Southern Ins. Co. v. Estes

• Decision Date: 19 January 1901
• Citation: 62 S.W. 149,106 Tenn. 472
• Parties: SOUTHERN INS. CO. v. ESTES et al. NORTH BRITISH & MERCANTILE INS. CO. v. SAME.
• Court: Tennessee Supreme Court

62 S.W. 149

106 Tenn. 472

SOUTHERN INS. CO. v. ESTES et al.

NORTH BRITISH & MERCANTILE INS. CO. v. SAME.

Supreme Court of Tennessee.

January 19, 1901

Appeal from circuit court, Davidson county; Bonner, Judge.

Consolidated actions by E. M. Estes against the Southern Insurance Company and the North British & Mercantile Insurance Company.From a judgment in favor of the plaintiff, defendants appeal.Affirmed.

J. J Vertrees and J. A. Cartwright, for appellants.

H. A Luck and Rutherford & Rutherford, for appellee Hunter.R. O Allen, for appellee Estes.

McALISTER J.

These actions were commenced separately to recover on policies of fire insurance.The same questions being involved in both suits, they were consolidated in the court below, and heard together.The trial resulted in a verdict and judgment against each company for the sum of $1,000, the amount of its policy, with interest.Both companies appealed, and have assigned errors.The declarations allege that on the 13th of February, 1899, the defendant companies issued to the plaintiff, E. M. Estes, policies of fire insurance for the sum of $1,000 each on a certain mill building, machinery, etc., known as "Brentwood Mills," situated in Williamson county, Tenn.The policies contained a clause, "loss, if any, payable to W. A. Hunter, Jr., as his interest may appear."On the 1st April, 1899, said building, machinery, etc., were totally destroyed by fire, without the fault of the plaintiff.Defendant companies were notified of the loss, and within the time prescribed by the policies the plaintiff filed with defendants proofs of loss, and defendants, although often requested to pay said loss, have wholly failed and refused to do so.Defendants pleaded the general issue, and also following special pleas, to wit: "First.That at the time the insurance was applied for and obtained the plaintiff stated and represented to the defendants that he owned the entire interest in the property insured, and the policy itself contains such representation, but as a matter of fact the plaintiff was the owner only of an undivided interest in the property, and not the whole thereof, which undivided interest was incumbered by a vendor's lien in favor of one W. A. Hunter for $1,260.80, which is unpaid, and also by a trust mortgage in favor of one J. E. Vandergrift for $100, unpaid, whereof the defendants then had no knowledge."It is further averred that the contract of insurance contains the following clause, to wit: "This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void *** if the interest of the insured be other than unconditional or sole ownership, or if the subject of insurance be a building on ground not owned by the insured in fee simple, or if, with knowledge of the insured, foreclosure proceedings be commenced, with notice given of sale of any property covered by the policy by virtue of any mortgage or trust deed."Defendants further aver that at the time of the issuance of the policy sued on, or about the 12th January, 1899, the property insured was incumbered by a vendor's lien in favor of one W. A. Hunter, and of which the defendant had no knowledge, and that on the 1st day of March, 1899, the said Hunter exhibited his bill in the chancery court of Franklin, Williamson county, Tenn., to enforce or foreclose said lien against the property for the payment of $1,260.80 due and secured by said lien as aforesaid.Defendants aver that plaintiff had notice or knowledge of said foreclosure proceedings before the destruction of the property insured, but that defendants had no notice thereof; wherefore defendants say said policy is utterly void.Plaintiff demurred to this last or third plea, the demurrer was sustained, and this action of the court is assigned as the first error.

It will be observed that the foreclosure proceedings mentioned in the policies relate to mortgages or deeds of trust.But it is insisted on behalf of the company that the clause of the policy in question applies with equal force to proceedings to enforce a vendor's lien, and that there can be no difference in principle, under the clause quoted, between the foreclosure of a vendor's lien and the foreclosure of a mortgage or deed of trust.In Delahay v. InsuranceCo., 8 Humph. 684, it was held that a failure on the part of assured to disclose the existence of a mortgage on the property is not a circumstance material to the risk, and will not avoid the policy.The reason given for the ruling is that a mortgage or deed of trust is only a security for the debt, and if the property be destroyed the debt remains, so that the assured has as much interest in protecting the property as if there were no incumbrance on it.In the case of Insurance Co. v. Barker, 7 Heisk. 504, it was a condition of the policy that it should be void if the interest of the insured in the property be any other than the entire, unconditional, and sole ownership of the property for the use and benefit of the assured, and this be not represented to the company.It appeared in that case there was an undisclosed vendor's lien on the goods sold, but the court held that fact did not avoid the insurance.It was held that the equitable owner of property is "the entire and sole owner," within the meaning of the policy.The reasoning of the court was that if the existence of a lien by a regular mortgage, undisclosed, does not vitiate a policy, then one based merely on the retention of title by the vendor would have no more effect.So, in Insurance Co. v. Crockett, 7 Lea, 725, the policy provided, as in this case, that "if the interest of the assured in the property be any other than the entire, unconditional, and sole ownership for the use of the assured, of if the building insured stands on leased ground, it must be so represented to the company, and so expressed in the written part of this policy; otherwise, the policy shall be void."It appeared that the assured only had a title bond to the premises.Held, the policy was not avoided, inasmuch as the failure to disclose the fact that the property was incumbered was not material to the risk.The same principles were reaffirmed by this court in Light v. Insurance Co.,105 Tenn. 480, 58 S.W. 851.

If, then, the existence of an undisclosed mortgage, deed of trust, or vendor's lien on the property insured will not invalidate the insurance, we cannot perceive how, on principle, notice of foreclosure of the mortgage or vendor's lien could have that effect, notwithstanding such a stipulation in the policy.Foreclosure proceedings are, of course, the remedy of the mortgagee for nonpayment of his debt on maturity of the mortgage or when the same is overdue.The remedy is an incident of the mortgage, and, while the ownership of the property may thus be changed during the currency of the insurance, it is a result that is brought about by the existence of the mortgage.The fact of the existence of the mortgage, as we have already seen, does not vitiate the insurance.

The next assignment is that the court erred in charging the jury on the subject of the equitable ownership of the property.The facts necessary to be stated in this connection are that W. A. Hunter, Jr., originally owned said mill, and sold it by deed to Dobson & Roser, retaining a vendor's lien to secure unpaid purchase money.On the 31st August, 1898 Dobson and wife, by deed, conveyed to the plaintiff, E. M. Estes, a one-third interest in said property, Estes assuming the payment of one-third the purchase money due Hunter.On October 18, 1898, Dobson and wife sold their remaining one-third interest in said mill to the plaintiff, E. M. Estes, the latter assuming another third of Dobson's indebtedness to Hunter.It is not disputed that these two deeds were executed and delivered to Estes, and the purchase money paid by him.It further appears that on the 30th December, 1898, Dobson and wife and Roser and wife joined in a deed conveying to Estes the remaining one-third interest in the mill property, Estes assuming payment of balance of purchase money due Hunter.This last deed recites that $200 was paid in cash, and notes executed for the balance, and that the other two-thirds of said tract had been by us heretofore sold to said Estes by deed, which is hereby ratified and affirmed.It is further recited that it was the intention of the grantors to transfer the whole of said tract known as the "Brentwood Mills Tract."Roser and wife signed and acknowledged this last deed, and left it at Esquire Roser's office, where Dobson later signed and acknowledged same.It is insisted on behalf of defendants that this last deed was never in fact delivered by the grantors to Estes, the plaintiff, and hence the latter was not the sole owner of the property at the time the insurance was effected and when the loss occurred.Estes died before the trial, and, in the absence of his testimony, there was some confusion about the delivery of the last deed.Estes swears in his proofs of loss that he was the owner of the entire property.Dobson testifies that the entire purchase money due him had been paid, and that Roser told him that he had sold his entire interest to Estes.Roser and wife, it appears, have removed from the state, and their evidence was not heard.Roser and wife have never filed with the administrator of Estes any claim for unpaid purchase money.It appears that Estes applied for and obtained the insurance January 12, 1899.At that time it was conceded that he owned a two-thirds undivided interest...