Travelers Ins. Co. v. Springfield Fire & Marine Ins. Co.
| Decision Date | 24 April 1937 |
| Docket Number | No. 10825.,10825. |
| Parties | TRAVELERS INS. CO. v. SPRINGFIELD FIRE & MARINE INS. CO. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Gardner Smith and D. C. Chastain, both of Kansas City, Mo., for appellant.
William S. Hogsett, of Kansas City, Mo. (Ralph E. Murray, Alvin C. Trippe, and Henry Depping, all of Kansas City, Mo., on the brief), for appellee.
Before SANBORN and THOMAS, Circuit Judges, and MUNGER, District Judge.
This appeal is from a judgment for the defendant in an action at law brought by the Travelers Insurance Company against the Springfield Fire & Marine Insurance Company to recover upon a policy of fire insurance payable to the Travelers Insurance Company, mortgagee, as its interest might appear.
In 1926, B. M. Hudson (mortgagor) and his wife executed a deed of trust mortgaging his farm in Missouri to the Travelers Insurance Company (mortgagee) to secure a loan of $12,000. The trust deed required the mortgagor to keep the buildings on the mortgaged premises insured against fire for not less than $6,000, with loss payable to the mortgagee. The mortgage debt at all times exceeded $4,700.
The Springfield Fire & Marine Insurance Company (insurer) on May 25, 1931, issued to the mortgagor an insurance policy covering various buildings on the mortgaged farm, for a five-year period, against loss from fire and windstorm. Among these buildings was a dwelling valued at $4,700. The policy was issued in consideration of the payment of $115.67 and the further payment, when due, of an installment premium note for $462.68 payable in equal annual installments on the first day of June in each of the years 1932, 1933, 1934, and 1935. The policy contained the following provision for suspension in case of nonpayment of premiums:
Attached to and made a part of the policy was a "Standard Mortgage Clause," which, so far as pertinent, reads as follows:
The premium note given by the mortgagor to the insurer contained this provision: "And it is hereby agreed that in case any one of the installments herein named shall not be paid at maturity * * * this Company shall not be liable for loss during such default, and the said Policy shall lapse until payment is made to this Company at the Western Department at Chicago. * * *"
The policy was apparently in the possession of the mortgagee, but it had no copy of the premium note.
On June 27, 1932, the mortgagor paid the first installment due upon the note. On June 20, 1932, prior to the receipt of this installment, the insurer had written the following letter to the mortgagee:
The mortgagor did not pay the installment of premium due June 1, 1933, nor did he pay any of the annual installments maturing thereafter. On June 19, 1933, the insurer wrote a letter to the mortgagee, which was received by it on June 21, 1933, calling its attention to the fact that the premium installment due June 1, 1933, had not been paid, and demanding payment thereof from the mortgagee. This letter and the letter of June 20, 1932, above quoted, were in all material respects identical in form, except that the letter of June 19, 1933, referred to the nonpayment of the June 1, 1933, installment of premium, and did not contain the fourth paragraph of the letter of June 20, 1932, relative to suspension of the insurance if the premium was not paid by the mortgagee within ten days. The mortgagee did not pay the June 1, 1933, premium installment or any of the succeeding installments. No payments of premium were made by any one to the insurer after June 27, 1932.
The policy was not canceled, and the insurer did not surrender the premium note. The mortgagee received no further communications from the insurer prior to April 16, 1935. On that date, which was nearly two years after default in premium payments, the insured dwelling was destroyed by fire, causing a loss of $4,700. The mortgagee then demanded from the insurer payment of the loss. The insurer denied liability, and this action was commenced.
The defense of the insurer was that the mortgagor and the mortgagee were both in default for nonpayment of premium, and that the insurance, at the time the loss occurred, was, by the terms of the policy, suspended.
In its reply, the mortgagee admitted default in the payment of premium installments due June 1, 1933, and thereafter, but alleged that its contract with the insurer was never canceled nor suspended, and that the insurer, by retaining the premium note, had waived default in the payment of premiums.
Trial by jury was waived, and the issues were submitted to the trial court, which held that the default in the payment of premiums by the mortgagee suspended the insurance as to it, that the suspension was in effect at the time of the loss, and that there had been no waiver of this default by the insurer. Judgment for defendant was entered, and this appeal followed.
Three questions are presented for the determination of this court:
(1) Did the failure of the mortgagee to pay, upon demand, the installment of premium due June 1, 1933, cause a suspension of the insurance as to the mortgagee?
(2) Was the retention of the premium note by the insurer after default in the payment of premium installments a waiver of such default?
(3) Did the trial court commit error in admitting the premium note in evidence?
1. The mortgagee contends that the standard mortgage clause, together with the policy to which it was attached, created a contract of insurance between the mortgagee and the insurer entirely separate and distinct from the contract which existed between the mortgagor and the insurer, and that the suspension clause of the policy was no part of the contract of insurance between the insurer and the mortgagee. The mortgagee argues, in effect, that the terms of its contract with the insurer are those found in the mortgage clause, supplemented by only such provisions of the policy as are essential to make the contract of insurance complete, and are unaffected by any of the policy provisions antagonistic to the interests of the mortgagee.
The insurer, while conceding that an independent contract of insurance was created between the mortgagee and the insurer by the mortgage clause, contends that such contract consists of the provisions of the mortgage clause together with all pertinent provisions of the policy, including the suspension clause.
In support of its contention that the contract of insurance between it and the insurer did not contain the suspension clause of the policy, the mortgagee relies upon the rule announced in Eddy v. London Assurance Corporation, 143 N.Y. 311, 38 N.E. 307, 25 L.R.A. 686; Reed v. Firemen's Insurance Co., 81 N.J.Law, 523, 80 A. 462, 35 L.R.A.(N.S.) 343, and similar cases.
In the Eddy Case, the New York Court of Appeals, in determining whether the mortgagee's right of recovery was affected by a clause...
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