J. I. Kelly Co. v. Saint Paul Fire & Marine Insurance

56 Fla. 456 | Fla. | 1908

Lead Opinion

Taylor, J.,

(after stating, the facts). — The assignments of error are as follows:

1st. The court erred in overruling plaintiff’s demurrer to defendant’s plea No. 1.

2nd. The court erred in sustaining defendant’s demurrer to plaintiff’s first replication to*, plea N’o. 1.

3rd. The Court erred in denying plaintiff’s motion to withdraw demurrer to second plea and file in lieu thereof replication. We Will dispose first of this third assignment of error with the remark that the record before us-presents nothing upon which this assignment can be predicated or considered. After the court below had made an order eliminating the defendant’s second plea from •the case by sustaining the plaintiff’s demurrer thereto, there appears transcribed in the record 'the following motion:

■ “Now comes said plaintiff and moves said court for leave to withdraw its demurrer herein filed 'to' the second plea of the defendant.”

No ruling or other action appears by the transcript to have been made or taken, by the court below upon this motion or by the parties. Under these circumstances there is nothing presented for review by this third assignment of error.

The policy sued upon contains the following provision :

“This entire policy, unless otherwise provided by agreement endorsed hereon or added hereto, shall be void * * * if, with the knowledge of the insured, foreclosure proceedings be commenced or notice given of sale of any property covered by this policy by virtue of any mortgage or trust deed.”

The first plea of the defendant invokes this clause of the policy to its defence, and succinctly, fully and clearly alleges that the said policy, prior to the alleged destruction of the property thereby insured by fire, became void by force 'of said provision therein, that prior to the alleged destruction of the insured property by fire foreclosure proceeding's were commenced, • with the knowledge of the plaintiff, to. foreclosure a valid, subsisting and unpaid mortgage theretofore executed upon the insured property, and that no written agreement of the defendant herein to the commencement of the said proceedings has ever been endorsed upon the said policy or added thereto. This provision in a policy of fire insurance appeals to us as a wise and proper safeguard to the insurer against the greatly increased risk consequent upon the circumstances provided against therein. Mortgages are not usually enforced by foreclosure when the mortgagor or person liable for their payment is able to liquidate them when due, but such proceedings are usually brought about by the inability of the mortgagor to pay the mortgage debt when due. The temptation to destroy the property and with the funds derived from existing insurance thereon to pay ■ off the mortgage demand is multiplied fourfold wh'en legal proceedings are actually instituted, and the final loss of the entire property to the mortgagor thereby becomes imminent. As a safeguard against such a contingency the quoted clause is wisely and properly inserted in such policies, and the plain meaning and proper and legitimate purpose of such a clause should not be emasculated and annulled by -any process of specious reasoning of judicial special pleading. The plain meaning and purpose of the clause is that such a policy shall become void if, with the knowledge of the insured, foreclosure proceedings of any mortgage, whether executed by the insured or by another, covering any of the insured property shall be commenced during the life of the policy, unless there shall be an agreement endorsed upon or added to the policy providing otherwise.

The plea of the defendant concisely, fully and sufficiently alleges the commencement of foreclosure proceedings of a valid and subsisting mortgage upon the insured property, and that the insured had knowledge of such proceedings, and that no' agreement had been indorsed upon or added to such policy providing against the avoidance of such policy by the commencement of such foreclosure proceedings, and that, therefore, said policy sued upon became null and void and no longer binding upon the defendant insurer, and such plea presented a valid defense and was not subject to the demurrer interposed thereto, and the court below committed no error in overruling such demurrer. From among a multitude of authorities upholding the validity and propriety of such provisions in policies of fire insurance we cite the following: Schroeder v. Imperial Ins. Co., 132 Cal. 18, 63 Pac. Rep. 1074, S. C. 84 Am. St. Rep. 17. In this case it is held that such a provision in a policy: “is directed to the fact of knowledge on the part of the insured of the commencement of foreclosure proceedings, and not to the time that he may obtain such knowledge. The reasonable construction to be given to the clause is, that whenever he shall have knowledge of the proceedings, and not before, and shall fail to obtain the consent of the insurer thereto, the policy shall be avoided.” We are in full accord with this construction of the California court. Findlay v. Union Mut. Fire Ins. Co., 74 Vt. 211, 52 Atl. Rep. 429, S. C. 93 Am. St. Rep. 885; Woodard v. German-American Ins. Co. of New York, 128 Wis. 1, 106 N. W. Rep. 681; Hayes v. United States Fire Ins. Co., 132 N. C. 702, 44 S. E. Rep. 404; Moore v. Hanover Fire Ins. Co., 141 N. Y. 219, 36 N. E. Rep. 191; Norris v. Hartford Fire Ins. Co., 55 S. C. 450, 33 S. E. Rep. 566, S. C. 74 Am. St. Rep. 765; McIntire v. Norwich Fire Ins. Co., 102 Mass. 230; Meadows v. Hawkeye Ins. Co., 62 Iowa 387, 17 N. W. Rep. 600; Hartford Fire Ins. Co. v. Clayton, 17 Tex. Civ. App. 644, 43 S. W. Rep. 919; Delaware Ins. Co. of Philadelphia v. Greer, 120 Fed. Rep. 916; Titus v. Glens Falls Ins. Co., 81 N. Y. 410; Woodside Brewing Co. v. Pacific Fire Ins. Co., N. Y. 11 App. Div. 68, 42 N. Y. S. 620; Merchants’ Ins. Co. of Newark v. Brown. 77 Md. 79, 25 Atl. Rep. 992.

