Reid v. Hardware Mut. Ins. Co. of Carolinas

• Decision Date: 03 March 1969
• Docket Number: No. 18884,18884
• Court: South Carolina Supreme Court
• Parties: Zelphia H. REID, W. C. Reid and Milford E. Tollison, Respondents, v. HARDWARE MUTUAL INSURANCE COMPANY OF the CAROLINAS, Inc., Appellant.

Page 317

166 S.E.2d 317

252 S.C. 339

Zelphia H. REID, W. C. Reid and Milford E. Tollison, Respondents, v. HARDWARE MUTUAL INSURANCE COMPANY OF the CAROLINAS, Inc., Appellant.

No. 18884.

Supreme Court of South Carolina.

March 3, 1969.

Haynsworth, Perry, Bryant, Marion & Johnstone, Greenville, for appellant.

Abrams, Bowen & Townes, Greenville, for respondents.

MOSS, Chief Justice.

Hardware Mutual Insurance Company of the Carolinas, Inc., the appellant herein, on May 22, 1964, issued a fire insurance policy to Zelphia H. Reid and W. C. Reid, in the amount of $5,000.00, insuring against loss or damage by fire, for a five year period, a one story frame dwelling located in Conestee, South Carolina, owned by Zelphia H. Reid, the respondent herein, with a mortgagee clause payable to the Peoples National Bank of Greenville, South Carolina, as trustee for the Pickens Mill Profit Sharing Fund, which held a first mortgage on the lot on which the insured dwelling was located. The building insured was described in the policy as being one story frame constructed, approved roof, owner occupied, one family dwelling. The record shows that on August 18, 1965, the respondent conveyed the said lot on which the dwelling was located to Milford E. Tollison, the deed reciting a consideration of One Dollar and the assumption of the aforesaid mortgage. The policy was not transferred with the property and Zelphia H. Reid and W. C. Reid remained the named insureds therein. The dwelling described in said policy was destroyed by fire on December 18, 1965, and at such time the balance of the mortgage debt owed by the respondent was $1,647.56. The appellant was notified of the loss of said dwelling by fire and demand for payment by the insureds under the aforesaid policy was made and such was refused.

This action was instituted by Zelphia H. Reid, in which she was joined by W. C. Reid because he was named an insured in the policy, and by Milford E. Tollison, the title owner of said property at the time of its loss by fire, demanding judgment against the appellant under the said policy for the sum of $5,000.00. By its answer, the appellant set up as defenses: (1) Material prejudice as a result of the failure of the insured and the mortgagee to notify it of the change in ownership and other changes in conditions of the insured premises; (2) A denial that Zelphia H. Reid and W. C. Reid had any insurable interest in the insured dwelling because they had conveyed the title to said property to Milford E. Tollison, and it was further denied that Tollison was an insured under said policy; (3) That any interest retained by Zelphia H. Reid and W. C. Reid was predicated upon a remote contingent liability and upon which they had sustained no loss; (4) That to permit Zelphia H. Reid, the original mortgagor, to recover in this case would be against public policy and would result in allowing recovery on a wagering contract; and (5) That the aforesaid policy was void Ab initio because the policy was written upon the basis that the dwelling was owner occupied and it was incumbent upon the respondent to notify the appellant of any change in occupancy because such was material to the risk.

This case came on for trial before the Honorable James H. Price, Jr., Judge of the Greenville County Court, and was, by agreement of counsel, tried before him without a jury. Testimony was taken and a stipulation was agreed upon by counsel as to the testimony that would have been given by another witness if present. Thereafter, the trial judge filed his order in which he held that there was no coverage under the aforesaid policy as to Milford E. Tollison because of the failure of notification of change of ownership. He did hold, however, that the appellant was liable to Zelphia H. Reid in the amount of $1,647.56, being the balance of the mortgage debt due by her at the time of the fire. It is from this order that the appellant prosecutes this appeal.

It is the position of the appellant that the trial judge committed error in holding that Zelphia H. Reid, who had conveyed the mortgaged-insured premises, continued to have an insurable interest therein where she remained liable for the payment of the note secured by the aforesaid mortgage.

The insurable interest that a mortgagor has in real property is not defeated by a voluntary sale and conveyance of the premises as long as he is personally liable for the payment of the mortgage debt. In the case of Crook v. Hartford Fire Ins. Co., 175 S.C. 42, 178 S.E. 254, this court said:

'It may be said, generally, that anyone has an insurable interest in property who derives a benefit from its existence or would suffer loss from its destruction.' 14 R.C.L., 910.

'An insurable interest in property is any right, benefit or advantage arising out of or dependent thereon, or any liability in respect thereof, or any relation to or concern therein of such a nature that it might be so affected by the contemplated peril as to directly damnify the insured. Joyce on Insurance (2d Ed.) § 887.'

Many cases hold that a mortgagor who has sold the premises, being still liable for the mortgage debt, has an insurable interest in the property. Lumberman's Nat. Bank v. Corrigan, 167 Wis. 82, 166 N.W. 650; Farmers & Merchants Bank v. Hartford Fire Ins. Co., 43 Idaho 222, 253 P. 379; Hanover Fire Ins. Co. v. Bohn, 48 Neb. 743, 67 N.W. 774; American Ins. Co. v. Dean, Mo.App., 243 S.W. 415; Baughman v. Niagara Fire Ins. Co., 163 Minn. 300, 204 N.W. 321. In the Baughman case it was held that because of the plaintiff's liability on the mortgage note to the bank he had an insurable interest in the property, even though his grantee had assumed the mortgage. In the Dean case it was held that where an owner had conveyed the insured premises and was not released from the payment of the mortgage indebtedness thereon he retained an insurable interest in the property conveyed, as a loss thereof would affect his liability on the note.

It is our conclusion that Zelphia H. Reid had an insurable interest in the property that was destroyed by fire because she remained liable for the payment of the note, which was secured by a mortgage to the bank.

It is the position of the appellant that since the respondent had no insurable interest in the...