The Northern Assurance Co. v. Rachlin Clothes Shop, Inc.

• Decision Date: 08 March 1924
• Citation: 32 Del. 406,125 A. 184
• Parties: THE NORTHERN ASSURANCE COMPANY, Defendant Below, Plaintiff in Error, v. RACHLIN CLOTHES SHOP, INC., Plaintiff Below, Defendant in Error. THE PENNSYLVANIA FIRE INSURANCE COMPANY, Defendant Below, Plaintiff in Error, v. RACHLIN CLOTHES SHOP, INC., Plaintiff Below, Defendant in Error. THE HOME INSURANCE COMPANY, Defendant Below, Plaintiff in Error, v. RACHLIN CLOTHES SHOP, INC., Plaintiff Below, Defendant in Error. FIREMAN'S FRIEND INSURANCE COMPANY, Defendant Below, Plaintiff in Error, v. RACHLIN CLOTHES SHOP, INC., Plaintiff Below, Defendant in Error. THE HARTFORD FIRE INSURANCE COMPANY, Defendant Below, Plaintiff in Error, v. RACHLIN CLOTHES SHOP, INC., Plaintiff Below, Defendant in error
• Court: United States State Supreme Court of Delaware

125 A. 184

32 Del. 406

THE NORTHERN ASSURANCE COMPANY, Defendant Below, Plaintiff in Error, v. RACHLIN CLOTHES SHOP, INC., Plaintiff Below, Defendant in Error. THE PENNSYLVANIA FIRE INSURANCE COMPANY, Defendant Below, Plaintiff in Error, v. RACHLIN CLOTHES SHOP, INC., Plaintiff Below, Defendant in Error. THE HOME INSURANCE COMPANY, Defendant Below, Plaintiff in Error, v. RACHLIN CLOTHES SHOP, INC., Plaintiff Below, Defendant in Error. FIREMAN'S FRIEND INSURANCE COMPANY, Defendant Below, Plaintiff in Error, v. RACHLIN CLOTHES SHOP, INC., Plaintiff Below, Defendant in Error. THE HARTFORD FIRE INSURANCE COMPANY, Defendant Below, Plaintiff in Error, v. RACHLIN CLOTHES SHOP, INC., Plaintiff Below, Defendant in error

Supreme Court of Delaware

March 8, 1924

Supreme Court, January Term, 1924.

Error to Superior Court, New Castle County.

Actions by the Rachlin Clothes Shop, Inc., against the Northern Assurance Company, against the Pennsylvania Fire Insurance Company, against the Home Insurance Company, against the Fireman's Friend Insurance Company, and against the Hartford Fire Insurance Company. Judgment for plaintiff, and defendants bring error. Reversed and remanded.

Statement of the Case. These were separate actions (tried as one) against five insurance companies to recover for loss occasioned by a fire which destroyed the stock of merchandise owned by the plaintiff below and located in its storehouse at Dover. The aggregate face amount of the insurance policies was $ 34,400. The plaintiff below claimed both in its proof of loss and at the trial that the value of the merchandise on hand at the time of the fire (August 23, 1921) was over $ 38,000, and that there was a total loss thereof. The plaintiff, therefore, sought to recover the full amount of the insurance. The cases were tried together and the jury by its verdict found in favor of the plaintiff below in the amount of $ 14,500.00.

The errors assigned present three questions for determination by this court. Those questions, and the facts disclosed by the record as pertinent to their consideration, will be found stated in the opinion of the court.

The judgment is set aside and the case remanded for retrial.

Charles F. Curley and W. Calvin Chesnut, of the Baltimore, Maryland Bar, for plaintiffs in error, defendants below.

Daniel O. Hastings and Clarence A. Southerland for defendant in error, plaintiff below.

WOLCOTT Chancellor, PENNEWILL, Chief Justice, HARRINGTON and RICHARDS, J. J., sitting.

OPINION

WOLCOTT, Ch.

1. The insurance companies demanded of the insured that it "furnish a certificate of the magistrate or notary public (not interested in the claim as a creditor, or otherwise, nor related to the insured) living nearest the place of the fire, stating that he has examined the circumstances and believes the insured has honestly sustained loss to the amount that such magistrate or notary public shall certify." The demand was based on a provision of the policies from which the quoted language is taken. The demand was made on October 8, 1921, before suits on the policies were instituted. Though the insured obtained a certificate which it claims is in accordance with the demand, yet it failed to produce the same until the trial was in progress and then only after the closing of testimony in chief by both plaintiff and defendants. The introduction in evidence of the certificate was objected to by the defendants. It was, however, admitted by the trial court. The defendants asked the court below to charge the jury as a matter of law that the production of the certificate at the trial did not constitute a compliance with the policy provision, and that, therefore, a verdict should be returned in favor of the defendants. This was the only charge requested with respect to the magistrate's certificate. The court below refused to give the binding instruction. Its charge to the jury makes no reference to the certificate.