. We are cited to the case of Bellevue Roller Mill Co. v. London & L. Fire Ins. Co., decided by the Supreme Court of Idaho in February, 1895, 4 Idaho 307, 39 Pac. Rep. 196, as holding a different doctrine from that announced in the cases cited above. We cannot at all approve of the findings of the Idaho court in this case. The plain terms of the clause under discussion were lost sight of entirely in that court’s construction thereof. For example the clause provides that the policy shall be,void if, “with the knowledge of the insured foreclosure proceedings be commenced,” that court holds that under this language to constitute a defense the insurer miust allege that the insured had knowledge that a foreclosure proceeding “was about to be brought/’ and that then he is required'to give notice to the insurance company. The clause in question makes no provision about notice to the insurance company — 'but, on the contrary, broadly avoids the policy if foreclosure proceedings are commenced with the knowledge of the insured, unless otherwise provided by an agreement endorsed upon or added to the policy. Under this clause, as we view it, it will make no difference whether the insured notified the insurer or not of the commencement of foreclosure proceedings, the institution of such proceeding's, upon the acquisition of knowledge thereof by the insured, no matter when he may acquire such knowledge, if acquired prior to the loss of the property, avoids the policy, unless it 'be otherwise provided by an agreement endorsed upon or added to' the policy.

The first replication of the plaintiff to the defendant’s first plea seems to have been drafted to meet the construction of the Idaho court of the clause under discussion, but with that construction, we cannot agree. This first replication of the plaintiff to the defendant’s first plea admits the commencement of proceedings to foreclose a mortgage covering the insured property, and admits that the insured plaintiff acquired knowledge of the commencement of such proceedings after, but on the same day, that they were commenced, which was prior to the destruction of the property by. fire, and admits that no agreement was endorsed upon or added to the policy providing otherwise than' that such commencement of foreclosure proceedings should avoid the policy. These admissions of the replication closed the door to ■the plaintiff’s right to the relief sought by his suit, and the side agreement alleged in such replication between the insured plaintiff and the foreclosing mortgagee that ■such foreclosure proceedings would be discontinued if the insured would pay part of the mortgage debt on his return from Boston, can make no difference with the forfeiture of such policy effected by the actual commencement of such foreclosure proceedings. The first replication of the plaintiff to the first plea of the defendant set up nothing in avoidance of the defense alleged by such plea and the court below committed no error in .sustaining the defendant’s demurrer to such first replication to said first plea.

Finding none of the errors assigned to be well taken, the judgment of the circuit court' in said cause is hereby affirmed at the cost of the plaintiff in error.

Cockrell, J., disqualified.

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Concurrence Opinion

Whitfield, J.

I concur in the conclusion reached in the opinion of Mr. Justice Taylor.'

It appears that before the commencement of the foreclosure proceedings the insured mortgagor knew the debt secured by the mortgage was due, and knew the mortgagee contemplated enforcing the mortgage lien. It also appears that the insured mortgagor endeavored to make arrangements to postpone the institution of the foreclosure proceedings, and that he was notified of the commencement of the suit on the same day hut after the bill for foreclosure was Med. In view of the circumstances of this case it seems to be clear the foreclosure proceedings were commenced with the knowledge of the insured mortgagor within the meaning of the provision contained in the policy of insurance so- as to render the policy void unless otherwise provided by agreement endorsed on the policy. The provision is clear, imperative and unambiguous, is- intended to serve á highly salutary and useful purpose, is not contrary to any provision or principle of law, and is not unreasonable, therefore it is binding on the parties unless waived, and no waiver appears in this case.

