Kernochan v. . the New-York Bowery Fire Insurance Company

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 430 [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 431 [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 432 The notice of loss in this case, in the name of George F. Cooledge Brother, stated that the buildings were insured by the defendants, and specified their numbers, and the streets on which they were situate, according to the policy. And the preliminary proofs of loss, in the names of the Cooledges, accompanied with the affidavit of the plaintiff, in addition to those facts, among others, gave the number of the policy. It does not appear that when either was served, or afterwards, before the trial of the action, objection was made to the notice or proofs that they were not by the plaintiff, or for any other cause; and in the absence of such evidence it must be assumed they were satisfactory to the defendants. Certainly, when the proofs were served, the defendants were apprised that they related to the policy in question, and that they were given with the approbation and authority of the plaintiff; and if not willing to receive them as a compliance with the condition of the policy, good faith and the law required them to say so, or be concluded from doing so thereafter. There was then time to correct the defects suggested in the notice and proofs, and doubtless it would have been done if the attention of the plaintiff had been called to them. In strictness, probably, the notice and proof should have been in the name of the plaintiff, but it was competent for the defendants to waive the objection that they were not so; and this was done by their assent to them, inferable from their silence. The papers were in substance all they would have been, as to reliability and otherwise, if they had been in the name of the plaintiff. Every reason in support of the doctrine of waiver from omission to object, in reference to preliminary proofs in any case, applies in regard to this point in the present case. The evidence of the agreement between the plaintiff and the Cooledges, that the former should keep the premises insured, and the latter should pay the premiums and have the benefit of the insurance, is not at all in conflict with the rule of *Page 434 law that parol evidence cannot be received to contradict, vary or explain a written contract. The policy of insurance may have full operation according to its terms and import, and yet have been obtained at the expense of the Cooledges, and be held for their benefit. Proof of the object of the policy, the source from which funds were obtained to procure it, and that others than the person named in it as the insured, were, with him, to be benefited by the avails of it, assumes that the policy is to operate according to its language and legal effect. (Truscott v. King, 2 Seld., 147, 161; Chester v. Bank of Kingston, 16 N.Y., 336.) Whether the defendants knew of the agreement at the time of the issuing of the policy and assented to it or not, makes no difference in regard to this point. In either case, the contract of insurance between the defendants and the plaintiff is unaffected by it. This evidence was material, as the effect of the agreement was to entitle the Cooledges to have the avails of the policy, in case of a loss, applied upon the bond and mortgage. The plaintiff held the policy as further security for the debt to apply upon the debt whatever should be received on the policy. Having this effect, the agreement precluded a resort by the defendants, on paying the loss, to the bond and mortgage, by way of subrogation, for their reimbursement. As payment of the loss would, to that extent, pay the bond and mortgage, the defendants could not, of course, derive any benefit from those securities in respect to the amount thus paid. In this view of the agreement between the plaintiff and the Cooledges on the subject of insurance, and assuming that the defendants had no notice of it when the policy was issued, or before the loss, the question arises, whether, in connection with the other circumstances of this case, it forms a defence to the action. If the defendants on paying the loss could have an equitable interest in the bond and mortgage to the amount paid, they would ultimately recover *Page 435 that amount with interest, and thus be made whole; but that is impracticable by reason of the said agreement. They claim that by their contract with the plaintiff as contained in the policy, they insured merely the debt of the plaintiff, and in case of a loss by fire and payment thereof to the plaintiff, were to have an interest in the bond and mortgage to that sum; and that as they cannot, on account of the agreement, of which they had no knowledge, have such benefit from the bond and mortgage, they are not liable on the policy. It is important in the examination of this question to consider the nature and extent of the contract of insurance between the parties. The contract in terms expresses that the defendants insure the plaintiff, "as mortgagee, against loss or damage by fire," to the amount and on the buildings specified; and agree to make good to the plaintiff "all such loss or damage, not exceeding in amount the sum insured, as shall happen by fire to the property as above specified," during one year; "the loss to be estimated according to the true and actual value of the property." The loss against which the plaintiff is insured, is, by the very language of the contract, "to the property insured;" the destruction in whole or in part of the value of the property by the total or partial burning of the property. In case of such loss it is stated that it is "to be paid within sixty days after due notice and proof thereof by the insured," in conformity to the policy. Whether the loss, by diminishing the mortgage security, endangers the collection of the debt, or the security remains ample, is not by the contract made of any importance; in either case it is insured against and the amount of it is to be paid. Nothing is said in the policy in regard to the mortgage debt, nor is any allusion made to it, further than by the statement that the plaintiff is insured as mortgagee. I think it apparent, therefore, on the face of the policy that the contract is in its nature an insurance of the property mortgaged, and not of the debt of the plaintiff. The debt *Page 436 is important to an interest of the plaintiff in the property; without an interest in the property the policy would be invalid, and the insurance is limited to that interest. The insurance thus has respect to the debt; the mortgage lien is the basis and extent of the right of the plaintiff to insure; but the insurance is upon the property, the subject of the lien. If the insurance was of the debt, there should, to warrant a recovery, be a loss as to the debt, which has not occurred and cannot take place; as the mortgaged property still far exceeds in value the sum unpaid, and the debtors are solvent. Regarding the insurance as of the debt, no risk has been insured by the defendants; the policy was not only of no possible benefit, but worse, it has been a constant source of expense. The insurance being of the property only, and the policy being silent in regard to the defendants, in any event, taking any interest in the bond and mortgage, there seems to be no ground for a claim under the contract to such an interest. If an insurance company, insuring a mortgagee, is in any case, on payment of a loss, entitled to claim an interest in the debt to an equal amount, in regard to which there is some difference of opinion, it is only in cases where the sum received by the insured does not go in reduction of the debt, and the insured might otherwise, notwithstanding the payment of the loss, proceed to collect the whole debt of the mortgagor, or by the mortgage. The utmost the company can claim, is to be subrogated, as to the amount paid by them, to the right of the insured to collect the debt, irrespective of the sum received by him on the policy. It is a mere equity to be put in the place of the insured as to that sum, in regard to the bond and mortgage, whatever his rights may be. This equity does not arise out of the contract of insurance, but from all the circumstances of the case. The plaintiff was not, in my opinion, under obligation to disclose to the defendants, without inquiry by them on the *Page 437 subject, the agreement between the plaintiff and the Cooledges as to insurance. It was for the defendants, if they deemed it important to know whether any, and if so what, relation existed between the mortgagor and the mortgagee, as to the insurance, to seek for information about it, or make provision on the subject in the policy. If no fraud was practised by the plaintiff, by misrepresentations or evasions in relation to it, and none is pretended, the defendants have no ground of complaint against him. The evidence of usage of the mortgagor to pay the premiums in cases of insurance for the security of the mortgagee, and the charge of the judge, if the foregoing views are correct, could not prejudice the defendants. It follows that the judgment is right and should be affirmed. All the judges concurred in this opinion, except SELDEN, J., who was absent, and ROOSEVELT, J., who expressed himself as follows: