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GENERAL ELECTRIC CREDIT CORPORATION v. AETNA CASUALTY AND SURETY COMPANY ET AL. (03/20/70)

SUPREME COURT OF PENNSYLVANIA


decided: March 20, 1970.

GENERAL ELECTRIC CREDIT CORPORATION, APPELLANT,
v.
AETNA CASUALTY AND SURETY COMPANY ET AL.

Appeal from judgments of Court of Common Pleas of Allegheny County, Jan. T., 1965, No. 826, in case of General Electric Credit Corporation v. The Aetna Casualty and Surety Company et al.

COUNSEL

Hubert I. Teitelbaum, with him James K. O'Malley, and Morris, Safier & Teitelbaum, for appellant.

Loyal H. Gregg, with him Jones, Gregg, Creehan, Graffam and Gerace, for appellees.

Jones, Cohen, Eagen, O'Brien, Roberts and Pomeroy, JJ. Opinion by Mr. Justice Eagen. Mr. Chief Justice Bell took no part in the consideration or decision of this case.

Author: Eagen

[ 437 Pa. Page 466]

A cause of action in assumpsit was brought by General Electric Credit Corporation (GECC) to recover on seven fire insurance policies, each issued by a different insurance company but through the same agent, for damage to personal property caused by a fire on October 28, 1963. The personal property, of which GECC was conditional vendor, consisted of equipment in the Silver Spur Restaurant in Monroeville, Allegheny County, Pennsylvania. The jury returned a verdict in favor of GECC for $50,000 against five of the seven insurance companies involved, and the other two insurance companies were held not liable. A subsequent motion for a new trial by GECC was denied. GECC now brings one appeal, asserting errors in the trial and in the charge of the court below, which it alleges entitle it to a new trial as to all seven defendants.

Before reaching the merits, certain procedural issues must first be disposed of.*fn1 Where a motion for a

[ 437 Pa. Page 467]

    new trial is made after a verdict and the motion is overruled, no appeal lies from the order refusing the new trial. Such an order is interlocutory and is unappealable: Bartkewich v. Billinger, 430 Pa. 207, 241 A.2d 916 (1968); Straw v. Sands, 426 Pa. 81, 231 A.2d 144 (1967); O'Donnell v. Bachelor, 425 Pa. 626, 229 A.2d 755 (1967); Lynch v. Metropolitan Life Insurance Company, 422 Pa. 488, 222 A.2d 925 (1966). In such case, the appeal must be from the judgment which is entered on the verdict: Bartkewich v. Billinger, supra; Simpson v. Pa. Turnpike Commission, 384 Pa. 335, 121 A.2d 84 (1956).

In this case, therefore, no appeal lay from the order of the lower court issued on December 9, 1968, denying GECC's motion for a new trial. However, pursuant to that order, judgments were respectively entered in favor of the defendants, The American Insurance Company and The American Casualty Company, on December

[ 437 Pa. Page 46831]

, 1968. Appeals could properly be taken from these final judgments.

Judgments were never entered prior to appeal as to the five companies against whom the jury returned its verdict. The judgments entered in favor of The American Insurance Company and The American Casualty Company will not support GECC's appeal from the verdicts against these five defendants, because each defendant's liability is separate, arising out of its separate contract with the plaintiff. Rule 2229(b)*fn2 of the Pennsylvania Rules of Civil Procedure gives the plaintiff the option of joining two or more persons as defendants if the liabilities of the defendants arise from a common factual background and a common question of law or fact will arise: Burke v. North Huntingdon Twp., 390 Pa. 588, 136 A.2d 310 (1957). However, this permissive joinder of defendants (or plaintiffs under Rule 2229(a)) does not unite the causes of action, and they remain independent to the same extent as if separate suits had been brought but consolidated for trial: George v. Snyder, 52 Pa. D. & C. 58, 49 Lanc. 123 (1944); Toth v. O'Brien, 44 Pa. D. & C. 405 (1942); Pa. R. Civ. P. 2231;*fn3 4 Anderson Pa. Civ. Prac.

[ 437 Pa. Page 469609]

(1962 ed.). For practice prior to the rule, see Azinger v. Pa. Railroad Co., 262 Pa. 242, 105 A. 87 (1918). Thus when plaintiffs or defendants are joined by virtue of Rule 2229, the claim and liability of each remains distinct and must be separately determined by the jury: Myers v. Buck, 50 Luz. 229 (1960); 3 Goodrich-Amram ยง 2231(d)-5. Separate judgments must also be entered in accord with the separate verdicts, as in the case of the joinder of husband and wife under Rule 2228: 4 Anderson Pa. Civ. Prac. 614 (1962 ed.); Notes of the Procedural Rules Committee to Rule 2231(c) and (d). See Fisher v. Diehl, 156 Pa. Superior Ct. 476, 40 A.2d 912 (1945).

