Court Opinion

ID: 8017170
Source: CourtListenerOpinion
Date Created: 2022-09-09 02:06:05.630569+00
Date Added: 2024-06-11T16:36:25.212662
License: Public Domain

DISSENTING OPINION.
LAMM, J.
In this dissent I shall state the facts from my viewpoint based on a study of the record. In 1903 plaintiff lodged his bill in equity in the circuit court of St. Louis county, the object and general nature of which was to cancel and discharge the record lien of a deed of trust executed by one Hopple to Farrar, trustee, to secure certain notes. This deed of trust is often referred to and will be designated “A” for brevity. “A” conveyed part of two lots described by metes and bounds. Defendants answered by denial, by admissions, and by way of crossbill to foreclose “A.” The decree dismissed plaintiff’s bill, found the issues for defendants and foreclosed “A.” Plaintiff appeals.
Plaintiff claims title to the ground by virtue of a foreclosure of another deed of trust, a junior lien to' “A,” and a trustee’s deed under that sale. Defendant. *132companies claim title and ownership' of “A” and the notes secured thereby and the consequent right to foreclose by virtue of an assignment under a mortgagee ' or subrogation clause in two policies of fire insurance, issued by them respectively on a building situate on the ground in question, and which policies were held as collateral security to the loan secured by “A.”
The facts are somewhat complicated, but there is no dispute on the features of the case evidenced by documents, which may be summarized as follows:
Hopple owned the ground on May 29, 1901. On that day he executed a deed of trust in the nature of a mortgage to Farrar, trustee, securing a principal note of $2800', due in three years, together with twelve quarterly interest notes of forty-two dollars each, and three yearly interest notes of fifty-six dollars each, which deed of trust (to-wit, “A”) was duly recorded. On that same day Hopple conveyed to one Choisel by warranty deed. This conveyance was subject to “A” and also to another deed of trust not material here. On June 14, 1901, Choisel took out two policies of insurance aggregating three thousand one hundred dollars — one-half in each of defendant companies. Each policy had a “rider” or attached clause, commonly known as a “mortgagee clause,” indemnifying the owner of the indebtedness secured by “A.” These policies contain the usual clause requiring proofs of loss to be made by the assured within sixty days after a loss by fire, which provision, together with the mortgagee clause, will be sufficiently elaborated presently.
“A” contained a provision that the property should be kept insured at all times and that the policies be kept “constantly assigned or pledged and delivered” to Farrar, trustee, as security for the notes. The policies were delivered to and thenceforth held by Farrar in pursuance of that provision. On the 20th day of July, 1901, Choisel sold and conveyed by warranty deed to Zackery T. Williams and Priscilla, his *133wife, subject to “A,” and said policies were (with consent of defendants) transferred to Zackery and Priscilla by written assignment. On the same day, to-wit, July 20, 1901, Zackery and Priscilla ex.ecuted a deed of trust (hereinafter called “B”) to a trustee to secure an indebtedness to said Choisel and the same was duly spread of record. “B” was in terms subject to “A,” and nothing was said therein about insurance so far as the abstract shows. On the 14th of June, 1902, “B” was in default and was foreclosed by public sale. Plaintiff was the highest bidder at the foreclosure sale and the real estate was knocked down to him and a trustee’s deed followed which was duly spread of record. The record does not show that plaintiff, Loewenstein, was owner of the notes or had any interest in “B.” He is a purchaser under a second deed of trust sale. Whatever equities he acquired, he acquired then, and not before. Prior to that, viz., on the 29th of January, 1902, the building insured by defendants’ policies was destroyed by fire — all of which plaintiff knew when he took his trustee’s deed. It seems there was another policy of insurance covering chattels issued to Zackery T. and Priscilla by another under-writer and that there was a loss under this policy by the same fire. Zackery and Priscilla at once employed Senator Kinealy as their attorney to attend to proofs of loss under all three policies and collect the insurance. They had no other agent or representative. To this end blank proofs of loss (as provided by statute) were promptly furnished by the insurance adjuster representing the three underwriters, that is, duplicate blanks for each policy. Proofs of loss were duly, furnished by the assured on the chattel policy, but. no proofs were furnished under the policies on the building issued by the defendant companies.
