Court Opinion

ID: 3596537
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:43:47.4802+00
Date Added: 2024-06-11T09:15:34.290497
License: Public Domain

This is an appeal by defendant Western Millers Mutual Fire Insurance Company from judgments entered upon orders of the Appellate Division, Third Department, affirming orders made at Special Term, Broome County, granting motions made by plaintiff Fields and defendant Lake, directing the dismissal of the counterclaim contained in the answer of said defendant company upon the ground that it failed to state facts sufficient to constitute a cause of action.
On this appeal we consider only the counterclaim contained in the answer of the defendant insurance company without reference to the complaint or the other portions of the defendant's answer.
The plaintiff Fields purchased a tractor from the Autocar Sales Service Co., Inc., hereinafter called Autocar. The company retained title to the automobile, payment for which was to be made under the terms of a conditional sale contract, in fifteen installments represented by promissory notes. The contract *Page 217 
and the notes were signed by Fields and also by one Lake, whose liability depends upon the same facts as does Fields' liability. The conditional sale contract provided that the purchaser Fields should forthwith insure the automobile against fire, theft and collision to an amount and in a company satisfactory to Autocar. A policy of insurance was obtained in the defendant company which provided that the loss should be payable, as interest might appear, to Assured and Autocar. The named Assured was the plaintiff Fields. The first of the promissory notes was payable September 20, 1940. The last monthly note was due on November 20, 1941. Fields defaulted in payment of the installments and notes due in February, April, May, June and July, 1941. On June 2, 1941, the automobile was damaged by fire to such an extent that when it had been repossessed by Autocar and sold at public auction it brought but seventy-five dollars. Fields had not only defaulted in payment of the installments and notes but he had defaulted in payment of the premium for the insurance upon the automobile. The insurance had been cancelled by notice to the Assured. No notice of cancellation had been given to Autocar and concededly the defendant insurance company continued to be obligated to Autocar upon the fire insurance policy. The result was that at the time of the fire there was no existing insurance for which anyone had paid a premium. There was insurance, however, covering the interest of Autocar in the automobile subject to the conditional sale contract. In other words there was a contract of insurance covering only the interest of the vendor under the conditional sale agreement. To that contract the purchaser or vendee had become a stranger. The purchaser Fields was still obligated under his agreement and upon his promissory notes to pay for the automobile and had breached his agreement to carry fire insurance upon the subject of the sale contract. After the cancellation, Fields no longer had any rights under the policy. He was no longer an assured.
There is a standard mortgagee clause in the standard fire insurance policy provided by statute in this State. It reads as follows: "On payment to such mortgagee of any sum for loss or damage hereunder, if this Company shall claim that as to the mortgagor or owner, no liability existed, it shall, to the extent of such payment be subrogated to the mortgagee's right of *Page 218 
recovery and claim upon the collateral to the mortgage debt, but without impairing the mortgagee's right to sue; or it may pay the mortgage debt and require an assignment thereof and of the mortgage." There is no such standard policy or provision in this State affecting automobiles either by statute or departmental regulation. There was no such clause in the fire policy herein involved.
After the repossession and sale of the automobile herein there remained due to Autocar under the contract and upon the promissory notes, the sum of $933.48 which the defendant company paid to Autocar, taking an assignment of the conditional contract of sale. It is on the theory of subrogation that the defendant insurance company seeks recovery of that sum from Fields and Lake by its counterclaim.
Most of the cases involving the question of subrogation by an insurance company to the rights of a mortgagee against a mortgagor under a fire policy have arisen in connection with policies issued in conformity with the statutory provisions of section 168 of the Insurance Law. In such cases where there is a mortgagee clause and liability thereunder to the mortgagee on the part of the insurance company but no liability by it to the mortgagor or owner, the insurance company is entitled to be subrogated to the rights of the mortgagee against the mortgagor or owner. (Barile v. Wright, 256 N.Y. 1, 5; Hastings v.Westchester Fire Ins. Co., 73 N.Y. 141; Ulster County Sav.Institution v. Leake, 73 N.Y. 161, 166; Springfield F.  M.Ins. Co. v. Allen, 43 N.Y. 389; Foster v. Van Reed,70 N.Y. 19, 26; Phoenix Ins. Co. v. Floyd, 19 Hun, 287.) It has been so held even in the absence of a clause similar to our statutory mortgagee clause. (First National Bank v.Springfield F.  M. Ins. Co., 104 Kan. 278.)
In the instant case while we are dealing with an automobile rather than property insured against fire under the "standard fire insurance policy of the State of New York" (Ins. Law, § 168), the reason for permitting subrogation by the insurance company to the rights of the vendor as against the conditional vendee of the chattel remains the same. We have here a contract of insurance which binds the insurance company only in so far as Autocar is concerned. Neither Fields nor Lake at the time of the fire nor at the time of the *Page 219 
assignment of the conditional sale contract was interested in the insurance contract as an assured. By the repossession and sale of the tractor there was established an ascertained valid assignable debt running from Fields and Lake to Autocar. A stranger to Fields and Lake could have purchased the account from Autocar and taken an assignment of it. Fields had become a stranger to the insurance contract when the policy of insurance was cancelled as to him. Lake had never occupied any position toward the insurance company other than that of a stranger.
Lake was not a party to the insurance contract and thus no contract providing for subrogation was made and none could have been made therein as to him. He had obligated himself to pay for an automobile. He had not paid. There was a debt owing by him to Autocar. That debt was assignable. When the insurance company paid Autocar for the peril insured against, Lake was in no position to claim that his debt had been paid for him, that he had been enriched to that amount, and his obligation to Autocar cancelled. It was to meet such a situation that equity created and applies the doctrine of subrogation or equitable assignment. (Pittsburgh-Westmoreland Coal Co. v. Kerr, 220 N.Y. 137;American Central Ins. Co. v. Weller, 106 Or. 494.) InPittsburgh-Westmoreland Coal Co. v. Kerr (supra), at page 143, we said (CHASE, J.): "The right of subrogation or of equitable assignment is not founded upon contract nor upon the absence of contract, but is founded upon the facts and circumstances of a particular case and upon principles of natural justice, and generally where it is equitable that a person furnishing money to pay a debt should be substituted for the creditor or in place of a creditor such person will be so substituted. (Crippen v. Chappel, 35 Kansas, 495.)"
In American Central Ins. Co. v. Weller (supra), it was said: "The doctrine of subrogation has long been an established branch of equity jurisprudence. It does not owe its origin to statute or custom but it is a creature of courts of equity, having for its basis the doing of complete and perfect justice between the parties without regard to form. It is a doctrine which will be applied or not according to the dictates of equity and good conscience, and consideration of public policy, and will be allowed in all cases where the equities of the case demand it. *Page 220 
It rests upon the maxim that no one should be enriched by another's loss and may be invoked wherever justice demands its application, in opposition to the technical rules of law."
While the right of the insurance company to subrogation against Lake appears more clearly on the facts it does not differ on principle from its right to subrogation against Fields. That which Fields contracted to do was to purchase and pay for an automobile. He purchased but did not pay for it. He had no insurance when the automobile burned. There is no reason why the insurance money covering the ownership of Autocar should be used to pay for the interest of Fields therein which he did not see fit to keep insured.
The judgments of the Appellate Division should be reversed with costs and motions to dismiss the counter-claim denied.
LOUGHRAN, FINCH, RIPPEY, JJ., concur with DESMOND, J.; CONWAY, J., dissents in opinion in which LEHMAN, Ch. J., and LEWIS, J., concur.
Judgments affirmed. (See 290 N.Y. 872.)