Opinion
Department Two
Appeal from a judgment of the Superior Court of San Joaquin County. Joseph H. Budd, Judge.
COUNSEL:
The mortgagor was the insured party, and was bound by the conditions of the policy. (Grosvenor v. Atlantic etc. Ins. Co ., 17 N.Y. 391.) The breach of the condition against further insurance avoided the policy. (Locey v. Insurance Co ., 11 P. Rep. 791.) No waiver of forfeiture can be asserted by reason of arbitration of amount of loss as against the terms of the policy against such waiver, and the terms of the submission. (Stockton etc. Works v. Insurance Co ., 98 Cal. 557, 570; Haslinger v. Long Island Ins. Co ., 62 Mich. 144; Soars v. Home Ins. Co ., 140 Mass.343.)
Van Ness & Redman, for Appellant.
Ed. J. Jones, for Respondents.
The law does not favor a forfeiture. ( Civ. Code, sec. 1442; Murray v. Home etc. Assn ., 90 Cal. 402; 25 Am. St. Rep. 133.) The application was not made by McMahan, and neither plaintiffs nor McMahan were bound by its purport. (Wheaton v. North British etc. Ins. Co ., 76 Cal. 419; 9 Am. St. Rep. 216; Union etc. Ins. Co. v. Wilkinson, 13 Wall. 222.) McMahan not having procured the policy, the mortgagees were the real parties insured, and they are not affected by McMahan's action in taking other insurance for himself, as such action cannot forfeit a policy which he did not apply for. (Titus v. Glen's Falls Ins. Co ., 81 N.Y. 410; Doran v. Franklin Fire Ins. Co ., 86 N.Y. 635; Carpenter v. Continental Ins. Co ., 61 Mich. 635; Westchester Fire Ins. Co. v. Foster , 90 Ill. 121.) The participation in the arbitration of the amount of loss was a waiver of the right to claim a forfeiture of the policy. (Queen Ins. Co. v. Young , 86 Ala. 424; 11 Am. St. Rep. 51; Titus v. Glen's Falls Ins. Co., supra ; Benninghoff v. Agricultural Ins. Co ., 93 N.Y. 495; Roby v. American Cent. Ins. Co ., 120 N.Y. 501; Pratt v. Dwelling House etc. Ins. Co ., 130 N.Y. 206; McNally v. Phoenix Ins. Co ., 137 N.Y. 396; Mercantile Ins. Co. v. Holthaus , 43 Mich. 423; Carpenter v. Continental Ins. Co., supra ; Marthinson v. North British etc. Ins. Co ., 64 Mich. 372; Cleaver v. Trader's Ins. Co ., 71 Mich. 414; 15 Am. St. Rep. 275; Webster v. Phoenix Ins. Co ., 36 Wis. 67; 17 Am. Rep. 479; Northwestern etc. Ins. Co. v. Germania etc. Ins. Co ., 40 Wis. 452; Gans v. St. Paul etc. Ins. Co ., 43 Wis. 108; 28 Am. Rep. 355; Oshkosh etc. Co. v. Germania Fire Ins. Co ., 71 Wis. 454; 5 Am. St. Rep. 233.)
JUDGES: Britt, C. Searls, C., and Haynes, C., concurred. McFarland, J., Temple, J., Henshaw, J.
OPINION
BRITT, Judge
[49 P. 556] Action on a policy of fire insurance which contained a clause against double insurance as follows: "This entire policy, unless otherwise provided by agreement. .. . shall be void if the insured now has or shall hereafter make or procure any other contract of insurance. .. . on property covered by this policy." The defense relied on is that the insured committed a breach of this condition by obtaining additional insurance without defendant's consent.
