Case Name: John Hutzler, Respondent, v. Julius Richter and Pauline Richter, his Wife, Appellants
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1897-01
Citations: 13 A.D. 592
Docket Number: 
Parties: John Hutzler, Respondent, v. Julius Richter and Pauline Richter, his Wife, Appellants.
Judges: 
Reporter: Appellate Division Reports
Volume: 13
Pages: 592–599

Head Matter:
John Hutzler, Respondent, v. Julius Richter and Pauline Richter, his Wife, Appellants.
Agreement by-a mortgagee to have a policy transferred—right of the mortgagor, on his failure to do so, to offset its amount—such oral agreement is not merged in the mortgage.
Proof of an independent contemporaneous oral contract, although relating to the same subject-matter as a written contract, does not violate the rule that paroi evidence is not admissible to explain, vary or contradict a written instrument.
Upon the sale of certain premises, the grantor took back a bondi and mortgage containing a covenant that the mortgagors would keep the premises insured for the benefit of the mortgagee, in a sum of not less than §700. At the time of the conveyance, the grantor, as an inducement to the grantees to make the’ purchase, verbally agreed to procure the transfer to the grantees, as owners, of a policy of insurance which he held for §700 on buildings on the mortgaged premises, and to have the policy made payable to him as mortgagee, ibsequently, .the buildings upon the mortgaged premises were destroyed by fire, and the mortgagors then, for the first time, learned that the mortgagee had neglected to procure the transfer of the policy, and that, consequently, the insurance company was not-liable thereunder.
In an action to foreclose the mortgage, it was
Held, that the agreement to procure the transfer of the policy of insurance was a ■ collateral contract, independent of and distinct from the covenant to insure contained in the bond and mortgage, and that; consequently, paroi proof of such agreement was admissible;
That such agreement was not only supported by an adequate consideration, but was one which was also capable of absolute fulfillment without interfering with the obligation under which the mortgagors rested to make good, the covenant contained in their mortgage;
That an independent action would lie by the mortgagors for the breach of the verbal contract, and that, therefore, the damages occasioned by the breach were a proper subject of recoupment in the foreclosure action.
Green, J., dissented.
Appeal by the defendants, Julius Richter and another, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Erie on the 13th day of Hay, 1896, upon the decision of the court rendered after a trial at the Erie Special Term directing a foreclosure and sale of certain premises described in the complaint.
This action was brought by the plaintiff to foreclose a mortgage given by the defendants to secure the payment to him of the sum of §800, with interest thereon.
An answer was interposed to the plaintiff’s complaint, and the issues raised thereby were tried by the court without a jury. Upon such trial the facts found by the trial court were undisputed, and they are substantially as follows:
Upon the 18-th day of October, 1893, the plaintiff, being then the owner in. fee of the premises described in the complaint, conveyed the same to the defendants for the sum of §1,200, §400 of which sum was paid in cash, and the remainder was secured by the bond and mortgage in suit, which instruments contained a provision to the effect that the whole sum of principal and interest secured thereby should, at the plaintiff’s option, become due and payable at the expiration of thirty days after any default in the payment of any portion of the principal or interest which might become due thereon, and the further provision that the mortgagors should keep the buildings on the premises, described in the mortgage, insured against loss or damage by tire for the benefit of the mortgagee in a sum of not less than §700.
At the time of the conveyance of the premises to the defendants the plaintiff was the owner of a policy of insurance upon the buildings standing thereon, issued by the Erie County Mutual Insurance Company, which policy was so issued upon the 26th day of August, 1892, for the term of three years, and insured such buildings against loss or damage by fire in the sum of $700. As an inducement to the defendants to purchase the premises, and as a part consideration for such purchase, the plaintiff verbally agreed to have- this policy of insurance transferred to the defendants, as owners-, and made payable to him, as mortgagee, he to retain possession of such policy until his mortgage was paid.
It is further found that the insurance company which issued the policy would have consented to a transfer of the same- to the defendants, -as owners, and made it payable to the plaintiff, as mortgagee, had the latter presented the sanie to it for that purpose.
That the defendants, relying upon the verbal promise of the plaintiff, did not procure any insurance upon, the buildings upon the premises purchased by them. •
That thereafter, and on the 6th day of April, 1895, the buildings upon the premises were totally destroyed by fire, without any fault or negligence of the defendants, and that they, were'worth not less than $750.
That,a few days after the fire the defendants learned from the plaintiff, for the first time, that he had omitted to have the policy of insurance transferred to them, and that for this reason, by the terms of the policy, the insurance company had been relieved from any. liability thereunder, ■
That thereafter, and on the 28th da'y of May, 1.895, the defendants tendered to the plaintiff the sum of $110, which was the amount-then due and payable of principal and interest upon the bond and mortgage in suit, over and above the $700 covered by the policy of insurance, which tender the plaintiff refused to accept, and that the money so tendered has since been kept good.-
Clpon these facts the learned trial -court held, as matter of law, that the written agreements of the parties, as contained in the bond and mortgage, superseded the verbal agreement to tiansferthe policy of insurance, and rendered the same of no force or effect. An exception was duly taken to the decision of the trial court, and from the judgment subseauently entered this appeal is brought.
