Case Name: Louisa S. Shotwell, Plaintiff and Respondent, v. The Jefferson Insurance Company in the City of New York, Defendants and Appellants
Court: New York Superior Court
Jurisdiction: New York
Decision Date: 1859-07-28
Citations: 5 Bosw. 247
Docket Number: 
Parties: Louisa S. Shotwell, Plaintiff and Respondent, v. The Jefferson Insurance Company in the City of New York, Defendants and Appellants.
Judges: 
Reporter: Reports of cases argued and determined in the Superior Court of the city of New York
Volume: 18
Pages: 247–265

Head Matter:
Louisa S. Shotwell, Plaintiff and Respondent, v. The Jefferson Insurance Company in the City of New York, Defendants and Appellants.
1. Where a policy of insurance upon buildings against loss or damage by fire provides, “ that in case of any transfer or termination of the interest of the insured, either by sale or otherwise, without the consent of the insurers manifested in writing, the policy shall thenceforth be void and of no effect,” and where the insured contracted to sell and convey the insured property to one S. for $5,500; viz.: $2,500 cash, and $1,500 in twelve and $ 1,500 in twenty-four months, and to keep the premises insured, and that the benefit and indemnity against loss and damage by fire should enure to the said S., who was to pay to such insured the premium she might pay for the insurance, and to convey the property by warranty deed to 8. on full payment by him of the purchase money; and S. forthwith took and kept possession of said premises; and where subsequently and after the $1,500 first payable had been paid, and before the other $1,500 was paid, and while the policy was in force, the premises were damaged by fire to more than $2,000, the sum insured; and where no notice of the contract between the insured and S. had been given to the Company until after the loss; the insured is entitled to recover to the extent of the unpaid purchase money and interest due thereon, and to that extent only.
2. The contract and its partial performance do not transfer or terminate the whole interest of the assured; but it continues to the extent of the amount of the purchase money remaining unpaid.
3. It is no defense or ground for exonerating the insurers from liability, that after suit brought upon the policy and prior to the trial, S. paid the purchase money in full and received a deed of the insured premises.
4. By force of the agreement between the insured and S., the latter is entitled to the benefit of the sum recovered; and becomes equitable assignee of the right of action accruing from the loss by fire; the policy in force at the time of the loss having been obtained by the insured pursuant to the said contract between her and S., and the latter having paid to the insured the premium thereon.
(Before Hoffman, Woodruff and Pierrepont, J. J.)
Heard, May 10th;
decided, July 28th, 1859.
This case comes "before the Court on an appeal by the defendant from a judgment entered in favor of the plaintiff for the sum of $2245, with costs.
The action was tried before Mr. Justice Pierrepont without a jury on the 4th of November, 1858, a trial by jury having been waived.
The action was commenced March 21st, 1857, and is brought upon a policy of insurance executed by the defendants, to indemnify one William Shotwell against damage by fire, to certain buildings situated at Macon, in the State of Georgia, and alleged to have been damaged by fire to the amount of $2,000, while the policy was in force.
The policy was produced at the trial, and is dated the 2d of November, 1844; its material portions are as follows:
“No. 45,098.
“The Jefferson Insurance Company in the city of New York. By this policy of insurance, the Jefferson Insurance Company, in consideration of $55, to them paid by the assured hereinafter named, the receipt whereof is hereby acknowledged, do insure William Shotwell, loss, if any, payable to Henry R. Shotwell, against loss or damage by fire to the amount of two thousand dollars on his frame buildings, situated at the corner of Third and Mulberry streets, in Macon, Georgia, and marked Nos. 1, 2, 8 and 4, on plan and application filed, No. 8,000, in this office; said buildings privileged as extra hazardous stores and dwellings. $2,000 one year at 2£ per cent, $55.”
“ May 29th, 1854.
“ This Company recognize H. R. Shotwell as owner.
“ J. Milton Smith, Secretary.”
“November 14th, 1854.
“ This Company recognizes Louisa Shotwell as owner.
“ M. Tucker, President."
“ And the Jefferson Insurance Company above named, for the consideration aforesaid, do hereby promise and agree to make good unto the said assured, his executors, administrators and assignees, all such loss or damage not exceeding the amount insured, as shall happen by fire to the property above specified, from the 2d day of November, 1844, at twelve o’clock at noon, unto the full end and term of one year thence next ensuing, which term will expire on the 2d day of November, 1845, at twelve at noon, the said loss or damage to be estimated according to the true and actual cash value of the said property at the time the same shall happen, and to be paid within sixty days after due notice and proof thereof made by the assured, in conformity to the conditions annexed to this policy.
