The opinion
HOOK, Circuit Judge
(dissenting). The case in brief is this: The reduction company, as the owner of certain real and personal property comprising a chlorination mill and consisting of buildings, machinery, and supplies for the operation of the same, procured from the insurance company a policy insuring both the realty *510 and personalty against loss by fire. The policy contained this clause:
“This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void * * * if the subject of insurance be personal property and be or become incumbered by a chattel mortgage.”
The agents of the insurance company had no authority to waive this provision, but they did have full authority to assent to a mortgage of the insured personalty by means of written indorsement on or addition to the policy. A month after the insurance was procured, the insured, being indebted to Dodge and Stevenson, gave them as security two mortgages upon the mill property, one upon the realty, which required no assent to preserve the validity of the policy, and the other upon the personalty. Thereupon, at the request of the insured and Dodge and Stevenson, the agents of the insurance company made this indorsement upon the policy: “Subject to all the conditions of this policy, loss, if any, payable to G. B. Dodge and A. M. Stevenson, as their interest may appear.” It was positively averred in the complaint to which a demurrer was sustained that the insurance company consented to both mortgages. The insured property was destroyed by fire, proofs of loss were furnished, the authorized representatives of the parties and of other insuring companies met and adjusted the loss, but the defendant company refused to pay. My associates hold that a complaint setting forth these facts does not state a cause of action, and that the plaintiffs may not, by proofs, show what was actually intended by the indorsement upon the policy.
The insurance company contends — and its contention is sustained — -that the general averment in the complaint of its consent is referable to the particular indorsement upon the policy by its agents, and that the indorsement cannot be construed as a consent to the chattel mortgage. Out of the latter part of this contention arise the principal questions in the case. In the cases cited in the foregoing opinion (Carpenter v. Insurance Co., 16 Pet. 495 , 10 L. Ed. 1044 ; Northern Assurance Co. v. Building Ass’n, 183 U. S. 308 , 22 Sup. Ct. 133, 46 L. Ed. 213 ; Forbes v. Insurance Co., 9 Cush. 470 ; Worcester Bank v. Insurance Co., 11 Cush. 265 , 59 Am. Dec. 145 ; Walsh v. Insurance Co., 73 N. Y. 5 ) there was an entire failure to make indorsements upon the policies, as was required by their terms, and it was sought to supply the omission by oral testimony. The doctrine of these cases is unassailable, but it has merely an indirect bearing upon the case at bar. Here an indorsement was requested. It was made by the authorized agents, and the questions are: What is to be done with it? How should it be construed? If it is ambiguous in its application, is oral testimony admissible to explain it?
In Bates v. Insurance Co., 10 Wall. 33 , 19 L. Ed. 882 , also cited in the foregoing opinion, the policy contained a clause that, if the insured property be sold or conveyed, or if the policy itself should be assigned, without the consent of the company, the risk *511 should cease, and the policy become void. The indorsement made and consented to was, “Payable in case of loss to E. C. Bates.” It was held that this indorsement indicated neither a sale or conveyance of the insured property nor an assignment of the policy. Justice Miller, in delivering the opinion of the court, said:
“If it could be shown that it had been the course of dealing between these particular parties to recognize the indorsement of the party first assured as evidence of a sale, and the indorsement of the company as a consent to the sale, or if it could be shown that by custom and usage in any particular place these indorsements were so treated, the case might be different; buf, in the absence of such usage or custom, we can see in these indorsements nothing more than the direction of Philbrick and the consent of the company that any loss sustained by Philbrick, covered by that policy, should be paid to Bates. As Philbrick did not have any interest in the goods when the fire occurred, he sustained no loss, and the policy covered none.”
