Knights of Joseph B. & L. Ass'n v. Mechanics' Fire Ins.

Opinion by Kephart, J., The interest of the mortgagor in the premises damaged by fire was, by foreclosure proceedings, conveyed January 4,1915, to Sclarenco, and by him, on March 18,1915, to the plaintiff, the mortgagee. The fire occurred on April [94] 22,1915. This suit was brought by the mortgagee to recover on the contract of insurance arising from the mortgagee clause' attached to the mortgagor's policy. So much of this clause necessary to the determination of the case reads as follows: “Loss or damage, if any, under this policy, shall be payable to Knights of Joseph Building and Loan Association as mortgagee (or trustee), as its 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 proceeding 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.” The defendant denies liability because notice of the change of title and ownership had not been given to the defendant. The mortgagee clause with the contract of insurance creates a new agreement between the company and the mortgagee. It does not include all the provisions of the policy, and contains many provisions not included in it. It has been held that the mortgagee clause is not an assignment of the policy or a loss clause payable to the mortgagee, but an independent contract of insurance: Ormsby, et al., v. Phoenix Insurance Co., 5 S. D. 72, and cases there cited. Considered as an inde [95] pendent contract, the argument is advanced that in the use of the word “provided,” before the requirement of notice, a condition precedent to the existence of the contract is brought about which, until complied with, suspends the operation of the contract. The word “provided” has no such inflexible meaning that its use may not from the context following, be introductory of a covenant or precede requirements which affect no substantial object immediately vital to the contract, in which case it may be said to be merely directory. Notwithstanding there may be a change in the title, ownership or an increased hazard, from the provisions of the contract, the insurance continues in full force for the benefit of the mortgagee though notice of such change had not been given to the insurance company. The notice required is to be given by the mortgagee when he knows of the changes, but as the contract exists for his benefit, when he does not know of the changes, how can the fact of his knowledge alter the aspect of such “change” so as to impose a heavier or unusual burden on the company, or increase the insurance risk, and for what reason would such knowledge by the insured suspend the contract already in existence? The mortgagee clause does not undertake to impose on the insured the duty of ascertaining whether such changes are made, and when notice is given within a reasonable time no substantial right the company may have can be prejudicially affected. It would seem that the provision requiring notice is merely directory as it does not refer to anything that is by the agreement made such a substantive part of the contract; a forfeiture will not be declared if the notice be given within a reasonable time. It is the duty of the company, if it wishes to adopt a policy that will best protect its interests, preserve the safeguards which existed at the policy’s origin, and be protected in the payment of any loss arising under the policy, to be diligent in ascertaining if there has been a change of title, ownership or hazard affecting the policy. [96] This information is acquired in many ways, but as an additional source, it is agreed between the mortgagee and the company that should the mortgagee know of these facts, within a reasonable time it shall report them to the company. There is no allegation here that through the failure of the mortgagee to give notice before the fire the company has suffered any loss that it would not have been compelled to pay had such notice been given, and notice was given when the proof of loss was delivered to the company. It is not claimed that the transfer of the property in any manner increased the hazard of the risk. These matters would be a proper defense under the covenant in the contract, but should be averred and proven by the company. “Where the language of an agreement can be resolved into a covenant, the judicial inclination is so to construe it; and hence it has resulted that certain features have ever been held essential to the constitution of a condition. In the absence of any of these, it is not permitted to work the destructive effect the law otherwise attributes to it”: Paschall v. Passmore, 15 Pa. 295-307. This mortgagee clause, when given, contemplated changes in the title, ownership and possession that necessarily follows the ordinary foreclosure proceedings on a mortgage. It was the mortgagee’s interest, through these various changes, that was being protected under the agreement, and the damage in that protected interest is now being sued for. The provisions of the policy itself as to forfeiture are modified and under certain conditions omitted by the new agreement which springs from the mortgagee clause and the insurance policy, and as modified they should be dealt with in the light of the language contained in the mortgagee clause. We may conclude from what we have said, and as far as it is necessary for us to go in the present case, the notice as here required should be given within a reasonable time. The reasonableness of the time is generally a question for the jury. It depends on the circumstances [97] of each, case, and the necessity for prompt action.- .The law will not undertake to fix any definite period within which the mortgagee shall act. The circumstances may be such as to prevent him from giving the notice required and it should be only in clear cases that the court should say as a matter of law that the time when the . notice. was given was an unreasonable length of time. As was said by this court, in Portland Ice Co. v. Connor, 82 Pa. Superior Ct. 428, reasonable time is generally a mixed question of law and fact, not only where the evidence is conflicting but even in some cases where the facts are not disputed and the matter should be decided by the jury upon the proper instructions on the particular circumstances of each case. The jury were properly instructed on this phase of the case and the reasons why notice was not sooner given were outlined to them by the court. As we view the case, the- question of merger of title in the plaintiff when the property was bought by Sclarenco, was one of intention and for the jury. By their findingappellee’s mortgage was not divested by that sale. We do not think that the circumstances were so free from doubt that a definite legal rule could be applied to them and the question was, therefore, for the jury. The judgment is affirmed. Porter, J., dissents.