Page images
PDF
EPUB

owner of the property, who would be required to stand loss by fire; and it was said that the conclusion reached in this case would not be altered by the fact that time was of the essence of the contract, for, until forfeiture or failure to make payment as specified therein, the vendee remained the owner of the property.

See also Cottingham v. Firemen's Fund Ins. Co. (1890) 90 Ky. 439, 9 L.R.A. 627, 14 S. W. 417, where it was held that a contract for the sale of realty violated a provision forbidding the insured property to be sold or transferred, or any change in title or interest. V. Partnership transactions; forming

partnership. A policy on partnership goods containing a provision forbidding the property to be sold or conveyed is not violated by the sale by one partner of all his interest to the other partners. Burnett v. Eufaula Home Ins. Co. (1871) 46 Ala. 11, 7 Am. Rep. 581; Allemania F. Ins. Co. v. Peck (1890) 133 Ill. 220, 23 Am. St. Rep. 610, 24 N. E. 538 (dictum); Storment v. Hartford F. Ins. Co. (1919) 215 Ill. App. 295 (dictum); Dermani v. Home Mut. Ins. Co. (1874) 26 La. Ann. 69, 21 Am. Rep. 544; Powers v. Guardian F. & L. Ins. Co. (1883) 136 Mass. 108, 49 Am. Rep. 20 (sale to one partner with a mortgage back by vendee); Phenix Ins. Co. v. Holcombe (1899) 57 Neb. 622, 73 Am. St. Rep. 532, 78 N. W. 300; Pierce v. Nashua F. Ins. Co. (1870) 50 N. H. 297, 9 Am. Rep. 235 (“alienation"); Hoffman v. Ætna F. Ins. Co. (1865) 32 N. Y. 405, 88 Am. Dec. 337; Dresser v. Firemen's United Ins. Co. (1887) 45 Hun (N. Y.) 298. See also Tillou V. Kingston Mut. Ins. Co. (1850) 7 Barb. (N. Y.) 570.

Thus, the New York court has held that a provision forbidding insured property to be sold or conveyed does not apply to a sale by the retiring partner of his interest in the partnership goods to his other partners, inasmuch as the sales and conveyances contemplated by such provision meant only such as would transfer the proprietary interest of those with whom

the insurers contracted, to others with whom they had not consented to contract. Hoffman v. Ætna F. Ins. Co. (1865) 32 N. Y. 405, 88 Am. Dec. 337, supra. The court said that, since the insurance company issued the policy to a mercantile company, it must be deemed to have had in view the fluctuating nature of a partnership business and the changes of relative interest incident to that relation; further, it is said: "The design of the provision was not to interdict all sales, but only sales of proprietary interests by parties insured, to parties not insured. If the words were taken literally, a renewal of the policy would be required at the close of each day's sales. Indeterminate forms of expression, in such a case, are to be understood in a sense subservient to the general purposes of the contract It is true that the language of the proviso against sales was not guarded by a special exclusion of changes of interest as between the assured, or of the sales of merchandise in the usual course of their business; but this was for the obvious reason that there was nothing in the tenor of the instrument to denote that the application of the clause to such a case was within the contemplation of the underwriters."

In Burnett v. Eufaula Home Ins. Co. (1871) 46 Ala. 11, 7 Am. Rep. 581, the court said: "Inasmuch as words of this restriction cannot be used in their enlarged sense and their import is doubtful, their construction must incline against those for whose benefit the restriction was imposed. The interest of each partner in the goods was per my et per tout. The confidence reposed in them was testified only by the issue of the policy, and consequently was equal in each. The commingling of such an interest with such a confidence ought, by the rule above stated, to determine the construction in favor of the plaintiffs.”

In Powers v. Guardian F. & L. Ins. Co. (1883) 136 Mass. 108, 49 Am. Rep. 20, the court said: “Partners jointly contracted with as such are to be regarded as so far only one person, and the condition as so far limited to keep

ing the ownership of the thing in- sin a different rule exists. Thus, the sured in some member of the insured Pennsylvania courts have held that a body that changes between them- transfer by one partner, upon his selves, in the relative amounts or in withdrawal from the firm, of his inthe nature of their respective inter- terest in the firm to the remaining ests, do not fall within the fair mean- partner, is within the provision of an ing of the words used. . The insurance policy on the partnership proviso against the sale of the insured goods, declaring it void in case the property is directed to

the insured property is alienated by “sale preservation of an insurable interest. or otherwise.” Finley V. Lycoming So far as the object of preserving an County Mut. Ins. Co. (1858) 30 Pa. insurance interest is concerned, as the 313, 72 Am. Dec. 705; Buckley v. Garactual interests of the partners in the rett (1864) 47 Pa. 204. firm property are necessarily fluc- In the Finley Case (Pa.) supra, it tuating, there seems to be no partic- was said that the contention that such ular reason why the insurer should condition did not attach to a transfer wish to keep the state of the legal between partners, since that amounted title unchanged as between them; merely to a release of one partner's certainly, no sufficient ground for ex- interest to another, was neither a tending the language chosen by the sound legal nor a practical view of insurer beyond its plain and natural the question, for, if what took place meaning."

