Sanford v. Mechanics' Mutual Fire Insurance

Shaw, C. J.

1. The first material question in the present case is, who, under this contract, is to be deemed the “insured” or the “ assured,” for both of these terms are used in the by-laws, though they no doubt mean the same person or class of persons; and the court are of opinion, that it is John F. Eliot, and the other persons designated by the description, heirs of John Fleet.” The property at risk was theirs, the insurable interest was in them ; whereas the right and interest of Wm. H. Sanford, and of his assignee, Samuel Sanford, were derivative and subordinate. The money, it is true, was payable to Sanford, in case of loss, but that did not make him the assured. He was not a member of the Mechanics’ Mutual Fire Insurance Company; he could not vote, could not surrender the policy, or annul the contract. The legal relation of a party to whom, by the terms of the policy, the money is to be paid in case of loss, is most like that of the assignee of a chose in action, after notice of such assignment to the debtor, and a promise by him to the assignee to pay him. Such an assignee, or such a promisee, may maintain an action in his own name for the money when due.

2. Supposing, as we must suppose for the purpose of this action, that the acts done by Moore and others, the lessees of Samuel Sanford, by setting up works requiring fires, which increased the risk, would have rendered the policy void under the policy and by-laws, if done by the assured, does that avoid the policy, if done by a sub-lessee, without the consent or knowledge of the assured ?

This is a question of great importance, and one upon which very little, in the way of authority, can be found. In order the better to understand the relations of the parties to each other, and the rights and duties flowing from them, it is necessary to examine the leases referred to with some care.

It appears that in 1844, the heirs of John Fleet, by a lease by them severally signed, demised the estate in Atkinson street to Samuel Sanford. All the circumstances tend to show, that the estate was then out of repair, and one of the objects of the lease to Sanford was, to replace the old buildings with new ones, and to let the estate to a capitalist, at such a reduction of rent and for such a term of years, as to reimburse him for the costs of the buildings to be erected by him; the object of the owners and reversioners being, to have then estate at the end of the term, with improved buildings upon it, without other cost to them. Such a lease would naturally call for powers to the lessee, to pull down and alter buildings, and to deal with the estate in a manner which would amount to waste by a tenant, if not done under agreement with the owners. This lease was soon after assigned by Samuel Sanford to Wm. H. Sanford and S. B. Morse; after-wards Morse assigned his moiety to Wm. H. Sanford, so that Wm. H. Sanford was sole assignee, and holder of the lease when the policy was made by the defendants in August, 1845. At that time the alterations in the buildings contemplated to be made at the execution of the lease in 1844, had been made, either by Samuel Sanford, or his assignees; and in fact, it seems to have been the purpose of the heirs of Fleet, acting by John F. Eliot, one of them, to cause to be insured their interest in the buildings, thus newly erected on their land, in pursuance of their contract with Sanford. As to the authority of John F. Eliot to act for all the heirs of Fleet, it is not called in question here ; we are to presume that the defendant company were satisfied. The names of these hens are enumerated in the lease to Sanford, which was existing and on record when the policy was made, and by which they could be ascertained.

3. We are then brought to consider, what were the grounds of defence, relied upon by' the company to exonerate them from payment of the loss. They are substantially, that before the fire took place, the premises were leased by Samuel Sanford, who had then again become the assignee of the original lease, to Messrs. Collins, Moore & Co.; that said firm appropriated a part of said buildings to the sale of an article called “ washing fluid,” and one room to the manufacture of said fluid, in which four kettles were set for the purpose. We are to assume, that this appropriation did increase the risk; for though the evidence might leave it doubtful, it was not left to the jury, but was assumed, for the purpose of raising the questions of law reserved. This question is to be considered on the evidence hereafter, if found necessary.

The defendants contended that this establishment of a hazardous manufactory rendered the policy void upon two grounds.

1st. Under the 16th by-law, it was an appropriation by the assured, or those for whose acts they were responsible, to purposes other than those mentioned in the policy, without the consent of the president of the company.

2d. Under the 19th by-law, because the risk was increased by the act of the assured.

It is contended that this must be considered as done by John F. Eliot and his associates, the assured, because, priór to the insurance, they had given a lease which was then outstanding, with very large and unlimited powers to make any and all alterations, and that the act in question was done by tenants claiming under that lease.

The first inquiry upon this point is, whether the acts complained of were done, in pursuance of any of these extraordinary powers, or in other words, whether any such extraordinary powers were conferred on Moore, Collins & Co., the sub-lessees. It appears, then, that after this policy was made the lease was reassigned to Samuel Sanford, the original lessee, and he made the lease to Moore, Collins & Co. This lease conferred on the sub-lessees no extraordinary powers. It was in common form, a demise of the premises for three years and over, being the residue of his own term within one day. It was at a rent of $1,300, with usual covenants to keep a quiet and orderly place, not to make or suffer any waste thereof, nor lease, nor under-let, nor permit any other person or persons to occupy or improve the same, or make or suffer any alteration therein, &c., with clauses of reentry, &c.

