Whitehead v. Wilson Knitting Mills
| Decision Date | 28 September 1927 |
| Docket Number | 61. |
| Citation | 139 S.E. 456 |
| Parties | 194 N.C. 281, 56 A.L.R. 674 v. WILSON KNITTING MILLS. WHITEHEAD |
| Court | North Carolina Supreme Court |
Appeal from Superior Court, Wilson County; Nunn, Judge.
Action by J. S. Whitehead against the Wilson Knitting Mills. Judgment of partial recovery for plaintiff was remanded on appeal to the superior court with direction that a judgment of nonsuit be entered, and plaintiff appeals. Affirmed.
Civil action to recover of defendant premiums paid by plaintiff on fire insurance policies, tried originally in the Wilson general county court, where there was a partial recovery for the plaintiff. On appeal to the superior court, the cause was remanded with direction that a judgment of nonsuit be entered in the case.
The fact situation is as follows:
(1) In March, 1920, J. T. O'Briant executed to the defendant a purchase-money deed of trust on land situate in Wilson county, to secure an indebtedness of $30,000, in which, among other things, "The said O'Briant agrees to and with the said knitting mills company, that he will cause the buildings located upon said premises to be insured against loss or damage by fire in at least the sum of $25,000.00, and that he will pay all premiums thereon and that the said policy or policies shall be made payable to the said trustee for the benefit of the said knitting mills, and that if the said O'Briant shall fail, neglect or refuse to effect such insurance and to pay the premiums thereon, then the said knitting mills may effect such insurance and pay all premiums thereon, and all premiums paid by it shall be due and payable within 30 days from date of payment and shall be secured in same manner as the notes or bonds herein recited are secured."
(2) Pursuant to this stipulation, the said O'Briant, on March 25, 1920, procured and had the plaintiff, as agent, to issue to him three fire insurance policies of $10,000 each on the buildings located on the premises above mentioned. Each of said policies was issued for one year and contained, or had attached thereto, a "New York standard mortgage clause" in which, among other things, it was provided that any loss or damage arising under said policy should be payable to the trustee, as his interest might appear, etc.
(3) Upon the execution of the policies, they were delivered to the trustee, named in the deed of trust, who immediately forwarded them to the defendant at its main office in Tarboro, where they were received and accepted by the defendants, and have been in its possession ever since.
(4) One of the provisions, appearing in the standard mortgage clause attached to each of the policies, is as follows:
"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."
(5) Though repeated demands were made upon J. T. O'Briant to pay the premiums on these policies, he neglected to do so for more than 60 days; whereupon the plaintiff notified the trustee of the nonpayment of said premiums, and was advised that, in the opinion of the trustee, "both the mortgagor and the mortgagee are liable for the premiums."
(6) Acting upon the assumption of liability on the part of both O'Briant and the defendant for the payment of said premiums, the plaintiff, in accordance with local custom paid, out of his own personal funds, the premiums, amounting in the aggregate to $495, to the companies issuing the policies.
(7) Thereafter, on September 5, 1920, the plaintiff, for the first time, notified the defendant of the nonpayment of said premiums and demanded payment thereof. The defendant declined and refused to pay the same. The policies were not surrendered by the defendant, nor were they canceled by the plaintiff. They remained in full force and effect until March 25, 1921, the date of their expiration.
(8) The plaintiff had the right at any time to cancel said policies or to have them canceled, for nonpayment of premiums, also the right to cancel them, as to the interest of the mortgagee, by giving the mortgagee 10 days' written notice of cancellation. C. S. § 6437. Had this course been pursued, the defendant would have taken out other insurance and added the amount of premiums, required to be paid therefor, to O'Briant's indebtedness under the terms of the deed of trust.
(9) Plaintiff has been unable to collect for the premiums in question, and O'Briant is now financially unable to pay them. The plaintiff is seeking in this action to hold the Wilson Knitting Mills liable for the payment of said premiums under the terms of the policies and the deed of trust.
From the order and judgment of the superior court, remanding the cause with direction that it be nonsuited, the plaintiff appeals, assigning error.
Law will not aid mere volunteer or one seeking to become creditor without right or necessity.
John H. Jennings, of Wilson, for appellant.
John L. Bridgers, of Tarboro, for appellee.
The appeal presents, for the first time in this jurisdiction, the question as to whether the clause, "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," incorporated in the New York standard mortgage clause, attached to each of the policies, for the unpaid premium on which it is sought to hold the defendant liable, is to be construed as a covenant on the part of the mortgagee to pay any premium neglected or omitted to be paid by the owner or mortgagor, or merely as a condition which, if not fulfilled, will bar the mortgagee from any right of recovery for loss or damage under the policy of insurance. The plaintiff contends that the words in this clause import a contract on the part of the mortgagee to pay the premium if the mortgagor fail or neglect to pay it, while the defendant says that the clause in question should be construed as a condition, and not as an agreement.
According to the clear weight of authority in other jurisdictions, where the clause in question has been construed, it is held to be a condition, and not a covenant. In fact, in but two cases has a contrary conclusion been reached, and they have not been followed in the more recent decisions.
Apparently, the earliest reported case, dealing with the matter, is St. Paul F. & M. Ins. Co. v. Upton (1891) 2 N.D. 299, 50 N.W. 702. There it was said that the mortgage clause, like the ones now before us, amounted to a promise on the part of the mortgagee to pay the premium, due on the insurance policy, in case the mortgagor failed to pay it.
This case was followed, with like result, in Boston Safe D. & T. Co. v. Thomas (1898) 59 Kan. 470, 53 P. 472.
But as opposed to these North Dakota and Kansas cases, in which the clause in question was held to be a covenant and not a condition, the following South Dakota, New York, Rhode Island, Texas, California, and Wyoming cases, supported by two from Missouri, hold it to be a condition, and not a contract or covenant; Ormsby v. Phenix Ins. Co. (1894) 5 S.D. 72, 58 N.W. 301; Coykendall v. Blackmer (1914) 161 A.D. 11, 146 N.Y.S. 631; Home Ins. Co. v. Union Trust Co. (1917) 40 R.I. 367, 100 A. 1010, L. R. A. 1917F, 375; Johnson, Sansom & Co. v. Fort Worth State Bank (Tex. Civ. App. 1922) 244 S.W. 657; Schmitt v. Gripton (Cal. App. 1926) 247 P. 505; Farnsworth v. Riverton Wyoming Refining Co. (Wyo. 1926) 249 P. 555. And in support of the same conclusion are the cases of Trust Co. v. Phoenix Ins. Co., 201 Mo.App. 223, 210 S.W. 98; Trust Co. v. German-American Ins. Co. (1919) 201 Mo.App. 223, 210 S.W. 98, both being disposed of in a single opinion.
The position of the majority of the courts is perhaps as well stated in Coykendall v. Blackmer, 161 A.D. 11, 146 N.Y.S. 631, as in any other case. The facts were that George Blackmer, as mortgagee of certain real property, became beneficiary under the standard mortgage clauses attached to a number of fire insurance policies, which, at the request of the owner and mortgagor, had been issued and delivered to the mortgagee by the insurance agent, the plaintiff in the case. Nine of the policies had been issued in 1907 for the term of three years, and renewed for a like term in 1910; and two were for one year each. The action was brought against the executrix of the estate of the mortgagee. The mortgagee procured none of the policies, nor were they issued at his request, but all were mailed to and received and retained by him, whether with the...
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