#### The Erie Brewing Company et al. *v.*The Ohio Farmers Insurance Company.

*Mortgage clause in insurance policy making loss payable to mortgagee*— Not *an assignment of the policy to mortgagee*— Mort*gagee of policy bound by award of appraisers, when.*

A “mortgage clause” attached to a fire insurance policy at the time the same is executed, which clause makes the loss, if any, under the policy, payable to the mortgagee as his interest may appear, is not an assignment of the policy to such mortgagee, and, in the absence of fraud or collusion, he is bound by the award of appraisers provided for and required by the terms of the policy in the event of a disagreement between the insured and the insurance company as to the amount of the loss, *2although the mortgagee was not a party to and had no notice of the appraisement and award.

(No. 10948

Decided October 19, 1909.)

Error to the Circuit Court of Ashtabula county.

On the 8th day of September, 1904, Bridget Cullen brought suit in the court of common pleas against The Ohio Farmers Insurance Company, alleging in her petition that she owned certain premises, including the buildings thereon situate in the city of Conneaut, Ohio, and that on the 10th day of February, 1904, the said insurance company, for a consideration paid to it by her for the purpose, issued and delivered to her a policy of insurance in the sum of seventeen hundred and fifty dollars, and did thereby insure her against loss or damage she might sustain by fire in her two story frame metal roof building occupied by her as a boarding house and saloon. It is alleged that by the terms of the policy, the said company promised and agreed to make good to her all such loss or damage, not exceeding said sum, as should happen by fire to the property as therein specified, during the term of one year from noon, February 10, 1904, to noon, February 10, 1905, and the loss should be paid after sixty days after notice and proof of loss had been received by said company. A copy of said policy is attached to the petition and by its provisions other 'concurrent insurance might be, taken on said property.

It is- further alleged that on or about the 29th day of April, 1904, and while said insurance was in full force, the building so insured was damaged *3by fire, which did not occur from any of the causes excepted in the policy, and that the loss sustained by plaintiff by reason of the fire was at least $4,000. The policy held as concurrent insurance was _for the same amount — $1,750.

The plaintiff alleged that she duly performed all the conditions on her part to be performed and that more than sixty days have elapsed since the delivery by plaintiff to defendant of notice and proof of loss, and that the company has failed to pay said sum or any part thereof. And further, that The Erie Brewing Company claims some interest in the property insured and in said policy of insurance by reason of a mortgage upon the premises insured, and the plaintiff’s prayer is that the brewing company answer and set. forth what interest, if any, it has in said policy of insurance. Judgment is prayed for $1,750 with interest from May 27, 1904.

The Erie Brewing Company answered the petition, setting up the mortgage which it held covering the insured premises. It is alleged that this mortgage was executed and delivered by Bridget Carrigan (now Bridget Cullen) to Bridget Gaffney on the 8th day of November, 1893, to secure the payment of a note of even date executed by said mortgagor calling for the payment to the mortgagee of the sum of $2,000 on or before six years after date with six per cent, interest, interest payable annually. One payment of $129.75 was made and endorsed on the 24th day of January, 1902. It is averred that there was due at date of answer $2,449.25 with interest thereon from September 8, 1904, and further that on the *48th day of November, 1899, said Bridget Gaffney assigned said note and mortgage to The Erie Brewing Company, defendant, which has ever since been the holder and owner of the same.

One of the provisions .of the mortgage is that the mortgagor should keep the buildings insured for the benefit of the mortgagee, the policy payable to said Bridget Gaffney as her interest may appear at the time of the loss. The note has not been paid except as above stated.

