Case Name: Arctus Trumbull and others v. The Portage County Mutual Insurance Company
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1843-12
Citations: 12 Ohio 305
Docket Number: 
Parties: *Arctus Trumbull and others v. The Portage County Mutual Insurance Company.
Judges: 
Reporter: Cases decided in the supreme court of ohio : upon the circuit at the special sessions in Columbus
Volume: 12
Pages: 306–315

Head Matter:
*Arctus Trumbull and others v. The Portage County Mutual Insurance Company.
Where the assured has contracted to convey the assured premises at a future day, on payment of the purchase money, and, between the date of the contract and the day of payment, the premises are destroyed by fire, this is not such an alienation as would defeat the policy.
That the plaintiffs had an insurable interest, and the legal title, and an equity equal to the purchase money, or the whole value of the premises; and, being in possession, they might recover upon the policy.
This is an Action of Covenant, from Portage county, upon a policy of insurance, and was submitted to the court upon the following agreed statement of facts:
“ In this case it is admitted that the policy of insurance issued to Luther Trumbull, and that the loss occurred as stated in the declaration. That said loss occurred on the 22d day of February, 1843, and the requisite steps were immediately taken by the plaintiffs to notify and charge the insurers ; that all requisite proofs can be made by the plaintiffs, and that they are entitled to recover the amount named in the policy, as insured upon the buildings and machinery, with interest from the 1st day of June, 1843, unless the contract entered into by the plaintiffs, with Robert Wilson, deprive them of the right to recover to this extent. It is further agreed, that the stock and machinery were about of equal value, fifteen hundred dollars each. It is admitted that Lucy Trumbull is the widow of said Luther Trumbull, and that the plaintiffs are his heirs at law. That, on the 23d day of .January, 1843, a contract was entered into with said Robert Wilson, by the plaintiffs, for the sale, to him, of a certain tract of land, upon which the insured premises were situated, but that said premises remained in the possession of the plaintiffs up to the time of the fire. It is further agreed, that said Wilson is still living, put has paid nothing upon said contract, and has done nothing towards its fulfillment. That if the plaintiffs shall not recover more than two ^hundred dol- [306 lars, with interest from the first day of June, aforesaid, they shall ■not recover costs.”
Peter Hitchcock, R. Hitchcock, and Wilder, for plaintiffs.
We are not aware that there will, or can be, any great controversy as to the general principles of law applicable to the case. We are free to admit that a person talcing an assurance against fire must have-an interest in the property insured, and that this interest must continue until the loss happens. In other words, if the insured sells or-disposes of his interest in the thing insured, and, subsequently, that thing is destroyed by fire, he can recover nothing upon his policy. The reason is obvious. If he has no interest in the property destroyed, he sustains no loss by its destruction ; and it is only against loss that he is insured. It is not necessary, however, that the insured' should be the absolute owner of the property ; it will be sufficient if he have a qualified interest in it. In case of the. sale of property insured, the policy itself may be assigned to the purchaser ; and if this be done with the assent of the insurers, they will be holden for any loss which may subsequently happen.
But, although an absolute sale of the property, by the insured, would discharge the insurers from any subsequent liability upon the policy, still, we do not apprehend that every change in its situation would have this effect. As if, for instance, the insured should mortgage the property to secure the payment of a debt, or should lease it, or should agree to sell it. In either of these eases, we suppose, the insurers would still be liable, for the insured would still have an insurable interest in the property. And we suppose that so long as such insurable interest remains, the liability of the insurers continues.
The defendants, aware of the principle that when the insured parts with his interest the binding force of the policy ceases, and feeling the impropriety of compelling any person, to whom they would be no 307] longer liable for losses, to contribute *to their funds, have made provision whereby any person insured, and having disposed of the property insured, may eekse to be a member of the company. In the-fourth article of their bylaws, attached to the policy, we find the following : “ Whenever any member of this company shall alienate, or sell, any house or building insured, he shall surrender his policy to the secretary, with a request, signed by him, to have the same canceled, with a certificate of the recorder of deeds, or the agent of said-company, in his vicinity, or of some other person, under oath, of the fact, and the secretary shall deliver the same to the directors, to be canceled, and shall enter the same of record as canceled, to take effect from the day the same shall be received by the secretary. And in ease one building only is alienated or sold, where others are contained in the same policy, said policy may be surrendered as to that building only, and to take effect on the day it shall be received by the- secretary ; and the amount of the premium on the building so sold, shall be indorsed, after thirtj days from the day of surrender, on said member’s premium note, or such portion thereof as shall not have been paid or expended; provided further, that whenever the grantee, or alienee, shall procure an assignment and transfer of a policy, when he shall have purchased the whole property insured, and shall, within thirty days of the day he purchased the same, forward the said assignment and poli'cy to the secretary, he may have the same ratified and confirmed to him ; and when said assignment shall be approved by a director, the secretary shad record the same, and the confirmation thereof, by order of said director, when said grantee, or alienee, shall have given satisfactory security for the payment of the residue of the premium note given for said policy.”