The plaintiff also gave in evidence certain renewal receipts, continuing the said insurance, in the name of William Shotwell, down to January 12, 1855, and in the name of the plaintiff (who had become the owner of the insured premises) from that time, the last three of which receipts are as follows:
“No. 92,627.
“Beceived, New York, January 12th, 1854, of William Shot-well, sixty dollars, being the premium on two thousand dollars insured under Policy No. 45,098, which is hereby continued in force for one year, to wit, from the 12th day of January, 1854, until the 12th day of January, 1855, at noon.
“ Macon, Geo.
“ Moses Tucker, President.
“ (Attest,) J.’ Milton Smith, Secretary."
“ No. 97,442.
“Beceived, New York, January 12,1855, of Louisa Shotwell, sixty dollars, being the premium on two thousand dollars insured under Policy No. 45,098, which is hereby continued in force for one year, to wit, from the 12th day of January, 1855, until the 12th day of January, 1856, at noon.
“ Macon, Geo.
“ Moses Tucker, President.
“ (Attest,) J. Milton Smith, Secretary."
“Ho. 102,607.
“ Received, New York, February 5, 1856, of Louisa Shotwell sixty dollars, being the premium on two thousand dollars insured ' under Policy Ho. 45,098, which is hereby continued in force for nine months, to wit, from the 12th day of January, 1856, until the 12th day of October, 1856, at noon.
“Macon, Geo.
“ Moses Tucker, President.
“ (Attest,) J. Milton Smith, Secretary.”
■ The Policy contained the following clauses: “ And this Policy is made and accepted in reference to the proposals and conditions hereto annexed, which are to be used and resorted to in order to explain the rights and obligations of the parties hereto, in all cases not herein otherwise specially provided for.
“ The interest of the assured in this Policy is not assignable, unless by consent of this corporation manifested in writing; and in case of any transfer or termination of the interest of the insured, either by sale or otherwise, without such consent, this Policy shall from thenceforth be void and of none effect.”
Among the conditions annexed or attached to the Policy, were the following:
“ Property held in trust or on commission must be insured as such, otherwise the Policy will not cover such property; and in case of loss, the names of the respective owners shall be set forth in the preliminary proofs of such loss, together with their respective interests therein.
“ The interest of the assured in this Policy is assignable, provided the consent of the Company be first obtained to the transfer. Hotice of such assignment shall be given before any loss may have happened; and this Company, w.hen so notified, may elect either to continue the insurance, and express the same by indorsements on this Policy, or refund a ratable proportion of the premium for the time of the risk unexpired, and cancel the Policy.
“ Persons sustaining loss or damage by fire, shall forthwith give notice thereof in writing to the Company, and as soon after as possible they shall deliver as particular an account of their loss and damage as the nature of the case will admit, signed with their own hands. And they shall accompany the same with their oath or affirmation, declaring the said account to be true and just.
“All fraud or false swearing shall cause a forfeiture of all claims on the insurers, and shall be a full bar to all remedies against the insurers on this Policy.”
The following agreement was given in evidence:
“Georgia, Bibb County:
“ Know all men bt these presents : That I, Louisa Shot-well, of the State of Illinois, am held and firmly bound by these presents, to Dr. E. L. Strohecker, of said county of Bibb, in the sum of five thousand five hundred dollars, to the true and faithful payment of which sum to him, his heirs, executors, administrators, and assigns, I do hereby bind myself, my heirs, executors, and administrators.
“ In testimony whereof, I have hereunto set my hand and seal this twelfth day of May, 1855.
“ Now the condition of this obligation is such that, whereas I have this day sold to the said Strohecker a certain lot or parcel of land in the city of Macon, known and distinguished as ‘ the Shotwell Lot,’ situate on the corner of Mulberry and Third streets—it being part of lot No. 8, and square No. 22, according to the plan of said city of Macon—embracing one hundred and five feet front, more or less, on Mulberry street, and running back on the upper' line to the small alley or passage running across from Second to Third street, and running back on the line of Third street to the property now owned by the Messrs. Tracy, which lot is the same now occupied by the said Strohecker and S. Day, on Mulberry street, and Binder and Miller, on Third street, and which is actually and fully described in a deed to me made by Henry R. Shotwell, and now of record in the Clerk’s Office of the Superior Court of said county of Bibb, for the sum of five thousand and five hundred dollars, in the following payments, to wit: twenty-five hundred dollars in cash, and the remainder, in two equal installments of fifteen hundred dollars each—one due at twelve months from date, and the other at twenty-four months from date; for which said installments, he, the said Strohecker, has made and delivered his two several notes "now in my possession—both bearing even date with these presents—one due at twelve months, and the other at twenty-four months; the last named bearing interest from date, payable semi-annually; now, therefore, if he, the said Strohecker, shall well and truly pay to me the said several promissory notes at maturity, and upon such payments being so made, I shall make and deliver to him good warranty titles to the property herein-before described; then this obligation shall be null and void, else remain in full force and effect.