The mortgage was duly recorded April 10, 1894. The brewing company further says in compliance with the covenant in .the mortgage to insure the premises, the policy set out in the petition was issued by The Ohio Farmers Insurance Company and delivered to the mortgagor, now Bridget Cullen; that said policy had as a part thereof a mortage clause with full contribution, providing for loss or damage, if any, under the policy to be payable to The Erie Brewing Company as its interest might appear. The following is a copy of said mortgage clause in so far as pertinent to the present controversy: “Loss or damage, if any, under this policy, shall be payable to The Erie Brewing Company as mortgagee (or trustee) as interest may appear, and this insurance, as to the interest of the mortgagee (or trustee) only therein 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 proceedings or notice of sale relating to the property, nor by any change in the title or ownership of the property, nor by the occupation of the premises for purposes more hazardous than are permitted by *5this policy; provided, that in case the mortgagor or owner shall neglect to pay any premium due under this policy, the mortgagee (or trustee) shall on demand, pay the same.” The brewing company then pleads the loss by fire on the 29th of April, 1904, as described in plaintiff’s petition and avers that the loss by fire was to the. extent of $2,449.20 — this being about the amount due on its note and mortgage, and that the insurance company neglects and refuses to pay the amount due, though due proofs of loss had been made more than sixty days before the bringing of the action.

It is then alleged that The Columbia Insurance Company issued concurrent insurance on same premises for like amount, $1,750. .The prayer of the cross-petition is for judgment against The Ohio Farmers Insurance Company for $1,224.63 with interest from September, 1904.

The said insurance company filed an amended answer to the petition on October 20, 1905, admitting its corporate capacity and business, and it admitted the issuing of the policy of insurarice set out in the petition, and that it contained the mortgage clause in the copy attached to the petition, but for alleged want of knowledge, it denies that plaintiff is the person named in the policy and denies that the property damaged by fire was covered by the said policy, and for like want of knowledge it is denied that The Erie Brewing Company owns the note and mortgage set up in its cross-petition.

For a second defense, the insurance company “denies that said policy was issued in compliance with the covenant contained in said mortgage, *6and avers that neither at the time of issuing said policy or since, up to the commencing of this action, did it have, nor has it had any notice or knowledge of any of the tferms, conditions, covenants or agreements contained in the mortgage set out and referred to,” etc.

It is further averred that it was provided by the terms of said policy of insurance, “that in event of disagreement as to the amount of loss, the same shall as therein provided, be ascertained by two competent and disinterested appraisers, the insured and this company each selecting one, and the two so chosen shall first select a competent and disinterested umpire; and the appraisers together shall then estimate and appraise the loss stating separately sound value and damage, and failing to agree shall submit their difference to the umpire, and the award in writing of any two shall determine the amount of such loss.”' It is next averred, “that said Bridget Cullen named in said policy of insurance and this defendant company differed as to the amount of loss and' damage on the building therein and thereby insured, and that pursuant to the terms of said policy of insurance, on the 3d day of May, 1904, said Bridget Cullen and this defendant, together with The Columbia Insurance Company of Dayton, a concurrent insurer of said property, entered into an agreement in writing for submission to appraisers. to determine the loss and damage to said building, and selected as such appraisers A. E. Woodbury and Joseph Skeel, who, on the 11th day of May, 1904, were duly sworn so to act with strict impartiality in making an appraisement and estimate of the *7sound value and the loss and damage to said property, and to make a just and conscientious award of the same according to the best of their skill and judgment, and said appraisers thereupon first selected and appointed one John Hazleton to act as umpire to settle matters of dispute that might exist between them, and thereafter on the same day having carefully examined the premises and remains of said property in accordance with the terms and conditions of said policy of insurance determined the sound value thereof to be four thousand dollars and the loss and damage thereon to be $1,202.05, and reduced their said determination and award to writing and duly signed and executed the same.”

It is next averred, in substance, that this company should not be liable for a greater per cent, of any loss or damage than the amount insured in said policy should bear to the whole insurance whether valid or not, and that at the time of the loss the whole insurance covering said property amounted to $3,500, and that the amount of insurance in said policy issued by defendant is one-half of total amount of insurance, and this defendant is liable under said award for the sum of $601.03 and no more on said policy.

Afterwards, on October 28, 1905, The Erie Brewing Company demurred to the second defense above set out on the ground that it does not state facts sufficient to constitute a defense to the answer and cross-petition of The Erie Brewing Company.

The court of common pleas sustained the demurrer and no further amendment was made or *8requested. On the issues thus left, the cause came on for trial to a jury.

