#### Mollie E. O'Neil, Plaintiff, *v.*Franklin Fire Insurance Company of Philadelphia, Pennsylvania, Appellant, Impleaded with Daniel Crimmins, Respondent.

Fourth Department,

November 26, 1913.

Insurance — fire insurance — assignment to mortgagee of portion of policy covering realty — reservation of insurance on personal property by mortgagor — parties — separate suits' by mortgagor and mortgagee— consolidation of actions—limitation of action — when mortgagee’s right of action not barred by discontinuance of former action — tender of sum due mortgagee.

The plaintiff, a mortgagor holding an insurance policy covering both real and personal property, assigned any loss on the buildings to her mortgagee in the usual form, without assigning the insurance on the personal property. The house and its contents were destroyed by fire, and subsequently the mortgagee brought action against the insurance company without making the mortgagor a party to the action. The mortgagor also brought action against the insurance company for' the loss of the personal property within twelve months of the fire without making the mortgagee of the realty a party. Upon the suit by the mortgagee being brought to trial the court suggested that he might serve a cross-answer in the action brought by the mortgagor, and upon an agreement by the insurance company to receive the answer of the mortgagee, his action was discontinued, without costs. Thereafter the insurance company tendered the mortgagee the full amount unpaid upon his mortgage, demanding that it be subrogated to his rights by an assignment of the mortgage, which tender was refused. The insurance company allowed the mortgagor to take judgment for the sum due on the personal property.

*Held,*that if there was an h-regularity in the entry of the judgment in favor of the mortgagor before the issues between the insurance company and the mortgagee were disposed of, the remedy of the insurance company was to move to set aside the mortgagor’s judgment as prematurely entered and was not ground for a reversal of a judgment in favor of the mortgagee.

*Held, further,*that the mortgagee was a necessary party to the action brought by the mortgagor, as separate actions could not have been' maintained by the mortgagor and the mortgagee to recover separately the amounts payable to each;

That as the actions by the mortgagor and by the mortgagee were both brought within the twelve months’ Statute of Limitation provided for in the policy, a recovery by the mortgagee in the action brought by the mortgagor was not barred, although his cross-answer was served upon the insurance company after the twelve months’ period had expired;

*314That the tender by the insurance company to the mortgagee of the full amount of his mortgage with a demand for an assignment thereof did not preclude a recovery by the mortgagee in the action brought by the mortgagor, for the mortgage was not solely for his benefit, as the mortgagor had a right to have the payment applied in reduction of the mortgage due;

That the insurance company was not justified in paying the mortgagee and claiming subrogation without first contesting its liability to the mortgagor and establishing its indemnity from liability to her, and, hence, where it failed to disprove liability to the mortgagor at trial it failed to establish its right to subrogation.

Kruse, P. J., dissented, with memorandum.

Appeal by the defendant, Franklin Fire Insurance Company of Philadelphia, Pennsylvania, from a judgment of the Supreme Court in favor of the defendant Daniel Crimmins, entered in the office of the clerk of the county of Herkimer on the 22d day of January, 1913, upon the decision of the court after a trial before the court without a jury, with notice of intention to bring up for review certain preliminary objections made at the opening of the trial.

Defendant Crimmins has recovered a judgment against defendant Franklin Fire Insurance Company for $1,000 and $90.80 interest and $79 costs upon a fire insurance policy issued by defendant insurance company May 17, 1909, to plaintiff Mollie E. O’Neil, covering the dwelling house upon a farm owned by said Mollie E. O’Neil, to the amount of $1,000, and the furniture, etc., therein to the amount of $400. The loss, if any, upon the buildings was made payable to defendant Daniel Crimmins, mortgagee, as his interest might appear, by a New York standard mortgagee clause attached to said policy, said Crimmins then holding a mortgage on said farm on which there was unpaid about $1,600. The premium was paid by plaintiff. The policy was for a term of three years. On March 23, 1911, a fire occurred by which the dwelling house and contents were destroyed. Some time before the fire plaintiff entered into a contract with one Miller to sell this farm to him. Miller paid $200 of the purchase price, and was, by the terms of the contract, to pay the balance and receive his deed on April 1, 1911, and, notwithstanding the fire on March twenty-third, Miller did on or about April first complete the purchase by paying the remainder of the purchase price and receiving his deed. Plain*315tiff, however, remained in possession and retained the title until that date. Plaintiff prepared and served upon the insurance company in due time proofs of loss.

