Title: National Security Fire and Casualty Co. v. Hester

State: alabama

Issuer: Alabama Supreme Court

Document:

298 So. 2d 236 (1974)
NATIONAL SECURITY FIRE AND CASUALTY COMPANY, a corporation
v.
Walston HESTER et al.
SC 732.

Supreme Court of Alabama.
July 25, 1974.
*237 Rosser & Munsey, Tuscumbia, for appellant.
Tompkins & Tompkins, Tuscumbia, for appellees.
BLOODWORTH, Justice.
The appellant (complainant below), National Security Fire and Casualty Company, filed a complaint in the Circuit Court of Colbert County against the appellees (respondents below), Walston Hester, Jerry Bolton, Sarah Bolton, and the Farmers Home Administration seeking a declaratory judgment that National Security was not liable on a policy of fire insurance issued to the Boltons on the ground that the Boltons had no insurable interest in the dwelling house covered by the policy in that Hester was the true owner. [Farmers Home Adminstration made no claim and was dismissed from the suit.] The respondents, by cross-bill, claim the full amount of the policy, $6,000.00, and allege that the Boltons were vendees in possession of the insured dwelling at the time of the fire and thus had an insurable interest therein. The circuit judge, sitting without a jury, denied the relief sought by National Security and rendered judgment in favor of the Boltons and against National Security in the sum of $6,000.00. Hence, this appeal. We affirm.
It appears that on September 16, 1972, Walston Hester granted the Boltons a written option to purchase one hundred forty-one acres of land in Colbert County on which was situated a small house. The purchase price was stated to be $35,250.00. The option on a standard F. H. A. form, was, by its terms, irrevocable for a period of six months and recited the receipt by Hester from Bolton of $1.00. It contained the following clause:
On October 10, 1972, the Boltons accepted the offer, in writing, on the terms contained in the option. Following the Boltons' acceptance, the F. H. A. agreed to loan the Boltons part of the purchase money. As a condition of the loan commitment, the Boltons were required to purchase a $6,000.00 standard fire insurance policy on the house. Shortly after the F. H. A.'s loan commitment, the Boltons moved into the house. On October 17, 1972, the Boltons applied for the necessary insurance at the City Insurance Agency at Russellville, Alabama. The agent, one Masingill, filled in and signed the application on a form supplied by National Security. On the following day, National Security issued the policy in the name of the Boltons. The policy was likewise signed by Masingill.
On November 21, 1972, the house, while occupied by the Boltons, was completely destroyed by fire. The loan from F. H. A. was never closed.
Before the fire, the Boltons had improved the insured house by replacing numerous windows and doors, and laying linoleum. The value of these improvements was in dispute.
In January, 1973, Hester and the Boltons executed a new contract on the same property except for the two acres on which the house had been situated. The new purchase price was $28,500.00. Hester built a new house on the two acres, and although the Boltons moved into the new house, Hester still owns the house, as well as the two acres on which it is situated, and there exists no contract for its purchase between Hester and the Boltons. Mr. Bolton testified *238 that if he ultimately prevails in this suit, he will pay the money to Hester even though he is not legally obligated to do so.
The application form on which the agent took the Bolton's application for insurance contains this question: "Does applicant have full legal title?" Thereafter appears a blank, and written in handwriting, the answer: "Yes." There also appears the question: "Is property occupied by owner?" and thereafter a blank and the answer: "Yes," again written in handwriting. This form was signed by the agentnot the Boltons.
The policy of fire insurance issued by National Security provides as follows:
The appellant has made five assignments of error. Assignments of error three, four and five charge, in essence, that the evidence is insufficient to support certain findings of fact by the trial court. In regard to those assignments, the appellant has not included a condensed recital of the evidence given by each witness in narrative form as required by our Rule 9(b). Furthermore, in the argument purportedly directed to those assignments of error, the appellant has cited no authority but rather argues that the trial court erred in allowing Hester (the vendor) to give his opinion as to the value of the house before the fire in that Hester had not been qualified as an expert. Since the appellant has made no assignment of error raising this latter issue, this issue is not presented to us on this appeal. Likewise, since none of the argument is directed to those assignments of error which do raise the sufficiency of the evidence, the same are considered waived. Lowery v. Stinson, 291 Ala. 415, 282 So. 2d 244 (1973).
We now address ourselves to the remaining two assignments of error which comprise the heart of appellant's contentions.
In assignment of error one, appellant contends that the court erred in holding that the Boltons had an insurable interest in the subject property. In support of this assignment of error, appellant argues that before legal title passes, a vendee has an insurable interest in the property purchased only if the risk of loss has shifted to the vendee and that under the contract between Hester and Bolton, the risk of loss remained with Hester, the vendor, citing Alabama Farm Bureau Mutual Ins. Serv. v. Nixon, 268 Ala. 271, 105 So. 2d 643 (1958).
In assignment of error two, appellant contends that if the Boltons had any insurable interest in the subject property it was an interest less than the full value of the property. In support of this assignment of error, appellant argues that one who has less than full legal title can only have an insurable interest to the extent of the value of that interest and that the value of the Boltons' interest was the $1.00 option money, citing Royal Exch. Assur. of London, Eng. v. Almon, 206 Ala. 45, 89 So. 76 (1921).
In opposition to these arguments, appellees contend that a vendee in possession, who has made partial payment and improved the property has an insurable interest equal to the full value of the insured property because such vendee has a substantial interest in its preservation, citing American Equitable Assur. Co. v. Powderly Coal & Lumber Co., 221 Ala. 280, 128 So. 225 (1930).
