Barry & Brewer v. Wright

• Decision Date: 09 October 1933
• Docket Number: 30605
• Citation: 168 Miss. 216,150 So. 186
• Parties: BARRY & BREWER v. WRIGHT
• Court: Mississippi Supreme Court

150 So. 186

168 Miss. 216

BARRY & BREWER v. WRIGHT

No. 30605

Supreme Court of Mississippi

October 9, 1933

Suggestion Of Error Overruled November 13, 1933.

(In Banc.)

1 INSURANCE.

Where insurance company looks to agent for premiums and agent pays premium which insured fails to pay, agent is subrogated to all rights and remedies of company respecting premium and may demand and sue for it in his own name.

2 INSURANCE.

Where neither owner of property nor mortgagee secured by fire policy paid premium, but insurance agent did and loss occurred, agent held entitled to money arising from loss as credit on premium as against mortgagee (Code 1930, section 5185).

SMITH C. J., and COOK, J., dissenting. ANDERSON, J., takes no part.

HON. S F. DAVIS, Judge.

APPEAL from circuit court of Leflore county, HON. S. F. DAVIS, Judge.

Bill of interpleader by an insurance company against F. A. Wright, John Dahmer and Barry & Brewer, in which F. A. Wright and Barry & Brewer accepted the issue. The money delivered into court was awarded to F. A. Wright, and Barry & Brewer appeal. Reversed and remanded.

Reversed and remanded.

Alfred Stoner, of Greenwood, for appellant.

We do not find that the Mississippi Supreme Court has passed upon the identical question here involved. Our court has held, however, several times, that section 5185 of the code is automatically written into every insurance policy containing a mortgage clause taken out by a mortgagor. The mortgagee in each of the policies now before the court, as shown by the mortgage clause, obligated himself to pay the premium in the event the mortgagor failed to pay it. Independent of the statute, therefore, the mortgagee would be liable, because he accepted the policies and retained them in his possession for almost a year knowing that this provision was contained in each mortgage clause.

When Mr. Wright required that the mortgage clause be endorsed on the policy, a separate and independent contract was thereby created in favor of the mortgagee, giving the mortgagee a right in the event of loss to institute suit in his own name without regard to the interest of the mortgagor.

Bacot v. Insurance Company, 96 Miss. 223; Aetna Ins. Co. v. Cowan, 71 So. 746.

We submit that by accepting the policies, and by suing by virtue of the mortgagee clause, Mr. Wright is bound to admit that he is liable for the payment of the premium. The very mortgagee clause on which he relies expressly provides that in case the mortgagor or owner shall neglect to pay any premium due under this policy, the mortgagee shall, on demand, pay the same.

Wells, Jones, Wells & Lipscomb, of Jackson, amici curiae.

Counsel admit that the weight of authority in this country is that the so-called New York Standard Mortgagee Clause which appears in the Mississippi Code of 1930, as section 5185, and which has been the law of this state at least as far back as the Code of 1906, does not impose any liability upon the mortgagee for the premiums where the mortgagor owner fails to pay them, as the clause has been construed to create a condition and not a covenant with the mortgagee to pay the premiums.

Whitehead v. Wilson Knitting Mills, 139 S.E. 456, 56 A. L. R. 674.

Counsel also insists, and correctly, that the standard mortgagee clause, under the decisions of this court, creates an independent contract between the insurance company and the mortgagee but that is a far cry from saying that the clause creates any contract whatsoever between the local agent issuing it and mortgagee.

Home Insurance Company v. Union Trust Company, 40 R. I. 369; L. R. A. 1917F, p. 375; Farnsworth v. Riverton Wyoming Refining Company, 47 A. L. R. 1114.

The insurance agent cannot recover these premiums because when he makes payment of them to his company he is a mere volunteer.

Whitehead v. Wilson Knitting Mills, 139 S.E. 456, 56 A. L. R. 674.

Chalmers Potter and A. J. Von Bloombergh, both of Jackson, for appellant.

There is privity of contract between insurer and mortgagee.

In arguing this proposition, we are mindful of the fact that only a few courts have held that in the event the mortgagor fails to pay the premiums due that the mortgagee can be sued therefor, but the more recent cases hold the mortgagee can be.

The declaration alleges that the New York Standard Mortgage Clause was attached to the policies and delivered to and accepted by the mortgagee. This mortgage clause by section 5185 of the 1930 Code of Mississippi, is automatically written into every insurance contract of this kind, making an entirely new, separate and distinct contract between insurer and mortgagee under certain conditions.

Refuge Cotton Oil Co. v. Twin City Fire Ins. Co., 120 So. 214; Bacot v. Phoenix Ins. Co., 96 Miss. 223, 50 So. 729; 26 C. J., sec. 115, page 113.

Our court made it plain under Refuge Cotton Oil Co. v. Twin City Fire Insurance Co., 120 So. 214, that the clause makes a separate and independent contract between the mortgagee and insurer.

So thoroughly does the statute, written into an insurance policy, divorce the mortgagee from the mortgagor, as related to the policy that this court has held that the mortgagee may maintain in his own name and action on the policy where, as in this cause, the mortgage indebtedness exceeds the face of the policy and the total value of the property.

