Opinion
No. 35927.
October 22, 1945.
1. INSURANCE.
Where soliciting agent, when he accepted application for fire policy, knew that property was mortgaged and that applicant was procuring a new mortgage loan to pay off existing mortgages, existence of such mortgages did not invalidate policy under provision that policy should be void if, at time of its issuance, property was mortgaged or if it should be thereafter mortgaged without company's written consent.
2. INSURANCE.
Where fire policy provided that it should be invalidated if property should be mortgaged thereafter without company's written consent, insured's payment of mortgage subsequently placed thereon without company's consent restored property to protection of policy, where such payment was made before fire loss occurred.
3. SUBROGATION.
Subrogation cannot arise in favor of a party against another, from payment of a just debt owed by payor to party against whom he claims subrogation.
4. INSURANCE.
Where fire policy contained loss-payable clause in favor of insured and mortgagee, and on destruction of building by fire insurer denied liability to insured because of mortgage on property and admitted liability to mortgagee only on condition that mortgagee, on payment to it, would issue a subrogation receipt to insurer, the attempted subrogation agreement was invalid and company's payment to mortgagee was equivalent to payment on mortgage debt and, mortgage debt having been fully liquidated thereby, insured was entitled to cancellation of mortgage and of subrogation receipt.
APPEAL from the Chancery court of Tishomingo county, HON. ALVIS MITCHELL, Chancellor.
Jones Ray, of Jackson, for appellant.
Appellee filed his bill against The Home Insurance Company of New York and The Federal Land Bank of New Orleans, seeking a cancellation of a note and deed of trust he executed to the Federal Land Bank on April 7, 1927, on certain lands, and on which the Home Insurance Company had insured certain buildings. The bill charges that the policy of insurance was issued on December 3, 1926, prior to the making of the Federal Land Bank loan, and that on October 2, 1931, the residence insured under said policy, and which was mortgaged to the Federal Land Bank, burned. It is charged that the appellant the Home Insurance Company paid the sum of $500 to the Federal Land Bank and claimed subrogation to its security, and further charged that the said $500 should have been paid to the Federal Land Bank unconditionally as a credit upon the indebtedness of the appellee to the Federal Land Bank, and further charged that at the time the Home Insurance Company made payment to the appellant, the Federal Land Bank, it denied liability to the appellee and claimed subrogation from the Federal Land Bank. To the bill the Federal Land Bank answered, setting up the fact that the Home Insurance Company had claimed subrogation at the time it made the payment of $500, and that it had duly executed to the Home Insurance Company the subrogation instruments shown in the record and hereinafter referred to, and denied that the appellee had fully paid off his debt. The Home Insurance Company demurred to the bill on two grounds: First, that there was no equity on the face of the bill; and, second, that the cause of action was barred by Section 722, Code of 1942, Section 2292, Code of 1930. The demurrer of the Home Insurance Company was overruled and thereafter it answered. The answer set up the same statute of limitations as had been set up by the demurrer, and further pled as a defense that the appellee had sued it in the circuit court of Tishomingo County, and that the judgment rendered in that cause was res adjudicata, and that the present case was an attempt to split the cause of action, and the answer further set up the subrogation held by the Home Insurance Company from the Federal Land Bank and a breach in the contract, in that the property was mortgaged without notice to the Home Insurance Company.
The record shows unquestionably that the appellee applied to the Home Insurance Company, by written application, for a policy of insurance. That after the fire which destroyed the residence, J.C. Jourdan, Jr., attorney at law, of Iuka, Mississippi, representing the appellee, wrote the Home Insurance Company of New York, and demanded that payment be made under the policy. And thereupon the Home Insurance Company, on May 28, 1932, advised Mr. Jourdan that it denied liability to the appellee. Appellee in his testimony admitted his knowledge of the facts contained in the correspondence between his attorney, Mr. Jourdan, and Home Insurance Company, and, of course, he admitted his signature on the application for the policy. The Home Insurance Company proved by the record in Cause No. 1268 on the circuit court docket of Tishomingo County, styled "D.N. Northington vs. The Home Insurance Company, New York," the suit which appellee brought against it, and there is in the record, as exhibits to the testimony of appellee, a copy of the declaration and of the plea and of the final judgment in said Cause No. 1268 on the circuit court docket of Tishomingo County, in which cause appellee sued The Home Insurance Company of New York, on the identical policy sued on in this cause. A photostatic copy of the policy issued to appellee and a photostatic copy of the subrogation agreement issued by The Federal Land Bank of New Orleans to The Home Insurance Company is in the record. The appellants then proved numerous deeds of trust which were on this property at the time the policy of insurance was issued, and some of which continued to remain on the property as subordinate mortgages after the Federal Land Bank had made its loan, all of which, of course, were in violation of the terms of the application signed by appellee and the terms of the policy issued to appellee on the basis of the application.
