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The opinion of the Court was delivered by
Mr. Chief Justice Stabler.
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Under the facts of this case, we think that the conclusion reached by Judge Greene is correct. His decree, therefore, which will be reported, is affirmed.
Messrs. , Justices Bonham, Baker and FishburnE concur.
Mr. Justice Carter did not participate on account of illness.
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Case posture Posture Before GREENE, J., Abbeville, February, 1935. Affirmed.Action by Mrs. Bessie M. Dusenberry and another against the Abbeville-Greenwood Mutual Insurance Association, wherein G. Geiger was appointed Receiver for the Abbeville-Greenwood Mutual Insurance Association, and wherein G.H. Geiger, as Receiver, brought suit against J.B. Ashley and Mrs. Jennie Ivester, pursuant to a decree of the Court of Common Pleas, to foreclose a lien of the association on properties insured by the association. From a decree for G.H. Geiger, as Receiver, Mrs. Jennie Ivester appeals.
The decree of Judge Greene requested to be reported follows:
This action was begun in the County of Abbeville by G. H. Geiger, Receiver of Abbeville-Greenwood Mutual Insurance Association for the collection of an assessment levied against a policy of insurance issued by said association.
The defendant J.D. Ashley, is in default, and Mrs. Jennie Ivester answers, setting out that she is now the owner of the property; that she purchased the property at a foreclosure sale; and that she is a bona fide purchaser without notice of plaintiff's lien.
The parties have stipulated as to the facts, and the stipulation is in the file. Both parties by agreement came before me at chambers at Anderson.
There is no question but that under Section 8085 of the Code as well as under the application for insurance that the plaintiff has a lien on the insured premises described in the complaint. There is also no question but that the defendant,
Mrs. Jennie Ivester, had a lien on the premises under her mortgage. The defendant alleges that her lien was first and that she had no notice of plaintiff's lien.
In 1920 J.D. Ashley applied to the Abbeville Greenwood Mutual Insurance Association for a policy of insurance over certain real estate described in the complaint and thereafter asked that the policy be made payable under a loss payable clause to the defendant, Mrs. Jennie Ivester, who was taking a mortgage over the said real estate. The insurance association forthwith issued its policy insuring the buildings on the insured premises against fire and storm and made said policy payable to Mrs. Jennie Ivester under a mortgagee loss payable clause and delivered said policy to Mrs. Jennie Ivester, who held same. The insurance was taken out in the year 1920 and assessments were paid regularly up to and including the period ending October 1, 1931. An assessment was levied for the insurance on October 1, 1932, for the year just ending for $13.50, and said assessment was not paid. The contract and by-laws provide for a $25.00 attorney's fee if collection is made through an attorney.
In the fall of 1932 the said insurance association was unable to pay its claims, and the Court appointed a Receiver and ordered the Receiver to collect these assessments as shown by the Judgment Roll in the main action herein.
On or about February 15, 1934, the defendant, Mrs. Jennie Ivester, through foreclosure proceedings to which the plaintiff herein was not made a party became the owner of the insured property. In order to properly determine the case, it is necessary to construe Section 8085 of the Code.
This statute is discussed in the case of Parris v. Carolina Mutual Fire Insurance Company , 91 S.C. 344 , 74 S.E., 1010 , but that case does not directly pass on the question as to whether the association or a mortgagee holding the policy under a mortgagee clause has the first lien. The statute makes the insured property together
with the right and title of the assured in the lands upon which it is situate a pledge for the payment of the premium note or contingent liability. It makes the lien ineffective as against third parties without notice unless constructive notice is given and provides the method for that constructive notice. In order to claim that the lien is not effective against her, Mrs. Ivester must show that she is a third party without notice. She cannot do this, because she held the policy, and the policy itself in Paragraph 23 states: * * * and all buildings or other property insured by and with said corporations, together with the right, title and interest of the assured to the lands on which such buildings or other property may be located, shall be pledged to the said corporation, and the said corporation shall have a lien thereon against the insured, his, or her heirs and representatives during the continuance of their insurance, * * * and said policy refers to the statute. In addition, every one is presumed to know the law, and the law becomes a part of every contract. Mrs. Ivester had notice that the property was insured in a mutual association and that said association had a lien on the property for its pro rata assessments whatever same may be and for its contingent liability. And upon inquiry to the association she could have learned the provisions of the note as to cost, expense, and attorney's fees incident to the collection of the said note, and the duty was upon her to make such inquiry.
