Walker v. Queen Ins. Co.

• Decision Date: 02 February 1926
• Docket Number: 11914.
• Parties: WALKER v. QUEEN INS. CO. et al.
• Court: South Carolina Supreme Court

134 S.E. 263

136 S.C. 144

WALKER v. QUEEN INS. CO. et al.

No. 11914.

Supreme Court of South Carolina

February 2, 1926

Appeal from Common Pleas Circuit Court of Richland County; M. S Whaley, County Judge.

Action by Lula A. Walker against the Queen Insurance Company and others. Judgment for plaintiff, and defendant named appeals. Reversed, and remanded for judgment.

Watts J., and Gary, C.J., dissenting.

Frank G. Tompkins, of Columbia, for appellant.

Graydon & Graydon, of Columbia, for respondent.

COTHRAN J.

I do not agree with the conclusion announced in the opinion of Mr Justice Watts; on the contrary, I am convinced that the presiding judge wrongly directed a verdict in favor of the plaintiff, and should, at least, have submitted to the jury the defenses interposed by the insurance company. I will endeavor to make the grounds of this conviction intelligible.

This is an action upon a policy of fire insurance issued July 21, 1921, to T. J. Walker, husband of the plaintiff, Lula A. Walker, in the sum of $2,000, covering a dwelling house in the city of Columbia, which was totally destroyed by fire on March 21, 1923.

It is conceded that although the policy was issued in the name of T. J. Walker, the title to the property was in his wife. At the hearing of this appeal the counsel for the insurance company announced that the insurance company did not seek to escape liability upon this ground, although the policy provides that it shall be void "if the subject of insurance be a building on ground not owned by the insured in fee simple." Hence the matter may be dismissed without further consideration and the case treated as if the policy had been issued to Mrs. Walker.

The policy contained a provision that the insurance company would not be liable for loss or damages occurring while the insured had other insurance on the property, whether valid or not, in the absence of a written agreement of the company permitting such additional insurance. It is conceded that in January, 1923, just before the fire in March of that year, Mrs. Walker procured additional insurance under a policy issued to her by Atlas Insurance Company, for $2,000 upon the property; that there was no written agreement of the company permitting this; that the Atlas policy was in force at the time of the fire; and that Mrs. Walker collected the full amount of the policy.

There was a further provision in the policy, that, in case of any other insurance upon the property (evidently referring to other permitted insurance), the company should not be liable under the policy for a greater proportion of the loss or damage sustained than the amount of the policy bore to the total insurance, whether valid or not and whether collectable or not.

The agreed valuation of the property under the "valued policy" statute of this state, at the time of issuing the policy was $2,800. At the time the policy was issued, Mrs. M. S. Habenicht held a mortgage upon the property, executed by Mrs. Walker to secure a loan of $2,000. The policy contained the usual standard mortgage clause providing that, in the event of loss or damage, the insurance should be payable to Mrs. Habenicht, mortgagee, as her interest might appear. An important provision in this connection was that, as between the mortgagee and the company, the insurance, as to the interest of the mortgagee only, should not be invalidated by any act or neglect of the mortgagor, nor by certain other matters therein enumerated. The mortgage clause also provided that, in the event that the company should pay the mortgagee any sum for loss or damage, and should claim that, as to the mortgagor or owner, no liability therefor existed, the company should be subrogated to all the rights of the mortgagee under securities held as collateral to the mortgage debt.

After the fire claim was made by T. J. Walker through his attorneys, acting also for Mrs. Habenicht, for the insurance, a nonwaiver agreement was executed, and upon investigation the insurance company learned the trouble about the title, and the fact of other insurance, and declined the claim. Thereafter suit was commenced upon the policy in the name of Mrs. Habenicht, the mortgagee, but subsequently, in consequence of her objection to the suit being prosecuted in her name, T. J. Walker was substituted as plaintiff. That suit resulted in a nonsuit, I assume, upon the ground that the policy was issued to Mr. Walker whilst the title to the property was in Mrs. Walker.

