Metropolitan Life Ins. Co. of New York v. Mennonite Mut. Fire Ins. Co.

• Decision Date: 01 December 1930
• Docket Number: 29,510
• Citation: 131 Kan. 628,293 P. 402
• Parties: THE METROPOLITAN LIFE INSURANCE COMPANY OF NEW YORK, Appellee, v. THE MENNONITE MUTUAL FIRE INSURANCE COMPANY, Appellant. LORAN KISTNER, Interpleader, Appellee.
• Court: Kansas Supreme Court

293 P. 402

131 Kan. 628

THE METROPOLITAN LIFE INSURANCE COMPANY OF NEW YORK, Appellee, v. THE MENNONITE MUTUAL FIRE INSURANCE COMPANY, Appellant.

LORAN KISTNER, Interpleader, Appellee.

No. 29,510

Supreme Court of Kansas

December 1, 1930

Decided July, 1930.

Appeal from Allen district court; FRANK R. FORREST, judge.

Judgment affirmed.

SYLLABUS

SYLLABUS BY THE COURT.

1. FIRE INSURANCE--Right of Mortgagee Where Policy Void as to Mortgagor. Under the "union mortgage clause" attached to the policy issued by the defendant in this case, which is set out in the opinion, it is held that the defendant insurance company is liable to the plaintiff mortgagee notwithstanding the failure of the mortgagor to pay the premium on the policy and other acts of the mortgagor referred to in the opinion which rendered the policy void as to the mortgagor.

2. SAME--Misrepresentations Voiding Policy. Where the insured fails to pay the premium on an insurance policy and also violates its conditions by misstating the amount of encumbrance against the property insured, and by taking out additional insurance on the property contrary to the terms of his policy, he is not entitled to recover from the insurance company.

3. SAME--Subrogation of Insurer to Rights of Mortgagee. Under the "union mortgage clause" set out in the opinion, where it appears that the insurance company is not liable to the mortgagor and owner to whom the policy was issued, but is liable to the mortgagee, the insurance company upon payment of the amount of its policy is entitled to be fully subrogated to the security held by the mortgagee to the extent of the amount paid by it in accordance with the subrogation clause set forth in the mortgage clause attached to its policy.

Ezra Branine, Alden E. Branine, both of Newton, and Frank W. Taylor, of Iola, for the appellant.

Kenneth H. Foust, of Iola, for the appellee.

OPINION

JOCHEMS, J.:

This action was brought by plaintiff against the defendant upon an insurance policy issued by the defendant to one Loran Kistner as the insured. The policy had attached to it a mortgage clause in favor of the plaintiff as mortgagee. The insured, Loran Kistner, obtained leave of the court to interplead. Judgment was entered against the defendant in favor of plaintiff and of the interpleader. From this judgment defendant appeals.

The action was submitted to the court upon an agreed statement of facts and some oral and documentary testimony. From the record we glean the following:

That the interpleader, Loran Kistner, owned some land in Allen county upon which there were some improvements; that he made a loan on this land through the Commerce Trust Company, of Kansas City, acting as duly authorized agent of the plaintiff in this action; that the amount of the loan was $ 2,800 and was secured by a mortgage on the land; that the policy upon which suit was brought against defendant was issued March 22, 1926, for a term of three years. There was attached to the policy under date of May 20, 1926, a mortgage clause known as the "union mortgage clause," reading as follows:

"MORTGAGE CLAUSE WITH FULL CONTRIBUTION.

"Loss or damage, if any, under this policy shall be payable to the Metropolitan Life Insurance Company as mortgagee (or trustee or assign) 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 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 and of all such other securities; but no subrogation shall impair the right of the mortgagee (or trustee) to recover the full amount of their claim.

"Attached to and forming part of policy No. 46280, Mennonite Mutual Fire Insurance Co. Dated May 20, 1926.

P. W. BARTSCH, Secretary.

EULATE B. ANDERSON, Agt."

The defendant is a mutual insurance company and its premiums are paid by the assessment method. An assessment was due March 1, 1927, and notice of this assessment was sent to the insured, Loran Kistner, on that date.

The application for the policy in question, dated March 22, 1926, contained the following questions and answers:

"1. What title have you to these premises? Ans. Deed.

"2. How much encumbrance? To whom and when due? Ans. $ 2,800. Commerce Trust Company, K. C. Mo. 10 years."

At the date this application was submitted there was also of record against the property a mortgage under date of December 1, 1925, in the amount of $ 280; and another mortgage under date of December 28, 1925, against the same property in the amount of $ 700.

It appears further that on August 11, 1926, the Rumbel Lumber Company filed a mechanic's lien upon the real estate involved in this action for the sum of $ 1,250 for furnishing material. Also that on March 22, 1926, the defendant company issued another insurance policy, which is not in controversy here, to the insured in the sum of $ 1,000, and that this policy was duly assigned to the lumber company as security on its mechanic's lien; that when notice of this assessment was mailed to the lumber company on March 1, 1927, under the last described policy, the assessment was not paid and the policy was permitted to lapse. On March 29, 1927, the lumber company received a policy in the amount of $ 1,300 from the Underwriters Exchange Insurance Company, which policy was fully paid after the fire hereinafter mentioned and there remained due on the lien against the real estate at the time of trial of this action the sum of $ 125.

The insured, Loran Kistner, received notice from the defendant insurance company of the assessment falling due March 1, 1927, in the amount of $ 8, but instead of paying this assessment he procured two other policies for $ 1,000 each on April 1, 1927, from the Preferred Risk Fire Insurance Company, of Topeka, and caused a mortgage clause to be attached thereto in favor of the plaintiff herein as mortgagee. Both of these policies were in full force and effect at the time of the fire hereinafter referred to, and at the time of the trial of this action there was pending in the same district court a suit brought by plaintiff herein, and Kistner, against the company which issued those policies, seeking collection thereon.

On October 22, 1927, the defendant insurance company notified the Commerce Trust Company as agent for plaintiff herein that its policy No. 46,280 issued to Loran Kistner would be canceled in ten days from that time unless the assessment of $ 8 was paid. The defendant also advised that a second notice had been sent to the insured at Moran, Kan., for this assessment and that it had received no reply. The Commerce Trust Company wrote the insured advising him of the notice so received from the defendant insurance company, calling his attention to the fact that his contract with the mortgagee called for $ 1,500 insurance and advising that the trust company was forwarding its check for $ 8 in payment of the assessment and requesting the insured to forward them check for that sum immediately. On October 31, 1927, the insured replied to the letter from the trust company as follows:

"This notice duly received and wish to state that you were too quick to respond to the notice which you received. Upon receipt of their notice to me in which they asked for an extra assessment of $ 8 together with the ordinary premium I deemed it a company of poor reliability that has to assess the policyholders. In their notice they stated if the $ 8 was not paid by me in a certain number of days that the policy would be canceled, and which I presumed had been done long ago. Thinking the matter over, I thought I was perhaps as...