Fayetteville Bldg. v. Mut. Fire Ins. Co. Of West Va.

• Decision Date: 07 February 1928
• Docket Number: (No. 6115)
• Court: West Virginia Supreme Court
• Parties: Fayetteville Building and Loan Association v. Mutual Fire Insurance Company of West Virginia

105 W.Va. 147

Fayetteville Building and Loan Association v.Mutual Fire Insurance Company of West Virginia

(No. 6115)

Supreme Court of Appeals of West Virginia.

Submitted February 1, 1928.

Decided February 7, 1928.

1. insurance Clause in Fire Policy Protecting Mortgagee Held to Protect Against Mortgagor's Act or Neglect of Which Mortgagee Was Ignorant Prior or Subsequent to Issuance of Policy; Mortgagee May Recover on Fire Policy Protecting it Against Mortgagor's Act or Neglect, Though Mortgagor Obtained Policy by Misleading as to Property's Location.

Where there is attached to a policy of fire insurance a socalled "union mortgage clause," which provides, inter alia, that "this insurance as to the mortgagee only herein shall not be invalidated by any act or neglect of the mortgagor or owner" of the property, the mortgagee, in case of destruction of the property by fire, is protected against any act or neglect of the mortgagor of which the mortgagee is ignorant, whether prior or subsequent to the issuance of the policy, and is entitled to recover under the union mortgage clause even though the mortgagor obtained the policy by misleading the insurance company as to the location of the property with reference to protection against fires, (p. 149.)

(Fire Insurance, 26 C. J. § 234.)

2. Same Trial Where Evidence Doe Not Disclose Amount to Which Plaintiff is Entitled, Directing Verdict for Specific Sum is Error; Evidence as to Amount Mortgagee Was Entitled to Recover on Fire Policy PI eld Insufficient to Justify Directing Verdict for Specific Sum.

Where the evidence does not with certainty disclose the amount which plaintiff is entitled to recover, but such amount is left in doubt, it is error for the trial court to direct a verdict for a specific sum. (p. 155.)

(Fire Insurance, 26 C. J. § 770; Trial, 38 Cyc. p. 1575.)

(Note: Parenthetical references by Editors, C.1. Cyc. Not part of syllabi.)

Error to Circuit Court, Monroe County.

Action by the Fayetteville Building & Loan Association against the Mutual Fire Insurance Company of "West Virginia. Judgment for plaintiff, and defendant brings error.

Judgment reversed; verdict set aside; new trial awarded.

Thomas N. Bead and Thos. Leigh Bead, for plaintiff in error.

Summer field & Stanley, for defendant in error.

Lively, Judge:

This was an action on a fire insurance policy by the Fayetteville Building & Loan Association against the Mutual Fire Insurance Company of West Virginia, to recover the sum of $1,500.00 and interest, under a mortgage clause attached to a policy obtained by Mrs. S. I. Holliday to insure property held by the building and loan association as security for a $1,500.00 loan. The amount of the policy was $2,500.00. The insurance company defended on the ground that the mortgagor in her application for insurance had made the fraudulent representation that her property was in the town of Alderson, West Virginia, and within thirty yards of a fire hydrant, whereas in fact the property was not so situated, but was located on Flat Top Mountain about a mile and a half from Alderson, West Virginia. A verdict of $1,890.89 for plaintiff was instructed and returned, and judgment entered thereon. This writ followed.

The main question is presented by a consideration of the so-called standard or "union mortgage clause" attached to the insurance policy. Under this clause the insurance is payable to the building and loan association as its interests may appear. It is further provided therein, "that this insurance as to the interests of the mortgagee (or trustee) only therein, shall not be invalidated by any act or neglect of the mortgagor or owner of the within described property, nor by any foreclosure or other proceedings or notice of sale relating to the property, nor by any change in the title of the ownership to the property, nor by the occupation of the premises for purposes more hazardous than are permitted by this policy; 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." The mortgage clause further provided that the mortgagee or trustee should notify the company of any increase of hazard, and should on demand pay the premium for such increased hazard; and that upon payment of loss to the mortgagee the insurer was to be subrogated to all his rights as to collateral held as security for the mortgage debt.

It is the contention of the plaintiff in error, the insurance company, that under this mortgage clause the material misrepresentation as to the location of the property avoided the policy from its inception by reason of fraud, and consequently the building and loan association took no rights under the mortgage clause. It is further asserted that even though it should be held that the mortgage clause created a separate contract between the mortgagee and the insurance company, yet as such contract had been procured by the fraudulent act of the mortgagor who took out the policy at the instance of and for the benefit of the building and loan association, the association was bound by the act of its agent, and there could be no recovery under the policy. On the other hand, it is contended by the counsel for the defendant in error, the building and loan association, that the mortgage created a separate contract between the mortgagee and insurance company, which was not affected by the alleged fraudulent act claimed to have vitiated the contract between the mortgagor and the insurer.

