In Girard v Vermont Mutual Fire Ins Co, 103 Vt. 330, 336; 154 A. 666 (1931), the court said that "evidence that plaintiffs were being pressed by creditors was a relevant fact."Summary of this case from Smith v. Michigan Basic Ins
Opinion filed May 5, 1931.
Insurance — Mortgagee's Status under "Open Mortgage Clause" or "Loss Payable Clause" — Plaintiff in Suit on Policy Containing Such Clause — Evidence of Mortgagee's Having Guaranteed or Paid Insurance Assessments — Fraud — Rule as to Admissibility of Evidence Where Fraudulent Burning of Insured Buildings Was Issue — Circumstantial Evidence — Discretion of Trial Court — Evidence To Show Insured Was Being Pressed by Creditors When Fire Occurred — Pendency of Attachment — Failure of Attaching Officer To Locate Certain Personal Property on Insured Premises When Serving Writ Shortly Prior to Fire — Necessity of Showing Admissibility of Evidence When Offered To Render Exclusion Error — False Statements of Insured in Claiming To Have Been Away on Occasion of Fire — Harmless Error — Admissibility of Note and Mortgage in Showing Interest of Mortgagee — Opinion Evidence — Trial — Facts Irrelevant to Issue — Evidence of Conviction of Insured for Burning Buildings on Which He Seeks To Recover Insurance — Exceptions Not Briefed.
1. Under so-called "open mortgage clause," or "loss payable clause" in fire insurance policy, which merely provided that any loss should be payable to mortgagee as its interest might appear, mortgagee stands as an appointee, and not as assignee.
2. Fire insurance policy containing so-called "open mortgage clause" or "loss payable clause" is contract between insurer and mortgagor, insurance being on property of mortgagor as owner, and not on interest of mortgagee.
3. Suit on policy containing so-called "open mortgage clause" or "loss payable clause" may be brought in name of mortgagor for use and benefit of mortgagee.
4. Rights of mortgagee under so-called "open mortgage clause" or "loss payable clause" of fire insurance policy in case of loss are wholly derivative, and cannot exceed those of mortgagor; and, if mortgagor wilfully burns property, mortgagee cannot recover though entirely innocent of wrong.
5. In action on fire insurance policy, where loss was payable to mortgagee as its interest might appear, admission of evidence that mortgagee, long before policy in suit was written, gave insurer written guarantee covering all assessments which might accrue on any policy insuring property on which it held mortgage, and that thereunder it had paid one assessment on policy in suit, offered and received as tending to show contractual relation between company and mortgagee based upon sufficient consideration, held prejudicial error, being outside any issue raised by pleadings, and not alluded to in charge nor in any way withdrawn or warned against.
6. When fraud is issue, evidence necessarily takes wide range.
7. In action on fire insurance policy, where defense was that insured had burned buildings to defraud insurer, though fraud in its ultimate aspect was burning of buildings, any fact or circumstance, before or after that event, which in any way indicated purpose to accomplish that fraudulent result, was admissible.
8. That insured burned buildings covered by fire insurance policy to defraud insurer, might be wholly established by circumstantial evidence.
9. When circumstantial evidence is resorted to for purpose of proving fraud, objections to testimony on ground of irrelevancy are not favored, because circumstantial facts depend largely upon their relation to each other, and acts and circumstances, wholly inconclusive when separately considered, may by their number and joint operation be entirely sufficient to establish factum probandum.
10. Each act and circumstance offered to prove fraudulent burning of insured buildings must contribute something to that result, and, if they are as consistent with innocence as with guilt, they should be rejected.
11. Where acts and circumstances offered to prove fraudulent burning of insured buildings are fairly susceptible of two constructions, one which frees them from imputation of fraud must be accepted.
12. Extent to which testimony shall be allowed to go into acts and circumstances to prove fraud is left somewhat to discretion of trial court.
13. Exclusion of testimony as to what insured said after fire as to his plans and what he said when he paid his assessment, held within trial court's discretion.
14. In action on fire insurance policy, where defense was that insured had burned buildings to defraud insurer, evidence that witness was at insured's farm afternoon before fire to serve writ of attachment, was admissible to show that insured was being pressed by creditors.
15. In such action, exclusion of evidence that witness went to insured's farm to serve writ of attachment afternoon before fire, held harmless, where financial condition of insured was otherwise shown.