Appellees also argue that, notwithstanding the question and the affirmative answer in the policy application as to whether applicant had full legal title, appellant's agent (who filled out the application and signed it himself) knew the true situation *239 when the policy was issued. Therefore, it is argued appellant has waived this condition and is estopped to question the sufficiency of the Boltons' insurable interest, which is the full face value of the policy because no one else held insurance on the property. Appellees also cite Royal Exch. Assur. of London, Eng. v. Almon, supra, and American Equitable Assur. Co. v. Powderly Coal & Lumber Co., supra.
Both parties rely on the provisions of Tit. 28A, § 317, Code of Alabama 1940, as recompiled 1958 [§ 317, Act No. 407, p. 707, Vol. II, Acts of Legislature, Regular Session 1971, entitled "The Alabama Insurance Code"]:
Although we have not found that this section has as yet been construed by this Court, it is merely declaratory of those legal principles which have long governed the concept of insurable interest in this State. [The Act became effective January 1, 1972.] The doctrines of waiver and estoppel are an integral part of this concept. This Court demonstrated the interrelation of these principles in American Ins. Co. v. Newberry, 215 Ala. 587, 112 So. 195 (1927), viz.:
"Unquestionably, these plaintiffs. . . had an insurable interest.. . .
As we have already stated, the insureds were vendees in actual possession after partial payment of the purchase price pursuant to an executory contract for sale. The insureds had also made substantial improvements to the insured premises. We can say, beyond peradventure, that such interest *240 is at least that "some sort of interest" in the preservation of the insured property which is required by public policy to remove the "mere gambling element" from a contract of property insurance. There is no evidence of any misrepresentation or concealment by the Boltons. They acted in good faith. If the insurer, National Security, had knowledge that the Boltons did not own the full legal title at the time the policy was issued, then National Security is estopped to question the sufficiency and the amount of the Boltons' insurable interest.
At trial, Mr. Masingill, National Security's agent, testified, inter alia, as follows:
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"A. That is the way it is on all of the loans.
"Q. It is not completed?
"A. They have to have the policy before it is completed.
"Q. All right, that is all.
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From the agent's testimony, it seems obvious to us that he knew the Boltons didn't own the legal title, but were merely vendees under an executory contract. He was familiar with the F. H. A. practice of requiring insurance by the vendee before a closing and with the standard form the F. H. A. furnished its prospective mortgagors. Notwithstanding Masingill's knowledge of the true state of the title, he named the Boltons as the owner of the full legal title and signed the form. From the agent's unrebutted testimony, we believe it is also clear that whether or not he considered himself a general agent, he was clothed with the authority to bind the company. [His testimony is not conclusive on this issue. Consolidated Underwriters Insurance Company v. Landers, 285 Ala. 677, 235 So. 2d 818 (1970)]. As such, his knowledge of the facts received in the line and scope of his authority must be imputed to the company. [At oral argument before this Court, appellant, National Security, conceded that the knowledge of Mr. Masingill was to be imputed to the company.] American Life Ins. Co. v. Buntyn, 227 Ala. 32, 148 So. 617 (1933); Gunn v. Palatine Ins. Co., Limited, of London, England, 227 Ala. 245, 149 So. 672 (1933).
On these facts, Western Assurance Co. v. Stoddard, 88 Ala. 606, 7 So. 379 (1889), is dispositive of both contentions made by appellant. In that case the insured was only the life tenant of the insured property. The insurer defended a suit on the policy by alleging that the insured had represented herself to be the owner of the legal fee. The insured replied that the true facts were known to the agent who had negotiated the policy on behalf of the company. In rebuttal, the company argued that even if this was true, the insured could recover only the value of her life estate and not the full value of the property. This Court held, at pp. 611, 613, of 88 Ala., at pp. 379, 380, of 7 So.:
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In addition to the doctrines of waiver and estoppel, a similar doctrine also precludes the insurer from disclaiming liability. In Coastal States Life Insurance Company v. Leonard, 279 Ala. 171, 182 So. 2d 913 (1966), this Court quoted with approval an earlier holding in Williamson v. New Orleans Insurance Ass'n., 84 Ala. 106, 4 So. 36, viz.:
The Court also quoted with approval 7 Couch on Insurance, 2d Ed., § 35:186:
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*244 The evidence in this case, and the reasonable inferences flowing therefrom, seem sufficient to support a finding that the insurer's agent Masingill knew the Boltons were in the process of purchasing the house and did not have the "full legal title." Nevertheless, he filled out the application form himself, answering the question which inquired as to the legal title in the affirmative, thereby representing to the company that the Boltons did have full legal title.
This is more than sufficient to sustain a recovery upon principles of waiver and estoppel or innocent misrepresentation made by the insurer's agent without fault of the insured. As previously stated, these theories only require that the insureds act in good faith and have some sort of pecuniary interest in the insured property at the time of the loss. American Ins. Co. v. Newberry, supra. The mere fact that the insureds, after the occurrence of a loss, might elect to rescind the contract of sale cannot be said to inject the prohibited gambling element into the policy. National Security was bound by the representation of full legal title placed in the policy by its agent when it accepted the full premium and issued the policy. Having done so, it is estopped to assert any defense inconsistent with these representations.
Accordingly, the judgment of the trial court is affirmed.
Affirmed.
MERRILL, McCALL and JONES, JJ., and SIMMONS, Supernumerary Circuit Judge, concur. SIMMONS, Supernumerary Circuit Judge, assigned by the Chief Justice for temporary duty on the Supreme Court pursuant to authority contained in the provisions of Section 6.10 of the New Judicial Articles (Constitutional Amendment 328).