Thereafter on or about February 11, 1924, Mrs. Walker borrowed through Mr. Belser, attorney, $4,000 from a client of his and secured the note therefor by a mortgage upon the lot upon which the dwelling house insured had stood. Two thousand dollars was borrowed to pay off the Habenicht mortgage and $2,000 was to be used in replacing the burnt house. Mr. Belser gave his personal check to Mrs. Habenicht for the amount of the mortgage and the same was marked "fully satisfied" on February 11, 1924, and so entered upon the record. Four days thereafter, on February 15, 1924, Mrs. Habenicht executed a paper purporting to assign to T. J. Walker all of her right, title, and interest in the policy in question. Thereafter on May 13, 1924, Mrs. Walker instituted the present action, making parties defendant, along with the insurance company, Mrs. Habenicht, and her husband, T. J. Walker.

The foundation of the plaintiff's action is that, by the payment of the Habenicht mortgage, she has been subrogated to all of the rights of Mrs. Habenicht in the mortgage and in the policy of insurance which was made payable to her, free from any defenses which the insurance company may have had in an action by the plaintiff upon her original rights under the policy.

The defense of the insurance company is predicated upon the theory that there was no subrogation of Mrs. Walker as claimed above, and that the action of the plaintiff upon the policy, after the mortgage had been paid and marked satisfied, extinguished, became subject to the same defenses that would have been available, had there been no mortgage clause in the policy at all.

The insurance company therefore set up the following defenses, as if there had been no mortgage clause and the plaintiff had sued upon the policy in that shape: (1) As a ground of total immunity from liability under the policy, that in January, 1923, while the policy was in force, the insured took out additional insurance of $2,000, in the Atlas Insurance Company, covering the same property, without having obtained from the company a written agreement permitting such additional insurance, as provided for in the policy; (2) as a ground of partial immunity, that, if the policy should not be held avoided for the reason stated above, in toto, the company, under the terms of the policy and the statute law of the state, can be held liable for only a proportionate amount of the insurance carried in the policy. Other defenses are set up in the answer which, in the view that I take of the matter, need not be considered.

There appears to be little, if any, controversy as to the facts hereinbefore stated. At the conclusion of the evidence the defendant company moved for a directed verdict in its favor, upon the ground that the plaintiff was not entitled to be subrogated to the rights of the mortgagee in the policy, and that it appeared undisputed that additional insurance had been taken out by the plaintiff. The motion was refused. It does not appear in the record for appeal that the plaintiff made a similar motion. The bare statement is made:

" The Judge directed a verdict in favor of the plaintiff in the full amount of the policy upon which the suit was brought."

His reasons therefor are not stated. The direction of a verdict for the plaintiff, however, can be sustained only upon the theory, contended for by her counsel, that by the payment of the Habenicht mortgage, the plaintiff became subrogated to all the rights of Mrs. Habenicht in the mortgage and in the policy, free from any defense which the insurance company may have had in an action by the plaintiff in her own rights. It is manifest that, if this view be incorrect and the plaintiff cannot shield herself under the wing of the Habenicht mortgage, the defense of the insurance company must either have been sustained upon the motion for a directed verdict or submitted to the jury. From the judgment entered upon the directed verdict in favor of the plaintiff, the defendant insurance company has appealed upon exceptions hereinafter considered.

I think that it sufficiently appears from the foregoing statements that the principal question in this appeal is that of subrogation. Can the plaintiff stand in the shoes of the mortgagee, or must she stand in her own?

As between the insurance company and the mortgagee, under the mortgage clause, the mortgagee occupies a much more favorable position than the mortgagor or owner. According to the express terms of that clause, "the insurance, as to the interest of the mortgagee only therein, shall not be invalidated by any act or neglect of the mortgagor or owner of" the property, nor by certain other matters mentioned therein, which as between the company and the insured, are specifically declared in the policy sufficient to invalidate it. For instance, as between the company and the insured, among other things, the policy provides:

"This entire policy shall be void unless otherwise provided in writing added hereto: (a) If the interest of the insured be other than unconditional and sole ownership; or (b) if the subject of insurance be a building on ground not owned by the insured in fee simple; or (c) if with knowledge of the insured foreclosure proceedings be commenced or notice given of the sale of any

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