This was a demise under all the usual restrictions and limitations, and it is quite immaterial what Sanford’s own powers were, to make alterations, if he did not transfer them, but, on the contrary, prohibited them, to the actual occupants, who are alleged to have done the acts, causing a forfeiture of the insurance.

It may be proper to state here, that Samuel Sanford stands, or has heretofore stood, in two relations to this transaction, in both of which, it is contended, the assured are bound or affected by his acts or knowledge. It is maintained, that he was the “ assured ” under the policy, and also assignee of the lease. If he was the assured of the policy, then he is affected by the express terms of the by-laws, that if the alterations, &c., are made by the “ assured,” that shall avoid the policy.

We have already stated the grounds, on which we think that Eliot and his associates were the “ assured,” and the same considerations lead to the conclusion that Sanford, who was to receive the money in ease of loss, was not the assured. But we do not consider it necessary to decide that question. because we can see no evidence of any express assent on his part, to the acts done by the lessees, and upon the only evidence reported, we are of opinion that there is no sufficient proof to warrant a jury in finding that Sanford knew of the establishment of the obnoxious manufacture on the premises, until after the fire. After the fire it was matter of notoriety from the disclosure of kettles and boilers, which were the sub"ect of the very equivocal conversation alluded to. If he gave no express assent, and á fortiori, if he had no knowledge till after the fire, there were no facts to affect him as the “ assured,” except the acts done by tenants claiming under him; but this is equally true of Eliot and others, the owners. The tenants by whom the acts were done, were persons claiming, though a little more remotely, under the same lease, and, therefore, if those acts are to be deemed acts, for which the lessor is responsible, or by which his rights as assured could be affected, this consideration would apply as well to Eliot and others, as to Samuel Sanford, whether the one or the other, or both, could be- deemed for any purpose the assured.

4. The result of the above inquiry leads to the conclusion that it was immaterial whether the plaintiff, Samuel Sanford, was the assured, within the terms of the policy or not; because all the alterations done by him, are mere erections of buildings on the premises, and were done before the policy was effected. However large his powers were to make alterations under the lease from Eliot and others, he never exercised them or made any alterations after the policy was made; there was, therefore, no “ alteration ” made within the prohibition of article 16 of the by-laws, to affect the validity of the contract. Nor did the alleged increase of risk, by the erection of kettles and boilers therein, take effect, so as if done by the assured, to render the policy void under article 19 of the by-laws, until Sanford, the plaintiff, had underlet the premises to Moore, Collins & Co. This underletting was done by a lease for a term of years, with the usual restrictions not to lease, underlet, nor permit any other person or persons to occupy or improve the same, or make or suffer to be made any alteration therein, but with the approbation of the lessor thereto in writing, with clauses of reentry in case of non-compliance with their agreement. The question then is, whether, upon a policy made in reference to these articles 16 and 19 of the by-laws, the acts of lessees under such a lease, making alterations or so using the premises as to increase the risk, would have the same effect in avoiding the policy, as if the same acts were done by the assured; They are not acts literally done by the assured, nor by his express authority or assent. Can they legally be held to be so done by implication ? The argument against it is, that the lessor is not responsible for the acts of the lessee, in the use of the demised premises, any more than a grantor for those of his grantee. The lessee holds the premises by a legal title to the possession, and is not under the control of the lessor. Suppose the lessor, by the terms of his lease, prohibits the lessee from making any alteration in the premises, or from occupying them for any purpose, which would increase the risk of fire, and should require the insertion of express covenants to that effect; this would not necessarily prevent them. His ordinary remedy would be by an action to recover damages. But even when he has reserved a right to reenter, considerable time must elapse before he can make that power effectual by legal process, to regain his possession ; and meantime, if the assured is bound by the acts of his tenants, according to the argument of the defendants, the policy may be avoided. But it is not necessary for the decision of this case, to lay down the broader and more general principle, that in no case of a tenancy for years or at will, can the acts of the lessees be taken to be the acts of the lessors; as when, for instance, changes and alteration have been authorized or permitted to be made by parol agreement or license of the lessor to the lessee, either at the time of the letting or afterwards, or by a demise with such general powers as tacitly to permit them.

In the present case, the alterations and changes in the premises alleged to have been made by Moore, Collins & Co., were not made by the consent of the lessor, the present plaintiff but on the contrary, against his express dissent and prohibition expressed in the lease, and against their own express covenants. The lessor used all the means in his power, by the terms of his lease, to prevent such changes. If made as alleged, they were made in a manner apparently secret and not open and notorious, so that the lessor could not have taken measures to prevent them.

Under these circumstances, the court are of opinion that there has been no such alteration in the condition, or change in the occupation of the buildings insured by this policy as to avoid the contract; and that by the terms on which the case was reserved, the plaintiff is entitled to judgment as on a default. Judgment for the plaintiff.