Opinion
No. 6,618.
Submitted April 8, 1930.
Decided April 30, 1930.
Fire Insurance — Reformation of Policy After Destruction of Building — Equity — Jury Trial — Findings Advisory — Policy Provisions — Waiver — Nonownership of Land by Insured — Duty of Agent to Make Inquiry. Fire Insurance — Reformation of Policy — Equity — Court may Call Jury in Advisory Capacity — Court not Required to Announce Issues to be Submitted to Jury Before Submission of Evidence. 1. In an action to recover on a fire insurance policy and in which plaintiff inter alia prayed for the reformation of the policy, thus rendering the action one in equity, the trial court may in its discretion call a jury in an advisory capacity and submit to it such issues as deemed advisable, and in such a case it is not incumbent upon the court to announce, before submission of the evidence, as to what issues it will so submit. Same — Reformation of Policy — Showing Held Sufficient That Mistake was Mutual on Part of Insured (Unable to Read English) and Agent. 2. Where reformation of a fire insurance policy was sought on the ground of a mutual mistake on the part of the insured and the agent of the insurer relative to the answer to the question in the application whether the building insured stood upon ground not owned by the insured, the evidence showing that plaintiff was unable to read the English language and that he advised the agent that he did not own the land but was assured that the policy "was all right," held that there was a sufficient showing that the mistake was mutual, within the meaning of section 8726, Revised Codes 1921. Same — Retention of Policy Without Reading not Sufficient to Deprive Insured of Right of Reformation. 3. The fact that insured retained the fire insurance policy above referred to without reading it, did not prevent him from maintaining an action for its reformation after destruction of the property by fire, particularly so where he was unable to read the English language. Same — Building Destroyed Located on Leased Ground — Knowledge of Agent — Waiver of Provision in Policy by Insurer by Accepting Premium. 4. Where the agent of a fire insurance company at the time of procuring a policy on plaintiff's property knew, as found by the jury, that the property insured stood upon leased ground, a fact which under the terms of the policy rendered it void, the company by issuing it and thereafter accepting the premium, waived that provision in the policy, or was estopped from asserting nonliability thereunder. Same — Duty of Agent to Inquire of Insured Relative to Ownership of Land on Which Building Insured Stands — Failure of Inquiry Deprives Insurer of Right to Claim Nonliability. 5. A fire insurance company may not avoid liability on a policy on the ground, provided for in the policy, that the insured did not own the land on which the building destroyed by fire stood, since, if it deemed that provision material to its contract, it was incumbent upon its agent to interrogate plaintiff (unable to read English) with relation to his ownership, and failure on his part so to do bars his principal from urging that defense.
Equity, 21 C.J., sec. 723, p. 590, n. 66. Fire Insurance, 26 C.J., sec. 105, p. 107, n. 74; sec. 381, p. 308, n. 40; sec. 389, p. 313, n. 6. Reformation of Instruments, 34 Cyc., p. 988, n. 37, p. 991, n. 61.
Appeal from District Court, Silver Bow County; Frank L. Riley, Judge.
Mr. John K. Claxton, for Appellant, submitted a brief and argued the cause orally.
Mr. N.A. Rotering and Mr. M.S. Galasso, for Respondent, submitted a brief; Mr. Rotering argued the cause orally.
Assuming, without admitting, simply for the purpose of argument, that there was a mistake in the execution of the policy, the evidence clearly shows that it was unilateral and not mutual. The law is well settled that the proper remedy in the case of a unilateral mistake is rescission. ( Hearne v. New England Mutual M. Ins. Co., 20 Wall. (U.S.) 488, 22 L.Ed. 395; Moffett, H. C. Co. v. Rochester, 178 U.S. 373, 44 L.Ed. 1108, 20 Sup. Ct. Rep. 957; Page v. Higgins, 150 Mass. 27, 5 L.R.A. 152, 22 N.E. 63; Benson v. Markoe, 37 Minn. 30, 5 Am. St. Rep. 816, 33 N.W. 38; Green v. Stone, 54 N.J. Eq. 387, 55 Am. St. Rep. 577, 34 A. 1099; Wirsching v. Grand Lodge, 67 N.J. Eq. 711, 3 Ann. Cas. 442, 56 A. 713, 63 A. 1119; also notes in 2 L.R.A. 64; 5 L.R.A. 157; 28 L.R.A. (n.s.) 846.)
