Westchester Fire Ins. Co. v. McAdoo

• Decision Date: 01 December 1899
• Citation: 57 S.W. 409
• Parties: WESTCHESTER FIRE INS. CO. v. McADOO et al.
• Court: Tennessee Supreme Court

57 S.W. 409

WESTCHESTER FIRE INS. CO. v. McADOO et al.

Court of Chancery Appeals of Tennessee.

December 1, 1899.

Appeal from chancery court, Davidson county; H. H. Cook, Chancellor.

Action by Westchester Fire Insurance Company against E. B. McAdoo and another. From a decree for defendants, plaintiff appeals. Affirmed.

Stokes & Stokes, for appellant. Pitts & Meeks, for appellees.

WILSON, J.

The original bill in this case was filed by the Westchester Fire Insurance Company against Mrs. E. B. McAdoo and the Royal Building & Loan Association to enjoin them from bringing suit on a policy of insurance it had issued to Mrs. McAdoo, January 25, 1894, for $1,500, and to have the policy declared void and canceled. The bill avers, in substance: (1) That the policy was issued at the date stated, and was to run a year, and that it covered personal property, consisting of household furniture, bedding, carpets, wearing apparel, linen, etc. (2) That the policy, among other provisions, contained the following clause: "This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void if the subject of insurance become incumbered by a chattel mortgage." (3) That April 13, 1894, Mrs. E. B. McAdoo executed a chattel mortgage on the property insured to the Royal Building & Loan Association, without the consent or knowledge of complainant, and in utter disregard of the clause aforesaid in the policy, and that in so doing the policy was rendered void and uncollectible. (4) That Mrs. McAdoo, within the last 60 days, had filed written proofs of loss, sworn to, stating that the property insured had been damaged by fire August 23, 1894, and presenting a claim under the policy for $1,470, and directing that the amount of the chattel mortgage to the Royal Building & Loan Association be paid to it. The prayer of the bill was as stated. A preliminary injunction issued. Mrs. McAdoo and the Royal Building & Loan Association answered the bill, and filed their answer as a cross bill. Without going into details, it is sufficient to say that they allege that the insurance company had waived the provision in the policy forfeiting rights under it, if a chattel mortgage was put upon the property insured, and asked for a recovery for the face of the policy, with interest. The insurance company, in its answer to this cross bill, denied that it, through its agents at Nashville or otherwise, knew of the existence of the chattel mortgage upon the insured property until after the fire, and hence denied that it waived the clause in its policy herein quoted. It also denied that the property destroyed by fire was worth $1,470, the sum claimed in the cross bill. It furthermore denied that it had done anything to estop itself from claiming that liability under the policy was avoided by reason of the violation of the clause therein prohibiting the placing of a mortgage upon the insured property. It should have been stated that defendants in their answer and cross bill filed December 28, 1894, demanded a jury to try the issues of fact in the cause. It appears that upon the calling of the cause upon the docket of the chancery court, April 24, 1895, Mrs. McAdoo, through her solicitors, presented issues of fact to be tried by a jury. The chancellor held that under rule 30 of his court, requiring application for a jury to be made by petition in open court upon the first day of the trial term, the defendant was not entitled to a jury, although she had demanded one in her cross bill. This ruling was excepted to, and the exception properly preserved by bill of exception. After this ruling the parties introduced their proof. It is quite voluminous, as well as quite conflicting in some of its aspects. Over 80 depositions appear in the record. The great body of this evidence bears upon the point of whether the insurance company waived the clause in the policy prohibiting a mortgage of the insured property, and as to the value of the mortgaged property destroyed by the fire. The chancellor heard the cause, upon the pleadings and proof, November 12, 1897. He held, in substance, that the insurance company had waived the condition against chattel mortgages in the policy of insurance mentioned in the pleadings, and that it was not entitled to rely upon a forfeiture of the policy, by reason of a breach of such condition. He thereupon dismissed the complainant's bill, and the injunction granted thereon. He held that Mrs. McAdoo was entitled to recover from the insurance company the amount of the loss sustained upon the goods covered by her policy, by reason of the fire of August 23, 1894, not exceeding the sum of $1,470, the balance of the face of the policy, with interest from 60 days after said fire. He referred the cause to his master to ascertain from the proof on file the amount of said loss, and to report to the court at its then existing term. The master reported the loss by the fire, with interest, to be the sum of $604.25. Mrs. McAdoo filed four exceptions to this report. We need not set out in detail these exceptions. They all raise the point that the evidence showed that her loss upon the goods destroyed by fire, or damaged thereby, covered by the policy, amounted to more than the face of the policy, to wit, $1,470. The chancellor heard the cause upon the report of the master and the exceptions thereto, November 11, 1898. He sustained the exceptions, and gave Mrs. McAdoo a recovery upon her cross bill for the face of the policy, to wit, $1,470, and interest thereon, amounting to $355.25, making her total recovery $1,825.25. He taxed the complainant with all the cost of the cause. From this decree the insurance company appealed, and has assigned errors, in substance, as follows: First, that the chancellor erred in holding that it had waived the condition of the policy prohibiting the placing of a chattel mortgage upon the property insured; second, he erred in finding that the damage to the property insured covered by the policy amounted to more than $500, as found by the master; third, he erred in not prorating the loss, or rather abating the loss, in proportion to the property removed from the house it was in to that in which the fire occurred and that remaining in the former house.

The real questions in this case are: (1) Was the policy forfeited by the execution of the chattel mortgage upon the insured property by Mrs. McAdoo to the Royal Building & Loan Association? (2) Was the insured property damaged by fire to the extent found by the chancellor?

That Mrs. McAdoo mortgaged the insured property to secure a loan without first obtaining the assent of the insurance company is abundantly established by the evidence. Indeed, it is not disputed by her. In this connection she simply says that she did not know that in mortgaging it she was violating the terms of the policy. The prohibition against such an incumbrance on the insured property is a plain provision of the policy, and, of course, she is presumed to have known of its existence and purport. It is well settled that such a clause in a policy is valid, and if violated relieves the insurer. Olney v. Insurance Co., 88 Mich. 94, 50 N. W. 100, 13 L. R. A. 684, 26 Am. St. Rep. 287, note, and cases cited; Boyd v. Insurance Co., 90 Tenn. 212, 16 S. W. 470. This proposition is not disputed by the able counsel of Mrs. McAdoo. His contention is that this clause of the policy was waived by the company, and hence that it is estopped after a loss to insist upon it. The general line of reasoning advanced is that policies of insurance should be liberally construed in favor of the insured, so as not to defeat, without plain necessity, his claim to indemnity (Accident Co. v. Reigart [Ky.] 23 S. W. 191, 42 Am. St. Rep. 374, 21 L. R. A. 651); and that all conditions involving forfeitures or exemptions from liability are to be strictly construed against the insurer (Duran v. Insurance Co. [Vt.] 22 Atl. 530, 25 Am. St. Rep. 173, 13 L. R. A. 637); in other words, that forfeitures are not favored in the law (Insurance Co. v. Norton, 96 U. S. 234, 24 L. Ed. 689; Insurance Co. v. Eggleston, 96 U. S. 577, 24 L. Ed. 841; Dale v. Insurance Co., 95 Tenn. 49, 31...