Separate verdicts were rendered in this case. The mere fact that judgments were entered on only two of the verdicts does not affect the finality of these two judgments, but neither does it affect the interlocutory nature of the remaining five verdicts upon which judgments had not been entered of record as of the date of appeal.

Therefore, this appeal as to defendants The Aetna Casualty and Surety Company, The Buckeye Union Fire Insurance Company, National Union Fire Insurance Company of Pittsburgh, Pa., Niagara Fire Insurance Company and United States Fidelity and Guaranty Company will be quashed.

As to the other two defendants, The American Insurance Company and The American Casualty Company, although two final judgments were properly entered in their favor prior to appeal, GECC filed only one appeal therefrom, No. 104 March Term, 1969. Taking one appeal from several judgments is not acceptable practice and is discouraged:*fn4 Clark v. Clark, 411 Pa. 251,

[ 437 Pa. Page 470]

    n. 2 at 252, 191 A.2d 417 (1963). It has been held that a single appeal is incapable of bringing on for review more than one final order, judgment or decree:*fn5 Frailey Twp. School District v. Schuylkill Mining Co., 361 Pa. 557, 64 A.2d 788 (1949). When circumstances have permitted, however, we have refrained from quashing the whole appeal,*fn6 but this Court has quashed such appeals where no meaningful choice could be made.*fn7

In this case (1) the issues raised as to both judgments are precisely the same; (2) neither defendant objected to the plaintiff's bringing but one appeal; and (3) if the appeal were quashed, the statutory period

[ 437 Pa. Page 471]

    allowed for appeal will have already expired, precluding the institution of proper appeals.*fn8 Under the circumstances, we shall consider the appeal from these two judgments on the merits, but making special note of our disapproval of this procedure.

We turn now to the merits of the case as to defendants, The American Insurance Company and The American Casualty Company. The relevant facts may be simply stated: The equipment here involved had originally been financed by GECC in August 1962 for a restaurant known as "Essen and Fressen." This restaurant became insolvent and ceased doing business in July 1963. Thereafter, for the benefit of all concerned, it was agreed that GECC would repossess the equipment and sell the same to the Silver Spur Company, who was to operate a restaurant in the same location. Pursuant to such agreement, Silver Spur Company executed a conditional sale contract with GECC covering the restaurant equipment and providing that Silver Spur Company would maintain fire and extended coverage insurance on the equipment, payable to the parties as their interests may appear.

At the trial GECC offered the testimony of its attorney who handled the closing with the Silver Spur Company, Mr. Stanley Makoroff. Attorney Makoroff testified that at the closing on July 8, 1963, he called a Mr. John J. Mattey and ordered insurance on the restaurant equipment in the amount of $80,000, naming the Silver Spur Company as the insured thereon. He further testified that he told Mr. Mattey that "General Electric Credit Corporation was doing the financing and we wanted to be named in the policy under a lender's loss clause . . . . I told him that I wanted a clause that specifically insured us regardless of the cause of the loss, whether it be the act or negligence

[ 437 Pa. Page 472]

    of the primary insured . . . . Mr. Mattey said that he thought that this was covered in the mortgagee clause and he read the clause to me and I told him that we wanted a special lender's loss payee clause attached and added to the policy . . . . He agreed that he would do that."

Seven different fire insurance policies, one from each of the seven defendant insurance companies, were issued in various amounts, totaling $80,000. Five of the policies*fn9 contained special lender's loss payee endorsements*fn10 providing that GECC's coverage would not be affected by any act or neglect of the insured, as had allegedly been requested. The policies issued by The American Insurance Company and The American Casualty Company did not contain the Lender's Loss Payable Clause. Instead GECC was listed on these two policies only*fn11 as mortgagee in the Mortgagee Clause.*fn12

[ 437 Pa. Page 473]

The fire in this case was the result of arson by the owners (Tasso and George Chronis) of the named insured (Silver Spur Company).*fn13 The insurance companies are therefore not liable to the insured: Mineo v. The Eureka Security Fire & Marine Insurance Co., 182 Pa. Superior Ct. 75, 125 A.2d 612 (1956); Showalter v. Ins. Co., 3 Pa. Superior Ct. 448 (1897). In the absence of a stipulation in the policy giving to a creditor, who is made a beneficiary-payee in the policy, higher rights than the insured owner, the creditor's right to proceeds under the policy is derivative and limited to the extent of the insured's right of recovery: First National Bank v. Newark Fire Insurance Co., 118 Pa. Superior Ct. 582, 180 A. 163 (1935). Therefore, unless GECC can come within some provision in the two policies involved protecting it despite any act or neglect of the insured, it will be precluded from recovery under these policies.

