Mahler v. Milwaukee Mechanics Insurance

OuaRKSON, J.

We cannot bold that the judgment of the court below, upon the pleadings and the statement of agreed facts, is erroneous.

The New York Standard Mortgagee Clause attached to the policy issued in this controversy, is as follows: “New York Standard Mortgagee Clause for use in connection with first mortgage interest on real estate. Loss, or damage, if any, under this policy shall be payable to the Metropolitan Life Insurance Company, 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 mortgagee (or trustee) shall, on demand, pay the same. Provided, also, that the mortgagee (or 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 thereon 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. Dated 8 November, 1930. Mechanics Insurance Company, of Milwaukee. Roger A. Smith, Jr. (Signature for Company.)”

The defendant, Milwaukee Mechanics Insurance Company’s first contention is that it was “the duty of the Metropolitan Life Insurance Company, beneficiary named in the New York Standard Mortgage Clause, to report to the Milwaukee Mechanics Insurance Company the change in ownership of the property covered by the insurance, and the effect of its failure so to do” makes the policy null and void.

We cannot so> hold, under the facts and circumstances of this case. It will be noted that the rider was dated 8 November, 1930 “attached to policy No. 13 of the Milwaukee Mechanics Insurance Company of Milwaukee — Roger A. Smith, Jr. (Signature for Company.)”

In the findings of fact Nos. 4 and 5, supra, it is admitted: “That Roger A. Smith, Jr., on 22 October, 1930, and prior thereto, as well as a long time thereafter . . . was the duly authorized local agent of the Milwaukee Mechanics Insurance Company,” etc. — “had knowledge,” etc.

In Bank v. Ins. Co., 187 N. C., 97 (102), citing a wealth of authorities, it is said: “With respect to the rights of the mortgagee under the standard mortgage clause, it is the generally accepted position that this clause operates as a separate and distinct insurance of the mortgagee’s interest, to the extent, at least, of not being invalidated by any act or omission on the part of the owner or mortgagor, unknown to the mortgagee; and, according to the clear weight of authority, this affords protection against previous acts as well as subsequent acts of the assured.” C. S., 6420; Bank v. Bank, 197 N. C., 68; Peeler v. Casualty Co., 197 N. C., 286; Bennett v. Ins. Co., 198 N. C., 174.

In Johnson v. Ins. Co., 172 N. C., 142 (147-8), we find: “In Bergeron v. Ins. Co., 111 N. C., 47, the Court quotes with approval from May on Insurance, that Tacts material to the risk, made known to the agent (or a subagent intrusted with the business) before the policy is.issued, are constructively known to the company, and cannot be set up to defeat a recovery on the policy’; and in Grabbs v. Ins. Co., 125 N. C., 395: ‘It is well known that as a general rule fire insurance policies are issued in a different way from those of life insurance companies. The latter are usually issued directly from the home office, while fire insurance policies are generally sent to the local agent in blank, and are filled up, signed and issued by him. The blanks, while purporting to be signed by the higher officers of the company, usually have their names simply printed thereon in autographic facsimile. Under such circumstances, can it be doubted that the policy is issued by the agent, who, for all purposes connected with such insurance, is the alter ego of the insurer ? That he is, seems too well settled to need citation of authorities, and therefore his knowledge is the knowledge of the company. We can only repeat what we have so recently said in Horton v. Ins. Co., 122 N. C., 498, 503: 'It is well settled in this State that the knowledge of the local agent of an insurance company is in law the knowledge of the principal; that the conditions, in a policy working a forfeiture are matters of contract and not of limitation, and may be waived by the insurer; and that such waiver may be presumed from the acts of the agent.’ The same authorities also- support the position that if the defendant issued the policy knowing the conditions existing at the time, it cannot now avoid responsibility on account of those conditions. Nor does the provision in the policy restricting the power of the agent to waive conditions and stipulations affect the application of this rule, because the restrictions are generally construed to apply to something existing at the inception of the policy.” Bullard v. Ins. Co., 189 N. C., 34; Midkiff v. Ins. Co., 197 N. C., 139; Houck v. Ins. Co., 198 N. C., 303; Smith v. Ins. Co., 198 N. C., 578. This matter has recently been discussed in Hill v. Ins. Co., 200 N. C., 115.

