Smith v. Motors Ins. Corp., 7212

• Decision Date: 08 July 1954
• Docket Number: No. 7212,7212
• Citation: 270 S.W.2d 128
• Parties: SMITH v. MOTORS INS. CORP.
• Court: Missouri Court of Appeals

Page 128

270 S.W.2d 128

SMITH v. MOTORS INS. CORP.

No. 7212.

Springfield Court of Appeals, Missouri.

July 8, 1954.

Ward & Reeves, Caruthersville, for appellant.

R. W. Hawkins and R. H. Gowan, Caruthersville, for respondent.

McDOWELL, Presiding Judge.

This action is on a fire insurance policy for the loss sustained to plaintiff's hearse. The cause was transferred from Pemiscot County to Butler County where it was tried by a jury resulting in a verdict and judgment for plaintiff for $1,700. Defendant appealed.

Plaintiff's amended petition is based upon an insurance policy written by defendant, October 21, 1948, insuring plaintiff's 1938 LaSalle hearse-ambulance against loss by fire for $1,700. The petition states the vehicle was totally destroyed by fire October 15, 1949, while the policy was in force that defendant has vexatiously refused to pay the loss.

The amended answer is a general denial of liability and a separate plea that the policy of insurance sued on was not in effect at the time of the alleged loss for the reason that plaintiff had violated section (b) under 'Exclusions' in the policy by giving a chattel mortgage on said hearse June 2, 1949, to Mid-Continent Finance Corporation of Kennett, Missouri, securing an indebtedness of $202.80, which chattel mortgage was still in force and effect at the date of the fire loss and was not described and declared in the policy as therein provided.

The amended reply admits the giving of the chattel mortgage described in defendant's answer and alleges that the amount to be paid was payable in six monthly instalments of $33.80; that plaintiff only received $150; that the Mid-Continent Finance Corporation intentionally collected $46.80 usurious interest on the note; that the chattel mortgage was void because of such usurious interest and did not impair plaintiff's policy of insurance.

The reply further stated that substantially all of the $150 received from the Mid-Continent Finance Corporation was used to pay off the prior mortgage mentioned in the policy and for repairs on the ambulance which enhanced its value and that said mortgage was actually a renewal or substitute for the old encumbrance; that there was no substantial increase in the amount of mortgage from that stated in the application, which created a greater fire hazard moral or otherwise.

The reply is general denial of usurious interest and a plea of estoppel to set up the defense of usurious interest because plaintiff treated the chattel mortgage as valid and fully paid the note it secured, $67.60 of such note being paid after the fire.

The evidence consisted of the policy of insurance sued on which, defendant admitted, was in force at the time of the alleged fire. This policy provided under 'Exclusions':

'This Policy does not apply:

'(b) under any of the coverages, while the automobile is subject to any bailment lease, conditional sale, mortgage or other encumbrance not specifically declared and described in this policy'.

It was admitted by the parties that plaintiff gave two chattel mortgages on the hearse in question. October 21, 1948, plaintiff gave a chattel mortgage to General Motors Acceptance Corporation for $207.90, payable in nine monthly instalments of $23.10 each, the last instalment to be due July 22, 1949. This chattel mortgage was declared and recognized in the policy. On June 2, 1949, plaintiff gave a chattel mortgage on the hearse in question to Mid-Continent Finance Corporation of Kennett, Missouri, to secure indebtedness of $202.80, payable in six monthly instalments of $33,80 each. This chattel mortgage was not declared and set out in the insurance policy sued on and there remained due and unpaid the sum of $67.89 on this indebtedness at the time of the fire, October 15, 1949.

Plaintiff testified that he received only $150 of the $202.80 secured by the chattel mortgage given to Mid-Continent Finance Corporation; that from the proceeds of this loan he paid off the last instalment due on the first chattel mortgage given, to wit, $23.10; that he paid $25 of said money to have the motor tuned up on the hearse in question; that he bought two tires and two tubes for the ambulance; paid $31 each for the tires and $5 each for the tubes and that he actually had $30 of the money left.

As to the second mortgage given plaintiff gave this testimony:

'Q. Can you explain to the court and jury why you executed the note to them for two hundred and two dollars and eighty cents and only actually received one hundred and fifty dollars in cash? A. I can't.'

It was admitted that both chattel mortgages were recorded or filed for record as required.

On cross-examination plaintiff testified:

'Q. Now, T. J., you have testified here that you only got one hundred and fifty dollars from Mid-Continent Finance Corporation? A. Yes, sir.

