Source: http://masscases.com/cases/app/2/2massappct142.html
Timestamp: 2019-04-24 02:22:35+00:00

Document:
Present: HALE, C.J., GOODMAN, & GRANT, JJ.
BILL IN EQUITY filed in the Superior Court on March 17, 1970.
The suit was heard by Roy, J., on a master's report.
Joseph M. Cohen for William B. Strong, Sr., trustee.
John M. Crean for Warren Five Cents Savings Bank of Peabody.
Edward Nappan for Merchants Mutual Insurance Company.
Ralph Davis (Allen B. Schwartz with him) for Duco Associates, Inc. & another.
report and summaries of evidence relating to certain of the objections. The court confirmed the master's report and entered a final decree declaring that the insurer's cancellation of the policies on the plaintiff's premises "was valid and in accordance with the provisions of the insurance contract between the petitioner and the . . . [insurer]," that the bank's consequent possession of the premises was justified by its mortgage, and that the possession thereafter taken by the second mortgagee was also valid. The decree further declared the indebtedness of the plaintiff to the second mortgagee as of October 29, 1970, and that none of the defendants was liable to the plaintiff in respect to any matter alleged in the bill. The case is here on the plaintiff's appeal from an interlocutory decree confirming the master's report, from an order discharging a lis pendens and from the final decree.
expense involved in foreclosure." By letter of October 21 the bank notified the plaintiff's attorney that it was prepared to turn over the property to the plaintiff upon payment of $2,778.54, which was itemized, plus "any legal fees in connection with the matter." The letter also advised the plaintiff's attorney that "[t]he account has been turned over to our attorney to start foreclosure proceedings, and unless the above total is paid by October 31, 1969, he will be instructed to proceed accordingly." The plaintiff, however, made no further payments to the bank; his last payment was on September 12, 1969, representing the monthly payment due on August 15, 1969.
The plaintiff's primary attack is on the declaration in the decree that the notices of cancellation by the insurer were valid, and from that he argues that the bank wrongfully took possession. We agree that the cancellation notices were invalid as between the plaintiff and the insurer; but it does not follow that the bank's possession was wrongful.
below: "AGENT NOTE: The above additional information must appear on original copy of Cancellation Notice mailed to the Insured and on the carbon copies. Place an `X' in the box at the left of the condition applying." No "X" was placed in any of the boxes on the cancellation notices sent to the plaintiff, and the amounts were left blank.
It is clear from the master's report that when the cancellation notices were sent there was an "excess of paid premium . . . above the pro rata premium for the expired time." [Note 9] These unearned premiums were not tendered -- as appears from the failure to check the first statement under the heading, "PREMIUM PAID" (fn. 8) -- and the failure to check the last statement indicated, if anything, that nothing would be refunded on demand. The notices of cancellation were thus ineffective to cancel the insurer's liability on the policies to the plaintiff. "A notice of cancellation of insurance must be definite and certain. . . . Conditions imposed with respect to giving notice must be strictly complied with . . . [citing Michelson v. Franklin Fire Ins. Co. 252 Mass. 336, 340 (1925)]." Gulesian v. Senibaldi, 289 Mass. 384, 387 (1935). Fields v. Parsons, 353 Mass. 706 (1968). See White v. Edwards, 352 Mass. 655, 657 (1967). And "[c]ompliance with the provision of the policy that the notice of cancellation state that the excess premium will be refunded on demand is essential to a valid cancellation upon notice." Couch, Insurance (2d ed.) Section 67:155, p. 489. 43 Am. Jur. 2d, Insurance, Section 405, p. 450.
While we have found no case in which the Supreme Judicial Court has dealt with these specific circumstances, our decision is in accord with those from other jurisdictions. See Petersen v. Ohio Cas. Ins. Co. 131 Neb. 128, 137 (1936), collecting cases from a number of other jurisdictions; Allied Concord Financial Corp. v. Sterling Ins. Co. 251 S. C. 38, 40-41 (1968); Pellets, Inc. v. Millers Mut. Fire Ins. Co. 241 So. 2d 550, 553 (La. App. 1970), cert. den. 257 La. 607 (1971). The case of First Natl. Bank in Chicago Heights v. Home Ins. Co. 350 F. 2d 577 (7th Cir. 1965), cited by the insurer, is distinguishable since the policies in that case had been surrendered with the consent of the insured, who thus in effect waived any defect in the notice. See Michelson v. Franklin Fire Ins. Co. 252 Mass. 336 (1925), in which the court, after holding that provisions for cancellation had not been strictly complied with, sent the case back for a new trial on the question whether there had been a surrender.
have the insurance restored until October 8) as a breach of the covenant in the mortgage "[t]o insure . . . in companies satisfactory to the mortgagee" as well as a breach of the statutory condition. The bank's entry and possession on September 16, 1969, was therefore proper. No formal notice or demand was necessary. Joyner v. Lenox Sav. Bank, 322 Mass. 46, 53 (1947). See Miller v. Perry, 333 Mass. 155, 159 (1955).