Eoger A. Smith, Jr., was the duly authorized local agent of the Milwaukee Mechanics Insurance Company. Lie was the alter ego and made this contract and had knowledge of the change in ownership of the property covered by the insurance when the contract was made. The contract was made by Eoger A. Smith, Jr., “Signature for Company,” with the Metropolitan Life Insurance Company. The agent Smith, the alter ego, knew the facts which knowledge was imputed to the company. Why the necessity of the Metropolitan Life Insurance Company giving another- notice? The change of ownership was known to its alter ego. It may be noted that although the Milwaukee Mechanics Insurance Company, through its alter ego, had notice of the change in ownership, yet the company, with this knowledge, no doubt conveyed to it by its agent, took no steps, if it could, to repudiate the act of its alter ego, the local agent. If it had notified the Metropolitan Life Insurance Company, a new policy could have been obtained, but it did nothing until after the fire loss and now attempts to repudiate the rider — the New York Standard Mortgage Clause.

The defendant Milwaukee Mechanics Insurance Company’s second contention is: “Was the knowledge of the local agent imputable to the company?” We think so. This is fully sustained by the authorities above cited. But defendant, Milwaukee Mechanics Insurance Company contends that there is an exception, and cites Bank v. West, 184 N. C., 220 (223), that Eoger A. Smith, Jr., has an interest inimicable to his company. This is a well grounded principle of law, upheld by this Court and the courts of other states, but is not applicable to the facts in the instant case. Roger A. Smith, Jr., by issuing the policy served no interest of bis own. He did not conceal anything from the company, and his interest was not opposed to the company. His sole connection with the trade was as holder of a second mortgage on lands in nowise connected with this suit. Roger A. Smith, Jr., -was not serving two masters. His only one was the Milwaukee Mechanics Insurance Company. "We see no foundation in the facts of record for this contention.

The defendant, Milwaukee Mechanics Insurance Company’s third contention is that “Mrs. Mahler, the plaintiff, sues only as assignee of whatever rights R. P. Holding and Harvey Atkinson and wife had.” It is contended by this defendant that these parties had no rights, and therefore plaintiff had none. "We cannot so hold. The Metropolitan Life Insurance Company, had a first mortgage on the property and the Milwaukee Mechanics Insurance Company, agent, the alter ego, renewed the insurance with the Metropolitan Life Insurance Company, with full knowledge that the land of these parties was encumbered with the mortgages. We think these parties had- an equitable interest in the property subject to transfer to plaintiff. We do not think that it was necessary, under the facts and circumstances of this case, for plaintiff to ask for any reformation of the contract, and Burton v. Ins. Co., 198 N. C., 498, is not applicable to the facts in this case.

This Court has uniformly held that all actions must be instituted in the name of the real party in interest. The real party in interest'in this case is Alice R. Mahler, assignee. This claim or cause of action is nothing more than a chose in action which is the subject of an equitable transfer and assignment. Mr. Couch in his valuable work on Insurance, Yol. 6, section 1450-J, lays down this principle: “A mere equitable assignment, the policy itself not being assigned, will not defeat the policy under a general clause forbidding an assignment thereof, unless it is specially prohibited by the terms of the contract. But even though an assignment of a right to the proceeds in a fire jxfiicy may not be a valid legal assignment of the policy, it may operate as an equitable assignment, vesting in the assignee an equitable interest in the proceeds.” Nor was it necessary that the policy of insurance be reformed. This rule is laid down in 26 O. J., p. 107: “Reformation is not necessary where insurer has waived or is estopped to rely upon a breach of a condition in the policy.” The letter of R. P. Holding to the Metropolitan Life Insurance Company is immaterial.

It is admitted that Roger A. Smith, Jr., was the duly authorized agent of the Milwaukee Mechanics Insurance Company, he had actual notice of the change of owners and he also knew of the encumbrances against the property, both the first and second mortgages. He had this knowledge before the inception or effective date of the policy that was issued with rider, loss clause, New York Standard Mortgage Clause, for tbe benefit of the- Metropolitan Life Insurance Company, that had a first mortgage. With such knowledge, the written provisions of the policy were thereby waived. For the reasons given, the judgment in the court below is

Affirmed.