Prudential Ins. Co. of America v. German Mut. Fire Ins. Ass'n of Lohman

• Decision Date: 03 May 1937
• Citation: 105 S.W.2d 1001,231 Mo.App. 699
• Parties: PRUDENTIAL INSURANCE COMPANY OF AMERICA, APPELLANT, v. GERMAN MUTUAL FIRE INSURANCE ASSOCIATION, RESPONDENT
• Court: Kansas Court of Appeals

105 S.W.2d 1001

231 Mo.App. 699

PRUDENTIAL INSURANCE COMPANY OF AMERICA, APPELLANT, v. GERMAN MUTUAL FIRE INSURANCE ASSOCIATION, RESPONDENT

Court of Appeals of Missouri, Kansas City

May 3, 1937

Appeal from Circuit Court of Cole County.--Hon. L. Cunningham Special Judge.

REVERSED AND REMANDED.

Judgment reversed and cause remanded.

L. H Cook and Harry A. Hall for appellant.

Irwin Bushman & Buchanan for respondent.

OPINION

REYNOLDS, J.--

This is a suit on a fire insurance policy. The petition was filed on September 14, 1935, in the Circuit Court of Cole County; and the cause was tried before the Honorable LIEUTELLUS CUNNINGHAM, sitting as special judge of said court, and before a jury. At the conclusion of the whole evidence, an instruction in the nature of a demurrer was granted by the court, directing a verdict for the defendant; and the verdict was thereupon returned by the jury in favor of the defendant. From a judgment duly entered on the verdict in behalf of the defendant, the plaintiff, after an unsuccessful motion for a new trial, prosecutes this appeal.

The defendant is a farmers' mutual fire insurance company, organized under Section 6056, Revised Statutes of 1929, and engaged in insuring the property of its members against loss by fire for the purpose of paying the losses incurred by any member thereof by pro rata assessment.

On August 10, 1926, the defendant issued its policy of insurance No. 2005 to one Mrs. Alice E. Smith, insuring among other things her certain dwelling house located in Marion township, Cole County, Missouri, in the sum of $ 2400. The insurance was for five years, beginning July 29, 1926, and ending July 28, 1931.

On August 21, 1926, under the heading "Mortgage Clause," the following agreement, signed by the secretary of the defendant, was attached to the policy as forming a part thereof: "Loss or damage, if any, under this policy shall be payable to Prudential Insurance Company of America as far as their interest may appear. This company agrees to give 30 days notice, before cancellation of Policy."

At the time this clause was attached to the policy, the plaintiff held the note of Mrs. Smith, the insured under the policy, for $ 3500, bearing interest at the rate of five per cent per annum, secured by a mortgage or deed of trust against the property insured. Afterward, this mortgage or deed of trust was foreclosed on December 1, 1930, under power of sale; and the real estate described therein was purchased by the plaintiff at the sale and was conveyed to it upon such date by the trustee by deed under the mortgage. Subsequent to the time that the plaintiff acquired the title to said property, the dwelling house described in said mortgage and covered by the original policy of insurance herein was totally consumed by fire, during the month of January, 1931. There was evidence tending to show that the fair and reasonable value of said house at the time of said fire was $ 2400. Shortly after the fire, the defendant was notified by the plaintiff of the loss; and it denied liability on the ground that the foreclosure sale under the mortgage had rendered the insurance null and void. The evidence tends to show that, at the time of the fire, all insurance assessments and premiums had been fully paid and that no notice of cancellation had ever been given by the defendant either to Mrs. Smith, the original owner, or to the plaintiff.

The petition is as follows:

"Plaintiff for its cause of action states:

"That it is now and was at all the times herein mentioned a corporation duly organized according to law and duly authorized to do business in the State of Missouri. That the German Mutual Fire Insurance Association, of Lohman, Cole County, Missouri, is now and was at all the times herein mentioned engaged in insuring persons against loss or damage by fire to their property.

"Plaintiff further states that on July 29, 1929, in consideration of a certain premium paid to the defendant, the defendant did agree and did insure Alice E. Smith against loss or damage by fire to her dwelling located in Section Twenty-six (26), Township Forty-five (45), Range Fourteen (14), Cole County, Missouri, in the sum of twenty-four hundred dollars ($ 2400.00), for a term of five years beginning July 29, 1926, and ending July 28, 1931, and as an evidence of defendant's said agreement they issued their policy No. 2005.