[ 437 Pa. Page 474]

GECC, as a conditional vendor, is not so protected by being named mortgagee in the Mortgagee Clause. A condition precedent to recovery under the Standard Mortgagee Clause is that the beneficiary so named have a mortgage upon the property. It does not benefit a judgment or lien creditor: Dalesandro v. N. Y. Underwriters Ins. Co., 121 Pa. Superior Ct. 175, 183 A. 354 (1936); First National Bank v. Newark Fire Insurance Page 474} Co., supra; Clarke & Cohen v. Real to Use, 105 Pa. Superior Ct. 102, 159 A. 454 (1932). Nor will it benefit a conditional vendor. Only those with mortgage liens or deeds of trust similar to and partaking of the nature of a mortgage can benefit thereby: Clarke & Cohen v. Real to Use, supra.*fn14

In addition, a Standard Mortgagee Clause covers and relates only to insurance on real property or personal property so annexed to the real estate as to be bound by a mortgage on the real estate: Spangler v. Union National Mt. Joy Bank, 125 Pa. Superior Ct. 31, 189 A. 541 (1937); Clarke & Cohen v. Real to Use, supra. In this case the conditional sale contract stipulated: "All equipment . . . shall remain personal property regardless of how and to what degree it may be affixed or attached to any building or structure or what may be the consequences of its being removed from such building or structure, or for what purpose the Equipment or the building or structure may be used."

Nevertheless, GECC claims that where one with an insurable interest (here GECC), at the time of applying for a policy, advises the agent of the insurance company (here Mr. Mattey) of the desired coverage and truthfully states to such agent the facts involved in the risk, and the agent, acting within his real or apparent authority and without the actual or constructive knowledge of the applicant, fails to insert a requested provision, the insurer cannot set up such mistake in avoidance of the policy. If the events transpired as so alleged, on the facts of this case we agree.

The legal theory on which GECC seems to predicate recovery is that of waiver or estoppel.*fn15 Whether called

[ 437 Pa. Page 475]

    waiver or estoppel, some authority for such recovery exists in First National Bank v. Newark Fire Insurance Co., 118 Pa. Superior Ct. 582, 180 A. 163 (1935). There First National Bank was a judgment creditor. This status was known to the insurance agent, but he nevertheless designated First National Bank as a mortgagee in the Standard Mortgagee Clause in the policy issued. The Court held there that a provision in a policy insuring an owner of property, making loss payable to a third person as first mortgagee, imports a condition that, to be entitled to receive the amount of the loss or damage, such beneficiary must have a mortgage upon the property. It went on to say, however, that where the insurer has knowledge at the time of the issuance of the policy that the interest of the beneficiary is other than that of mortgagee, it is estopped from asserting a breach of the condition in an action by the beneficiary. Knowledge of the facts by the agent authorized to issue the policy was there deemed knowledge by the insurance company.

First National Bank did not recover, however. The Court limited the application of the enunciated doctrine to those situations where the inserted incorrect condition is advantageous to the insurer. The rule was held not applicable where the inserted provision is intended to operate in favor of the insured or one who derives his claim through the insured, by enlarging the insurer's liability. Previously, First National Bank had only been insured under a beneficiary loss payable clause*fn16 (under which the beneficiary's rights are derivative from the insured's and any defense against the insured can be set up against the beneficiary), had expressed no

[ 437 Pa. Page 476]

    clear intention of increasing its coverage so as to protect itself against acts or neglect of the insured, and could not have done so because such a provision was not authorized by statute in the case of judgment creditors. Therefore, First National Bank could not take advantage of the provision in the Standard Mortgagee Clause protecting a mortgagee despite any act or neglect of the insured, because this would have enlarged the insurer's liability from that which would have existed had no mistake occurred. As such, the Newark Fire Insurance Co. was not estopped from raising the defense against First National Bank of the fraudulent burning perpetrated by the insured.

The facts alleged in the case now before this Court are significantly different. At least as to the issue of protection despite acts or neglect of the owner or mortgagor,*fn17 the coverage and the insurers' liability in the Mortgagee Clauses and in the Lender's Loss Payable Clauses allegedly requested by GECC are identical. Thus the mistaken inclusion of GECC as mortgagee instead of lender's loss payee did not increase the insurers' liability nor aid GECC. It solely operated to the advantage of the insurers by restricting recovery to mortgagees. GECC could not satisfy this status condition, and the insurers through their agent, Mr. Mattey, were allegedly aware of this. In addition, by Attorney Makoroff's uncontradicted testimony, GECC clearly intended to protect itself despite any acts or neglect of the insured. The inclusion of the Lender's Loss Payable Clause in five of the seven policies corroborates this intent. In this case, therefore, the general rule enunciated in First National Bank v. Newark Fire Ins. Co., supra, is applicable. Attorney Makoroff's testimony was admissible to attempt to establish the

[ 437 Pa. Page 477]

    facts as alleged, and the jury should have been instructed that if they believed the testimony of Attorney Makoroff, as a matter of law, The American Insurance Company and The American Casualty Company are estopped from asserting the condition of mortgagee in avoidance of their liabilities. The jury was not so unequivocally charged.

