Court Opinion

ID: 8261275
Source: CourtListenerOpinion
Date Created: 2022-10-16 15:54:28.472071+00
Date Added: 2024-06-11T16:43:11.538982
License: Public Domain

Biggs, J.
This is an action on a policy of fire insurance. There is no question about the issuance of the policy, or the destruction of the property by fire during its life. It is also conceded that due notice of the fire was given, and that proper proofs of loss were furnished. At the time the policy was issued the property was mortgaged, and the policy provided that any loss should be paid to the mortgagee. The defense was that, prior to the destruction of the property, the conditions of the mortgage were violated, and that, by reason of-this, foreclosure proceedings were commenced which invalidated the policy. The cause was submitted to the circuit court on an agreed statement of facts, which resulted in a judgment for the defendant. The plaintiffs have appealed.
The facts as agreed on are these: The property was owned by the Springfield Steam Laundry Company. The insurance was taken out by it, and by the terms of the policy the loss, in case of the destruction of the property, was to be paid to the mortgagee as his interest might appear. After the loss the claim was assigned by the mortgagee to the plaintiff, Heffernan. The mortgage by its terms was subject to foreclosure, if the taxes on the mortgaged property were permitted to become delinquent. This condition of the mortgage was broken, and by reason of it the trustee advertised the property for sale as provided by the terms of the mortgage. The sale was enjoined. Subsequently the taxes were paid, and the injunction proceedings dismissed. A short time thereafter the fire occurred. The'policy contained this provision, to wit: “If the property be sold, transferred, or is or becomes incumbered by mortgage or trust deed, or by judgment, tax, or mechanics’ lien, or upon the commencement of pro*201ceedings for its foreclosure or sale, or levy thereon by law officer, or upon its passing into the hands of receiver or trustee, or if this policy be assigned before a loss, then, and in every such case, this policy shall, without the written consent of this company thereto be indorsed hereon, become absolutely void.” Another condition of the policy is as follows: “It is further understood and agreed, and made a part of this contract, that neither the agent who issued this policy, nor any other person, except its secretary in the city of Chicago, has authority to waive, modify, or strike from the policy any of its terms and conditions, * * * nor, in the event that this policy shall become void by reason of noncompliance with any of its terms or conditions thereof, shall the agent have power to waive, modify, or revive, the same, and any policy so made void shall remain void and of no effect, any contract by parol or otherwise or understanding with the agent to the contrary notwithstanding. ’ ’ It was further agreed that the local agent of the defendant, who issued the policy, had notice of the advertisement of the property for sale and the subsequent proceedings in reference thereto.
It is maintained by the plaintiffs that the advertisement of the property for sale was not the commencement of foreclosure proceedings; that is, that the advertisement was a mere proposition of sale, or a notice to bidders to appear at a contemplated sale. The only case relied on to support this position is that of Michigan Insurance Company v. Lewis, 30 Mich. 41. There the policy contained the following clause: “In case of any transfer or termination of the interest of the insured, * * * or in case any mortgage, lien, or incumbrance, shall be executed thereon, or shall attach thereto, or if the title thereto shall be in any way changed or affected after the date of this policy, *202or if any proceedings for sale thereof shall be had, commenced, or taken * * * this policy shall from thenceforth be void and of none effect.” In that case, like in this, there was only an advertisement of the property for sale under the mortgage, and the supreme court in its opinion undertook to determine what was meant by the phrase uproceedings for sale.” The court, making application of it to the foreclosure of a mortgage, said: “The words seem to us to be satisfied by confining them to the actual offer of the premises for sale at the time specified in the notice. In strictness, it may be said that such' an offer is the first proceeding for a sale; the previous notice is only a step which is to put it into the power of the mortgagee to make a sale at the time fixed upon, if payment shall not sooner be made. The notice, in a certain sense, is undoubtedly a proceeding for a sale, and so would be the commencement of a suit in equity; either proceeding may possibly result in a sale; but, while either method of foreclosure is in progress and before the right to make a sale has been reached, it is in substance rather a proceeding for the collection of the mortgage moneys,' than a proceeding for a sale. And it can never .be known until the day fixed in the notice shall arrive without actual payment being made, that a sale can take place at all.” In another portion of the opinion the court remarked that “it would be a most unreasonable and unjust construction of such a provision to hold that, by the mere commencement of foreclosure proceedings, the policy would be annulled. * * * Doubt-less the parties might agree upon conditions of this sweeping character,' but the operation would in some cases be so unreasonable and oppressive that they ought never to be discovered in doubtful, ambiguous phrases, but should be expressed so plainly that no reasonable doubt can rest upon the mind that they *203were mutually understood and fully assented to by the parties respectively.”
