McGrath v. First Mortgage Guarantee & Trust Co.

Opinion by Head, J., If the plaintiff may recover at all, his right must rest on an unwarranted breach by the defendant of some covenant contained in the policy of guarantee upon which he sues. That instrument is in writing under the corporate seal of the defendant, duly executed by its chief officers. The primary obligation of the defendant thereunder was a guarantee of the payment at its home office of the principal and interest of a certain bond and mortgage from the day of the date of the policy “until the sixth day of November 1910.” This obligation, however, was neither absolute nor unqualified. Its performance required the doing of certain things by the plaintiff therein plainly and clearly stipulated. The guarantee applied in the first instance to the regular semiannual payments of interest secured by the mortgage. No complaint having been made of any breach in this respect, we may pass by that portion of the instrument. It further obliged the defendant company to pay the — 216 — principal sum secured with any accrued interest thereon "within six months from the sixth day of November 1910, provided such payment shall have been requested of the company in writing by the assured before said sixth day of November 1910.” The significance of this plain condition upon which the indemnity covenant should become active may be readily understood. The plaintiff had bought, for the consideration named in his policy, the additional security provided by the policy only during a limited period of time. It might often happen that during such period the property covered by the mortgage would become so enhanced in value that thereafter the mortgagee could perceive no necessity for any further protection of his debt than that afforded by the bond and mortgage of the debtor. As a consequence there would be no occasion for the guarantee company to assume that its conditional obligation was to become active and unconditional until the receipt of the notice stipulated for in its covenant. No such notice was given. The plaintiff does not contend, and the evidence would not warrant such contention, that his failure to give the notice required was induced or brought about by any act, omission or declaration of the defendant or its proper officer. It is clear, therefore, that unless the company is prevented from standing upon the written contract it had made, its obligation ended on November 6, 1910. The obligation of the company rested on the further condition thus stated in the policy, viz.: "Whenever the principal sum due upon the said bond and mortgage shall become due, either by the terms thereof or by reason of the exercise of any option given therein to the mortgagee, the company shall have the right in the name of the assured, but without expense to the assured, to foreclose the said mortgage, and out of the proceeds of sale to be paid so much as may remain after paying- to the assured whatever may be due for principal and interest upon the said bond and mortgage, — 217 — provided, however, that in any such case the assured shall on demand in writing by the said company . . . . deposit the said bond and mortgage, with all title and fire insurance policies and all other documents accompanying said mortgage, with the company for foreclosure, and render such reasonable assistance as the company may require in enforcing the performance of any and all covenants contained therein, and if the assured shall fail so to do within thirty days after the date of the mailing of such notice, all further liability of the company under this policy shall cease.” The plaintiff having failed to give the required notice, as already indicated, on or before November 6, 1910, the situation remained unchanged until the twelfth day of that month. On that date one Thomas G. Hunter, who signed his name as the “real estate officer” of the defendant, wrote the plaintiff requesting him to deposit his bond and mortgage with the company, as the terms of his policy required him to do. He was further advised in that letter that the company, preparing to meet its indemnity obligation, had been negotiating with certain persons in the letter described, but that in the course thereof it had appeared there was some defect in the title of the mortgagor to the property covered by the mortgage and for that reason the negotiations had fallen through and the mortgagor was unable to raise the money. This letter specifically directed the attention of the assured to a further provision in the policy of guarantee which declared, “The company shall not be responsible for loss .... from defect in the title to the premises described in such mortgage or prior incumbrances now existing thereon.” The letter then proceeded to declare that the company did not assume any liability by reason of defective title, “but our effort is always to help out in any matter in which we are in any way interested. If you will send us the above papers we will proceed at once to have the matter straightened out.” The evidence discloses that — 218 — in response to this letter counsel for the plaintiff went to the office of the defendant company with the bond and mortgage in his possession, which he says he offered to deliver up if the officer of the defendant would declare the company had no defense to the claim of the plaintiff or that his policy of indemnity was then in full force and the company's liability thereunder admitted. We can perceive no right that existed in the plaintiff or his counsel to attach such a condition to the performance of