The retention of a policy without objection constitutes an acceptance and the insured is bound by its terms. ( American Ins. Co. v. Dillahunty, 89 Ark. 416, 117 S.W. 245; Swing v. Marion Pulp Co., 47 Ind. App. 199, 93 N.E. 1004; Mowles v. Boston Ins. Co., 226 Mass. 426, 115 N.E. 666; Sheldon v. Atlantic Fire etc. Ins. Co., 26 N.Y. 460, 84 Am. Dec. 213; Ginners' Mutual Underwriters' Assn. v. Fisher, (Tex.Civ.App.) 222 S.W. 285.)
By an unconditional acceptance of the policy the insured becomes bound by its terms and conditions. ( Luckett-Wake Tobacco Co. v. Globe Rutgers F. Ins. Co., 171 Fed. 147; Porter v. General Acc. etc. Corp., 30 Cal.App. 198, 157 P. 825; Pierce v. Home Ins. Co., 45 Kan. 576, 26 P. 5; Cass v. Lord, 236 Mass. 430, 128 N.E. 716; Commonwealth Mut. Fire Ins. Co. v. Wm. Knabe Co. Mfg. Co., 171 Mass. 265, 50 N.E. 516; Parsons, Rich Co. v. Lane, 97 Minn. 98, 7 Ann. Cas. 1144, 4 L.R.A. (n.s.) 231, 106 N.W. 485; Tiffany v. Queen Ins. Co., 199 Mo. App. 36, 200 S.W. 728.)
Reformation of an insurance policy will be denied when the misstatement as to ownership was due to misrepresentation or concealment on the part of the insured, even if he acted in good faith. ( Moeller v. American Fire Ins. Co., 52 Minn. 336, 54 N.W. 189; Diffenbaugh v. Union Fire Ins. Co., 150 Pa. St. 270, 30 Am. St. Rep. 805, 24 A. 745; Snow v. National Cotton Oil Co., (Tex.) 34 S.W. 177.)
Title of the insured is a most important element of the risk. It follows that a material representation or concealment as to the title voids the policy. ( Rockford Ins. Co. v. Nelson, 65 Ill. 415; Pangborn v. Continental Ins. Co., 62 Mich. 638, 29 N.W. 475; Ehrsam Mach. Co. v. Phenix Ins. Co., 43 Neb. 554, 61 N.W. 722; Graham v. Fireman's Ins. Co., 87 N.Y. 69, 41 Am.Rep. 349; Niblo v. North American Fire Ins. Co., 3 N.Y. Super. Ct. 551; Globe Rutgers Fire Ins. Co. v. Creekmore, 69 Okla. 238, 171 P. 874.) Stipulations as to ownership have been held valid. ( Rochester German Ins. Co. v. Schmidt, 162 Fed. 447, 89 C.C.A. 333; Parsons, Rich Co. v. Lane, 97 Minn. 98, 7 Ann. Cas. 1144, 4 L.R.A. (n.s.) 231, 106 N.W. 485; Schoucair v. North British etc. Ins. Co., 16 N.M. 563, 120 P. 328; Rohrbach v. Germania Fire Ins. Co., 62 N.Y. 47, 20 Am. Rep. 451; Globe Rutgers Fire Ins. Co. v. Creekmore, 69 Okla. 238, 171 P. 874; Groce v. Phoenix Ins. Co., 94 Miss. 201, 22 L.R.A. (n.s.) 732, 48 So. 298.)
Misrepresentations or concealment as to title or interest will invalidate a policy containing such provisions although not made with knowledge of their falsity or with intent to deceive and although the condition of the title did not increase the risk. ( Rochester German Ins. Co. v. Schmidt, 162 Fed. 447, 89 C.C.A. 333; Wilson v. Germania Fire Ins. Co., 140 Ky. 642, 131 S.W. 785.)
Every presumption in equity favors the view that a written instrument expresses the true intent and meaning of the parties. ( Burt v. Los Angeles Olive Growers' Assn., 175 Cal. 668, 166 P. 993; Hochstein v. Berghauser, 123 Cal. 681, 56 P. 547.) A bare preponderance of evidence which leaves the question in doubt will not suffice. ( Penn Mutual Life Co. v. Union Trust Co., 83 Fed. 891.)
