I. D. PETERSON, Appellant,
THE HUDSON INSURANCE COMPANY, a Corporation, Appellee
APPEAL from a judgment of the Superior Court of the County of Maricopa. Joseph S. Jenckes, Judge. Judgment affirmed.
Mr. V. L. Hash, for Appellant.
Messrs. Frazier & Perry, for Appellee.
[41 Ariz. 32] LOCKWOOD, J.
I. D. Peterson, hereinafter called plaintiff, brought suit against Hudson Insurance Company, a corporation, hereinafter called defendant, to recover on a certain policy of fire insurance issued by defendant in favor of plaintiff and covering certain property located in Maricopa county. The case was tried to the court sitting without a jury upon an agreed statement of facts, and, judgment being rendered in favor of defendant, this appeal was taken.
The question therefore presented is whether upon such an agreed statement of facts the court properly rendered the judgment which it did. This statement may be summarized as follows: On October 30th, 1929, plaintiff was the owner of certain real estate in Maricopa county upon which there was a frame dwelling-house. On that day defendant issued to plaintiff a policy of fire insurance insuring the house against fire for the term of three years in an amount not exceeding $1,500. The policy, among other matters, contained the following clause: "This entire policy, unless otherwise provided by agreement endorsed hereon or added hereto, shall be void if . . . with the knowledge of the insured, foreclosure proceedings be commenced or notice given of sale of any property covered by this policy by virtue of any mortgage or trust deed," which clause is part of the New York standard form of fire insurance required by the statute to be used in Arizona. On February 15th, 1930, some three and one-half months after the issuance of the insurance policy aforesaid, plaintiff mortgaged the premises in question to the J. D. Halstead Lumber Company, which mortgage was duly recorded in March, 1930. On October 15th, 1930, the lumber company commenced an action against plaintiff in the [41 Ariz. 33] superior court of Maricopa county to foreclose the mortgage, summons being issued and served the same day upon the plaintiff. No notice of the pendency of the action was filed in the office of the county recorder at any time, but on November 6th the default of plaintiff was entered, and on the sixteenth day of February, 1931, a judgment of foreclosure was entered in the suit, upon which execution was regularly issued. On March 24th the sheriff sold the real property and building covered by the mortgage to the J. D. Halstead Lumber Company, certificate of sale being issued on that date, but not recorded until October 17th, 1931. On the eleventh day of April, 1931, the building covered by the insurance policy was wholly destroyed by fire, being then reasonably worth the sum of $1,500. Shortly after the fire, plaintiff notified the Standard Insurance Agency, which was the local agent of the defendant, that he made claim to recovery under the policy herein sued upon, and it informed plaintiff that it did not have authority to either admit or deny liability, but would refer the matter to defendant's San Francisco office. This latter then sent it to the Phoenix office of the Fire Insurance Companies' Adjustment Bureau. Plaintiff called upon the Standard Insurance Agency and the Adjustment Bureau many times in respect to his claim, spending a good deal of time and some money in so doing, but could never get an express admission or disclaimer thereof, the bureau on the occasion of each call informing plaintiff that it was investigating the matter. Becoming tired of the delay, on the fifth day of November, 1931, he instituted this suit. It is further agreed that plaintiff had paid the defendant all the premiums due on said policy as and when due, and that defendant at no time had tendered the return to the plaintiff of any unearned portion of said premium or demanded the surrender of the policy, but it is admitted by plaintiff that, had such tender and demand been made [41 Ariz. 34] after the fire, he would have refused it. The policy contained no mortgage clause in favor of the Halstead Lumber Company, and the latter makes no claim thereunder, and it is stipulated defendant never in any manner waived, modified, changed or dispensed with the provision of said policy above quoted, or consented to the foreclosure proceedings, or any part thereof.
The real legal questions raised by the appeal may be stated thus: (1) Did the bringing of the foreclosure proceedings, as above set forth, render the policy in question void, unless reaffirmed by the insurer; (2) if it did, did the insurer waive its rights in any manner; and (3) if the insurer did not waive such rights, was it by its conduct estopped from claiming that the policy is void?
There has been considerable litigation in the different states over provisions of fire insurance policies, either exactly like the one in question or of similar effect, and there are two distinct lines of decisions upon the question, but it is a matter of first impression in Arizona, and we are therefore at liberty to follow the line which we think is most consistent with justice and our public policy. We have frequently had under consideration the construction of both fire and life insurance policies, and we think the general principles applicable to such construction are well set forth in the case of Equitable Life Assur. Soc. v. Pettid, 40 Ariz. 239, 11 P.2d 833, as follows:
"There are certain general principles which we must keep in mind in determining this question, as well as the more special ones to which we shall refer hereafter.
These general provisions are: (1) An insurance policy is a contract, and in an action based thereon the terms of the policy must govern. The court cannot write a new contract for the parties in accordance with its idea of what the original one should have been. Standard Life & Accident Ins. Co. v. Ward, 65 Ark. 295, 45 S.W. 1065; Brown v. [41 Ariz. 35] Conn. Fire Ins. Co., 52 Okl. 392, 153 P. 173. (2) In construing an insurance contract, where there is any ambiguity, or more than one possible construction of the provisions thereof, it is to be construed most strongly against the insurer and in favor of the insured. United States Fidelity etc. Co. v. California-Arizona Co., 21 Ariz. 172, 186 P. 502; 32 C. J. 1152. (c) But, where the provisions of the contract are plain and unambiguous upon their face, they must be applied as written, and the court will not pervert or do violence to the language used, or expand it beyond its plain and ordinary meaning or add something to the contract which the parties have not put there. Treloar v. Keil & Hannon, 36 Cal.App. 159, 171 P. 823; Green v. National Casualty Co., 87 Wash. 237, 151 P. 509. And the rule that the policy is construed most strongly against the insurer applies only to the language of the contract and not to the facts of the case. Hardenbergh v. Employers' Liability Assurance Corp., 80 Misc. 522, 141 N.Y.S. 502."
The reason for the insertion in fire insurance policies of clauses similar to the one in question is explained in the case of J. I. Kelly Co. v. St. Paul Fire & Marine Ins. Co., 56 Fla. 456, 47 So. 742, 16 Ann. Cas. 654, as follows:
"The temptation to destroy the property and with the funds derived from existing insurance thereon to pay off the mortgage demand is multiplied fourfold when legal proceedings are actually instituted, and the final loss of the entire property to the mortgagor thereby becomes imminent. As a safeguard against such a contingency, the quoted clause is wisely and properly inserted in such policies, and the plain meaning and proper and legitimate purpose of such a clause should not be emasculated and annulled by any process of specious reasoning or judicial special pleading. The plain meaning and purpose of the clause is that such a policy shall become void if, with the knowledge of the insured, foreclosure proceedings of any mortgage, whether executed by the insured or by another, ...