The action of the court below in thus declining to instruct the jury to find for the defendants is alleged to constitute error. We do not feel at liberty to examine de novo the question of law involved in the proposition raised by this assignment of error, for the reason that the case of Continental Insurance Co. v. Rosenberg, 23 Del. 174, 7 Penn. 175, 74 A. 1073, decided by this court in 1909, has closed the door against the discussion. The plaintiffs in error seek to distinguish that case from the one before us. We are unable, however, to do so. That case was concerned with the production of certain books and inventories for the inspection of the insurer in obedience to the requirements of the socalled "iron safe clause" of the policy. The books and inventories were demanded but not produced until the trial was in progress. The trial court in that case in construing the provisions of the contract held that the production must be made within a reasonable time, that production at the trial could not as a matter of law be said to be not within a reasonable time, and that it was for the jury to determine whether, in view of all the circumstances and considering the purpose for which they were to be produced, the plaintiff had produced the books and inventories within a reasonable time. The Supreme Court approved of this ruling. So clearly does it control the question now being considered in the case at bar, that the only way we could escape its consequences would be to disregard it. This we are unwilling to do especially when to do so would determine this case finally against the plaintiff below who, we are entitled to assume, may have been guided in its conduct by that very decision.

2. We now proceed to consider the second ground which the plaintiffs in error urge as constituting error in the proceedings below. The contention made under this head is based on that provision of the policies which reads, as follows:

"This entire policy shall be void * * *in case of any fraud or false swearing by the assured touching any matter relating to this insurance or the subject thereof, whether before or after a loss."

The facts, briefly stated, upon which it is contended that an avoidance of the policy has occurred under the provision of the policy above quoted are as follows: after the fire the plaintiff below presented its proof of loss to the various insuring companies setting forth the amount of its claim in obedience to the provisions of the policies in that behalf. In the proof of loss the value of the merchandise in the store at the time of the fire was stated as $ 38,035.07. A study of the figures set forth in the proof of loss discloses that the plaintiff below claimed a loss in one item of $ 5,194.54. This item covers goods purchased by the plaintiff below from one Cohen, a former owner of the store, at the price of $ 5,837.39, a figure as is manifest in excess of that actually claimed in the proof of loss. The companies apparently were not satisfied to accept the proof of loss without further question. They accordingly demanded an inspection of the books kept by the insured. An examination of the books disclosed the entry of an item showing the purchase price of the goods bought by the plaintiff below from Cohen to be $ 9,837.39, paid by notes of Rachlin Clothes Shop in the amount of $ 5,832.31 and by cash in the amount of $ 4,000. The adjusters for the companies interrogated the general manager, Rachlin, as to this entry. Rachlin, who was acting for the plaintiff below, asserted the correctness of the entry and stated that the $ 4,000 in cash was advanced by Mr. Robbins, who was the president of the plaintiff below. It is admitted that the entry in the books was false, that Robbins did not advance any cash, and that in truth the price paid to Cohen for the goods was $ 4,000 less than the sum represented by the books and asserted by Rachlin. This false statement by Rachlin supplies the basis on which the present contention rests, viz., that fraud within the meaning of the above quoted policy provision was committed.

The statements made by Rachlin when he was questioned by the adjusters were not made under oath. We are, therefore, not concerned with that portion of the forfeiture clause which avoids the policies for "false swearing." This being so, there is no occasion for us to trouble ourselves with a discussion such as some courts have been called upon to engage in as to what if any distinction is to be drawn between fraud and false swearing in policy clauses similar to the one involved here. The sole question before us in this connection is this: Is it a fraud within the meaning of the quoted clause for an insured to make a falsely exaggerated statement concerning what he paid as a consideration for certain merchandise when by his proof of loss formally presented and sworn to he states his claim to be based on a less sum and one that actually accords with the true purchase price?

When the word "fraud" is used in the policy contracts sued on, we must take it to be used in the sense which the law accords to it. In Kent County R. R. Co. v. Wilson, 10 Del. 49, 5 Houst. 49, Chief Justice Gilpin gave expression to the following:

"Now, I may say that actual or positive fraud may be defined or described to be any false representation, deceit, device, or artifice resorted to or used by one person with the intent and for the purpose of deceiving and misleading another person to his injury."

This language clearly recognizes what we dare say no court has ever questioned, that one of the elements indispensable to the existence of fraud, whether accomplished or attempted, is an intent knowingly to mislead its victim to his injury. We have given careful consideration to the evidence upon which the charge of fraud is based in his case and are...