Hartford Fire Insurance v. Liddell Co. , 130 Ga. 8 ( 1908 )

Evans, P. J.

The facts of this ease may be thus summarized: Collins was the owner of a ginning outfit, as well as a boiler and engine and appurtenances. The ginning outfit had been purchased from the Liddell Company, and that company had retained title to secure the purchase-money. The boiler and engine had been purchased from the E. D. Cole Manufacturing Company, and that company- had retained title to secure the payment of the purchase-money. The policy of insurance was issued with full knowledge on the part of the insurance company that such was the condition of the title. When the first policy was issued there was a provision in the policy that the loss should be payable to the companies above referred to, as their interests might appear. This clause was, by mistake, omitted from the policy when it was renewed. The evidence established the fact that this was due to a mistake, and it is conceded that the ease is to be treated as if such clause had been duly attached to the policy. Subsequently to the issuance of the policy Collins gave the Liddell Company a mortgage on his interest in the boiler and engine. The insurance company pleaded that the execution and delivery of this mortgage was a breach of that provision in the policy which declares that the same “shall be void if the subject of insurance be personal property and be or become .incumbered by a chattel mortgage.”

Policies of fire insurance often contain a stipulation that if there be a sale of the property or a change of interest in the same, or an alteration of the same, the policy will be void. A condition in a policy-,, that the policy “shall be void if the subject of insurance be personal property and be or become incumbered by a chattel mortgage,” is a reasonable requirement; and when the insured accepts a policy with this condition in it,- and commits a breach of the condition, he can not recover in case the property is destroyed by fire. Alston v. Phenix Ins. Co., 100 Ga. 287 (27 S. E. 981). It is the contention of the defendant in’ error that the giving of the mortgage to the Liddell Company on the boiler and engine did not violate this condition, because they and Collins sustained the relation of joint owners of the property to the insurer, and the transaction was but a shifting of their interest, and was not violative of the condition of the policy. By the great preponderance of authority, where the subject of insurance is partnership property, and the insured are partners, a sale by one partner to another is not such an alienation as will work a forfeiture of the policy under a stipulation of this character. 1 May on Ins. (4th ed.) §279; 1 Biddle on Ins. 218; Hoffman v. Ætna Ins. Co., 32 N. Y. 405 (88 Am. D. 337) ; Pierce v. Nashua Ins. Co., 50 N. H. 297 (9 Am. R. 235) ; Allemania Fire Ins. Co. v. Peek, 133 Ill. 220 (24 N. E. 538, 23 Am. St. R. 610) ; German Mut. Fire Ins. Co. v. Fox, 4 Neb. (Unof.) 833 (96 N. W. 652, 63 L. R. A. 334) ; Powers v. Guardian Ins. Co., 136 Mass. 108 (49 Am. R. 20) ; Lockwood v. Middlesex Assur. Co., 47 Conn. 553. Our own case of Ga. Home Ins. Co. v. Hall, 94 Ga. 630 (21 S. E. 828), is in accord with the current of authority. Likewise a transfer from one joint owner to another, because of their common and undivided ownership of the whole property, will not terminate an insurance policy issued to the joint owners, because of a covenant against alienation or eneumbrancing. 2 Cooley’s Briefs on Law of Ins. 1726. The underlying principle of the proposition that a covenant against alienation by the insured does not terminate a policy issued to partners on partnership property, because of a transfer of interest by one partner to his copartner, is that each partner is interested in the whole property; and as the insurer contracted to insure the purchasing partner’s interest in the whole propertjq the hazard is not increased because the purchasing partner has acquired a greater interest in the property by a transfer of his co-partner’s share. The same reasoning which supports this proposition applies to a mortgage by one partner to his copartner upon his interest in the partnership property. Alston v. Phenix Ins. Co., supra. A controlling question, therefore, is whether the insured and the mortgagee were joint owners of the property insured, so as to take their transaction out of the operation of the covenant agáinst eneumbrancing the property. In the first place it may be observed that the policy only purported to insure Collins against fire. The loss-payable clause was but a power of appointment to pay to the Liddell Company the loss incurred by lire as its interest might appear. The insurer did not insure the Liddell Compaq’s propert3r, but that of Collins. The inhibition against encumbrancing had no reference to the Liddell Company transferring its reserved-title note. If Liddell Company had relinquished their interest in the property, or its debt had been paid before loss, Collins could have collected the insurance. Again, the reason of the rule allowing joint owners to shift their interests from one to another without violating this condition rests upon their common and undivided ownership of the whole property. Here the Liddell Company had a reserved-title note to one article of the property, and the mortgage was taken by it on other articles of property. There was not that community of interest in the whole property which made it a joint owner with Collins, although the different items of personalty were used to operate a single enterprise. When the policy was • issued the Liddell Company had no interest, by lien or otherwise, in the property upon which the mortgage was subsequently given. From these considerations it would seem clear that the Liddell Company was neither joint owner with Collins, nor insured by the policy, but only held a power of appointment to collect the insurance money due to Collins in ease of loss.

