Key v. Continental Ins. Co.

• Decision Date: 14 April 1903
• Citation: 101 Mo. App. 344,74 S.W. 162
• Parties: KEY v. CONTINENTAL INS. CO.
• Court: Missouri Court of Appeals

74 S.W. 162

101 Mo. App. 344

KEY v. CONTINENTAL INS. CO.

Court of Appeals at St. Louis, Missouri.

April 14, 1903.

FIRE INSURANCE—DEPOSIT OF POLICY AS COLLATERAL BY MORTGAGEE—ACTION—PLAINTIFF—PARTY IN INTEREST.

1. The deposit, as collateral security, by a mortgagee, with one to whom he assigned the mortgage note, of the fire policy on the mortgaged property containing a mortgage clause, is not within the provision of the policy that an assignment of it without the consent of the insurer shall render it void.

2. The code requirement that an action be brought in the name of the real party in interest does not prevent suit by the assignor for the benefit of the assignee, where the assignment passed only the beneficial interest and not the legal obligation of the contractor to the assignor, so that the assignee cannot maintain an action in his own name.

3. Though the mortgagee of property for whose benefit there was a mortgage clause in the insurance policy on the property assigned the note and mortgage, and deposited the policy as collateral with the assigned, yet he, being liable as indorser on the note, which was protested, may sue on the policy as the real party in interest.

4. Where plaintiff is the real party in interest, he is not prevented from recovering by the action being entitled in his name for the benefit of another.

Appeal from Circuit Court, Newton County; H. C. Pepper, Judge.

Action by Frank Key, for the benefit of Warren Heaton, against the Continental Insurance Company. Judgment for plaintiff and defendant appeals. Affirmed.

J. T. Sturgis, for appellant.

Statement of Facts and Opinion.

GOODE, J.

A.J. Fugitt was the owner of a two-story frame house on a tract of land in Newton county, on which the Continental Insurance Company of New York wrote a policy of insurance with a mortgage clause attached, which made the loss payable to Frank Key, the respondent. The policy was issued April 22, 1901, and on the same day Fugitt put a mortgage on the house to Frank Key to secure a negotiable promissory note of $300, payable July 2, 1901. Before the maturity of the note Key indorsed and delivered it for value to Warren Heaton, and also delivered the insurance policy as collateral security to Heaton, who is still the owner of the note, which, when it matured, was protested for nonpayment. Key was notified as indorser, and is liable on his indorsement to Heaton for the amount of the note. After the transfer of the note, the house burned, and, as the insurance company refused to pay the policy, this action was instituted by Key, to the use of Heaton, to compel payment.

The case went off on a demurrer to the petition in the court below, but it will not be necessary to copy the petition, as the above statement embraces the allegations material to the decision. The policy of insurance was filed with the petition, and made part of it, but is not preserved in the abstract of the record filed in this court, which merely contains a recital that it was in the ordinary form. The mortgage clause, however, was preserved, and is as follows:

"Minnesota Standard Policy. Schedule A. 16.

"Mortgage Clause with Full Contribution.

"Loss or damage, if any, under this policy shall be payable to Frank Key as the mortgagee (or trustee), as interest may appear, and this insurance, as to the interest 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 or ownership of 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.

"Provided also, that the mortgagee (or trustee) shall notify this company of any change of ownership or occupancy or increase of hazard which shall come to the knowledge of the said mortgagee (or trustee) and, unless permitted by this policy, it shall be noted thereon, and the mortgagee (or trustee) shall, on demand, pay the premium for such increased hazard for the term of the use thereof; otherwise this policy shall be null and void.

"This company reserves the right to cancel this policy at any time as provided by its terms, but in such case this policy shall continue in force for the benefit only of the mortgagee (or trustee) for ten days after notice to the mortgagee (or trustee) of such cancellation and shall then cease, and this company shall have the right, on like notice, to cancel this agreement.

"In case of any other insurance upon the within described property, this company shall not be liable under this policy for a greater proportion of any loss or damage sustained than the sum hereby insured bears to the whole amount of insurance on said property issued to or held by any party or parties having an insurable interest therein, whether as owner, mortgagee or otherwise.

