Twin City Fire Ins. Co. v. Stockmen's Nat. Bank of Ft. Benton, Mont.

• Decision Date: 27 October 1919
• Docket Number: 3297,3299.
• Citation: 261 F. 470
• Parties: TWIN CITY FIRE INS. CO. v. STOCKMEN'S NAT. BANK OF FT. BENTON, MONT. HOME INS. CO. OF NEW YORK v. SAME.
• Court: U.S. Court of Appeals — Ninth Circuit

261 F. 470

TWIN CITY FIRE INS. CO. v. STOCKMEN'S NAT. BANK OF FT. BENTON, MONT.

HOME INS. CO. OF NEW YORK v. SAME.

Nos. 3297, 3299.

United States Court of Appeals, Ninth Circuit.

October 27, 1919

Actions by the Stockmen's National Bank of Ft. Benton, Montana-- one against the Twin City Fire Insurance Company, and the other against the Home Insurance Company of New York. Judgments for plaintiff, and defendants bring error. Affirmed.

Freeman & Thelen, of Great Falls, Mont., and Nathan H. Chase, of Minneapolis, Minn., for plaintiffs in error.

Norris Hurd & McKellar, of Glasgow, Mont., for defendant in error.

Before ROSS, MORROW, and HUNT, Circuit Judges.

PER CURIAM.

The defendant in error was the plaintiff in two actions in the court below, one against the Twin City Fire Insurance Company and one against the Home Insurance Company, to recover on policies of fire insurance. The Saco Hotel Company mortgaged its hotel property to the Homebuilders' Investment Company, and on July 13, 1916, in a suit to foreclose the mortgage, a decree was entered for the sum of $14,369.60, and an order of sale was made. The property was advertised to be sold on August 17, 1916, but at the instance of Dunbar and Rider, two of the stockholders of the hotel company, the sale was postponed. On the date last named Dunbar and Rider borrowed $21,000 from the plaintiff on their joint note secured by some chattel mortgages, and with a portion of the money so borrowed they purchased the Homebuilders' judgment, taking an assignment of the same in the name of the plaintiff, as additional security for its loan of $21,000. On September 2, 1916, Armstrong, who was president of the hotel company, recovered a judgment against that company for $9,089.62. There was included in the judgment certain notes given by the hotel company to Armstrong, Dunbar, and Rider for money advanced by them to pay for furniture for the hotel and a note of $1,675 given to the First National Bank of Saco for money borrowed; the notes having been assigned to Armstrong for the purpose of suit.

In November, 1916, a meeting of the directors of the hotel company was had, to discuss the question whether the hotel property should be sold under the Homebuilders' judgment or a receiver should be applied for. The former course was adopted. The attorneys for Dunbar and Rider inquired if the plaintiff would consent to the sale, and stated that it might be well to have the property bid in in the plaintiff's name. Dunbar and Rider controlled the Homebuilders' judgment, and also an interest of $3,277.98 in the Armstrong judgment, and had to their credit in the plaintiff's bank about $6,500, balance of the $21,000 which they had borrowed. Shortly thereafter Rider assigned his interest in the Homebuilders' judgment to Dunbar. On December 7, 1916 when the hotel property was about to be sold at sheriff's sale, Skjerseth, the defendant's local agent at Saco, made, executed, and issued the policies in suit, to take effect December 14th. The loss payable clause in the policies ran to the Homebuilders' Company without instruction from the hotel company, following the prior policies. Upon executing the policies, in accordance with the usual custom, daily reports were mailed by the agent to the home offices of the defendants, containing duplicates of all riders and writings attached to policy contracts as issued. At that time Skjerseth knew the financial condition of the hotel company, and knew that it was unable to bid in the hotel property at sheriff's sale. On December 29, 1916, the hotel real and personal property was sold at sheriff's sale, the personal property was bid in by the plaintiff for $1,000, the real estate was first sold to satisfy the Armstrong judgment, and bid in for $50 by Dunbar, and immediately thereafter it was again sold to satisfy the prior judgment of the mortgagee, which had been assigned to plaintiff, and was bid in by plaintiff at $24,000, to protect the plaintiff and Dunbar and Rider. After paying plaintiff $14,369.60 and interest and costs, the sheriff paid the balance of $9,341.76 to Armstrong's attorney in satisfaction of the Armstrong judgment. The right of redemption remained in the hotel company and in Dunbar.