This case, so far from militating in any degree against the contention of Dodge and Stevenson and the insured is, on the contrary, helpful in its bearing, in that, as applied to the case before us, it tends to limit the indorsement to the scope and purport averred to have been actually within the contemplation of all of the parties. It is not claimed here that the insured property was sold, or that the policy was assigned. On the contrary, it was averred that the insured property of both classes was mortgaged, that the company actually consented thereto; and it is contended that the indorsement which was made is fairly and reasonably calculated to so signify. Scania Insurance Co. v. Johnson, 22 Colo. 476 , 45 Pac. 431 , is a case like Bates v. Insurance Company; and in Delaware Insurance Co. v. Greer, 120 Led. 916, 57 C. C. A. 188 , 61 L. R. A. 137, it was merely held that an indorsement making loss payable to a mortgagee as his interest might appear, did not excuse compliance with another and additional provision that the policy should be void if, with knowledge of the insured, foreclosure proceedings be commenced, etc., unless otherwise provided by agreement indorsed on the policy.
In approaching the questions arising in this case it should be borne in mind that the settled rule of construction is that the language of a policy of insurance is the language of the company, and this includes indorsements made by its agents, and it is both reasonable and just that its own words should be construed most strongly against itself. If the policy is so framed, and an indorsement thereon is so worded, as to leave the meaning doubtful or ambiguous, or when the phraseology employed is calculated to mislead the insured, the courts will lean against the construction which would limit or discharge the liability of the company. National Bank v. Insurance Co., 95 U. S. 673 , 24 L. Ed. 563 ; Grace v. Insurance Co., 109 U. S. 278, 282 , 3 Sup. Ct. 207, 27 L. Ed. 932 ; Moulor v. Insurance Co., 111 U. S. 335, 341 , 4 Sup. Ct. 466, 28 L. Ed. 447 ; Travellers’ Ins. Co. v. McConkey, 127 U. S. 661, 666 , 8 Sup. Ct. 1360, 32 L. Ed. 308 ; Thompson v. Ins. Co., 136 U. S. 287, 297 , 10 Sup. Ct. 1019, 34 L. Ed. 408 ; London Assurance v. Companhia, etc., 167 U. S. 149, 159 , 17 Sup. Ct. 785, 42 L. Ed. 113 ; Liverpool, *512 etc., Ins. Co. v. Kearney, 180 U. S. 132, 136 , 21 Sup. Ct. 326, 45 L. Ed. 460 ; McMaster v. Life Ins. Co., 183 U. S. 25, 40 , 22 Sup. Ct. 10, 46 L. Ed. 64 ; Texas & Pacific Ry. Co. v. Reiss, 183 U. S. 621, 626 , 22 Sup. Ct. 253, 46 L. Ed. 358 ; Royal Ins. Co. v. Martin, 192. U. S. 149, 162, 24 Sup. Ct. 247, 48 L. Ed. 385 .
In American Surety Co. v. Pauly, 170 U. S. 133, 144 , 18 Sup. Ct. 552, 42 L. Ed. 977 , it was said:
“If, looking at all its provisions, the bond is fairly and reasonably susceptible of two constructions, one favorable to the bank and the other favorable to the surety company, the former, if consistent with the objects for-which the bond was given, must be adopted; and this for the reason that the instrument which the court is invited to interpret was drawn by the attorneys, officers, or agents of the surety company. This is a well-established1 rule in the law of insurance.”
In Liverpool, etc., Insurance Co. v. Kearney, 94 Fed. 314 , 36 C. C. A. 265 , this court, speaking through Judge Thayer, held that the terms of policies of insurance should receive a reasonable',, not a strictly literal, construction. In affirming this case ( 180 U. S. 138 , 21 Sup. Ct. 326, 45 L. Ed. 460 ) the Supreme Court said i
“A literal interpretation of the contracts of insurance might sustain a contrary view, but the law does not require such an interpretation. In so holding the court does not make for the parties a contract which they did not make for themselves. It only interprets the contract so as to do no violence-to the words used, and yet to meet the ends of justice.”
