Buckner v. United States Fire Insurance

Clarkson, J. The question involved: Is the plaintiff mortgagor, in ,an independent action, under mortgagee loss clause, entitled to have the sum of $2,292.45 fire loss paid by defendant Insurance Company to defendant Land Bank, under the policy of insurance in defendant Insurance Company, credited upon his indebtedness of $3,972.33, due as of 1 April, 1935, to defendant Land Bank? We think so, under the facts and circumstances of this case. *645 The prayer of plaintiff is as follows: “(1) That the defendant U. S. Eire Insurance Company he required to cancel and deliver any agreement it may have entered into by it and its codefendant Federal Land Bank of Columbia, attempting to assign any interest of the plaintiff in his notes and his farm given as security for the same; (2) that the Federal Land Bank of Columbia be required to credit the principal sum of the note of the plaintiff described in the deed of trust in the amount of $2,292.45, as of the date of 28 November, 1933; (3) for such other and further relief as the plaintiff may be entitled herein.” In Bank v. Insurance 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.” S. c., 188 N. C., 747 (751) ; Bank v. Insurance Assn. (Hager case), 203 N. C., 669; Mahler v. Ins. Co., 205 N. C., 692; Stockton v. Ins. Co., 207 N. C., 43. This is an independent civil action, instituted in the Superior Court of Buncombe County, 8 September, 1934, wherein the plaintiff mortgagor seeks to have the fire loss under the policy of insurance paid by the defendant Insurance Company to its eodefendant, the Land Bank, credited upon his notes given to the defendant Land Bank. In the policy issued by defendant Insurance Company is the following: “Does insure the Federal Land Bank of Columbia and legal representatives, to the extent of the actual cash value (ascertained with proper deductions for depreciation) of the property at the time of loss or damage, but not exceeding the amount which it would cost to repair or replace the same with material of like kind and quality within a reasonable time after such loss or damage,” etc. Under the contract plaintiff elected that the $2,292.45 be credited on his deeds of trust to the Land Bank, and brought this action for that purpose. The property burned was considered by plaintiff to be worth far above the appraisal. The total sound value by the appraisers was fixed at $3,675.58. The premium paid was $48.60 a year for amount of insurance. From the record we are unable to understand by what legerdemain the Insurance Company paid the Land Bank only $2,292.45 under the insurance contract — which was for $2,700 in case of loss. We will pass over the questions of waiver and breach of contract on the part of defendant Insurance Company. It may be noted that plaintiff accepted the reduced amount and elected to sue and have the amount *646 credited on his deeds of trust. We will consider the right on the part of the Insurance Company to set up the subrogated receipt. There is one thing fatal to the Insurance Company’s defense — it relies on the form of Standard Policy, N. C. Code, 1935 (Michie), sec. 6437. In Johnson v. Ins. Co., 201 N. C., 362 (363-4), it is said: “These stipulations and provisions are included in the policies by virtue of statutory requirements, and are valid in all respects. Midkiff v. Ins. Co., 197 N. C., 139, 147 S. E., 812; Greene v. Ins. Co., 196 N. C., 335, 145 S. E., 616; Bank v. Ins. Co., 187 N. C., 97, 121 S. E., 37; Black v. Ins. Co., 148 N. C., 169, 61 S. E., 672. In the last cited case, referring to the stipulations and provisions included in a policy of fire insurance, as required by C. S., 6437, it is said: 'They are inserted in the policy, not by the company or by the plaintiff, but by the statute. To fail to give them force and effect is to nullify the statute.’ These stipulations and provisions are included in the policies, and unless waived as provided therein, must and will be enforced.” A provision in the policy of defendant Insurance Company is as follows : “It is understood and agreed where the printed conditions of this policy are in conflict with the conditions of the standard fire and lightning policy of any State or territory where this contract is to be performed, then and in that event the standard policy of such State or territory shall control and govern the construction of the printed portion of this policy,” etc. The only subrogation clause we can find in the Form of Standard Policy, in section 6437, supra, is the following: “Subrogation — This company may require from the insured an assignment of all right of recovery against any party for loss or damage to the extent that payment therefor is made by this company.” This has been held to be an equitable right independent of the statute. Cunningham v. R. R., 139 N. C., 427 (434). The defendant Insurance Company has put in the policy a new right, contrary to the standard policy. We do not think under the terms of its policy or on any equitable principle that its subrogation receipt is valid or binding on plaintiff on the facts and circumstances of this case. The policy period contended by defendant Insurance Company for bringing this action does not apply on this record. This is an independent action, brought by plaintiff against the Land Bank to have the amount of insurance paid it by the Insurance Company credited on its deeds of trust, in accordance with his contract with the Land Bank. This action was brought immediately when plaintiff found that this had not been done. On this record the exclusion of evidence on the part of the Insurance Company by the court below is not material. *647 The plaintiff, by the amount being tacked, on to his debt, under his contract with the Land Bank, paid the insurance policy. The plaintiff had no notice of this new right of subrogation put in the policy by the Insurance Company — contrary to the statute — as the policy was left with the Land Bank. The Land Bank’s interest in the policy, under its contract with plaintiff, is the “loss, if any, to be payable to Federal Land Bank of Columbia, as its interest may appear at the time of the loss.” In Richards on the Law of Insurance (4th Ed.), p. 75, part sec. 52, is the following: “A corollary incident to the doctrine of indemnity is the right of subrogation. Upon paying the loss under a fire or marine policy, the insurer becomes subrogated pro tanto to such rights and remedies as the insured may have against third persons who are primarily liable to him for his damage sustained. The person who has caused the loss is said to (be) the one primarily liable.” This is the right given the Insurance Company under section 6437, supra — “Subrogation.” An insurer, on paying a loss, is subrogated to the insured’s claim against the wrongdoer causing the loss. Cunningham, & Hinshaw v. S. A. L. Ry. Co., supra; Fidelity Ins. Co. v. A. C. L. R. Co., 165 N. C., 136; Powell & Powell v. Wake Water Co., 171 N. C., 290; Lumbermen’s Mut. Ins. Co. v. Sou. Ry. Co., 179 N. C., 255. N. C. Code, 1935 (Michie), sec. 446, provides that all actions must be prosecuted in the name of the real party in interest. “But this section does not authorize the assignment of a thing in action not arising out' of contract.” Held, that if the exception in the section operated to prevent a fire insurance company, on paying a loss, from suing the one whose negligence caused the loss, it was repealed by Laws 1899, ch. 54, sec. 43, which provides that the insurance company should be subrogated, to the extent of the payment by it, to all right of recovery by assured. Hamburg-Bremen Fire Ins. Co. v. A. C. L. R. Co., 132 N. C., 75. See subrogation clause now in the Standard Policy, sec. 6437, supra. “But where the mortgagor has any interest in the policy, either by payment of premiums or by agreement with the mortgagee, then there will be no subrogation in favor of the insurers, for the latter takes only such rights as the assured can give.” Richards, supra, p. 80, part sec. 53. Fire insurer paying insurance to mortgagee under mortgage clause held not entitled to be subrogated pro tanto to right of mortgagee against insured mortgagors. Atlantic Joint Stock Land Bank of Raleigh v. Farmers Mut. Fire Ins. Assn. of N. C., 203 N. C., 669 (Hager case). We see no error in the charge. On the entire record we see no prejudicial or reversible error. No error.