It was contended below, inter alia, as it is here, that there was a waiver of proofs of loss and that *134the right of the insured to recover on the policies was kept alive. On that head we shall not set forth the testimony. At most the evidence tending to show a waiver was faint. On the other hand there was cogent testimony from plaintiff’s own witnesses, as well as from defendants’, tending to show there was no waiver, that defendants were-standing on their policy terms, and that Zackery T. and Priscilla, acting under the advice of their said attorney, of set purpose abandoned proofs of loss under the policies issued on the building by defendants and abandoned all claims under their policies. Any other facts on this phase of the case necessary to determine the point will appear presently.
On the coming in of proofs of loss on the chattel policy an adjustment was negotiated and that policy was compromised and paid to Zackery T. and Priscilla through the services of Senator Kinealy.
At a certain time after proofs of loss were due, Mr. Farrar, trustee under “A,” who at that time for the purposes of settlement also held legal title to the notes secured by “A,” demanded a settlement from defendant companies under the mortgagee clause. His right to make such demand was recognized by the adjuster. In turn the adjuster claimed the right of defendant companies to have the notes and security evidenced by “A” assigned to them. This, on the theory that Zackery and Priscilla had no claim under the policies. On this basis a settlement was made. Defendant companies paid Farrar the amount of the notes secured by “A,” to-wit, $2930, with interest; and Farrar indorsed to them said notes without recourse. At the same time he executed the following written assignment:
“St. Louis, Mo., June —, 1902.
“For value received I hereby transfer, assign and set over to the Queen Insurance Company of America and the Phoenix Assurance Company of London, all *135my right, title and interest in all the securities held by me for the payment of any debts due me by Zackery T. Williams and Priscilla Williams, or either of them, hereby subrogating to said insurance companies all my rights under such securities.”
And delivered the notes, mortgage, policies and assignment to the adjuster on June 6, 1902.
Policy provisions touching proofs of loss were the same in each. They need not be set forth in extenso. In substance they are: (1) A provision that the policy loss shall be payable sixty days after due notice, ascertainment, estimate and satisfactory proof of the loss have been received by the company in accordance with the terms of the policy; and (2) another provision to the effect that the insured should give immediate written notice to the company of loss by fire and within sixty days render a statement to the company signed and sworn to by the insured, stating the knowledge and belief of the insured as to the time and origin of the fire, the interests of the insured and of all others in the property, any incumbrance, any other insurance, and many other things.
The mortgagee clause attached as a rider to each policy reads:
“Loss or damage, if any, under this policy, shall be payable to Bernard C. Farrar as mortgagee (or trustee), as interest may appear, and this insurance, as to the interest of the mortgagee (or trustee) only therein, shall not be invalidated by any act or neglect of the mortgagor or owner of the within described property, nor by any foreclosure or other proceedings or notice of sale relating to the property, nor by any change in the title or ownership of the property, nor by the occupation of the premises for purposes more hazardous than are permitted by this policy. Provided, that in case the mortgagor or owner shall neglect to pay any premium due under this policy, the *136mortgagee (or trustee) shall, on demand, pay the same.
“Provided also, that the mortgagee (er trustee) shall notify this company of any change of ownership or occupancy or increase of hazard which shall come to the knowledge of said mortgagee (or trustee) and, unless permitted by this policy, it shall be noted théreon, 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 cease, and this company shall have the right on like notice, to cancel this agreement.