“ Signed, sealed and delivered, the day and year above written.”
The finding of the Judge was as follows:
“ First. That the said defendants did, on the 5th day of February, 1856, insure the said plaintiff against loss or damage by fire to the said premises in the manner set forth in said Policy and receipts.
“ Second. That before the said contract of insurance was last renewed as aforesaid, the said plaintiff, by virtue of the said agreement dated May 12th, 1855, contracted to convey the said premises unto Edward L. Strohecker, who thereupon, and by virtue of the said contract, entered into the possession and enjoyment of said premises, and has ever since so continued.
.“ Third. That the said defendants had no notice of such contract of sale, or of any conveyance by the said plaintiff of any interest in the said premises, or of any change of possession thereof, until after the said 4th day of December, 1856.
“ Fourth. That on the 27th day of September, 1856, the said premises were, without fraud or fault on the part of the insured, damaged by fire to the amount of more than the sum of two thousand dollars, and that the said preliminary proofs of such loss and damage were furnished unto the said defendants as early as the said 4th day of December, 1856.
“ Fifth. That at the time the said contract of May 12th, 1855, was executed by the plaintiff and delivered unto the said Strohecker, he, in pursuance of the terms thereof, paid unto the said plaintiff the sum of two thousand five hundred dollars in cash, and also his two certain promissory notes, each for the sum of $1,500, by him made payable to his own order, and by him indorsed, both dated the day last aforesaid—one payable twelve months after date, and the other payable twenty-four months after the date thereof, with interest; and that the said notes were by the said Strohecker duly paid as the same respectively became due, except the last note, which was not paid until the 13th day of June, 1857, because the deed of conveyance was not ready until then to be so delivered.
“ Sixth. That upon the payment by the said Strohecker of the said last mentioned note, the said plaintiff executed and delivered unto him a deed of conveyance of all her right, title and interest in and to the said premises, and has not since had any interest whatsoever therein.
“ Seventh. That by agreement made and entered into between the said plaintiff and the said Strohecker, of which the defendants had no notice, plaintiff was to keep the said premises insured, and the benefit and indemnity against loss and damage by fire was to enure to the said Strohecker, who was to pay unto the said plaintiff the premium she might pay therefor, and the said insurance existing at the time of said loss was by the plaintiff obtained in pursuance of the said agreement.
“ Eighth. That the said premises were immediately after the said fire worth more than the sum of two thousand dollars, and the damage caused by the said fire was repaired' by the said Strohecker at his sole expense.”
And upon the foregoing facts the said Justice did find as matter of law that the said plaintiff sustained loss in the buildings insured and damage by means of the said fire to the amount of two thousand dollars.
And that by reason thereof the said plaintiff is entitled to recover against the defendants the said sum of two thousand dollars, with interest thereon from sixty days after the 4th of December, 1856—being in all the sum of $2,245.
To which finding and conclusions of the Judge, the counsel of the defendants duly excepted.
Judgment was entered upon the decision of the Judge, from which the present appeal was taken.
E. W. Stoughton, for defendants, (appellants.)
I. A policy of insurance being a personal contract of indemnity, nothing in the law is better settled than that the insured can never recover beyond the extent of his interest in the sub ject insured. (2 Comst., 210; 3 Hill, 501; 13 Wend., 94; 17 N. Y. R., 391.)
II. Upon the sale of the premises to Stroheclcer, the plaintiff retained the legal title thereto, although in equity they belonged to the vendee. The plaintiff also retained an insurable interest in the property to the extent of $3,000, being the amount of the unpaid purchase* money; but such interest was contingent, and liable to be extinguished upon the payment of the two notes, or upon a sale and transfer thereof without recourse.