between the partners passed the inSo, an assignment of the interest terest in the property of one partner of one partner to another is not a to the other, then "it was alienation violation of a provision in a policy of by sale;" if it did not, it was an alieninsurance on the partnership proper- ation "otherwise.” Further, the court ty that in case of any transfer, either said: “It was against alienation the by sale or otherwise, without the as- prohibition was leveled, and the mere sent of the insurer, the policy should use of terms will not defeat the inbe void, for an occurrence of this kind tent. That a sale by one' partner to is so common that the parties are pre- another is within the prohibition cansumed to have contracted knowing it not be doubted; there is no exception might arise during the period of the in its favor in the instrument, and the insurance, and if it was desirable to terms used give no room to imply any. put a limitation upon the right of the By the transaction the one parted insured in this respect a stipulation to with all his interest, and the other that effect should be inserted. Der- acquired double what he previously mani v. Home Mut. Ins. Co. (1874) possessed. This is a legitimate conse26 La. Ann. 69, 21 Am. Rep. 544. quence of sale and purchase, and no

And a provision voiding an insur- substitution of terms will make it ance policy if the property is trans- anything else." ferred without the assent of the in- And the Wisconsin court in Keeler surer is not breached by a transfer v. Niagara F. Ins. Co. (1863) 16 Wis. between partners. Sun Fire Office v. 523, 84 Am. Dec. 714, held that a Wich (1895) 6 Colo. App. 103, 39 Pac. policy of fire insurance issued on 587.

partnership property, providing for a So, in German Mut. F. Ins. Co. v. forfeiture "if said property should be Fox (1903) 4 Neb. (Unof.) 833, 63 sold or conveyed” without the conL.R.A. 334, 96 N. W. 652, it was held sent of the insurer, was rendered void that a conveyance by one partner to by a sale of one partner's interest to the other of his interest in the part- the other partner, unless such sale nership real estate was not a convey- was consented to by the insurer. The ance within the meaning of a provision court says: “The same reasons which in a fire policy, making the policy void would induce a company to protect in case of a conveyance of the prop- itself against a sale to strangers may erty.

exist in a sale from one partner to But in Pennsylvania and in Wiscon- another. In making contracts of in

[ocr errors]

surance, the company has regard to the habits and character of the other contracting parties. If a firm is composed in part of prudent and careful men, a company may be willing to insure the property of the firm, though the others were of an entirely different character. But if, after this was done, those who were prudent and careful could, by selling out to the others, leave the company exposed to the unguarded negligence of the latter, it might suffer the same evil as from a sale to strangers.”

So, it has been held that a sale of one partner's interest to his copartner violates a provision forbidding the property to be sold, or any change of title or interest, without the assent of the insurer. Hartford F. Ins. Co. v. Ross (1864) 23 Ind. 179, 85 Am. Dec. 452. And such a transaction violates a provision against a sale, transfer, or change of title. Germania F. Ins. Co. v. Home Ins. Co. (1884) 144 N. Y. 195, 26 L.R.A. 595, 43 Am. St. Rep. 749, 39 N. E. 77.

However, in an answer to the suggestion that a proviso in an insurance policy on partnership goods, forfeiting the policy if “the said property shall be sold or conveyed,” may have been desired to secure the continuance in the firm of the only member in whom the insurers reposed confidence, the court, in Hoffman v. Ætna F. Ins. Co. (1865) 32 N. Y. 405, 88 Am. Dec. 337, where there was nothing to indicate that all of the partners were not equally worthy of confidence, said: “The only evidence of their confidence in either is the fact that they contracted with all; and the theory is rather fanciful than sound that they may have intended to conclude a bargain with rogues, on the faith of a proviso that an honest man should be kept in the firm to watch them."