“Whenever this company shall pay the mortgagee (or trustee) any sum for loss or damage under this policy and shall claim that, as to the mortgagor or owner, no liability therefor existed, this company shall, to the extent of such payment, be thereupon legally subrogated to all the rights of the party to whom such payment shall be made, under all securities held as collateral to the mortgage debt, or may at its option, pay to the mortgagee (or trustee) the whole principal due, or to grow due on the mortgage with interest, and shall thereupon receive a full assignment and transfer of the mortgage and of all such other securities; but no subrogation shall impair the right of the mortgagee (or trustee) to recover the full amount of its claim. ’ ’
Defendants claim to own “A” and the notes secured thereby by virtue of the foregoing mortgagee clause and assignment; contra, plaintiff, as owner und§r the foreclosure of “B” and the trustee’s deed following, claims that defendants’ payment to Farrar, *137trustee, operated in equity as an extinguishment of the notes secured by “A,” and that he is entitled to have the record lien of “A” discharged.
We have carefully examined the record and have reached the conclusion that plaintiff’s bill was properly dismissed and that the decree of foreclosure on the crossbill accords with correct and settled legal principles. This, because:
(a) It must be conceded that the lawmaker, because of the importance of insurance contracts and the intricate nature of the subject-matter, has evidenced a lively concern in regulating insurance companies and their contracts. This is not singular when the technicalities of the business are considered and when experts usually represent the insurer, while the assured as a rule does not stand on an equal footing. Courts have not been laggard in keeping pace with the lively concern of the lawmaker. Policies are contracts prepared by skilled and astute people and accepted by plain folk, the unwary and confiding. Therefore, they are construed somewhat strongly against the insurer. Such policies swarm with intricate technical provisions hedging about liability or looking to its avoidance, and courts are inclined to match their judicial astuteness to avoid a forfeiture against the astuteness of the policy-maker to invent or establish one. This judicial attitude may be gathered from cases. For example:
In Boyle’s Sons v. Insurance Co., 169 Pa. St. l. c. 355, Mr. Justice Williams commenting on a policy, says: “Arranged around this contract is a line of defensive ‘stipulations, exceptions, conditions and provisions.’ Some of these are not numbered, but with-others numbered from 1 to 112 inclusive, they stand bristling like armed sentinels around the contract and the liability of the company thereunder, ready to impale even an honest claimant on a bare technicality.”
*138And, as pointed by learned counsel for plaintiff, in Dezell v. Fidelity and Casualty Co., 176 Mo. l. c. 265 et seq., this court, speaking through Valliant, J., held language directed to life insurance but not inapplicable to fire, vis.: “Courts do not favor forfeitures, nor do they favor the defeat of a meritorious cause on any purely technical ground. Insurance companies have probably realized that fact more clearly than any other class of business concerns. . . . And not only have the Legislatures exerted their authority in such matters, but the courts of the country also have strained the discretion that lies in the scope of judicial interpretation to prevent a forfeiture of the insurance. Sometimes the reasoning of the court in such case is so technical that to the mind of the layman it but thinly disguises the praiseworthy determination to do justice in that particular case in spite of the letter of the contract.”
We are asked to apply the doctrine of the Dezell case. We are quite willing to do so. But that or no other ease holds that a waiver can be seen where none exists. Courts have held under a general charge in a petition of full performance of policy conditions, where defendant pleads the non-performance of a specific policy term, that plaintiff may show a waiver without pleading one, this contrary to the general rule of pleading. Yet the general doctrine is that the requirement of proofs of loss is a fair and reasonable requirement, one intended to sift and purge the conscience of the assured and necessary to protect the insurance company from fraud and imposition, and that such policy provision must be substantially complied with. We know of no ruling to the effect that policies, such as these, are kept in force in favor of the property-owner unless proofs of loss are furnished by him or waived by the company.
