Baker v. Fargo Building And Loan Association, a Corp.

• Decision Date: 19 December 1933
• Docket Number: 6208
• Citation: 252 N.W. 42,64 N.D. 317
• Court: North Dakota Supreme Court

252 N.W. 42

64 N.D. 317

ROY T. BAKER, as Surviving Partner of Baker Insurance Agency, a Co-partnership, Respondent, v. FARGO BUILDING AND LOAN ASSOCIATION, a Corporation, Appellant

No. 6208

Supreme Court of North Dakota

December 19, 1933

Rehearing Denied January 4, 1934, Reported at 64 N.D. 317 at 331.

Appeal from the District Court of Cass County, Swenson, J.

Affirmed.

Conmy Young & Conmy, for appellant.

The loss payable clause in a fire insurance policy is a condition and not a covenant. St. Paul F. & M. Ins. Co. v Upton, 2 N.D. 229, 50 N.W. 702; Boston Safe-Deposit & T. Co. v. Thomas, 53 P. 472; Whitehead v. Wilson Knitting Mills, 194 N.C. 281, 139 S.E. 456, 56 A.L.R. 674; Schmitt v. Gripton, 247 P. 505; Trust Co. v. Phenix Ins. Co. (Mo.) 210 S.W. 98; Coykendall v. Blackmer, 146 N.Y.S. 631; Muddle v. Van Slyke, 118 N.Y.S. 473; Baker v. Lyons, 202 N.Y.S. 879; Home Ins. Co. v. Union Trust Co. (R.I.) 100 A. 1010, L.R.A.1917F, 375; Ormsby v. Phenix Ins. Co. 58 N.W. 301; Acuff Co. v. Bankers Trust Co. 7 S.W.2d 52; Johnson-Sampson & Co. v. Ft. Worth State Bank (Tex.) 244 S.W. 657; Farnsworth v. Riverton Wyoming Ref. Co. 249 P. 555, 47 A.L.R. 1114.

Subrogation is a creature of equity and governed by equitable principles. McMillen v. Nelson, 47 N.D. 284, 181 N.W. 618; Heegaard v. Kopka, 55 N.D. 77, 212 N.W. 440; 4 Pom. Eq. Jur. § 1419, note; 60 C.J. 707.

Laches is frequently held a bar to equitable relief. Slimmer v. Martin, 42 N.D. 265, 172 N.W. 879; Johnson Constr. Co. v. Austin, 55 N.D. 905, 215 N.W. 484.

Laches may be a ground for denying the right of subrogation. 60 C.J. 829; Atkins v. Nordyke & M. Co. (Kan.) 51 P. 304; Gring's Appeal, 89 Pa. 336; Harn v. Interstate Bldg. & L. Co. (Okla.) 216 P. 123; Dakota Trust & Sav. Bank v. Hanson, 5 F.2d 915.

Nilles, Oehlert & Nilles, for respondent.

The clause of the insurance contract embodied in the loss payable clause is a covenant, consequently there is an obligation on the part of the mortgagee to pay the premium. St. Paul F. & M. Ins. Co. v. Upton, 2 N.D. 229, 50 N.W. 702; Boston Safe-Deposit Co. v. Thomas, 53 P. 472; Security Ins. Co. v. Eakin (Ga.) 152 S.E. 606.

When a point of law has been settled by decision for many years, it forms a precedent not afterwards to be departed from. Youmans v. Hanna, 35 N.D. 479, 161 N.W. 797; State v. State Bd. of Canvassers, 44 N.D. 126, 172 N.W. 80; Stoddard v. Black, 8 P. 307; Ladwig v. National Guardian L. Ins. Co. (Wis.) 247 N.W. 312; Merchants Nat. Bank v. Miller, 59 N.D. 273, 229 N.W. 357.

The rights of the parties to a transaction are determined by the law in force at the time of the contract and cannot be altered either by subsequent legislation or judicial decision. Schaffner v. Young, 10 N.D. 245, 86 N.W. 733; State ex rel. Cleveringa v. Klein, 63 N.D. 514, 249 N.W. 118.

Where one of the agents of the insurer advances premiums which the insured has failed to pay, the agent will be subrogated to such rights as the insurer had by the terms of the insurance contract to recover the premiums, and it is not necessary, to enable the agent to recover, that an assignment of such rights should be made. Joyce, Ins. 2d ed. § 3580; Harrison v. Birrell (Or.) 115 P. 141.

Burke, J. Burr, Ch. J., and Nuessle and Christianson, JJ., concur. Moellring, J., did not participate.

OPINION

BURKE

The plaintiff, as surviving partner of the Baker Insurance Agency, a co-partnership, brings this action to recover the premiums from the mortgagee of insured mortgaged property. The trial court made findings of fact and conclusions of law favorable to the plaintiff and from a judgment duly entered thereon the defendant appeals.