As was stated in the Parris case above cited, mutual insurance companies have no capital stock and no funds, except as such are collected on assessments, to be immediately paid out. The members assume contractual obligations to each other and, when one member suffers a loss by fire and when the assessment is duly made, the obligation becomes duly fixed. Mrs. Ivester held the policy of insurance as one of the payees, and she was one of the insured, and under the statute her right and title to the property was pledged to secure payment for the protection she
was to receive. The purpose of a mutual insurance association is to provide for protection at low cost to those who wish to enter a mutual contract to divide their loss between them. A mortgagee as well as a mortgagor has an insurable interest and, if the mortgagor fails to provide insurance, the mortgagee frequently provides it. It was protection to Mrs. Ivester as well as to Ashley that the cost of insurance be held down, and this was accomplished by insuring in a mutual insurance association. In fact, by accepting the policy and holding same as one of the payees thereunder, the said Mrs. Jennie Ivester was a party to the contract subjecting the property to the lien of the insurance association. If this property had burned, Mrs. Ivester could have, and no doubt would have, filed a claim against the association and insisted upon liens of the association being foreclosed on all of the insured property in order that she might be paid her loss under her policy. By accepting the protection of the association by insuring this property or permitting the property to be insured by the association for her benefit, she submitted her equity in the property just as the holder of the fee submitted his equity in the property to the statutory lien in order to obtain cheap insurance. I must therefore conclude that the lien of the insurance association is prior to the lien of Mrs. Jennie Ivester, and the plaintiff is entitled to foreclosure of its lien on the property.
A study of the authorities does not disclose that this question, as to which one has the prior lien, has yet been passed upon by the Supreme Court. Our Supreme Court in the case of Farmers' Mutual Insurance Association of Florence County v. Burch , 47 S.C. 453 , 25 S.E., 211 , 214 , 34 L.R.A., 806, 58 Am. St. Rep., 899, after holding that this lien is a lien upon the homestead exemption, uses this language: We reach this result with all the more satisfaction because the legislation and contract in question are not hostile to the preservation of homesteads, but, on the contrary, are directly designed to afford owners
of homesteads, at small expense, mutual protection against the destruction of their homes. The same language might be applied to the results as reached in this case, because the legislation and contract in question in this case afford to mortgagees as well as property owners, at small expense, mutual protection against the destruction of their property.
A mutual insurance association does not have a capital stock or anything to depend upon for the payment of losses and expenses except the lien for assessments which the law gives them. They do not know until the end of the year what the pro rata contingent liability is on each policy, and it is the purpose of the law to make these associations strong and safe by making the very property insured a pledge for the payment of the pro rata contingent liability. It would not be equity to permit one who would have the right if he sustained a loss to demand the benefit of the lien to deny the benefit of the lien to another. Were I to hold that this mortgage lien was first, it would make it unsafe for one to insure in a mutual association and would defeat the purpose of the statute.
It is therefore ordered:
1. That the plaintiff have judgment against the defendant J.D. Ashley for the sum of $38.51.
2. That the defendants and all persons claiming under them subsequent to the filing of the lis pendens herein be, and they hereby are, forever barred and foreclosed from asserting any interest in, lien upon, or claim upon, or exercising any equity of redemption of, the real estate hereinafter described.
3. That the Master of Abbeville County, after due advertisement once a week for three consecutive weeks in the Press and Banner , a newspaper published at Abbeville, S.C. during the usual hour of sale, do sell in front of the courthouse door of this county the real estate hereinafter described to the highest bidder at public outcry on some convenient sales day, convenient to the plaintiff or his attorneys.
That the terms of the sale be cash, purchaser to pay extra for papers and stamps. Upon the terms of the sale being complied with by the purchaser, the said Master shall execute and deliver unto the purchaser a good and sufficient title to said real estate in fee simple, subject, however, to taxes. That upon the failure of the purchaser to comply with his bid the said Master shall readvertise said real estate and resell same as often as may be necessary in the same manner and upon the same terms as provided for the original sale and such subsequent sale shall be at the risk of the former purchaser. That the purchaser be let into possession of the real estate hereinafter described upon production of the deed thereto from the Master aforesaid.
4. That the proceeds of said sale be applied as follows:
(a) To the payment of the costs of this action.
(b) To the payment of plaintiff's judgment. Source: CourtListener
