O'Neil v. Franklin Fire Insurance of Philadelphia

Foote, J.: If there was an irregularity in the entry of the judgment in plaintiff’s favor before the issues as between the two defendants were disposed of, we think the remedy of the appellant was to move at Special Term to set aside plaintiff’s judgment as prematurely entered, and that is not a ground for reversal of the judgment appealed from. We are also of opinion that defendant Crimmins was a necessary party to this action, and that it was proper practice for him to assert his claim -under the policy in suit against defendant insurance company by his answer in this action, and that such practice is authorized by section 521 of the Code. Separate actions could not have been maintained by plaintiff and defendant Crimmins to recover separately the amounts payable to each under this policy. (Lewis v. Guardian Fire & Life Assur. Co., 181 N. Y. 392.) Appellant next urges that the short Statute of Limitations of twelve months contained in the policy is a bar to the right of defendant Crimmins to recover. This claim is based upon the fact that Crimmins’ claim was first asserted in this action by his answer, which was made and served upon the insurance company on October 17,1912, while the fire occurred on March 23, 1911. The policy is the New York standard form of policy and contained this clause: “No suit or action on this policy, for the recovery of any claim, shall be sustainable in any court of law or equity until after full compliance by the insured with — 318 — all the foregoing requirements, nor unless commenced within twelve months next after the fire.” It was held at the trial that the limitation, contained in the policy did not bar Crimmins’ claim asserted in his answer, inasmuch as this action was begun by the service of the summons within the year, and in the opinion of the learned trial justice it was further said that the circumstances under which the action brought by Crimmins was discontinued, and his answer in this action accepted by defendant insurance company, constituted a waiver of the contractual limitation contained in the policy. It is now urged that the contractual limitation is, in legal effect, a statutory limitation, inasmuch as the form of the policy is fixed by statute, and that section 415 of-the Code is controlling, which provides: “The periods of limitation, prescribed by this chapter, except as otherwise specially prescribed therein, must be computed from the time of the accruing of the right to relief by action, special proceeding, defence, or otherwise, as the case requires, to the time when the claim to that relief is actually interposed by the party, as a plaintiff or a defendant, in the particular action or special proceeding.” Periods of limitation fixed by special contract are held to be periods of limitation prescribed by this chapter, as that expression is used in the above-quoted section. (Hayden v. Pierce, 144 N. Y. 512; Hamilton v. Royal Ins. Co., 156 id. 327.) If the claim interposed as a defense referred to in the above-quoted section 415 is not limited to defenses tending to defeat plaintiff’s claim, but apply to affirmative defenses in the nature of independent causes of action against a codefendant (as to which we need not here express an opinion), still we think the right of defendant Crimmins is not barred by the twelve months’ period of limitation, because of the provisions of section 405 of the Code, as follows: “If an action is commenced within the time limited therefor, and a judgment therein is reversed on appeal, without awarding a new trial, or the action is terminated in any other manner than by a voluntary discontinuance, a dismissal of the complaint for neglect to prosecute the action, or a final judgment upon the merits; the plaintiff, or, if he dies, and the cause of action survives) — 319 — his representative, may commence a new action for the same cause, after the expiration of the time so limited, and within one year after such a reversal or termination.” The burden here was.upon the insurance company to establish that the claim of defendant Crimmins was barred by limitation. He had brought an action upon this claim before the twelve months expired. That action was terminated under circumstances not amounting to a voluntary discontinuance, so far as appears in this record. The court was about to hold that the action could not be maintained because of defect of parties defendant, whereupon the court suggested that the Crimmins claim could be litigated in the present action, and that he should present it here by serving an answer. The action was discontinued by virtue of a stipulation signed by counsel for the respective parties. We think this was not a voluntary discontinuance within the intent and meaning of this section, and that the limitation of the policy is not a bar to a new action by Crimmins, or to asserting the same by answer served upon the insurance company. (Bannister v. Michigan Mut. Life Ins. Co., 111 App. Div. 765; People ex rel. McCabe v. Snedeker, 106 id. 89; affd., 182 N. Y. 558; Conolly v. Hyams, 176 id. 403.) There is further reason why the twelve months’ limitation is not available to defendant insurance company as a defense, assuming, as we do, that it was not necessary for the insurance company to plead this defense as between itself and its codefendant Crimmins. The clause in the policy which provides that suit upon the policy must be brought within twelve months is found in lines 106 to 109 of the standard form of policy. Lines 56 to 59 contain this clause: “If, with the consent of this company, an interest under this policy shall exist in favor of a mortgagee of of any person or corporation having an interest in the subject of insurance other than the interest of the insured as described herein, the conditions hereinbefore contained shall apply in the manner expressed in such provisions and conditions of insurance relating to such interest as shall be written upon, attached, or appended hereto.” This clause has recently received judicial construction and it has