Weems v. American Sec. Ins. Co., 54792

Decision Date02 May 1984
Docket NumberNo. 54792,54792
Citation450 So.2d 431
CourtMississippi Supreme Court
PartiesMargaret C. WEEMS, Appellant, v. AMERICAN SECURITY INSURANCE COMPANY, Appellee.

William J. Johnson, Clinton, for appellant.

David M. Sessums, Varner, Parker & Sessums, Vicksburg, for appellee.

Before WALKER, P.J., and HAWKINS and ROBERTSON, JJ.

ROBERTSON, Justice, for the Court:

I.

This civil action has been brought by a mortgagee following a fire loss of the mortgaged and insured premises. The insurance company defended charging that there had been a material change of ownership or occupancy or a material increase of hazard, that the mortgagee had knowledge of these facts, and that the mortgagee failed timely to give notice of same.

A jury of the Circuit Court of Hinds County, Mississippi, returned a verdict in favor of the insurance company. On the evidence adduced at trial, we hold that a peremptory instruction should have been given in the insured mortgagee's favor. Accordingly, the judgment below is reversed, and this action is remanded for a determination of damages and such other proceedings as may be appropriate.

II.

On December 14, 1981, John C. Barlow contracted with American Security Insurance Company ("American Security") for fire insurance on Barlow's home in the amount of $245,000. American Security was the Defendant below and is the Appellee here. The policy contained a standard mortgagee clause in favor of Margaret C. Weems. Mrs. Weems was the ex-mother-in-law of Barlow and was the holder of a $30,000 note from Barlow secured by a deed of trust on the home. Mrs. Weems was the Plaintiff below and is the Appellant here.

At the time the insurance contract was written Barlow was deeply in debt. Several judgments had been enrolled against him. A federal tax lien had been filed against him. He had been indicted on two counts of forgery. Vicksburg College, the operation of which had for the past ten years been Barlow's principal livelihood, had closed. At the time Barlow had no visible means of support.

On March 16, 1982, three months after the issuance of the policy in question, the insured premises burned to the ground. As mortgagee Mrs. Weems made claim on the policy. American Security denied the claim on grounds of an alleged change of condition or increase of hazard and the mortgagee's failure to notify the insurance company thereof. Specifically, American Security invokes the language of the policy, mandated by Miss.Code Ann. Sec. 83-13-9 (1972), which provides

"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."

As revealed by the record, the facts relevant to whether the above quoted policy provision should be called into the play are these: First, on March 5, 1982, 11 days prior to the fire, Barlow pleaded guilty to the two counts of forgery and was sentenced to serve two four-year terms running concurrently with each other. Of course, Barlow vacated the residence immediately thereafter as he went to jail. The next day, March 6, 1982, American Security received knowledge that Barlow had vacated the premises and gone to jail. This information did not come from Mrs. Weems; rather, it was obtained when American Security's agent simply read about the matter in the newspaper. On March 6, 1982, the agent went to the jail to visit Barlow and advised Barlow that the policy would be cancelled. American Security in due course issued a notice of cancellation dated March 16, 1982, expressly providing that the policy would be cancelled on April 16, 1982.

The only other "changes" between December 14, 1981, the date the policy was originally issued, and March 16, 1982, the date of the fire, were (a) Barlow's status had changed from one merely indicted for forgery to one finally convicted of forgery and (b) Barlow had fallen even further behind on his debts.

In spite of this evidence, the jury rejected Mrs. Weems' claim and returned a verdict in favor of Defendant, American Security. Final judgment in favor of American Security was entered thereon. In due course Mrs. Weems' alternative motions for judgment notwithstanding the verdict or for a new trial were overruled. This appeal has followed.

III.

Appellant Weems' first assignment of error is that the trial court incorrectly saddled her with the burden of proving her compliance with the notice of change of circumstances or increase of hazard clauses of the policy. More specifically, Mrs. Weems argues that American Security's reliance upon this policy clause amounts to an affirmative defense and, as such, American Security bore the burden of proof with respect thereto. American Security answers by arguing that the matter is not an affirmative defense at all but rather a provision of the policy, compliance with which the claimant must show as a condition precedent to recovery.

At trial Mrs. Weems requested jury instruction C-2 which reads as follows "The Defendant claims an affirmative defense which is explained in later instructions. The burden of establishing this affirmative defense by a preponderance of the evidence rests upon the Defendant."

This instruction was denied, and Mrs. Weems assigns this denial as error.

We agree with Mrs. Weems that American Security bore the burden of proving noncompliance with the notice of change of circumstances or increase of hazard provision of the policy. We are dealing here with a condition subsequent. Corbin on Contracts Section 739. The clause in question provides that the policy shall become null and void, i.e., extinguished, as it relates to the mortgagee only upon the happening of a certain event. A contract that is conditioned to become void on a specified event is one subject to a condition subsequent. The burden of proving a condition subsequent rests upon the party seeking to show that the condition has occurred and that the obligation has been voided.

The point ultimately is of little consequence. The trial court did instruct the jury as follows:

"If you believe from a preponderance of the evidence in this case that there was at the time of the fire in question, an increase in either the physical or the moral hazards which came to the attention of the plaintiff, Margaret C. Weems, and that she failed to notify the insurance company thereof prior to the fire loss in question, then it will be your sworn duty as jurors to return a verdict for the Defendant."

This instruction correctly placed upon American Security, as insurer, and as the party invoking the condition subsequent, the burden of proving by a preponderance of the evidence that the increase of hazard did occur, that it came to Mrs. Weems' knowledge, and that she willfully failed to notify the company thereof. The instruction should have gone further and placed a similar burden on American Security on the change of ownership or occupancy issue. This error is of no moment in view of the disposition we make below.

IV.

The ultimate question is whether there was, as a matter of law, an issue for the jury on the question of whether a change of circumstances or increase of hazard had occurred of which...

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