Thielbar Realties, Inc. v. National Union Fire Ins. Co.

• Decision Date: 03 March 1932
• Docket Number: 6882.
• Citation: 9 P.2d 469,91 Mont. 525
• Parties: THIELBAR REALTIES, Inc., v. NATIONAL UNION FIRE INS. CO.
• Court: Montana Supreme Court

9 P.2d 469

91 Mont. 525

THIELBAR REALTIES, Inc., v. NATIONAL UNION FIRE INS. CO.

No. 6882.

Supreme Court of Montana

March 3, 1932

Rehearing Denied April 6, 1932.

Appeal from District Court, Toole County; R. M. Hattersley, Judge.

Action by the Thielbar Realties, Incorporated, against the National Union Fire Insurance Company. Judgment for plaintiff, and defendant appeals.

Affirmed.

Freeman Thelen & Freeman and Ernest Abel, all of Great Falls, for appellant.

Speer & Hoffman, of Great Falls, for respondent.

MATTHEWS J.

The National Union Fire Insurance Company, a corporation, has appealed from a judgment against it and in favor of "Thielbar Realties, Inc.," entered in an action brought by the latter for the reformation of a policy of insurance and recovery thereunder.

The record warrants the following statement of the case: Prior to 1926 one Ethel Warren had conducted a resort known as "Ethel's Place," on the outskirts of Shelby and near it stood a like resort called the "Chicken Shack." The latter was "closed," and the Warren woman purchased the building and moved it to a tract of land approximately a mile out of town, on which she secured a lease. At some time not designated, Ethel Warren married Fred Thielbar, and the plaintiff company was incorporated with Mrs. Thielbar as president, Thielbar as secretary-treasurer, and one H. Norskog, an attorney, as vice president and counsel. The three constituted the board of directors, and Norskog acted as secretary in the absence of Thielbar.

In the spring of 1926, Ethel Warren Thielbar assigned her lease to the plaintiff; the "shack" was torn down, and from the salvaged lumber and new material plaintiff commenced the erection of a building consisting of a dance hall and five small rooms, to be known as "Ethel's road house," where food, drink, and entertainment would be furnished by Mrs. Thielbar and women known as the cook, the piano player, and "entertainers."

In August, when the building was partially completed and occupied for the above purposes, D. Watson Robb, vice president of the "Moon Agency" of Great Falls, and who had known Ethel Warren for fifteen years, visited the establishment, accompanied by a state agent of the defendant company, for the purpose of soliciting insurance on the building and was successful to the extent that, in September the Moon Agency, as local agent for the insurance companies wrote a $1,000 policy in the defendant company and a like policy in the Netherlands Insurance Company. On the completion of the building, the first of these policies was surrendered and a new policy written giving a coverage of $2,000 on the building, $150 on furniture, and $350 on Mrs. Thielbar's clothing.

In drafting the original policies, Robb, the agent, well knowing the business which was being conducted in the building, suggested that it be issued as a "community hall," and this was done, and, having the lease before him for the purpose of describing the land on which the building stood, and thus being advised as to the nature of the insured tenure, wrote the insurance, although the policy contains the printed provision that the policy shall be void "if the subject of insurance be a building on ground not owned by the insured in fee simple."

The lease describes the tract by metes and bounds, but only with reference to lot 6 of block 8 of "Guth's" first addition to Shelby, and, while the agent had the lease before him for the purpose of description, he mistook the tract to be described as "Lot 6, Block 8, Guthrie's first Addition to Shelby," and so described it in the policy. As a matter of fact there was neither a "Guth's" nor a "Guthrie's" addition to Shelby recorded in the county clerk's office. The land should have been described in both the lease and the policy by metes and bounds and as located in the southwest corner of the proper legal subdivision of the section.

In early November, Mrs. Thielbar became sick, and in consequence closed the road house and left it under the supervision and care of a reliable and competent person, with all doors and windows closed and locked and all rubbish cleared away, inside and out. The vacancy was reported to the Moon Agency within forty-eight hours, and, on November 20, it issued and attached to the policy a vacancy permit valid for thirty days, within which period the building and contents were totally destroyed by fire. The agency was duly notified of the loss, and, on January 8, 1927, plaintiff made and filed formal proof, under oath, and therein stated that at the time of the fire the building was used as a "community hall."

