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Fidelity-Phenix Fire Insurance Co. v. Garrison

Supreme Court of Arizona

December 14, 1931

I. L. GARRISON and D. E. SMITH, Who Sues for the Benefit of I. L. GARRISON, Appellees

APPEAL from a judgment of the Superior Court of the County of Maricopa. M. T. Phelps, Judge. Cause reversed and new trial ordered.

Messrs. Stockton & Perry, Mr. E. G. Frazier, Mr. Stanley A. Jerman and Mr. Thomas P. Riordan, for Appellant.

Mr. John W. Ray, for Appellees.


[39 Ariz. 278] ROSS, J.

This action was brought by D. E. Smith and I. L. Garrison to recover on an insurance

Page 48

policy issued on February 14, 1930, by the defendant Fidelity-Phenix Fire Insurance Company to D. E. Smith, with the provision attached thereto that loss or damage, if any, should be paid to I. L. Garrison, mortgagee, as his interests might appear. It was a standard New York policy, and the rider attached thereto was the standard "union mortgage clause."

[39 Ariz. 279] The property was described in the mortgage and policy as a one-story, shingle roof, brick building, located on the extreme southwest corner of section -- , in township 1 North, Range 3 East, Maricopa county, Arizona, whereas in fact it was located on the W. 1/2 of the S.W. 1/4 of the S.E. 1/4 of section 30, said township and range.

At the time the policy was issued, there were two mortgages against the property, one to Thomas Welsh for $3,000, overdue, and one to Beatrice B. Formsby for $5,000, and the latter was being foreclosed.

Smith had obtained a policy or policies in other insurance companies providing that loss or damage, if any, was payable to Welsh, as his interests might appear, which policy or policies were in effect on February 14, 1930, the date of the issuance of the present policy. There was evidence that the insured, Smith, represented to the agent of the defendant that the Garrison mortgage for $2,000 was a first mortgage. The policy so recited. March 8, 1930, the building insured was destroyed by fire.

The defendant's defense is that plaintiffs had failed to disclose to defendant the existence of the Welsh and Formsby mortgages, or the policy of insurance on the property in favor of Welsh, or that the Formsby mortgage was in the course of foreclosure, thereby concealing from defendant material facts. Also that plaintiff Garrison did not have an insurable interest in the premises and did not have a mortgage lien thereon; that said mortgage lien was simulated for the purpose of defrauding defendant; that defendant relied upon plaintiffs' representations as to unencumbered title and the bona fides of mortgage to Garrison and issued the policy; that the mortgaged property was not worth to exceed the Welsh and Formsby mortgages. It is alleged that, in further pursuance of the plaintiffs' conspiracy to defraud [39 Ariz. 280] defendant, the plaintiff Smith, on March 8, 1930, caused the insured building to be destroyed by fire, and thereafter plaintiffs fraudulently presented proof of loss and demanded of defendant the sum of $1,700 the face of the policy. In other words, the defense is that plaintiff Smith did not owe plaintiff Garrison; that the mortgage insured against was simulated; that the defendant was deceived by plaintiffs into believing that there were no other encumbrances on the property; that Garrison participated in this deceit and assisted in obtaining the policy and that thereafter plaintiff Smith burned the property to carry out the conspiracy and to defraud defendant.

At the close of the case, both plaintiffs and defendant moved for an instructed verdict, and plaintiffs' motion was granted. The verdict was for $1,771.40, the face value of the policy and interest from date of filing complaint, plus statutory penalty of 15 per cent., or $255. Judgment was entered for such sums, and $250 attorneys' fees.

The defendant has appealed, and, for reasons, assigns several errors. We shall largely confine ourselves to determining if under the state of the evidence the court was right in directing a verdict for the plaintiffs.

The defendant's answer and its evidence in support thereof were directed in part to proving that the insured, Smith, had concealed certain material facts in order to obtain the policy, and that Garrison, the mortgagee, was cognizant of such concealment of facts and affected thereby. Before we inquire into the soundness of defendant's position, we state the rule that should guide the court in passing on a motion for a directed verdict to be that the evidence is to be taken in its strongest light against the movant. The party against whom the motion is directed is entitled to the benefit of every inference that [39 Ariz. 281] might justifiably be drawn from the evidence, and it is only when all the evidence with all such inferences is insufficient to support a verdict in his favor that the court may direct a verdict against him. Stanfield v. Anderson,5 Ariz. 1, 43 P. 221; Root v. Fay,5 Ariz. 19, 43 P. 527; Roberts v. Smith,5 Ariz. 368, 52 P. 1120; Haff v. Adams,6 Ariz. 395, 59 P. 111; Haupt v. Maricopa County,8 Ariz. 102, 68 P. 525; White Sewing-Machine Co. v. Bradley,16 Ariz. 338, 145 ...

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