The alienation or sale here spoken of is unquestionably the counter part of that alienation or sale which would exonerate the company from any further liability on the policy. And what description of' sale is it ? Unquestionably such sale as changes the ownership of the property, and vests the entire interest in the purchaser — a sale which may be proven by *the certificate of the recorder of the county. [308 Of course it must be a sale by deed, and by deed absolute. A mere mortgage of the property for the security of a debt ; a mere contract to sell and convey at a future period would not entitle the insured to have his premium note surrendered or canceled. This privilege is, manifestly, intended to be extended to those, and those only, who cease to have an insurable interest in the property insured. In such-case the company would be no further liable, and, of course, it would be right and proper that the insured himself should be no further liable.
As before remarked, it seems to us that the decision of this case must depend upon the construction which the court shall give to the written agreement which is made a part of the agreed case. If the court shall hold this to be evidence of the absolute sale of the buildings — as evidence that the plaintiffs were divested of all insurable interest in the same, then, so far as the buildings are concerned, the plaintiffs can not recover. But if, on the other hand, this is a mere contract to sell, and not a sale — if by it the plaintiffs were not divested of their interest in the property, but still retained an interest which might be insured — if, in fact, they actually sustained, or could sustain,, a loss by the destruction of the buildings, then, it seems to us, our right of action is complete, and we are entitled to a judgment for the whole amount insured.
It seems to us, that, if ever there was an instrument of writing -which would be construed as a mere agreement to sell property, this is one. It is drawn with peculiar care to secure to the vendors an interest in the property, until full payment should be made by the vendee. And if payments were not punctually made, then the contract was to have no further binding force ; it was to be considered as null and void. Time is, in fact, made of the essence of the contract. Such being the ease, we can not see with what propriety the defendants can resist this claim, or how they can sustain the position, that the plaintiffs had no interest in the proporty insured, at the time of its destruction by fire. They were in possession ; they were the owners in fee 809] simple; the property was unincumbered, ^except that the plaintiffs had given to Wilson a contract, by which they agreed to convey to him, at a future period, provided he made payments as therein stipulated. If he did not make such payments, the whole contract was to be void, and of no effect.
E. Wade, for defendants.
The defendants deny the plaintiffs’ right to recover the insurance money, upon the buildings and machinery, for the following reasons, viz.
First : Because the sale by the contract, independently of the provision in the twelfth section of the charter, divested the lien of the company, upon the insured premises, for the premium note, and being a voluntary act of the plaintiffs, to the injury of the defendants, takes from the plaintiffs the right to recover upon the policy.
Second ; Because the contract of sale, made by the plaintiffs, to Wilson, is such an alienation of the insured property as was contemplated by the twelfth section of the charter, and, consequently, makes the policy, on which the suit is brought, void.
Upon the first point I would remark that the contract of insurance is a personal contract of indemnity, and it does not differ “ from a bond of indemnity, or a guaranty of a debt, since the obligor, or guarantor, takes upon himself certain risks, to which the obligee or creditor would otherwise be. exposed.” 1 Philip’s Institutes, 2. This being the nature of the contract of insurance, it follows, that whenever the •creditor, guaranty, or insured, does any act by which the liability of the surety, guarantor, or insurer is ineresed, or his means of indemnification for losses are diminished or destroyed, the contract of suretyship, •guaranty, or insurance, is at an end. To the first part of this proposition, the authorities are too numerous to be cited. See Theobald, Prin. and Surety, 70, and the authorities cited. To the second part of the proposition, see Chitty on Contracts, 5 Am. Ed. 534. “ The negligent loss of, or injury to, collateral securities, held by the creditor, or a *fund in his hand, to the prejudice of the surety, will, under [310 circumstances, afford the surety ground for relief in equity.” And so it is at law. Baker v. Briggs, 8 Pick. 122, 128 ; Commonwealth v. Vanderslier, 8 Serg. and Rawle, 457 ; Lichtenthaler v. Thompson, 13 Ibid. 157 ; Hayes v. Ward, 4 Johns. Chancery, 129.
In the case before the court the insured premises in the hands of the plaintiffs were held as security for the defendants, to satisfy them for their undertaking to guaranty or insure the safety of the plaintiffs’ property; the plaintiffs standing in the light of principal, and the defendants as the sureties or guarantors, so far as this lien upon the insured property is concerned.
