Case Name: Philips, Beckel & Co. v. The Knox County Mutual Insurance Company
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1851-12
Citations: 20 Ohio 174
Docket Number: 
Parties: *Philips, Beckel & Co. v. The Knox County Mutual Insurance Company.
Judges: 
Reporter: Cases decided in the supreme court of ohio : upon the circuit at the special sessions in Columbus
Volume: 20
Pages: 148–157

Head Matter:
*Philips, Beckel & Co. v. The Knox County Mutual Insurance Company.
■Where a building and the land on which it stands is the property of an incorporated company, the stockholders of the company can not insure the same as their individual property in a mutual insurance company.
Error to the Supreme Court of Knox county.
On July 27, 1848, Horatio G. Philips, Daniel Beckel, Jonathan D. Philips, and Samuel D. Edgar, traders in company, using the name of Philips, Beckel & Co., commenced an action against the “Knox County Mutual Insurance Company,” and declared in assumpsit upon a policy of insurance, dated October 27, A. d. 1847. To this declaration the defendant filed a plea of non assumpsit.
At the December term of the court of common pleas of Knox county, 1849, the issue joined was submitted to the court, and by the court that issue was found in favor of the defendant.
Thereupon the plaintiffs moved for a new trial, on the ground that the finding of the court was against the law and evidence in the case. This motion was overruled, and judgment entered iu pursuance of the finding of the court.
To the decision of the court, in overruling the motion for a new trial, the plaintiffs excepted,’ and their bill of exception was allowed, sealed, and made part of the record.
*The facts sufficiently appear in the opinion of the court.
The error assigned in this case when before the Supreme Court, was, that the court of common pleas erred in overruling the motion for a new trial. And the error now assigned is, that the Supreme Court erred in affirming the judgment of the court of common pleas.
H. B. Curtis & Mitchell, for plaintiffs, claimed:
I. That there was, in point of fact, no misrepresentation of the title in the application by the assured, in the present case.
1. The statement in the application for insurance is, that “the fee of the land is held by Philips, Beckel, Edgar & Philips, leased perpetually to Johnson & Douglas.”
The application is by “ Philips, Beckel & Co.”
The naked fee was in the “Dayton Hydraulic Company,” but the persons named in the application as holding the fee, composed the “Dayton Hydraulic Company.” It is not denied by the defendants but that these persons were at that time the legal owners of the naked fee ; but it is claimed that they held it not in their individual, but in their corporate capacity. It is nowhere in tho application so alleged. In what manner they hold it, whether in individual or corporate capacity, is not pretended to bo given.
In stating the fee as they did, the applicants stated a conclusion of law, in which they were mistaken, but which mistake is apparent upon the face of the application itself. The application shows that the premises were leased perpetually to Johnson and Douglas.
By the law, as held in this state, a perpetual lease amounts to a transfer of the fee. Loring v. Melondy et al., 11 Ohio, 358.
In Boyd’s Lessee v. Salbert, 13 Ohio, 213, it was said that “the question whether a lease be.realty or personalty is open;” but in the later case of the Northern Bank of Kentucky v. Roosa et al., 13 Ohio, 334, the question came fairly and ^legitimately before the court, and is determined substantially the same as in Loring v. Melendy et al.
And under the law as declared by our courts of last resort, this “perpetual lease” is the same in every particular as a fee-simple estate.
The( right of mortgagees to insure, for their own protection, mortgaged pr emises, we do not understand to be disputed. 2 Barn & Ald. 194. And without specifying their interest to consist in a mortgage. 4 Dall. 421; 1 Wash. C. C. 409; 2 Barn & Ald. 193 ; 2 Marsh. 509.
When a misstatement of title has not tended to mislead the judgment of the underwriters, because in no degree affecting the risk) it does not avoid the policy. 20 Pick. 389 ; 8 Pick. 86 ; 10 Pick. 525.
2. We claim that the allegations in the policy, in order to become matter of warranty, must bo of some fact or circumstance relating to the risk. 1 Phil. on Ins. 348; Mackil v. Pleasants, 2 Binn. 363 ; Pawson v. Watson, Cowp. 785; Le Megurier v. Vaughn, 6 East, 387; Dobson v. Sotheby, 1 Mood. & Malk. 90 ; Ellis on Ins. 59 (4 Law Lib.) ; Guy Catlin v. Springfield Fire Ins. Co., 1 Sumn. 434; Bean v. Stupart, Doug. 11; Hyde v. Bruce, 3 Doug. 213; Marsh. 347; Phillips, 346 ; Ruan v. Gardner, 1 Wash. C. C. 147.
