Westchester Fire Ins. Co. v. Norfolk Building & Loan Ass'n

• Decision Date: 02 August 1926
• Docket Number: No. 7375.,7375.
• Citation: 14 F.2d 524
• Parties: WESTCHESTER FIRE INS. CO. OF NEW YORK v. NORFOLK BUILDING & LOAN ASS'N.
• Court: U.S. Court of Appeals — Eighth Circuit

14 F.2d 524 (1926)

WESTCHESTER FIRE INS. CO. OF NEW YORK v. NORFOLK BUILDING & LOAN ASS'N.

No. 7375.

Circuit Court of Appeals, Eighth Circuit.

August 2, 1926.

Matthew A. Hall, of Omaha, Neb. (Raymond G. Young and Harvey M. Johnsen, both of Omaha, Neb., on the brief), for plaintiff in error.

M. S. McDuffee, of Norfolk, Neb. (Donald D. Mapes, of Norfolk, Neb., on the brief), for defendant in error.

Before LEWIS, Circuit Judge, and TRIEBER and KENNAMER, District Judges.

KENNAMER, District Judge.

This action was instituted by the Norfolk Building & Loan Association, a mortgagee, to recover on a contract of fire insurance issued by the Westchester Fire Insurance Company of New York, on the 29th day of December, 1917, to E. A. Dimmitt, as the owner of the insured property, described as lot 19, in block 15, of the original town of O'Neill, Hope county, Neb. At the time of the issuance of the policy of fire insurance, E. A. Dimmitt was indebted to the Building & Loan Association in the amount of $6,000 which debt was evidenced by promissory notes executed by himself and his wife, Maude Dimmitt, and secured by a mortgage upon the above-described property.

There was attached to the policy of insurance a uniform Nebraska mortgage clause, or rider, as follows:

"Subject to all conditions of said policy not specifically waived herein, loss or damage, if any, under this policy, shall be payable to Norfolk Building & Loan Association as mortgagee (or trustee) as interest may appear, and this insurance to the interest of the mortgagee (or trustee) only therein shall not be invalidated by any acts of neglect of the mortgagor or the owner of the within described property, or by any foreclosure or other proceedings or notice of sale relating to the property or by any change of the title or ownership of the property, or by the occupation of the premises for purposes more hazardous than are permitted in this policy. Provided, that in case the mortgagor or owner shall neglect to pay any premiums 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 the 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 have the right, on like notice, to cancel this agreement. * * *"

Subsequent to the issuance of the policy of fire insurance, E. A. Dimmitt entered into a contract with one Gilmore with a view of trading his equity in the real estate covered by the mortgage, but the sale was never consummated, so far as the record herein discloses. However, Gilmore asserted a claim against Dimmitt and attempted to establish a lien against the property by reason of the contract. For the sole purpose of forestalling the establishment of a lien or claim against his property, Dimmitt permitted his payments to the Building & Loan Association to become delinquent, and upon advice of counsel procured the foreclosure of the mortgage by the Norfolk Building & Loan Association. Gilmore was made a party to the foreclosure proceedings, but asserted no claim in the action. A decree of foreclosure and sale of the property were ordered. Maude Dimmitt, wife of E. A. Dimmitt, was the successful bidder for the property, and upon confirmation of the sale the sheriff of Hope county executed a deed to her. The only payments made by the Dimmitts upon purchasing the property at the foreclosure sale were the delinquent payments due on the original loan made by the Building & Loan Association to E. A. Dimmitt, the costs of the foreclosure suit, and the sum of $162.82. By virtue of a prearranged agreement between the Dimmitts and the Norfolk Building & Loan Association, the original loan made to E. A. Dimmitt in the sum of $6,000 was continued in force by the execution by Maude Dimmitt and E. A. Dimmitt of a new note and mortgage evidencing the original debt.

The trial court found that the new note and mortgage were not given in payment of the original debt but were executed only as a renewal of, or as new evidence of, the original obligation; that the sole purpose of procuring the foreclosure on the part of the Dimmitts was to hinder and forestall Gilmore in establishing or asserting a lien or claim against the property.

The case was submitted to the trial court, a jury having been waived, and judgment was entered in favor of the plaintiff, the Norfolk Building & Loan Association, for the amount of the policy, together with interest and attorneys' fees. The insurance company prosecutes this appeal to reverse the judgment of the trial court.

The defendant insurance company, by proper assignments, presents a number of alleged errors, which, briefly summarized, resolve themselves into the proposition of determining whether or not the change in the title from E. A. Dimmitt to Maude Dimmitt voided the policy of fire insurance by reason of the condition contained in the mortgage clause or rider attached to the policy providing that a change of title without the consent of the insurance company terminated the policy, and the proposition that the surrender of a right for a valid consideration works an estoppel on the party surrendering to claim the continued existence of that right.

It is urged by the defendant that the foreclosure proceedings extinguished the interest of the mortgagee, the Norfolk Building & Loan Association, which interest was insured by the contract of insurance, the subject-matter of this suit.

It is well settled that a mortgage clause in an insurance policy only refers to a mortgage then in existence and does not cover any subsequent mortgage interest (Attleborough Savings Bank v. Security Insurance Co., 168 Mass. 147, 46 N. E. 390, 60 Am. St. Rep. 373); also, a mortgagee's interest in the mortgaged property is entirely extinguished by...