The court found that the $500 paid to the Federal Land Bank by the Home Insurance Company should be an absolute credit on the indebtedness of appellee to the Federal Land Bank, and by its decree so adjudicated, and further decreed that the Federal Land Bank should, upon the payment of the balance due it — some eighty-odd dollars — cancel of record the deed of trust given it by appellee and surrender the note and deed of trust to appellee instead of delivering them to the Home Insurance Company under the subrogation claimed by that appellant. We submit, first, that the cause of action, if any, that Northington possessed is and was completely barred by the provisions of Section 722, Code of 1942, being the same as Section 2292, Code of 1930.
The record shows without dispute that the Home Insurance Company denied liability to Northington in its letter to his then attorney, Mr. J.C. Jourdan, on May 28, 1932. And the record shows without dispute that appellee knew that the Home Insurance Company had paid the Federal Land Bank the sum of $500 and claimed subrogation in the security which the bank held. Therefore, appellee's cause of action was complete upon the date the company refused to pay him. Appellee then proceeded to bring a suit on the policy, as is shown by the record, but did not seek any adjudication of his right to the $500 and sued only for the personal property. It is perfectly palpable that whatever action appellee had for the $500 was just as perfect in him as his right of action for the insurance on the personal property, and the record shows that at no time, until just before the filing of the present suit, did appellee ever make demand of either the Federal Land Bank or the Home Insurance Company that the $500 be credited absolutely on his note, and it is certainly true that appellee could have sued for the $500 in the circuit court of Tishomingo County just as easily as he sued for the insurance on the personal property, and it is also equally certain that he could have sued for the whole amount of the policy in the one suit. We know of no rule of law which would toll the running of the statute of limitations against appellee.
We next submit that the proceedings in the circuit court of Tishomingo County in the suit brought by appellee against the Home Insurance Company is res adjudicata of any right of action appellee might have had. Whatever the rule may be in other states, it is settled beyond the necessity for the citation of authorities that the rule in Mississippi is that a judgment is res adjudicata of everything which was litigated, could have been litigated, or should have been litigated in the given suit. In the circuit court case which appellee filed he certainly could have, and should have, asserted every right he claimed under the fire insurance policy issued to him by the Home Insurance Company and now sued on in this case.
We next submit that appellee has attempted to split his cause of action by bringing a suit on the policy in the circuit court of Tishomingo County for the amount of the personal property insurance and by now bringing this suit in equity for the amount of the insurance on the residence. The contract was one contract; the cause of both losses was the same, to-wit: a fire, and the cause of action on the policy was a unit. The Court has long since held that it is the policy of this state that all questions or issues germane to any issue in litigation shall be settled, if possible, in one suit.
See Sharp v. Learned, 195 Miss. 201, 14 So.2d 218; State to Use of City of Aberdeen v. Board of Sup'rs of Monroe County, 188 Miss. 636, 196 So. 253, 649; Thorne v. True-Hixon Lumber Co., 167 Miss. 266, 148 So. 388.
The record amply proves the breach of the policy condition relied on by the appellant, the Home Insurance Company of New York. There is no question about the fact that the application falsely stated that there was a deed of trust to the Federal Land Bank, because the policy was issued long before the Federal Land Bank mortgage was placed upon the property, and there is no doubt about the fact that there were several outstanding mortgages against the property at the time the application was made, and there is no doubt about the fact that the application did not reveal their existence. Furthermore, the record shows beyond question that there were subordinate mortgages left on the property even after the Federal Land Bank loan was made, and there is no pretense that appellee gave notice thereof to the insurer.
If the judgment is erroneous as to the Home Insurance Company, it follows that it is erroneous as to the Federal Land Bank, which, after all, is but a stake-holder as to the $500 appellee here sues for and the security behind it. The decree is further erroneous as to the Federal Land Bank, in any event, because it requires the bank to cancel the note and deed of trust without requiring the appellee to pay them the balance due on his loan, and the answer of the bank shows that there is a balance due of eighty-odd dollars.
W.C. Sweat, of Corinth, for appellee.
The insurance company is barred by the statute of limitations or laches.
60 C.J. 827, Sec. 131; 50 Am. Jur. 768, 770, Secs. 133, 136.
The appellee in bringing suit for his household goods did not split his cause of action.
Underwriters at Lloyd's Ins. Co. v. Vicksburg Traction Co., 106 Miss. 244, 63 So. 455; Kimball v. Louisville N.R. Co., 94 Miss. 396, 48 So. 230; Rosso v. New York Life Ins. Co., 157 Miss. 469, 128 So. 343; McVay v. Castenara, 152 Miss. 106, 119 So. 155.
The insurance company knew that there were mortgages on this property when the application was taken and when the insurance was written.
Hartford Fire Ins. Co. v. Williams et al., 165 Miss. 233, 145 So. 94; Hartford Fire Ins. Co. v. Clark, 154 Miss. 418, 122 So. 551; Code of 1930, Sec. 5196; Code of 1942, Sec. 5706.
There can be no subrogation where the insurer does not prove that it was not liable to the mortgagor.
