Gibbes Machinery Co. v. Niagara Fire Ins. Co.

• Decision Date: 25 April 1922
• Docket Number: 10877.
• Citation: 111 S.E. 805,119 S.C. 1
• Parties: GIBBES MACHINERY CO. v. NIAGARA FIRE INS. CO.
• Court: South Carolina Supreme Court

111 S.E. 805

119 S.C. 1

GIBBES MACHINERY CO. v. NIAGARA FIRE INS. CO.

No. 10877.

Supreme Court of South Carolina

April 25, 1922

Appeal from Richland County Court; M. S. Whaley, Judge.

Action by the Gibbes Machinery Company against the Niagara Fire Insurance Company. From order granting defendant a new trial plaintiff appeals. Reversed.

Cothran J., dissenting.

Hunter A. Gibbes and Graydon & Graydon, all of Columbia, for appellant.

Melton & Belser, of Columbia, for respondent.

FRASER J.

The appellant sold an automobile to one H. L. Gregory, and took a mortgage on the machine for a part of the purchase money. The mortgage contained an agreement by the mortgagor that he would insure the machine and assign the policy of insurance to the appellant. This mortgage was duly recorded. The policy of insurance noted the fact that the machine was mortgaged to the appellant, but did not make the loss payable to the appellant. The machine was burned, and the adjuster applied to the appellant for information as to the status of the mortgage debt. The company paid the policy to the mortgagor, and this suit is brought by the appellant for the proceeds of the policy. The appellant demurred to the complaint. The demurrer was overruled. The defendant moved for a nonsuit. This also was overruled. The plaintiff moved for a direction of a verdict. This was granted. The trial judge ordered a new trial on the ground that he had made a mistake of law in directing a verdict.

There is evidence that the adjuster knew of the existence of the mortgage itself, and went to the mortgagee to get information in regard to the mortgage, and got it. Even if the company was not required to make inquiry, it did inquire. The bare fact that they came to inquire threw the mortgagee off his guard. Why should the company inquire if it was not for the purpose of complying with the terms of the mortgage? When the company had notice of the mortgage itself, they were chargeable with notice of all the facts that a reasonable inquiry would have revealed. A simple question, "Have you any interest in this insurance policy?" was all that was required. The provision that the mortgaged property shall be insured for the benefit of the mortgagee is a very common practice, and the provision to be expected.

In Gandy v Insurance Co., 52 S.C. 231, 29 S.E. 657, we find:

"Now, it is clear the third proposition is not sound, for it required the agent to have actual knowledge of the actual existence of the other policy; whereas, if the agent had only such information which, if pursued, would have led to actual knowledge of the existence of the other policy, that would have been sufficient notice of the other policy."

Here there was actual notice of the mortgage and an inquiry, the only apparent purpose of which was to comply with the terms of the mortgage. The authority above cited is full to the point.

The complaint stated the above facts, and was not demurrable. It was tried as an equity case would have been tried by the court on a direction of a verdict. The evidence complained of was not prejudicial, in that it did not affect the real issue.

The order granting a new trial is reversed.

GARY, C.J., and WATTS, J., concur.

COTHRAN J. (dissenting.)

Action by the mortgagee of an automobile, partly destroyed by fire, to require an insurance company, which insured the car at the instance of the mortgagor, and paid the loss to him, to account to the mortgagee for the amount so paid. The facts appear to be as follows:

On February 11, 1920, the plaintiff sold to one H. L. Gregory an automobile, taking from him a mortgage to secure the unpaid portion of the purchase price. The mortgage was recorded on February 12th. By the terms of the sale and a stipulation in the mortgage Gregory was required and agreed to insure the car for the protection of the mortgagee. He had the car insured, but did not have attached to the policy a clause providing that the loss, if any, should be payable to the mortgagee, as he was obligated to do. At the time of the issuance of the policy, the insurance company had knowledge of the fact that it was under mortgage to the plaintiff. The policy, dated February 16th, contains a notation, "Mortgage to Gibbes Machinery Company, Columbia, S.C. $1,300.00," and the agent's report to the company of the policy has the same notation. On April 27th the car was damaged by fire. On May 18th proofs of loss were made up by Gregory and the insurance adjuster. They fixed the loss at $2,000. The proofs of loss showed that at the time of the loss the plaintiff had a mortgage on the car; also that, in consideration of the payment of the loss to Gregory, he assigned his interest in the car to the insurance company. On June 27th the insurance company paid the loss, $2,000, to Gregory, took possession of the car, and sold it without the knowledge or consent of the plaintiff. On the day the proofs of loss were made out, the insurance adjuster called at the plaintiff's place of business, and got information as to the purchase of the car, and the mortgage on it and was told by the plaintiff the purchase price of the car and the amount unpaid on the mortgage. He testified that:

"There was no loss payable clause in the policy and under the circumstances he felt bound to pay the money to the assured H. L. Gregory, which he recommended should be done and which was done shortly after the loss."

Both the insurance agent and the adjuster testified that they knew nothing of the particular terms of the mortgage or of any agreement between Gregory and the plaintiff. The testimony for the plaintiff tended to show that at the time of the sale of the car Gregory agreed to insure the car for its benefit, and a stipulation to that effect was also contained in the mortgage. There was no testimony tending to show that the insurance company had any knowledge of this agreement prior to its payment of the loss to Gregory except what might be implied from the record of the mortgage. The entire purchase price matured before the proofs of loss were made out.

The complaint contains two alleged causes of action: The first is based upon the theory that the insurance company, before it paid the loss to Gregory, had notice of the agreement by Gregory to insure the car for the protection of the plaintiff, and relief is accordingly sought by the establishment of an equitable lien upon the proceeds of the insurance. This is an equitable cause of action. In Swearingen v. Insurance Co., 56 S.C. 355, 34 S.E. 449, the court declared:

"This is an action by a mortgagee against an insurer and the mortgagor, to enforce an alleged equitable lien upon the proceeds of an insurance policy on the mortgaged premises taken out by the mortgagor in her own name. * * * The right asserted by plaintiff was a mere equity, and the issues should have been tried by the judge as chancellor."

The second alleged cause of action is based upon the conduct of the insurance company, after payment of the loss to Gregory in taking possession of the damaged car, and converting it to its own use, to the damage of the plaintiff $300, and punitive damages $1,000. This...