(1939). Buckley v. White, 328 Mass. 653 (1952). Cf. DiNardo v. Dovidio, 312 Mass. 398, 404-405 (1942).
The plaintiff also contends that he is entitled to damages because "the bank conducted its possession negligently in that it failed to comply with the requirements of G. L. c. 244, Section 20 for an accounting." We are of the opinion that Section 20, which "appears under the subtitle `Redemption'" (Krikorian v. Grafton Co-operative Bank, 312 Mass. 272, 276 ) see G. L. c. 244, Sections 19, 21, 22, 24), cannot (without more; cf. Sandler v. Silk, 292 Mass. 493, 498 ) be made the basis of a cause of action which, as the plaintiff's brief indicates, is essentially in tort and unconnected with a claim for redemption -- which this bill is not -- or with a similar claim involving the satisfaction of the mortgage debt, e.g., a suit for a deficiency (City Inst. for Sav. v. Kelil, 262 Mass. 302, 307 ) or for a surplus (Davis v. Newburyport Five Cents Sav. Bank, 311 Mass. 377, 386-387 ). See Osborne, Mortgages (2d ed. 1970) Section 165, p. 287; Glenn, Mortgages (1943) Section 206, p. 1035. The purpose of Section 20 is to enable the mortgagor to make a proper tender; but whether or not a proper tender is made does not affect the original possession taken for default or a subsequent sale. Sandler v. Green, 287 Mass. 404, 407 (1934); the court said, "Such a tender gave the plaintiffs no rights at law, but merely furnished them the foundation for an equitable remedy by suit for redemption under G. L. (Ter. Ed.) c. 244, Section 21, of which they have not, on this record, availed themselves. Nor are the plaintiffs seeking here the equitable relief under G. L. (Ter. Ed.) c. 244, Section 22, which may be had without tender."
purporting to cancel insurance policies numbered FE214676 and FE214677 on petitioner's property located at 458 Beacon Street, Boston, Massachusetts, were in violation of the standard form cancellation clause in those policies and G. L. c. 175, Section 99 (prior to St. 1969, c. 425, Section 1) and were therefore ineffective to cancel those policies." and (b) by renumbering paragraphs 3 to 8 inclusive to be paragraphs 2 to 7 inclusive, and as so modified the final decree is affirmed. The appeal from the interlocutory decree confirming the master's report and the appeal from the order allowing a motion to discharge the lis pendens raise no questions not disposed of in this opinion; the interlocutory decree is affirmed and, treating the order allowing the motion to discharge the lis pendens as a decree, it is also affirmed. Costs of appeal are not to be awarded to any party.
[Note 1] Warren Five Cents Savings Bank of Peabody, Allen B. Schwartz and Duco Associates, Inc.
[Note 2] That mortgage was also made "upon the STATUTORY CONDITION" (G. L. c. 183, Section 20), which includes a similar provision that the mortgagor "shall keep the buildings . . . insured against fire in a sum not less than the amount secured by the mortgage . . . for the benefit of the mortgagee . . . and assigns, in such form and at such insurance offices as they shall approve . . . ."
[Note 3] A cancellation notice was also sent on a third policy written July 18, 1968. This cancellation has not been regarded as material by the parties, perhaps because the two policies of October 23, 1968, were in sums sufficient to cover the mortgage debt.
[Note 4] While the letter of September 3 referred specifically only to the policy issued on July 18, 1968 (see fn. 3), there is nothing to indicate that this in any way misled the plaintiff to his prejudice prior to September 10 when, at the latest as appears from the master's report, the matter was clarified.
[Note 5] We are informed that on June 21, 1971, there was a foreclosure sale and auction and that the property was sold pursuant to the second mortgage.
[Note 6] "This policy may be cancelled at any time by this company by giving to the insured and to any mortgagee to whom this policy is payable a 10 day's written notice of cancellation with or without tender of the excess of paid premium above the pro rata premium for the expired time, which excess, if not tendered, shall be refunded on demand. Notice of cancellation shall state that said excess premium (if not tendered) will be refunded on demand" (emphasis supplied).
"1. Please return this policy to us with remittance of $. . . . ., being the amount of earned premium for time it has been in force at date of cancellation.
"2. As the premium due has not been received by this Company for this insurance, there is none to be returned."
"1. Enclosed find $. . . . ., being amount of return premium at pro rata rate for the unexpired term of this policy.
"2. The excess of paid premium, if any, above the pro rata premium for the expired time, (if not tendered) will be refunded upon demand."
[Note 9] The master found that on each of the two policies in dispute $945 of the $1,278 premium had been paid. He also found that the policies were effective on October 22 of 1968 for a term of three years, and that they were cancelled on August 29, 1969, about twenty-eight per cent of the way into the term. Thus it would appear that the "pro rata premium for the expired time" on each policy (see fn. 6) was twenty-eight per cent of $1,278, or about $358, while the "paid premium" was $945, leaving an "excess" of about $587 to be returned to the plaintiff.

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