'Q. Is that correct? A. Yes, sir.

'Q. Do you know what the other amount, two hundred and two dollars and eighty cents, what that difference was for? A. I do not.

'Q. Do you know who you were talking to at Mid-Continent Finance Corporation on this arrangement, borrowing this money, giving this note and mortgage? A. Didn't know anyone personally there.

'Q. You had dealings with them before had you T. J.? A. Yes, sir.

'Q. You know whether or not they are brokers? A. No, sir, I didn't know.

'Q. Do you know whether or not they are agents of Mid-Continent Finance Corporation? A. No sir, I was in the office.

'Q. Do you know whether or not they charged you a brokerage fee? A. No, sir.

'Q. Do you know whether or not they charged you a brokerage commission? A. No, sir.

'Q. Do you know whether or not they charged you an investigating fee? A. No, sir.

'Q. So you just don't know what that extra amount there was for, do you? A. I don't know.'

It is admitted that plaintiff paid all of the instalments due on the second chattel mortgage; that $67.80, being the last two instalments, was paid after the fire. Plaintiff testified that he never at any time questioned the validity of this note and chattel mortgage or said anything to the lender about it and that he paid the full debt.

The endorsement on the second chattel mortgage showed that the last payment was made November 7, 1949. The policy of insurance was in evidence as plaintiff's exhibit 'A'. The note and second mortgage was in evidence as plaintiff's exhibit 'B' and 'C' and the first mortgage, which was declared in the policy, was in evidence by plaintiff as exhibit 'D'.

In this opinion we will refer to appellant as defendant and to respondent as plaintiff, the position they occupied in the trial court.

Plaintiff makes two assignments of errors:

'I. The court erred in refusing its motion for a directed verdict at the close of the case.

'II. The court erred in giving at the request of the plaintiff instructions numbers 1, 2 and 3.'

Under points and authorities plaintiff's first contention is that the trial court erred in refusing defendant's motion for a directed verdict at the close of the case because plaintiff made no submissible case for the jury.

In ruling upon the question of whether plaintiff made a submissible case for the jury we must disregard defendant's evidence unless it aids plaintiff's case and consider the evidence most favorable to plaintiff and favorable inferences therefrom. Ford v. Louisville & N. R. Co., 355 Mo. 362, 196 S.W.2d 163, 165; Bootee v. Kansas City Public Service Co., 353 Mo 716, 183 S.W.2d 892.

It is defendant's contention that the placing of the second mortgage on the hearse-ambulance by plaintiff suspended and made ineffective the car coverage under the policy while the second mortgage remained an encumbrance on the property.

Plaintiff admits that at the time of the fire loss sued on, there ws still due two instalments on the second mortgage in the sum of $67.89, this amount being paid after the fire, in full, to wit, November 7, 1949. Plaintiff makes this admission under point I of his points and authorities.

To sustain defendant's first allegation of error, he cites Dougherty v. German-American Insurance Company, 67 Mo.App. 526.

This was an action on a policy of fire insurance. The defense, among other things, was that plaintiff mortgaged the property after procuring the insurance, without the consent of the company. The evidence showed that at the time the policy was issued there was a mortgage upon the place, originally for $1,375, but the indebtedness had been reduced to $850 by payments. The policy provided that it should become void if the property be mortgaged after the insurance was obtained. The plaintiff executed a second mortgage for $800 and used all the money to pay the first mortgage. The two mortgages were never in force at the same time. The court held, 67 Mo.App. on page 532:

'* * * The extinguishment of the original and the giving of the new mortgage were but one transaction, not altering the situation of the property. Burns v. Thayer, 101 Mass. 426. We held that any substantial increase in the amount of the mortgage in fact from that stated in the application of insurance would avoid the policy. But here there was no increase of the amount, or of the risk, the change not, in fact, altering the original indebtedness save to decrease it. In such case, it will not be held to create a forfeiture of the policy. Bowlus v. [Plenix] Ins. Co., 133 Ind. 113 [32 N.E. 319, 20 L.R.A. 400]; Russell v. [Cedar Rapids] Ins. Co., 71 Iowa 69 .

'* * * The reason for the rule that the creation of an incumbrance in violation of the terms of the policy works a forfeiture has been thus stated: 'It goes upon the theory of an increased risk by reason of incumbrances. If a man may incumber his property to its full value, and then insure it to its full value, it may easily be seen how it may be turned into a source of profit.' * * *

'We do not wish to be understood as stating that it would be allowable for a policy holder to discharge an incumbrance existing on...