"Whenever this company shall pay the mortgagee (or trustee) any sum for loss or damage under this policy and shall claim that, as to the mortgagor or owner, no liability therefor existed, this company shall, to the extent of such payment, be thereupon legally subrogated to all the rights of the party to whom such payment shall be made, under all securities held as collateral to the mortgage debt, or may, at its option, pay to the mortgagee (or trustee) the whole principal due or to grow due on the mortgage with interest, and shall thereupon receive a full assignment and transfer of the mortgage and of all such other securities; but no subrogation shall impair the right of the mortgagee (or trustee) to recover the full amount of his claim.

"Dated April 22, 1901.

"Attached to and forming part of Policy No. 586."

The grounds of demurrer relied on are that there is a defect of parties plaintiff, as Key had no interest in either the policy or the building after he transferred the note to Heaton, and therefore had no right of action on the policy. Further, that the deposit with or the assignment of the policy to Heaton is not averred to have been made with the consent of the company, so that Heaton acquired no interest in it or its proceeds. The demurrer was overruled, and, as defendant refused to plead further, final judgment was entered according to the prayer of the petition, and the defendant appealed.

What proviso the policy contains about an assignment is not disclosed further than the statement that it was similar to policies in common use, which contain a clause rendering an assignment without the consent of the company void. When there is no such clause, an unauthorized assignment of a policy does not necessarily work a forfeiture, but the assignee cannot sue on it in his own name, unless there is an enabling statute. This is because a contract for fire insurance is one of personal indemnity, into which the character of the insured for trustworthiness and prudence enters as material to the risk. Such agreements are, therefore, exempt from the general rule that assignments of those choses in action which survive the decease of the original holder carry the right of action as well as the beneficial interest to the assignees, who are permitted, and, indeed, obliged, by the Code to sue in their own names. But in the present case we have to deal principally with the mortgage clause, which was a contract of insurance between the mortgagee, Key, and the company, separate and distinct from the one between Fugitt and the company. Lombard Inv. Co. v. Ins. Co., 62 Mo. App. 315; Hastings v. Ins. Co., 73 N. Y. 141. We doubt whether the rule of law that a contract of insurance cannot be assigned without the company's consent is applicable to these separate agreements with mortgagees, the primary purpose of which is to secure the mortgage debts. It must be of slight importance to an insurance company what person is thus secured as mortgagee, in comparison with its interest in the owner of the property covered, whose character tells directly on the risk. Nor is there any good reason why the transfer of a policy by the insured should not be as permissible as the transfer of any other chose in action, if the ownership or occupancy of the property remains unchanged, so that the risk is not increased. But the law seems to prohibit the assignment of an insurance policy without the company's consent.

If there was a provision in this policy that the assignment of it without the consent of the company should render it void (and granting that such a provision takes effect on the mortgage clause, which we doubt), the question arises whether the deposit of the policy with Heaton as collateral security was a transaction that fell within the clause of avoidance. This question is answered in the negative by all the cases we have found in which the point is decided, and by all the text-books. Such a disposition of the policy will be held valid unless restrained expressly or by necessary implication, and the ordinary provision against assignment does not restrain it. Ellis v. Kreutzinger, 27 Mo. 311, 72 Am. Dec. 270; True v. Ins. Co. (C. C.) 26 Fed. 83; Griffey v. Ins. Co., 100 N. Y. 417, 3 N. E. 309, 53 Am. Rep. 202; Lynde v. Newark Ins. Co., 139 Mass. 57, 29 N. E. 222; 3 Joyce, Insurance, §§ 2311-2315; 2 May, Insurance (4th Ed.) § 379; Ostrander, Insurance, § 212; 13 Am. & Eng. Ency. Law, § 187. The point under discussion is not affected, therefore, by any clause the policy may contain providing that an unauthorized assignment shall end the risk.

The effect of the deposit of the policy with Heaton along with the transfer of Fugitt's note was to give Heaton an equitable lien on the proceeds in case of loss equal to the...