an act which his policy, if in force, plainly obliged him to do. If there were any defect in the title of the mortgagor which would weaken the security of what was intended to be a first mortgage, the plaintiff had not purchased, when he bought his policy, any protection against such loss. It is true, neither the plaintiff nor the defendant was to be concluded by the claim advanced by the officers of some other company, to which application for insurance of the title had been made, that there was any such defect in that title as was contemplated by the provision of the policy we have quoted. In so far as the defendant company was denying its liability for loss produced by such defect, if it existed, it was plainly within the right reserved to it in its policy. The plaintiff could not therefore relieve himself of the obligation to turn over his bond and mortgage to the defendant company and thus permit it to determine whether the claim of a defective title was well founded or not by demanding, as a condition precedent to the deposit of his papers, an admission by the real estate officer of any other or different liability than that set up by the policy. The contention of the plaintiff then is that by writing the letter of November 12 the defendant had waived its right to defend this action on the ground that there had been, a failure to give the original notice provided for in the policy. It will be observed that the waiver contended for does not rest on any act or declaration of the defendant company made before the expiration of the — 219 — term of the policy. In Everett v. London & Lancashire Ins. Co., 142 Pa. 332, the policy required that any action founded thereon must be brought within a stipulated time. Suit was not brought until some months thereafter, and the plaintiff contended that the right of the company to ■defend on that ground had been waived by reason of something done by the company after the limitation period had expired. Mr. Justice Mitchell, speaking for the court, thus stated the situation: “In regard to the time of bringing suit, the failure of the evidence of waiver is even more marked. The policy stipulated that no suit should be sustainable unless commenced within three months next after the loss, and the original writ in this action was not issued until eleven months after. By the terms of the policy it was too late, and the judge correctly so instructed the jury. But he also instructed them that if the defendant, after the stipulated time had expired, had been willing to pay, although denying its liability, they might find a waiver. In this there were two serious errors. The acts to constitute a waiver by implication must be done during the running of the period of limitation, not after it has expired and the rights of the parties have become fixed. In Beatty v. Lycoming County Mut. Insurance Co., 66 Pa. 9, it was said by Sharswood, J.: “To constitute a waiver, there should be shown some official act or declaration by the company during the currency of the time, dispensing with it, something from which the assured might reasonably infer that the underwriters did not mean to insist upon it. . . . After the thirty days had expired without any statement, nothing but the express agreement of the company could renew or revivify the contract.” We have already seen the plaintiff does not even urge that his failure to give the notice required was brought about by any act or declaration emanating from the company ór its officers. By its terms then the contract of guarantee came to an end on November 6, 1910. But it is argued the request of the company made six days — 220 — later for the deposit of the bond and mortgage was a recognition by it that the policy was still alive and that its obligation had not terminated by the failure to give the notice. There was testimony also to the effect that, during the meeting on November 12, the real estate officer expressly stated his company would not take advantage of plaintiff’s failure to give the written notice required by the policy. Even if that be conceded, no consideration whatever moved from the plaintiff to support any further promise by the company or its officers, and it does not appear that by reason of the receipt of that letter, or because of any declaration then made, the plaintiff was led to do or forbear to do anything to his injury. But apart from that, if the plaintiff took the position on November 12, 1910, that his policy was still in force, notwithstanding his failure to give notice, then he was clearly obliged to respond to the request of the company that he deposit his bond and mortgage so that it might proceed to foreclose the latter. If its undertaking to guarantee to the plaintiff the full amount of his debt and interest was then active, it was no more than right that it should have the opportunity, as the policy provided, to determine for itself the time and the manner of the foreclosure proceedings to the end that its loss, if any, might be minimized. Under existing circumstances there was ■no warrant whatever in the policy for the action of the plaintiff in proceeding himself to foreclose the mortgage and then hold the defendant responsible for any loss arising from the failure of the fund at sheriff’s sale to pay his debt in full. We are of opinion that the course pursued by the plaintiff has left him without remedy on his policy against the defendant, and the defendant’s fourth point (third assignment) praying for a directed verdict should have been affirmed. That assignment must accordingly' be sustained. Judgment reversed.