In Palatine Insurance Co. v. Ewing, 92 Fed. 111, 114 , 34 C. C. A. 236 , in discussing the effect of a “rider” upon the provisions of the-body of a policy, Judge Severens, of the Sixth Circuit, said:
“But if this conclusion were not so clear as it seems to us to be, and were-only a permissible one, there are several established rules of construction applicable to the subject which concur in inducing the same result. One of those rules is that forfeitures are not favored in law, and the courts will seek to find, if fairly possible, such a construction of the contracts of parties-as will relieve them from the inequitable consequences arising therefrom. * * * Another rule, which is especially, but not solely, applicable to insurance contracts, is that, when the meaning of the instrument, taken as a-whole, is doubtful, its several provisions should be construed favorably to-the party to whom the undertaking is made, and most strongly against the party in whose interest the provisions are introduced. * * * still another rule is that, where a special provision is added to the formal contract,, the special provision will be taken to dominate the formal part, upon the-principle that it more surely expresses the final purpose of the parties.”
In Hoffman v. Ætna Insurance Co., 32 N. Y. 405, 413 , 88 Am. Dec. 337 , the court, after observing that the terms of the policy that was being considered were not such as would naturally suggest even a query in the minds of the assured whether a transfer of interest as between themselves would work a forfeiture, said:
“It is a rule of law as well as of ethics that, where the language of a promisor may be understood in more senses than one, it is to be interpreted' in the sense in which he had reason to suppose it was understood by thepromisee. It is also a familiar rule of law that, if it be left in doubt, in-view of the general tenor of the instrument and the relations of the contracting parties, whether given words were used in an enlarged or a restricted sense, other things being equal, that construction should be adopted which-is most beneficial to the promisee.”
*513 In Utley v. Donaldson, 94 U. S. 46 , 24 L. Ed. 54 , the Supreme Court approved of the following from the case last mentioned:
“Every intendment is to be made against tbe construction of a contract under which it would operate as a snare.”
As Lord St. Leonards observed in Anderson v. Fitzgerald, 4 H. L- Cas. 510, a policy of insurance “ought to be framed with such deliberate care that no form of expression by which, on the one hand, the party assured can be caught, or by which, on the other, the company can be cheated, shall be found upon the face of it.”
Such instruments are addressed primarily not to the court, but to the comprehension of men who presumably are of average intelligence, and who are not especially skilled in the technicalities of language. It is not meant by this that there is room for construction when plain and unequivocal language is employed, or that the ignorant and careless may be assisted at the expense of an insurance company by subtle distinctions which do not pertain to the substance of things. On the other hand, courts should not be astute to discover grounds for forfeiture that would not occur to men of ordinary intelligence whose minds are alert for the proper protection of their interests. One extreme is as much to be avoided as the other.
The discovery of the intent is the cardinal rule of construction, and in aid thereof courts should, as much as possible, place themselves in the position of the contracting parties, and thereby endeavor to regard the writing in the same light as those who made it.
In Scott v. United States, 12 Wall. 443, 444 , 20 L. Ed. 438 , a case involving a contract for transportation, the court said :
“In cases like this it is the duty of the court to assume the standpoint occupied by the parties when the contract was made, to let in the light of the surrounding circumstances, to see as the parties saw, and to think as they must have thought in assenting to the stipulations by which they are bound. This process is always effective. When the terms employed are doubtful or obscure, there is no surer guide to their intent and meaning.”
Again, another rule is that an exception to the liability imposed by the contract of insurance is not to be liberally construed. Canton Ins. Office v. Woodside, 90 Fed. 301 , 33 C. C. A. 63 .
Again, it is the settled rule that if in the application of the provisions of a policy of insurance to the subject-matter thereof an ambiguity arises, and a doubt as to what the parties intended, parol evidence is admissible for the ascertainment of their real intention. In summing up the principles announced in Northern Assurance Co. v. Building Ass’n, 183 U. S. 308, 361 , 22 Sup. Ct. 133, 46 L. Ed. 213 , the court recognized this modification of the principal doctrine of that case; and it was also recognized in the excerpts from some of the cases which were cited. Sheldon v. Insurance Co., 22 Conn. 235 , 58 Am. Dec. 420 ; New York Ins. Co. v. Thomas, 3 Johns. Cas. 1 ; Franklin Fire Ins. Co. v. Martin, 40 N. J. Law, 568, 29 Am. Rep. 271 .