Shortly after the fire and before the filing of the formal proof of loss, an officer of the Pacific Coast Adjustment Bureau visited Shelby for the purpose of investigation, but did no more than inquire of the county clerk of the existence of "Guthrie's" addition, and, finding no record thereof, notified the Moon Agency and Norskog that the policy did not cover the property destroyed. Tender was made by the adjuster of the amount of the premium on cancellation of the policy, which tender was not accepted.

The complaint correctly describes the leased land, and alleges that the misdescription was the result of mutual mistake. It alleges that the building was declared, in the proof of loss, to have been occupied as a "community hall" because of the recommendation of defendant's agent, and that, if the proof was defective in this regard, the defect was waived by failure to specify it as ground for rejection of the claim.

The answer admits the issuance of the policy, the destruction of the property by fire, and that the loss exceeded the coverage, but denies the validity of the policy, denies that the land was misdescribed by "mutual mistake," and denies all liability. It sets up special and separate defenses to the effect that the action is barred by the terms of the policy and by the statute of limitations; that the policy is void for misrepresentation respecting the ownership of the land, the use of the building, and by reason of vacancy without permit from November 1 to November 20. Issue was joined by reply and the cause tried to the court sitting with a jury.

At the close of the case the court discharged the jury and thereafter made findings of fact and conclusions of law in favor of plaintiff and in conformity with the fore-going statement, and thereon entered judgment reforming the policy and fixing the amount of recovery.

The defendant has made thirty-three assignments of error based upon rulings of the court on the introduction of testimony, on the alleged insufficiency of the evidence to support the findings, and on the refusal of the court to make tendered findings, but argues only the following propositions:

The plaintiff is not entitled to a reformation of the policy; the action is barred by the terms of the policy or by the statute of limitations; misstatements as to the use and occupancy of the building render the policy void; the policy is void by reason of the fact that the insured was not the owner in fee of the land on which the building was situated; and vacancy without a permit renders the policy void.

Under the first assertion it is urged that the only provision of section 8726, Revised Codes 1921, applicable is for relief on the ground of "mutual mistake," and no such mistake was shown. The rule is that, "in order that a written instrument may be reformed in equity for mistake, it must appear that the parties agreed upon a certain contract; that they executed a contract ***; that the contract executed was not the one agreed upon; that the variance *** occurred by mistake; in what the mistake consisted; and that the mistake was mutual." Gassert v. Black, 11 Mont. 185, 27 P. 791, 793. "A mutual mistake is one which is reciprocal and common to both parties, where each alike labors under the same misconception." 23 R. C. L. 328; Comerford v. United States F. & G. Co., 59 Mont. 243, 196 P. 984.

It is at least doubtful that, under the circumstances, a reformation of the policy was necessary. While there are decisions to the contrary, "a long line of authorities holds that, where, by mutual mistake of the parties or error on the part of the insurer, the policy misdescribes the property intended to be insured, or falsely states the location of such property, no reformation of the policy is necessary in order to permit a recovery thereon." 66 A. L. R. 767, note, where the authorities are assembled. In addition to the authorities there cited, see Kansas Farmers' Fire Ins. Co. v. Saindon, 52 Kan. 486, 35 P. 15, 39 Am. St. Rep. 56; Holyfield v. Farmers' Alliance Ins. Co., 132 Kan. 539, 296 P. 710, 712; State Mutual Ins. Co. v. Green, 62 Okl. 214, 166 P. 105, L. R. A. 1917F, 663. The theory on which recovery is permitted without reformation is waiver or estoppel. 66 A. L. R. 768, note; see, also, Johnson v. Rocky Mountain Fire Ins. Co., 70 Mont. 411, 226 P. 515.

In Holyfield v. Farmers' Alliance Ins. Co., above, the court declared: "There was plenty of extrinsic evidence that the property was located at the farm actually owned and occupied by appellee. It is very probable that there was not anybody in the court room on the day the case was tried who did not know where this property was located, and certainly the insurance company knew, because its agent came out and saw the property and wrote the application. *** Plenty of extrinsic evidence showed that nobody was deceived. If the court should insist that there should be a reformation in this case, it would just be cluttering up the records of Leavenworth county with one more unnecessary lawsuit."

However the evidence before us is sufficient to warrant a reformation, if reformation was necessary before...