It was agreed to by the parties in open court in the presence of the jury that The Erie Brewing Company was the owner of the mortgage set up in its answer and cross-petition, and that “the agreement for submission to appraisers dated May 3, 1904, between Bridget Cullen and The Columbia Insurance Company, and The Ohio Farmers Insurance Company shall be conceded to have been executed by the parties to said agreement, and that the award on said agreement made on the 11th of May, 1904, was signed by the appraisers and sworn to by them at the time indicated in said award.”

The case proceeded on hearing of evidence to prove the loss for the one-half of which The Ohio Farmers Insurance Company would be liable. The jury found a verdict for The Erie Brewing Company against the said insurance company in the sum of $1,049.41. Motion for new trial overruled and judgment rendered on the verdict.

The said insurance company prosecuted error in the circuit court to obtain a reversal of the judgment, and the record shows the judgment of the circuit court to be that “the court of common pleas erred in sustaining the demurrer of the said defendant The Erie Brewing Company to the second defense of the amended answer of the said Ohio Farmers Insurance Company to the answer and cross-petition of the said The Erie Brewing Company, the said cross-petition not being sufficient in law, and not stating a cause of action in that it contains no averment that any demand or request *9had been made by The Erie Brewing Company for an appraisal of fhe loss. And no averment of any excuse for not making such demand or request.” The circuit court reversed the judgment of the court of common pleas, and the case is here on petition in error filed by The Erie Brewing Company.

*Mr. Allen M: Cox,*for plaintiffs in error.

We have this anomalous condition; an appraisement had been made between the insurance company and Bridget Cullen; the brewing company was not a party to it, yet the circuit court says, that although there was an appraisement between the insured and the insurance company, The Erie Brewing Company was also bound to demand and ask for an appraisal before suit could be maintained.

Unless there was a provision for more than one appraisal, the company was entitled to but one appraisal and award. *Fire Association*v. *Appel, Admr.,*76 Ohio St., 1.

Because the insurance company did not make the brewing company a party, it was not bound by the appraisal. *Bergman et al.*v. *Assurance Co.,*15 L. R. A., 270.

This case is not exactly similar to the one at bar. It seems that the simple endorsement upon the policy was, “Loss, if any, payable to the mortgagee,” and the policies were delivered to the mortgagees, and the court holds that an arbitration and award was not binding without the notice' and consent of the mortgagee.

*10In the case at bar, the policy provided, “In the event' of disagreement as to the amount of loss, the same shall, as above provided, be ascertained by two competent and disinterested appraisers; the insured and this company each selecting one.”

So that, under the terms of our policy, there was but one way to proceed, that is, 'the insured, Bridget Cullen, to select one appraiser, and the insurance company the other, then if they sought to have the mortgagee bound by the appraisal, it should have been made a party by notice of the time and place, and attendance requested. This was not done. *Hardy et al.*v. *Insurance Co.*(Mass.), 33 L. R. A. 241.

Where insurance is obtained by the owner and a mortgagor’, and in addition to making the loss payable to mortgagee, there is inserted or added what is called the mortgagee clause, it operates as a distinct, separate and independent insurance contract, as between the mortgagee and the company, in protection of the mortgagee’s interest. Not necessarily and wholly independent insurance of that interest, yet separate and distinct in protection of it. Fire Insurance as a Valid' Contract, Clement, rule 2, page 32.

An owner of the property and the company cannot, without the concurrence of the mortgagee to whom the loss was made payable as interest may appear, effect a settlement or accord and satisfaction without the assent of the latter. Clement’s Fire Insurance as a Valid Contract, rule 11,' page 38; *Hathaway*v. *Insurance Co.,*134 N. Y., 409, 32 N. E. Rep., 40, 22 Ins. L. J, 358; *Harrington*v. *Insurance Co.,*124 Mass., 126; *Hall*v. *11*Fire*Association, 64 N. H., 405, 13 Atl. Rep., 648, or bind the mortgagee in appraisal or arbitration; *Brown*v. *Insurance Co.,*5 R. I., 394; *Bergman*v. *Assurance Co., 92*Ky., 494, 18 S. W. Rep., 122, 15 L. R. A., 270, 21 Ins. L. J., 271; *Building Association*v. *Insurance Co.,*94 N. W. Rep., 1100, and when there is a mortgagee clause in the policy, the mortgagee is not bound by an adjustment- of amount with owner. *Insurance Co.*v. *Field,*70 Pac. Rep., 149.

