Home Ins. Co. of New York v. Tumlin , 241 Ala. 356 ( 1941 )

The appellee filed his complaint in code form claiming the amount due for repairs to his automobile on a policy of insurance issued by appellant, insuring the car against loss or injury by collision. The case was submitted to the jury and a verdict was rendered in favor of appellee and against appellant. There was a motion for a new trial, which was duly overruled and exception reserved.

Appellant sets up as defense to the action based on the policy in question that plaintiff was not entitled to recover in the absence of the Universal Credit Company, the payee named in the policy; or that the plaintiff was not entitled to recover without proof that the interest of the credit company had been discharged in full. Home Ins. Co. of New York v. Scharnagel, 227 Ala. 60, 148 So. 596. The questions now presented of the right of plaintiff to recover on the policy were raised by objection to the introduction of the policy ill evidence, as presenting a variance and by the request for the general affirmative charge requested in writing by the Home Insurance Company of New York, the payor in the policy.

The policy of insurance on which the suit was brought contains the following unequivocal provision as to the payee and the liability of the payor:

"Name of Purchaser Assured James S. Tumlin

Address of Purchaser Guntersville Dam, Ala., Marshall County

and Universal Credit Company. Loss, if any, to be adjusted with the purchaser assured, though to be paid, subject to all the conditions of this insurance only to the Universal Credit Company for the account of all interests."

It is apparent from the foregoing that James S. Tumlin and the Universal Credit Company are co-assureds under the policy and bound thereby. The specific and unequivocal provisions of that contract are that all payments for loss must be adjusted with the purchaser (Tumlin) and paid by the insurance company (the Home Ins. Co. of N.Y.) only to the Universal Credit Company for the account of all interests.

On the trial of the cause it developed that appellee purchased an automobile on credit which was financed by the Universal Credit Company procuring and furnishing the policy here declared on. In common parlance, the credit company effected the loan to and for appellee and took security on the car and the insurance declared on. Counsel refers to the particular clause set out above as a "loss payable clause." It is necessary to carefully consider it under the decisions and it is given greater significance as affecting the right of a suit for recovery under such tripartite contract of insurance. The decisions touching the right of suit by mortgagor and mortgagee have been adverted to and are produced below. This present contract is of different import.

In the case of Capital City Ins. Co., v. Jones, 128 Ala. 361,30 So. 674, 675, 86 Am.St.Rep. 152, in considering the rights of a mortgagee and a mortgagor under a policy of insurance with a loss payable clause to the mortgagee as its interest may appear, the court said: "If the amount due upon the mortgage was equal to or exceeded the loss under the policy of insurance, the National Building and Loan Association [mortgagee], or its assignee, being the exclusive beneficial owner of the whole money due by defendant, is the only person entitled to recover it. After the loss became fixed, 'the policy was nothing other than a contract for the payment of money.' * * * So, in this case, we hold that the plaintiff can maintain this suit for the balance, if any, of the loss, after deducting the amount due upon the mortgage at the time of the loss. This is the promise of the defendant, and there is no good reason why it should not be enforced as made. Palmer Savings Bank v. Ins. Co., 166 Mass. 189, 44 N.E. 211, 32 L.R.A. 615, 55 Am.St.Rep. 387. This, of course, imposes the burden upon the plaintiff of showing there was a balance after paying the mortgage, and the amount of such balance."

In Ætna Ins. Co. v. Koonce, 233 Ala. 265, 266,171 So. 269, 270, the holding in the foregoing case is quoted with approval, stating that: "The liability became fixed as of the date of the loss; that, if the mortgage debt then covered the whole loss, the sole right of action was in the mortgagee, but, if the mortgagee's interest covered only a part of the loss, he could sue therefor as a beneficial owner of the policy. In either event the mortgagee must aver and prove the amount of the mortgage debt as of the date of the loss. This has become the established rule in Alabama."

Many of our later cases on this point are cited with approval in the Koonce case, supra.

In the case of Union Ins. Soc. v. Sudduth et al., 212 Ala. 649,103 So. 845, the court pointed out that a loss payable clause in a policy gives such named payee the superior right to recover, to the extent of his or her interest shown to the court, and the assured can only recover any balance in excess. Capital City Ins. Co. v. Jones, 128 Ala. 361, 30 So. 674, 86 Am.St.Rep. 152; Taber v. Royal Ins. Co., 124 Ala. 681, 26 So. 252; Girard Fire Marine Ins. Co. v. Gunn, 221 Ala. 654, 130 So. 180; Home Ins. Co. v. Scharnagel, 227 Ala. 60, 148 So. 596; Gunn v. Palatine Ins. Co., Ltd., 227 Ala. 245, 149 So. 672.

The contention of appellant is that under the terms of the policy the Universal Credit Company has the exclusive right to maintain an action on the policy and any party with an interest therein bringing suit thereon other than the Universal Credit Company must show that the amount due the Credit Company on the mortgage indebtedness has been paid or satisfied in full and that "such complainant has the beneficial interest therein."

If appellee was entitled to recover for the whole amount of insurance, the burden was upon him to show a loss, the amount due under the policy, and that the contract of indebtedness as to such matter, due the credit company, had been theretofore satisfied in full. This results from the absence of the credit company as a party to the suit.

It is shown by the evidence that after the loss occurred, there was a balance due on the contract indebtedness for the car to the credit company of $410, and that after the damage had occurred the car was repossessed (not being repaired) by the Universal Credit Company.

Appellee's contention as to this is that the repossessed car was evidence of full satisfaction of the indebtedness theretofore existing; while at the same time he contended that the car was not worth more than $50 after the collision. Further he presents no receipt of full settlement for the claim of the credit company nor does his evidence show a satisfaction of that company's claim or lien.

On this evidence the trial court held, under the scintilla rule that obtains, that the evidence was sufficient to warrant the jury in determining the value of the car at the time it was repossessed, and to ascertain if the repossession satisfied the mortgage indebtedness.

It results from this condition of the record and bill of exceptions that these issues were submitted to the jury for determination of issues of fact touching the rights of the Universal Credit Company, and that company not being a party to the suit. Hence there was error in failing to grant the general affirmative charge requested in writing by the appellant.

And it is held that where a policy of insurance provides that the insurer's liability for loss or damage to the property insured shall not exceed "what it would cost to repair or replace the automobile or parts thereof with others of like kind and quality" the insured is entitled to recover only the cost of such repairs or replacements. Such a provision will be construed as a limitation of the insurer's liability and the test or measure of damages which insured is entitled to recover. Spivy-Johnson Portrait Co. v. Belt Automobile Indemnity Assn., 210 Ala. 681, 99 So. 80.

The Home Insurance Company was liable under the contract terms of its policy to the parties in interest, and the Universal Credit Company was also an interested party in the ascertainment of the respective rights of the parties as purchasers and as co-purchasers. In this state of the record a judgment res adjudicata could not be rendered which would assure the payment of the amount due under the policy to the parties entitled thereto. The suit was rested upon the averment that the plaintiff was the owner of the policy. The burden was on the plaintiff to show that he was such sole owner of the policy and having failed as to his proof in this behalf, defendant was entitled to the general affirmative charge duly requested. For this error of the trial court, in refusing such affirmative charge, the judgment of the circuit court is reversed and the cause is remanded.

Reversed and remanded.

GARDNER, C. J., BROWN and FOSTER, JJ., concur.

On Rehearing.