J. I. Kelly Co. v. Saint Paul Fire & Marine Insurance

Taylor, J., (after stating, the facts). — The assignments of error are as follows: 1st. The court erred in overruling plaintiff’s demurrer to defendant’s plea No. 1. 2nd. The court erred in sustaining defendant’s demurrer to plaintiff’s first replication to*, plea N’o. 1. 3rd. The Court erred in denying plaintiff’s motion to withdraw demurrer to second plea and file in lieu thereof replication. We Will dispose first of this third assignment of error with the remark that the record before us-presents nothing upon which this assignment can be predicated or considered. After the court below had made an order eliminating the defendant’s second plea from — 475 — •the case by sustaining the plaintiff’s demurrer thereto, there appears transcribed in the record 'the following motion: ■ “Now comes said plaintiff and moves said court for leave to withdraw its demurrer herein filed 'to' the second plea of the defendant.” No ruling or other action appears by the transcript to have been made or taken, by the court below upon this motion or by the parties. Under these circumstances there is nothing presented for review by this third assignment of error. The policy sued upon contains the following provision : “This entire policy, unless otherwise provided by agreement endorsed hereon or added hereto, shall be void * * * if, with the knowledge of the insured, foreclosure proceedings be commenced or notice given of sale of any property covered by this policy by virtue of any mortgage or trust deed.” The first plea of the defendant invokes this clause of the policy to its defence, and succinctly, fully and clearly alleges that the said policy, prior to the alleged destruction of the property thereby insured by fire, became void by force 'of said provision therein, that prior to the alleged destruction of the insured property by fire foreclosure proceeding's were commenced, • with the knowledge of the plaintiff, to. foreclosure a valid, subsisting and unpaid mortgage theretofore executed upon the insured property, and that no written agreement of the defendant herein to the commencement of the said proceedings has ever been endorsed upon the said policy or added thereto. This provision in a policy of fire insurance appeals to us as a wise and proper safeguard to the insurer against the greatly increased risk consequent upon the circumstances provided against therein. Mortgages — 476 — are not usually enforced by foreclosure when the mortgagor or person liable for their payment is able to liquidate them when due, but such proceedings are usually brought about by the inability of the mortgagor to pay the mortgage debt when due. The temptation to destroy the property and with the funds derived from existing insurance thereon to pay ■ off the mortgage demand is multiplied fourfold wh'en legal proceedings are actually instituted, and the final loss of the entire property to the mortgagor thereby becomes imminent. As a safeguard against such a contingency the quoted clause is wisely and properly inserted in such policies, and the plain meaning and proper and legitimate purpose of such a clause should not be emasculated and annulled by -any process of specious reasoning of judicial special pleading. The plain meaning and purpose of the clause is that such a policy shall become void if, with the knowledge of the insured, foreclosure proceedings of any mortgage, whether executed by the insured or by another, covering any of the insured property shall be commenced during the life of the policy, unless there shall be an agreement endorsed upon or added to the policy providing otherwise. The plea of the defendant concisely, fully and sufficiently alleges the commencement of foreclosure proceedings of a valid and subsisting mortgage upon the insured property, and that the insured had knowledge of such proceedings, and that no' agreement had been indorsed upon or added to such policy providing against the avoidance of such policy by the commencement of such foreclosure proceedings, and that, therefore, said policy sued upon became null and void and no longer binding upon the defendant insurer, and such plea presented a valid defense and was not subject to the demurrer interposed thereto, and the court below committed no error in — 477 — overruling such demurrer. From among a multitude of authorities upholding the validity and propriety of such provisions in policies of fire insurance we cite the following: Schroeder v. Imperial Ins. Co., 132 Cal. 18, 63 Pac. Rep. 1074, S. C. 84 Am. St. Rep. 17. In this case it is held that