Court Opinion

ID: 8863231
Source: CourtListenerOpinion
Date Created: 2022-11-26 17:55:28.297935+00
Date Added: 2024-06-11T17:05:54.191297
License: Public Domain

ROSS, Circuit Judge.
I dissent. The action was upon a policy of fire insurance issued by the plaintiff in error to the defendant in error on the 19th day of August, 1896, whereby it insured the defendant. in error, in accordance with the terms and conditions of the policy, for a period of one year, against all direct loss or damage by fire, to an amount not exceeding $2,500, “on his 600 tons of *938hay” then being in a bam upon the farm of the defendant in error in Skagit county, state of Washington. The barn and its contents were destroyed by fire on the 10th day of October, 1896. The value of the hay so insured and destroyed was ascertained by agreement between the assured and the plaintiff in error to be the sum of $2,412. The case was tried by the court below with a jury, which returned a verdict for the plaintiff in the action, upon which judgment was entered against- the insurance company for-the sum of $2,579.45. The case is brought here by the company by writ of error.
The policy contains this stipulation with respect to the ownership of the property insured:
“This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void * * * if the interest of the insured be other than unconditional and sole ownership.”
It was not otherwise so provided.
The policy also contains this clause:
“This entire policy shall be void if the insured has concealed or misrepresented, in writing or otherwise, any material fact or circumstance concerning this insurance or the subject thereof, or if the interest of the insured in the property be not truly stated therein, or in case of any fraud or false swearing by the insured touching any matter relating to this insurance or •the subject thereof, whether before or after loss.”
The company, by its answer, set up three defenses to the action: (1) That the policy is void by reason of the fact that the interest of the insured in the property was other than that of unconditional and sole ownership; (2) that the insured, in making his proofs of loss, made oath that the hay belonged exclusively to him, and that no other person or persons had any interest therein, and that this action on the part of the insured avoided the policy by reason of the second condition above quoted; (3) that the loss sustained by the defendant-in error was only two-thirds of the value of the hay destroyed.
From what has been said it will be seen that the case in the court below turned upon the question of ownership of the hay. There was no substantial conflict in the evidence. The defendant in error was the owner of a farm in Skagit county, Wash., and on the 12th day of February, 1894, entered into a written contract with one E. E. Bulson for its cultivation during a period of two years. In effect, it provided that, the owner of the farm was to furnish seed, teams, and farming implements, and the labor of one man, and that Bulson was to furnish all other labor, and pay the running expenses of the house, one-half the wire for baling hay, one-half the sacks for sacking grain, and one-half of the outside expenses for breakages; that, of all of the products of the farm except butter, the owner was to have two-thirds, and Bulson one-third, and all of the butter was to go to Bulson. The contract, by its terms, expired February 12, 1896. It is claimed on behalf of the defendant in error that, during the year 1895, Bulson, by reason of floods and other misfortunes, was without means to perform his part of the contract, and that, in consequence thereof, an oral agreement was entered into between the parties to the effect that the defendant in error should advance the necessary money required by Bulson for the performance of his part of the written contract, and *939charge it to Bulson’s account; that the crop when raised should be turned over to the defendant in error for sale; that he should sell the same, keep two-thirds of the proceeds himself, and apply the remaining one-third on Bulson’s indebtedness to him for the advances made under the oral contract, rendering to Bulson the surplus, if any; that tlie farming operations of 1895 were carried on between Bulson and the defendant in error under the written contract of 1894, as thus modified by the oral agreement of 1895. On June 24, 1896, Bulson and the defendant in error indorsed upon the written contract of 1894, and executed, the following:
“It is hereby agreed between the parties to the within lease that the term of said lease, and each and every of the provisions thereof, are continued in force for the period of one year from the above-named lease, namely, l<’ebruary 12, 1894. Witness our hands, this 24th- day of June, 1896.
“1 Signed] 13. B3. Bulson.
“Robert Abrams.
“Witness:
“A. 13. Anderson.
“W. Lisin”
This agreement of June 24, 1896, continuing in force the provisions of the so-called “lease” of .1894 “for the period of one year from the above-named lease, namely, February 12, 1894,” is unintelligible. But it appears from the testimony of the defendant in error — and there is nothing to the contrary in the record — -that the crop of 1896, constituting the hay that was insured and destroyed, was grown by Bulson on the farm of the defendant in error under the same agreement as was the crop of 1895. That, crops grown and harvested under such a cropping contract are, until divided, owned by the respective parties as tenants in common, is well settled. Bernal v. Hovious, 17 Cal. 542; Knox v. Marshall, 19 Cal. 617; Walls v. Preston, 25 Cal. 60; Taylor v. Bradley, 39 N. Y. 129; Dixon v. Niccolls, 39 Ill. 372; Wentworth v. Railroad Co., 55 N. H. 540; State v. Jewell, 34 N. J. Law, 259; Fiquet v. Allison, 12 Mich. 328; Delaney v. Root, 99 Mass. 546.
