Ulster County Savings Institution v. Decker

The policy of the Home Insurance Company was in the ordinary form of an insurance upon property, issued in the name of the owner of the equity of redemption, but payable, in case of loss, to *517tbe plaintiff to the extent of its mortgage interest therein, the balance to such owner. The plaintiff held a mortgage for $3,000 upon snch property. By the terms of the mortgage the mortgagor agreed to keep the buildings insured for $3,000, and assign the policy to the plaintiff. In case of failure to do so the plaintiff was authorized to effect such insurance, and the premium paid by it became a lien on the premises. The insurance was, therefore, a collateral security for plaintiff’s mortgage. Such insurance was not kept up by the mortgagor or his grantee, and plaintiff effected the insurance as provided for by the mortgage, paying the premium. Upon a subsequent foreclosure of the mortgage this premium was included as a part of the debt secured, and a decree obtained against the mortgagor and owner of the equity of redemption for such premium and debt. The property was burned April 1, 1874. On the 30th July, 1874, the plaintiff assigned its decree for a foreclosure and sale, under the mortgage, to the Home Insurance Company, to the extent of $3,000 thereof, but subject and junior to the balance due plaintiff under such decree, to be first paid. This assignment was made in pursuance of a contract, March 27, 1869, between plaintiff and the Home Insurance Company, whereby the insurance company agreed that all policies issued by it which might be assigned to or held by the plaintiff as mortgagee, shall be binding, and the interest of the said plaintiff shall be absolutely insured so as to save plaintiff from loss. The contract also provides for an assignment of the bond and mortgage to the insurance company in case of loss (if the policy has become invalid as to the interest of the mortgagor) upon full payment to plaintiff of its claim.

We are called upon to determine the effect of such a contract and the action of the parties thereto. In the absence of that contract the insurance was solely for the benefit of the owner of the property. (Excelsior Fire Ins. Co. v. Royal Ins. Co., 55 N. Y., 343 ; Clinton v. Hope Ins. Co., 45 id., 467.) Can that contract convert a policy, issued for the benefit of the owner, into an insurance of plaintiff’s interest as mortgagee ? Can the insurance company, by virtue of such contract with plaintiff, and assignment, acquire a greater interest against the owner of the equity of redemption than the plaintiff had % I think it evident that the plaintiff could not receive the $3,000 of the insurance company and still *518claim the whole amount of its mortgage, without allowance for such payment. It was not plaintiff’s interest as mortgagee that was insured, but the property mortgaged, and for the benefit of the mortgagor or his assigns. He or they paid the premiums, either in person or by the plaintiff, as their agent. Such premium is charged to the insured hy the terms of the policy, and is included in the judgment recovered. If the position of the insurance company is correct it will recover bach the $3,000 paid, and would also recover again the premiums paid upon the policy, provided the property mortgaged is worth enough, but for the limitations in the assignment.

But this was not an insurance of plaintiff’s interest as mortgagee. It was an insurance of the property of the owner of the equity of redemption, for the benefit of the mortgagee. The plaintiff and the insurance company could not qualify the effect of the receipt of the insurance money or modify the contract of insurance. If the insurance company saw fit, with or without consideration, to indemnify the plaintiff against the loss of its debt, that would not affect the right of the insured to have the insurance money, when paid, applied towards the satisfaction of the debt. That was the contract. (Waring v. Loder, 53 N. Y., 581.) In this case Andrews, J., says (p. 585): “ The plaintiff received from the underwriter, after the judgment was entered, an amount sufficient to pay it, and upon the receipt, the law giving effect to the contract between the mortgagor and mortgagee, applied it in payment of the debt.” In their essential facts the two cases are alike, and the language quoted is applicable to each. (See, also, Graves v. Hampden Fire Ins. Co., 10 Allen, 281; Cone v. Niagara Fire Ins. Co., 60 N. Y., 619 ; Kernochan v. Bowery Ins. Co., 17 id., 428.)

In Excelsior Fire Insurance Company v. Royal Insurance Company (55 N. Y., 343) the insurance was of the mortgagee’s interest in the premises, and the mortgagor was not a party to the contract, and had no rights under it. The case of Foster v. Van Reed (5 Hun, 321) was like the last case cited, an insurance of the mortgagee’s interest and not of the mortgagor’s interest. It is, doubtless, for this reason, that case was reversed in the Court of Appeals in May last.

Nor is it deemed of any importance that the company might have *519defended successfully its liability to tbe mortgagor or his grantees. Quoting again from Judge Andrews’ opinion in Waring v. Loder (write): “ Tbe company and tbe plaintiff could not, by their contract, qualify tbe effect of tbe receipt by tbe mortgagee of tbe insurance money, as between tbe plaintiffs and defendant.”

In tbe case of The Springfield, etc., Insurance Company v. Allen (43 N. Y., 389) tbe right of tbe insurer to be subrogated was a part of tbe contract of insurance, and hence bound tbe party insured.

I conclude, therefore, that this was an insurance of tbe property and interests of tbe mortgagor as collateral security for tbe payment of bis mortgage; that tbe insurance company could and did waive defenses that might have been available against tbe insured, without bis knowledge or consent, by a contract with tbe mortgagee; that such contract did not invalidate the contract of insurance between tbe company and tbe insured, whereby any payment made by tbe company, in case of loss, was to be applied in payment of tbe mortgage. Hence, I conclude tbe Home Insurance Company was not entitled to be subrogated to tbe rights of tbe mortgagee upon payment of tbe $3,000, and is not entitled to any portion of tbe surplus arising on tbe sale under tbe foreclosure of tbe mortgage.

Tbe order is, therefore, affirmed, with ten dollars costs and expenses of printing.

Order affirmed, with ten dollars costs and printing.