U.S. Guarantee Co. v. Harrison & Owen Produce Co.

• Decision Date: 16 May 1940
• Docket Number: 6 Div. 615.
• Citation: 198 So. 240,240 Ala. 186
• Parties: UNITED STATES GUARANTEE CO. v. HARRISON & OWEN PRODUCE CO. HARRISON & OWEN PRODUCE CO. v. LONDON GUARANTEE & ACCIDENT CO., LIMITED.
• Court: Alabama Supreme Court

198 So. 240

240 Ala. 186

UNITED STATES GUARANTEE CO. v. HARRISON & OWEN PRODUCE CO.

HARRISON & OWEN PRODUCE CO. v. LONDON GUARANTEE & ACCIDENT CO., LIMITED.

6 Div. 615.

Supreme Court of Alabama

May 16, 1940

Rehearing Denied Oct. 17, 1940.

Appeal from Circuit Court, Jefferson County; C. B. Smith, Judge.

Bill for declaratory judgment and for reformation or correction of policies of automobile liability insurance by W. H. Harrison and A. Owen, partners doing business under the firm name of Harrison & Owen Produce Company, against the United States Guarantee Company, London Guarantee & Accident, Company Ltd., and Herbert E. Swanger, and cross-bill by respondent United States Guarantee Company. From a decree denying reformation of the policies and declaring liability as against United States Guarantee Company, said respondent appeals, and complainants cross-assign error.

Reversed and rendered.

GARDNER C.J., and BROWN and LIVINGSTON, JJ., dissenting on rehearing.

Murphy Hanna & Woodall, of Birmingham, for appellant United States Guarantee Co.

Curtis & Maddox, of Jasper, for appellee and cross-appellant Harrison & Owen.

J. P. Mudd, of Birmingham, for appellee London Guarantee & Accident Co.

Taylor & Higgins, of Birmingham, for appellee Swanger.

THOMAS Justice.

The bill was for correction or reformation of insurance policies according to the intent and agreement of the parties.

The bill, among other things, sought a declaratory judgment and averred that complainants had the serial and motor number of both trucks, and in giving him the said numbers mistakenly gave to him the serial and motor number of the old truck, and the said agent so made the change and as changed, and as in force at the time of the accident, said policy so changed covers a 1934 model one and one-half ton Chevrolet truck, serial number 8 PD-023954 and motor number T-4068952, which is the old truck and which did not hit the child for the death of whom the suit is brought. That while said serial and motor number actually identifies the older truck it was intended that the numbers should identify the newer truck, which did hit the child. That by mutual mistake the wrong numbers were inserted, and was brought about by complainants' mistake in giving to the agent the wrong numbers. That complainants thought and believed the said policy covered the new truck that hit the child, reported the accident to the company and its agents entered into an investigation. On checking the motor number of the new truck, it was revealed that the policy did not cover it, but was in fact the numbers on the older truck. The company thereupon declined to defend the suit for the reason it says its policy does not cover the truck that hit the child, but covers the older truck which did not hit the child. At the time the change in the policy was written it was intended by complainants and the agent of the company to cover the new truck, but the identity was mistakenly given by the complainants to said agent. Said mistake was not accompanied by any fraud on the part of the agent or the complainants, but was a mutual mistake. Complainants say that said policy either covers the new truck, as it was the one intended to be insured, or that same should be reformed so as to cover same, as of the date of change by showing the motor number to be T 4635293, the number of the new truck instead of the number that said policy really bears. That said policy has in it the following clause: "It is further agreed that as respects insurance afforded by this policy under coverage A and B the company shall (a) defend in his name and behalf any suit against the insured alleging such injury or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent." Complainants say that said right or undertaking is valuable and a material part of the coverage of said policy, and the company refuses to defend said suit for the reasons set forth in the complaint.

The relief so prayed was denied by the decree of the trial court. Hence the appeal and cross-assignment of errors by parties in interest.

A justiciable issue is presented by the pleading under the Declaratory Judgment Act, Gen.Acts 1935, p. 777, as indicated in the original bill and in the cross-bill seeking reformation of the insurance policies because of mutual mistake. The policies were automobile liability insurance policies issued respectively by the two respondent insurance companies, one of whom is a cross-complainant.

It is shown by the pleading that a suit is pending on the law side of the court against the assured (complainant) for damages for the death of plaintiff's minor child, alleged to have been caused by the negligent operation of defendants' automobile truck. It is averred that said truck was insured apparently under one of said policies of the parties before the court, but that by mutual mistake, common to both of said policies, it was the intention of the parties that the truck should have been expressly insured, by the other of said policies exhibited by the pleadings.

