Vancouver Nat. Bank v. Law Union & Crown Ins. Co.

• Decision Date: 04 March 1907
• Docket Number: 3,040.
• Citation: 153 F. 440
• Court: U.S. District Court — District of Oregon
• Parties: VANCOUVER NAT. BANK v. LAW UNION & CROWN INS. CO.

153 F. 440

VANCOUVER NAT. BANK v. LAW UNION & CROWN INS. CO.

No. 3,040.

United States Circuit Court, D. Oregon.

March 4, 1907

On April 25, 1905, the defendant issued to George W. Cone, under the firm name of George W. Cone Lumber Company, its policy of insurance, to which a slip is attached showing the amount of insurance and the property covered, as follows:

$500 00 On one story rubberroid roof, frame building, occupied by the assured as a wet log sawmill, situate on the east bank of the Willamette river, at St. Johns, Multnomah county, Oregon.

$500 00 On engines, boilers, etc.

$500 00 On other fixed and movable machinery.

$500 00 On lumber in piles and about the premises.

$500 00 On frame dock, situate on the above-described premises.

Upon the same slip is the memorandum: 'Loss, if any, payable to Vancouver National Bank, Vancouver, Washington.'

The policy contains this clause at the foot of it:

'This policy is made and accepted subject to the following stipulations and conditions, printed on the back hereof together with such other provisions, agreements, or conditions as may be indorsed hereon or added hereto, and no officer, agent, or other representative of this company shall have power to waive any provision or condition of this policy except such as by the terms of this policy may be the subject of agreement indorsed hereon or added hereto, and as to such provisions and conditions no officer, agent, or representative shall have such power or be deemed or held to have waived such provisions or conditions unless such waiver, if any, shall be written upon or attached hereto, nor shall any privilege or permission affecting the insurance under this policy exist or be claimed by the insured unless so written or attached.'

And on the back thereof are printed these provisions, among others:

'This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void * * * if the interest of the insured be other than unconditional and sole ownership * * * or if any change, other than by the death of an insured, take place in the interest, title or possession of the subject of insurance (except change of occupants without increase of hazard) whether by legal process or judgment or by voluntary act of the insured, or otherwise.'

'If with the consent of this company, an interest under this policy shall exist in favor of a mortgagee, or of any person or corporation having an interest in the subject of insurance other than the interest of the insured as described herein, the conditions hereinbefore contained shall apply in the manner expressed in such provisions and conditions of insurance relating to such interest as shall be written upon, attached or appended hereto.'

The property was destroyed by fire September 1, 1905. Prior to that time, to wit, on April 22, 1905, George W. Cone, under the firm name of George W. Cone Lumber Company, entered into a contract with the Oregon Fir Lumber Company, whereby, for the consideration of $50,000, he sold and agreed to convey the property, both real and personal, to the latter company. After the fire an adjustment was had of the loss, and there was apportioned to the defendant company, as its proportional liability, among other companies covering upon the same property, the sum of $2,156.84. For a recovery of that amount, this action has been instituted.

The defendant has set up, by way of defense to the recovery, that the George W. Cone Lumber Company, in violation of the stipulations of the policy, on August 22, 1905, sold the property to the Oregon Fir Lumber Company, which said company assumed possession all without the consent or agreement of defendant; that thereafter the unconditional and sole ownership was not in the George W. Cone Lumber Company, and that by reason of such sale a change took place in the interest, title, and possession of the subject of the insurance, whereby the policy was rendered void as against the defendant company, and it was relieved of responsibility. The reply alleges that the defendant company had, long prior to the fire, full knowledge of such transfer under the contract alluded to, and, further, that the Oregon Fir Lumber Company never entered into possession, or carried out the covenants resting upon it, and thus never acquired any right, title, interest, or ownership in or to the property.

W. E. Yates and Platt & Platt, for plaintiff.

Snow & McCamant, for defendant.

WOLVERTON, District Judge (after stating the facts).