It' is well settled that a mortgagee to whom a loss is made payable, is not bound by an adjustment to which he is not a party, and which is made without his knowledge or consent, and that an adjustment made only by the insurer and the insured mortgagor, is without effect as to the mortgagee. Jones on Mortgages, Section 409, page 321; *Hall*v. *Fire Association,*64 N. H., 405; *Harrington*v. *Insurance Co.,*124 Mass., 126.

In *Insurance Co.*v. *Drackett et al.,*63 Ohio St., 41, there was a question relating to the admission of evidence, and the court held that the mortgagees, being directly interested, and parties to the suit, had a right to show what the loss was.

*Mr. Lee Elliott*and *Mr. E. I. Betts,*for defendant in error.

There are two methods in use for protecting the interest of the mortgagee, where the original policy is issued to the mortgagor. The original form used was a writing on the face of the policy insuring the mortgagor, “Loss, if any, payable to A B mortgagee, as his mortgage interest may appear.” This is now known as the “open” form, and. has *12been so long in use that rights of the parties under it have been pretty well established. *Fogg*v. *Insurance Co.,*10 Cush., 337.

There is substantial agreement not only among text-writers but also the courts, on the lines laid down by Chief Justice Shaw, *supra,*that notwithstanding the endorsement of the mortgage clause, the mortgagee is not the person insured, and does not recover in his own right but merely in the right of the mortgagor, the original, continuing and only party whose interest in the property covered by the policy is insured. *Loring*v. *Insurance Co., 8*Gray, 28; *Minturn*v. *Insurance Co.,*10 Gray, 501; *Grosvenor*v. *Insurance Co.,*17 N. Y., 391; *Insurance Co.*v. *Greer,*120 Fed. Rep., 916; *Reduction Co.*v. *Insurance Co.,*138 Fed. Rep., 497; 13 Am. & Eng. Ency. Law, 202; May on Insurance (2 ed.), Sections 378-9; Ostrander on Insurance, 339. This precise question was decided by this court in *Insurance Co.*v. *Tobacco Co.,*77 Ohio St., 640, unreported.

It followed as a necessary corollary to this doctrine, that where the insured mortgagor for any reason could not recover, neither could the mortgagee to whom the loss was made payable by this form of endorsement. 13 Am. & Eng. Ency. Law, 202. And there is as little disagreement on this as upon the original proposition. 2 Cooley’s Briefs on Insurance, 1521.

For the purpose of protecting the interest of the mortgagee against having his claim defeated by the act or default of the mortgagor under the construction placed on the open mortgage clause, the form commonly known as the “Union” mort*13gage clause, referred to in this case as the “N. Y., Pa. & N. J. Standard mortgage clause with full contribution,” came into use. It was not endorsed on the policy, as had been the case with the open clause, but was printed on a separate slip and attached to the policy.

The printed slip provides for payment of the premium by the mortgagee in case of neglect to do so by the mortgagor, or any increased premium required by an increase in the hazard, cancellation, contribution in case of loss, and subrogation.

There seems to be substantial agreement that the claim of the mortgagee for the insurance cannot be defeated by any act or neglect of the mortgagor in violation of the conditions of the policy of which the mortgagee is ignorant. 2 Cooley’s Briefs on Insurance, 1526.

The mortgage slip attached does not constitute a new, separate and distinct contract, insuring the interest of the mortgagee, as it depends on the original contract of insurance with the mortgagor for its vitality, and is not wholly independent of and separate from it. *Graham*v. *Insurance Co., 87*N. Y., 69; *Cole*v. *Insurance Co., 99*N. Y., 37; *Insurance Co.*v. *Bank,*34 S. W. Rep., 333.

Neither of these cases can be reconciled with the assumption that the Union mortgage clause is a separate and distinct contract of insurance covering the interest of the mortgagee.

