United States Bond & Mortgage Corp. v. Berry

Decision Date06 June 1933
Citation249 Ky. 610
PartiesUnited States Bond & Mortgage Corporation v. Berry.
CourtUnited States State Supreme Court — District of Kentucky

4. Vendor and Purchaser. — Failure of vendor, within reasonable time, to transfer insurance policies to purchaser as agreed, constituted breach of contract, and loss sustained by purchaser through fire occurring thereafter was not proper element of damages.

5. Damages. — Only "general damages" and "special damages" may be recovered for breach of contract.

"General damages" recoverable for a breach of contract are such as may fairly and reasonably be considered as arising naturally — that is according to the usual course of things — from the breach of the contract itself or such as may reasonably be supposed to have been in the contemplation of the parties at the time the contract was made as the probable result of a breach thereof. "Special damages" are such as arise where there are special circumstances attending the making of the contract and its observance would take it out of the natural and usual course of things.

6. Evidence. — Contracting parties are charged with knowledge of existing law fixing measure of damages for breach thereof.

7. Damages. — As basis for recovery of special damages for breach of contract, defaulting party must have had notice of special circumstances at time contract was made.

As basis for special damages for breach of contract, it is not required that party sought to be charged must have had actual knowledge or information in detail as to just what loss would result, but it is sufficient if circumstances are known to the parties or are of such character that they may be fairly supposed to have been in the contemplation of the parties at the time of making the contract.

8. Insurance. — Deed conveying insured property held such change in title or interest of insured under fire policy as will defeat recovery thereunder.

9. Insurance. — Vendor's agreement to transfer fire insurance policies, held not equivalent to agreement to insure or cause property to be insured, or pay for insurance, and vendor cannot be held liable as insurer upon breach of agreement and destruction of property by fire.

10. Damages. — Purchaser, upon breach of vendor's agreement to transfer fire insurance policies, held required, under doctrine of minimizing damages, to exercise diligence to protect herself by procuring insurance on property.

Purchaser, upon vendor's breach of agreement to transfer fire insurance policies within reasonable time, had imperative duty to take such steps as ordinary prudent person would ordinarily take under similar circumstances to protect herself from such damages as might arise from the failure of the vendor to comply with his contract within a reasonable time.

11. Damages. Party to contract, upon breach thereof by other party, must use reasonable diligence to minimize loss resulting from its breach.

12. Damages. Party to contract, upon breach thereof by other party, cannot stand idly by and permit loss to accrue or increase, and then hold defaulting party liable for loss which he might have prevented by use of reasonable effort, expense, and diligence.

13. Witnesses. — In purchaser's action against vendor for breach of agreement to transfer insurance policies, brought after fire, husband of purchaser held incompetent to testify concerning statements at conference at which both husband and wife were present (Civil Code of Practice, sec. 606).

14. Witnesses. — Both husband and wife may testify, when either is acting as agent of other, as to facts coming to knowledge of one in absence of other, but not as to facts occurring when other is present (Civil Code of Practice, sec. 606).

Appeal from Boyd Circuit Court.

WILSON & ROBINSON for appellant.

WAUGH & HOWERTON, J.W. McKENZIE and HANNAH, VAN SANT & McKENZIE for appellees.

OPINION OF THE COURT BY JUDGE RICHARDSON.

Reversing.

The Hans Watts Realty Company, as agent of the United States Bond & Mortgage Company of Kentucky, and Sam Berry, a resident of Ashland, Ky., entered into a contract, subject to acceptance by the United States Bond & Mortgage Corporation, reciting that the United States Bond & Mortgage Corporation was the owner of certain properties located at No. 2625 Holt street, 2428 Adams street, 5272 Winchester avenue, and 1908 Carter avenue, Ashland, Ky., and that Berry was the owner of certain property located at the southwest corner of Twenty-Third street and Carter avenue, Ashland, Ky., and that they would exchange these properties for the consideration recited in the instrument, and execute and deliver deeds with covenant of general warranty, according to its terms. At that time Berry's property was incumbered by a lien of the Louisville Title Company, and the property of the United States Bond & Mortgage Company, by certain liens. The difference in their equities was $2,620 in favor of the United States Bond & Mortgage Corporation, which Berry agreed to pay in cash on the consummation of the deal, each party assuming the existing liens on the properties. Berry thereafter agreed to lease a certain portion of the property of the United States Bond & Mortgage Corporation for a definite period of time for a fixed rental and to execute a mortgage to secure it. At the time the contract was signed by Berry and wife, and the Hans Watts Realty Company, certain insurance policies were in existence, insuring the property of each against loss by fire. They were not considered by the parties at the time of the making of the contract, and no mention of them is made therein. A deed was prepared by an attorney, residing at Ashland, Ky., and forwarded to the United States Bond & Mortgage Corporation, Louisville, Ky., for execution. It was later signed and acknowledged by John J. Davis, president, and J.S. Wigginton, assistant secretary, of the United States Bond & Mortgage Corporation. Wigginton, before leaving Louisville to go to Ashland to complete the deal between the corporation and the Berrys, went to the Southern Trust Company which held a lien on the property the United States Bond & Mortgage Corporation was conveying to the Berrys, and obtained a list of the policies, together with the numbers, the amounts, the dates, the stipulated premiums, and the dates of their expirations. Wigginton, with this statement of the insurance, and the deed which was to be delivered to the Berrys, went to Ashland, Ky., to meet with the Berrys, deliver the deed, accept their deed, lease, and mortgage, given by the Berrys to secure the rental per the terms of the leae. The deed, the lease, and the mortgage do not state or indicate that the insurance policies on the respective property were in any way considered in the transaction.

Wiggington, the Berrys, and the attorneys representing them, assembled at the office of Wilson and Robinson on the 15th day of December, 1930, for the purpose of delivering and accepting the papers evidencing these transactions. At the suggestion of the attorney of the Berrys, a slight change was made by the parties in the mortgage. A certain portion of the property was conveyed directly to Mrs. Ada Berry, including a cottage and a garage with an apartment above, located in the rear of a brick residence fronting on Winchester avenue. At that time the Southern Trust Company of Louisville had the possession of the insurance policies on the brick building, on Winchester avenue, of the face value of $8,000, evidenced by two policies, with a loss payable clause. There was no policy of insurance in existence covering the cottage and garage with the apartment above. On the 31st day of January, 1931, the cottage and the apartment over the garage were destroyed by fire, and the garage damaged thereby. Mrs. Berry filed this action against the United States Bond and Mortgage Corporation in which she charged "that at the time said deed [the deed from the U.S. Bond & Mortgage Corporation to her] was executed and delivered by the defendant to her, and as a part of the consideration for the acceptance of said deed, and for the purchase of said property covered by said deed, the defendant then stated and represented to her that it held two valid fire insurance policies protecting it against loss from fire which might result to the buildings upon said lot in the following proportions: that it had a $5,000 fire insurance policy protecting it against loss from the burning of the dwelling on the front part of said lot facing Winchester Avenue, and that it had a $3,000 fire insurance policy protecting it against loss by fire on the dwelling house and the accommodation garage and apartment in the rear of said lot; that it represented the said policies were in existence that they were in solvent fire insurance companies and were payable to it, and that it then had protection against loss by fire as above alleged; that it represented the said policies were held by the Southern Trust Company in Louisville, Ky. Plaintiff further says that the defendant, as a part of the consideration mentioned in said deed and as an inducement to her to accept said deed, agreed and promised to immediately thereafter procure an endorsement by the fire insurance company or companies with whom the said insurance was held, transfer said policies to this plaintiff as beneficiary in said insurance policies. Plaintiff...

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