16. In such action, evidence that at time officer went to insured's farm to serve writ of attachment afternoon before fire and made search but could not find calves there to attach, held inadmissible, when evidence then failed to show that insurance was claimed on such calves.
17. To secure reversal for exclusion of evidence, it must be shown that evidence was admissible in then present aspect of case.
18. In action on fire insurance policy, where defense was that insured had burned buildings to defraud insurer, fact that insured had falsely stated that he was away night of fire was admissible as an incriminating circumstance.
19. In action on fire insurance policy payable to bank mortgagee as its interest might appear, where suit was for its use and benefit, admission of note and mortgage held by bank was not harmful, where existence of incumbrance had already appeared, and it had been alleged in complaint and not denied in answer or at trial.
20. Where suit on fire insurance policy, payable to bank mortgagee as its interest might appear, was brought and carried on for its use and benefit, it was necessary to show bank's interest, so that it might control judgment until its claim was extinguished, and in this connection note and mortgage held by bank were admissible.
21. Where witness had testified that he saw person in insured's house within few seconds after he had seen man with lantern and circumstances were not complicated or obscure, exclusion of witness' opinion about person or persons at house held without error, since jury could say as well as witness whether it was possible two persons were there.
22. In action on fire insurance policy for benefit of mortgagee, exclusion of record of foreclosure on mortgage prior to fire, offered to get full record of parties to that proceeding in case, held proper.
23. In such action, where defense was that insured had burned buildings to defraud insurer, record of insured's conviction for burning such insured buildings was inadmissible.
24. Exception to charge which is not briefed is waived.
ACTION OF CONTRACT on a fire insurance policy, brought for benefit of bank as mortgagee, to whom policy was made payable as its interest might appear. Pleas, general denial and that insured buildings had been burned to defraud insurer. Trial by jury at the April Term, 1930, Franklin County, Sturtevant, J., presiding. Verdict for plaintiff and judgment thereon. The opinion states the case. Reversed and remanded.
Fred L. Laird and George M. Hogan for the defendant.
P.L. Shangrew, F.L. Webster, and M.H. Alexander for the plaintiffs.
Present: POWERS, C.J., SLACK, MOULTON, WILLCOX, and THOMPSON, JJ.
This is an action on a fire insurance policy brought by the assured for the use and benefit of a mortgagee of the property covered. It appeared that Louis Girard and his wife Cora owned and occupied a farm in Berkshire, which they had mortgaged to the Richford Savings Bank Trust Co., for the sum of $8,000. The buildings on the place were insured by the defendant by a policy which contained a provision that any loss on the real estate should be payable to the Bank aforesaid, as its interest might appear. The buildings burned, the company refused to pay, and this suit was brought. The defense is based upon the claim that the Girards or one of them burned the buildings to defraud the insurer. The trial below resulted in a verdict for the plaintiff, and the defendant excepted.
The rights of the parties here contending depend largely upon the clause in the policy making the loss payable to the bank. This clause is what is called the "open mortgage clause," or the "loss payable clause." It merely provides that any loss shall be payable to the mortgagee as its interest may appear. Under such a provision, a mortgagee stands as an appointee, and not as an assignee. The contract is between the insurer and the mortgagor; the insurance is on the property of the mortgagor as owner; it is not on the interest of the mortgagee. So a suit on the policy is well brought in the name of the mortgagor for the use and benefit of the mortgagee. Powers v. New England F. Ins. Co., 69 Vt. 494, 495, 38 A. 148. The rights of the latter in case of loss are wholly derivative, and cannot exceed those of the former. These propositions are well established. Home Loan Finance Co. v. Fireman's Fund Ins. Co., 221 Ala. 529, 129 So. 470, 471; Grosvenor v. Atlantic Fire Ins. Co., 17 N.Y. 391; Warbasse v. Sussex County Mut. Ins. Co., 42 N.J. Law, 203; Brunswick Sav. Inst. v. Commercial Union Ins. Co., 68 Me. 313, 315, 28 A.R. 56; Brecht v. Law Union C. Ins. Co. (C.C.A.), 160 Fed. 399, 18 L.R.A. (N.S.) 197, 206; Collinsville Sav. Soc. v. Boston Ins. Co., 77 Conn. 676, 60 A. 647, 69 L.R.A. 924, 925; Fitchburg Sav. Bank v. Amazon Ins. Co., 125 Mass. 431, 434; State Sav. Bank v. Shible Mut. Fire Ins. Co., 172 Minn. 122, 214 N.W. 926, 927. So it is that any defense that can be made by the insurer to a suit brought on the policy by a mortgagor for his own benefit, is equally available to it in a suit brought in behalf of the mortgagee. And, since a mortgagor who wilfully burns the property insured can take no benefit under his policy, Rent-a-Car Co. v. Globe Rutgers Ins. Co., 158 Md. 169, 148 A. 252, 256, it follows that a mortgagee, whose only rights are what are afforded by the "open mortgage clause," can take nothing in such circumstances. Hocking v. Virginia F. M. Ins. Co., 99 Tenn. 729, 42 S.W. 451, 39 L.R.A. 148, 63 A.S.R. 862; Ford v. Iowa State Ins. Co., 317 Mo. 1144, 298 S.W. 741, 56 A.L.R. 842; Westmacott v. Hanley, 22 Grant Ch. (U.C.) 382; Smith v. Germania F. Ins. Co., 102 Ore. 569, 202 P. 1088, 19 A.L.R. 1444. If, then, the Girards wilfully burned the buildings covered by the defendant's policy, there can be no recovery here, though the bank be entirely innocent of any wrong.