3. Having sufficiently shown that, to constitute a warranty, the statements contained in the policy must relate to the risli, wo will now, thirdly, inquire whether this statement of title did relate to the risk. It has no connection with it—no bearing upon it. 2 Camp. 610; 1 Phil. on Ins. 410 ; 13 Wend. 92; 16 Wend. 481. 2 Denio, 75, does not overrule these authorities.
4. That the mortgages from Johnson & Douglas to plaintiffs, were not “ incumbrances,” within the meaning of section 9 of defendants’ charter; and consequently, to omit to state them could not be “ material to defendants.”
To construe this section sensibly, we must look at the object ^intended. It was certainly one of two things—perhaps both : first, to give greater security to the company, by reason of their lien for the unpaid premium note; secondly, to inform the-company how great was the pecuniary inducement of the assured to watch and protect the insured premises.
Now, “incumbrances” upon any interest which the applicant might have in'the premises, would be material to the defendants to know, because they would affect both the above supposed objects. But an accretion of interest could be no incumbrance. It would promote, not impede, both of said objects of the law.
Odlin & Lowe, on same side.
R. C. Hurd, for defendants.
The finding, ruling and judgment of the court below, and on the circuit, were all right, because of—
I. The breach'of plaintiffs’ express warranty as .to title.
II. The misrepresentation by plaintiffs of the title and incumbrances.
III. The provisions of ninth section of the charter of the defendants.
I. The express warranty of the plaintiffs as to title and ownership was broken.
An express warranty is defined to be “ an agreement expressed in the policy, whereby the assured stipulates that certain facts relating to the risk, are, or shall be true; or certain acts relating to the same subject have been or shall be done.”
The circumstance or act warranted need not be material to the risk, and in this respect differs from a “representation;” and though it is always a part of the policy, it may, “ like any other part of the express contract, be written in the margin, or contained in proposals and documents expressly referred to in the policy, and so made a part of it.” 1 Phillips on Insurance, 346, 347; Dennis v. Ludlow, 2 Caine, 111; Bean v. Stupart, Doug. 11; Kenyon v. Berthon, Doug. 12, n.
*For the defendants it is claimed that the statement in the application in regard to the title and ownership of the promises “ relates to the risk.” Jenning v. Chenango County Mutual Insurance Co., 2 Denio, 75 ; 1 Phillips on Insurance, 351.
“A warranty,” says Lord Mansfield, “must be strictly performed': nothing tantamount will do.” Rawson v. Watson, Cowp. 785; Blackhurst v. Cochell, 3 Term, 360; De Hahn v. Hartley, 1 Term, 343; 2 Term, 186.
II. But if there be no express warranty, the policy is void by reason of the misrepresentation and concealment of the plaintiffs.
“A representation is a material fact stated, before completing the contract, by either party to the other; and a misrepresentation is the statement of such a fact, which turns out not to be true.
“By a material fact is meant one that shows the nature and extent of the risk, and may induce the other party to enter into the contract” 1 Phillips on Insurance, 214.
“ The test of materiality is the probable influence of the state ment made on the mind of the underwriter.” 1 Arnold on Insurance, 515, sec. 194; 1 Phillips on Insurance, 214.
Under tho ninth section of the charter the fact of title and ownership was material. 1 Arnold on Insurance, 518, 567, sec. 210.
It is said, however, that this fact ceases to be material when it is shown that the plaintiffs were the sole stockholders in tho “ Dayton Hydraulic Company.” This incorporated company is a distinct and independent person in law.
Tho right of property was in the corporation, liable to be sold or incumbered by them, and persons dealing with the corporation in regard to the insured property, would, of course, take it discharged of all equities derived simply through the individual stockholders.
Tho charter says, the insurance “ company shall have a lien upon the lands against the insured,” etc. Who are the*“insured ?" “Philips, Deckel, Edgar & Philips.” It is not the “Dayton Hydraulic Company.” Can it be pretended that the lien thus intended to bo given, could be enfored against the “ hydraulic company.”
III. The legislature has established the law for these parties. Section 9 of the charter requires the applicant to set forth in his application his “ true title;" and, in' default thereof, declares that the “ policy shall he void.”
This decision is made mainly upon a construction of the charter of the Knox County Mutual Insurance Company, which gives the company a lien on property insured, including the land on which the insured buildings stand. By tlie charter, a sale of the insured property renders the policy void, and section 9 declares that if the insured have a less estate than an unincumbered title in foe simple, to the buildings insured and the lands covered by the same, tlie policy shall be void, unless the true title of the insured and the incumbrances be expressed in the policy and in the application therefor.

Opinion:
Hitchcock, C. J.
