Laurenzi v. Atlas Ins. Co.

• Decision Date: 22 May 1915
• Parties: LAURENZI ET AL. v. ATLAS INS. CO. ET AL.
• Court: Tennessee Supreme Court

176 S.W. 1022

131 Tenn. 644

LAURENZI ET AL. v. ATLAS INS. CO. ET AL.

Supreme Court of Tennessee.

May 22, 1915

Certiorari to Court of Civil Appeals.

Suit by Eugene Laurenzi and another against the Atlas Insurance Company and another. There was a judgment of the Court of Civil Appeals modifying a decree for complainants, and defendants bring certiorari. Decree of the Court of Civil Appeals modified, and that of the chancellor affirmed.

Randolph & Randolph, of Memphis, for plaintiffs.

R. Lee Bartels, of Memphis, for defendants.

NEIL C.J.

The bill was filed by the parties complainant, named as trustees under a deed of trust, seeking to recover from the defendants upon a fire insurance policy issued to one S. H. Hardin on February 13, 1911, insuring him against loss by fire to the premises described in the policy. The amount claimed was the face of the policy, $1,600. The German Fire Insurance Company was made a party defendant, upon the theory that it, having reinsured the risk of the Atlas Company, which issued the policy, was liable for the contract of that company.

The right of the plaintiffs as trustees to recover under the policy was predicated upon a mortgage or trust deed, naming them as trustees, executed by S. H. Hardin, the insured taken in connection with a mortgage clause attached to the insurance contract. The trust deed and insurance policy were respectively, made a part of the bill, the material provisions thereof being as follows:

The policy of insurance contains the following:

"If with the consent of this company, an interest under this policy shall exist in favor of a mortgagee or any person or corporation having an interest in the subject of the 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 the insurance relating to such interest as shall be written upon, attached to, or appended hereto. * * *

This company shall not be liable under this policy for a greater proportion of any loss on the described property * * * than the amount hereby insured shall bear to the whole insurance, whether valid or not, or by solvent or insolvent insurers, covering such property. * * *"

As appears upon the face of the policy, it contained a provision as follows:

"Other insurance permitted."

On the 26th of May, 1911, the insured, S. H. Hardin, executed the trust deed already referred to to the complainants, as trustees, and, pursuant to the request of the trustees, the representatives of the insurance company attached to the policy a rider containing the so-called New York standard mortgage clause, of which the following is a copy:

"Loss or damage, if any, under this policy, shall be payable to Eugene and Bindo Laurenzi, trustees, as 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 withindescribed 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 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 insurance 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 payments 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 its claim."

The mortgage clause was attached to the insurance policy pursuant to an agreement had with the insured, S. H. Hardin, to keep the improvements upon the property conveyed in trust insured for the benefit of the trustees or their beneficiary. This agreement was as follows:

"I covenant to and with the said trustees that I will keep the improvements on the above-described property insured in a good and solvent insurance company doing business in Tennessee in at least the sum of $1,600.00; any loss under such policy to be made payable to said trustees as their interest may appear.

Any loss under the policy, at the option of the holder of the debt secured hereby, shall be applied to the payment of the debt secured, or to the cost of repairing or rebuilding the premises destroyed.

I further covenant to pay the insurance premiums for the insurance on said improvements, * * * and, should I fail, * * * then said trustees, or the holder of any of said notes, may pay said premiums, * * * and the money so paid out shall become my debt, and is to bear interest at 6 per cent. from the date of payment, and is to be considered a part of the debt secured by this instrument, and payment thereof enforced hereunder or against me personally."

The defendants answered the original and amended bills, and by way of answer averred:

That all liability of the Atlas Insurance Company under the policy sued upon had been assumed by the German Fire Insurance Company, its codefendant; that the loss had been adjusted with the insured, S. H. Hardin, on the basis of $1,500; that at the time of the fire complained of there was another outstanding policy issued by another company for the sum of $1,600 to S. H. Hardin, and that, by virtue of the provisions of what is known commonly as the pro rata clause, "contained in both the contract of insurance sued upon and the mortgage clause annexed thereto," the defendant insurer was liable only for its proportion of the amount of the loss, "to wit, 1600/3200 of $1,500.00, or $750.00"; that this sum the defendant had been ready and willing at all times to pay to the trustee, pursuant to the mortgage clause; and that it was still ready and willing to so pay, and tendered the amount by paying it into the registry of the court.

The evidence showed the following material facts:

The complainants' debt of $1,800 is practically wholly unpaid. The mortgage was executed May 26, 1911, and the mortgage clause attached thereto on the same date. The policy sued on was issued February 13, 1911, but provided that the insurance was to run from February 18, 1911, to February 18, 1914. S. H. Hardin, the owner, obtained another policy of insurance upon the improvements insured by the defendant's policy, which was issued by the Globe & Rutgers Fire Insurance Company on February 18, 1911. The complainants, as trustees, were in no wise interested in the Globe & Rutgers policy as mortgagees, or in any other manner. Neither the mortgagee nor the trustees had any knowledge of the existence of the Globe & Rutgers policy. The insurance in the Globe & Rutgers Company was contested upon the ground of other insurance obtained without the consent, knowledge, or permission of the insurer, based on the following term or condition therein:

"This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void if the insured now has or shall hereafter make or procure any other contract of insurance, whether valid or not, on property covered in whole or in part by this policy."

There was no agreement with the Globe & Rutgers Insurance Company sanctioning the prior insurance.

The chancellor awarded the complainants a decree for the amount of their claim, $1,600, thus denying defendants' claim to have a proration of its policy with the face of the policy issued by the Globe & Rutgers Insurance Company. The defendants appealed to the Court of Civil Appeals from so much of the decree as awarded the complainants an amount in excess of $750, the amount tendered.

The Court of Civil Appeals modified the decree of the chancellor to the extent of fixing the amount of the loss at $1,500, but in all other respects affirmed his decree.

We shall reserve to a later part of this opinion consideration of the amount of the loss.

The case was brought to this court by the...