Court Opinion

ID: 6120698
Source: CourtListenerOpinion
Date Created: 2022-02-04 18:43:39.06855+00
Date Added: 2024-06-11T08:23:12.476121
License: Public Domain

Learned, P. J.:
This is an action to foreclose a mortgage, given by Jacob EL Van Reed to Philo Plank, which was assigned by Mrs. Anna Plank, executrix of Philo Plank, to the plaintiffs, who are the trustees of the London Assurance Corporation. The mortgage contained the usual covenant for insurance on the part of the mortgagor, and an agreement that, in default thereof, the mortgagee, or his representatives, might make such insurance, and that the mortgagor would pay the premium on demand, and that the same should be deemed secured by the mortgage. The mortgage was for $6,500, payable May 1st, 1875, with semi-annual interest.
In April, 1874, Mrs. Plank, then the owner of the mortgage, took out a policy of insurance in the London Assurance Company against loss by fire to the amount of $4,000, “ on her interest, as mortgagee,” in the buildings on the mortgaged premises. The policy contains this clause : “ In case of loss the assured shall assign to this company an interest in said mortgage, equal to the amount of loss paid.” Subsequently, in May 1874, the property was injured by fire to an extent exceeding the amount insured, and a claim for the loss was inade upon the company. Afterward, in June5 1874, the company, with knowledge of the fire, paid to Mrs. Plank, the holder of the mortgage, $7,044, being the amount of principal and interest, and including $20 paid by' her for insurance, and took from her an assignment of the mortgage. It appeared that Mrs. Plank, after taking out this insurance, and before the fire, had called upon one Adams, then the owner of the land subject to the mortgage, and had demanded the repayment to her of the money paid by her for insurance, and had threatened a foreclosure in default thereof. The mortgage contains the usual covenant that, in case of default in the payment of interest for twenty days, the whole principal shall become due, at the option of the mortgagee or his representatives.
The Special Term on trial, held that, to the extent of $4,000, the *325payment by the company to Mrs. Plank, operated as a payment upon the mortgage; that the plaintiffs became owners of the balance secured by the mortgage; that such payment was to be applied first upon the interest; and that, therefore, nothing was-payable at the commencement of this action; and the complaint was dismissed.
It cannot affect the rights of the parties, that the plaintiffs, instead of paying the loss, took an assignment of the mortgage. They were liable to pay the amount of the loss, and could gain no advantage by the mere form of the transaction.
It is insisted, on the part of the plaintiffs, that the present case differs from many of a somewhat similar character, which may be found in the books, in these respects : First, that the assurance is of the mortgagee’s interest; second, that there is an agreement for sub-rogation. But it is well pointed out in Excelsior Fire Ins. Co. v. Royal Ins. Co. (55 N. Y., 343), that insurance companies in this State have no authority to insure a debt, or to guarantee its payment. Their authority is only to insure property against loss by fire. The same thing appears by the charter of the plaintiffs which authorizes them to insure buildings or merchandise, but gives no authority to insure, or guaranty, debts. Whatever, then, may be the language used in the policy, the real meaning is that the company insures the property, and the mention of the insured, as mortgagee, is intended as a statement of the manner in which the insured is interested in the property. It certainly would not be claimed that a mere simple contract creditor could obtain a valid insurance of his debt from a fire insurance company. The creditor must have an interest in the real estate to authorize him to insure.
Furthermore, in the present case there was an agreement between the mortgagor and mortgagee that the mortgagor should insure the property, and that, in ease of his failure so to do, the mortgagee might insure; and the mortgagor should repay the premiums, which should also be secured by the mortgage. The insurance effected by Mrs. Plank, was therefore under this authority. The mortgagor was liable personally to her for the premium, and the premium was secured on the land. Even when the plaintiffs took an assignment of the mortgage, they paid to Mrs. Plank the $20 premium. And this could have been done only on the ground *326that she had a claim on the mortgagor therefor, or that she was secured by the mortgage for this amount. The mortgagor, then, being liable for the premium, is entitled to the benefit of the insurance.
The claim made by the plaintiffs is opposed to the idea of insurance. This is, that, for certain money paid, the company shall bear the loss in ease of fire. To illustrate : Suppose the owner of property should insure it with the plaintiffs, by a policy which should contain a clause that, in case of loss, the owner should convey to the company an interest in the property equal to the amount of the loss paid. The absurdity of such a contract would be apparent. But the same absurdity exists in this present policy as construed by the plaintiffs. . They claim the right to take the premiums, and to undertake no risk whatever, if the land and the mortgagor together are good for the mortgage debt.
Again, suppose that the plaintiffs should take the privilege (often found in policies) of repairing a partial injury. Such repairs would plainly become a part of the original property, and would thus inure to the benefit of the mortgagor as well as of the mortgagee. The respective rights of the mortgagor and mortgagee would remain unaffected, and the insurance company would have made good the injury by repairing the buildings.
We may properly look upon the money, payable on a loss, as taking the place of the destroyed property. Instead of the buildings, the insurance company places the $4,000. This money is received by the mortgagee and so far pays the debt.
On the question of application, Mrs. Plank had not claimed the privilege that the whole money secured should be payable. The whole was not, therefore, payable. The money paid to her was not by her specifically applied. Under the ordinary rules, therefore, it was applied by the court, and applied properly.
The judgment should be affirmed.
Present — LearNed, P. J., BoardmaN and Jambs, JJ.
Judgment affirmed, with costs.