U.S. Fire Ins. Co. v. Hecht

• Decision Date: 17 October 1935
• Docket Number: 7 Div. 339
• Parties: UNITED STATES FIRE INS. CO. et al. v. HECHT.
• Court: Alabama Supreme Court

164 So. 65

231 Ala. 256

UNITED STATES FIRE INS. CO. et al. v. HECHT.

7 Div. 339

Supreme Court of Alabama

October 17, 1935

Rehearing Denied Nov. 29, 1935

Appeal from Circuit Court, Etowah County; Paul Speake, Judge.

Action on a policy of fire insurance by Hugo Hecht against the United States Fire Insurance Company of New York and the National Liberty Insurance Company of America. From a judgment for plaintiff, defendants appeal. Transferred from Court of Appeals.

Affirmed.

Foreclosure or mortgage in ignorance of fact that house had burned held not to preclude mortgagee from recovering on fire policy with New York standard mortgagee clause, where foreclosure sale was for cash, no deed or memorandum of sale was made purchaser declined to pay, and foreclosure was treated as abandoned, since mortgagee is entitled to hold title as mortgagee against any bidder until bid is paid in manner prescribed by power, or until mortgagee becomes bound by agreement with successful bidder to execute conveyance and to become accountable to mortgagor for amount of bid.

See also, United States Fire Ins. Co. v. Smith, 164 So 70.

Count 4, claiming the sum of $627.47, of the defendants, avers that on February 5, 1932, defendant United States Fire Insurance Company, issued a fire insurance policy in the sum of $1,000 insuring the house described, located in the city of Gadsden, Etowah county, against loss by fire; that Thomas Smith was named as insured in said policy; that there was attached to said policy a New York Standard Mortgage clause (made Exhibit A to the complaint), payable to plaintiff as his interest may appear; that the house described in the policy, and covered by said policy and said mortgage clause, was totally destroyed by fire November 10, 1932, and that at the time of the fire and some time prior thereto plaintiff held a first mortgage covering said house, at which time there was due on said mortgage the sum of $627.47; that on the date of aforesaid fire said policy and mortgage clause were in full force and effect. It is further averred that defendant National Liberty Insurance Company reinsured the property or policy in question prior to the date of said fire, the reinsurance agreement being made Exhibit B to the complaint.

The instruments exhibited are as follows:

"No. 220

"(Revised 5-30)

"Mortgagee Clause with Full Contribution. (N.Y. Standard.)

"Loss or damage, if any, under this policy, shall be payable to Hugo Hecht as first mortgagee (or trustee), as interest may appear, and this insurance, as to the interest of the mortgagee (or trustee) only therein, shall not be invalidated by any act or neglect of the mortgagor or owner of the within described property, nor by any foreclosure or other proceedings or notice of sale relating to the property, nor by any change in the title or ownership of the property, nor by the occupation of the premises for purposes more hazardous than are permitted by this policy; Provided, That in case the mortgagor or owner shall neglect to pay any premium due under this policy, the mortgagee (or trustee) shall, on demand, pay the same.

"Provided, also, That the mortgagee (or trustee) shall notify this Company of any change of ownership or occupancy or increase of hazard which shall come to the knowledge of said mortgagee (or trustee) and, unless permitted by this policy, it shall be noted thereon, and the mortgagee (or trustee) shall, on demand, pay the premium for such increased hazard for the term of the use thereof; otherwise this policy shall be null and void.

"This Company reserves the right to cancel this policy at any time as provided by its terms, but, in such case this policy shall continue in force for the benefit only of the mortgagee (or trustee) for ten days after notice to the mortgagee (or trustee) of such cancellation, and shall then cease, and this Company shall have the right, on like notice, to cancel this agreement.

"In case of any other insurance upon the within described property, this Company shall not be liable under this policy for a greater proportion of any loss or damage sustained than the sum hereby insured bears to the whole amount of insurance on said property, issued to or held by any party or parties having an insurable interest therein, whether as owner, mortgagee or otherwise.

"Whenever this Company shall pay the mortgagee (or trustee) any sum for loss or damage under this policy and shall claim that, as to the mortgagor or owners, no liability therefor existed, this Company shall, to the extent of such payment, be thereupon legally subrogated to all the rights of the party to whom such payment shall be made under all securities held as collateral to the mortgage debt, or may at its option pay to the mortgagee (or trustee) the whole principal due or to grow due on the mortgage with interest, and shall thereupon receive a full assignment and transfer of the mortgage and of all such other securities; but no subrogation shall impair the right of the mortgagee (or trustee) to recover the full amount of his claim.

"It is understood and agreed that this clause does not apply to personal property.

"Attached to and forming part of Policy No. 34502 of the United States Fire Insurance Company, of New York.

"Loveman Insurance Agency

"Robert Loveman Agent.

"Manager.

"Note: Agents will sign and paste one on Policy, one on Daily Report, and one on Register."

"Reinsurance Agreement.

"It is the purpose of this contract to reinsure from May 20, 1932, the liability of the United States Fire Insurance Company as insurers under the several policies issued at its Gadsden Alabama agency to such parties for such amounts and to such expiration as are mentioned in the schedule attached hereto and made a part of this policy.

"It is understood and agreed that any expenses, legal or otherwise arising from any loss which may occur under any of the policies herein mentioned shall be borne by the National Liberty Insurance Company and it is further understood and agreed that the said National Liberty Insurance Company is bound by the terms and conditions of the several policies of the United States Fire Insurance Company as herein mentioned, which are entirely reinsured. The purpose of this transaction being to relieve the said United States Fire Insurance Company from any and all claims for which it may become liable under its policies as per schedule attached hereto, written through its Gadsden, Alabama Agency, any errors or omissions to be covered under this reinsurance policy from date thereof, provided prompt notice is given to the National Liberty Insurance Company and proper correction made by endorsement thereon.

"The said National Liberty Insurance Company, is hereby empowered to cancel or endorse any or all of the policies hereby reinsured, or to make any other changes therein as may be in its opinion necessary or desirable, and in all respects to act as though said reinsurance policies enumerated in the aforesaid schedule the National Liberty Insurance Company agrees to take charge of and adjust and pay same without expense to the United States Fire Insurance Company.

"It is further understood that any reinsurance effected by the United States Fire Insurance Company on policies hereby reinsured is cancelled from date of this policy, May 20, 1932, and does not extend to the protection of the National Liberty Insurance Company.

"Attached to and forming part of Policy No. 1.

"Cliff G. Key, State Agent."

The plea in abatement sets forth stipulations of the policy for proof of loss to be made by insured, and avers that neither insured (mortgagor) not plaintiff (mortgagee) before commencement of suit filed a proof of loss as required by the policy, wherefore suit is prematurely brought.

Coleman, Spain, Stewart & Davies and Frank M. Young, all of Birmingham, and O.R. Hood, of Gadsden, for appellants.

Inzer, Davis & Martin, of Gadsden, for appellee.

GARDNER Justice.

The suit is upon a fire insurance policy issued by defendant United States Fire Insurance Company to Thomas Smith, and included a reinsurance contract entered into by said company with defendant National Liberty Insurance Company of America. The plaintiff held a mortgage on the insured property, and the policy contained what is called a New York Standard or Union Standard, mortgagee clause, which is made exhibit to count 4, upon which for the plaintiff the cause was tried. This clause appears in the report of the...