Hartford Fire Ins. Co. v. Green et al., 148 Miss. 627, 114 So. 865; Sun Ins. Office of London v. Heiverer (Colo.), 99 P. 39; Traders Ins. Co. v. Ross, 142 Ill. 338, 31 N.E. 392; Lowenstein v. Queen Ins. Co. (Mo.), 127 S.W. 72; Richards Insurance Law (3 Ed.), p. 400; 8 Couch on Insurance 6623, Sec. 2006b; Code of 1906, Sec. 5185 (Code of 1942, Sec. 5695).
A little while before the date next to be mentioned appellee applied to the Federal Land Bank for a loan of $1200 on his homestead, his purpose being to pay off all the mortgages then existing on the property. The Bank agreed to make the loan provided a fire insurance policy for $500 covering the residence were procured, with loss payable clause to the Bank. On November 25, 1926, appellee requested appellant insurance company to issue the policy, which was done on December 3, 1926. The policy which was issued contained the usual stipulations rendering the policy void if at the time of its issuance the property was mortgaged, or if it should be thereafter mortgaged without the written consent of the company.
The testimony is sufficient to show that the soliciting agent of the insurance company knew at the time he accepted the application that the property was mortgaged, and knew that the purposes for which the loan from the Land Bank was being obtained was to pay off the existing mortgages with the proceeds of the Bank loan, which knowledge is evidenced in part by the fact that the agent who filled out the application wrote therein that the property was subject to a mortgage in favor of the Land Bank, when the agent then knew that there was no mortgage to the Land Bank, and he wrote the application in this form because he knew that the Land Bank encumbrance subsequently to be made was to take the place of those then existing.
The mortgage to the Land Bank was executed on April 7, 1927, and when the money came, all the mortgages resting upon the property at the time of the issuance of the policy were cancelled of record, but it was found that the loan money was insufficient by about $200 to pay all the encumbrances and appellee procured the needed money as a mortgage second to that of the Land Bank encumbrance, the date of this second mortgage being April 13, 1927. This second mortgage was fully paid and cancelled of record on December 16, 1927.
On October 2, 1931, before the expiration of the five-year term of the policy, the insured residence was totally destroyed by fire, of which proof of loss was duly made, but the insurance company denied any liability to the insured, and admitted liability to the Land Bank only on condition that the Land Bank upon payment to it would issue to the insurance company a subrogation receipt, which was done on May 5, 1932.
Appellee continued to make the annual contract payments on the Land Bank mortgage until paid in full, when taken with the $500 paid by the insurance company to the Bank. Thereupon appellee called upon the Bank to cancel the mortgage held by it, but the Bank declined to do so on account of the outstanding subrogation receipt. Appellee filed his bill against both the Land Bank and the insurance company praying the cancellation of the mortgage and of the subrogation receipt, and the court awarded the relief prayed.
The insurance company defended on the ground that the insurance policy was void and of no effect because (1) at the time of its issuance the property was encumbered, and (2) because of the subsequent encumbrance without its consent. Inasmuch as the soliciting agent knew of the encumbrances existing at the time of the issuance of the policy, their existence did not affect the validity of the policy, as we have often heretofore held; and as to the subsequent encumbrance it was fully paid and discharged long before the fire.
In Insurance Co. v. Pitts, 88 Miss. 587, 592, 41 So. 5, 7 L.R.A. (N.S.), 627, 117 Am. St. Rep. 756, 9 Ann. Cas. 54, the Court cited with approval Elliott on Insurance, Sec. 205, and Born v. Home Ins. Co., 110 Iowa, 379, 81 N.W. 676, 80 Am.St. Rep. 300, and Freeman's note to that report. And this note is as follows: "The general rule to be deduced from the weight of authority is, that the violation of a condition in a policy of insurance which works a forfeiture thereof merely suspends the insurance during the violation, and that if such violation is discontinued during the life of the policy and is nonexistent at the time of the loss, the policy revives, the insurance is restored, and the insurer is liable, although he has never consented to a violation of the conditions." The policy had, therefore, been restored to full force at the time of the loss, and the company thereby became indebted to the insured for the full amount of the residence coverage, to wit, $500.
Obviously no subrogation may arise in favor of a party against another when the payment was of a debt owed by the payer to the party against whom he claims the subrogation. When the insurance company paid the fire loss to the mortgagee, the Land Bank, the legal effect thereof was the same as if the payment had been made to the insured, the mortgagor, to whom the insurance company owed it, and the mortgagor had thereupon transmitted it forthwith in full to the mortgagee — with the result that the liability of the insurance company for the loss on the residence was extinguished, and the payment to the mortgagee became unqualified, with no right of subrogation inherent therein. The attempted subrogation agreement between the insurance company and the mortgagee was wholly invalid, and since with the payment made by the insurance company the mortgage debt has been fully liquidated, appellee was entitled to the relief prayed and awarded, that is to say, the cancellation of the mortgage and of the subrogation receipt.
The stated conclusion takes out of the case the other contentions presented, and they need not be pursued.
Affirmed.