Stebbins v. Westchester Fire Ins. Co.

• Decision Date: 16 May 1921
• Docket Number: 16174.
• Citation: 115 Wash. 623,197 P. 913
• Parties: STEBBINS v. WESTCHESTER FIRE INS. CO.
• Court: Washington Supreme Court

197 P. 913

115 Wash. 623

STEBBINS v. WESTCHESTER FIRE INS. CO.

No. 16174.

Supreme Court of Washington

May 16, 1921

Department 1.

Appeal from Superior Court, Spokane County; David W. Hurn, Judge.

Action by L. J. Stebbins against the Westchester Fire Insurance Company, in which the estate of J. O. Pugsley, Gram &amp Barrett, and another asserted priorities to any recovery. From a judgment in favor of plaintiff, but giving the estate of J. O. Pugsley priority, defendant insurer appeals, and L J. Stebbins appeals. Affirmed in all respects.

Gram, Hull & Barrett and M. E. Mack, all of Spokane, for appellant.

Caleb Jones, Danson, Williams & Danson, R. E. Lowe and H. G Twomey, all of Spokane, for respondent.

BRIDGES J.

There are two distinct branches to this case. The first concerns the liability of the Westchester Fire Insurance Company on a policy of insurance issued by it, and the second is to determine who is ultimately to receive the insurance money in the event we hold the insurance company liable.

We will proceed at once to the first branch. This part of the case was tried to a jury, which returned a verdict against the insurance company. Inasmuch as the chief defenses revolve around certain clauses of the insurance policy, we will here call attention to them. The policy was dated July 9, 1918, and ran to L. J. Stebbins, and was for $3,300 on the dwelling, which was destroyed, as we will hereinafter mention. It provided that the policy should be void 'if the interest of the insured in the property be not truly stated,' or 'if the hazard be increased by any means within the control or knowledge of the insured,' or 'if the interest of the insured be other than unconditionsal and sole ownership,' or 'if, with the knowledge of the insured, foreclosure proceedings be commenced or notice of sale of any property covered by this policy by virtue of any mortgage or trust deed.'

There was testimony from which the jury might have found the facts to be as follows: In 1907 Stebbins, the plaintiff, entered into a written contract with one J. O. Pugsley and wife for the purchase of a 10-acre tract of land located in Spokane county, Wash, the payments to be made in installments. After Stebbins had paid a considerable portion of the purchase price, litigation arose over the contract. Pugsley undertook to forfeit all of Stebbins' rights. That litigation reached this court by appeal. Pugsley v. Glenn, 98 Wash. 570, 168 P. 172. We held, in substance, that while Pugsley could not terminate the contract, yet he had a right to enforce collection of the balance of the purchase price, and to impress the land with a lien to secure the payment of such balance. Shortly thereafter, and on February 7, 1918, Pugsley and wife commenced suit against Stebbins for the balance due under the contract, and sought to establish a lien upon the property and to foreclose it, all in accordance with our previous decision. On July 9, 1918, the policy of insurance involved here was issued. On July 23 following, the Sponkane court entered judgment in favor of Pugsley and against Stebbins in excess of $3,000, being the balance due under the contract of sale, and in the same action declared such amount to be a lien on the property, and entered a decree foreclosing the lien, and directed that the property be sold for the purpose of raising money to satisfy the judgment. At once after entry of this decree the sheriff gave notice of the sale of the 10-acre tract, including the house in question here, which was located on the land, and such sale, according to notice, was to take place on August 24, 1918. Early in the morning of that day, and a few hours before the sale was to take place, the dwelling covered by this policy of insurance was completely destroyed by fire.

The outstanding facts, therefore, are that at the time the policy of insurance was written and delivered Stebbins was not the unqualified owner of the property, and there was a lien which had previously been established by this court, and suit has been commenced to foreclose the lien. There was further testimony from which the jury might conclude that when Stebbins made application for this insurance he fully informed the agents of the insurance company of the true condition of his title, and all of the facts above recited. The insurance company contends that these facts showed conditions violative of the express terms of the policy of insurance, and that Stebbins was not entitled to recover.