But the defendant in error contends, that the language of the loss-payable clause implies more than a power of appointment to receive the money in case of loss; that it is equivalent to the insurer’s assent to subsequent encumbrances to the same appointees. One to whom a policy is thus made payable is not an assignee thereof, and must claim in the right of the party insured, and not in his own. Bates v. Equitable Ins. Co., 10 Wall. 38 (19 L. ed. 882) ; Hale v. Mechanics Ins. Co., 6 Gray, 169, and cases cited in note to this case in 66 Am. Dec. 413. The direction as to the payment of the money should loss occur during the existence of the policy contract does not remotely suggest a waiver of any condition in the policy. The insurer only assents to the nomination of another to receive what may be due the insured under the policy. The words “as his interest may appear” only serve to limit the appointee’s recovery. If his interest be less than the amount due on the policy, he could not recover from the insurer, over the insured’s objection, the excess over his debt. These words will estop the insurance company from insisting that the exact nature or amount of thq appointee’s interest was not' stated in its assent, but can not be enlarged into a consent to a subsequent mortgage. A loss-payable clause of this nature only means that the insurer has notice that the person to whom payment is to be made in the event of loss has some interest in the property, and, to the extent of that interest as then existing, agrees to pay to such person out of its liability on the policy. If the appointee’s interest be that of a mortgagee, a renewal of the mortgage on the same property to secure the original debt, in whole or in part, will not violate the policy provision against a subsequent mortgage. This is so for the reason that it is the same hazard of which the insurer had knowledge when it assented to pay the loss to the insured’s appointee. Koshland v. Home Mut. Ins. Co., 31 Or. 321 (50 Pac. 567) ; Kansas Farmers Fire Ins. Co. v. Saindon, 52 Kan. 486 (36 Pac. 983) ; Weiss v. Am. Fire Ins. Co., 148 Penn. St. 349 (23 Atl. 991). The case in hand is not one where the appointee renewed his debt, but where the insured executed to the appointee a subsequent mortgage on a portion of the insured property not embraced in the appointee’s original security. It does not matter that the subsequent mortgage was to secure the same debt, since the policy forbade any subsequent encumbrance by chattel mortgage. The insurer evinced its willingness to pay the loss, if any, to the insured’s appointee according to the then existing status, but specially stipulated that the insured should not change that status by a subsequent chattel mortgage. A case much in point is that of Atlas Reduction Co. v. New Zealand Ins. Co., 121 Fed. 929. The insurance company issued its policy to the Atlas Seduction Company. Thirty days thereafter the insured gave a mortgage on certain real estate and also a chattel mortgage to D. and S., and on the same day the company’s agent indorsed on the policy a statement that loss, if any, was payable to D. and S. as their interest might appear, subject to the conditions in the policy. The policy contained a clause, that, unless otherwise provided by agreement indorsed thereon, it would become void “if the subject of insurance be personal property, - and be or become encumbered by a chattel mortage.” The insurer had no actual knowledge of the mortgage at the time the indorsement was made on the policy, and it was held that this indorsement was not sufficient to show the assent of the insurance company to the chattel mortgage. We think that this contention of the defendant in error is also unsound. The execution of the chattel mortgage violated the condition of the policy against encumbrance; and it was error to direct a verdict in favor of the plaintiff.-

Judgment reversed.

All the Justices concur, except Holden, J., who did not preside.