Subject to the defendant's exception, the plaintiff was allowed to show that the bank, at some time long before the policy in question was issued, gave the company a written guaranty covering all assessments which might accrue on any policy insuring property on which the bank held mortgages, and that thereunder it had paid one assessment on this very policy. This evidence was not relevant to any issue in the case, and therefore inadmissible. It was offered and received as tending to show a contractual relation between the company and the bank, based upon a sufficient consideration. But as was objected to it, it was wholly outside the pleadings, and did not and could not affect the rights of the parties in any way. It was well calculated to impress the jury as a fact giving the bank a special advantage in the action on trial.
It is true that this theory was not submitted to the jury as a basis of recovery or as affecting the rights of the parties in any way; but it was not alluded to in the charge of the court, nor in any way withdrawn or warned against. In these circumstances, and in view of the character of the evidence, we think it must have been prejudicial, and this exception must be sustained. This disposes of exceptions numbered from 1 to 8, inclusive.
Exceptions 9 to 14 relate to the exclusion of certain circumstantial evidence, consisting of acts and sayings of the Girards, together with certain conditions and circumstances tending, it was claimed, to establish the fraudulent character of the fire. As we have often said, when fraud is the issue, the evidence necessarily takes a wide range. Niles v. Danforth, 97 Vt. 88, 95, 122 A. 498; Downing v. Wimble, 97 Vt. 390, 394, 123 A. 433; Land Finance Corp. v. Sherwin Elec. Co., 102 Vt. 73, 80, 146 A. 72. So here, though the fraud in its ultimate aspect was the burning of the buildings, any fact or circumstance, before or after that event, which in any way indicated a purpose to accomplish that fraudulent result was admissible. Indeed, that ultimate fact might be wholly established by circumstantial evidence. Raithel v. Hall, 99 Vt. 65, 72, 130 A. 749. And, when such evidence is resorted to, objections to testimony on the ground of irrelevancy are not favored because the force and effect of circumstantial facts depend largely upon their relation to each other; and acts and circumstances, although wholly inconclusive when separately considered, may by their number and joint operation be entirely sufficient to establish the factum probandum. Castle v. Bullard, 23 How. 172, 16 L. ed. 424, 425. Nevertheless, each act and circumstance, either by itself or in connection with other evidence admitted or offered in that connection, must contribute something to that result. If, when so considered, they are as consistent with innocence as with guilt, they should be rejected. They would not then afford a rational basis for inferring the ultimate fact, so would not be "fit to be considered." Smith v. Martin, 93 Vt. 111, 129, 106 A. 666, 674. Then, too, such acts and circumstances stand in the law of evidence like representations alleged to be fraudulent: If they are fairly susceptible of two constructions, the one that frees them from the imputation of fraud must be accepted. Moncion v. Bertrand, 98 Vt. 332, 334, 127 A. 371. How far into these matters the testimony shall be allowed to go, is, of necessity, left somewhat to the discretion of the trial court. Townsend v. Felthousen, 156 N.Y. 618, 51 N.E. 279, 281; Thomas v. Miller, 202 Mich. 43, 167 N.W. 859, 860; First Nat. Bank v. Harvey, 29 S.D. 284, 137 N.W. 365, 369.