"Plaintiff further states that attached to, and forming a part of, said insurance agreement was an agreement by defendant insuring plaintiff against loss or damage by fire to said property. A verified copy of said insurance agreement is herewith filed and marked Exhibit 'A'.

"Plaintiff further states that on or about January 18, 1931, and while said policy was in full force and effect a fire occurred which totally destroyed the dwelling house mentioned therein; that due notice was given to the defendant of said loss and damage and that all the terms and conditions of said policy have been duly complied with. That from the time said insurance contract was entered into, and continuously until said fire, plaintiff had an insurable interest in said property in excess of twenty-four hundred dollars ($ 2400.00), and that the loss and damage to said property was in excess of twenty-four hundred dollars ($ 2400.00).

"Wherefore, plaintiff prays judgment for twenty-four hundred dollars ($ 2400.00), with interest thereon from January 18, 1931, and for costs."

The answer sets up that the defendant is a voluntary association of persons mutually insuring the property of its members, under the provisions of Section 6056, Revised Statutes of 1929, and that it is without assets of any kind or character. It admits the execution of the original policy, by which it insured Alice E. Smith against loss and damage to her dwelling located in section twenty-six, township forty-five, range fourteen, Cole County, Missouri, in the sum of $ 2400 for a term of five years beginning July 29, 1926. It admits the execution of the loss payable clause attached to the original policy, providing that, in case of loss or damage, the insurance thereunder should be paid to the plaintiff as its interest might appear, and admits further than in such clause it was provided that the defendant should give to the plaintiff thirty days' notice before cancellation of the policy. It admits the destruction of the insured property by fire on or about January 18, 1931. Among the defenses set up in the answer is that the loss payable clause, upon which the plaintiff sues, was ultra vires the powers of the defendant association and its officers, for the reason that it had no power to enter into such a contract or to enter into any contract of insurance whatever on real estate with any persons except landowners (or in exceptional cases renters) who were members of the association and that the plaintiff was neither a member of the association nor the owner (or renter) of the property insured and that it was ineligible to become a member and that such loss payable clause was merely a collaterial agreement making plaintiff an appointee of such funds as might become due Mrs. Smith under the original policy on account of any loss or damage to her insured property and that such clause expired and terminated on the foreclosure of the plaintiff's mortgage and the delivery of the trustee's deed thereunder to the plaintiff.

The reply is a general denial.

The defendant has a written constitution and by-laws, which were introduced in evidence on the trial, providing among other things that "All persons whose property is insured in this company shall be members of the same;" that "only" landowners (and in exceptional cases renters) shall be accepted as members; that policies cannot be transferred; that each member shall pay his pro rata share of the losses incurred; and that new members, before being admitted to membership, shall make written application for membership and be recommended by two members of the association and pay an initiation fee. There is a further provision that property shall be assessed at its full value and so insured but that, in case of loss, only two-thirds of the sum insured shall be paid. The policy issued to Mrs. Smith provides that the insurance granted is in accordance with the constitution and by-laws.

Upon the trial, the plaintiff introduced the original policy and the mortgage or loss payable clause under which it claims and made proof of the loss of the property insured by fire and of its damages, while the defendant introduced its constitution and by-laws and other evidence.

OPINION.

On this appeal, the question of the propriety of the action of the court below in granting a peremptory instruction in the nature of a demurrer directing a verdict for the defendant at the close of all of the evidence and in rendering judgment for the defendant is presented. The plaintiff contends that such action upon the part of the court was erroneous and that the judgment should have been for it.

1. The plaintiff contends that the loss payable or mortgage clause attached to the original policy, under which its interest in the property insured was insured, insured such interest separate and apart from the interest of Mrs. Alice E. Smith, the mortgagor therein.

It was so held by this court in Prudential Insurance Company v. German Mutual Fire Insurance Association, 228 Mo.App. 139, 60 S.W.2d 1008, a suit between these same parties and upon this same contract of insurance.

It was further held in that case that the clause in question is to be considered in the same light as a union mortgage clause (under which the interests of the mortgagee are insured rather than those of the mortgagor) and that, in such...