Tarleton v. De Veuve

• Decision Date: 11 September 1940
• Docket Number: No. 9229.,9229.
• Citation: 113 F.2d 290,132 ALR 343
• Parties: TARLETON et al. v. DE VEUVE et al.
• Court: U.S. Court of Appeals — Ninth Circuit

132 ALR 343, 113 F.2d 290 (1940)

TARLETON et al. v. DE VEUVE et al.

No. 9229.

Circuit Court of Appeals, Ninth Circuit.

July 3, 1940.

Rehearing Denied September 11, 1940.

COPYRIGHT MATERIAL OMITTED

H. N. Mitchell and James D. Meredith, both of Sacramento, Cal., for appellant Tarleton.

O. F. Meldon, of Sacramento, Cal., for appellant McElligott.

Frank L. Murphy, of Sacramento, Cal., for appellees.

Before GARRECHT, HANEY, and HEALY, Circuit Judges.

GARRECHT, Circuit Judge.

This suit was commenced in the Superior Court of California, in and for the County of Sacramento, by the appellants, who are both residents and citizens of the State of California. The appellee The Texas National Insurance Company of Dover, Delaware, is a Delaware corporation and appellee The Security National Fire Insurance Company of Galveston, Texas, is a Texas corporation. These two companies have been authorized to do business in the State of California under the firm name of the San Francisco Underwriters. Because of the diversity of citizenship this cause was removed, upon petition of appellees, to the court below, where it was tried without a jury.

Appellant Mary Ann McElligott, the owner of a certain piece of land located about eight miles north of Sacramento, California, together with the frame store building and two gasoline pumps situated thereon, borrowed $4,000 from appellant Ida Louise Tarleton on April 24, 1926, and to secure the repayment of this loan executed a first deed of trust upon said property. The total principal amount with interest thereon from May 15, 1930, is due and unpaid. There was a provision in said deed of trust to the effect that the borrower agreed "to keep all improvements upon said premises insured for the full insurable value" and that in default thereof the lender "may procure such insurance, paying the premium thereon." It was in pursuance of this agreement that appellant McElligott, in August, 1935, requested one W. V. McGlone, a general insurance agent located in Sacramento, to procure for her fire protection on her property. She instructed him to insure the building for $4,000, with any loss thereon made payable to appellant Ida Louise Tarleton, the mortgage. The stock and contents of the building were to be insured for the additional sum of $1,000. McGlone was to keep the property insured, in any company he might select. Several companies had declined to insure, or had canceled policies on, this property because it was considered a bad risk, or for other reasons immaterial here.

On or about March 1, 1936, one Hubbs, an agent for the Lumberman's Underwriting Alliance, a company which had canceled a previous policy covering Mrs. McElligott's property, came into McGlone's office, and McGlone sought his aid in securing the insurance. McGlone testified that he told Hubbs "to make up a policy for $5000, $1000 on the stock and $4000 on the building, Mary Ann McElligott's name on the policy with Ida Louise Tarleton as the mortgagee"; that Hubbs "said he couldn't write the business himself for his own company, but he would place it for me McGlone in San Francisco." Hubbs then sent in the application to A. J. Ulvilla, his superior, who, in turn, contacted John D. Richards, a general insurance broker located in San Francisco. Richards applied in person at the office of the appellees, where he was issued the policy here involved, together with the attached mortgage clause, duly countersigned and executed by their general agent, Clarence deVeuve. The record does not reveal what arrangements Richards made with them for the payment of the premium. Thereafter the policy, unaccompanied by any bill for the premium, was delivered to Ulvilla, who transmitted it by mail to McGlone. No letter was sent with it, nor were there any instructions about delivery or non-delivery. According to the terms of the policy the protection was to extend over a three-year period, from March 5, 1936, to March 5, 1939. The coverage on the building was given at $4000, with an additional insurance of $1000 on the stock and contents.

The policy executed by the appellees is in the standard form as set forth in Section 2071 of the Insurance Code of California, St.1935, p. 596, and recites in part:

"In Consideration of the Stipulation herein named and of Two Hundred and no/100 Dollars Premium San Francisco Underwriters Does insure Mary Ann McElligott for the term of three years, * * *.