Shortly after the sale Armstrong used a portion of the money so received by him in paying the Saco Bank the amount of its note, which had been merged in the Armstrong judgment. In the meantime, about December 7, 1916, the hotel company not knowing that new policies had been executed, decided to renew the insurance, and the secretary of the company went to the Saco Bank for that purpose. He was there informed that the policies had issued, and he was told the amount of the insurance and the amount of the premium. Before the sheriff's sale, the defendants' agent agreed with the hotel company, acting by Rider, that after the sale the policies should be assigned to the purchaser. Subsequent to the sale it was again agreed between the agent's assistant in the Saco Bank and Dunbar and Rider on behalf of the hotel company that the policies would be assigned to the purchaser. On February 17, 1917, Dunbar paid the premiums on the policies at the demand of Dychtowicz, the assistant agent. Dychtowicz entered into correspondence with the defendants and the plaintiff, inquiring whether the policies should not be payable to Dunbar as insured, and loss payable to plaintiff as mortgagee, and received affirmative answers. He then wrote Armstrong, the president of the hotel company, asking him to come to the bank and assign the policies. Armstrong went to the bank, and the assistant informed him that the papers were 'fixed.' He again went to the bank with Dunbar, and they were told by Dychtowicz that the papers were fixed. Dychtowicz denied these conversations, and denied that Armstrong came to the bank; but it was shown that others acted for the defendants at the bank, and it is possible that some other employe of the bank acted in this instance.

As a matter of fact, no assignment was made and no loss payable clause to the plaintiff was attached to the policies. The policies remained in the hands of the agents, as also had remained the preceding policies, which had expired. On February 28, 1917, the hotel was destroyed by fire. The loss was total and in excess of the insurance. The policies contained the provision that no agent had power to waive any provision or condition thereof, unless such waiver be indorsed thereon, and that unless otherwise provided by agreement so indorsed the policies would be void if foreclosure proceedings were commenced, or notice given of sale, or if any change should take place in the insured's interest, title, or possession; that, fire occurring, the insured should give immediate notice of any loss in writing to the insurers, and within 60 days should render statements to the insurers, signed and sworn to by the insured, stating all the latter's knowledge and belief of the time and origin of the fire, interests, incumbrances, other insurance, etc., and that no action upon the policies should be sustainable until the insured had complied with all such requirements. On June 20, 1917, the defendants directed the plaintiff's attention to the 60-day clause, and advised it that no proofs had been furnished, and denied their liability. The defendants retained the premiums until late in July, 1917, when they tendered them to Dunbar, who refused them. The hotel company assigned its claims on the policies to the plaintiff. On the trial in the court below a jury was waived in each case, and the court, upon the issues and the evidence, made a general finding for the plaintiff, on which judgment was entered.

The defendants rely upon the fact that the loss payable clause in each policy ran in favor of the Homebuilders' Company. which they say possessed no interest in the property at the time when the policies were renewed, of which fact the defendants' agent was aware, and upon the fact that, although the defendants notified their agent, a few days prior to the fire, to have the policies issued to Dunbar, and new loss payable clauses attached in favor of the plaintiff, nevertheless nothing was done, and at the time of the fire, the policies remained in the same form as when issued, and they point to the fact that there is no prayer in the complaints for reformation of the policies or for equitable relief, and invoke the rule that a federal court cannot afford equitable relief in an action at law, as is permitted under the Codes of some of the states.

We do not understand that the court below by its decree attempted to reform the policies, or to afford relief that could not be obtained in an action at law. The court was of the opinion that the oral agreement between the hotel company and the defendants' agent that the policies should be assigned to the plaintiff then and there accomplished such assignment, and that, although a writing was contemplated, it would have been but a record, and evidence of the previous assignment, rather than itself the assignment, and held that the hotel company, possessing a right of redemption, had an insurable interest. If there was variance between the allegations of the complaint and the proofs, that fact cannot avail the defendants in this court, for the reason that no such variance was brought to the attention of the court below. Roberts v. Graham, 6 Wall. 578, 18 L.Ed. 791; Insurance Sav. Bank v. Anglo-American Co., 189 U.S. 221, 23 Sup.Ct. 517, 47 L.Ed. 782; Preiss v. Zitt, 148 F. 617, 78 C.C.A. 56; Phoenix Securities Co. v. Dittmar, 224 F. 892, 140 C.C.A. 336.

We are of the opinion that the defendants are estopped to allege that the modification of the terms of the policies making loss payable to the plaintiff and the...