Butterfield Construction Co. v. Federal Land Value Insurance

ALLYN, J., pro tem. — The plaintiff and appellant, a street contractor, before submitting a bid to the city of San Diego for certain street work then pending under the Im[18]provement Act of 1911, negotiated with defendant, a land value insurance company, for the issuance of insurance policies on the various parcels and lots of land within the improvement district. It was necessary for plaintiff to finance its operations, if it was successful in securing the contract, to get an advance commitment from some concern dealing in securities of this kind to purchase the warrant, assessment and bonds to be thereafter issued under the terms of the act. It was thought that if policies of land value insurance might be issued upon each piece or parcel of property against which a bond should thereafter issue, the value of these bonds would be enhanced. A sample policy of insurance was submitted and it was agreed that such policies should be issued, in the event plaintiff were successful in securing the contract, in amounts ten per cent in excess of the amounts due on the bond or bonds. Defendant repudiated its agreement and plaintiff, having been awarded the contract, was compelled to default. In an action for damages for breach of contract, the trial court found for plaintiff on all issues as to the contract, the breach thereof and plaintiff’s damage, but found that the form of insurance agreed upon was not land value insurance and hence beyond the corporate powers of defendant. Judgment was entered for the defendant and plaintiff appeals therefrom.

The determination of this appeal rests upon the solution of one problem, namely, was the agreed form of policy one of land value insurance 1 If it was not, the agreement to issue it was clearly beyontf the corporate powers of the defendant and in direct violation of the statute upon which defendant’s corporate existence depended (Pol. Code, sec. 594; Civ. Code, see. 453hh).

There is little conflict in the testimony as to what transpired or as to what the parties were really trying to accomplish. They were all trying to fit land value insurance to 1911 Improvement Act proceedings so that the bonds issued thereunder might be more salable by reason of insurance against loss by depreciation of value of the land. In their discussions and correspondence it was variously termed “land value insurance” and “insurance on bonds”.

The proposed policy undertakes to insure the purchaser and his assigns of “a certain right, title, interest or lien in or upon” certain real property against loss on subsequent