Case Name: GIBBES MACHINERY CO. v. NIAGARA FIRE INS. CO.
Court: Supreme Court of South Carolina
Jurisdiction: South Carolina
Decision Date: 1922-04-25
Citations: 119 S.C. 1
Docket Number: 10877
Parties: GIBBES MACHINERY CO. v. NIAGARA FIRE INS. CO.
Judges: Mr. Chief Justice Gary and Mr. Justice Watts concur.
Reporter: South Carolina Reports
Volume: 119
Pages: 1–10

Head Matter:
10877
GIBBES MACHINERY CO. v. NIAGARA FIRE INS. CO.
(111 S. E. 805)
Insurance — Insurer Paying Insurance to Mortgagor With Knowl- . edge of Mortgage, Though Not of its' Provisions for Insurance for Mortgagee, Liable to Mortgagee. — Where mortgagor of auto took out fire policy thereon, payable to himself, reciting it was mortgaged to a certain company for a certain amount, and such mortgage was recorded, and contained agreement of mortgagor to insure and assign policy to mortgagee, the insurer, paying the policy to the mortgagor, after inquiring of the mortgagor as to the status of the mortgage, and being put on inquiry as to provision of mortgage as to insurance, though having no actual knowledge thereof, is liable to the mortgagee for the policy’s proceeds.
Note: On right of mortgagee to benefit of insurance taken in name of mortgagor, see note in 25 L. R. A. 305.
Before Whaley, J., Richland County Court, March, 1921.
Reversed.
Action by Gibbes Machinery Co. against Niagara Fire Insurance Co. From order refusing to sustain a demurrer to.the complaint, and from an order granting a new trial after a directed verdict for plaintiff, both parties appeal.
Messrs. Hunter A. Gibbes and Graydon & Graydon, for Gibbes Machinery Co.,
cite: Mortgagee’s interest in proceeds of insurance on mortgaged property: 101 U. S. 439; 14 R. C. b. 1367; 23 R. C. b. 211; 52 S. C. 315 and cases cited. Effect of notice from record: 72 S. C. 404; 43 S. C. 72; 6 Cyc. 1064; 89 S. C. 454; 14 S. C. 37; 35 S. C. 187; 70 S. C. 487; 18 How. 143. Adjustment with mortgagor not binding on mortgagee: 124 Mass. 126; 134 N. Y. 409. Chattel mortgagee is owner of chattels after condition broken: 44 S. C. 315; 46 S. C. 199; Bail Eq. 412; 108 S. C. 131; 85 S. C. 348; 105 S. C. 140; 1 Hill b. 291. Judge has no power to grant non-suit in equity case : 12 S. C. 97; 47 S. C. 307.
Messrs. Melton & Belser, for respondent,
cite: Equitable lien affects only those having notice of such lien:< Joyce, Ins., Sec. 3523; 52 S. C. 309; 56 S. C. 355. Record of mortgage no notice to Insurers: Pom. Eq. Jur., Sec. 657. Record only of papers required to be recorded is notice: Pom. Eq. Jur., Sec. 651; 14 S. C. 66; 10 Rich. Eq. 149; 1 Story. Eq. Jur., Sec. 404; 39 S. C. 72; 23 R. C. b., 219; 42 L. R. A'. (N. S.), 157. Mortgage clams should be attached to policy: Joyce Sec. 1045-2304; 25 b. R. A. 679. Assignment not required to be recorded, and is no notice: 97 S. C. 291. Actual, notice necessary: 28 S. C. 211; 51 S. C. 462. Mortgagor has insurable interest in chattels even after condition broken: 23 S. C. 198; 26 S. C. 494.
April 25, 1922.

Opinion:
The opinion of the Court was delivered by
Mr. Justice Eraser.
The appellant sold an automobile to one H. b. Gregory, and took a mortgage on the machine for a part of the purchase money. The mortgage contained an agreement by the mortgagor that he would insure the machine and assign the policy of insurance to the appellant. This mortgage was duly recorded. The policy of insurance noted the fact tjiat the machine was mortgaged to the appellant, but did not make the loss payable to the appellant. The machine was burned, and the adjuster applied to the appellant for information as to the status of the mortgage debt. The company paid the policy to the mortgagor and this suit is brought by the appellant for the proceeds of the policy. The appellant demurred to the complaint. The demurrer was overruled. The defendant moved for a nonsuit. This also was overruled. The plaintiff moved for a direction of a verdict. This was granted. The trial Judge ordered a new trial on the ground that he had made a mistake of law in directing a verdict.
There is evidence that the adjuster knew of the existence of the mortgage itself, and went to the mortgagee to get information in regard to the mortgage, and got it. Even if the company was not required to make inquiry, it did inquire. The bare fact that they came to inquire threw the mortgagee off his guard. Why should the company inquire if it was not for the purpose of complying with the terms of the mortgage? When the company had notice of the mortgage itself, they were chargeable with notice of all the facts that a reasonable inquiry would have revealed. A simple question, "Have you any interest in this insurance policy?" was all that was required. The provision that, the mortgaged property should be insured for the benefit of the mortgagee is a very common practice, and the provision to be expected.
In Gandy v. Insurance Co., 52 S. C. 231, 29 S. E. 657 we find:
"Now, it is clear the third proposition is not sound, for it required the agent to have actual knowledge of the actual existence of the other policy; whereas, if the agent had only such information which, if pursued, would have led to actual knowledge of the existence of the other policy that would have been sufficient notice of the other policy."
Here there was actual notice'of the mortgage and an inquiry, the only apparent purpose of which was to comply with the terms of the mortgage. The authority above cited is full to the- point.
The complaint stated the above facts, and was not demurrable. It was tried as an equity case would have been tried by the Court on a. direction of a verdict. The evidence complained of was not prejudicial, in that it did not affect the real issue.
The order granting a new trial is reversed.
Mr. Chief Justice Gary and Mr. Justice Watts concur.