Meader v. Farmers' Mut. Fire Relief Ass'n

• Decision Date: 14 July 1931
• Citation: 1 P.2d 138,137 Or. 111
• Parties: MEADER et ux. v. FARMERS' MUT. FIRE RELIEF ASS'N.
• Court: Oregon Supreme Court

1 P.2d 138

137 Or. 111

MEADER et ux. v. FARMERS' MUT. FIRE RELIEF ASS'N.

Supreme Court of Oregon

July 14, 1931

Department 1.

Appeal from Circuit Court, Jackson County; H. D. Norton, Judge.

Action by Hiram Meader and wife against the Farmers' Mutual Fire Relief Association, a corporation. Judgment for the plaintiffs, and the defendant appeals.

Affirmed.

On or about the 4th day of August, 1928, defendant, a mutual fire insurance association, issued its policy insuring one Fred C Sander from the 4th day of August, 1928, at noon to the 4th day of August, 1933, at noon, against all direct loss or damage by fire or lightning to an aggregate amount not to exceed $3,000; the policy covering a dwelling house in the sum of $2500, and contents, not involved in this action, in the remaining sum of $500, said dwelling house being on premises owned and occupied by insurer to wit, 24 acres in section 16, township 37 south, range 2 west, plat ___ Jackson county, state of Oregon.

Under the title "Assignment of Interest," this policy contains the following clause:

"Loss if any, at the request of the insured, is hereby made payable to H. F. and Pauline Meader, mortgagees, as their interests may appear. Dated at Portland, Oregon, this 4th day of August, 1928.

"W G. Kane, Secretary."

At the time said policy was issued, plaintiffs held and ever since have held a mortgage upon said above-described real property in the principal sum of $2,000.

The policy, being the standard form, approved by statute contained this further provision: "This entire policy, unless otherwise provided by agreement endorsed (indorsed) hereon, or added hereto shall be void *** if any change other than by the death of an insured take place in the interest, title, or possession of the subject of insurance (except change of occupants without increase of hazard), whether by legal process or judgment or by voluntary act of the insured, or otherwise."

Section 8 of the by-laws of defendant is as follows: "Section 8. It shall be the duty of every member to give immediate notice to the secretary of any change of condition, situation, interest, title, ownership, or any cause that may increase the hazard of any property insured in the association within the control or knowledge of such member. In such cases the association may continue the insurance or it may cancel the policy and refund to such member the pro rata amount of the last installment. Failure to give such notice shall of itself terminate such member's insurance and his policy thereby becomes null and void."

A copy of the constitution and by-laws of defendant is printed upon the policy issued as aforesaid.

On or about December 22, 1928, said Fred C. Sander sold his interest in the real property mentioned and described in said policy to one, B. J. Palmer, subject to plaintiffs' mortgage, and said Palmer went into possession of said real property, including said dwelling house, and ever since has remained in possession of said real property. No notice was given to defendant of said transfer of title and change or ownership and possession of said real property.

On or about May 11, 1929, said dwelling was destroyed by fire.

This action was instituted by plaintiffs as said mortgagees to recover upon said policy. From a judgment in favor of plaintiffs, defendant appeals.

Charles W. Reames, of Medford, for appellant.

Porter J. Neff, of Medford, for respondents.

KELLY, J. (after stating the facts as above).

It is claimed by defendant that the transfer of the insured property by Sander rendered the policy void.

Two reasons are assigned. One is that, because notice was not given to defendant of said transfer, the provision on that subject conforming to the standard form of insurance policy and section 8 of the by-laws of defendant were both violated.

The other is that, when the transfer was made, it terminated Sander's membership in the defendant association, and that policies are effective only in favor of those who are members; hence, when Sander's membership ceased, the policy issued to him became ineffective and void.

The question whether plaintiff could recover upon the policy in suit hinges upon whether the law applicable to stock insurance companies is applicable to mutual insurance associations with reference to the right of a mortgagee to recover after the breach of one of the conditions of the policy by the insured when by the terms thereof the loss, if any, is made payable to the mortgagee as his interest may appear.

In Smith v. Germania Fire Insurance Co., 102 Or. 569, 202 P. 1088, 1090, 19 A. L. R. 1444, this court, speaking through Mr. Justice Brown, construed the standard mortgage clause reading: "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 interest as shall be written upon, attached, or appended hereto."

Attention was there called to a long list of cases holding that where, as in the case at bar, a policy provides that, if any interest thereunder shall exist in favor of a mortgagee, the conditions "hereinbefore contained" shall apply in the manner expressed in such conditions relating to such interest "as shall be written upon, attached or appended thereto," a violation of the conditions by insured will not affect the rights of the person for whose benefit a loss payable clause is attached or indorsed on the policy unless such indorsed or attached clause also contains or refers to the conditions mentioned in the body of the policy; and such holding was approved.

Cases holding to the contrary were also cited. Among those so cited is Brecht v. Law, Union & Crown Ins. Co. (C. C. A.) 160 F. 399. This case is one upon which defendant elaborates. It is also reported in 18 L. R. A. (N. S.) 197. It is of interest to note that, in an exhaustive note thereto, the learned editors of that publication, referring to the provisions that conditions of insurance as to mortgagee be written upon the policy or attached thereto, say: "In the construction of this clause, the weight of authority is against the conclusion reached in the Brecht Case. That conclusion, that such provision was intended to apply only in cases where the insurer, by some special agreement with the mortgagee, consented to the modification or waiver of the conditions in the policy, finds support only in the four following cases: Delaware Ins. Co. v. Greer, 61 L. R. A. 137, 57 C. C. A. 188, 120 F. 916; Vancouver Nat. Bank v. Law Union & Crown Ins. Co. [C. C.] 153 F. 440; Franklin Ins. Co. v. Wolff, 23 Ind.App. 556, 54 N.E. 772; and Ritchie County Bank v. Fireman's Ins. Co., 55 W.Va. 261, 47 S.E. 94 (in which no reference was made by the court to such clause, except to set it out; but recovery was denied to a mortgagee because of a breach of the policy by the owner, and the policy was treated exactly as if it contained no more than a loss-payable clause). The greater number of cases, however, have emphatically dissented from such construction, as it leaves the policy in the same condition as if the clause did not exist, and as if the policy contained no other reference to the mortgagee than the loss-payable clause."

Defendant argues that this construction of these provisions of the policy is not applicable to policies issued by mutual companies. In that respect we find no distinction in reason nor upon authority between policies issued by mutual companies and those issued by stock companies.

The principle was applied by the Supreme Court of Iowa in the case of People's Savings Bank v. Retail Merchants Mutual Fire Insurance Association, 146 Iowa, 536, 123 N.W. 198, 31 L. R. A. (N. S.) 455. There the mortgage clause provided that fifteen days' notice of any delinquency on the part of the mortgagor should be given to the mortgagee before suspension or cancellation could be made affecting the mortgagee's interests. No such notice was given, and although the delinquency of the mortgagor was contemporaneous with the issuance of...