Within the rule that a forfeiture provision in case of a sale or conveyance of the property without the assent of the insurer is not violated by the sale of an interest in the property, where the insured retains an interest also therein, the formation of a partnership by the insured, and the placing of the insured property in the

partnership assets, does not constitute a prohibited sale or conveyance. Scanlon v. Union F. Ins. Co. (1869) 4 Biss. 511, Fed. Cas. No. 12,436; Cowan v. Iowa State Ins. Co. (1875) 40 Iowa, 551, 20 Am. Rep. 583; Blackwell v. Miami Valley Ins. Co. (1891) 48 Ohio St. 533, 14 L.R.A. 431, 29 Am. St. Rep. 574, 29 N. E. 278.

Thus, in Scanlon v. Union F. Ins. Co. (Fed.) supra, where the insured property was put in as a part of the partnership assets of a copartnership formed by the insured subsequent to his taking out of the policy, which contained a clause voiding the policy if the property should be sold or conveyed without consent of the insurer, Drummond, Dist. J., charging the jury, said that, in order to avoid the policy, the insured must sell his own interest, and that so long as he held any interest in the property the policy was binding, for “it was competent for the insurers to declare that if a part of it were sold, that should avoid the policy. It was also competent for them to declare that if there was any change in the condition or title of the property, that the policy would be void; but that is not this condition.”

In Cowan v. Iowa State Ins. Co. (1875) 40 lowa, 551. 20 Am. Rep. 583, supra, the court stated that, while it was true, to a certain extent, that a copartnership is considered as a person separate from the partners, who may have transactions and make contracts with it as such, it was not true that a partner, by the sale of property to the firm, actually parted with the interest which, as partner, he actually held in the firm property. The court distinguished the case from that of a transfer by a retiring partner of his interest in the partnership property.

And in Blackwell v. Miami Valley Ins. Co. (Ohio) supra, the court, while stating that, in a strict legal sense, a transaction whereby one engaged in business alone takes a partner into his business results in the formation of a new concern, accompanied by a sale and transfer of the property of the old establishment to a new one, held that such a trransaction is not

[ocr errors][ocr errors]

such a sale or transfer of the entire sold or transferred or any change
interest in the property as would take place in title or possession," for
avoid a policy declaring a forfeiture by this the insured has done precisely
should the property insured be sold that which he agreed should make the
or transferred by the insured. The contract of insurance void. Malley v.
court states: “It was competent for Atlantic F. & M. Ins. Co. (1883) 51
the policy to provide expressly that a Conn. 222.
sale of a part of the property, or of See also Drennen v. London Assur.
an interest therein, should avoid the Corp. (1884) 20 Fed. 657 (reversed
policy; this they did not do. The ab- on other grounds in (1885) 113 U. S.
sence of a specific provision to that 51, 28 L. ed. 919, 5 Sup. Ct. Rep. 341),
effect, when it could have been so Shuggart v. Lycoming F. Ins. Co.
easily inserted, together with the rule, (1880) 55 Cal. 408, and Germania F.
before referred to, that conditions Ins. Co. v. Home Ins. Co. (N. Y.) su-
which defeat a policy should be con- pra, involving policies which, in addi-
strued strictly against the forfeiture, tion to forbidding a sale of the
leads us to hold that a sale of the en- property, stipulated against a change
tire interest of the party insured was of title or interest, and against trans-
necessary to avoid the policy."

fers.
However, in Massachusetts, it has

VI. Transfer to joint tenant or to tenant been held that the sale of an interest

in common.
in a merchant's business to a purchas-
er whom he takes in as a partner is

A provision forbidding property inwithin the condition that insurance

sured to “be alienated by sale or on the merchant's stock shall be void,

otherwise" is not violated by a co“if the property be sold or trans

tenant's sale of his interest to the other tenant in common.

Lockwood ferred, or any change takes place in the title or possession.” Germania

v. Middlesex Mut. Assur. Co. (1880) F. Ins. Co. v. Home Ins. Co. (1894)

47 Conn. 553; Manley v. Insurance Co. 144 N. Y. 195, 26 L.R.A. 591, 43 Am.

of N. A. (1869) 1 Lans. (N. Y.) 20. St. Rep. 749, 39 N. E. 77. The court

“The alienation here contemplated distinguished the case from the case

is a sale by the insured to a party of a sale by one partner of his inter

not insured. Any transfer of interest est to another partner, where both

between the parties insured by the were insured.