(b) In this case it is conceded no proofs were furnished by the property-owner. Were they waived? *139We think not. The adjuster represented all three of the insurance companies and furnished blank forms for proofs when notified of the fire to the right parties, vis., Zackery, Priscilla and their attorney. There is substantial evidence tending to show the adjuster was standing on the policy right to have proofs of loss. The insured and their attorney so understood his attitude. Accordingly they furnished complete proofs of loss-on one policy covering the household furniture. After a somewhat extended negotiation that policy was compromised. It seems that unknown to and without any suggestion from the adjuster, the Williamses and their attorney opened negotiations with those representing “B,” the second deed of trust. The plaintiff at that time was the agent for the holders of the paper secured by “B.” The Williamses were ready to go to the trouble and expense of furnishing proofs of loss and collecting all the insurance, but, as they had no interest in the insurance on the building (as they looked at it), it being held as collateral security under “A” and the amount of surplus being very small, they wanted a rebate on the second mortgage sufficient to remunerate them for the expense and trouble of collecting that insurance. The people interested in “B” refused aid by way of rebate or concession. Thereupon, Senator Kinealy and his clients, on their own initiative and without any suggestion of the adjuster or any other agent of defendants, of set purpose abandoned their claim under the house policies by refusing and failing to make proofs of loss, although the adjuster had furnished the blanks and Senator Kinealy had got possession of the policies from Farrar for the purpose of making such proofs. When they came to this conclusion the policies were returned to Farrar where they belonged. There is some testimony to the effect that Mr. Loewenstein, feeling an interest in the insurance, saw and talked with the adjuster. He puts one construction on these conversations. The *140adjuster puts a contrary construction on them. If there was any waiver in the case it arises on those conversations. If the chancellor, considering that evidence and the other facts in the case, chose to believe the adjuster, we ought not to interfere because he is better equipped than we are to pass upon disputes in evidence. Neither Zackery nor Priscilla testify. Senator Kinealy does testify, and the deciding weight of the testimony is against a waiver of proofs and in favor of abandonment.
While a waiver is not a technical estoppel, yet it is closely related to estoppel and has elements of it. Says Brown, J., in Armstrong v. Insurance Co., 130 N. Y. 560: “The rule is now established, however, that if in any negotiations or transactions with the assured after knowledge of the forfeiture, it recognizes the continued validity of the policy, or does acts based thereon, or requires the insured to do some act or incur some trouble or expense, the forfeiture is waived.” And further in the same case: “As has
been already said, in every case where a waiver has been implied from the defendant’s acts, there has existed something of the element of an estoppel. The plaintiff has been misled to his harm, or the company has done something which could be done only by virtue of the policy, or has required something from the assured which he was bound to do only at the request of the company and which request could only be made under a valid policy.”
The foregoing we deem a fair statement of.the law. If in this case defendant companies on uncontradicted evidence, or on evidence which (if contradicted) • the chancellor believed, had taken such position in regard to the proofs that the insured was misled on the necessity of making them, we would have a different case. The most the adjuster did in this case, under the weight of the testimony, was to sit tight and do nothing after furnishing blank forms of proofs *141of loss. It will not do to say that snch course is a waiver, nor will it do to contend that those who adopt a line of policy for their own purpose or- of their own wish can he said to have taken their position because of waiver. The chancellor found specially against a waiver and so wrote it down large in his decree. We think his finding well-bedded in the facts.
(c) The right to subrogation to mortgage securities has been discussed in cases where there are no such mortgagee clauses as those in hand. For instance, where policies simply provide that loss, if any, is payable to a mortgagee or trustee as his interest may appear, and in other cases of similar kind. In such cases the courts have refused subrogation, and a payment to the mortgagee or trustee has been-held to extinguish the notes and mortgage lien by operation of law. We are cited to some such cases but they are not in point. Under such mortgagee clauses' as were attached to defendants’ policies the clear right to subrogation and assignment exists by the very terms of the contract in case the insurer is not liable to the insured under the policy but remains liable to the mortgagee or trustee by virtue of the policy terms. The claim of non-liability to the insured must not be merely arbitrary, colorable or whimsical, but based on fact. [Traders’ Insurance Co. v. Race, 142 Ill. 338.]
