION AND LOCATION OF PROPERTY COVERED

ON STOCK IN THE ONE STORY BRICK-TILE BLDG WITH APPROVED ROOF OCCUPIED AS AUTO & IMPLT SALES & SERVICE SITUATED LOT 11-14 BLK 9 RB 552 DODGE COUNTY SCRIBNER NEBR."⁴

That policy of insurance contained the following provisions, among many others:

"MORTGAGEE If loss hereunder is made payable, in INTERESTS AND whole or in part, to a designated mortgagee OBLIGATIONS. not named herein as the insured such interest in this policy may be cancelled by giving to such mortgagee a ten days' written notice of cancellation

If the insured fails to render proof of loss such mortgagee, upon notice, shall render proof of loss in the form herein specified within sixty (60) days thereafter and shall be subject to the provisions hereof relating to appraisal and time of payment and of bringing suit. If this Company shall claim that no liability existed as to the mortgagor or owner, it shall, to the extent of payment of loss to the mortgagee, be subrogated to all the mortgagee's rights of recovery, but without impairing mortgagee's right to sue; or it may pay off the mortgage debt and require an assignment thereof and of the mortgage. Other provisions relating to the interests and obligations of such mortgagee may be added hereto by agreement in writing."

and:

"PERILS NOT INCLUDED. This company shall not be liable for loss by fire or other perils insured against in this policy caused, directly or indirectly, by: ...........................................

(i) neglect of the insured to use all reasonable means to save and preserve the property at and after a loss."

and also:

"Unless otherwise provided in writing added hereto this company shall not be liable for loss occurring

(a) while the hazard is increased by any means within the control or knowledge of the insured."

204 F. Supp. 211

Attached to and constituting a part of such policy was this endorsement:

"UNIFORM STANDARD (new style) FORM No. 107L (edition Aug. 53).

LIBERALIZATION CLAUSE

If during the period that insurance is in force under this policy, there be adopted in this state by the fire "insurance rating organization on behalf of this company, any forms, endorsements or rules by which this insurance could be extended or broadened, without additional premium charge, by endorsement or substitution of such form or endorsement, then such extended or broadened insurance shall inure to the benefit of the insured hereunder as though such endorsement or...