In Fogg v. Insurance Co., 10 Cush. 337 , Chief Justice Shaw said:
“When words are doubtful, it is .competent for parties to go into proof of the relation in which the parties stood to each other, the acts mutually done *514 by them, and generally the surrounding circumstances, in order the better to understand the language used by them, and thus ascertain their Intent; and under this rule the evidence was admitted.”
Turning, then, in the light of the foregoing principles, to the provision of the policy in suit that it should be void in case the subject of insurance was personal property and became incumbered by a chattel mortgage without the consent of the company indorsed thereon, and to the language of the indorsement itself, the inquiry which first suggests itself is as to the scope and purport of the operating clause of the indorsement, “Loss, if any, payable to G. B. Dodge and A. M. Stevenson as their interest may appear.” It is sufficiently shown by the authorities cited in the foregoing opinion that its meaning could not be that the insured property had been sold to Dodge and Stevenson, or that the policy of insurance had been assigned to them (see, also, Minturn v. Insurance Co., 76 Mass. 501 ; Franklin Savings Inst. v. Insurance Co., 119 Mass. 240 ; Griswell v. Insurance Co., 70 Mo. 654 ; Froehly v. Insurance Co., 32 Mr. App. 302); and therefore, as there was no sale of the property, and no assignment of the policy, that matter may be dismissed from consideration.
This leaves remaining the inference either (1) that Dodge and Stevenson were general creditors of the insured, or (2) that they held a mortgage or other lien upon the insured property. It will not be profitable to discuss the former at length. It is sufficient to say that such indorsements upon fire policies in favor of mere general creditors without lien upon or interest in the property are not frequent, and that the one before us plainly indicates that Dodge and Stevenson were something more than general creditors. It is a matter of common knowledge that among those having to do with fire insurance either as agents of insurers or as insured such a loss payable clause almost invariably signifies that the persons named have a mortgage or other lien upon the insured property either existing or in immediate contemplation, but that the amount thereof is subject to fluctuation in the future, or may be fully discharged before loss under the policy. Hence the words “as their interest may appear.” The term “interest,” as ordinarily used in connection with fire insurance, signifies some right that has relation to property, and it would seem to be a misinterpretation of language to say that the interest referred to in the indorsement was solely an interest created by the indorsement itself. But assuming that it is a possibility that the indorsement might mean that Dodge and Stevenson were mere general creditors without lien, the sufficient answer is that the rights of litigants ought not to be determined by general rules of construction applied to possibilities, when the qualifications of those rules and the probabilities of the case lead unerringly to a different result.