In the case at bar non-liability actually exists. That fact entitled the underwriters to claim an assignment and stand on the doctrine of subrogation as .provided in the contract of insurance; for, although the insured paid the premium, yet that premium was the consideration for a contract having dual features, vis: It insured his property against loss, but it also insured the mortgagee’s debt against loss, and it contemplated that a condition might arise in which it would insure the mortgagee and no longer insure the property-owner.' That condition arose in this case and under an unquestioned line of authorities the mortgagee clause was *142valid and operative. [Ordway v. Chace, 57 N. J. Eq. 478; Springfield Fire and Marine Insurance Co. v. Allen, 43 N. Y. 389; Badger v. Platts, 68 N. H. 222; Ulster County Savings Institution v. Leake, 73 N. Y. 161; Foster v. Van Reed, 70 N. Y. 19; Alamo Fire Insurance Co. v. Davis, 25 Tex. Civ. App. 342; Gillespie v. Insurance Co., 61 W. Va. 169; Adams v. Insurance Co., 115 Mo. App. 21; Allen v. Insurance Co., 132 Mass. 480.]
(d) It is argued that the mortgagee clause contemplates, as a condition precedent to assignment, a forfeiture sprung before a loss by fire. Further, that it was the duty of the mortgagee to make proofs of loss; that such proofs would have answered for the assured; that the settlement with Farrar, trustee, is therefore equivalent to a waiver of proofs of loss. But learned counsel argue unsoundly, we think, in that behalf, because :
(1) The mortgagee clause is not restricted to forfeitures springing up before the loss. The words do not run that way, but plainly cover all acts making the insurance inoperative as to the assured, and leaving it alive as to the mortgagee. That clause reads, inter alia, that the insurance as to the interest of the mortgagee or trustee ‘ ‘ shall not be invalidated by any ret or neglect of the mortgagor or owner of the within described property.” It would be unnatural and strained construction to say the clause did not cover the property-owner ’s failure to furnish proofs of loss. We rule -the contention against plaintiff.
(2) As to the mortgagee’s furnished proofs of loss, this may be said: It has been ruled by the Kansas City Court of Appeals that the mortgagee could not maintain an action on the policy without proofs made by either the assured or the mortgagee. [Lombard Investment Co. v. Insurance Co., 62 Mo. App. 315.] It has been ruled by the same court that the mortgagee need not make proofs of loss. He may make them or let it alone. [Adams v. Insurance Co., 115 Mo. App. *14321.] In Maine (under a statute) it was ruled that a mortgagee could not maintain an action until proofs of loss were made. [Nickerson v. Nickerson, 80 Me. 100.] It has been ruled in Georgia on an action by the mortgagee against the company that proof of loss by either the mortgagee or the assured was a condition precedent to recovery. [Southern Home Building and Loan Association v. Ins. Co., 94 Ga. 167.] And in Massachusetts it was ruled in a late case (Union Institution for Savings v. Insurance Co.* 196 Mass. 230), in a suit by the mortgagee upon the policy, that while the mortgagee from necessity could not make the proofs of loss contemplated from the assured, yet it was necessary for him to make such modified and scant proofs as possible for him to do.
It must be admitted that the law in that particular is in a fluid and formative state and possibly the last word has not been spoken. We think it clear, however, that while proofs furnished by the assured under the policy scheme would be all the proofs necessary to entitle the mortgagee to recover by suit in those jurisdictions requiring proofs of loss as a condition precedent to recovery on the policy by the mortgagee, yet proofs by the mortgagee himself, under his oath and on his personal knowledge, could not take the place of that sifting and purging of the conscience to which the insurer is entitled from the owner of the property. Therefore, a waiver of proofs of loss from the mortgagee could not be taken as a waiver of proofs from the assured. It follows that the insurer has the right to voluntarily recognize its liability to the mortgagee without thereby admitting liability to the property-owner. [Burnham v. Insurance Co., 75 Mo. App. l. c. 401 et seq.]