The last extract from the foregoing opinion states precisely the case we have here, for it is expressly agreed that the commencement of foreclosure proceedings should annul the policy, and the entire opinion clearly indicates the difference between that case and this, thus making the case an authority against rather than in favor of plaintiffs’ position. Now, there can be no question that an advertisement of property under a mortgage with power of sale is the commencement of foreclosure proceedings, and, as it is conceded in this case that the condition of the mortgage has been broken by failure to pay taxes, we must hold that the' proceedings of foreclosure were rightfully commenced. This, under the plain terms of the contract, avoided the policy. It may be that such a condition may operate unjustly in individual cases, but courts have no power to make contracts for litigants, and can only relieve them from improvident or oppressive bargains when it is shown that they have been overreached.
But such clauses as we have here are by no means unusual in insurance policies, and, while they may operate oppressively in particular cases, a little reflection will show that they rest on a sound business principle. An insurance company may be willing for a certain premium to insure mortgaged property so long as the owner is not in default, but, after default and foreclosure proceedings have been commenced, it may not deem it provident to continue the insurance, at least at the same rate, for it is clear that the moral risk would be increased by the new condition of things. In the case of Titus v. Glens Fall Insurance Company, 81 N. Y. 410, the policy there in suit contained such a, clause. The property was advertised for sale under a judgment of foreclosure, and a few days before the *204time fixed for the sale it was burned. The argument of the assured against the enforcement of the condition was that, as the defendant recognized the mortgage by agreeing to pay the loss to the mortgagee, it must be presumed to have assented to the natural result and incident of the mortgagee’s title, to wit, the commencement of foreclosure proceedings in case of default in the payment of the debt or other conditions of the mortgage. The court of appeals held the argument to be unsound, and sustained the forfeiture upon the ground that the condition was plainly written in the policy and could not be evaded by construction.
So, in the case of Merchants Insurance Company v. Brown, 25 Atlantic Rep. 992, the Maryland court of appeals decided that the advertisement of mortgaged property for sale as provided by the terms of the mortgage was the commencement of foreclosure proceedings, and avoided the policy under a clause which provided that the policy should be annulled “if, with the knowledge of the insured, foreclosure proceedings be commenced or notice given of sale of any mortgage or trust deed.”
But it is insisted that the forfeiture (if any) must be considered as having been waived by the defendant’s local agent. The evidence is that the agent had power to issue policies, that he was advised of the advertisement of the property under the mortgage, and that he took no steps to cancel the policy. The doctrine of many of the cases is that an agent who has authority to issue policies, that is, make contracts of insurance, must be presumed to have authority to modify or change the contract or waive forfeitures. But this can not be where such power is expressly vested in a particular officer of the company. This was our decision in the case of Jenkins v. German Ins. Co., 58 Mo. App. 210. To the same effect are the cases of Loehner *205v. Ins. Co., 17 Mo. 247, and Shoup v. Ins. Co., 51 Mo. App. 287, and we know of no decision in this state to the contrary.
It follows that on the admitted facts the judgment of the circuit court was for the right party, and it must be affirmed. Judge Rombauee concurs. Judge Bond dissents, and is of the opinion that the decision is in conflict with the following decisions of the supreme court: Franklin v. Ins. Co., 42 Mo. 461; Hamilton v. Home Ins. Co., 94 Mo. 353; Hanna v. Ins. Co., 56 Mo. App. 582, and others cited in his dissenting opinion. The cause will, therefore, be certified to the supreme court for final determination.