The bill of exceptions in this case shows that on the trial in the court of common pleas, the plaintiffs offered in evidence the original policy of insurance, described in the declaration, and which, with part of the act of incorporation of the defendant, is recited in the bill of exceptions. This policy of insurance is in terms similar to the ordinary policies of mutual insurance companies. The property insured is an oil-mill and machine shop, insured at $800, situate at Dayton, and the lot on which situated, is particularly described. The application of the plaintiffs is referred to for a more particular description, and as part of the policy. The application so referred to, and made part of the policy, is also made part of the bill of exceptions. From this it appears that the property, for the insurance of which the application was made, was represented as the property of Philips, Deckel & Co., and that to the question as to " who holds the fee of the land on which said buildings stand, whether incumbered by •mortgage,'and to what amount," the reply was, " Philips, Beckel, Edgar and Philips, leased perpetually to Johnson & Douglas"— the applicants—and insured, thereby stating the fee to be in themselves, although subject to a perpetual lease, and no other incumbrances are named. It is unnecessary to insert hei'e the sections of the statute referred to in the bill of exceptions, as they will be referred to hereafter. The by-laws of the company, attached to the policy, were made part of the bill. It was admitted that the buildings intended to be insured were destroyed by fire, on or-about March 26, 1848, and proven that necessary preliminary steps had been *taken to charge the defendants, that domand of payment, etc., had been made. The insurance was for five years.
Defendant gave in evidence the original application before referred to, and also transcripts from the record of certain deeds, which are also made part of the bill. These records show, first, a deed from Philips, Beckel & Co. to the "Dayton Hydraulic Company," an incorporated company, for the lands on which the insured property was situated, bearing date June 18, 1846.
Second. A lease from the "Dayton Hydraulic Company " to Johnson & Douglas, for the same premises, for ninety-nine years, renewable forever. This instrument bears date July 9, 1847.
Tim'd. Two deeds of mortgage from Johnson & Douglas, dated the same 9th day of July, upon the same premises, to the " Dayton Hydraulic Company:" the one to secure the payment of two notes for two hundred dollars each—one due in one, and the other in two years; and the other to secure the payment of two notes of like amount, one due in three, and the other in four years.
The plaintiffs then proved that they were the sole stockholder's in the " Dayton Hydraulic Company."
In the bill of exceptions, the reasons are assigned which induced the court to find the issue joined in favor of the defendant, but with this, this court has nothing to do. The simple question for us to decide is, whether, under the circumstances disclosed in the bill of exceptions, the plaintiffs were entitled to a verdict and judgment. If they were, then the court of common pleas erred in overruling the motion for a new trial. If the plaintiff were not entitled to a verdict and judgment, then there is no error.
It is apparent that here was an insurance effected upon certain buildings as the property of the plaintiffs, and represented by the plaintiffs, in their application, to stand upon land, the title to which in fee simple was in the plaintiffs. A recovery is resisted by the defendants, on the ground that the ^property was not in the plaintiffs, and the title to the land itself, upon which the building was situated, was not in the plaintiffs. On the part of the defendants, it is claimed that this application having been by express terms made part of the policy, the representation as to the title is a warranty, and to be treated as such. On the other hand, it is claimed that it is a mere representation, and although it may not be true in point of fact, still it can not effect the policy unless it relates to things material to the risk. Numerous authorities are cited by the plaintiff's counsel, and perhaps if they are right in the position that this is a mere representation, the authorities cited might, in ordinary cases of insurance, establish their right to recover.
It must be remarked, however, that in most or all the cases referred to, the suits were against individual insurers, or against companies not mutual insurance companies, and when a case arises cither in favor of or against an incorporated company, we must look into the charter or act incorporating the company, to ascertain its rights, its privileges, as well as its duties, its liabilities, its responsibility. If a fire insurance company has a lien upon the land upon which the building insured stands, no matter how small, it would seem to be material, that the true situation of the property should bo made known', and that a false representation might with propriety be held to avoid the policy.
As to the question whether, in this case, the representation as to title was a warranty, we incline to the opinion that it was. It was made part of the policy, in express terms; but it is not, in fact, necessary to decide this question.
The " Knox County Mutual Insurance Company " was incorporated by act of the General Assembly, of March 14, 1838 (36 Ohio L. L. 288), " for tho purpose," as expressed in the first section of the act, " of insuring their respective dwelling-houses, stores, shops, and other buildings," etc., " against loss or damage by fire," etc. The second section provides that all persons who shall insure in said company shall ^become members thereof, and shall continue to be members as 'long as they shall continue to be insured.