been held that the clauses of the policy applicable as — 320 — between the company and the mortgagee are only those clauses which precede lines 56 to 59, and that the clauses following from line 60, which have reference to proceedings after fire has occurred or for the adjustment of the loss and the payment or collection of insurance, are not applicable to the mortgagee. (Heilbrunn v. German Alliance Ins. Co., 140 App. Div. 557; affd., 202 N. Y. 610.) A sentence from the opinion of Collin, J., in the Court of Appeals indicates the extent to which the decision goes in relieving the mortgagee from the limitation clause of the policy which the defendant insurance company relies upon here: “We admit that insurance companies ought to have more protection in the matter of the time within which actions upon their policies must be brought, and possibly in other respects, than has been afforded them under the decision of the Appellate Division in this case; but the difficulty is .that the language of those stipulations or conditions of the policy which relate to the proceedings after the liability of the company has accrued through the fire, does not enable or permit us to apply them to the mortgagee in such part only as may be practicable or expedient.” (See, also, McDowell v. St. Paul Fire & Marine Ins. Co., 207 N. Y. 482, where the doctrine of the Heilbrunn case is reaffirmed.) It is next contended that the tender by the insurance company’s agent to defendant Crimmins of the full amount of his mortgage and the demand for an assignment thereof precludes a recovery by Crimmins of the insurance money in this action. We are of opinion that such is not the case. The policy was issued directly to Mrs. O’Neil, plaintiff, by defendant’s agent and the premium was paid by her. It was a policy for $3,200, $1,000 upon the dwelling house, which burned, and $400 upon the furniture and contents. The rest was upon barns and contents which did not burn. It is clear that if defendant Crimmins’ mortgage had been paid up before the fire, the whole insurance would have remained for the benefit of the owner. The insurance payable to Crimmins as mortgagee was not only for his benefit but for the benefit of the owner, who had the right to have such payment applied in reduction of the mortgage debt. Hence, it would be unjust — 321 — and not according to the intention of the parties that the insurance company should, upon payment to Orimmins, be subrogated to his position as holder of the mortgage, and thereby deprive the owner of the benefit of that part of the insurance money, unless the owner had in some way forfeited her right. The answer of the insurance company does not set up any breach of the contract of insurance upon the part of plaintiff, Mrs. O’Neil, or that her right under the policy has been in any way forfeited, nor does it allege that as to plaintiff no liability under the policy exists. The contract to sell the farm did not avoid the policy. But assuming that notwithstanding the form of its answer, the insurance company may still assert and prove any defense which is available to it as against defendant Orimmins, we are of opinion that it was incumbent upon defendant insurance company to prove upon the trial that as to the plaintiff, mortgagor and owner, no liability existed against it. The contract as contained in the mortgagee clause is: “ Whenever this company shall pay the mortgagee * * * any sum for loss or damage under this policy and shall claim that, as to the mortgagor or owner, no liability therefor existed, this company shall, to the extent of such payment, be thereupon legally subrogated to all the rights of the party to whom such payment shall be made, under all securities held as collateral to the mortgage debt, or may at its option pay to the mortgagee * * * the whole principal due or to grow due on the mortgage with interest, and shall thereupon receive a full assignment and transfer of the mortgage and of all such other securities; but no subrogation shall impair the right of the mortgagee * * * to recover the full amount of his claim.” It is true that defendant insurance company did by written notice served upon defendant Orimmins claim that as to the mortgagor no liability existed against it, but it did not prove upon the trial that it was not liable to the mortgagor. On the contrary, before the trial, it made an offer of judgment to plaintiff, which plaintiff accepted, thus conceding a liability to plaintiff under the policy. This clause should not be construed to vest in the insurance company the right to — 322 — subrogation upon the mere assertion of claim, unfounded in fact, and such was not the intent or purpose of the clause in question. The claim which it may assert must be a valid and well-founded claim, and so it has been held in construing mortgagee clauses identical with this. (Traders’ Insurance Co. v. Race, 142 111. 338; Anderson v. Saugeen Mut. Fire Ins. Co., 18 Ont. 355; Bull v. North British Canadian Investment Co. & Imperial Fire Ins. Co., 15 Ont. App. 421; affd., sub nom. Imperial Fire Ins. Co. v. Bull, 18 Canada Sup. Ct. 697.) In the last case it was held that the insurance company was not justified in paying the mortgagees and claiming subrogation without first contesting its liability to the mortgagor and establishing their indemnity from liability to him. As the defendant insurance company failed to prove upon the trial that as to plaintiff no liability existed under the policy, it has failed to establish its right to subrogation in this action. In Heilbrunn v. German Alliance Ins. Co. (150 App. Div. 670) it appeared that as to the owner the policy had become null and void; hence, what is said in the prevailing opinion as to the contract with the mortgagee being nothing more than a contract of indemnity is not applicable here. The other questions urged upon this appeal were, we think, correctly disposed of and do not call for special consideration here. The judgment appealed from must be affirmed, with costs. All concurred, except Kruse, P. J., who dissented in a memorandum.