There is no dispute in the facts. At the time of the institution of the action the defendant, Fargo Building and Loan Association, was the owner of two mortgages, one for $ 40,000 and one for $ 5,000, executed by one C. H. Porritt, covering a certain business block in the city of Fargo. The said mortgages contained a covenant on the part of Chas. H. Porritt to keep such premises and buildings insured against loss by fire, tornado and windstorm and against loss of use, occupation and rents to said premises arising out of any such casualty and requiring the said Chas. H. Porritt to procure and deliver to the said defendant, Fargo Building and Loan Association, policies of insurance acceptable to the said Fargo Building and Loan Association, with loss, under said policies, payable to the said Fargo Building and Loan Association, as such mortgagee, as its interest might appear. That said mortgage further provided that in case the said C. H. Porritt failed, neglected or refused to procure said insurance or to deliver said policies to said mortgagee, that the said mortgagee was authorized to obtain and procure such insurance, and if said mortgagee was required to pay or advance any insurance premiums for the protection of said mortgaged property, then that amount so paid or advanced by said mortgagee should constitute a part of said mortgage indebtedness and that the amount thereof, together with interest, should be added to and constitute a part of said mortgage debt which might be enforced against said mortgaged property. The said C. H. Porritt, with the approval of the defendant, procured certain insurance policies from the plaintiff and delivered them to the defendant. The names of the insuring company, the policy numbers, the amount of the policy and the premiums involved are as follows:

Policy

Amount

Insuring Company

Number

Date

of Policy

Premium

N.Y. Underwriters Ins. Co.

27130

2-18-27

$ 8,850

$ 178.06

St. Paul Fire & Mar. Ins. Co.

77671

4-20-28

9,000

155.25

N.Y. Underwriters Ins. Co.

27276

5-26-28

4,500

90.54

N.Y. Underwriters Ins. Co.

2066

6-29-28

10,000

50.00

St. Paul Fire & Mar. Ins. Co.

7784

9-14-28

10,000

201.20

St. Paul Fire & Mar. Ins. Co.

1- 6-29

10,000

50.00

Hartford Fire Insurance Co.

10431

8-13-29

7,500

139.13

St. Paul Fire & Mar. Ins. Co.

7868

9- 7-29

2,500

46.25

Etna Insurance Company Co.

9187

9-24-29

13,500

249.75

St. Paul Fire & Mar. Ins. Co.

7886

12-11-29

5,000

92.75

N.Y. Underwriters Ins. Co.

27443

2-28-30

8,850

164.17

As a further security for the payment of the mortgage debt, the defendant took an assignment of the rents of the mortgage property and the record shows that it was collecting such rents at the time of the trial.

Sometime after the last policy was issued Porritt died and the plaintiff who, by virtue of a contract with the insurance companies, had paid to the various companies the amount of the premiums, less 25% his commission, filed a claim for the amount paid in premiums against the Porritt estate in the county court, which claim has not been paid. The mortgage clause in each insurance policy had the usual provision for subrogation and each of the insurance companies executed and delivered to the Baker Insurance Agency an assignment describing each policy, the amount of the premium and containing this provision:

"Whereas, The premium on said policy was not paid by the said owner and/or the mortgagee, and, whereas, the premium on said policy was charged to and was also an obligation of Baker Insurance Agency of Fargo, North Dakota, and said premium has been paid by said Baker Insurance Agency to the undersigned.

"Now therefore, In consideration of the payment to the undersigned, of a sum of money equal to the amount of said premiums, the receipt whereof is hereby acknowledged, the undersigned does hereby assign, set over, transfer and subrogate to the said Baker Insurance Agency of Fargo, North Dakota, all rights, claims, choses or things in action which the undersigned might have as against the said owner and/or mortgagee, to whom said policy was issued and do hereby authorize and empower the said Baker Insurance Agency at its own cost and expense to sue, compromise or settle in its name or otherwise, the said claim for said unpaid premium and said Baker Insurance Agency is hereby fully substituted in the place of the undersigned and subrogated to all of the rights of the undersigned by reason of the issuance and delivery of the said policy."

On November 29, 1932, the plaintiff made demand upon the defendant for the payment of the premiums. The plaintiff relies on the clause contained in each of the insurance policies as follows:

"Loss, if any, payable to Fargo Building and Loan Association, or assigns as mortgagee, as such interest may appear. This policy as to the interest therein of the said payee, as mortgagee (or trustee) only, shall not be invalidated by any act or neglect of the mortgagor or owner of the within described property nor by the commencement of foreclosure proceedings, nor the giving of notice of sale relating to the property, nor by any change in the interest, title, or possession of the property, nor by any increase of hazard; Provided that in case the mortgagor or owner shall neglect to pay any premium due under this policy, the mortgagee (or trustee) shall, on demand, pay the same; and Provided further, that the mortgagee (or trustee) shall notify this company of the commencement of foreclosure proceedings, and of any notice of sale relating to the property, and of any change of ownership or occupancy or increase of hazard which shall come to the knowledge of said mortgagee (or trustee) and, unless permitted by this policy, the same shall be noted thereon and the mortgagee (or trustee) shall, on demand, pay the premium for any increased hazard."

It is the contention of the appellant (1) that the standard mortgage clause of the insurance contract is a condition and not a covenant, consequently there is no obligation on the part of the appellant to pay the premiums. (2) The plaintiff is not entitled to be...