The sixth section, which is made part of the bill of exceptions, is as follows : "Every member of said company shall be, and hereby is, bound and obliged to pay his proportion of all losses or expenses happening or accruing in or to said company, to the amount of his deposit note, and no further; and all buildings insured by and with said assurance, together with the right, title, and interest of the insured to the lands on which they stand, shall be pledged to said company; and the said company shall have a lien thereon against the insured, during the continuance of his, her, or their insurance."
By this section a lien is given to the company to secure the payment of assessments for losses, etc., not only upon the buildings insured, but upon the land upon which such buildings may stand. It is material, then, that before an insurance is made, the company should be truly informed as to the titles to both buildings and land. Upon that title depends their security; for it will not be contended, I apprehend, that the insurance would operate as a lien where the assured had no title. In a subsequent section it is provided that if, after insurance, the insurance shall alienate the property, the policy shall become void; and this, I suppose, upon the general principle that the insured must have an insurable interest, and that, if at the time the insurance is effected, he has such interest, but parts with it before the loss, he can not have an action upon the policy. In order to recover upon that policy, ho mutt have had an interest at the time of the insurance, and at the time of the loss.
Another section is recited in the bill of exceptions. It is the ninth of the act, and is as follows: " The company may make insurance for any time not exceeding ten years, and any policy of insurance issued by said company, signed by the president and countersigned by the secretary, shall be deemed valid and binding on said company in all cases where the assured has a title, in fee simple, unincumbered, to the building *or buildings insured, and to the lands covered by the same ; but if the insured have a loss estate therein, or if the premises be incumbered, the policy shall he void, unless the true title of the insured, and the incumbrances of the premises, be expressed therein, and in the application therefor."
It is contended by counsel for defendant, that it is not material to the risk whether the insured owns the property, or whether his application is in accordance with the truth or not; and therefore the policy can not be defended against, although a falso representation has been made.
But such is not the law by which this company, of which these plaintiffs were members by insuring therein, was incorporated. That provides that the policy shall be binding, provided the insured is owner in fee simple of the building insured, and the land upon which it stands. But the same law prescribes that if tbo insured does not so own the building and land, "the policy shall be void, unless the true title of the insured, and the incumbrances of the premises, be expressed therein, and in the application." Now if the law, in a certain state of case, declares the policy void, how can this court declare it otherwise ?
In the application made by Philips, Beckel & Co. to the insurance company, they represented themselves to be the owners, in fee simple, of the buildings sought to be insured, and of the land upon which those buildings were situated. If they were such •owners, then the policy is binding upon the company, and the plaintiffs should have recovered a judgment. But were they such owners? It is scarcely jmetended. True, they had once been the owners; but months before this application was made they had conveyed the property to the "Dayton Hydraulic Company." This company was a body corporate and politic, capable of suing and being sued, of receiving, holding, and conveying land, etc., created by an act of the general assembly of the state, of the date of March 1, 1845. The fee of the land was in this company, not in these plaintiffs. The policy, then, does not fall within the first part of the *ninth section of the act incorporating the "Knox County Mutual Insurance Company."
Does it fall within the second clause of that section? In order that a policy may be held good under this last part of the section, it is necessary that the applicants, in making the application, not having the foe in themselves, should, in their application, state their "true title" and also " the incumbrances;" otherwise the policy is void. This.they did not do. In fact, they had no title or interest, except as stockholders of an incorporated company, in which company the title was vested. This fact was not disclosed to, it was concealed from, the insurance comjjany. Besides, there was a mortgage upon this property, not to these plaintiffs, but to the "Dayton Hydraulic Company." This was an incumbrance, but was not disclosed.
But it is said that these plaintiffs wore the sole stockholders of the "Dayton Hydraulic Company," and might therefore well insure the property of that company as their own individual property. We think not. We can find no authority sustaining any such principle, and no one is referred to. An execution upon a judgment against Philips, Beckel & Co. could not be levied upon the property of the " Dayton Hydraulic Company." Neither could an execution upon a judgmentagainstthe "Dayton Hydraulic Company" bo levied upon the individual property of Philips, Beckel & Co. In truth, the property of the hydraulic company is just as distinct from thedndividual property of these plaintiffs as would bo the individual property of Horatio G. Philips from that of Daniel Beckel.
In fact, these plaintiffs had no insurable interest in this property whatever. The fee was in another person ; not in a natural person, but an artificial person—a corporation. If they had any insurable interest, it was the stock which they held in the hydraulic company, and this they did not attempt to insure.
In the opinion of this court, the court of common pleas did not err in refusing to grant a new trial, and the judgment of the Supreme Court is affirmed, with costs.