In anv event, the three cases last above cited establish the point that the act or neglect referred to in the mortgage clause does not include any act or neglect of the mortgagor or owner that *14precedes the inception of a valid policy of insurance in his hands binding on him and on the insurer, but must be confined to some time subsequent thereto. To invalidate, is defined in the Century Dictionary as meaning, “To render invalid; to destroy the strength or validity of; render of no force or effect.” And in law, “To deprive of binding force or legal efficacy.” Both definitions assume the prior existence of validity. A contract already invalid, could not be deprived of validity or legal efficacy. An existing valid contract of insurance is therefore necessary to satisfy the terms of the mortgage clause itself.

The efficacy of the mortgage clause in protecting the rights of the mortgagee,- therefore necessarily grows out of and depends upon the existence of a valid contract of insurance between the mortgagor and the insurer. Since the policy refers to the mortgage clause and the mortgage clause reciprocally refers to the policy, the two writings so intimately connected must necessarily be construed together. If invalidate means to destroy the strength or validity of; render of no force or effect; then it cannot refer to furnishing proofs of loss or any of the policy provisions relating to the adjustment of the loss, since none of these relate to the validity or invalidity of the policy; on the contrary they relate to the manner of carrying it into effect. Nor can it relate to the right to receive the money due in case of loss, as between the mortgagor, mortgagee and the insurer, since that was provided for in the open form which is a part of the Union mortgage clause.

*15It cannot be claimed that either of the policy provisions relating to adjustment are abrogated or even modified by anything found in the Union mortgage clause. They bind the mortgagee as well as the mortgagor and the insurer. No- part can be eliminated. They must stand or fall together. All parts of these provisions bind all the parties or none, and it seems clear to us that they do bind all. As the mortgagee makes claim under the policy, it agrees to them and that the. loss shall be ascertained and estimated in the manner provided.

The mortgagor is the “insured,” and she is the one entitled to take part with the insurer in the ascertainment and estimate of the loss, and, as the selection' of an appraiser is limited to the “insured,” she and not the mortgagee is entitled to make the selection. This is conceded in *Bergman*v. *Assurance Co.,*15 L. R. A., 270; *Building Association*v. *Insurance Co.,*94 N. W. Rep., 1100.

In *Chandos*v. *Insurance Co.,*84 Wis., 184, the court, after reviewing substantially all the cases cited by the plaintiff in error held that the assured has the right to enter into the appraisement or arbitration according to the terms of the contract, without notice to the mortgagee and without his approval'.

Price, J.

While the action under review was brought by Bridget Corrigan (now Bridget Cullen), who is one of the plaintiffs in error, it is developed in the record that her interest in the results of the litigation are not in dispute, inasmuch as the controversy is waged between the *16insurance company and The Erie Brewing Company, the holder and owner of the mortgage set up in its answer and cross-petition. In her petition she counts on her ownership of the insured property; pleads and sets out the policy of insurance and alleges generally that she performed all the conditions made incumbent on her to be performed by the terms of the policy, and that after receiving due proofs of loss and damage by fire the insurance company refused to pay such loss and damage. Her prayer for recovery is for the full amount of the policy, $1,750.

Nothing is said in the petition about a mortgage clause; and The Erie Brewing Company is made a party because it claims some interest in the insured property by reason of a mortgage on the same; and nothing is said about any difference between her and the insurance company as to the amount of loss and damage, and nothing about an appraisal and an award. The Erie Brewing Company in its answer and cross-petition sets out its ownership of the mortgage and note secured thereby, which ownership came by assignment from Bridget Gaffney, the mortgagee. The terms and conditions of the mortgage are alleged, as well as the substance of the policy of insurance issued by The Ohio Farmers Insurance Company, and the so-called mortgage clause is copied as part of said answer and cross-petition. This clause appears in the statement made of the case preceding this opinion. It is alleged that the building insured was damaged to the extent of $2,449.20, for the one-half of which (there being concurrent insurance) it prayed judgment.

*17Nothing is said in this pleading about a difference between the insured and the company as to the loss or damage; and nothing as to proofs of loss having been made by any one, and nothing as to any demand for an appraisal of the loss, it being assumed by the pleader, as we suppose, that these were acts to be done by the mortgagor, a neglect of which by the mortgagor, according to the terms of the mortgage clause, would not invalidate the insurance.

