Gordon v. Ware Savings Bank

Wells, J. The plaintiff, by virtue of his second mortgage, acquired no right to, or interest in the policy of insurance. His bill in equity must be maintained, if at all, upon one of two grounds; 1st, that the receipt of $500 by the defendant operated as an absolute payment, pro tanto, of the debt secured by the first mortgage; or, 2d, that in equity the money received from insurance ought to be appropriated for the relief of the second mortgage. We are of opinion that the bill is maintainable upon neither ground. 1. The insurance was for indemnity to the mortgagor as well as to the mortgagee. To the mortgagee it was for protection of the security, not for payment of the debt. It was collateral to the debt. Money received from the insurance took the place of the property destroyed, and was still collateral until applied in payment by mutual consent, or by some exercise by the mortgagee of the right to demand payment of the debt, and upon default of payment, to convert the securities. There was no such consent by the mortgagor; and the facts do not show that the money was received and indorsed upon the note with any intention to exercise the right to convert the security for payment of the debt. The indorsement was erased and the money appropriated to its original purpose, to wit, the restoration of the security. Both mortgagor and mortgagee treated the indorsement as a mistake or as unauthorized; and we see no reason why they might not properly do so. 2. The money having been properly applied to the restoration of the impaired security, for the benefit alike of all parties interested, there are no equities in favor of this plaintiff which entitle him to appropriate that benefit exclusively to his own use. On the contrary, it would be inequitable even if such were his legal right by reason of the indorsement of the money, in the first instance, upon the note. Bill dismissed.