But, after all, this is not a vital, or even a very important, matter in the case, as I view it, for it may be assumed without detriment to the position of the insured and Dodge and Stevenson that such an indorsement is broad enough to include general creditors as well as mortgagees. Under all the authorities, and the usages *515 and customs of the business, and by all rational rules of interpretation the operating clause of the indorsement, if standing alone, would have embraced both mortgages of Dodge and Stevenson— the one upon the personalty as well as the one upon the realty. I do not understand that this is disputed. The words were sufficiently comprehensive for that purpose. They were such as business men would naturally employ, and be satisfied with as evidencing their intention, and as complying with the requirements of the policy. But it is said that by reason of the prefixing of the qualifying words, “Subject to all the conditions of this policy,” the specific subject-matter of the operating clause was invaded and so circumscribed that a condition of the policy against a chattel mortgage not consented to was broken, and the policy thereby became void. To this I do not assent. The operating clause of the indorsement was directed to a specific subject-matter among all those contained in the policy, and its obvious and apparent effect was to give consent to the mortgages of Dodge and Stevenson. It is but fair to say that it is more than probable that the parties so intended it. The qualifying clause was a general reference to all the stipulations of the policy which determined or affected the responsibility of the company, and there were about Y0 of them, from those pertaining to the management of the insured premises down to those governing the ascertainment and adjustment of a loss. The former was immediately significant and intelligible, and would naturally be at once recognized as being fully adequate for the safeguarding of the rights of the insured and his mortgagees. The operation of the latter was at the best indirect, and implied relation to many subjects and conditions. The construction desired by the insurance company would have required of the insured and Dodge and Stevenson a weighing and an accurate conception of all the consistencies and inconsistencies between the words of the indorsement and the many stipulations in the body of the policy itself, and this in the face of the fact that there were plain words before them, which seemed sufficient for their protection. It would fatally affect them with a hidden and an indirect sense, contrary to one that was of plain and direct import. May it not reasonably be said that a man of ordinary intelligence, knowing the terms of his policy — and it is to such that these matters are first addressed — would naturally have assumed, under the circumstances of this case, that the existence of. the chattel mortgage was duly recognized by the indorsement, and that the general reference to all of the conditions of the policy meant simply those conditions that related to other matters which had a bearing upon the risk? Courts themselves not infrequently apply to the construction of the solemn enactments of Legislatures a rule based upon an analogous course of reasoning. And from the opposite standpoint, may. it not reasonably be said that in employing the words in question it was the sole purpose of the insurance agents to make sure and to inform the mortgagees that there was no contract of indemnity with them, but that it was still confined to the original parties to the instrument, and that the integrity of the *516 policy and the rights of Dodge and Stevenson arising from their mortgages and the consent of the company thereto were nevertheless subject to be affected or wholly defeated by the acts or omissions of the insured? If, upon placing ourselves as nearly as possible in the position of the insured and Dodge and Stevenson and the insurance agents, and regarding the words they used in the light of the known circumstances surrounding them, the above inquiries should be answered in the affirmative, then the actual intent of the parties has yielded to a rigid rule of strict construction.
Manufacturing concerns, reduction works, electric light, gas and water works, and the like, are almost always made up of both real and personal property, and mortgages and trust deeds given by their owners in many cases embrace the property of both classes. And I cannot escape the conviction that, having mortgaged both the realty and the personalty of their concerns, the great majority of such owners or their managers, men of intelligence and business affairs, cognizant of the stipulations of their policies of insurance, would, upon applying to the agents of the insuring companies, and fully advising them of the facts, be satisfied with the making of just such an indorsement as was made in this case, and would rest in full faith that their rights had been adequately protected. Suppose the indorsement before us had been: “Subject to all the conditions of this policy, loss, if any, payable to G. B. Dodge and A. M. Stevenson mortgagees, as their interest may appear.” Logically the contention of the company would then have been that, since the term “mortgagees” might have related to the real estate mortgage, and not to that upon the personalty, the policy was void.. It is unfortunate that such precision of thought and expression may not soon be expected in the usual conduct of business affairs. In my opinion, the construction sought by the insurance company is. at variance. with every rule to which attention has been directed. It contemplates that its own language, fairly open to a different view, be taken most favorably to itself. It seeks the strict application of a rule of law to a condition of fact created by the exclusion of every hypothesis which would make to a contrary conclusion, and avoids those other supplemental and qualifying rules which are equally as well settled. It does not seek the answer to the question which in the construction of contracts in writing should always be asked, “Viewed in the light of the surrounding circumstances as presented to them, what was the real intention of the parties”? The tendency to the unrestrained invasion of the clear terms of policies of insurance by oral testimony which was so destructive of the rights of the companies has been well checked by the decision of the Supreme Court in Northern Assurance Co. v. Building Ass’n, supra; but it seems to me that the present contention of the insurance company tends strongly to the other extreme,, and that a rule is sought more rigid than that applied to other written contracts, or even that which obtains in cases involving statutes against frauds and perjuries.