Sossaman v. Pamlico Banking & Insurance

To cite and analyze the numerous cases to which we were referred on the argument would be a labor without any useful result. They may be found collected in May on Insurance and in the briefs of the counsel. They generally turn on the language of the condition under which a forfeiture of the policy is claimed to have been incurred. It has been held that under a condition against alienation no forfeiture is incurred by mortgage of the property, at least not until foreclosure, although the right to redeem has been lost at law and turned into an equity. This is because in many of the Northen [Northern] States a mortgage is not regarded as creating an estate in the mortgaged property, but merely a lien on it. A somewhat different view has been commonly taken in this and other States. But we were referred to no case in which it was held that giving a mortgage did not work a forfeiture, where the terms of the condition were as comprehensive as they are in this case.

There are two considerations on which it seems to me the (147) question of forfeiture may always be fairly and reasonably decided:

1. Does the making of a mortgage come within the words of the condition as commonly understood? If it does not, a forced meaning should not be put on the words in favor of the company; while if it does, the natural and usual meaning must be allowed to them, notwithstanding the conditions are in fine print, if it be legible.

If in deference to what seems the weight of decision we admit that a mortgage is not an alienation even after a forfeiture of the legal estate by nonpayment of the debt at maturity, yet it must be considered under such circumstances as making a material change in the interest of the insured in the property; at least as much as a levy upon and seizure of the goods under execution, which is specially named as a ground of forfeiture. Both, at law, take the property out of the mortgagor and vest it in another person; while in substance both are merely liens, from which the property may be exonerated by payment.

2. When, as in this case, the making of a mortgage comes within the apparent meaning of the words in the condition of forfeiture, it is proper then to consider whether there is anything in the nature of the contract or in the purposes for which it was entered into to control this apparent meaning and restrict the words used. A reason why the company might intend to, and might prudently require that any diminution of the interest of the insured in the property should work a forfeiture, unless consented to by it, is obvious. No company will generally insure property for its full value. To insure it for more than its value is justly regarded as hazardous and an inducement to fraud. A company looks to the amount of interest in property which an insured has at risk as a principal reason for expecting from him care and watchfulness to protect it from loss. Every diminution of the interest of the insured tends to diminish the watchfulness which is impliedly stipulated for, and when that interest is substantially wholly parted with in (148) any manner, it is equivalent to an absolute alienation, which is admitted to be a ground of forfeiture. In many cases a mortgage on property to its value, or for even less, is substantially an alienation; for although after a loss of the property the debt or the residue of it would continue owing, yet the insured might little regard his mere personal liability. At all events, it is neither unreasonable nor unjust to introduce in a policy such a condition of forfeiture. There is nothing in it to lead to a suspicion of fraud or deception on the insured, and having deliberately and knowingly entered into it, there is no more reason why it should not be enforced against him than the terms of any other contract would be.

PER CURIAM. Affirmed.

Cited: Biggs v. Insurance Co., 88 N.C. 143; Gerringer v. InsuranceCo., 133 N.C. 412; Modlin v. Insurance Co., 151 N.C. 41; Watson v.Insurance Co., 159 N.C. 640; Roper v. Insurance Co., 161 N.C. 155.

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