That this analogy between the insurers and sureties is not fancied, but real, will appear when we consider the right of the insurers to be subrogated, on payment of a loss, to all the rights of the insured, in the thing insured, or in its proceeds. Thus, when an insurance is effected b*y a mortgigee for his own benefit, in ease of loss and payment by the underwriters, they thereby become entitled to a proportional interest in the debt secured by the mortgage, in the nature of salvage. Robert v. Traders’ Insurance Company, 17 Wend. 631. So, where a vendor, by contract, effects an insurance on the premises sold, intending to secure himself against the insolvency of the vendee, in case of loss and payment, the insured are entitled to so much of the purchase money as is paid for insurance. Tyler v. Ætna Insurance Company, 16 Wend. 385 ; Atlantic Insurance Company v. Storrow, 5 Paige, 285.
This contract to Wilson was, in equity, a conveyance of the estate to him, and he was, and is, in equity, the owner of this property, subject to the lien of the plaintiffs for the unpaid purchase money. All risks of loss by fire or flood, or any other casualty, devolved on Wilson, from the time the contract was executed. No proposition in the law is clearer than this. Sugden Vendors, 278, at bottom, and 338, 339, at top ; Paine v. Miller, 6 Vesey, 349 ; 2 Story’s Equity, 96,. sec. 789 ; Columbian Insurance Company v. Lawrence, 1 Peters, 151.
*The interest of the plaintiffs in equity, after the contract, was [311 • but a mere lien for the purchase money. “ But there is a class of cases where the vendor retains a lien, notwithstanding he may have taken either personal or other collateral security. Where the title' /remains in the vendor, and the purchaser is in default for nonpayment of the whole or part of the purchase money, the vendor will not be compelled to part with his title until the purchase money is paid.” Williams v. Roberts, 5 Ohio, 35. Thus the plaintiff’s right in these premises, at the time of the loss, was but a mere lien for the purchase money, which Wilson could at any time discharge by complying with .his contract; and this right in Wilson wholly suspended the lien of the defendants for the premium note.
Before entering upon the discussion of the second point it may not be improper to state that the law is very clear, that, in ordinary policies of insurance, where the insured, as such, are not members of the company, and have no interest in, or knowledge of, its charter, or organization, the absolute transfer of the thing insured defeats the policy, as it is but a personal contract, and does not attach to the thing insured. Carroll v. Boston Marine Insurance Company, 8 Mass. 515.
But in reference to policies of this kind it has been decided, and would in all probability be held as good law, that where the vendor retains an interest in the thing sold, or holds a lien on it for the purchase money, the policy will cover such interest as the vendor retains in himself, and no more. Of this class is the case of Lazarus v. Commonwealth Insurance Company, 5 Pick. 76 ; Same case, 17 Ibid. 81 ; Etna Insurance Company v. Tyler, 16 Wend. 385, 397.
But because policies of that character are not void where the insurer sells, but retains an interest in the property, or a lien for the purchase money, it by no means follows that, in a mutual fire policy, like the present, under a charter and bylaws like those above specified, ■such a sale as the plaintiffs made to Wilson will not avoid the policy. The policy in this case being modified by all the provisions in the charter of the company renders it necessary to ascertain the true 312] meaning and *intent of the charter, in order to know the extent of the obligations imposed on the company by the policy of insurance.
But it is said that the plaintiffs retain a lien upon the land for the purchase money due by the contract to Wilson. So they do. And so they would have done had they made an absolute deed of conveyance to Wilson, of the same lands, and upon the same terms of payment as the contract, the terms being stated in the deed. 5 Ohio, 35. There is this difference only — that now the plaintiff’s can defeat Wilson’s right to the land by a deed to a bona fide purchaser, and in the other case, Wilson could have defeated the plaintiff’s right to the lands by •the like deed; and yet, in the case of the deed to Wilson, it would have been the identical case put by the plaintiffs for avoiding the policy. The rule of interpretation applicable to the present ease is this : “ A thing which is within the intention of the makers of the statute is as much within the statute as if it were within the letter ; and a thing which is within the letter of the statute is not within the statute unless it be within the intention of the makers, and such construction ought to be put upon it as does not suffer it to be eluded.” People v. The Utica Insurance Company, 15 Johns. 358, 381; Bacon’s Abridgt. Stat., I, 5, 10. On this principle, supposing the phrase to “ alienate by sale or otherwise” to be taken to refer literally to alienations by deed of bargain and sale, still, if alienations by contract were within the intention of the legislature, the charter should be so construed as to make the policy void.