On February 1, 1912, defendant Crimmins brought an action in this court against defendant insurance company to recover the $1,000 payable to him as mortgagee upon the loss on the dwelling house. He did not make plaintiff a party to that action. On March 20, 1912, and within twelve months after the fire, this action was begun. In her complaint plaintiff alleged the making of the insurance policy; the standard mortgagee clause thereto attached, making the loss payable to defendant Crimmins, mortgagee, as his interest should appear; the occurrencé of the fire and making of proofs of loss; the bringing of an action by Crimmins against the insurance company to recover the $1,000 loss on the dwelling house payable to him, without making plaintiff a party, and demanded judgment for $400, the loss on the furniture and contents of the dwelling, which was not payable to the mortgagee. In October, 1912, the Crimmins action was brought to trial and, as appears from the findings of the justice who presided at the trial in the present case, upon the question being raised by defendant insurance company that the present plaintiff was a necessary party to that action, and upon the suggestion of the court that Crimmins might serve a cross-answer in this action, setting up his claim against the insurance company, and upon the express or implied agreement of the insurance company to receive such answer, the Crimmins action was discontinued, without costs. These facts, however, do not appear in the record on this appeal except in the findings and opinion of the court. Thereupon defendant Crimmins prepared and served his answer in this case upon plaintiff and upon defendant insurance company, his right to do so not having expired by limitation of time as to defendant insurance company (Code Civ. Proc. § 521) and plaintiff being willing to accept the same, although as to her the time had expired. By this answer defendant Crimmins sought to recover from defendant insurance company the $1,000 payable to him as mortgagee. Crimmins’ action was not, in fact, formally discontinued by stipulation and order until some days after this answer had been *316served and on October 30, 1912. The answer of defendant Orimmins was served on October 17, 1912.

Prior thereto and on October 7, 1912, one Staley, special agent and adjuster for defendant insurance company, on its behalf, tendered to defendant Orimmins the full amount remaining unpaid upon his mortgage, and at the same time served upon him a written notice, signed in the name of the insurance company by said Staley as special agent, stating, among other things, that the insurance company claimed that as to the mortgagor and owner, Mollie E. O’Neil, no liability under said policy existed, and that said company accordingly elected to and exercised its option, pursuant to the terms of the mortgagee clause, to pay to Orimmins, the mortgagee, the whole amount due and to grow due on the mortgage and all interest thereupon and to receive a full assignment and transfer of the mortgage. Said notice also stated that the tender would be kept good by depositing and leaving the same with the said Staley to be paid to said Orimmins at any time upon his executing and delivering to said Staley an assignment of the said mortgage to the said insurance company. This tender Orimmins refused to accept. The tender was made in legal tender currency, which Staley kept, and, at the time of the trial, he testified that he still had the same in his possession in a safe deposit vault in the Oneida National Bank in Utica. It was not, however, paid into court, nor did Staley present to Orimmins a prepared assignment of the mortgage to be executed.

This action, as between the defendants, was brought to trial on December 11, 1912, plaintiff not appearing. A few days before and on November twenty-sixth, defendant insurance company served upon plaintiff’s attorney an offer to permit plaintiff to take judgment against it in the sum of $200. On December fifth plaintiff accepted this offer, and on December twelfth judgment was entered in Herkimer county clerk’s office in favor of plaintiff against defendant insurance company for $200 and costs upon filing the offer and acceptance.

By motion at the opening of the trial and at the close of plaintiff’s evidence, and at the close of the whole case, counsel for defendant insurance company moved to dismiss the claim of *317Crimmins as asserted in his answer, upon the several grounds now urged in support of this appeal, and counsel for defendant Crimmins moved for the direction of a verdict in his favor, whereupon the jury were discharged and the court made findings of fact and conclusions of law, and therein directed judgment in favor of defendant Crimmins against defendant insurance company for the $1,000 claimed, with interest and costs. From the judgment entered upon this decision defendant insurance company appeals.

*William Townsend,*for the appellant.

*P. H. Fitzgerald,*for the respondent.

Foote, J.:

If there was an irregularity in the entry of the judgment in plaintiff’s favor before the issues as between the two defendants were disposed of, we think the remedy of the appellant was to move at Special Term to set aside plaintiff’s judgment as prematurely entered, and that is not a ground for reversal of the judgment appealed from.

We are also of opinion that defendant Crimmins was a necessary party to this action, and that it was proper practice for him to assert his claim -under the policy in suit against defendant insurance company by his answer in this action, and that such practice is authorized by section 521 of the Code. Separate actions could not have been maintained by plaintiff and defendant Crimmins to recover separately the amounts payable to each under this policy. *(Lewis*v. *Guardian Fire & Life Assur. Co.,*181 N. Y. 392.)

Appellant next urges that the short Statute of Limitations of twelve months contained in the policy is a bar to the right of defendant Crimmins to recover. This claim is based upon the fact that Crimmins’ claim was first asserted in this action by his answer, which was made and served upon the insurance company on October 17,1912, while the fire occurred on March 23, 1911. The policy is the New York standard form of policy and contained this clause: “No suit or action on this policy, for the recovery of any claim, shall be sustainable in any court of law or equity until after full compliance by the insured with *318all the foregoing requirements, nor unless commenced within twelve months next after the fire.”