Henry W. Brendel, for the appellants.
W. C. Miner, for the respondent.

Opinion:
Adams, J.:
The decision of the learned trial court was manifestly made to rest upon the assumption that the verbal agreement established by the evidence, if given any force or effect, would conflict, with the rule which prohibits paroi evidence to explain, vary or contradict a written instrument, and if such was the necessary result of investing that agreement with validity, the court was undoubtedly correct in .its conclusion.
The rule adverted to is one which, while subject to modification in cases where fraud or injustice are attempted, as where it may be shown by paroi that an instrument is not what it purports to be, or in another class of cases, where an instrument obviously incomplete in itself, may be rendered complete and efficient by resort to paroi proof, is, nevertheless, one which, in its essential features, has been long applied and is still preserved in its integrity by the courts of this State.
The opinions in the case of Thomas v. Scutt (52 Hun, 343; S. C. affd., 127 N.Y. 133) may be referred to as containing an exhaustive and instructive statement of the principle "which lies at the foundation of this rule, as well as of the circumstances which will warrant any departure from its strict enforcement; and a careful examination of that case will also, as we think, make it perfectly •clear that the rule adopted by the trial court has really no application to the case now under consideration; for the covenant to insure, which is written into the mortgage in suit, is one which, upon its face, leaves nothing to be supplied in order to render it complete and entire; nor can it be claimed that it is not precisely what it purports to be; and, in our view of the matter, its terms and requirements will be .in no sense varied or contradicted if full effect be given to the agreement which was not reduced to writing.
If, then, the verbal agreement does not conflict with, and is not merged into, the written one, obviously the principle upon which it must be sustained, if at all, is that it constitutes a collateral contract, separate and distinct from the one which is contained in the mortgage, it being well settled that proof of an independent, contemporaneous oral contract, even though it relates to the same subject-matter, in no manner violates the rule we have been considering. (Tayl. Ev. § 1038-1040; Batterman v. Pierce, 3 Hill, 171; Lewis v. Seabury, 74 N. Y. 409; Thomas v. Scutt, supra.)
Let us endeavor, therefore, to determine from the established facts of this case whether these-two agreements are to be treated as dependent or independent contracts.
When the defendants purchased the premises in question of the plaintiff, they also, it seems, purchased something else of value, which was a policy of insurance for $700, having nearly two years to run. And the plaintiff agreed that if the defendants would pay him his price for the land he would let them have this policy, and would, moreover, see that it was properly transferred to them, so that they could have the full benefit thereof. Here, then, were all the essentials of a valid contract, and in-reliance thereon, the defendants made their purchase, - paid a portion of the purchase price in cash, and secured the remainder by their bond and mortgage, in which they agreed, by way of additional security, to keep the buildings upon the premises insured in the amount of $700.
This contract of insurance does not provide how the insurance indemnity is to be furnished, whether by means of a separate policy or the one already existing, which' the plaintiff was to retain in his hands until the mortgage was paid. In either event the condition would have been fulfilled, and had the defendants procured another policy in a different company for the like amount, they would unquestionably have had the right to avail themselves of whatever benefit might accrue to them-from the ownership of the policy which the plaintiff sold to them: They could have retained it for what it was worth by way of additional insurance, or they could have surrendered it and obtained whatever rebate they were entitled to receive thereunder.
.This fact alone would seem to furnish a complete demonstration of the correctness of the idea we are seeking to develop, which is that the verbal contract was not only supported by an adequate consideration, but it was one which was also capable of absolute fulfillment, without interfering with the obligation under which the defendants rested to make good the covenant contained in their mortgage. It follows, therefore, that it was a distinct and independent agreement for the'breach of which some redress should be afforded, and when we come to consider the remedy available to the defendants, we are furnished with still another test by which the principal question in this case may possibly be. determined:
The plaintiff seeks by this action to foreclose his mortgage, claiming a certain amount to be due thereon, and this is not denied by . the defendants. That is, they do not claim to have paid anything upon the mortgage beyond what the plaintiff concedes has been jiaid, but they do insist that they have been damaged by the plaintiff's breach of the contract made contemporaneously with then-mortgage and growing out of the same transaction, in consequence of which they ask to recoup such damage and to have the same applied in liquidation of the amount due upon the mortgage.
If' we are correct in the view which we take of this case, the plaintiff's failure to secure to the defendants the benefits of the policy which he had sold to them constituted a breach of his contract, for which a separate action would lie. And this being the case, we fail to see why the damage occasioned by such breach, whatever it may prove to be, is not the proper subject of recoupment in this action. (Batterman v. Pierce, supra; Van Brunt v. Day, 81 N. Y. 251; Acer v. Hotchkiss, 97 id. 395.)
The judgment appealed from should be reversed and a new trial granted, with costs to abide the event
All concurred, except Gbeen, J., dissenting.