Burns v. The Alliance Co-Operative Insurance Company

• Decision Date: 07 December 1918
• Docket Number: 21,664
• Citation: 103 Kan. 803,176 P. 985
• Parties: C. A. BURNS, Appellant, v. THE ALLIANCE CO-OPERATIVE INSURANCE COMPANY, Appellee
• Court: Kansas Supreme Court

176 P. 985

103 Kan. 803

C. A. BURNS, Appellant, v. THE ALLIANCE CO-OPERATIVE INSURANCE COMPANY, Appellee

No. 21,664

Supreme Court of Kansas

December 7, 1918

Decided July, 1918.

Appeal from Sedgwick district court, division No. 1; RICHARD E BIRD, judge.

Judgment affirmed.

SYLLABUS

SYLLABUS BY THE COURT.

1. FIRE INSURANCE--Annulment of Policy by Acts of Insured. The circumstances presented held to be such as to result in the annulment of a fire insurance policy so far as concerns any claim on the part of the insured.

2. SAME--Mortgage Clause in Policy Interpreted. Where an insurance policy contains a provision that its conditions shall apply to a mortgagee in the manner expressed in such provisions and conditions of insurance relating to such interest as shall be written thereon or attached thereto, and the attached clause which makes the loss payable to a mortgagee contains the words "subject to all the terms and conditions of this policy," all the conditions of the policy are thereby made applicable to the mortgagee, and if the rights of the owner have been forfeited by his breach of any such condition the mortgagee is likewise precluded from recovery.

E. L. Foulke, of Wichita, for the appellant.

S. H. Allen, Otis S. Allen, and George S. Allen, all of Topeka, for the appellee.

OPINION

MASON, J.:

L. O. Rutter obtained from the Alliance Co-operative Insurance Company a five-hundred-dollar fire insurance policy on a building owned by him. Afterwards he mortgaged the property to C. A. Burns for $ 250, and a slip was attached to the policy making the loss payable to the mortgagee, as his interest should appear. Thereafter Rutter was adjudged a bankrupt on his own petition, and the trustee sold the property. Still later it was destroyed by fire. The mortgagee demanded payment to the amount of his lien, and on being refused brought this action against the insurance company. There was no controversy over the facts, which were fully disclosed in the pleadings, and the court was asked by both parties to render judgment in accordance therewith. Judgment was rendered for the defendant, and the plaintiff appeals.

1. Various reasons are suggested why Rutter himself could not have recovered. We regard the transfer of title referred to as a sufficient reason, inasmuch as the policy contained clauses making the policy void in case he should sell or transfer the property, without the consent of the company being indorsed thereon. (19 Cyc. 753; Note, 15 L. R. A., n. s., 827.) The point is sought to be made, in reliance upon Insurance Co. v. Bank of Blue Mound, 48 Kan. 393, 29 P. 576, that the by-laws of the company were not binding upon the plaintiff. The case cited has been doubted (Smith v. Insurance Co., 82 Kan. 697, 703, 109 P. 390), but in any event cannot affect the result here, for the provisions referred to were made a part of the contract, and the mortgage rider was expressly made subject to the by-laws.

In response to a demand made by the mortgagee for payment of his claim, the company wrote a letter denying liability on the ground that "Mr. Rutter had abandoned the building some months ago, thus rendering the insurance void." It is argued that by placing the refusal to pay on this ground the company was precluded from relying upon the change of title. But the statement that the insured had abandoned the property seems broad enough to cover the grounds already referred to, or at least not to exclude them from consideration.

2. The vital question in the case is whether the contract gave the mortgagee a right to recover notwithstanding conduct of the insured which would have precluded any recovery by him. The policy contained a provision reading as follows:

"If, with the consent of this company, an interest under this policy shall exist in favor of a mortgagee or of any person or corporation having an interest in the subject of insurance other than the interest of the insured as described herein, the conditions hereinbefore contained shall apply in the manner expressed in such provisions and conditions of insurance relating to such interests as shall be written upon, attached or appended hereto."

The language of the rider was:

"Loss, if any, on buildings, to be adjusted with the assured and made payable to C. A. Burns, mortgagee, or assigns, of Wichita, post office, State of Kansas, as his interest may appear, subject, however, to all the terms and conditions of this policy and the by-laws of this company."

The provision above quoted from the body of the policy, or one substantially the same, is required by the statutes of several states. (Note, 135 Am. St. Rep. 750.) By the great weight of authority its effect is to protect the mortgagee against any forfeiture resulting from a breach of the conditions of the policy by the mortgagor, unless such conditions are made a part of the loss-payable clause, or otherwise indorsed on the...