The offer to show what Girard said after the fire about his plans, and the offer to show what was said when Girard paid his assessment, came within the rule just stated, and we cannot say that they were not properly excluded as a matter of discretion.
The defendant offered to show by the witness Wilder that he went to the Girard farm late in the afternoon before the fire to serve a writ of attachment, and that he searched the barn and could find no calves there to attach. This was excluded, and the defendant excepted. In view of the nature of the defense, evidence that the plaintiffs were being pressed by creditors was a relevant fact. Commonwealth v. Haddad, 250 Mass. 391, 145 N.E. 561, 563; State v. Rosenswieg, 168 Minn. 459, 210 N.W. 403, 405; State v. Gates, 197 Iowa, 777, 197 N.W. 908, 909. If Wilder was then to serve a writ as stated, this fact should have been admitted. But, so far as this feature of the offer goes, it does not appear that any harm resulted from its exclusion; for the financial condition of the Girards was sufficiently shown. The search for calves, if made, bore on another question. But its importance depended upon the further fact that the plaintiffs claimed insurance on calves in their proof of loss. If they did, this search would have a tendency to prove one of the steps in the general scheme to defraud the company. But the plaintiff objected on the ground that there was then no evidence in the case that such insurance was claimed, stating that the proof of loss, Plffs. Ex. 4, was admitted only to show the claim for loss on the real estate; and the transcript sustains this claim. So, when this offer was made it was inadmissible; for, the rule is that to secure a reversal for the exclusion of evidence, it must be shown that it was admissible in the then present aspect of the case. State v. Lapan, 101 Vt. 124, 132, 141 A. 686.
Evidence was introduced by the defendant tending to show that, prior to the fire, Girard had caused six truck loads of furniture and other personal property, including stanchions from the barn, to be transported to a farm in Georgia some 30 or 35 miles away, and there stored; that these loads went in the night, and that the last one went the night before the fire. This line of evidence also tended to show that this property was taken out of the buildings to the truck by Girard and his children, and that Mrs. Girard was present and gave some assistance. The defendant improved Thomas Laden as a witness. He held a second mortgage on the farm and a chattel mortgage on the personal property. The defendant offered to show by him that, on the day after the fire, Girard, in answer to his questions, told him that he was away the night of the fire, and that neither he nor anyone else had taken away any of the furniture or other property. This was excluded, and the defendant excepted. That the removal of the property above referred to was evidence tending to show that Girard and his wife or one of them were responsible for the fire is not questioned. People v. Smith, 162 N.Y. 520, 56 N.E. 1001; State v. Mann, 39 Wn. 144, 81 P. 561; Patrick v. State, 18 Ala. App. 335, 92 So. 87, 88. But evidence of that fact, by the testimony of Laden, was afterwards admitted. So nothing can be claimed here so far as its exclusion is concerned. But the fact that he falsified as to where he was at the time of the fire — if he did so falsify — was also an incriminating circumstance, and should have been received. Burrill, Cir. Ev. 460, 468. It is claimed that the evidence did not tend to show that Girard was at home at the time of the fire. It is true that the witnesses who saw a man at the door that night with a lantern did not identify him as Girard, but the circumstances indicate that it was, and Mrs. Girard, according to the evidence, told the Duvals how the family drove into a side road, and three of them went back and set the fire. This testimony evidently referred to Girard and the boys, or at least the jury could so infer. Girard's falsehood as to his whereabouts is in the law of evidence like attempting to conceal one's identity, as in State v. Taylor, 70 Vt. 1, 39 A. 447, 42 L.R.A. 673, 67 A.S.R. 648; attempting to get witnesses "out of the way," spoken of in State v. Barron, 37 Vt. 57, 61; asserting a falsehood when charged with crime, as in State v. Bradley, 64 Vt. 466, 470, 24 A. 1053; flight, as in State v. Chase, 68 Vt. 405, 409, 35 A. 336; a false alibi, as in State v. Ward, 61 Vt. 153, 194, 17 A. 483, and State v. Manning, 75 Vt. 185, 189, 54 A. 181; an attempt to persuade one to speak falsely, as in State v. Manley, 82 Vt. 556, 557, 74 A. 231; introducing false and fabricated evidence at the trial, as in State v. Williams, 27 Vt. 724, 726, and State v. Magoon, 68 Vt. 289, 292, 35 A. 310; falsely attempting to fasten guilt upon another party, as in State v. Totten, 72 Vt. 73, 78, 47 A. 105.