When we look to the amended answer of the insurance company to the cross-petition of the brewing company, we find it pleading so much of the policy as provides that it was agreed therein by the insured and the insurance company, that in the event of disagreement as to the amount. of loss, the same should be ascertained by two competent and disinterested appraisers, the insured and the insurance company each selecting one, and that the two so chosen to first select a competent disinterested umpire; that these appraisers should estimate and appraise the loss, and they failing to agree should submit their differences to the umpire, the award in writing of any two shall determine the amount of such loss.

It is alleged that the insured and the insurance company did differ as to the amount of the loss and damage on the insured building, and that on May 3, 1904, this company and the company issuing the concurrent insurance agreed in writing with the insured to submit the question of loss and damage to certain appraisers, which was done after the selection of an umpire, and that the award made in pursuance of the terms of the *18policy was in the sum of $1,202.05. This award was reduced to writing, and that the insurance company was not liable for more than one-half of said award.

It is not averred in this defense that the owner of the mortgage — The Erie Brewing Company— had any notice or knowledge of the differences between the insured and the insurance company as to the amount of the loss, or that -the brewing company had notice or knowledge of the time and place of the appraisal and award. It is not averred that it was present or took part in said submission and appraisal. The court of common pleas sustained a demurrer to this defense, which judgment the circuit court reversed, and that ruling gives rise to the principal controversy in this proceeding.

Is the appraisal and award thus made binding on the owner of the mortgage where such owner does not assail the award for fraud or collusion? We find the authorities are not in harmony on the question. .The decided cases are in serious conflict, but many of them adjudicate controversies unlike the one before us, while others are more directly in point. The legal status of the so-called mortgage clause has been differently defined by courts and text-writers, some of which hold that it is a' new and independent contract, not controlled necessarily by all the provisions of the policy, while others hold that such clause is - a designation or appointment of the mortgagee as the party to share in or receive the amount of the loss and damage.

It must not be overlooked that there was no assignment of the policy in this case. There was *19no assignment in terms of any part of it. The clause designates a payee to receive the fruits of the policy — fruits that will 'accrue by reason of its protection and the rights secured thereby by the express language of the policy. There is nothing in it concerning differences between the company and mortgagee as to the amount of loss and damage; and nothing making it incumbent upon the mortgagee to furnish proof of loss. The clause in question is careful to provide, “and this insurance as to the interest of the mortgagee only therein, 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 proceedings, or notice of sale relating to the property, nor by any change in the title or ownership of the property, nor by the occupation of the premises for purposes more hazardous than are permitted by this policy; provided, that in case the mortgagor or owner shall neglect to pay any premium due under this policy, the mortgagee shall *on demand*pay the same. Provided also, that the mortgagee shall notify this company of any change of ownership or occupancy or increase of hazard which shall come to the knowledge of said mortgagee, and unless permitted by this policy, it shall be noted thereon and the mortgagee shall on demand pay the premium for such increased hazard for the term of use thereof, otherwise this policy shall' be null and void.”

It seems that clause expresses what will not *invalidate*the policy as to the mortgagee, and creates an obligation on his part, if he have knowledge of change of ownership or occupancy, or in*20creased hazard, to notify the insurance company of the same, and if the hazard is increased by the change, the premium for the increased hazard shall on demand by the company be paid, or the policy be void. In all other respects, not excepted by the clause, the rights of the mortgagee ■ depend on a compliance with the terms of the policy by the insured mortgagor. The premium is due from the insured and only where he neglects to pay it may the insurer demand its payment of the mortgagee.

In this language it is to be further. observed that the clause does not vest in the mortgagee any additional title or interest in the insured property, for it says: “Loss or damage, if any, under this policy shall be payable to The Erie Brewing Company as mortgagee as interest may appear, and this insurance as to the *interest of the mortgagee only therein*shall not be invalidated,” etc.

It would appear reasonable that in respects not modified or limited by the express language of this mortgage clause, the plain provisions of the policy as between the insured mortgagor and the insurance company must prevail and be observed. The rights conferred by the clause spring from the contract relation which the mortgagor sustains to the company, and but for saving words in the clause, the neglect or default of the insured might defeat the interests of both.