It was

said: "It policy is not an alienation within the would be a harsh and indefensible

meaning of the charter. By such a rule that required the underwriter

transfer no new party, with whom the

defendants did not contract, is inwho had insured an individual on a

troduced, but simply the interest of stock of goods in a store to continue

those who did contract is changed. the insurance after the insured had

Such a change does not affect the taken in two partners, and formed a

risk, whether partial or extending to firm wherein each partner was vested

the entire interest, so long as no new with an undivided third interest in

party is brought into contract relathe property covered by the policy, tions with the insurers. If a party without having been afforded the op- parts with his entire interest, the inportunity to examine into the moral

surance as to him ceases, and the and business character of the two purchaser, if a stranger to the policy, strangers to the original contract." is not insured; if before a party to

And the Connecticut court has held the policy, the insurance inures to his that where the owner of an insured benefit. The object of this provision stock of goods forms a partnership doubtless was to guard against fraud, with another, transferring the in- to prevent the policy from becoming a sured's property to the partnership as mere gaming contract by remaining as his contribution to title, he thereby a valid instrument in the hands of violates a provision in the policy that one who is no longer interested in the it shall be void “if the property be property, and to secure to the insur

ers contracting parties of their own choosing. No one of these purposes is defeated by the alienation in this case." Lockwood v. Middlesex Mut. Assur. Co. (1880) 47 Conn. 563.

And the sale of an undivided half interest in property insured under a policy declaring a forfeiture in the event of the sale or transfer of the property insured does not avoid the policy as to that interest to which the insured retains title. Manley v. Insurance Co. of N. A. (N. Y.) supra. VII, Foreclosure sales; judicial sales.

A sale on execution is not within the meaning of a provision forfeiting a policy if the property be sold without the assent of the insurer, so long as the equity of redemption exists. Strong v. Manufacturers' Ins. Co. (1830) 10 Pick. (Mass.) 40, 20 Am. Dec. 507; Stuart v. Reliance Ins. Co. (1901) 179 Mass. 434, 60 N. E. 929; Hopkins Mfg. Co. v. Aurora F. & M. Ins. Co. (1882) 48 Mich. 149, 11 N. W. 846; Loy v. Home Ins. Co. (1877) 24 Minn. 315, 31 Am. Rep. 346; Marts v. Cumberland Mut. F. Ins. Co. (1882) 44 N. J. L. 478; Hammel v. Queen's Ins. Co. (1882) 54 Wis. 72, 41 Am. Rep. 1, 11 N. W. 349.

And so it has been held that there has been no sale or alienation of property within the meaning of the conditions in the policy voiding it for that reason, where a decree of foreclosure has been entered against the property, and the property set up for sale and bid in by the mortgagee, but no deed delivered, before the fire destroying the property insured, and the purchaser refused to accept the deed after the fire. Marts v. Cumberland Mut. F. Ins. Co. (1882) 44 N. J. L. 478. The court states: “These words, 'alienation' and 'sale,' import an actual transfer of title. This is uniformly true of 'alienation' when properly employed, . . and, although 'sale' may be used to signify a mere contract to sell, yet in strictness it denotes only an actual transmission of property. In this policy it is to be confined to the narrower meaning, for two reasons: First, because the rule is that courts will construe conditions

and provisions in a policy strictly against the underwriter; . ... and secondly, because, in the second of these clauses,—the expression 'shall be alienated by sale or otherwise,'— 'sale' is manifestly a mere mode of alienation, and uniformity of construction requires that in the prior clause it should be treated as having the same meaning; ‘sale or alienation' there signifies sale or other mode of alienation.”

And the New Hampshire court has held that foreclosure cannot be regarded as an alienation of property within the charter of an insurance company avoiding a policy should the property be alienated, since that provision referred only to the voluntary act of parting with ownership by a bargain and sale, or by some conveyance, gift, or will. Bragg v. New England Mut. F. Ins. Co. (1852) 25 N. H. 289.

An execution or foreclosure sale not being a sale within the control of the policyholders, the Massachusetts courts have questioned whether such a sale ever comes within the terms of insurance policies forbidding property to be sold without the consent of the insurer. See Strong v. Manufacturers' Ins. Co. (Mass.) supra; Stuart v. Reliance Ins. Co. (1901) 179 Mass. 434, 60 N. E. 929. And the Michigan court has doubted whether the foreclosure of an existing mortgage could ever have the effect of forfeiting a policy conditioned to be void if the insured should sell or transfer the property. Hopkins Mfg. Co. v. Aurora F. & M. Ins. Co. (1882) 48 Mich. 149, 11 N. W. 846.

However, in Connecticut, it has been held that a sale under foreclosure avoids a policy forbidding a sale without the assent of the insurer, where the time for redemption has expired. Essex Sav. Bank v. Meriden F. Ins. Co. (1889) 57 Conn. 335, 4 L.R.A. 759, 17 Atl. 930. In that case it was held that a policy of insurance, conditioned to be void if "the said property shall be sold” without the consent of the insurer, became void by a transfer of title of the insured property by foreclosure proceedings and the expira

« PreviousContinue »