Before the fire in question, one of these notes was paid, and soon after the maturity of the last note, and as soon as the deed was ready for delivery, that was- paid also. Thus the insurable interest of the plaintiff in the premises was extinguished, and her right to indemnity gone; for it is well settled that an insurance by the vendor of property covers only his remaining interest therein, and cannot be resorted to for the benefit of the vendee. (Ætna Ins. Co. v. Tyler, 16 Wend., 385, 396-399; McLaren v. Hartford Fire Ins. Co., 1 Seld., 151; Howard v. Albany Ins. Co., 3 Denio, 301; Angell on Fire and Life Ins., § 66; Parsons on Merc. Law, 508, &c.; 2 Phillips on Ins., 419; 17 Penn. R., 253; 21 id., 513; 16 Peters’ U. S. S. C. R, 501; 17 N. Y. R, 392; 393; 9 Paige, 568.)
The case of Kernochan v. The Bowery Fire Insurance Company does not change, or profess to change, the law as above laid down.
• There it was conceded that Kernochan, who was insured as mortgagee, was entitled, as such, to the amount claimed by him, and therefore had a corresponding insurable interest in the property. It was also said by the Court, that but for the existence of this interest his policy would have been void.
III. The fact that, at the time of the loss, the plaintiff had a contingent interest in the premises to the extent of $1,500—the amount of the unpaid note—affords no ground of recovery even of that sum.
1. Because the negotiable promissory note of Stroheclcer having been given for the balance of the purchase money, is to be regarded as a substantial payment thereof. Nor could the plaintiff have recovered against him the balance of the purchase money without producing such note, and canceling the same upon the trial. (Dayton v. Trull, 23 Wend., 345.)
2. Because it is proven that such note was paid before the trial, whereupon the insurable interest of the plaintiff in the premises became absolutely extinguished, and her right to indemnity for a loss, which fell wholly upon another, gone.
3. If it be said that the plaintiff was at the commencement of this suit entitled to recover to the extent of the unpaid purchase money, the defendants, upon payment of that sum, would have been entitled to be subrogated to her right to recover that amount of Strohecker. This claim having been extinguished by payment during the pendency of this action, affords a complete defense to the plaintiff’s demand against the underwriters. (See the cases cited under the second point.)
IV. By the terms of the policy, its assignment during the existence of the risk, without the assent of the defendants, would have rendered it void; whilst a transfer of the interest of- the plaintiff in the subject insured would have deprived her of the right to recover.
If she may, however, by a secret arrangement between herself and her assignee or vendee, undertake, notwithstanding such assignment or transfer, to hold the policy for his benefit, the provision to which I have referred becomes inoperative, and the underwriter may be compelled to indemnify those whom he has never undertaken to insure.
V. Even upon the principles supposed to have been laid down by Roosevelt, J., in the case of Kernochan v. The Bowery Insurance Company, the plaintiff, at the time of the fire, had an insurable interest in the premises to the extent of only $1,500, the amount of the then unpaid note given for the purchase money. Upon the foregoing grounds the defendants are entitled to judgment.
Daniel Lord, for plaintiff, (respondent.)
The statement of the facts is in the finding of the Judge.
The law of the case is covered by the decision in Kernochan v. The Bowery Insurance Company, in the opinion concurred in by the five Judges. (17 N. Y. R., 428.)
I. At the time of the insurance, (February 5, 1856,) of the fire, (September 27, 1856,) and after this action was brought, (March 21, 1857,) and until the delivery of a deed for the land, (June 17, 1857,) the plaintiff owned the property.
She was, under a contract of May 12, 1855, to convey the property upon certain payments being made, the last falling due in May, 1857, (after this suit was brought,) and in the meantime to effect insurance to apply in case of loss, as a payment on the contract, the contracting purchaser paying her the premium.
The agreement to keep insured was part of the contract to sell, and the defendants cannot set up a part without taking the whole.
But as collateral to the sale and to the insurance, it was admissible in evidence. (17 N. Y. R., 435.)
2. This ownership was the legal title and full insurable interest in the property; it was not an insurance of the contract debt, but of the property. (17 N. Y. R., 435; Reed v. Cole, 3 Burr. R., 1512; Oliver v. Greene, 3 Mass. R., 133.)
3. It was not a trust estate, held for the purchaser, although he had remedies at his option analogous to those of a cestui que trust. He had the option of a specific performance of his contract, or to sue at law for the non-performance by the contracting vendor, if she refused to convey or to keep insured, and could recover in money. The plaintiff was, in equity, in a position identical with that of a mortgagee; and the case of Kemochan is therefore in point.
II. Under a policy in general terms on a building, all interests, general or special, are covered, unless the defendants make inquiry and are deceived. (17 N. Y. R., 437; opinion of Nelson, J., 12 Wend. R., 512; affirmed, 16 Wend. R., 392.)
