Summary
finding that residential real estate insurance policy remained in effect as to mortgagee because insurance company did not give notice of cancellation to mortgagee as required under predecessor to O.C.G.A. §§ 33-24-44 and 33-24-46
Summary of this case from Colony Bank v. Hanover Insurance CompanyOpinion
43034.
ARGUED SEPTEMBER 6, 1967.
DECIDED SEPTEMBER 15, 1967. REHEARING DENIED OCTOBER 4, 1967.
Declaratory judgment. Douglas Superior Court. Before Judge Winn.
Long, Weinberg Ansley, Ben L. Weinberg, Jr., John K. Dunlap, for appellant.
Woodruff, Savell, Lane Williams, A. Ed Lane, James R. Dollar, Jr., Robert J. Noland, Jean E. Johnson, Sr., for appellees.
1. The motion to dismiss is without merit.
2. The holder of a bare legal or record title to property which stands as security for an indebtedness owed by the holder has an insurable interest in the property.
3. The unilateral act of an insured-mortgagor in requesting cancellation of a fire insurance policy containing a standard mortgagee clause, without the consent of, or notice to, the named mortgagee, does not effect a cancellation of the policy as to the mortgagee.
ARGUED SEPTEMBER 6, 1967 — DECIDED SEPTEMBER 15, 1967 — REHEARING DENIED OCTOBER 4, 1967.
Pennsylvania Millers Mutual Insurance Company brought suit against Employers' Fire Insurance Company, Eugene J. Kovacs, Douglas County Federal Savings Loan Association, and Cecil G. Thompson seeking a declaratory judgment that a loss by fire of property on Summers Road in Paulding County was not covered by a policy which it had issued. The case was determined by the trial court on the basis of the pleadings, the policies of the two insurance companies, and a stipulation agreed to by all the parties.
Pennsylvania Millers and Employers' had issued their respective policies to Kovacs providing fire coverage for his frame residence on Summers Road in Paulding County, naming Douglas County Federal as mortgagee and loss payee to the extent of its interest. The limits of Pennsylvania Millers' and Employers' policies were $10,000 and $10,500 respectively, and each policy contained the provision that "This Company shall not be liable for a greater proportion of any loss than the amount hereby insured shall bear to the whole insurance covering the property against the period involved, whether collectible or not."
Kovacs and Thompson entered into an agreement whereby Kovacs was to trade the Summers Road property to Thompson for Thompson's house and lot on Kimberly Lane in Lithia Springs. In furtherance of this agreement Thompson conveyed title to the Kimberly Lane property to Kovacs; Kovacs vacated the residence on Summers Road; Thompson took possession of the latter property and began making improvements, although Kovacs had not conveyed the title to him. Kovacs requested cancellation of the Pennsylvania Millers policy through its agent who had countersigned the policy, but at the time of the subsequent fire loss of the Summers Road property the unearned premium had not been refunded and the policy had not been formally canceled. It does not appear from the record that Douglas County Federal consented to, or had notice of, Kovacs' cancellation of the Pennsylvania Millers policy, and the parties in this court have treated the case on the basis that there was no such consent or notice. The agreed amount of the loss was $10,000.
The trial court held that Kovacs had no insurable interest in the Summers Road property but, assuming an insurable interest, that Pennsylvania Millers' policy had been effectively canceled so that in either event Employers' was solely liable under its policy for the full amount of $10,000 to the mortgagee, Douglas County Federal. Employers' appeals from this judgment, contending that, although its policy was admittedly in force as to both Kovacs and the mortgagee, the policy of Pennsylvania Millers was also in force at least as to the mortgagee so that the amount of the loss to the extent of the indebtedness owed by Kovacs to the mortgagee should be prorated between the two companies in accordance with the pro rata clauses.
1. A motion to dismiss has been filed on the ground that the record was not timely filed with this court. It is asserted that the certificates of the clerk of the trial court show that the delay was caused by failure of appellant to pay the costs until the last day of the twenty-day period allowed the clerk to prepare and transmit the record under § 12 (a) of the Appellate Practice Act of 1965 (Ga. L. 1965, pp. 18, 28, as amended by Ga. L. 1966, pp. 493, 497; Code Ann. § 6-808 (a)).
Assuming that appellant was required to pay the costs at some date earlier than the 20th day after the filing of the notice of appeal, and that the clerk could not begin preparation of the record until costs were paid, and that the certificates of the clerk of the trial court can properly be construed as stating that failure to pay the costs earlier caused the sixteen-day delay in transmitting the record, the case was nevertheless docketed for the September calendar just as it would have been had the record been transmitted on the 20th day or even on the date the notice of appeal was filed. Accordingly the motion to dismiss is denied. Hornsby v. Rodriguez, 116 Ga. App. 234 (1) ( 156 S.E.2d 830).
2. It is not seriously contended that Kovacs had no insurable interest in the Summers Road property. Since he had made no conveyance to Thompson, he held title, if only bare legal or record title. But whether he held title or not, he was indebted to Douglas County Federal, and the property which burned was security for that indebtedness. Accordingly Kovacs had an insurable interest in the property. Insurance Code § 56-2404 (Ga. L. 1960, pp. 289, 657; Code Ann. § 56-2404); Pike v. American Alliance Ins. Co., 160 Ga. 755 ( 129 S.E. 53). Cf. Motors Ins. Corp. v. Turner, 96 Ga. App. 6 ( 99 S.E.2d 503).
3. The remaining question is whether Kovacs' request for cancellation of the Pennsylvania Millers' policy effectively canceled it as to the mortgagee, Douglas County Federal. If not, then Pennsylvania Millers' policy was in force as to the mortgagee, and proration of the loss to the extent of the indebtedness (up to $10,000, the stipulated amount of the loss) would be in order.
It is virtually conceded by Employers' that Pennsylvania Millers' policy was canceled as to Kovacs. DeLaPerriere v. American Home Assur. Ins. Co., 106 Ga. App. 516 ( 127 S.E.2d 478), prescribes such a holding although the policy may not have been surrendered and the return premium received.
Special Condition 6 of Pennsylvania Millers' policy (mortgagee clause) provides: "Loss or damage . . . under this policy shall be payable to the mortgagee . . . named on the first page of this policy [Douglas County Federal], as interest may appear, under all present or future mortgages upon the property herein described in which the aforesaid may have an interest as mortgagee . . . , and this insurance as to the interest of the mortgagee . . . 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 the occupation of the premises for purposes more hazardous than are permitted by this policy. . ." (Emphasis supplied.)
Under such a New York standard, or union mortgage clause, "it is considered that the insurer has entered into a separate contract with the mortgagee, and the mortgagee cannot be affected by any act or default of the mortgagor. Mechanics Ins. Co. v. Goodwin, 48 Ga. App. 823, 826 ( 174 S.E. 160); Northwestern Fire c. Ins. Co. v. Waycross Bldg. Loan Assn., 51 Ga. App. 857, 859-860 ( 181 S.E. 509); 5 Appleman [Insurance Law and Practice], 557, 559, § 3401; 124 ALR 1034." Insurance Co. of North America v. Gulf Oil Corp., 106 Ga. App. 382, 385 ( 127 S.E.2d 43). "[W]here to the policy of insurance there is attached in favor of the mortgagee what is known as the `New York standard mortgagee clause,' by the terms of which it is provided that the interest of the mortgagee shall not be invalidated by reason of any act or neglect on the part of the mortgagor, this agreement operates as a separate and distinct contract of insurance upon the mortgagee's interest, and gives to the mortgagee such an independent status as might authorize a recovery by him on the policy even though the circumstances were such as would prevent a recovery by the mortgagor." Southern States Fire c. Ins. Co. v. Napier, 22 Ga. App. 361, 362 (2) ( 96 S.E. 15). See also 11 Couch on Insurance 2d, 344, 348, §§ 42:685, 42:694.
Since an independent contract of insurance engrafted upon the main insurance contract existed for the benefit of the mortgagee, Douglas County Federal, the unilateral act of Kovacs in requesting a cancellation of the policy without its consent and without written notice as provided for by various other policy provisions could not effect cancellation of Pennsylvania Millers' policy as to the mortgagee. Gilman v. Commonwealth Ins. Co., 112 Me. 528 ( 92 A 721); 11 Couch on Insurance 2d, 362, § 42:714. Cf. Northwestern Fire c. Ins. Co. v. Waycross Bldg. Loan Assn., 51 Ga. App. 857, supra; Citizens Finance Co. v. Insurance Co. of St. Louis, 105 Ga. App. 422 ( 124 S.E.2d 676).
Moreover, it is provided in the Insurance Code ( Code Ann. §§ 56-2430, 56-2430.1) that in order for a company to effect cancellation of a policy which protects the interest of a lienholder, notice of the cancellation must be delivered or mailed to the lienholder at its last known address as shown in the policy. This provision contemplates written notice.
But Pennsylvania Millers urges that since it is alleged in Paragraph 15 of the petition, and admitted in the answers of Thompson, Kovacs and Douglas County Federal, that "Thompson did on January 28, 1966, contact Mr. Willie W. Yates of the Douglas County Federal Savings Loan Association and advise him that he understood that there had been no insurance on the Summers road property in Paulding County since December 7, 1965, and requested that Mr. Yates obtain insurance on the property," and that thereafter Employers' Fire Insurance Company did on January 28 issue its policy, and that it was stipulated that this policy was issued to Kovacs with loss payable to Douglas County Federal, it must follow that Douglas County Federal had actual knowledge of the cancellation of Pennsylvania Millers' policy, obviating necessity for the statutory notice.
Assuming that under these facts actual notice would obviate the necessity for giving the statutory notice of cancellation, the facts alleged and stipulated are not sufficient to show actual notice to Douglas County Federal. "In order to impute to a corporation notice or knowledge acquired by one of its officers or agents, the information must have been acquired while such officer or agent with reference to the subject matter of his agency was `acting for it in connection with its business, and within the scope of his agency.'" Georgia Power Co. v. Kinard, 47 Ga. App. 483, 487 ( 170 S.E. 688). It does not appear from the allegations or the stipulation here whether Mr. Yates was an officer or agent of Douglas County Federal, nor whether any information relative to cancellation of the Pennsylvania Millers' policy came to him when he was acting for the association in connection with its business, and within the scope of his agency.
It does not appear whether Thompson assumed the payment of the balance of the loan outstanding from Kovacs or, if so, whether Douglas County Federal was holding both Kovacs and Thompson for the obligation or had consented to a substitution of debtors, nor whether it had consented or agreed to accept a substitution of the policy of Employers' Fire Insurance Company for that of Pennsylvania Millers.
Consequently, under this record, we can only conclude that both policies were in full force and effect when the house burned, and the judgment must be
Reversed. Felton, C. J., and Hall, J., concur.