Citing: Johnson v. Rocky Mountain Fire Ins. Co., 70 Mont. 411, 226 P. 515; Michigan Idaho Lumber Co. v. Northern Fire Marine Ins. Co., 35 N.D. 244, 160 N.W. 130; Marysville Mercantile Co. v. Home Fire Ins. Co., 21 Idaho, 377, 121 P. 1026; German Ins. Co., etc., v. Gibbs, Wilson Co., 42 Tex. Civ. App. 407, 92 S.W. 1068, 96 S.W. 760; Granger v. Manchester Fire Assur. Co., 119 Mich. 177, 77 N.W. 693, 695; Stevens v. Equity Mut. Fire Ins. Co., 66 Mont. 461, 476, 213 P. 1110; 26 C.J. 413.
Defendant on October 24, 1927, issued to plaintiff a fire insurance policy for a period of three years, covering property owned by plaintiff and situated at 27 Casey Street in the city of Butte. The policy was for the sum of $1,800, $1,300 of which was on a one-story, shingle roof, frame building, and the other $500 was for furniture, bedding, and wearing apparel situated in the building.
Defendant has its home office in Davenport, Iowa, and an agent in Butte. Defendant's agent at Butte examined the house and furniture before issuing the policy. Defendant collected from plaintiff premium for three years. On April 5, 1928, all of the property was destroyed by fire; proper proof of loss was thereupon made, and defendant's agent in charge of its adjustment bureau investigated the loss, and an agreement was reached between him and plaintiff whereby plaintiff agreed to accept the sum of $1,449.08 in settlement of the loss. A draft was executed by defendant and sent to its agent in Butte, but before it was delivered to plaintiff the agent at Butte received a telegram from the company instructing him not to deliver the draft. The delivery of the draft was withheld because the company had learned that the house was situated upon land leased by plaintiff and not owned by him in fee simple.
The policy of insurance contains this clause: "This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void * * * if the subject of insurance be a building on ground not owned by the insured in fee simple."
Plaintiff by his complaint sought to have the policy reformed to show that the house stood upon leased ground and to recover under the policy. He alleged that the omission to state in the policy that he was not the owner of the land was due to the mutual mistake of the parties. He testified in support of his right of reformation that he told the agent of the defendant at the time the application for the policy was made that the land was owned by the Northern Pacific Railway Company, and that the agent replied that that was all right, that "he would just insure the house and furniture," and assured plaintiff that the policy was all right. The evidence shows that plaintiff is unable to read the English language, and that no one read the policy to him. Defendant's agent denied that plaintiff had made the statement to him that the ground was owned by the Northern Pacific Railway Company, and said, "There was no conversation at all on that."
At the time of the trial, over objection of defendant, the court directed that a jury be impaneled to assist it in determining the action. The jury returned a special verdict favorable to plaintiff on a special interrogatory submitted to it. The defendant moved the court to reject the special verdict and adopt a finding in favor of defendant. The motion was denied, and the special verdict was adopted by the court. Other findings of fact and conclusions of law were made, and judgment was entered for plaintiff for the reformation of the policy and for the recovery of $1,449.08, together with interest in the sum of $124.30. Defendant's motion for new trial was denied, and it appealed from the judgment.
The special interrogatory which was submitted to the jury was as follows: "Question: Did the plaintiff, Valentine Krpan, before the insurance contract herein sued upon was made and executed by the defendant insurance company, state to the witness Sherman I. Schrock that he, said plaintiff, did not own the ground upon which stood the house described as No. 27 Casey street, in the city of Butte, Montana?" The jury answered in the affirmative. (Schrock was the agent of the defendant company who wrote the policy.)
The first assignment of error is grounded upon the action of [1] the court in retaining a jury to assist in the consideration of the case. While in an equity case it becomes the exclusive province of the judge to ascertain the facts, he may, in his discretion, use the jury in an advisory capacity and submit to it such issues as he sees fit, as was done here. ( Lenahan v. Casey, 46 Mont. 367, 128 P. 601; Hoskins v. Scottish Union Nat. Ins. Co., 59 Mont. 50, 195 P. 837; Ebaugh v. Burns, 65 Mont. 15, 210 P. 892.) Nor was it incumbent upon the trial judge, as contended by defendant, to announce, before the evidence was submitted, as to what issues he would submit to the jury. Determination of what issues will be submitted to the jury in a case involving the equitable powers of the court may properly be withheld until the evidence by both sides has been introduced.
