Court Opinion

ID: 6813754
Source: CourtListenerOpinion
Date Created: 2022-07-23 18:57:59.416256+00
Date Added: 2024-06-11T16:03:46.047057
License: Public Domain

Sims, J.,
after making the foregoing statement, delivered the following opinion of the court:
1. The defense above stated was provable and hence could be relied on by the defendants under their plea of the general issue, and no special plea was necessary to put such defense in issue. It is true the notes, and not the contract, were sued on upon the face of the notice or motion. But the testimony introduced by the plaintiff itself disclosed that the notes constituted a part of a written contract between the parties, all entered into at one and the same time. Hence, the action on the notes was an action on the written contract also and the general issue involved the question of what was that contract and the effect of it upon the obligation of said notes. Further—
2. In the view we take of the case the fact that the contract in writing between the parties did not contain a positive obligation on the part of the plaintiff to insure its in*444terest in the property which was the subject of the contract, is immaterial. The contract provided that the plaintiff, had thereunder an option so to do. It did in fact, after the contract was made, insure such interest and subsequently realized from collection of such insurance some $250 or $269 for which it has not given the defendants any credit and declines to do so. Since the contract contained the express provision as to insurance above quoted, we are of opinion that the insurance, afterwards effected by the plaintiff in accordance with' the option given it by such provision, must be taken to have been effected in pursuance of such contract, in the absence of any evidence to the contrary, except the mere claim of the plaintiff post motern litem that it effected the insurance independently. The insurance is presumed under such circumstances to have been taken out in accordance with the provision in the contract.
Such a provision as that contained in the instant case is a very frequent one in contracts such as that in question; and practically the same provision is often contained in mortgages and deeds of trust. It is well settled that when the vendor of the property effects insurance in pursuance of such a contract, the insurance is collateral security for the payment of the debt and the vendor must credit the debt by whatever amount he may realize from such insurance if not in excess of the debt, and if in excess of the debt, the residue must be paid over by the vendor to the vendee. And this is true whether the insurance be of property or only of the vendor’s insurable interest therein. See note of Judge Freeman, 54 Am. Dec. 698-9; 2 May on Ins., sec. 452 B, 452 C; Vance on Ins., secs. 417, 419.
It is true that if the vendor effects, for his own benefit, insurance on the property sold, independently of any contract with the vendee on the subject, the latter is entitled to no benefit from the insurance. See 54 Am. Dec. 693, et seq., and Carpenter v. Providence Washington Ins. Co., *44516 Pet. (U. S.) 495, 10 L. Ed. 1044. But such is not the case before us as shown by the evidence in the record. And, as above noted, where there is a contract between vendor and vendee containing a covenant with respect to insurance, the insurance taken out while such contract is in force will be presumed to have been effected in pursuance of the contract, in'the absence of evidence to the contrary.
The instructions above quoted erroneously disregarded the above mentioned rule of law. And as they directed a verdict in favor of the plaintiff for the full amount of its claim in disregard of such rule, and as the facts in the case as shown by the plaintiff’s own evidence established that under such rule the defendants were entitled to the credit aforesaid, such action of the court affirmatively appears from the record to have been prejudicial to the defendants and hence was reversible error.
This being our conclusion, we find it unnecessary to consider or pass upon the other assignments of error of the defendants, as they are none of them such as are likely to arise on a new trial of the case.
The result of the above holding is that the judgment complained of was excessive to the extent of $?50 or $269, the fire insurance money collected by the plaintiff which should have been credited, but was not credited, on the plaintiff’s debt in accordance with the evidence in the case upon its trial in the court below. We are, therefore, of opinion to set aside and reverse the judgment, and remand the case to the trial court with instructions to put the plaintiff on terms to release the said excess amount of such judgment to the extent of the fire insurance money aforesaid collected by it of not less than $250, or to award a new trial, and if such excess is released to enter judgment for the correct amount of the plaintiff’s debt so ascertained.

Reversed and Remanded.