Although there are decisions to the contrary, the great weight of authority in this country supports the view that when there is attached to a policy of fire insurance the socalled "standard" or "union" mortgage clause providing that the insurance shall not be invalidated by any act or neglect of the mortgagor or owner of the insured property, an independent contract between the insurance company and the mortgagee is created, and no act or omission of the mortgagor, of which the mortgagee is ignorant, will invalidate the policy, whether it occurs before, at the time of, or subsequent to the issuance thereof. Am. & Eng. Ency. Law, Vol. 13 (2d ed.) page 206; 14 R. C. L., sec. 215, p. 1038; Vol. 4 Joyce on Insurance (2d ed.) sec. 2795, p. 4776; Vol. 1 Jones on Mortgages (7th ed.) sec. 406-A, p. 568; Note to Brecht v. Law Union & Crown Insurance Co., 18 L. R. A. (N. S.) p. 206; Syndicate Insurance Co. v. Bohn, 65 Fed. 165; Germania Fire Insurance Co. v. Bally, 19 Ariz. 580, 173 P. 1052; Philadelphia Fire Ass'n. v. Evansville Brewing Ass'n., 73 Fla. 904, 75 So. 196; People Saving Bank v. Retail Merchants Mutual Fire Ass'n., 146 Iowa 536, 123 N. W. 198, 31 L. R. A. (N. S.) 455; Allen v. St. Paul Fire & Marine Insurance Co., 208 N. W. (Minn. 1926) 816; Bacoi v. Phoenix InsuranceCo., 96 Miss. 223, 50 So. 729, 25 L. R. A. (N. S.) 1226; Burns v. Ohio Farmers' Insurance Co., 224 S. W. (Mo.) 98; Hanover Fire Insurance Co. v. Bohn, 67 N. W. (Neb.) 774; Beed v. Firemens Insurance Co., 81 N. J. L. 523, 80 Atl. 463, 35 L. R. A. (N. S.) 343; Hastings v. Westchester Fire Insurance Co., 73 N. Y. 141; Federal Land Bank v. Globe & Rutgers Fire Insurance Co., 121 S. E. (N. C. 1924) 37; Firemens Insurance Co. v. Boland, 30 Ohio Cir. Ct. Rep. 811; Smith v. Union Insurance Co., 25 R. I. 260, 55 Atl. 715; Ormsby v. Phoenix Insurance Co., 5 S. D. 72, 58 N. W. 301.

The authorities holding that such a mortgage clause protects the mortgagee against only the subsequent acts or omissions of the mortgagor are: Glens Falls Insurance Co. v. Por- ter, 44 Fla. 568, 33 So. 473 (but see Phil. Fire Ass'n v. Evansmile Brewing Co., 73 Fla. 904); Genesee Falls Permanent Savings etc. Ass'n. v. U. S. Fire Insurance Co., 16 App. Div. 587, 44 N. Y. Supp. 979; Hanover Fire Insurance Co. v. National Exchange Bank, 34 S W. (Tex.) 333; Liverpool etc. Insurance Co. v. Agricultural Savings etc. Co., 33 Can., S. C. 94, 1 BRC 593; Omnium Securities Co. v. Canada Fire etc. Insurance Co., 1 Ont. 494; Young Men's Lyceum v. National B. F. F. Insurance Co., 163 N. Y. Supp. 226.

In the ease of Syndicate Insurance Co. v. Bohn, 65 Fed. 165, the Court, through Sanborn, Circuit Judge, said: "Our conclusion is that the effect of the union mortgage clause when attached to a policy of insurance running to the mortgagor, is to make a new and separate contract between mortgagee and the insurance company, and to effect a separate insurance of the interests of the mortgagee, dependent for its validity solely upon the course of action of the insurance company and the mortgagee, and unaffected by any act or neglect of the mortgagor, of which the mortgagee is ignorant, whether such act or neglect was done or permitted prior to the issue of the mortgage clause." It was held that the fact that the mortgagor did not own the property at the time the policy was issued did not affect the rights of the mortgagee, although the policy provided it should be avoided if the interests of the insured were other than unconditional and sole ownership.

In Hastings v. West Chester Fire Insurance Co., 73 N. Y. 141, the court held that the prior act of the insured in obtaining other insurance had no affect upon the union mortgage clause attached to the policy in favor of the mortgagee, and that the mortgagee could recover the full amount guaranteed to it by the said union clause;...