It is averred that each of said insurance companies had denied liability, under its respective policy, to defend the damage suit at law brought by the plaintiff in that damage suit who is also made a party respondent to the instant suit, and is likewise a party co-respondent in the equity proceeding. The original bill of complaint prays for declarations as to which of said insurance companies, if either, was liable for the damage done by the truck in question and should defend the assured in said action at law for damages. This was declared to be a valuable contract right in United States Fidelity & Guaranty Company v. Hearn, 233 Ala. 31, 170 So. 59, and such is shown to have been a valuable contract right under the original pleading and policy provision exhibited.

The last-cited case has been cited with approval and followed in Jefferson County v. Johnson, 232 Ala. 406, 168 So. 450, in Herbert v. Perry, 235 Ala. 71, 177 So. 561, in Auto Mut. Indemnity Co. v. Moore, 235 Ala. 426, 179 So. 368, in American Mutual Liability Ins. Co. v. Agricola Furnace Co., 236 Ala. 535, 183 So. 677, and in Bagwell v. Woodward Iron Co., 236 Ala. 668, 184 So. 692, 118 A.L.R. 396, note.

It is established that when the evidence is given ore tenus before the judge rendering the decision, the usual presumptions of correctness prevail. Hodge v. Joy, 207 Ala. 198, 92 So. 171. This court must be "convinced beyond any sort of doubt" that the trial court "has erred in the decree in the cause, both as to the facts and in the application of 'sound principles of law' to the facts found in the record," before the judgment may be changed. Esco v. Davidson, 238 Ala. 653, 193 So. 308, 310; American Nat. Bank & Trust Co. v. Powell, 235 Ala. 236, 178 So. 21.

As stated by Mr. Justice Sayre, the rule is that after making all proper allowances and indulging all reasonable intendments in favor of the court below, "we reach a clear conclusion that the finding and judgment are wrong" (Twinn Tree Lumber Co. v. Day, 181 Ala. 565, 61 So. 914, 915), may this court hold to the contrary?

The rule applied as to reformation of an automobile liability insurance policy only as to the motor number of the automobile insured is that there must be shown to have been a mutual agreement to embrace a certain automobile, but that it was incorrectly described as to its number, by mutual mistake, or by the mistake of one party and fraud of the other (or the equivalent of fraud). Code, § 6825. Sufficient mutuality is shown to exist if the insurance company intended to insure a certain automobile which assured had in mind and proposed to insure by that policy. Where the mistake of the parties goes to the identity of the automobile itself to be insured, reformation is denied and the contract of insurance may be rescinded since there was no meeting of the minds of the parties. Reeves v. Thompson, 225 Ala. 204, 142 So. 663; McKleroy v. Dishman, 225 Ala. 131, 142 So. 41; National Union Fire Ins. Co. v. Lassetter, 224 Ala. 649, 141 So. 645; Warren v. Crow, 195 Ala. 568, 71 So. 92; Camper v. Rice, 201 Ala. 579, 78 So. 923; Welsh v. Neely et al., 187 Ala. 222, 65 So. 795; Miller et al. v. Morris et al., 123 Ala. 164, 27 So. 401.

The rule as to the revision of contracts as stated by the Code of 1923, § 6825, is as follows: "When, through fraud, or a mutual mistake of the parties, or a mistake of one party, which the other at the time knew or suspected, a written contract does not truly express the intention of the parties, it may be revised by a court of equity on the application of the party aggrieved, so as to express that intention, so far as it can be done without prejudice to the rights acquired by third persons, in good faith and for value."

See Atlas Assur. Co. Ltd., of London, England, v. Byrne, 235 Ala. 281, 178 So. 451; Duran v. Smith et al., 237 Ala. 577, 188 So. 72.

When the evidence is carefully considered, it cannot be sufficiently or successfully urged that Harrison and Owen did not have protection under one or the other of the policies of insurance. The premiums were paid as understood and demanded to cover the two trucks with proper liability insurance. The respective agents were insuring a truck indicated and understood by them as the "old" or "new" truck, as they were used locally under the standard rules of insurance. Both trucks were of the same model and make, and used for like purposes, the difference being that one was used in travel from Jasper to Birmingham and return and the other in the vicinity of Jasper. Thus, it is evident that the risk as to the one truck was greater than the risk on the truck used locally. All parties concede that there...