It was held at the trial that the limitation, contained in the policy did not bar Crimmins’ claim asserted in his answer, inasmuch as this action was begun by the service of the summons within the year, and in the opinion of the learned trial justice it was further said that the circumstances under which the action brought by Crimmins was discontinued, and his answer in this action accepted by defendant insurance company, constituted a waiver of the contractual limitation contained in the policy. It is now urged that the contractual limitation is, in legal effect, a statutory limitation, inasmuch as the form of the policy is fixed by statute, and that section 415 of-the Code is controlling, which provides: “The periods of limitation, prescribed by this chapter, except as otherwise specially prescribed therein, must be computed from the time of the accruing of the right to relief by action, special proceeding, defence, or otherwise, as the case requires, to the time when the claim to that relief is actually interposed by the party, as a plaintiff or a defendant, in the particular action or special proceeding.”

Periods of limitation fixed by special contract are held to be periods of limitation prescribed by this chapter, as that expression is used in the above-quoted section. *(Hayden*v. *Pierce,*144 N. Y. 512; *Hamilton*v. *Royal Ins. Co.,*156 id. 327.)

If the claim interposed as a defense referred to in the above-quoted section 415 is not limited to defenses tending to defeat plaintiff’s claim, but apply to affirmative defenses in the nature of independent causes of action against a codefendant (as to which we need not here express an opinion), still we think the right of defendant Crimmins is not barred by the twelve months’ period of limitation, because of the provisions of section 405 of the Code, as follows: “If an action is commenced within the time limited therefor, and a judgment therein is reversed on appeal, without awarding a new trial, or the action is terminated in any other manner than by a voluntary discontinuance, a dismissal of the complaint for neglect to prosecute the action, or a final judgment upon the merits; the plaintiff, or, if he dies, and the cause of action survives) *319his representative, may commence a new action for the same cause, after the expiration of the time so limited, and within one year after such a reversal or termination.”

The burden here was.upon the insurance company to establish that the claim of defendant Crimmins was barred by limitation. He had brought an action upon this claim before the twelve months expired. That action was terminated under circumstances not amounting to a voluntary discontinuance, so far as appears in this record. The court was about to hold that the action could not be maintained because of defect of parties defendant, whereupon the court suggested that the Crimmins claim could be litigated in the present action, and that he should present it here by serving an answer. The action was discontinued by virtue of a stipulation signed by counsel for the respective parties. We think this was not a voluntary discontinuance within the intent and meaning of this section, and that the limitation of the policy is not a bar to a new action by Crimmins, or to asserting the same by answer served upon the insurance company. *(Bannister*v. *Michigan Mut. Life Ins. Co.,*111 App. Div. 765; *People ex rel. McCabe*v. *Snedeker,*106 id. 89; affd., 182 N. Y. 558; *Conolly*v. *Hyams,*176 id. 403.)

There is further reason why the twelve months’ limitation is not available to defendant insurance company as a defense, assuming, as we do, that it was not necessary for the insurance company to plead this defense as between itself and its codefendant Crimmins. The clause in the policy which provides that suit upon the policy must be brought within twelve months is found in lines 106 to 109 of the standard form of policy. Lines 56 to 59 contain this clause: “If, with the consent of this company, an interest under this policy shall exist in favor of a mortgagee of of any person or corporation having an interest in the subject of insurance other than the interest of the insured as described herein, the conditions *hereinbefore*contained shall apply in the manner expressed in such provisions and conditions of insurance relating to such interest as shall be written upon, attached, or appended hereto.”

This clause has recently received judicial construction and it has been held that the clauses of the policy applicable as *320between the company and the mortgagee are only those clauses which precede lines 56 to 59, and that the clauses following from line 60, which have reference to proceedings after fire has occurred or for the adjustment of the loss and the payment or collection of insurance, are not applicable to the mortgagee. *(Heilbrunn*v. *German Alliance Ins. Co.,*140 App. Div. 557; affd., 202 N. Y. 610.)

A sentence from the opinion of Collin, J., in the Court of Appeals indicates the extent to which the decision goes in relieving the mortgagee from the limitation clause of the policy which the defendant insurance company relies upon here: “We admit that insurance companies ought to have more protection in the matter of the time within which actions upon their policies must be brought, and possibly in other respects, than has been afforded them under the decision of the Appellate Division in this case; but the difficulty is .that the language of those stipulations or conditions of the policy which relate to the proceedings after the liability of the company has accrued through the fire, does not enable or permit us to apply them to the mortgagee in such part only as may be practicable or expedient.” (See, also, *McDowell*v. *St. Paul Fire & Marine Ins. Co.,*207 N. Y. 482, where the doctrine of the *Heilbrunn*case is reaffirmed.)