III. There is nothing for the insurers to claim by subrogation ; for the insurance money was to go and pay the contract price, and to the benefit of the contracting purchaser. (17 N. Y. R., 436.)
IV. The payment and deed in June, 1857, after action brought, cannot be given in evidence to defeat the action as to form. (McKyring v. Bull, 16 N. Y. R., 297.)
2 Nor do they bar the plaintiff to recover the insurance under the agreement with the contractor.
V. 1. All the objections to the preliminary proofs fail, unless the defendants can contradict the above points of the plaintiff.
2. There is no evidence of any objection to their sufficiency when delivered, or at any other time since. (17 N. Y. R., 433.)

Opinion:
By the Court—Hoffman, J.
Previous to the fire causing the damage for which the action is brought, the plaintiff (the assured) had entered into a contract with Strohecker, which was so far executed as, according to the settled doctrine of a court of equity, to make the latter the owner of the property, entitled to its profits, liable for impositions upon it, and subject to any loss which might fall upon it by fire or otherwise. He had gone into possession. He could have been compelled to pay the balance of his purchase money, notwithstanding the destruction of the property. In short, he was the absolute equitable owner in possession, and entitled to the legal title upon payment of $1,500, the unpaid purchase money. (McLaren v. The Hartford Fire Co., 1 Seld., 151.)
By a condition of the Policy, " in case of any transfer or termination of the interest of the insured, either by sale or otherwise, without such consent," (the consent of the insurers, manifested in writing,) "this Policy shall from thenceforth be void and of none effect." Again, " the interest of the assured in the policy is assignable, provided the consent of the Company be first obtained to the transfer."
The transfer, by sale or otherwise, indicated in the first clause, is the transfer of the property and the plaintiff's interest therein; and the object and effect of this and similar conditions is forcibly stated in the late case of The State Mutual Insurance Company v. Roberts. (31 Penn. R., 438.) "The safety of the insurer is dependent much upon the character of the assured—not alone upon his integrity and good faith, but upon his habits of carefulness, prudence and vigilance. It is not the purpose to stipulate for a new contract with the assignee. It is designed, rather, to afford substantial protection to the underwriters, by enabling them to preserve, during the continuance of the risk, the safeguards which existed at its origin—those found in the honesty and watchfulness of the assured."
There are several cases, some in our own Courts, which bear upon the question.
In Conover v. The Mutual Insurance Company of Albany, (3 Denio, 254, and 1 Comst., 290, on appeal,) the clause of the charter, " whenever any property insured by this corporation shall be alienated by sale or otherwise, the Policy shall be void," &e., was considered. It was held that a mortgage creating only á lien upon the land was not a violation of the provision. The Company had also given a consent to the assignment of the Policy to the proposed mortgagee. The Judges speak of the alienation mentioned in the act as being an absolute transfer of the title to the property.
In Masters v. The Madison County Mutual Insurance Company, (11 Barb., 624,) the Policy was executed on the 8th of June, 1848, in favor of the plaintiff, for five years. The Policy was subject to the 7th section of the act of incorporation, " that, where any property insured shall be alienated by sale or otherwise, the Policy should thereupon be void." On the 15th of March, 1850, a written contract was made by the plaintiff with one Hicks to sell and convey the premises to him, and give him a good deed by the 1st of September ensuing. Hicks was to pay $3,250— $500 to be paid on the 1st of September, and the balance in annual installments of $200 each, to be secured by bond and mortgage. Hicks was given immediate possession, but there was a stipulation that, upon any default in the payments, he was to yield up possession and forfeit the contract.
On the 19th of July, 1850, the property was destroyed by fire. It did not appear that payment had been made of the $500 payable the 1st of September, nor anything else done to carry out the contract. It was held that there was no alienation within the provision of the Policy, so as to defeat the plaintiff's right to recover.
Hodges v. The Tennessee Marine and Fire Insurance Company, (4 Seld., 416,) amounts to this: That where the assured was the owner in fee at the date of the Policy, and made a deed absolute on its face, but proven (by parol testimony even, there held admissible) to be intended simply as a mortgage, an assignment of the Policy to the mortgagee, with the assent of the Company, entitled the assignee to recover. There is nothing to indicate that the mortgagee went into' possession. The assured retained an insurable interest' at the time of the loss, viz., the equity of redemption. In fact, he remained the owner as to the question of interest in the premises, and the mortgagee had become, with the assent of the insurers, assignee of the Policy, and entitled thereby to recover the amount of the loss.