Shackleford, C. J., concurs with Whitfield, J.

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Dissenting Opinion

Parkhill, J.,

(dissenting). — In my 'Opinion the court erred in sustaining the demurrer to the first replication to plea number one as amended.

By that plea the defendant company invoked the following provision of the contract of insurance: “This entire policy, unless otherwise provided by agreement endorsed hereon, or attached hereto-, shall be void if, with the knowledge of the insured, foreclosure proceedings be commenced or notice given of sale of any property covered by this policy by virtue of any mortgage or trust deed.”

The replication admits that the policy of insurance contained the condition just qu-o-ted, but, “alleges that said foreclosure proceedings were not commenced either with its knowledge or consent, b-ut in truth and in fact the filing of the bill of complaint, and the instance of the subpoena thereon on the 24th day of July, A. D. 1906, was without either the knowledge or consent of said plaintiff; that said plaintiff had no knowledge of the filing of -the bill of -complaint, -nor of the issuance of the subpoena in consequence thereof until the subpoena was served upon it, on the 24th day of July, A. D. 1906.”

I am of the opinion that the replication shows that the foreclosure proceedings were not commenced with the knowledge of the insured plaintiff, and that the demurrer thereto should have been overruled. ■

When may it be said that foreclosure proceedings are commenced according to our statute?

All mortgages shall be foreclosed in chancery. Section 2501 of the General Statutes of 1906. No subpoena in chancery shall issue until a bill ■ of complaint shalhave been filed in the clerk’s office. Section 1862 of thGeneral Statutes of 1906.

The issuance or service of subpoena is preceded by the filing of the bill of oreclosure. The bill comes before the issuance or service of the subpoena. The bill initiates the foreclosure proceedings. To initiate means to' commence. “Commence” is defined in the Century Dictionary as “to cause to begin to be, perform the first act ofenter upon, begin;” as defined by Webster, “to begin, to originate, to do the first act in anything, to take the first step.” State v. Hartford Fire Ins. Co., 99 Ala. 221, 13 South. Rep. 362; 2 Words and Phrases, 1281.

“In England it is settled that the filing of a bill or declaration is to be regarded, for every essential purpose, as commencement of the suit.” Lowry v. Lawrence, 1 Caines (N. Y.) 69 text 72 (quoting Cowp. 454).

In Burton v. Buckeye Insurance Co., 26 Ohio St. 467, Welch, C. J., for the court said: “The real question here is one of construction of the policy: what did the parties mean by the word ‘commenced,’ in this limiting clause ? In common parlance, a suit or action would be considered as ‘commenced,’ perhaps, when the first step is taken in' court. This, under our law, is the filing of the petition. The proviso' in the policy being in the nature of a penal provision, it is by no means clear to me that it should not be interpreted in 'that sense.” The Supreme Court of Louisiana has said .that “commencement of foreclosure proceedings” must be held to be synonymous with “filing of suit.” Stenzel v. Pennsylvania Fire Ins. Co., 110 La. 1019, 35 South. Rep. 271; and the Idaho Supreme Court has held that the suit was commenced when the complaint was filed. Bellevue Roller Mill Co. v. London & L. Fire Ins. Co., 4 Idaho 307, 39 Pac. Rep. 196.

Whether we give to the word “commenced” its common meaning, or whether we construe its meaning in the light of the provisions of the General Statutes already quoted, it is clear to me that the filing of the bill of complaint commences the foreclosure proceedings. But this proposition is admitted, as the brief of counsel for the defendant in error admits, on page 6, that the filing of a bill is in this State the commencement of a suit. Certainly the service of -the subpoena upon the defendant was not the commencement of the foreclosure proceedings because the subpoena cannot issue until the bill of complaint shall have been filed.

When the replication, therefore, alleges that the insured had no knowledge of the filing of the bill of complaint until a subpoena was served upon the insured, it Is made clear -that the foreclosure proceedings were not commenced with the knowledge of the insured.

The language of the policy is so plain and unambiguous and there is such unanimity as to what is meant by the commencement of foreclosure proceedings it would seem that there could be but one side to this question.