Llere we have in the policy the unequivocal provision that: “In event of disagreement as to the amount of loss the same shall, as above provided, be ascertained by two competent and dis*21interested appraisers, the *insured*and this company each selecting one, and the two *so*chosen shall first select a competent and disinterested umpire; the appraisers together shall then estimate and appraise the loss, stating separately sound value and damage, and failing to agree, shall submit their differences to the umpire; and the award in writing of any two *shall*determine such loss.”

This is a part of the body of the policy and it has been uniformly held that a compliance with the conditions is a prerequisite to recovery on the policy, and this mortgage clause, although on a separate paper, is of same date as the mortgage and attached to the policy at the time of its execution. Hence it was not intended to be a new and separate contract between the insurance company and the mortgagee, but to designate or appoint the payee of the amount of loss according to the interest in — not the property insured — but in the *insurance*which he may make appear. Such clauses for convenience perhaps are not contained in the forms of the principal contract of insurance between the insured and the company, but pre-' pared on a separate sheet in order that in a proper case it may be attached, and when this is done, it does not waive or destroy any express provision of the policy, but serves its purpose by designating the payee when loss occurs and modifies the principal contract only to the extent that a modification or qualification is clearly expressed therein.

This view leads to the conclusion that the principal contract must be observed, except as expressly modified, and that the rights of the mortgagee depend upon and must be. worked out *22through the relation the insured sustains to the insurance company, that relation being one of solemn primary contract.

Therefore an arbitration was in order where the principal parties could not agree. There is. no provision in the mortgage clause that recognizes his right to select or be present when an appraiser is selected. That method of determining the loss is fixed in the policy and remains there after the mortgage clause is attached, and there is nothing in *it*which in any degree qualifies the authority for appraisal existing between the principal parties. And surely there could not be two appraisals one according to the policy between the insured and the insurance company, and another at the behest of the mortgagee. There is nothing in the mortgage clause that provides notice of appraisal to the mortgagee. Two appraisals might not be for. same amount and the situation would be unique. The present question, as we are now advised, has not heretofore been passed upon by this court, but our views find support in several well considered cases decided in other jurisdictions.

In *Fogg and another*v. *Middlesex Mutual Fire Ins. Co.,*10 Cushing, 337, it is held an indorsement on a policy of insurance, “for value received, pay the within, in case of loss to F. and H.,” made to a purchaser of the property insured, is rather an order of or assignment of a right to the money in case of loss, than a regular transfer of the contract of insurance.

After discussing other forms of assignment of insurance, Shaw, C. J., on page 346, says: “But there is another species of assignment or transfer *23it may be called, in the nature of an assignment of a chose in action; it is this: Tn case of loss, pay the amount to A. B3 It is a contingent order or assignment of the money, should the event happen- upon which money will become due on the contract. If the insurer assents to it, and the event happens; such assignee may maintain an action in his own name, because, upon notice of the assignment, the insurer has agreed to pay the assignee instead of the assignor. But the original contract remains: the assignment and assent to it form a new and derivative contract out of the original. But the contract remains as a contract of guaranty to the original assured. He must have an insurable interest in the property, and the property must be his at the time of the loss. The assignee has no insurable interest *prima facie*in the property burnt and does not recover as the party injured, but as the assignee of a party who has an insurable -interest, and a right to recover, which right he has transferred to the assignee, with the consent of the insurer.”

The same view is adopted by the same court in *Minturn*v. *Manufacturers' Insurance Co.,*10 Gray, 501.

In *Grosvenor*v. *The Atlantic Fire Ins. Co., 17*N. Y., 391, it is held that, “where a fire policy names the owner of the property as the one insured, and declares the damages in case of loss to be payable to another person therein named as mortgagee, the latter cannot recover in case of a ^breach of the conditions of the policy by the mortgagor. In such case, the contract is with the mortgagor, and for the insurance of his interest, *24and the mortgagee- can recover only where the mortgagor could have done so, had the money been payable to himself instead of being payable for his benefit to the mortgagee.”

