Planters' Bank v. Globe & Rutgers Fire Ins. Co.

• Decision Date: 16 May 1930
• Docket Number: 12924.
• Parties: PLANTERS' BANK v. GLOBE & RUTGERS FIRE INS. CO.
• Court: South Carolina Supreme Court

153 S.E. 385

156 S.C. 453

PLANTERS' BANK v. GLOBE & RUTGERS FIRE INS. CO.

No. 12924.

Supreme Court of South Carolina

May 16, 1930

Appeal from Common Pleas Circuit Court of Orangeburg County; Wm. H Grimball, Judge.

Action by the Planters' Bank against the Globe & Rutgers Fire Insurance Company. Judgment for defendant, and plaintiff appeals.

Affirmed.

Brantley & Zeigler, J. S. Salley, and W. C. Wolfe, all of Orangeburg for appellant.

Lide & Felder, of Orangeburg, and Huger, Wilbur, Miller & Mouzon, of Charleston, for respondent.

COTHRAN J.

This is a case certainly of most novel impression in at least three particulars: The plaintiff was not the owner of the property insured; it was not a party, directly or indirectly connected with the insurance policy; the amount of the policy has been paid by the company to the parties in whose interest it was issued. The plaintiff claims the right to a judgment requiring the company to pay again the amount of the policy to it, as the holder of a mortgage given to it by a party other than the insured, upon property which its mortgagor did not own, for the reason that its mortgagor had agreed to insure the property covered by the mortgage, for its benefit; although the house insured was placed upon the mortgaged land after the date of the mortgage, under an agreement between the insured and the mortgagor that the house should be the property of the insured.

The evidence develops the following facts which are undisputed:

The Wagener Farms Company owned a tract of land containing about 500 acres.

On December 20, 1921, it mortgaged the land to the Prudential Insurance Company to secure a debt of $9,000; the mortgage was assigned by the Prudential Insurance Company to the Old Dominion Trust Company and by it to the State-Planters' Bank & Trust Company.

Later on January 5, 1922, the Wagener Farms Company gave a second mortgage upon the land, to J. H. Hydrick Realty Company, to secure a debt of $7,237.25; expressly declared to be junior to the mortgage of the Prudential Insurance Company above referred to; this mortgage was assigned by the J. H. Hydrick Realty Company to Mary L. Hydrick and Wannamaker & Wannamaker in consideration of $8,406.07; later it was assigned by the assignees named to the plaintiff, the Planters' Bank. This mortgage contained an agreement between the parties (Wagener Farms Company and Hydrick Realty Company), that the mortgagor, Wagener Farms Company should insure the house and buildings on the property and assign the policy to the Hydrick Realty Company, and that upon default the mortgagee might cause the insurance to be taken out in its name and be reimbursed for the premiums paid by it.

Later, on January 14, 1922, the Wagener Farms Company gave a third mortgage upon the land to W. A. Whitlock, to secure a debt of $6,476.64.

Some time in the early part of 1924, one Tillman Jackson entered upon a portion of the mortgaged land and constructed a combination store-house and dwelling and other buildings, under an oral agreement with the Wagener Farms Company for a lease and for the right to remove the buildings constructed by him at the termination of his lease.

On July 19, 1924, after Jackson had completed the construction of the buildings, the defendant Insurance Company issued a policy insuring Jackson from loss by fire, of the buildings referred to, in the sum of $2,500. The policy covered other property not involved in the present controversy. The loss under the policy was made payable to W. A. Whitlock the owner of the third mortgage above referred to. Why this was so can be explained only upon the theory that Whitlock was procuring the insurance for his protection as a third mortgagee, and doubtless was paying the premiums. It does not appear that Jackson owed Whitlock anything, or that there was any reason why he should personally take any steps for Whitlock's protection. It does not distinctly appear that Whitlock's mortgage contained an agreement on the part of Wagener Farms Company to insure for his benefit, but I assume that it did. Whether it did or not Whitlock had the right to procure the insurance.