* * *

"Cancellation. This policy shall be cancelled at any time at the request of the insured, in which case the company shall, upon surrender of this policy, refund the excess of paid premium above the customary short rates for the expired time. This policy may be cancelled at any time, without tender of unearned portion of premium, by the company by giving five (5) days' written notice of cancellation to the insured and to any mortgagee or other party to whom, with the written consent of the company, this policy is made payable, in which case the company shall, upon surrender of the policy or relinquishment of liability thereunder, refund the excess of paid premium above the pro rata premium for the expired time."

Ida Louise Tarleton is named as the mortgagee. The following excerpts are taken from the mortgage rider:

"Subject to the terms, covenants and conditions set forth in this rider, loss or damage (if any) under this policy, on buildings only shall be payable as follows:

"Firstly, to Ida Louise Tarleton as First Mortgagee (or Trustee or Beneficiary under Deed of Trust), as interest may appear, whose mail address is 1403 `H' Street, Sacramento, California.

* * *

"The term `Mortgagee,' as hereinafter used in this rider, shall (except as otherwise indicated by the context) include all mortgagees, trustees, or beneficiaries under deed of trust hereinabove named.

"Subject to and in consideration of the terms, covenants and conditions set forth in this rider this insurance, as to the interest of the mortgagee only therein, shall not be invalidated by any act or neglect of the mortgagor or owner of the within described property, nor by any foreclosure or other proceedings, or notice of sale relating to said property, nor by any change in the title or ownership of said property, * * *.

* * *

"This company reserves the right to cancel this policy at any time as provided by its terms, but in such case this policy shall continue in force for the benefit only of the mortgagee for ten days after notice to the mortgagee of such cancellation, and shall then cease; and this Company shall have the right on like notice to cancel this mortgagee clause."

McGlone informed Mrs. McElligott of the arrival of the policy. She thought the policy was paid for, that McGlone had taken care of it, and she promised him that she would pay the $200 premium a little later in the year.

Ulvilla, in his testimony, declared that he had, prior to the return of the policy, "dunned McGlone for the premium upon the request of the company." McGlone, in response to these requests, endeavored to obtain the money from Mrs. Elligott but was unable to contact her because she was ill.

On May 2, 1936, McGlone returned the policy to the agent of appellees with a request that it be canceled, explaining that the insured was unable to make payment of the premium because of sickness in the family. Appellant McElligott was unaware that the policy was being returned to the appellees, and was not apprised that McGlone had done so or had suggested cancellation. In this regard McGlone acted upon his own initiative, without consulting with Mrs. Elligott and without her direction or consent.

May 4, 1936, deVeuve, in a letter addressed to Richards, acknowledged receipt of the policy from McGlone, but did not state specifically that it had been canceled. He demanded payment of an earned premium of $30, declaring: "Now, Mr. Richards, if this assured does not wish this insurance, it is her privilege, of course, to cancel; but the fact remains she has been covered from March 5, 1936, to May 5, 1936, and had a loss occurred in the meantime, she certainly would have looked to us for payment, and, as you have neglected to send with the policy your check for the earned premium of $30.00 which is due this Company, we are stating that unless this amount is paid within the next 15 days it will be transferred to our Collection Agency for collection. (Emphasis supplied.) Appellants seek to escape the force and effect of this letter because written and signed not by deVeuve but in his stead by one Brooks, his cashier. Brooks used a letterhead of the San Francisco Underwriters, and thus concludes the message: "Very truly yours, Clarence deVeuve, General Agent, By signed Edw. Brooks, Cashier." The appellees offered no evidence to rebut the presumption that the cashier had the authority to act as he did. While on the stand Brooks testified that he, in his position as cashier, had knowledge of the issuance of policies, of their cancellation, and of the proration of premiums on cancellation. Approximately a week after the receipt of this communication, which Richards had forwarded to him, McGlone demanded of Mrs. McElligott payment of the $30, without informing her that he had returned the policy for cancellation. About the middle of the month of May she paid in $15 at his office, but he never forwarded that money to the appellees. He testified that he was awaiting payment of the balance.

On May 21, 1936, a fire completely destroyed all of the property described in the policy in question. The next day McGlone gave notice of the loss by a long-distance telephone call to deVeuve's office in San Francisco. In response to this notification, deVeuve, in a letter dated May 22, 1936, declared that the policy had been returned to the company "canceled flat," that is, that no earned premium was claimed by the insurer, that the policy had never gone into effect. He disclaimed absolutely any liability on the part of...