I have found but two cases in the books upon mutual fire insurance policies, where the effect of a sale upon the policy came in question. The first is the case of Stetson v. Massachusetts Mutual Eire Insurance Company, 4 Mass. 330. In that case the plaintiffs, after the insurance, and before the loss, sold one half the house insured, reserving to himself an interest in the part sold, for seven years, and at the time of sale taking a mortgage to secure the purchase money for the half sold. At the time of the loss the house was occupied by a tenant of the insured, who paid him rent for the house.
*The 18th article of that company (but whether of its charter [313 or bylaws does not appear from the report,) provided, that “ when any building insured should be alienated by death, sale, or any other means, the insured, his, her or their representatives, may surrender his, her, or their policy, and receive a sum not exceeding their deposit money.” The twenty-third article provided, “ that a transfer of the policy should not operate as a discharge of the insured from his obligation to fulfill the conditions of the policy until the transfer should be entered in the books of the company.”
It will be observed that in that charter the insured, instead of giving a premium note, and making it a lien upon the insured premises, made a deposit of money with the company, to the amount of the premium required, and the articles did not make the policy void, as in the ca3e before the court, but only required it to be surrendered, on alienation, and made it optional with the company to receive the policy or refuse it. The court in that case held the policy, under the circumstances, binding, and Sewall, Judge, says : “ That the 18th article, especially if we connect it with the twenty-third section, imports a continuance of the contract, notwithstanding an alienation of the-premises insured It seems to have been the intent of the parties, that in this mutual insurance, although the insured is at liberty, upon an alienation, to surrender his policy or transfer, yet that his deposit and personal responsibility are retained by the company until a surrender or an acceptance of the assignee, by an entry in the transfer book of the company.” In the case before the court the whole interest was sold ; whereas, in that ease, hut half was sold. And so-far as that case is similar to the present, it is in favor of the defendants.
The other is that of Lane v. The Maine Mutual Fire Insurance Company, 3 Fairfield, 44. I have not access to the report of this case, and can only give the abstract of it from the .Treatise on Fire Insurance, 125. The insurance in that case was upon a store and stock of goods. A sale was made of the stock of goods, and a verbal lease of the store; but before the time of insurance had expired (and 314] it is presumed before *the loss,) the insured took back both the store and stock of goods. The charter of the company provided, that “whenever the property insured should be alienated by sale or otherwise, the policy should be void, etc.” The court held that the store was not alienated by the verbal lease; that it was only a tenancy at will; that the policy was intended to cover, and did cover, whatever goods the insured might have in his store at any one time, and that it made no difference whether he sold the goods all at once, or retailed them out in the course of trade, and renewed them as necessity required ; and they gave judgment for the plaintiffs. It does not appear, from the above very meagre abstract of the case, whether the charter of that company required the execution and deposit of premium notes by the assured, nor whether, if it did, they would operate as liens on the insured property. Upon the store no question of this nature would arise, as it was determined that a lease at will was not an alienation. The insurance of a stock of goods in a store, for a period of one or more years, must of necessity give the right to sell' and renew the stock. The question whether, under a charter which makes alienation a forfeiture of the policy, such a company could insure property, giving the right of alienation, was not discussed or decided. The ease is not an authority against the defendants.
I conclude, therefore, that from the reason of the thing — from a just construction of the charter of the company — and from authority,, so far as the same can be'found, the case is with the defendants.

Opinion:
Birchard, Judge.
This ease turns mainly on the question, whether the plaintiffs had an insurable interest in the premises insured at the time the loss occurred.
From the facts stated in the agreed case, it appears that they had. The legal title was in them, coupled with an equity equal to the full value of the premises, that is, a lien for all the purchase money, and they were in possession. They had entered into a contract to convey at a future day. At law, this contract did not transfer any right in the land; and in *equity, ths purchaser can only enforce a [315-transfer after he shall have laid a proper basis by paying the purchase money.
This being the case there was no alienation of the property which renders the defence, of a want of interest in the thing insured, valid. The plaintiffs have sustained a loss, covered by the policy, and it is-equal to the amount insured.
It is said, however, that inasmuch as the premises insured were pledged for the payment of the premium note, the contract to sell avoided the policy by impairing the lien of the company. We can not admit this. If the lien of the defendants is a legal one, the contract with Wilson certainly does not defeat or impair it; if only unequitable lien, it is equally certain that it is elder, and, therefore, better than the equity of Wilson growing out of the contract.
It is supposed that questions might be raised as between the parties- and Wilson; especially should Wilson pay up the purchase money, and demand a specific performance ; but it will be sufficient to determine them when they come before uS.
Judgment for plaintiffs.