But counsel for defendant in error contend, “The true meaning of the provision is that if foreclosure proceedings be commenced and knowledge thereof be brought to the assured, he must, after such knowledge, bring notice to the insurance company and require its consent to be endorsed on or added to the policy.”

If we ke.ep before us the words of the policy, “if with the knowledge of the insured foreclosure proceedings be commenced,” the departure therefrom of the contention of counsel will be seen easily, clearly and quickly. The language of the policy is, “if with the knowledge of the insured foreclosure proceedings be commenced.” Counsel would have us read 'the policy thus: “If foreclosure proceedings be commenced and knowledge thereof be brought to the assured.” ■ In other words, the policy requires the foreclosure proceedings to be commenced with the knowledge of the insured, bdt counsel contend that the foreclosure proceedings to be commenced and knowledge thereof be brought to the insured.

To analyze further, counsel would substitute for the words of the policy, “with the knowledge of the insured,” the words, “knowledge thereof be brought to the insured.” This departure, thus changing by construction of the language of the policy, is emphasized by the further contention of counsel for defendant in error: “The words ‘be commenced with a knowledge of the assured’ relate not to the act of comjmencement, but to. the fact of commencement, that is, not to the -time of commencement, but to the status created by the commencement.”

W'hat principles of law authorize such a loose construction of the language of the policy? In the first place, it seems to me that the language of the policy is clear and unambiguous and the courts as well as the parties must be bound by the language of the policy; and that language clearly relates to. the time of commencement of the foreclosure proceedings, not to -the fact of the commencement of them. But even if the language of the policy were of a doubtful meaning or import, it is the universal rule that the construction which is most favorable to the insured is to be placed upon it. London & L. Fire Ins. Co. of Liverpool, England v. Davis, 37 Tex. Civ. App. 348, 84 S. W. Rep. 260; Goddard v. East Texas Fire Ins. Co., 67 Tex. 69, 1 S. W. Rep. 906, S. C. 60 Am. Rep. 1; Bills v. Hibernia Ins. Co., 87 Tex. 547, 29 S. W. Rep. 1063, 29 L. R. A. 706, 47 Am. St. Rep. 121.

If the language used in the policy of insurance is ambiguous, if it bears hard upon the insurance company, if it must hurt any one, it must be the company to suffer, because that language was chosen by the insurance company. The insured had no choice in the matter, except to accept or reject the policy as it was written by the company in its own office by advice of its own lawyers. The policy was accepted as it was written by the defendant company, and the plaintiff only 'asks that this court accept and enforce the plain language of the policy as it has been written by the defendant company. The plaintiff asks for nothing more. He should have at the hands of our court nothing less.

Moreover, if the condition of the policy is of doubtful import it should be construed in favor of the insured because the law does not favor forfeiture, and will always give preference to' that reasonable construction which will sustain the claim' of the insured. London & L Fire Ins. Co. v. Davis, supra; Brown v. Palatine Ins. Co., 89 Tex. 590, 35 S. W. Rep. 1060.

It is said in May on Insurance, section 175 : “No- rule in the interpretation of a policy is more fully established, or more imperative or' controlling than that which declares that in all cases it must be liberally construed in favor of the assured, so as not to defeat, without a plain necessity, his claim for indemnity, which it was his object to secure in making the insurance.”

Again, “contracts of insurance like other contracts, are tO' be construed according to the sense and meaning of the terms which the parties have used; and if they are clear and unambiguous, their terms are to be taken and understood in their plain, ordinary and popular sense.” Imperial Fire Ins. Co. v. Coos county, 151 U. S. 452, text 463 (38 L. ed.) 231, text 235, 14 Sup. Ct. Rep. 379; Fred J. Kiesel & Co. v. Sun Ins. Office of London, 31 C. C. A. 515, text 518, 60 U. S. App. 10, 88 Fed. Rep. 243, text 246; McGlother v. Provident Mut. Acc. Co. of Philadelphia, 32 C. C. A. 318, text 322, 60 U. S. App. 705, 89 Fed. Rep. 685, text 689.

I think all of us will accept these rules of construction. Applying them to the language used in -the policy sued upon, I think the conclusion already arrived at in this opinion is inevitable.

