Phenix Ins. v. First National Bank

Richardson, J. (after stating the case), delivered the opinion of the court. We have had no hesitancy in coming to the conclusion that the decree complained of is without error, either on principle or authority. The case involves only one single question: Does an insurer, who has paid a loss to a mortgagee that covers only a part of the mortgage debt, acquire as against the mortgagee a right to demand and take from the mortgagee the evidences of the debt secured to the amount of the loss paid by the insurer, whether the mortgagee he able or not to obtain satisfaction of his debt from the remaining evidences of the debt ? Or, in other words, must not the creditor’s debt be paid in full before the insurer can take from him by subrogation any part of that debt ? The doctrine which is applicable to this case, and which squarely meets this question, is clearly laid down by Mr. Justice Strong in pronouncing the opinion of the supreme court of the United States in Carpenter v. The Providence Washington Insurance Co., 16th Peters, 501, where the learned judge says: “Eo doubt can exist that the mortgagor and the mortgagee may each separately insure in his own distinct interest in the property. But there is this important distinction between the cases, that where the mortgagee insures solely on his own account, it is but an insurance on his debt; and if his debt is afterwards paid or extinguished, the policy ceases from that time to have any operation; and even if the premises insured are subsequently destroyed by fire, he has no right to recover for the loss, for he [768] sustains no damage thereby; neither can the mortgagor take advantage of the policy, for he has no interest whatever therein. On the other hand, if the premises are destroyed by fire before any payment or extinguishment of the mortgage, the underwriters are bound to pay the amount of the debt to the mortgagee, if it does not exceed the insurance. But then upon such payment, the underwriters are entitled to an assignment of the debt from the mortgagee, and may recover the same amount from the mortgagor, either at law or in equity according to circumstances.” And in Insurance Co. v. Stinson, 103 U. S. 25, Mr. Justice Bradley concludes the opinion with the remark: “ After a loss has occurred and the insurance has been paid sufficient to discharge the debt, the insurer may be subrogated to the rights of the creditor against the debtor.” In a note to King v. State M. Fire Insurance Co., 54 Am. Dec. 696, the learned annotator says: “The doctrine of the principal case that the insurer is not entitled to demand subrogation under a policy which does not expressly provide for it, is the established law in Massachusetts, * * * • and that doctrine seems to be adopted in May on Ins. § 456; Wood on Fire Ins. 782; and in later editions of Mr. Phillips’ work. 2 Phill. on Ins. § 1712. But it must be admitted that the decided preponderance of authority is against this doctrine, and in favor of the insurers right of subrogation and assignment in such cases upon paying the loss, and if necessary, the balance due on the mortgage” ; citing Flanders on Ins. 400 ; 16 Peters, 495, and numerous other authorities. The authorities demonstrate the correctness of the decree appealed from, and we are therefore of opinion that the same must be affirmed. Decree affirmed.