American Insurance Co. v. Hattaway ( 1942 )

1. Failure of counsel for the plaintiff in error to comply with the rule of this court relating to the time of serving his brief on counsel for defendant in error renders him subject to be attached for contempt, but is not ground for dismissal of the writ of error.

2. The taking out of additional insurance on the same property, unless by consent of the insurer, renders the policy void as to the insured. This rule is applicable in a case where the insured did not authorize the issuance of the original insurance, but later ratified the same by making proof of loss and seeking to recover thereunder, there being nothing to show any conduct on the part of the insurer to estop it from asserting the invalidity of the policy because of such second insurance.

3. Where a policy of fire insurance is rendered void as to the named insured, but the insurer by reason of the mortgage clause in the policy pays to the holder of a security deed from the insured the full amount of the secured indebtedness and takes a transfer of the debt and the security, in accordance with the terms of the mortgage clause, the insurer is subrogated to the rights of the grantee in the security deed to the extent of the debt paid. Having paid the entire secured indebtedness, such an insurer is entitled to receive from the proceeds of another insurance policy on the property, which also contained a mortgage clause payable to the original security deed holder, a pro rata part of such insurance.

No. 14135. MAY 21, 1942. The record discloses substantially the following facts: On March 15, 1937, Albert F. Hattaway executed to the First Federal Savings Loan Association of Dublin a note for $2100, and secured the same by a loan deed to a described house and lot in Dublin. Under the terms of the note and deed Hattaway obligated himself to pay the interest and principal on the note at the rate of $13.86 per month, and to make such additional monthly payments as might be required to pay the taxes and insurance on the property. Under date of March 17, 1940, the American Insurance Company issued a policy of fire insurance in the sum of $2100 on the house of Albert F. Hattaway, the named insured, with a mortgage clause payable to the First Federal Savings Loan Association. Under the same date the Atlantic Mutual Fire Insurance Company issued to Albert F. Hattaway a fire-insurance policy in the amount of $2100, covering the same house and the same in all respects as the one issued by the American Insurance Company. Both policies were delivered to the loan association, the mortgagee, which declined to accept the one issued by the Atlantic Mutual Fire Insurance Company, after holding the same for about thirty days. The latter policy was returned to the local agent of the company, and was canceled. On June 7, 1940, Hattaway applied for and obtained from the Atlantic Mutual Fire Insurance Company a policy of fire insurance on the house, in the amount of $500, with a mortgage clause in favor of the loan association. On June 22, 1940, the house was destroyed by fire. Hattaway filed proof of loss with the American Insurance Company; but this company declined to pay his claim, on the ground that its policy had been rendered void by the taking out of additional insurance without its consent. However, under the mortgage clause in its policy this company paid the First Federal Savings Loan Association the amount of Hattaway's indebtedness, which was less than the face amount of the policy, and took from the association an assignment of Hattaway's note and security deed. The American Insurance Company immediately instituted suit against Hattaway on the note, asking that the judgment sought be decreed to be a special lien on the property described in the security deed.

The defendant filed an answer in which he alleged, that he did not authorize the American Insurance Company to issue its policy of insurance; that he did not know of its existence until after his house was destroyed by fire; that he authorized the Atlantic Mutual Company to issue a policy for $2100 on or about March 17, 1940, and did not have knowledge of the cancellation of this policy until after the fire; that the American Insurance Company had knowledge of the $2100 policy issued by the Atlantic Mutual Company at the time it issued its policy; that the house was worth about $3000, and for this reason he obtained the additional policy of insurance in the amount of $500 from the Atlantic Mutual Company on June 7, 1940; and that under these circumstances the American Insurance Company was liable to him for the full amount of its policy. He also alleged that after this suit was filed the American Insurance Company had required him to pay it $387.50 from the $500 check issued by the Atlantic Mutual Company in settlement of its policy issued on June 7, 1940. The defendant prayed for cancellation of the note and security deed, and for judgment for the $387.50 just referred to, the difference between the amount of his indebtedness to the loan association and the face amount of the policy, and certain alleged damages.

