Terminal Ice And Power Company v. American Fire Insurance Company
| Decision Date | 30 April 1917 |
| Citation | 194 S.W. 722,196 Mo.App. 241 |
| Parties | TERMINAL ICE AND POWER COMPANY, Appellant, v. AMERICAN FIRE INSURANCE COMPANY, Respondent |
| Court | Kansas Court of Appeals |
Appeal from Jackson Circuit Court.--Hon. Allen C. Southern, Judge.
Judgment affirmed.
Lathrop Morrow, Fox & Moore, and Boyle & Howell for appellant.
Fyke & Snider for respondent.
This is an action on a policy of fire insurance issued to plaintiff by defendant September 20, 1912, on a two-story building and appurtenances which were a part of an ice manufactory plaintiff owned Kansas City. The plant was in operation but this particular building was not being used and was insured as an unoccupied building. At the time of the fire which wholly destroyed the property the policy, which was issued for a term of one year, had not expired, and five other policies issued by different insurance companies and insuring the same building were held by plaintiff and were in force when it was destroyed. All of the companies refused to acknowledge liability and adjust the loss, plaintiff brought separate suits to collect the insurance suffered defeat in the circuit court and appealed each case to this court. The cases were submitted at the same time have common issues, and our decision in the instant case will dispose of the controlling questions in the others.
The policy, in the standard form, contains the following conditions and agreements which are the basis of the principal defenses interposed in the answer: "This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void if the interest of the insured in the property be not truly stated herein, or if the interest of the insured be other than unconditional and sole ownership, or if the subject of insurance be a building on ground not owned by the insured in fee simple, 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 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."
The answer alleges breaches of the foregoing provisions at the time of the loss, as follows: First, that after the policy was issued and before the loss the property was advertised for sale under a deed of trust with the knowledge of plaintiff and without provision therefor being indorsed on the policy and that such advertisement was being published at the time of the loss; second, that the interest of plaintiff in the property was not truly stated in the policy; third, that the building insured was on land not owned by plaintiff in fee simple and, fourth, that a prohibited change in the interest and title occurred in virtue of an option which plaintiff, after the policy was issued, gave to another corporation--the City Ice Company--to purchase plaintiff's interest in the property, "and that thereafter the said contract, or option, was exercised by the said City Ice Company and whatever interest or title, if any, the said plaintiff had in said property was purchased by the City Ice Company and conveyed by the said plaintiff to it . . . and that at the time of the fire plaintiff had no interest in the subject of insurance, etc."
The reply is a general denial and a plea of waiver. The cause was tried without the aid of a jury and the views of the court on issues of law and fact were clearly defined in rulings on declarations of law asked by plaintiff.
The material facts of the case chronologically stated are as follows: 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 and Power Company of which he was the principal stockholder and moving spirit. The corporation began its business career (which was short-lived 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 encumbered 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 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 and 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 word off the 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 and 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.
About the time of these changes, i. e. April 3, 1911, the Gate City Bank, a general creditor of plaintiff was given judgment for about $ 1700 in an action against the Lyons Company as defendant, and had execution issued and levied on the factory including the building afterwards covered by the policy in suit. The property was sold at execution sale and bought in by the bank which received the sheriff's deed April 5, 1912. Thereafter the bank made unsuccessful attempts in court to gain possession of the property and did not wholly discontinue such efforts until October 6, 1913, when it compromised its demands with the attorney for Vanderslice, Chick and Lynds for $ 200 in cash and executed a quitclaim deed as directed by the attorney.
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 book holder 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.
This sale could not affect the lien of the first mortgage but since the bonds it secured were owned or controlled by Vanderslice, Chick and Lynds, that mortgage and the suit to foreclose it did not stand in the way of the purpose to convey the property clear of incumbrances. The value of the entire plant appears from the evidence to have been approximately $ 110,000, or about $ 20,000 less than the total mortgage indebtedness. Consequently there was no equity in the property to which general creditors could look for the payment of their demands. This condition of insolvency resulted from the management of Lyons. The activities of Vanderslice, Chick and Lynds, after they secured control of the corporation appear to have been prompted by a purpose to extricate the corporation from its pecuniary difficulties without resorting to bankruptcy proceedings to the end of preventing loss on their holdings under the second deed of trust.
Passing for the present, the subject of the effect on the interest of plaintiff in the property of the execution sale procured by the Gate City Bank we shall discuss and determine the issues raised by the specific defenses set forth in the answer. First we shall consider the defense that plaintiff, at the time of the issuance of the policy, was not the sole and unconditional owner of the building insured, nor the owner in fee simple of the ground on which the building stood and, therefore, that the policy...
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