such a provision in a policy: “is directed to the fact of knowledge on the part of the insured of the commencement of foreclosure proceedings, and not to the time that he may obtain such knowledge. The reasonable construction to be given to the clause is, that whenever he shall have knowledge of the proceedings, and not before, and shall fail to obtain the consent of the insurer thereto, the policy shall be avoided.” We are in full accord with this construction of the California court. Findlay v. Union Mut. Fire Ins. Co., 74 Vt. 211, 52 Atl. Rep. 429, S. C. 93 Am. St. Rep. 885; Woodard v. German-American Ins. Co. of New York, 128 Wis. 1, 106 N. W. Rep. 681; Hayes v. United States Fire Ins. Co., 132 N. C. 702, 44 S. E. Rep. 404; Moore v. Hanover Fire Ins. Co., 141 N. Y. 219, 36 N. E. Rep. 191; Norris v. Hartford Fire Ins. Co., 55 S. C. 450, 33 S. E. Rep. 566, S. C. 74 Am. St. Rep. 765; McIntire v. Norwich Fire Ins. Co., 102 Mass. 230; Meadows v. Hawkeye Ins. Co., 62 Iowa 387, 17 N. W. Rep. 600; Hartford Fire Ins. Co. v. Clayton, 17 Tex. Civ. App. 644, 43 S. W. Rep. 919; Delaware Ins. Co. of Philadelphia v. Greer, 120 Fed. Rep. 916; Titus v. Glens Falls Ins. Co., 81 N. Y. 410; Woodside Brewing Co. v. Pacific Fire Ins. Co., N. Y. 11 App. Div. 68, 42 N. Y. S. 620; Merchants’ Ins. Co. of Newark v. Brown. 77 Md. 79, 25 Atl. Rep. 992. . We are cited to the case of Bellevue Roller Mill Co. v. London & L. Fire Ins. Co., decided by the Supreme Court of Idaho in February, 1895, 4 Idaho 307, 39 Pac. Rep. 196, as holding a different doctrine from that an — 478 — nounced in the cases cited above. We cannot at all approve of the findings of the Idaho court in this case. The plain terms of the clause under discussion were lost sight of entirely in that court’s construction thereof. For example the clause provides that the policy shall be,void if, “with the knowledge of the insured foreclosure proceedings be commenced,” that court holds that under this language to constitute a defense the insurer miust allege that the insured had knowledge that a foreclosure proceeding “was about to be brought/’ and that then he is required'to give notice to the insurance company. The clause in question makes no provision about notice to the insurance company — 'but, on the contrary, broadly avoids the policy if foreclosure proceedings are commenced with the knowledge of the insured, unless otherwise provided by an agreement endorsed upon or added to the policy. Under this clause, as we view it, it will make no difference whether the insured notified the insurer or not of the commencement of foreclosure proceedings, the institution of such proceeding's, upon the acquisition of knowledge thereof by the insured, no matter when he may acquire such knowledge, if acquired prior to the loss of the property, avoids the policy, unless it 'be otherwise provided by an agreement endorsed upon or added to' the policy. The first replication of the plaintiff to the defendant’s first plea seems to have been drafted to meet the construction of the Idaho court of the clause under discussion, but with that construction, we cannot agree. This first replication of the plaintiff to the defendant’s first plea admits the commencement of proceedings to foreclose a mortgage covering the insured property, and admits that the insured plaintiff acquired knowledge of the commencement of such proceedings after, but on the same day, that they were commenced, which was prior — 479 — to the destruction of the property by. fire, and admits that no agreement was endorsed upon or added to the policy providing otherwise than' that such commencement of foreclosure proceedings should avoid the policy. These admissions of the replication closed the door to ■the plaintiff’s right to the relief sought by his suit, and the side agreement alleged in such replication between the insured plaintiff and the foreclosing mortgagee that ■such foreclosure proceedings would be discontinued if the insured would pay part of the mortgage debt on his return from Boston, can make no difference with the forfeiture of such policy effected by the actual commencement of such foreclosure proceedings. The first replication of the plaintiff to the first plea of the defendant set up nothing in avoidance of the defense alleged by such plea and the court below committed no error in .sustaining the defendant’s demurrer to such first replication to said first plea. Finding none of the errors assigned to be well taken, the judgment of the circuit court' in said cause is hereby affirmed at the cost of the plaintiff in error. Cockrell, J., disqualified.