Stockton v. . Insurance Co.

Civil action to recover for loss by fire under a policy of insurance issued by the defendant.

The facts are these:

1. On 20 June, 1932, the defendant issued to Mrs. D.C. (Hermie) Stockton fire insurance policy in amount $1,350, on two-story, frame building, occupied by tenant as a dwelling-house, with loss payable, under New York Standard Mortgagee Clause, to D.C. Stockton, husband of insured, as his interest may appear under a $1,000 deed of trust on said property.

2. Prior to the issuance of the policy in suit, D.C. Stockton had pledged his note and deed of trust to H. Arthur Osborne Company, A. B. Slagle, and J. W. Hastings as collateral security.

3. The Federal Land Bank of Columbia held a first and prior mortgage on said property (executed by plaintiff's predecessor in title), and had also insured the same for its benefit, at the time of the issuance of the policy in suit.

4. The plaintiffs offered to show, under their plea of waiver, that the defendant's agent had full knowledge of this prior encumbrance before issuing the policy in suit. Evidence excluded, and plaintiffs except.

5. Foreclosure proceedings were instituted by the Federal Land Bank on 22 June, 1932.

6. The dwelling covered by the policy in suit was totally destroyed by fire 12 January, 1933.

From a judgment of nonsuit entered at the close of all the evidence the plaintiffs appeal, assigning errors. Under their plea of waiver it was competent for the plaintiffs to show that defendant's agent had full knowledge of the encumbrance held by the Federal Land Bank at the time of the issuance of the policy in suit. Houckv. Ins. Co., 198 N.C. 303, 151 S.E. 628; Aldridge v. Ins. Co.,194 N.C. 683, 140 S.E. 706; Johnson v. Ins. Co., 172 N.C. 142,90 S.E. 124.

The correctness of the judgment as it affects the owner, Mrs. Stockton, was conceded on the argument. Bank v. Ins. Co., 187 N.C. 97,121 S.E. 37. But the case of D.C. Stockton, who claims under a separate contract of insurance, the Standard Mortgagee Clause, would seem to be one for the jury. Bank v. Ins. Co., supra; Mahler v. Ins. Co., 205 N.C. 692,172 S.E. 204.

It is the generally accepted position that the New York Standard Mortgagee Clause, engrafted on a policy of fire insurance, operates as a distinct and independent contract of insurance for the separate benefit of the mortgagee, as his interest may appear, to the extent, at least, of not being invalidated, pro tanto or otherwise, by any act or omission on the part of the owner or mortgagor, unknown to the mortgagee; and accordingly, as such, it affords protection against previous as well as subsequent acts of the assured. Bennett v. Ins. Co., 198 N.C. 174, 151 S.E. 98, 72 A.L.R., 275; Bank v. Bank, 197 N.C. 68, 147 S.E. 691.

The fact that, prior to the issuance of the policy in suit, the mortgagee had hypothecated his note and mortgage as collateral security did not ipso facto render the Standard Mortgagee Clause void as to his interest. There is nothing in the separate contract of insurance to this effect.

Reversed.