It is next contended that the tender by the insurance company’s agent to defendant Crimmins of the full amount of his mortgage and the demand for an assignment thereof precludes a recovery by Crimmins of the insurance money in this action. We are of opinion that such is not the case. The policy was issued directly to Mrs. O’Neil, plaintiff, by defendant’s agent and the premium was paid by her. It was a policy for $3,200, $1,000 upon the dwelling house, which burned, and $400 upon the furniture and contents. The rest was upon barns and contents which did not burn. It is clear that if defendant Crimmins’ mortgage had been paid up before the fire, the whole insurance would have remained for the benefit of the owner. The insurance payable to Crimmins as mortgagee was not only for his benefit but for the benefit of the owner, who had the right to have such payment applied in reduction of the mortgage debt. Hence, it would be unjust *321and not according to the intention of the parties that the insurance company should, upon payment to Orimmins, be subrogated to his position as holder of the mortgage, and thereby deprive the owner of the benefit of that part of the insurance money, unless the owner had in some way forfeited her right. The answer of the insurance company does not set up any breach of the contract of insurance upon the part of plaintiff, Mrs. O’Neil, or that her right under the policy has been in any way forfeited, nor does it allege that as to plaintiff no liability under the policy exists. The contract to sell the farm did not avoid the policy. But assuming that notwithstanding the form of its answer, the insurance company may still assert and prove any defense which is available to it as against defendant Orimmins, we are of opinion that it was incumbent upon defendant insurance company to prove upon the trial that as to the plaintiff, mortgagor and owner, no liability existed against it. The contract as contained in the mortgagee clause is: *“*Whenever this company shall pay the mortgagee * * * any sum for loss or damage under this policy and shall claim that, as to the mortgagor or owner, no liability therefor existed, this company shall, to the extent of such payment, be thereupon legally subrogated to all the rights of the party to whom such payment shall be made, under all securities held as collateral to the mortgage debt, or may at its option pay to the mortgagee * * * the whole principal due or to grow due on the mortgage with interest, and shall thereupon receive a full assignment and transfer of the mortgage and of all such other securities; but no subrogation shall impair the right of the mortgagee * * * to recover the full amount of his claim.”

It is true that defendant insurance company did by written notice served upon defendant Orimmins claim that as to the mortgagor no liability existed against it, but it did not prove upon the trial that it was not liable to the mortgagor. On the contrary, before the trial, it made an offer of judgment to plaintiff, which plaintiff accepted, thus conceding a liability to plaintiff under the policy. This clause should not be construed to vest in the insurance company the right to *322subrogation upon the mere assertion of claim, unfounded in fact, and such was not the intent or purpose of the clause in question. The claim which it may assert must be a valid and well-founded claim, and so it has been held in construing mortgagee clauses identical with this. (Traders’ *Insurance Co.*v. *Race,*142 111. 338; *Anderson*v. *Saugeen Mut. Fire Ins. Co.,*18 Ont. 355; *Bull v. North British Canadian Investment Co. & Imperial Fire Ins. Co.,*15 Ont. App. 421; affd., *sub nom. Imperial Fire Ins. Co.*v. *Bull,*18 Canada Sup. Ct. 697.) In the last case it was held that the insurance company was not justified in paying the mortgagees and claiming subrogation without first contesting its liability to the mortgagor and establishing their indemnity from liability to him.

As the defendant insurance company failed to prove upon the trial that as to plaintiff no liability existed under the policy, it has failed to establish its right to subrogation in this action.

In *Heilbrunn*v. *German Alliance Ins. Co.*(150 App. Div. 670) it appeared that as to the owner the policy had become null and void; hence, what is said in the prevailing opinion as to the contract with the mortgagee being nothing more than a contract of indemnity is not applicable here.

The other questions urged upon this appeal were, we think, correctly disposed of and do not call for special consideration here.

The judgment appealed from must be affirmed, with costs.

All concurred, except Kruse, P. J., who dissented in a memorandum.

Kruse, P. J. (dissenting):

I think the insurance company was entitled to an assignment of the mortgage. As between the mortgagee and the insurance company, it was not necessary for the insurance company to show that it was not liable to the mortgagor and owner upon the policy. The insurance company made that claim and offered to pay the mortgagee the whole principal due or to grow due, with the interest, and demanded an assignment of the mortgage. Whether or not the insurance shall be applied as a payment upon the mortgage is a question between the mort*323gagor and the insurance company in which the mortgagee has no interest. I think the mortgagee has no standing to contest that question with the insurance company.

The plaintiff, the owner, although originally a party to the action, dropped out of the case before the' trial. She did not appear at the trial, but accepted the offer of judgment made by the insurance company, and a separate judgment was entered thereon. Furthermore, the action was not brought to recover the loss of property covered by the mortgage, but only for the personal property.

Judgment affirmed, with costs.