On December 13, 1924, the oral agreement between the Wagener Farms Company and Jackson, in reference to the lease, was reduced to writing. In this agreement the following clause appears: "Whereas there are now certain improvements located on this property in the nature of one dwelling and store-house combined and one gin house and machinery and other small buildings, including one barn and stables, which were erected during the year 1924, by the party of the second part, under an agreement with the party of the first part which gave the right to the party of the second part to remove all buildings herein mentioned from the premises, as they were erected by him for his convenience and use under the agreement that they would be his. That agreement is hereby extended in line with this lease and we therefore recognize the right of ownership of the party of the second part to these buildings and his right to remove the same as above stipulated."

On February 2, 1925, the insured property was destroyed by fire; on March 12th, Jackson furnished proof of loss as required; and on March 16th the company paid the amount of the loss by a draft drawn payable to Jackson and Whitlock jointly.

I do not deem it necessary to consider the objections raised by the company to the proof of loss or the grounds of forfeiture claimed, for the reason that the company in the most conclusive manner possible has waived them by paying the loss.

On February 16, 1927, the State Planters' Bank & Trust Company, the holder of the first mortgage brought an action in the court of common pleas for Orangeburg county to foreclose its mortgage, and Wagener Farms Company, W. A. Whitlock, R. T. Jackson (Tillman Jackson), Wannamaker & Wannamaker, and the Planters' Bank, along with others immaterial here, were made parties. The property was sold by the Master on salesday in December, 1927, and after paying the prior mortgage there was a deficiency judgment in favor of the Planters' Bank, the plaintiff herein, against Wagener Farms Company for the sum of $6,913.14. No question of this insurance seems to have been brought into this action when all of the parties of interest in the property were before the court.

Prior thereto (in December 1926) the Planters' Bank (the plaintiff herein) the holder of the second mortgage, having learned of the collection by Whitlock of the insurance money, had made demand upon the company for the payment of the insurance money based upon the single fact that it owned the second mortgage upon the property and that it provided that the mortgagor Wagener Farms Company should take out insurance for the protection of the mortgagee, which it had failed to do.

I cannot perceive the slightest foundation of the plaintiff's claim to the proceeds of the insurance which have been paid by the company in compliance with the terms of the policy.

It cannot be sustained upon the agreement of the Wagener Farms Company, contained in the mortgage, that it would insure the buildings for the benefit of the mortgagee. In the first place that agreement evidently referred to the buildings that were then upon the property; not to buildings thereafter constructed by a lessee of the mortgagor. While these buildings, placed after and with notice of the recorded mortgage, and in the absence of such an agreement as is referred to, may have become subject to the lien of the mortgage (1 Jones Mortg. [6th Ed] § 681), I do not think that the mortgagor, if they had been constructed by him, would have been under obligation to insure them; much less where they were constructed by a lessee who by agreement owned them and had the right of removal.

I do not think that there is any doubt as to the correctness of the proposition that when the mortgage provides that the mortgagor shall keep the premises insured for the benefit of the mortgagee, and in fulfillment of this covenant he takes out a policy of insurance in his own name, which is not assigned to the mortgagee or made payable to him in any way, the mortgagee is regarded as having an equitable lien upon the proceeds of the policy. 1 Jones Mtg. (6th Ed.) § 400.

Being an equitable lien, my impression is that the mortgagee would be obliged to enforce it upon the fund before it may have been paid over to the beneficiary of the insurance.

In reference even to such a situation Mr. Jones says, in the same section: "But these cases which support the claim of the mortgagee to insurance obtained by the mortgagor in his own name are regarded as resting upon special facts which justify the inference that the insurance in question was obtained by the mortgagor with the intent to perform his agreement to insure for the benefit of the mortgagee, or that the agreement had reference to the insurance already obtained. Accordingly where there was no ground for such inference, and the Insurance Company paid the amount of loss to the mortgagor, the Supreme Court of Massachusetts held that the mortgagee had no equitable lien upon the policy, and could not recover in the name of the mortgagor"--citing Stearns v. Ins. Co., 124 Mass. 61, 26 Am. Rep. 647; Farmers' Loan & Trust Co. v. Penn Plate-Glass Co. (C. C. A.) 103 F. 132, 56 L. R. A. 710.

It is manifest, therefore, that the right could not be enforced where the policy was taken out by some one not connected with the obligation of the mortgagor to take out insurance for the benefit of the mortgagee.

In the present case the Wagener Farms Company, mortgagor, did not comply or attempt to comply with its agreement (so far at least as the Jackson buildings were concerned), and the plaintiff,...