Defendant contends that the evidence is insufficient to [2] support the decree ordering a reformation of the policy. Specifically it is contended that the mistake, if any, was unilateral and not mutual.
Our statute treating of the revision of contracts provides: "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 on the application of a party aggrieved, so as to express that intention, so far as it can be done without prejudice to rights acquired by third persons, in good faith and for value." (Sec. 8726, Rev. Codes 1921.)
Conceding that under the pleadings it was incumbent upon plaintiff to show a mutual mistake, we think he has met the requirement. The facts in this case are substantially the same as those before this court in the case of Stevens v. Equity Mutual Fire Ins. Co., 66 Mont. 461, 213 P. 1110, where it was held that the pleadings and proof were sufficient to warrant reformation. Similar facts have been held by other courts to warrant reformation on the ground of mutual mistake. ( Back v. People's Nat. Fire Ins. Co., 97 Conn. 336, 116 A. 603; Hanover Fire Ins. Co. v. Hiers, 79 Fla. 408, 84 So. 605; Gregan v. Northwestern Nat. Ins. Co., 83 Or. 278, 163 P. 588.)
The fact that plaintiff retained the policy without reading it [3] does not, as contended by defendant, prevent him from maintaining the action for its reformation ( Stevens v. Equity Mutual Fire Ins. Co., supra, and particularly where, as here, he was unable to read the English language ( Giammares v. Allemania Fire Ins. Co., 89 N.J. Eq. 460, 105 A. 611).
But, were we to hold that the proof was insufficient to [4] justify reformation on the ground of mutual mistake, we would still uphold the judgment under the facts here alleged and found. Here it is alleged that, at the time the policy was obtained, plaintiff informed defendant's agent that the land on which the house was situated was held by him under lease, and that he was not the owner of the land. His evidence, as above noted, supported this allegation. The jury and the court found this to be the fact. True, it was contradicted, but we cannot say that the evidence preponderates against the finding. It has generally been held that, where the agent of the insurance company, at the time of procuring the policy, knows facts which by the terms of the policy render it void, the insurance company by issuing the policy and accepting the premium waives such provision in the policy, or, as some courts hold, is estopped from asserting nonliability under such circumstances. ( Foster v. Scottish Union Nat. Ins. Co., 101 Ohio, 180, 127 N.E. 865; Bryant v. Granite State Fire Ins. Co., 174 Mich. 102, 140 N.W. 482; Blackstock v. Jefferson Insurance Agency, 23 Ga. App. 642, 99 S.E. 142; Hite v. Liverpool etc. Co., 33 Ga. App. 349, 126 S.E. 304; Springfield etc. Co. v. Price 132 Ga. 687, 64 S.E. 1074; State Mutual Ins. Co. v. Green, 62 Okla. 214, L.R.A. 1917F, 663, 166 P. 105; Martin v. Continental Ins. Co., (Mo.App.) 256 S.W. 120; Van Schoick v. Niagara Fire Ins. Co., 68 N.Y. 434; Georgia Home Ins. Co. v. Bennett, 134 Ark. 52, 203 S.W. 279; Plunkett v. Piedmont Mutual Ins. Co., 80 S.C. 407, 61 S.E. 893; Anderson v. United States Fire Ins. Co., 57 N.D. 462, 222 N.W. 609.)
Were we to accept the testimony of defendant's witnesses as to [5] what was said at the time of issuing the policy, we would be forced to the same conclusion. The agent who wrote the policy testified that nothing was said at the time the application for the policy was made with reference to plaintiff's ownership of the land on which the house was situated. If defendant regarded this a material part of the contract, it should have interrogated plaintiff concerning it. By issuing the policy, it led plaintiff to believe in good faith that his property was insured. Having failed to inquire concerning plaintiff's ownership of the land on which the house was situated prior to issuing the policy, the defendant company cannot escape liability on the ground that plaintiff was not the owner of the land. ( Johnson v. Rocky Mountain Fire Ins. Co., 70 Mont. 411, 226 P. 515.)
Other contentions are made by defendant, but we find no reversible error in the record. The judgment is affirmed.
ASSOCIATE JUSTICES MATTHEWS, GALEN and FORD concur.
MR. CHIEF JUSTICE CALLAWAY, being absent, did not hear the argument, and takes no part in the foregoing decision.