The exclusion of this part of the offer was error. The offer of Laden's talk with Girard about calves was properly rejected for the reason that it did not go far enough to disclose that the expected testimony would be of any probative value.
There was no harmful error in the admission of the note and mortgage held by the bank. In the first place, the existence of this encumbrance on the real estate had already appeared by the application, the policy, and the proof of loss. It was alleged in the complaint, and it was not denied in the answer or at the trial. Then, too, inasmuch as this suit was brought and carried on for the use and benefit of the bank, it was necessary to show the bank's interest, so that it might control the judgment until its claim was extinguished. And, finally, counsel for the defendant admitted when the papers were offered, that they were admissible for the purpose of showing how much was due the bank.
No claim is here made that such evidence should be addressed to the court and not to the jury, so we give it no attention.
There was no error in excluding Larock's opinion about the person or persons seen at the Girard house on the night of the fire. The circumstances were not complicated or obscure; Larock said that it was only a very few seconds after he saw the man with the lantern that he saw the person in the house. The jury could say as well as the witness whether it was possible that two persons were there.
The defendant called the clerk of the court as a witness, and offered to show by him (1) the record of a foreclosure brought by the bank against Girard and the Ladens prior to the fire; and (2) the record of the conviction of Louis Girard for burning these buildings with intent to defraud the defendant. The offers were excluded, and the defendant excepted.
The first offer was properly excluded because the only ground on which it was offered was "in order to get the full record of the parties to that proceeding in the case." This reason was wholly inadequate, and the facts tendered were irrelevant to any issue being tried.
The second offer requires more attention. As we have seen, anything that would be a defense as against the Girards, would be a defense against the bank. But it does not follow that such a defense could be proved by the record referred to or even be evidenced thereby. There is a vast difference in admitting a judgment to prove its rendition, and admitting it to prove the facts on which it is predicated.
For the former purpose, if relevant, it may always be given in evidence; for the latter purpose it is not admissible in a civil suit though such facts are directly in issue. This doctrine is supported by the great weight of authority, though cases are to be found to the contrary. The reasons for the rule are well stated in Interstate Dry Goods Stores v. Williamson, 91 W. Va. 156, 112 S.E. 301, 31 A.L.R. 258, and the whole subject, together with a collection of the cases, is covered by a note thereto. Our own cases are in accord. Quinn v. Quinn, 16 Vt. 426; Robinson v. Wilson, 22 Vt. 35, 36, 52 A.D. 77; Fratini v. Caslini, 66 Vt. 273, 276, 29 A. 252, 44 A.S.R. 843. These cases put the matter on the ground that the convictions evidenced by the record may have been obtained on the testimony of the person in whose favor it is offered. But, as Chief Justice Shaw said in Mead v. Boston, 3 Cush. (57 Mass.) 404, 407, "It is not the fact that the verdict was or was not obtained upon the testimony of the plaintiff or other person interested, that renders the conviction incompetent evidence, but it is rejected because it is res inter alios."
It is earnestly argued that a distinction exists between the case in hand and other cases in its general class, and that public policy requires us to accept the view of the law contended for by the defendant, but we are not willing to conform to this argument, and are quite content to leave the law of the subject as we find it. We have tried to make it plain that the guilt of the Girards would be a complete defense here; all we hold is that guilt must be proved anew and cannot be established in whole or in part by the record of Girards' conviction.
The defendant argues that to permit a recovery by an assured who has deliberately set fire to his property "shocks the most fundamental notions of justice." We quite agree. But the fact that the assured did set the fire cannot be assumed; it must be proved; and that proof must be of such form and character as the rules of evidence require.
In our discussion of the exception last disposed of, we have deliberately broadened the scope of it. The record was offered as a bar. It is so treated in the answer. But, inasmuch as the case is to go back for a retrial, we have deemed it best to cover the whole question of the record's admissibility.
An exception was taken to the charge, but it is not briefed, and we treat it as waived.
The defendant moved for a verdict, in arrest of judgment, and for a judgment. But as the retrial may materially change the case made by the proof, we do not consider the exceptions saved when these motions were overruled.
Judgment reversed, and cause remanded.
NOTE. WILLCOX, J., sat in this case, but took no part in the decision.