Moulton v. Globe Mut. Ins. Co.

• Decision Date: 19 November 1915
• Docket Number: 3685.
• Citation: Moulton v. Globe Mut. Ins. Co., 154 N.W. 830, 36 S.D. 339 (S.D. 1915)
• Parties: MOULTON et al. v. GLOBE MUT. INS. CO. [*]
• Court: South Dakota Supreme Court

154 N.W. 830

36 S.D. 339

MOULTON et al. v. GLOBE MUT. INS. CO. ^[*]

No. 3685.

Supreme Court of South Dakota

November 19, 1915

Appeal from Circuit Court, Faulk County; Joseph H. Bottum, Judge.

Action by William L. Moulton and J. D. Newcomer Company against the Globe Mutual Insurance Company. Judgment for plaintiffs, and defendant appeals from it and an order denying its motion for new trial. Judgment and order affirmed.

Null & Royhl, of Huron, for appellant.

Corrigan & Jackson, of Aberdeen, for respondents.

SMITH J.

Action on an insurance policy, to recover the value of a barn damaged by windstorm. The policy is the standard form of fire insurance policy of 1905, with a rider attached which makes the policy in the form thus used a tornado, cyclone, and windstorm insurance policy, and makes the terms of the fire insurance policy applicable to the tornado insurance "in so far as the difference in conditions between them may apply." The provisions of the policy, so far as material to this appeal, are as follows:

"This policy shall be void *** if without such assent the situation or conditions affecting the insured property shall be altered so as to materially increase the hazard, if such increase in hazard be occasioned by the act or agency of the insured, or if without such assent the insured shall sell and dispose of all insurable interests in the insured property. ***"

Attached to this policy was a mortgage clause making the loss, if any payable to J. D. Newcomer Co. or assigns, mortgagee (or trustee), as his interest may appear. The policy further provides that:

"If this policy shall be made payable to the mortgagee or trustee of the insured real estate, no act or default of any person other than such mortgagee or his agents or those claiming under him, shall affect such mortgagee or trustee's rights to recover in case of loss of such real estate *** and in case this policy shall have been issued to the owner of the insured property with the loss payable to a mortgagee, and the owner shall have done any act voiding the policy as herein provided, or the policy shall have been canceled so that the company is not liable to him in any event, then the mortgagee upon payment to him of the full amount secured by such mortgage shall assign to the company or companies making such payment, the mortgage, together with the note or debt secured thereby. *** Any person who solicits insurance or issues policies of insurance or procures applications therefor, shall be held to be and considered the general agent of the insurer issuing the policy or making a renewal thereof, except as to proof of loss and adjustment thereof. ***"

The policy further provides that:

"It shall be the duty of the insurer in order to avail himself of any provision in this policy rendering it void, to promptly cancel the policy as provided herein, upon having or obtaining notice or knowledge of the existence of any facts or circumstances which would, according to the terms of the policy, render it void; otherwise it will be deemed to have waived such provision or provisions voiding the policy."

The answer alleges that after the issuance of the policy, and without the knowledge or assent of the defendant, the plaintiff Wm. L. Moulton entered into a contract in writ-with C. H. and L. L. Rowley, whereby he covenanted and agreed that, on payment of certain sums at times therein specified he would convey and sell to them certain lands, including the premises described in the policy; that at the time of the execution of said contract, the Rowleys paid the sum of about $1,500, on the purchase price, and made further payments about May and October of that year, aggregating some $4,500; that upon the execution of said written agreement, the plaintiff delivered possession of all the lands and premises, including that described in the policy of insurance, to the vendees, who retained possession thereof, up to and including the time when the barn described in the complaint was damaged in a windstorm, on or about July 8, 1912; that after the execution and delivery of said contract, and the delivery of possession of said premises, the plaintiff presented said policy to the defendant, and requested it to attach thereto the mortgage clause wherein the loss, if any, was made payable to the plaintiff J. D. Newcomer Company, and that upon such request, and without any knowledge on the part of the defendant, of the sale of said lands, and without any assent thereto, the defendant, believing the said plaintiff to be the full and true owner and in possession of said lands, at the request of plaintiff, indorsed and attached to said policy the said mortgage clause. The defendant further alleges that by reason of the written agreement for the sale of said lands, and the transfer of possession thereof, the policy of insurance became void, and the defendant not liable for the amount of loss claimed for damages to said barn; that the plaintiff, when said loss occurred, was not the sole, absolute, and exclusive owner of the lands upon which the barn was situated, but fraudulently made proofs of loss with intent to collect the insurance under said policy for the use and benefit of the Rowleys; that by reason of the written agreement of sale, the situation or conditions affecting the insurance policy, without the assent of the defendant, were so altered as to materially increase the hazard, and the policy thereby became and was void at the time of the loss. The answer further demands that, in case it be determined that the mortgage clause is valid, and the defendant be held liable to plaintiff J. D. Newcomer Company as mortgagee for the amount of loss sustained, the mortgagee be required to assign its mortgage to the defendant, according to the terms of the policy.

At the conclusion of the evidence, and before the case was submitted to the jury, the plaintiff J. D. Newcomer Company, in open court, admitted payment of the mortgage given by Moulton, and consented that any verdict or judgment rendered in the case might be for the plaintiff Moulton alone, and expressly waived any rights under the mortgage clause attached to the policy, or any rights acquired by virtue of the suit. This was, in legal effect, a dismissal, on the merits, of the action of J. D. Newcomer Company, and the court instructed the jury that any verdict returned for plaintiff must be for Wm. L. Moulton alone. Appellant assigns this as error, insisting that a dismissal of the action by the mortgagee deprived the defendant of its right, under the policy of insurance, to be subrogated to the rights of the mortgagee. This contention is without merit. The policy provides that where the owner of the property shall have done any act voiding the policy, or the policy shall have been canceled so that the company is not liable to him in any event, the mortgagee, upon payment to him of the full amount secured by the mortgage, shall assign to the company making such payment the mortgage, together with the note or debt secured thereby. This clause of the policy must be construed in connection with another clause, which provides that no act or default of any person, other than such mortgagee or his agents or those claiming under him, shall affect such mortgagee's or trustee's rights to recover in case of loss. The plain import of these provisions is that when a mortgagee is permitted to recover upon a policy of insurance which has become void as to the owner of the property by cancellation, or the doing of any act voiding the policy, the insurer, upon payment of the full amount secured by the mortgage, shall be entitled to an assignment of the mortgage and the indebtedness secured thereby. None of these conditions exist in this case. The insurer never became entitled to an assignment of the mortgage, and therefore could not have been prejudiced by a discontinuance of the action by the mortgagee.

At the trial, photographs of the...