oral modification of the written con (Tact of 1894, by which the defendant in error agreed to advance to Bulson the money necessary to enable him to carry out his pari: of that agreement, upon the condition that the whole crop should he delivered to the defendant in error, to be by him sold, with the right on the part of the latter to deduct from Bulson’s one-third part of the proceeds the amount of such advance's, by no means devested Bulson of all interest in the hay. He remained the owner of one-third thereof, subject to the right of possession in the defendant in error of (he whole of it, together with the right on his part to sell the whole, and appropriate so much of Bulson’s share of the proceeds as should prove to he necessary to make good the advances made on his account. That was the condition of the ownership of the hay at. the time the insurance in question was applied for and effected. The hay had not then been sold, and it could not therefore be then known that Bulson’s one-third of the proceeds of its sale would not more than repay the few hundred dollars that the defendant in error had advanced on his account.
*940I find it impossible to sustain the view, contended for on behalf of the defendant in error, and by the court below conveyed in one of its instructions to the jury, that he was the sole and unconditional owner of the hay. Bulson never sold his interest therein, or any part thereof, to the defendant in error. He consented that the latter should, for his security, receive the hay into his exclusive possession, should sell it, and handle the proceeds; but this agreement fell far short of devesting the entire interest of Bulson. With the burning of the hay, the security of the defendant in error for the advances he had made on account of Bulson disappeared; but not so Bulson’s obligation to repay those advances. That debt remained, and is asserted by the defendant in error in his testimony in this case. The defendant in error lost his security, but he did not sustain the entire loss, for Bulson also lost his interest by the destruction of the property. He still owes the amount of the advances. Suppose he had paid those advances just before the fire occurred; would not the right of the defendant in error to appropriate any part of Bulson’s one-third of the proceeds of the hay to his own use have thereupon ceased? Undoubtedly so; and, if so, we do not understand how it can be seriously contended that, when the policy in suit was applied for and issued, the defendant in error was the sole and unconditional owner of the hay.
“To be ‘unconditional and sole,’ ” said the court of appeals of Maryland, “the interest must be completely vested in the assured, not divided or conditional, but of such a nature that the insured must sustain the entire loss if the property is destroyed; and this is so whether the title is legal or equitable.” Insurance Co. v. Keating, 38 Atl. 29, 31.
The policy in question was taken by the assured, as has been seen, upon “his 600 tons of hay,” and provides, among other things, that if the assured be other than the entire, unconditional, and sole owner thereof, the policy shall be void and of no effect. The provision in question is common in such policies, is plain in its terms, and is inserted for good and substantial reasons.
“They rest,” said the circuit court of appeals for the Eighth circuit, in Insurance Co. v. Bohn, 12 C. C. A. 536, 65 Fed. 170, “upon a sound policy of the business of insurance, — a policy founded in reason, and in accord with an enlightened public policy, — the policy of reducing the moral hazard to which the underwriter is exposed. ‘Moral hazard,’ in insurance, is but another name for a pecuniary interest in the-insured to permit the property to burn. Statistics,' experience, and observation all teach that the moral hazard is least when the pecuniary interest of the insured in the protection of the property against fire is greatest, and that the moral hazard is greatest when the insured may gain most by the burning of the property.”
In Insurance Co. v. Lawrence, 2 Pet. 25, 49, Chief Justice Marshall, speaking for the supreme court, said:
“The contract for insurance is one in which the underwriters generally act on the representation of the assured, and that representation ought consequently to be fair, and to omit nothing -which it is material for the underwriters to know. * * * Generally speaking, insurances against fire are made in the confidence that the assured will use all the precautions to avoid the calamity insured against which would be suggested by his interest. The extent of this interest must always influence the underwriter in taking *941or rejecting tlie risk, and in estimating the premium. So far as it may influence him in these respects, it ought to he communicated to him. Underwriters do not rely so much upon the principles as on the interest of the assured; and it would seem, therefore, to he always material that they should know how far this interest is engaged in guarding the property from loss.”
In the present case, as has been shown, the assured only owned an undivided two-thirds of the hay; the other undivided one-third being owned by Bulson, subject to Abrams’ right of possession of the whole, and his right to sell the whole, and repay his advances out of Bulson’s share of the proceeds. Bulson’s interest might or might not have greatly exceeded those advances; but his interest existed and was, according to the record, insured by Bulson in another company. There can be no doubt that his interest was an insurable one; and, if so, it necessarily follows that Abrams did not have the entire beneficial interest in the hay. Yet he represented the entire 600 tons to be “his,” and, indeed, still so insists in his testimony in this case, in which respect he was sustained by the court below in at least one instruction given to the jury, and in its action in refusing certain instructions requested by the defendant. In these respects, error was, in my opinion, committed, as well as in the refusal of the court below to instruct the jury to return a verdict for the defendant, as requested by the defendant’s attorney. I think the judgment should be reversed, and the cause remanded, with instructions to award a new trial.