Before we discuss this error in the charge, however, we note that if the facts were believed as alleged by GECC, GECC would have been entitled to a reformation of the policies under this Court's decisions in Bugen v. N. Y. Life Ins. Co., 408 Pa. 472, 184 A.2d 499 (1962); Easton v. Wash. Co. Ins. Co., 391 Pa. 28, 137 A.2d 332 (1957); Overholt v. Reliance Ins. Co., 319 Pa. 340, 179 A. 554 (1935); and Broida v. Travelers Ins. Co., 316 Pa. 444, 175 A. 492 (1934). Parol evidence is generally admissible for the purpose of showing that, by reason of a mutual mistake, a written instrument does not truly express the intention of the parties. But to obtain the reformation of a contract because of mutual mistake, the moving party is required to show the existence of the mutual mistake by evidence that is clear, precise and convincing. This requires evidence by two witnesses or by one witness and corroborating circumstances: Bugen v. N. Y. Life Ins. Co., supra; Easton v. Wash. Co. Ins. Co., supra.

In this case, there was testimony of only one witness, Attorney Makoroff, as to the circumstances in which the insurance was ordered. His testimony was therefore uncontradicted.*fn18 Although he was an interested

[ 437 Pa. Page 478]

    witness, being an attorney for one of the parties, his testimony was "clear, precise and convincing": See Easton v. Wash. Co. Ins. Co., supra; Broida v. Travelers Ins. Co., supra. Attorney Makoroff's credibility is enhanced by the very substantial corroborating circumstances in this case. The Lender's Loss Payable Clause allegedly requested by GECC was in fact included in five of the seven insurance policies issued to GECC. The clause so inserted in all five policies was a standard form clause, Form No. 544-Edition Date 6/54. No reasonable justification is raised in defense why GECC would ever have wanted different coverages in the seven policies, and the designation of GECC as mortgagee only in some policies, as lender's loss payee in one and as both in others supports Attorney Makoroff's testimony concerning Mr. Mattey's belief, or at least uncertainty, over the proper clause to adequately protect GECC. Attorney Makoroff's intent seemed clear, however. This evidence, therefore, met the standard of being clear, precise and convincing so as to support a reformation of the insurance contract for mutual mistake, if the jury believed the testimony of Attorney Makoroff. See Easton v. Wash. Co. Ins. Co., supra.

The trial court partially charged the jury correctly as to the ultimate legal result in such cases as this, but it limited its application to "under certain circumstances and in special cases."*fn19 Such a limitation was

[ 437 Pa. Page 479]

    included, because the court was uncertain as to the principle's application in a situation where the error could have been discovered by one of the parties prior to the loss had it read the policy as issued. The parties to this transaction were knowledgeable businessmen experienced in commercial affairs. Attorney Makoroff, however, admitted that he had not seen or read the policies until after the fire.*fn20 The special Lender's Loss Payable Clause is contained on a separate sheet of paper affixed to the standard policy. A cursory examination of the policy would have disclosed its absence if the examiner knew it was supposed to be included. In addition, the two policies that did not contain the Lender's Loss Payable Clause (the two now before the Court) were amended in other respects shortly after they were issued, so someone in GECC presumably had examined the policies.

Nevertheless we have held that if all of the elements necessary for the reformation of a written contract are present, mere negligent conduct on the part of one of the parties thereto in failing to discover the mistake will not bar reformation in the absence of prejudice or a violation of a positive legal duty: Bugen v. N. Y. Life Ins. Co., supra; Overholt v. Reliance Ins. Co., supra;

[ 437 Pa. Page 480]

Makoroff, the mere failure to read the policies and discover the error prior to the fire would not bar recovery by GECC under these policies.*fn22 The failure to so charge the jury constitutes reversible error, for which GECC is entitled to a new trial.

In view of our disposition of this case, we deem it unnecessary to decide the other errors asserted by GECC.

This appeal as to defendants The Aetna Casualty and Surety Company, The Buckeye Union Fire Insurance Company, National Union Fire Insurance Company of Pittsburgh, Pa., Niagara Fire Insurance Company and United States Fidelity and Guaranty Company is quashed.

A new trial consistent with this Opinion is ordered as to defendants The American Insurance Company and The American Casualty Company. The judgments entered below in favor of these two defendants are, therefore, vacated.

Disposition

Appeal as to certain defendants quashed; judgments as to other two defendants vacated and new trial ordered.


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