In Hooper v. The Hudson Fire Insurance Company. (15 Barb., 413, and, on appeal,. 17 N. Y. R., 424,) the Policy contained the same provision as in the present case. The Policy would expire the 18th of March, 1853. On the 21st of June the stock covered by the insurance was sold under execution, and the plaintiff became the purchaser. On that day he applied for and obtained a consent of the Company to the assignment of the policy to him,, without disclosing what interest he possessed. The assignment was made on the 30th of June, and on the 1st of July, 1852,. a portion of the property was destroyed by fire.
These positions were held by the Court of AppealsAfter the sale, and before the assignment of the Policy,, no- recovery could have been had, not because the Pblicy had become void,, but because the insured had suffered no loss, and the owners of the goods (the purchasers, it is presumed) had no claim, for they had no interest in the Policy. The Policy, however, was not extinct, and, being assigned with the Company's assent, it reattached to the goods.
The proposition of Judge Barculo, in Tillou v. The Kingston Mutual Insurance Company, is recognized in The Buffalo Steam Engine Works v. The Sun Mutual Insurance Company, (17 N. Y. R., 412,) that a transfer of one joint owner to his coo'wner was not within the prohibition of the P'olicy. (Wilson v. The Genesee Mutual Insurance Company, 16 Barb., 511.)
In Dey v. The Poughkeepsie Mutual Insurance Company, (23 Barb., 623,) a transfér of the interest of one of' the parties to the Policy to the other party, and a stranger, by way of general assignment for creditors, was held to be "within an interdiction in the Policy similar- to this. The object of the provision was to protect the Company from controversies- with strangers, or persons other than those with whom they have contracted.
In McLaren v. The Hartford Fire Insurance Company, (1 Seld., 151,) insurance was made by the plaintiff' with the defendant on the 17th of January, 1843, for one year. R. H. Gumming held two mortgages on the premises. He obtained a decree of foreclosure, and the property was sold on the 6th of September, 1843, and purchased by Quackenbush. He paid the deposit required by the terms. Of the purchase money, $12,000 was to be secured by bond and mortgage, and the balance paid on the 1st of October ensuing, or as soon as the decree of sale should be enrolled, when the master's deed would'be ready for delivery. The purchaser was- to- keep.- the premises insured, and to assign the Policies to protect the mortgagee. A fire occurred on the 11th of October. The decree was not enrolled until the 6th of November, and the deed was then delivered. The Policy con- , tained the usual clause, that in case of any transfer or change "of title in the property insured, the insurance should be void."
The Court held, " that the sale under the decree vested a com- ' píete equitable title in the vendee to the mortgaged premises." It was apparent that the transfer of the ownership of the mortgaged premises was within the spirit of the condition of the Policy. Foot, J., said: "Although the naked title may not vest in the purchaser till the deed be given, yet the whole right and interest passes to him immediately on the sale, and he becomes thenceforth the owner. By a decision of the Supreme Court made in 1843, and afterwards affirmed by the Court of Appeals, the master's sale passed the interest of the parties presently, and the deed when given related back to the time of sale."
It is of consequence to notice that, in this case, the Policy had been assigned to Gumming to secure payment of the mortgages held by him exceeding the amount insured.
The Court also say, that whether the conclusion they had before stated was so or not, McLaren could not recover without showing a valuable interest in the subject insured.
It is clear that it was considered that his valuable and insurable interest had been extinguished and divested by the sale.
Some authorities in other States may be usefully referred to.
In Powers v. The Ocean Insurance Company, (19 La. R., 28,) under a similar clause, it was held, that where there was a sale and possession, and the property reverted by reason of unpaid purchase money, the Policy was suspended during the possession of the intended purchaser, and revived on the property reverting to the vendor, and possession held by him at the time of the loss.
So in Trumbull v. The Portage County Mutual Insurance Company, (12 Ohio, 305,) it was decided that an agreement for a sale, and part payment of the purchase money, was not a breach of such a condition where the assured remained in possession, and no conveyance was made.
In Norcross v. The Insurance Companies, (17 Penn. R., 429,) the vendee of goods received part of the price, and remained in possession at the time of the loss. He was held to be covered by a Policy made with him before the sale for so much as remained unpaid.
Upon a careful consideration of these authorities, we do not find that an executory contract of the nature of that in question, even when it creates an equitable title, and the intended purchaser is let into possession, is a breach of such a provision of a Policy against alienation without consent, as we find in this case. The mere fact of a change of possession would seem to apply to a lease or mere tenancy, as well as to the present case.