While the authorities are not in entire agreement, it has generally been held that knowledge of the agent who issues the insurance, concerning the condition and title of the property insured, is the knowledge of the insurance company. Mesterman v. Home Mutual Life Ins. Co., 5 Wash. 524, 32 P. 458, 34 Am. St. Rep. 877; Hart v. Niagara Fire Ins. Co., 9 Wash. 620, 38 P. 213, 27 L. R. A. 86; Foster v. Pioneer Mutual Ins. Co., 37 Wash. 288, 79 P. 798; Norris v. China Traders' Ins. Co., 52 Wash. 554, 100 P. 1025; Staats v. Pioneer Ins. Ass'n, 55 Wash. 51, 104 P. 185; 14 R. C. L. 1156 et seq.; People's Fire Ins. Ass'n v. Goyne, 79 Ark. 315, 96 S.W. 365, 16 L. R. A. (N. S.) 1180, and particularly the extensive note to that case, 9 Ann. Cas. 373. It has also generally been held that where an insurance agent issues and delivers a policy of fire insurance which contains forfeiture clauses contradictory to the facts known to him at the time of the issuance of the policy, the company so issuing the policy will be held to have waived such inconsistent provisions, and is estopped to defend by virtue of them. 19 Cyc. 815, and cases there cited; note commencing on page 1222 of 16 L. R. A. (N. S.); Sidebotham v. Merch. Fire Ass'n, 41 Wash. 436, 83 P. 1028; Hatcher v. Sovereign Fire Ass'n, 71 Wash. 79, 127 P. 588; Ramat v. Cal. Ins. Co., 95 Wash. 571, 164 P. 219; Boskovich v. Union Assurance Soc., 98 Wash. 579, 168 P. 166; Robbins v. Milwaukee Mech. Ins. Co., 102 Wash. 539, 173 P. 634.

The trial court submitted to the jury, with somewhat elaborate and entirely proper instructions, the questions whether Stebbins, at the time he made oral application for the insurance, fully informed the insurance agents of the condition of the title to the insured property, of Pugsley's interest therein, and of the suit to enforce that interest. Since the jury found for Stebbins we must assume that the agents had all this information. To hold with appellant on this question would be to hold that the policy was void when issued, and that the insurance company was accepting premiums for a policy which it knew was void.

But the appellant contends that, in any event, the provision in the policy making it void in the event of notice of sale under foreclosure has not been waived, because such notice has not been given when the plicy was issued, and the agents could not have had any knowledge of the violation of that provision of the policy. Its argument is that, while it might be willing to insure property which was covered by a mortgage or lien, and might even be willing to insure such property after suit had been commenced to foreclose such lien, it does not logically follow that it would be willing to insure the property after notice of sale had been given. They argue that a mortgage upon property creates an additional hazard, and that suit to foreclose such mortgage increases that additional hazard, and that a notice of sale under the decree of foreclosure gives still additional hazard, and that, while it might be willing to waive one or more of these additional hazards, it should not be construed that it has waived all of them because it has waived some of them. This question is not without difficulty, but we have concluded that the insurance company is not in position to make this defense. In the first place, this provision of the policy reads as follows:

'Or 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 dead' (the underscoring is ours), the policy shall be void.

It may be somewhat difficult to give any specific name to the lien which was being foreclosed in the Pugsley suit, but, in any event, it is perfectly plain that it was not a mortgage nor a trust deed. If the Pugsley suit had been an action to foreclose a labor or mechanic's lien, we think it would hardly be contended that such an action would be in violation of this provision of the policy. If it be said that this construction is a strict one, our answer is that the insurance company is responsible for the provisions found in the policy. The words there used are its own, and it has been almost universally held that insurance policies will be strictly construed against the insurer, and liberally construed in favor of the insured.

But there is another reason why this defense cannot be made. The notice of sale by the sheriff was but a part of the foeclosure proceedings, and if the insurance company knew that suit had been commenced to foreclose the lien, it also knew that,...