On the trial there was evidence that the American Insurance Company policy was issued in pursuance of written authority given by the defendant in January, 1940; that the policy was issued and delivered to the loan association some time before its effective date, March 17, 1940; that the defendant received due notice of the cancellation of the Atlantic Mutual policy for $2100, and had knowledge of the same at the time he obtained additional insurance of $500. He denied that he authorized the issuance of the American Insurance Company policy, or that he had any notice of the cancellation of the other policy. It appeared without dispute that the house destroyed was worth more than $2600, and that none of the parties intended that both $2100 policies should be effective at the same time. The American Insurance Company policy contained the following provisions: "This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void if the insured now has or shall hereafter make or procure any other contract of insurance, whether valid or not, on property covered in whole or in part by this policy. . . Loss or damage, if any, under this policy, shall be payable to the mortgage (or trustee) as provided herein, 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. . . In case of any other insurance upon the within described property, this company shall not be liable under this policy for a greater proportion of any loss or damage sustained than the sum hereby insured bears to the whole amount of insurance on said property, issued to or held by any party or parties having an insurable interest therein, whether as owner, mortgagee, or otherwise. 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 owners, 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 his, her or their claim."

The court directed a verdict in favor of the defendant for cancellation of the note and security deed, and for $387.50 principal and $16.65 interest to date. The plaintiff's motion for new trial was overruled, and it excepted. 1. The defendant in error filed a motion to dismiss the writ of error, because the plaintiff in error's brief was not served upon his counsel ten days before the day set for the call of the calendar to which the case was assigned, as required by the Code, § 24-4519. This motion must be overruled. Counsel failing to comply with the rule referred to may be dealt with as for contempt of court, but such neglect will in no case cause a dismissal of the writ of error. Code, § 6-1306; Roberts v. Roberts, 115 Ga. 259 (2) (41 S.E. 616, 90 Am. St. R. 108); City of Macon v. Ries, 180 Ga. 371 (179 S.E. 529);Samples v. Ashley, 51 Ga. App. 109 (3) (179 S.E. 745).

2. "A second insurance on the same property, unless by consent of the insurer, will void the policy." Code, § 56-830. The policy issued to the defendant by the American Insurance Company on March 17, 1940, contained a provision to the same effect. The record shows without dispute that the defendant did take out additional insurance on the property insured with another company on June 7, 1940, without the consent or knowledge of the first insurer. The defendant contends, however, that under the circumstances of this case the first policy of insurance was not rendered void by the taking out of the second policy. We can see no merit in his contentions. Even if he did not authorize any one to procure the issuance of the policy, he ratified the same by making proof of loss and seeking to recover thereunder in his cross-action to the present suit. Having elected to seek the fruits of the policy, he is bound by the limitations and conditions thereof. He could not ratify in part and repudiate in part, but had to adopt the policy as a whole or not at all. Code, §§ 4-302, 4-303; Central of Georgia Railway Co. v. James,117 Ga. 832 (45 S.E. 223). The evidence upon the trial did not disclose any facts from which it could have been found that the insurer was estopped from insisting upon the provision of its policy against the taking out of additional insurance without its consent. The fact that the defendant obtained a $2100 policy of insurance from the Atlantic Mutual Fire Insurance Company to take effect on March 17, 1940, that this policy was canceled at the direction of the mortgagee without the consent or knowledge of the defendant, and that the defendant did not know of the cancellation at the time he took out an additional policy of insurance with that company, if true, might have been relevant had the defendant sought to hold that company liable on its policy; but the plaintiff company is not shown thereby to have done anything to cause it to be estopped.

3. While the taking out of the additional insurance rendered the policy void as to the insured, the mortgagee was protected under the mortgagee clause of the policy. When the insurer paid the amount of the insured's indebtedness to the First Federal Savings and Loan Association of Dublin, in satisfaction of its liability under the mortgage clause, the indebtedness of the defendant was not thereby extinguished, but the insurer became subrogated to the rights of the loan association, the mortgagee, and the assignment to it of the insured's note and security deed was valid. Peoples Bank of Mansfield v. Insurance Company ofNorth America, 146 Ga. 514 (91 S.E. 684, L.R.A. 1917D, 868). It was therefore error for the judge to direct a verdict for the defendant for the cancellation of the note and security deed. It was also error to direct a verdict for the defendant for $387.50, the amount received by the plaintiff from the second insurance policy on the property. The latter policy also contained a mortgage-payable clause in favor of the loan association, and the plaintiff insurer had succeeded to the rights of that association at the time the sum referred to was paid to it. The second insurance was, under the terms of the policies, required to bear its proportionate part of the mortgage debt. However, the defendant should be given credit for this payment in any judgment that may be obtained by the plaintiff. It follows that the court erred in overruling the plaintiff's motion for a new trial.

Judgment reversed. All the Justices concur.