State v. Ellison

• Decision Date: 21 December 1916
• Docket Number: No. 19688.,19688.
• Citation: 190 S.W. 879,269 Mo. 410
• Parties: STATE ex rel. AMERICAN FIRE INS. CO. v. ELLISON et al., Judges.
• Court: Missouri Supreme Court

190 S.W. 879

269 Mo. 410

STATE ex rel. AMERICAN FIRE INS. CO. v. ELLISON et al., Judges.

No. 19688.

Supreme Court of Missouri, In Banc.

December 21, 1916.

Original proceedings by certiorari by the State, on the relation of the American Fire Insurance Company, against James Ellison and others, Judges of the Kansas City Court of Appeals. Judgment rendered by the Court

of Appeals quashed, and record remanded for further proceedings.

Fyke & Snider, of Kansas City, for relator. Lathrop, Morrow, Fox & Moore, Charles M. Howell, and Joseph S. Brooks, all of Kansas City, for respondents.

FARIS, P. J.

This is an original proceeding by certiorari, whereby it is sought to quash the judgment heretofore rendered by the Kansas City Court of Appeals in the case of Terminal Ice & Power Co., Appellant, v. American Fire Insurance Co., Respondent, 187 S. W. 564, on the ground that the opinion therein is contrary to the opinion of this court in the case of Springfield Steam Laundry Co. v. Traders' Insurance Co., 151 Mo. 90, 52 S. W. 238, 74 Am. St. Rep. 521.

For convenience and brevity in designating the parties to that action and the parties to this one, we shall refer to the Terminal Ice & Power Company as "plaintiff," to the American Fire Insurance Company as "defendant," and to the parties in the instant case as "relator" and "respondents," respectively.

The original action (the judgment wherein relator by this proceeding seeks to quash) was brought by plaintiff upon a policy of insurance issued by defendant, who is the relator herein. This policy of insurance provided, among other things not here pertinent, as follows:

"This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void if * * * with the knowledge of the insured foreclosure proceedings be commenced, or notice given of the sale of any property covered by this policy by virtue of any mortgage, or trust deed, or if any change other than by the death of the insured take place in the interest, title or possession of the subject of insurance whether by legal process or judgment, or voluntary act of the insured."

Other facts in the case extrinsic to the clause above quoted from the policy of insurance, and which were considered by the learned Kansas City Court of Appeals as warranting the views held and the judgment entered by them, are thus clearly and succinctly stated by that learned court:

"The property insured was a part of a manufactory owned by W. F. Lyons, who in 1908 transferred it to a corporation known as the W. F. Lyons Ice & Power Company, of which he was the principal stockholder and moving spirit. The corporation began its business career (which was shortlived and disastrous) by issuing and selling bonds for $100,000, which it secured by a first mortgage on all its property. Afterwards on November 5, 1909, it further incumbered the property with a second mortgage or trust deed executed and delivered to John H. Lynds, trustee, to secure notes for $20,000 for money borrowed for the use of the company. These notes were owned by Howard Vanderslice, J. S. Chick, John H. Lynds and Fred Wolferman, and in December, 1909, the control of the corporation and its property and affairs was surrendered to these four holders of the second mortgage notes, whose number was reduced to three by the withdrawal of Wolferman, who sold his interest to the others. In 1910 suit was brought to foreclose the first mortgage, and that suit was pending when the policy in question was issued. To protect their interests as second mortgagees, Vanderslice, Chick and Lynds bought and became the owners of a large part of the bonded indebtedness, and thereby obtained control of the foreclosure suit. They also became the owners of all of the capital stock of the W. F. Lyons Ice & Power Company, and Lyons retired from the corporation and its affairs. At that time the corporation was on the verge of bankruptcy, had lost its credit, and had a bad reputation in the business world. Vanderslice, Chick and Lynds, in an obvious effort to ward off attacks of creditors as well as to escape other consequences of such bad reputation, had the name of the corporation changed to the Terminal Ice & Power Company, early in 1911, and incorporated another company under the name of the Sheffield Ice Company, which operated the factory under a lease from the Terminal Company for a term of two years. Both of these companies were controlled by Vanderslice, Chick and Lynds, who owned all the stock of both; the stock of the Sheffield Company being paid by the transfer to that company of the second mortgage notes.

"On April 2, 1913, while the factory was being operated by the Sheffield Company, plaintiff gave a written option to another corporation, the City Ice Company, to purchase the plant, and in February, 1913, executed a lease to the City Ice Company under which that company as lessee took possession of the property about June 1, 1913, and proceeded to operate the factory. The fire occurred June 17th, and on June 30th the City Ice Company formally notified plaintiff in writing of its decision to exercise the option, and afterwards the sale was consummated.

"At about the time the City Ice Company took charge of the plant under the lease and shortly before the fire, Vanderslice, Chick and Lynds, acting in the name of the Sheffield Company, the bookholder of the second mortgage notes which then amounted to about $30,000, had the trustee in the deed of trust securing the notes advertise the plant for sale under the terms of that trust deed.

"This sale was made about two weeks after the fire, and the property was sold to Vanderslice, who bid $2,000, and a trustee's deed was executed and delivered to him by Lynds, the trustee. The attorney for Vanderslice, Chick and Lynds testified that the advertisement and sale of the property under the second trust deed was pursuant to the request of all the parties in interest, viz., his clients and the City Ice Company, who desired `this title straightened out.' We understand him to mean that the purpose of the sale was to secure the plant against the attacks of the general creditors of the Old Lyons Company in order that the property might be sold and conveyed, clear of all incumbrances, to the City Ice Company."

The policy of insurance on which the action was instituted out of which this proceeding grew was issued on September 20, 1912. The fire which destroyed the property occurred on the 17th day of June, 1913. Under these facts it is plain that neither the antecedent nor the subsequent acts of the owners of the property, or the facts touching the title thereto, can be of any help in the case, except upon the theory that we are to read into the insurance contract between the parties a provision that the clause therein against a foreclosure, or a sale, or advertisement for sale, under a deed of trust shall render the policy void only when a violation of it shall actually serve in the opinion of the trial court or jury, to increase the hazard. For clearly the sole reason for the offering of proof of these facts was to show that the hazard was not in fact increased.

The facts of the case and the condition of the ownership at and after the making of the contract of insurance (till the fire happened) run thus: The plaintiff in the suit below owned the insured property. On this property there was a first deed of trust to secure bonds in the sum of $100,000. Vanderslice, Chick, and Lynds owned "a large part of the bonded indebtedness" above mentioned. There was also on the property of plaintiff Terminal Ice & Power Company a second mortgage (the one now here vexing us) securing notes amounting, principal and interest, to $30,000. These notes formerly held by Vanderslice, Chick, and Lynds had been by them transferred to the said Sheffield Ice & Power Company in payment, as stated, of their stock in the latter company, and were at the time of the fire owned by this company. From (and probably before, but that does not here concern us) the time the property was insured on the 20th day of September, 1912, till the 1st day of June, 1913, the Sheffield Ice & Power Company, the holder of the second mortgage, was in possession, operating the property under a lease. But on the last-mentioned date the City Ice Company went into possession under a lease of the property and was operating it when the fire happened. In February, 1913, said City Ice Company took an option to purchase this property, and after the fire and the foreclosure sale did so purchase it. The Sheffield Ice & Power Company, in order to "straighten the title out," began proceedings to foreclose the second mortgage and sell the property, and while these proceedings for a sale were going forward, but prior to the sale, the part of the property here in controversy burned.

The learned Court of Appeals finds...