The necessity of proofs to maintain a suit on the policy by the mortgagee is a question not in this case, and is therefore reserved.
*144Moreover, if it be conceded by way of argument that proofs of loss from tbe mortgagee were necessary in this ease to fasten liability, then, in that event, defendant companies stood altogether free and acquit when they took an assignment of “A” and the notes secured thereby. In such case subrogation in a strict sense is not a necessary element in a suit to foreclose “A.” It could proceed on purchase and assignment of the notes.
Finally, to sum. up, the grounds of this dissent are that:
(a) The opinion of my learned brother Valliant proceeds on an assumption of fact unwarranted in this record, as I read it, viz., that Loewenstein, at the time he purchased at the foreclosure sale, was the owner of the notes secured by the second deed of trust.
(b) The evidence on waiver fell from the lips of witnesses below, hone of it was documentary. At best it was conflicting, therefore, there being the factor of credibility to be reckoned with, the chancellor’s opportunity for weighing that testimony and tagging it with a value mark was superior to our own. He did weigh it and found against plaintiff. To overrule his decision on that question of fact seems to me contrary to the long-established and sound rule of this court — a rule announced over and over again early and late, that we, in such conflict, defer to the trial judge.
(c) True, subrogation is a doctrine of equity, arising as pure benevolence to seek and do' justice in a given case. It is judge-made law. But when even so much had been said as that, is it sound doctrine to rule that subrogation may not be specifically contracted for and that a contract, like the mortgagee clause we are •considering, adds nothing to itself by the use of the word “subrogation,” as held in the principal opinion? Here were three people entering into a solemn contract to the effect that in a certain contingency one of the parties might be subrogated to certain rights in certain *145securities. Is such a contract immoral? Is it against public policy? Were tbe parties not sui juris and capable of contracting? Was the contract not clothed with a sufficient consideration? If so, why may we not labor to enforce it if tbe contingency happens? A valid contract may be said to be a law between tbe parties — tbe parties making their own rule of subrogation.
There are lurking dangers in insuring mortgaged property. There are still greater lurking dangers in insuring tbe mortgagee’s interest and making tbe insurer responsible to tbe mortgagee in spite of tbe act or neglect of tbe owner of the property. These mortgagee clauses aid business, they facilitate tbe investment of money, tend to lower tbe rate of interest, and meet a business Want; therefore, while insurance policies should be liberally construed in tbe interest of the insured yet we have no call to ignore or overcome tbe plain meaning of tbe contract words, but should enforce tbe contract as written.
(d) The contract does not say that the policy must be “null and void” before subrogation takes effect. To the contrary, it speaks of the “act or neglect” of the owner as the thing not affecting the mortgagee. It speaks of the “insurance” not being “invalidated.” Suppose the mortgagor declined to make proofs of loss, does not the mortgagee clause provide against that contingency when it speaks of the act or neglect of the owner? I think so. This sboWs it was not forfeiture and null-cmd-voidness which were alone held in mind. Therefore I dissent from my brother’s opinion in so far as it bolds, that the mortgagee clause only relates to those acts which forfeit the policy prior to the loss by fire.
(e) In effect and in a roundabout way tbe result reached is to allow a recovery on tbe policy of insurance without proofs of loss. Therefore, I dissent on that ground. If Williams could not recover as tbe *146owner at the time, neither can the plaintiff who is the present owner through standing in Williams’s shoes. If the policy could not be recovered on directly by suit, then to take the proceeds of the policy to apply to the payment of Williams’s debts, in spite of the prior appropriation of the proceeds under the policy terms, is but to move in a circle instead of in a straight line to the same result.
For these considerations, the judgment should be affirmed.
Graves, J., agrees with me in these views.