Lowry v. Ins. Co. of N. America, 75 Miss. 43, 21. So. 664, 37 L. R. A. 779, 65 Am. St. Rep. 587; Stuyvesant Ins. Co. v. Smith Motor Sales Co., 135 Miss. 585, 99 So. 575; Hartford Fire Ins. Co. v. Buckwalter Lbr. Co., 116 Miss. 822, 77 So. 798; Scottish Union & Nat. Ins. Co. v. Warren Gee Lbr. Co., 118 Miss. 740, 80 So. 9; Refuge Cotton Oil Co. v. Twin City Fire Ins. Co., 120 So. 214.

If then it is true that this independent contract exists in favor of the mortgagee then it must also be true that this separate contract is also for the benefit of the insurer and that he gains the benefit of being able, under certain circumstances, to collect the premium from the mortgagee.

5 Couch's Cyclopedia Ins. Law, par. 1215b; 26 C. J. 346, pp. 274-275; Bacot v. Phoenix Ins. Co., 96 Miss. 223, 50 So. 729, 25 L. R. A. (N. S.) 1226, Ann. Cases 1912B, 262; Hartford Fire Ins. Co. v. Buckwalter Lumber Co., 116 Miss. 822, 77 So. 798; Scottish Union & Nat'l Ins. Co. v. Warren Gee Lbr. Co., 118 Miss. 740, 80 So. 9; Refuge Cotton Oil Co. v. Twin City Ins. Co., 120 So. 214; Ormsby v. Phoenix Ins. Co., 5 S.D. 72, 58 N.W. 301; Home Ins. Co. v. Union Trust Co., 40 R. I. 369, 100 A. 1010, L. R. A. 1947F, 1375; Farnsworth v. Riverton Wyoming Ref. Co., 249 P. 555, 47 A. L. R. 1114.

We submit that the insurer, or their agent, who has been required to pay, and who in good faith has paid at the instance or with the knowledge and consent of the mortgagor or mortgagee, for the benefit and protection of the mortgagor or mortgagee, to keep the insurance alive, is entitled, when the mortgagor has failed to pay the premium and demand has been made on the mortgagee, to recover from the mortgagee.

H. Talbot Odom, of Greenwood, amici curiae.

The point for decision stated briefly is whether or not the mortgagee is liable to the insurance agency for premiums under the standard mortgagee clause attached to the policies in question. This is strictly a legal question and as stated is one of the first impression in Mississippi. Although there is a sharp conflict in the decisions elsewhere, the decided weight of authority is against liability.

The provision for payment of premiums by the mortgagee is not an absolute promise on the mortgagee's part to pay the premiums, but merely makes such payment a condition to his recovery.

Coykendall v. Blackmer, 161 A.D. 11, 146 N.Y.S. 631; Home Ins. Co. v. Union. Trust Co., 40 R. I. 367, 100 A. 1010, L. R. A. 1917F, 375; Schmitt v. Gripton. (Cal. App.), 247 P. 505; Farnsworth v. Riverton Wyoming Refining Co. (Wyo.), 249 P. 555, 47 A. L. R. 1114; Johnson-Sansom Co. v. Fort Worth State Bank (Tex. Civ. App.), 244 S.W. 657; Compare Ormsby v. Phoenix Ins. Co.) 5 S.D. 72, 58 N.W. 301, and Trust Co. of St. Louis County v. Phoenix Ins. Co., 201 Mo.App. 223, 210 S.W. 98, in which though not involving the question of liability for premiums, the mortgage clause was held to be a condition, and not a convenant.

Cases construing the provision to be a condition only are: Ormsby v. Phoenix Ins. Co., 5 S.D. 72, 58 N.W. 301; Coykendall v. Blackmer, 161 A.D. 11, 146 N.Y.S. 631; Home Ins. Co. v. Union Trust Co., 40 R. I. 367, 100 A. 1010, L. R. A. 1917F, 375; Trust Co. v. Phoenix Ins. Co., 201 Mo.App. 223, 210 S.W. 98; Bell v. Monroe Hotel Co., 23 Pa.Super. Ct.-- ; Johnson Sansome & Co. v. Bank (Tex.), 224 S.W. 657; Rich v. Atwater, 16 Conn. 409; Schmitt v. Gripton, 77 Cal.App. 429, 247 P. 505; Farnsworth v. Refining Co., 35 Wyo. 334, 249 P. 555, 47 A. L. R. 1114; Whitehead v. Wilson, 194 N.C. 281, 139 S.E. 456, 56 A. L. R. 674; Metropolitian Life Ins. Co. v. Olmsted Co., 28 Ohio App. 139, 162 N.E. 641; Armstead & Co. v. Metropolitan. Life Ins. Co., 118 Ohio State, 421, 161 N.E. 276; Acuff & Co. v. Bankers Trust Co. (Tenn.), 7 S.W.2d 52; 47 A. L. R. 1115-1125; 47 A. L. R. 1126; Whitehead case, 194 North Carolina, 281, 137 Southeastern 456, 56 A. L. R. 674; 56 A. L. R. 676-678.

As we understand the brief of counsel for appellants, the principal argument made by counsel for appellants is that under the holding of our court in the Bacot case, supra, the effect of the standard mortgagee clause is to create a separate and independent contract between the insurance company and the mortgagee. Certainly counsel can find no comfort in this contention in view of the fact that all of the authorities which hold that the mortgagee provision in the mortgage clause...