Vandegraaff v. Medlock

Hopkins, J. The question in this case is, have the plaintiffs in error, who are mortgagees, a right, in a Court of equity, to the, proceeds of a policy of insurance against, fire, effected by the mortgagor af-r ter the mortgage w'as made, which contains no covenants that he should insure ? The facts relied upon to support this right, which they claim, are, 1 hat after the execution of the mortgage, that was made to secure the purchase money of the mortgaged premises, which the plaintiffs had previously sold and conveyed to the mortgagor, the houses were burnt down — an event that so greatly diminished the value of ihe estale, that the mortgage ceased lobe an adequate security for, the purchase money, and that, the mortgagor was insolvent. The mortgagor is not entitled to receive from the insurers any thing in the nature of proceeds of ihe houses which were burnt; but the proceeds of the policy, which is a different, thing. He was bound to pay the purchase money, though the value of the estale might, he-reduced so low, by fire or any other pause, as to become merely nominal. He effected [391] the. insurance at his own expense', and the proceeds of the policy, when ho shall receive, them, will not be the value of the estate, or any part of it, which he had disposed of to another person, but a substitute for the value, that he had provided by his own contract. This substitute will have been procured with his own money. When the insurers shall pay the loss, they will have received no part of the consideration of the contract, upon which they may pay, from the mortgagees, or from the mortgaged estate, but the whole of it from the general means of the mortgagor. For the mortgage, the plaintiffs gave a consideration, but. none for the policy of insurance. It. is well settled that a policy of insurance is a distinct. independent contract between the insured and insurers, and ihird persons have no right either in a Court of equity, or in a Gout t of law, to the proceeds' of it, unless there be.some contract or trust, express or implied, between the insured and ihird persons. If'.here were a covenant in the mortgage, on the part of the mortgagor, that, he would insure, and in case of a fire, pay lite proceeds of the policy, if he failed to pay the debt, 1o the mortgagees, it would create an express trust, in their favor upon the policy, and a bare covenant, of the mortgagor to insure the premises might make an implied trust for them.a As there •are no such covenants in lite mortgage, and no other contract on the.subject between the parties, the case is one, in which the mortgagor has obtained a con [392] tract. with his own money, and a Court, of equity has no more control over the proceeds, to which he may be entitled, .than it has over any other debt due to him. If he be insolvent, his other creditors have as just a claim to the proceeds of the policy as the mortgagees. But no cieditor could make them liable by the aid of a Court of equity, to satisfy his demand, who had, not before he filed his bill for the purpose, obtained a judgment at law upon the demand, sued out execution, and pursued the latter to every available extent at lavv.a Let the decree be affirmed. Collier, J. — I awarded the injunction in this case; consequently do not join in the opinion — but I, by no means, dissent from its reasoning or conclusion. Footnotes [a] 4 Johns Chancery Rep, 671. [a] Hughes on Insurance. 33, 40 — Ellis on Insurance and Annuities, or 12th No Law Library, 81, 82. 155, ¡56. (iu brackets) — Khh JVn. I.avv Library, 331,132, top page — 8 English Oommnu Law lieports, 175.176, 177 — 2 English Common Law Chancery"lieports, 74 — 4 Taunton, 380 — 17 Vesey, 339 — Id ib. 115 — 3 £)owl. Ry. 158.