Plaintiffs loaned a sum of money to one J. C. D. McMahan. In the course of the negotiation of such loan it was agreed that plaintiffs should have as security a mortgage upon land of the borrower in the city of Stockton and a policy of insurance on a building to be erected thereon. The mortgage was executed by McMahan on November 9, 1892; it provided, among other things, that he would keep the buildings on the land insured to the amount of at least one thousand dollars and assign the policies of insurance to the plaintiffs. One Henderson negotiated the said loan as broker both of the mortgagor and the mortgagees; he was also the local agent for the defendant insurance company; on December 5, 1892, he filled out a blank form of application to defendant for insurance to the amount of one thousand dollars on McMahan's building, then in course of erection; the paper was entitled 'Application and Survey of J. C. D. McMahan,' and it was stated therein that the insurance was for the security of a mortgagee; Henderson signed the name of McMahan thereto as applicant. Thereupon he issued on behalf of defendant the policy in suit, wherein it was stated that the Baloise Company 'does insure' J. C. D. McMahan for the term of three years against loss by fire to the amount aforesaid on his said building; loss, if any, payable to said mortgagees. The policy was delivered to the mortgagees; the premium was paid from funds of theirs in the hands of Henderson, but on the completion of the building McMahan gave to them his note for the amount thereof. After the issuance of this policy, and after the execution of his note to plaintiffs for the said premium advanced by them, McMahan obtained a policy from the Insurance Company of North America to the amount of twelve hundred dollars upon his interest in said building. Defendant had no notice of such subsequent insurance until after the fire by which the building was destroyed. After such notice, however, defendant joined the North American company in an agreement with McMahan to submit the question of the amount of the loss to appraisers; and such amount was thus ascertained to be the sum of $ 1,210.37. Said agreement for appraisement contained a provision that the submission was without reference to any other matter of difference within the conditions of the insurance and should be of binding effect only so far as regarded the damage to the property; and it was one of the clauses of defendant's policy that it should not be held to have waived any condition of the policy by proceeding on its part to an appraisal in the manner stated. The findings of the court disclose the matters above set out: it was further found that defendant did not intend to insure the interest of plaintiff as mortgagee in said building, but did intend to insure the interest of McMahan therein "for the benefit and security of plaintiffs"; also that McMahan "had no actual personal knowledge of the issuance" of said policy of defendant. Judgment was for plaintiffs in the sum of $ 550.15; the court prorating the liability of defendant with that of the North American company.
In view of the terms of the agreement by which the two insurance companies submitted to arbitration the question of the amount of the loss, and the provisions of the policy in suit looking to such submission, the contention of respondents that the steps taken by defendant in that matter operated to waive the forfeiture insisted upon, cannot be sustained. (Stockton etc. Works v. Glen's Falls Ins. Co ., 98 Cal. 557; Johnson v. American Ins. Co ., 41 Minn. 396.) The question then is whether "the insured" procured the second insurance within the condition against the same contained in the policy. Respondents contend that they, and not McMahan, were 'the insured,' and hence were not affected by his act. But the [49 P. 557] payment of the premium was, in effect, made by McMahan; he was the person said in the policy to be insured; if the mortgage had been discharged before the loss he would still have been indemnified by the policy for the full period named therein. Therefore we think it clear that the stipulation in the policy for payment to the mortgagees in case of loss was but a provisional assignment of the contingent proceeds of the contract and had not the effect to substitute the mortgagees for the mortgagor as the party insured. "It is still," said the supreme court of Wisconsin in the discussion of a similar provision, "the owner of the premises who is insured and the contract of the company is with him alone, and the continued validity of the policy is dependent upon the performance by him of the conditions embraced in it." (Williamson v. Michigan etc. Ins. Co ., 86 Wis. 393, 396; 39 Am. St. Rep. 906; see Gillett v. Liverpool etc. Ins. Co ., 73 Wis. 203; 9 Am. St. Rep. 784; Moore v. Hanover F. Ins. Co ., 141 N.Y. 219; and the note in 28 Am. Law Reg., N. S., 221-43, where the learning pertaining to this subject is well digested.) We do not perceive how the finding that defendant intended to insure the interest of McMahan for the benefit and security of plaintiffs, understood as it must be in connection with the other facts found, at all influences the case; the finding declares no more than the implications which flow from the policy itself and the circumstances attending its issue.
We agree with respondents that McMahan could not become "the insured" without his knowledge or consent, but we think they mistake in the assertion that he procured the North American policy, "in total ignorance of the issuance of the Baloise policy." It is true the court found that McMahan "had no actual personal knowledge" of its issuance; but considering the other facts found this must be held to mean no more than what it literally imports -- that he had no knowledge thereof derived from the immediate exercise of his own senses; for, in the first place, he had agreed with the plaintiffs through Henderson that they should have as part of the security for their loan a policy of insurance on the building; a similar stipulation was inserted in the mortgage executed by him; the issuance of the Baloise policy was the only attempt at compliance with his promises in this regard; and secondly, he gave to the plaintiffs his promissory note for the amount of the premium they had advanced to Henderson. If these facts do not show that McMahan had actual notice of the Baloise policy, they at least show that Henderson was the agent of McMahan to whom the latter committed the matter of obtaining the same, and that Henderson's knowledge of the issue thereof must be imputed to McMahan. And since the plaintiffs accepted and retained the policy showing on its face that McMahan was the insured, they are in no position to say that they should not be affected by mere imputed knowledge of McMahan; they acted on the assumption that he had actual knowledge.
The insured having procured further insurance without the consent of the insurer, the policy sued on became void in virtue of the express provision for such result. (Locey v. Insurance Co. (Cal.), 11 P. Rep. 791.) We recommend therefore that the judgment be reversed and the cause remanded with directions to the court below to render judgment for defendant on the findings.
For the reasons given in the foregoing opinion the judgment is reversed and the cause remanded with directions of the court below to render judgment for defendant on the findings.