2. The case is then to be considered upon the theory that the contract in question, executed as it was, does not amount to a violation of that prohibition. . .
To my mind, it is clear that the plaintiff could not recover moré than the unpaid purchase money due when the action was commenced.
There must be an insurable interest, not only at the date of. the Policy, but at the time of the loss, to entitle the plaintiff to recover. The plaintiff, although he continued vested with the legal title, retained nothing of an insurable interest in the property, but for the unpaid purchase money. We may treat this interest as continuing. The Policy remained in force pro tanto. By the successive payments, the original entire right in the subject has been abridged and parted with, and the insurable interest diminished. (3 Denio, 305.)
Again: Strohecker obtained, after the contract and possession; an insurable interest in the property, not merely commensurate with his payments as successively made, but for the full value. His actual payments, his liability for the balance, and his title as equitable owner, gave him this right. (The Ætna Ins. Co. v. Tyler, 12 Wend., 507; 16 Wend., 385; McGivney v. The Phoenix Fire Ins. Co., 1 Wend., 85.)
Strohecker, in his own right and as purchaser of the premises, cannot claim the slightest interest in the present Policy. The rights and relations between the plaintiff and defendants cannot, in any mode, directly or indirectly, be affected by anything done or contracted between the plaintiff and him without the Company's assent. So far as the present case is concerned, the rule remains, as I think, in its absolute force, that "aPolicy of insurance, before a loss, is a chose in action, which is not assignable so as to pass the legal interest." (3 Denio, 305; 17 N. Y. R., 424.) It constitutes a personal contract between the assured and insurers, in.which three great elements are conspicuous and controlling: an insurable interest in the subject at the time of the loss; a continuing title in the Policy at that time, which will enable the insurers to measure and terminate their liability by dealing with him alone, or in reference to him alone; and the due observance of all the conditions and stipulations of the Policy. To allow that Strohecker got a right which enables the plaintiff to recover any of the insurance money for his benefit, beyond the extent of their own interest, is to make the defendants partially his insurers; to assume the risk of his possible heedlessness or dishonesty, when they had provided for the advantage of the plaintiff's prudence and integrity. And it may be observed that the reasoning which sanctions the retention of an insurable interest in the plaintiff for unpaid purchase money, is wholly insufficient to warrant an implied transfer of an interest in the policy to Strohecker for any indemnity to him.
I do not think that anything in the cases of Benjamin v. The Saratoga County Mutual Insurance Company, (17 N. Y. R., 415,) or Kernochan v. The New York Bowery Fire Insurance Company, (id., 429,) conflicts with the view I have thus taken. In the former, the mortgagee obtained an insurance as agent of the owners, and apprised the Company of his interest. He foreclosed and became the purchaser, and agreed to convey to Brainard; then the Company agreed that the policy should continue in force until the title was perfected in Brainard, the vendee, he agreeing to pay the premiums, of which the defendants had notice. " The fair interpretation of the agreement, that the policy should continue valid until the title should be perfected in Brainard, is, that the indemnity should inure to the benefit of Brainard as well as of the plaintiff. To the extent of his equitable interest in the property, the plaintiff is to be regarded as holding the Policy in trust for him."
The other case seems also distinguishable on various grounds.
When an insurance is made expressly with a mortgagee, the insurer is apprised of the existence of a mortgagor, who he is bound to know is the actual owner, and it may be a presumption that an actual owner is in possession.
Again: The clauses as to a consent for the assignment of the policy, or to an alienation, did not come into consideration in that case.' The bearing of such provisions upon the present case, in any view, has been already stated fully.
The contract was with the mortgagee, explicit and absolute, without regard to the sufficiency of the bond or solvency of the debtor. He had an insurable interest in the property to the amount of the policy, because his interest or his debt exceeded or equaled it. It was an insurance of the property, not of his demand. The Company merely altered a former Policy in favor of Kernochan, by adding the word "mortgagee."-
The view thus taken involves the result that the judgment was wrong in allowing more than $1,500, the unpaid purchase money, omitting for the present the consideration that this sum has been paid since the action was commenced.
The counsel for the defendants insists, that had they paid that amount, they would have been entitled to resort to Strohecker to recover the unpaid balance from him, upon the doctrine of subrogation.
This rule of subrogation rests upon the foundation of a clear natural equity, and can only exist when it is just, both that the party claiming it should be indemnified, and that the party against whom it is asserted should answer the demand.