Clearly the words of the policy, “if, with the knowledge of the insured, foreclosure proceedings be commenced” relate to the time of the commencement of the. foreclosure proceedings, and not to the fact of commencement. If these words be enlarged to mean that the policy shall be void if foreclosure proceedings be commenced and knowledge thereof at any time be brought to the insured, then the meaning of the language of the contract would be enlarged by the court so as to bind the insured to a forfeiture of the policy if he acquires knowledge of the foreclosure proceedings- after they have been commenced, when he bound himself to a forfeiture only if he had knowledge of the foreclosure proceedings wlhen the same were commenced. Such a construction would be a departure from the plain language employed and would be a construction of the language favorable to the insurer and favorable to' a forfeiture, where the language must be construed most favorably to the insured so as not to defeat his claim for indemnity.

Thus far I have contented myself with a construction of the language employed'by the parties to the contract of insurance, but let us consider some of the arguments made by counsel against the construction indulged in by me. Counsel for plaintiff in error contend: “Nor would the provision be of any value if the insured be requested to have the knowledge at the time of the commencement of the suit, because this involves constant presence of the insured with the mortgagee, or his constant presence at the office of the clerk of the circuit court where the proceedings are instituted, for, if he must knowi at the moment, then a knoiwledge acquired after the filing" of a bill (which is in this State the commencement of a suit), would be equally inoperative to protect the insurer as if that knowledge be acquired an hour, a day or a week thereafter.” A sufficient reply is, that if this provision be of no value it is the fault of the defendant company. If the def'endanj; corporation wanted to make the contract apply to knowledge of the foreclosure proceedings acquired after the commencement of them, or after the filing of the bill of complaint, it should have so written the policy, and it is not the province of this court to malee a new contract of insurance for the parties, whereby the corporation may be enabled to keep from paying to citizens of this State the money contracted by the defendant corporation to' pay, especially when the defendant corporation keeps in its coffers the money of the plaintiff paid for this contract of insurance. The following cases will be. found to support the views expressed and the conclusion reached by me herein:. London & L. Fire Ins. Co. of Liverpool, England, v. Davis, 37 Tex. Civ. App. 348, 84 S. W. Rep. 260; North British & Mercantile Ins. Co. v. Freeman, Tex. Civ. App. , 33 S. W. Rep. 1091; Bellevue Roller Mill Co. v. London & L. Fire Ins. Co., 4 Idaho 307, 39 Pac. Rep. 196.

The decision in the case of Norris v. Hartford Fire Ins. Co., 55 S. C. 450, 33 S. E. Rep. 566, 74 Am. St. Rep. 765, holds that the commencement of a suit is when, the summons is served because, according to the statute, “an action is commenced as to each defendant when the summons is served on him.” This case is regarded as an authority in favor of, rather than against, the position 01 plaintiff in error.

As opposed to these cases, defendant in error cites, in support of its position the following" cases: Schroeder v. Imperial Ins. Co., 132 Cal. 18, 63 Pac. Rep. 1074, 84 Am. St. Rep. 17; Findlay v. Union Mut. Fire Ins. Co., 74 Vt. 211, 52 Atl. Rep. 429; Delaware Ins. Co. v. Greer, 120 Fed. Rep. 916, 57 C. C. A. 188, 61 L. R. A. 137-

Counsel for defendant in error express the opinion that the two Texas cases seem to be opposed to, the decision by one of the same courts in Hartford v. Clayton, 17 Tex. Civ. App. 644. In commenting upon that case, the Texas court, in London & L. Fire Ins. Co. v. Davis, supra, said: “In the case of Insurance Co. v. Clayton (Tex. Civ. App.) 43 S. W. 910, it was held that the condition as to the commencement of foreclosure proceedings with the knowledge of the insured was a valid and binding clause and that the clause is-not waived by the fact that the insurance company knew of the existence of the mortgage at the time of the issuance of the policy. The question involved in this case, was not adverted to in any manner.”

The opinion of the court by Mr. Justice Fly, in London & L. Fire Ins. Co. v. Davis, is an able exposition’ of the subject before us and a comprehensive review of nearly all the cases that bear directly or indirectly upon this question.

AVhen we consider the conflict in the authorities there would seem to be two sides to this question. That being ■so, if there are two ways of construing the language of the policy, one construction in favor of the insured and another construction in favor of the insurer, I am required by the rules of construction to decide in favor of the construction most favorable to the insured. That consideration must determine my judgment, if I were not otherwise convinced by the plain words used in the policy.

I think the judgment should be reversed.

Hocker, J., concurs with Parkhill, J.