Court Opinion

ID: 5481223
Source: CourtListenerOpinion
Date Created: 2022-01-10 01:56:07.685595+00
Date Added: 2024-06-11T08:33:37.071905
License: Public Domain

Fuld, J.
(concurring). I, too, am for reversal in the action brought by the Syracuse Savings Bank, but I would add a few words about that aspect of the case relating to the appraisal provision.
The conclusion reached by Judge Dye follows, it seems to me, from the settled rule that the effect of the mortgagee clause is to make an entirely separate insurance of the mortgagee’s interest and to impose upon the insurance company an independent obligation to pay the loss or damage under the policy to the mortgagee “ as interest may appear ”. (See e.g., Savarese v. Ohio Farmers Ins. Co., 260 N. Y. 45, 51; McDowell v. St. Paul Fire & Marine Ins. Co., 207 N. Y. 482, 487-488; Eddy *412v. London Assur. Corp., 143 N. Y. 311, 322.) That being so, that interest of the mortgagee may not be affected by any act or statement of the insured owner and mortgagor. The latter is the party who takes out the insurance and, by reason of that, the one called upon to perform many of the provisions of the policy, but that does not render him the agent of the mortgagee to bind the latter without his acquiescence or, at least, without his knowledge after notice.
Thus, the amount of the loss or damage set forth in the proof of loss filed, as prescribed in the policy, by the owner and mortgagor with the insurance company is not binding on the mortgagee, for it has been held that no admission of the former after the fire has occurred concerning the property’s worth or the amount of the damage is even receivable in evidence against the mortgagee in an action brought by him against the company on the policy. (See Browning v. Home Ins. Co., 71 N. Y. 508, 512.) Moreover, an agreement of settlement between the owner and the insurance company is not binding upon the mortgagee — even though the policy provides that the insurance company is to pay the loss as ascertained or estimated “ by the insured and this company.” (See Hathaway v. Orient Ins. Co., 134 N. Y. 409; see, also, McDowell v. St. Paul Fire & Marine Ins. Co., supra, 207 N. Y. 482, 485.) And, beyond that, since the mortgagee is a necessary party in a suit brought by the owner mortgagor against the insurance company upon the policy for the loss or damage suffered (see Lewis v. Guardian Fire & Life Assur. Co., 181 N. Y. 392, 397-398), a judgment rendered in such an action is not binding upon the mortgagee if he was not a party to it. (Civ. Prac. Act, § 193; see Steinbach v. Prudential Ins. Co., 172 N. Y. 471, 477-478; see, also, Twelfth Annual Report of N. Y. Judicial Council, 1946, pp. 169, 176-179; Shapiro, Necessary and Indispensable Parties [1941], 29 Cal. L. Rev. 731, 736.)
Certainly, then, if the mortgagee must be a party to any settlement between the insured and the company and to any judicial proceeding brought by the insured against the company, the mortgagee cannot be bound by an appraisal of which it had no notice and in which it had no opportunity to participate.
It is no answer that the policy issued by the company provides for the appointment of appraisers by the insured and the company “In case the insured and this Company shall fail to agree *413as to the amount of loss or damage ”. As I pointed out above, the policy before the court in the Hathaway case provided for an “ ascertainment ” of damage to be “ made by the insured and this company ”, and yet this court held that an agreement of settlement between them was not binding upon the mortgagee (134 N. Y. 409).
The policy was written to cover all cases, whether there was a mortgagee or not. There would, of course, be no question as to the binding effect of the award arrived at pursuant to the appraisal provision — just as there would be no doubt as to the conclusiveness of the proof of loss filed by the insured or the settlement agreed to by him — if there was no mortgage on the property. But it does not follow, from the presence of the provision in the policy, that it is binding on any one but the insured. While, therefore, the policy provided for an appraisal by appraisers selected by the insured and the company, that provision was not intended or designed to prescribe the applicable rules of law that would govern the rights of the parties involved if there was a mortgagee. In short, relating it to the present case, who are to be parties to the appraisal proceeding, in order to render the award binding in any particular case, depends upon principles altogether independent of the policy itself, and those principles do not permit the insured to deprive the mortgagee of the right to participate in a proceeding designed to determine the amount to be paid by the company on account of the loss or damage suffered.
No one will question the fairness and the importance of permitting the mortgagee to participate in fixing the amount to be paid under the policy. In many cases, his mortgage interest will be in excess of the fire damage and he will be entitled, under his contract with the company, to the entire amount of insurance paid. It would be going pretty far to hold that the mortgagee has not only no say in choosing the appraisers who are to hear and determine the question of the amount to be paid to him, but no right to attend the appraisal proceedings and introduce evidence that will have a bearing upon that question. True, the mortgagor may be intent on procuring the. highest possible award, and, it may be urged, he may be expected to present all available evidence and in the best possible light. That same argument, however, could be advanced with equal force where the *414insured owner enters into an agreement of settlement with the company or where the insured sues the insurance company upon the policy and obtains a judgment, and yet it is settled that neither the agreement nor the judgment is binding upon the mortgagee. The mortgagee has a vital, indeed, a primary interest, which is distinct from the owner’s and he should not be precluded from protecting this interest in the manner he deems most effective and from participating in the proceeding which will actually decide the amount to be paid to him.
The judgments of the Appellate Division should be reversed in the Bank case.