When a surety pays the debt, both of these requisites exist. When an underwriter pays a general average, this is equally the case. (16 Wend., 398.) When, as in The Quebec Fire Insurance Company v. St. Louis, (7 Moore's Pr. Coun. C., 236,) the insurers pay a demand covered by the policy, for which an action could have been sustained against others, whose wrong caused the loss, the rule in its full extent is justly observed.
The French writers are full of disquisitions upon this subject.
In supposed analogy to the rule in marine insurances, the question has been raised and much discussed, whether the insurer against fire, who has paid a loss to the assured, is entitled to all the actions he possessed against tenants, neighbors, &c., under article 1733 of the Code.
The question is presented in two forms: one whether the right of subrogation exists absolutely without agreement or cession, (de plein droit:) the other, when the assured has stipulated to cede, or has actually ceded, such rights.
Article 1733 of the Code gave a right of action to the owner against the tenant for damage caused by fire, unless it arose from inevitable accident, superior force, fault of construction, or was communicated from a neighboring building.
Against an incendiary, or the neighbor in whose building a fire has originated through his fault or negligence, all the writers agree that there is a right of subrogation upon a principle of equity, and the insurer succeeds to the privileges of the assured, The reasoning of M. Pardessus on this point is admitted universally. (Alauzet Traite Des Assurances, tom. 2, arts. 477, 478.)
But it seems to be equally settled that, as between the tenant, responsible under the article of the Code before cited, and the insurer, there is no such right of subrogation given as matter of law:
. The contested point appears to have been, whether the insurer could lawfully stipulate in his policy for the acquisition or cession to him of this right against a tenant. (Grun & Folliat Des Assurances Terrestres, art. 296.)
The discussion of this point is very interesting, and the strength of the argument is, in my judgment, with those who deem such stipulations void. The liability of the tenant is by force of a rigorous law, which great views of public policy dictated, but is often harsh and inequitable in its application. It is a purely personal liability to the owner. There is no mutual engagement of the tenant with the insurer, or joint contract with the creditor. They are strangers to each other. The tenant is no more primarily responsible than the insurer, and, in an equitable view, is less so. The contract of insurance has its full effect between the parties by payment of the damage, and cannot survive to assume a new face against a third person.
It appears, however,.that a decision was given by the Tribunal of Montdidier, and affirmed on appeal by the Court of Amiens, supporting such stipulations, and sustaining an action by the insurers against the owner of an adjoining house in which the fire originated. (Grun & Folliat, p. 247, n.)
Even in this view of the law, we find a substantial distinction between the rule there stated and the present case. The insurer makes it part of his contract that he shall have these privileges, and in that view undertakes the risk and graduates his premium. There was no such, stipulation here. The precepts of equity, so far from approving such a substitution, are hostile to it. " It would add to the affliction of one, already an innocent victim of misfortune."
The result is, that the defendants had no right to a subrogation had they paid the $1,500 upon the commencement of the suit.
3. One question remains, viz.: the effect of the payment, during the pendency of the action, of the $1,500, the amount of the purchase money unpaid at its commencement.
It seems to me that the following considerations may dispose of this point. It is perfectly equitable that, as between the plaintiff and Strokecker, the insurance money should goto the latter. Had the Policy been assigned to him after the loss, and before the suit, he could have brought the action in his own name. (Mellen v. The Hamilton Fire Insurance Company, 5 Duer, 101; 17 N. Y. R., 609.) On payment of the note to the plaintiff he could have required an actual assignment of the Policy, and recovered the amount of the insurable interest which the plaintiff had at the time of the loss and institution of the suit. By the agreement between him and the plaintiff, she was to keep the property insured for his benefit; and it is in evidence that he paid the last premium to the plaintiff, which she paid to the defendants in February, 1856, and which continued the Policy in force to the time of the loss. We think that the payment of the remaining debt during suit, coupled with the agreement and payment of the premium, has operated as a virtual equitable assignment of the plaintiff's interest in the Policy; and as she had a clear right of action at its commencement, we see no reason why the Court should act upon proof of such payment, not even brought before it by any pleading, to defeat what is a just demand against the Company.
The result is, that the judgment must be reversed, and a new trial ordered, with costs to abide the event, unless the plaintiff-consents to a reduction of the amount so as that the judgment shall stand for $1,500, with interest from the 2d of February,
1857, being sixty days after the 4th of December, 1856. If the plaintiff so consent, the judgment will be affirmed for the reduced amount, and reversed as to the residue.
Ordered accordingly.