Haley v. Manufacturers' Fire & Marine Insurance

Deyens, J. It is contended by the defendant, as the plaintiffs had agreed to sell their mortgages (upon which a much larger amount was due) for the sum of $62,500, upon payment by Cherry of certain notes with interest, amounting to that sum, one of which notes, amounting to $20,000, had already been paid at the time of the occurrence of the loss, that the sum of $42,500, with interest, is all that can now be recovered of the insurers, although the loss of property by the fire was $53,000 in amount, that being all that the plaintiffs would have received if Cherry had paid his notes. This argument treats the interest of the plaintiffs as mortgagees as determined by the amount for which they were ready to sell their mortgages, although the debt due the plaintiffs upon the mortgages and the property upon which they were secured both exceeded the amount of the loss. The contract made by the plaintiffs with Cherry was one collateral to that made by the mortgages, and was for the sale of those mortgages, which were to be transferred upon full payment by Cherry of the amount agreed upon. Whether the plaintiffs continued to own them, or whether they became the property of Cherry, the mortgages still continued to exist, unaffected by any payments which Cherry might make to the plaintiffs upon his contract. He was not the owner of the equity of redemption; and, if these mortgages are to be treated as paid pro tanto by the payments made by him, the result would follow that, when these were completed and the mortgages were transferred to him, no debts would exist, upon non-payment of which he could foreclose them as against the owner of the equity., While the agreement provides that the plaintiffs were not to foreclose their mortgages or to sell the property so long as Cherry continued to make his payments, it declares that in case of the failure to pay the notes, the plaintiffs resume the right to foreclose them, and „o take or sell the property, as if the notes of Cherry were the notes mentioned in the mortgages, it being the intent to allow the mortgages to remain as security for the payment of the Cherry notes. These latter clauses cannot be construed as limiting the foreclosure to the amount due upon the Cherry notes. The mortgages were not to be loreclosed until there was a fail [296] ure by Cherry to pay his notes ; but when this default was made and the plaintiffs resumed their rights, these rights were not affected by what had been paid by Cherry, or by the existence of the contract with him. Nor is the interest of the plaintiffs as mortgagees, which is the interest insured, limited by the amount due upon the Cherry notes. They held the legal title to the mortgages, and had an interest in the property insured to the amount of the debt it was mortgaged to secure. Although they had made a contract for the sale of those mortgages, such contract was executory simply, its terms might never be complied with, or it might be abandoned by mutual agreement of the parties. No property had passed to Cherry, and, although he had made no default, he had not complied with the terms upon which he was to obtain these mortgages when the loss occurred. Even if he was in possession of the mortgaged property, he was not in possession of the mortgages, which the plaintiffs had agreed to sell; these were kept in their own possession. Suffolk Ins. Co. v. Boyden, 9 Allen, 123. Rider v. Ocean Ins. Co. 20 Pick. 259. An executory contract to convey a mortgagee’s interest does not deprive him of his right to insure, or limit his recovery to the amount of the unpaid purchase money. Davis v. Quincy Ins. Co. 10 Allen, 113. There was a provision in the contract that Cherry should keep the property insured for the benefit of the plaintiffs; but while this was not done by him, but by the plaintiffs, who had the property actually insured at the date of the agreement, even if it were held that the premiums for this insurance were properly chargeable to Cherry and the amount could thus be treated as paid by him, this would not affect the result. If a creditor, at his own expense and for his own benefit, insures the property mortgaged, the debtor has no benefit therefrom; yet if the debtor insures property held as collateral for the benefit of the creditor, any sums received from such insurance are applied for the benefit of the debtor. King v. State Ins. Co. 7 Cush. 1. The interest of the plaintiffs was still an interest to the amount of the mortgage debt, the preservation of which was essential for the protection of Cherry as well as themselves; the mortgages and the right to the property described therein were theirs. If, by reason of their agreement with Cherry and its [297] subsequent performance bv him, they should afterwards become responsible to account to him for such sums as they might have received over and above what he was to pay, it would be a matter not affecting their rights here and in which the defendant had no interest. Nor is it important that, by the relinquishment of the contract with Cherry, which took place after the loss but before action brought, the plaintiffs will in fact receive a larger amount from the insurance than they would have done if such contract had been carried out. That the occurrence of the loss may either, because of the existence of collateral contracts, or because of the abandonment of such contracts, indirectly give to the insured an advantage, does not concern the insurer. He does no more than indemnify the insured according to his policy if he pays no more than the value of the property destroyed, the sum insured upon it and the interest of the insured at the time of the loss. Suffolk Ins. Co. v. Boyden, 9 Allen, 123, 127. By the terms of the agreed statement of facts there must be judgment for the plaintiffs for the larger sum. Judgment for the plaintiffs accordingly.