In *Hathaway*v. *Orient Ins. Co.,*134 N. Y., 409, the preceding case with others was considered and distinguished, but its doctrine was not overruled.

*Atlas Reduction Co. et al.*v. *New Zealand Ins. Co.,*138 Fed. Rep., .497, is a leading case decided by the circuit court of appeals of the United States. The substance of the holding is, that where an indorsement was made on a policy of fire insurance, by the agents of the insurer, at the request of the insured, to-wit: “Subject to all the conditions of this policy, loss, if any, payable to D. and S. as their interests may appear” — the indorsement must be read in the light of the purpose which actuated the parties in stipulating that the policy could be modified, or any provision thereof waived, only by a writing of equal dignity and credit with the policy itself. Such an indorsement is a common mode of furnishing a species of security by a debtor to his creditor, who may be willing to trust to the debtor’s honesty, etc., but who requires some indemnity against such accidents as loss by fire, and it does not create a new contract of insurance with the payee, or abrogate or waive any condition of the policy. The terms of the indorsement are not conflicting, but consistent and plain, and their purpose and effect are to make D. and S. the simple appointees of the insured to receive payment of any loss payable to the insured under the policy, and to receive it, not absolutely, but to the extent of any interest they *25may have in such payment at the time of the loss. The words ‘as their interest may appear/ are -plainly prospective, and refer to the interest, not in the property insured, but in the payment of the loss.” That court was somewhat divided on some questions in the case, but we think not on the proposition above stated.

We content ourselves with consideration of another case, although others are cited in brief for defendant in error. In *Chandos et al.*v. *American Fire Ins. Co.,*84 Wis., 184, omitting part of the syllabus, we quote from the third section: “A mortgagee to whom the insurance is made payable ‘as her interest may appear’ is bound by the appraisement or award, although she was not a party to and had no notice of the proceedings.” The opinion of the court is a thorough discussion of this and other subjects and is valuable for the array of authorities cited.

On page 191, the court says: “That the mortgagee was not a party to the appraisement, and had no notice of it, is an objection of much more importance. All of the insurance policies contain the same direction of ‘loss payable to Louisa W. I. Goff, the mortgagee, as her interest may appear.’ To determine whether she was entitled to all the insurance, all of the policies of insurance must be considered together as one policy and at the time the loss occurred, and not since it has been determined in this case whether the loss is less or more than the mortgage. To determine the question whether the mortgagee ought to have had notice of the appointment of appraisers, and to have been a party to the appraisement, it is im*26portant to know whether at that time it appeared that she was entitled to the whole insurance. Nearly all, if not all, the authorities cited by the learned counsel of the respondents, which hold that the mortgagee is the sole party in interest in the insurance, and must be represented in the arbitration or other adjustment of the loss, are cases where the direction is. to pay the *zvhole*insurance to the mortgagee or other third person, who thereby becomes the assignee of the policy and loss. In this case it could not be known what interest the mortgagee might have in the insurance, or what interest in her might appear. First, her interest was not commensurate with the insurance; second, it was not known what part, if any, of the mortgage would remain unpaid by the mortgagor. It was therefore uncertain what interest the mortgagee had, if any, in the insurance. She (the mortgagor) was the owner of the property and of' the equity of redemption in the mortgaged premises. * * * It follows that in all cases where the language of direction is that the insurance should be paid to the mortgagee ‘as his interest may appear/ the assured mortgagor remains the responsible party, or the party in interest to control the insurance and the adjustment of the loss. This is the distinction, as I understand it, which divides the authorities on the question.”

This logic applies to the case at bar, for the policy and clause under consideration was not an assignment of all the insurance, nor of the insurance policy. The insurance given by this policy is $1,750, and concurrent insurance in same amount — $3,500. The mortgage debt at date of *27policy was less than $2,500. The sound value of the insured property, as fixed by the appraisal, was $4,000, and the loss $1,202.05.

There are some cases that seem to hold contrary to our views and they are cited for plaintiff in ertor in its brief. We have examined these cases, but have not space for their discussion here.

We concur in the decision of the circuit court and affirm its judgment.

*Judgment affirmed.*

Crew, C. J., Summers, Spear, Davis and Shauck, JJ.; concur.