Farmville Insurance & Banking Co. v. Butler ex rel. Hoffman

Bowie, J., delivered the opinion of the Court. The appellees, who were the complainants below, filed their bill in the Circuit Court of Baltimore City, for the reformation of a policy of fire insurance issued by the appellant, on certain property therein described as the property of the assured, alleging that material clauses were omitted by mistake, indicating the existence of incumbrances on the property, and the real interest of the parties insured or intended to be insured. The Court below granted the prayer of the appellees, and decreed that the policy should be reformed accordingly, from which decree this appeal is taken. ²³⁵ The policy purported, in consideration of the receipt of seventy-five dollars, to insure Kennedy H. Butler, and his legal representatives, twenty-five hundred dollars on property situated in Cumberland, 'Maryland, as therein described, including certain buildings designated by letters referring to a diagram on file, and on certain fixtures, stock, furniture and other articles enumerated in a schedule annexed, under certain provisions and conditions therein contained. The first clause of the conditions of said policy among others provided: “If the interest of the assured in the property, whether as owner, trustee, consignee, factor, agent, mortgagee, lessee, or otherwise, he not truly stated in this policy, * * * then and in every such case this policy shall he void.” In the fourth clause it is declared : “ If the interest of the assured in the property, be any other than the entire unconditional and sole ownership of the property for the use and benefit of the assured, or. if the building insured stands on leased ground, it must he so represented to the company and so expressed in the written part of the policy, otherwise the policy shall be void.” Neither of these conditions were complied with.

The property insured being destroyed by fire, the assured furnished proof of the loss, and that he had complied with all the conditions in said policy required, but the insurance company declined and refused to pay, alleging non-compliance with the provisions of the fourth clause above cited. The appellees then instituted suit in a Court of law against the appellant, and that Court decided they could not maintain the action unless the interest of Henderson was described in the same. The appellees then non prossed the suit at law, and filed their hill against the appellant to reform and amend the policy. ²³⁶ It is alleged in the bill that Butler, being extensively engaged in the manufacture of furniture in the City of Cumberland, and desirous to raise money for the prosecution of his business, proposed to mortgage the premises described in the policy to Henderson for that purpose, but Henderson preferred the loan should be secured by the creation of a redeemable ground rent on the premises. Hence Butler, on the 14th of July, 1876, prior to the execution of the policy, by deed of bargain and sale in consideration of the sum of six thousand dollars, conveyed the fee to George Henderson, who on the same day leased the premises to Butler for ninety-nine years, renewable for ever, subject to a ground rent of $420 per annum, payable quarterly, with the reservation of the right of re-entry to the lessor, in case of default in the payment of the rents and other covenants, and reserving to the lessee the right to redeem upon the payment of the sum of six thousand dollars and all rent then due, the lessor will release the property from the payment of the rent and give a good sufficient deed for that purpose, etc. And the lessee covenanted, that during the continuance of the lease, he would keep the property insured in some reliable company or companies, to the amount of $6000, and will assign the policies to the said Henderson, his heirs or assigns, for his or their benefit, in case of loss by fire.

The appellees allege in their bill, that they insured the premises in several other companies besides the appellant, and had the amount of $6000, entered to the use of George Henderson, “ but that in the policy issued by the said Farmville Insurance and Banking Company, (the appellant) said endorsement was not made, because a sufficient amount bad been already assigned him.” As to the representation of the interest of the assured in the property, the bill in substance, alleges, that at the time of effecting insurance, no questions were asked by the agent of the insurers, as to the title or interest of the ²³⁷ assured, that the agent, having effected insurances in several other companies of which he was the proctor, on the same property, on which policies the qualified interest of the assured was endorsed, he had actual or constructive notice of the fact, that George Henderson, Jr. had an interest in the premises. And further, that the said fourth covenant in said policy is known as the “National Board of Underwriters’ Form,” and has no reference to the long leases peculiar to this State, hut it is intended to embrace only short leases where the tenure of the party insured is of a short and precarious nature ; and that the transaction between the insured and Henderson, was in the nature of an incumbrance or equitable mortgage, and in no manner increased the risk assumed by the insurers. The bill further charges, that the policy of insurance in question, was effected through the agency of an insurance broker, who took out three policies therein mentioned, through the agent of said company, and when the last mentioned policy, that now in suit was