It is first contended that the plaintiff cannot recover, for the reason that it is without an insurable interest in the property covered by the policy of insurance. Under the testimony, and by the explicit admission of the parties, the plaintiff had not at the date of the policy, nor has it now, any other interest in the subject of the insurance except as a general creditor. It had not then, nor has it now, any mortgage or judgment, but holds the promissory notes of the George W. Cone Lumber Company for moneys loaned or advanced, so that it stands absolutely as a general creditor, and in no other position. Such a creditor is without an insurable interest. As expressed by the court in Foster v. Van Reed, 5 Hun (N.Y.) 321, 325:

'It certainly would not be claimed that a mere simple contract creditor could obtain a valid insurance of his debt from a fire insurance company. The creditor must have an interest in the real estate to authorize him to insure.'

Under certain peculiar conditions simple contract creditors have been held to have an insurable interest, as where the debtor is insolvent, or has since deceased, and the estate constitutes a fund, as it were, for the discharge of his obligations, or the property has been purchased upon the credit or responsibility of the person claiming the interest. Herkimer v. Rice, 27 N.Y. 163; Rohrbach v. Germania Fire Ins. Co., 62 N.Y. 47, 20 Am.Rep. 451; Roos & Co. v. Merchants' Mutual Ins. Co. of New Orleans, 27 La.Ann. 409. But no such conditions attend the claim or demand of plaintiff.

The real question, however, is not whether the plaintiff has an insurable interest, but whether it is entitled to sue upon the demand for loss under the policy. It will be noted from the memorandum upon the slip that the loss, if any, was made payable to the bank unconditionally, not, as is usually the case, 'as its interest may appear.' This is, in effect, an appointment of the bank as the party to receive payment in case of loss. The parties to the policy have regularly so stipulated with reference to the loss, and the bank has assented thereto; and why may it not sue to enforce the obligation? The legal consequences of such a stipulation and agreement are well stated by Mr. Justice Miller in the case of Bates v. Equitable Insurance Company, 10 Wall. (U.S.) 33, 19 L.Ed. 882. He says:

'Now, it is a well known and frequent thing in insurance business for a person to insure his life, or his property, and either in the policy itself, or by indorsement at the time it is made, or by subsequent indorsement, to which the consent of the company is generally required, to direct the loss to be paid to some third party. And this is done in language similar to, if not identical with, that used in this case. It is a mode of appointing that the loss of the party insured shall be paid by the company to such third person. This transaction is a very common mode of furnishing a species of security by a debtor to his creditor, who may be willing to trust to the debtor's honesty, his skill and success in trade, but who requires indemnity against such accidents as loss by fire, or the perils of navigation. The property of the debtor at risk being thus insured for the benefit of the creditor gives him this indemnity.'

So that the relation stands here simply that the Cone Lumber Company insured its property for the benefit of its creditor, namely, the Vancouver National Bank; and there exists no good or sufficient reason why this may not be done. Guiterman v. German-Amer. Ins. Co., 111 Mich. 626, 70 N.W. 135; Ermentrout v. American Fire Ins. Co., 60 Minn. 418, 62 N.W. 543. I am of the opinion, therefore, that the action was rightly brought in the name of the Vancouver National Bank, and that it could sue whether it had an insurable interest in the property of the insured or not. It is sufficient that the bank was appointed as the party to receive the loss, if any should occur. Such being the agreement of all the parties concerned, it occupies the relation of a trustee, and may recover in its own name.

The next contention is on the part of counsel for plaintiff, which is that, under the provisions of the paragraph running, 'If, with the consent of this company, an interest under this policy shall exist in favor of a mortgagee, ' etc., it was not designed that a breach by the assured of any of the preceding conditions contained upon the back thereof should void the policy, because, it is argued, all the conditions, if any, affecting the bank were, by intendment, to be contained upon the slip attached thereto, whereby the loss is made payable to the bank. There are several cases in the state courts so holding, the first, and leading one, of which is Oakland Home Ins. Co. v. Bank of Commerce, 47 Neb. 717, 66 N.W. 646, 36 L.R.A. 673, 58 Am.St.Rep. 663. The case is determined entirely upon the interpretation of a paragraph identical with the above. The learned commissioner who announced the opinion of the court renders the stipulation as follows:

''The conditions hereinbefore contained shall apply,' not absolutely, but in a qualified way, 'in the manner expressed in such provisions and conditions * * * as shall be written upon, attached, or appended hereto'; that is,

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