Doughty v. Van Horn

The Chancellor. The controversy in this suit is in reference to the insurance money due upon a policy of insurance against loss or damage by fire to the amount of $2,000, issued on the 12th of November, 1872, by tbe Hillsborough Mutual Eire Assurance Association to John Van Horn, on what is in tbe policy described as-bis “new” two-story frame ■ dwelling-. bouse, &c. Tbe building was destroyed by fire in or about October, 1873. Tbe liability of tbe insurance company to pay tbe insurance-money is not denied. The question is, whether tbe complainant is entitled to it as mortgagee of tbe property, and tbe controversy is between him and the assignee (for tbe benefit of creditors) of tbe mortgagor, tbe mortgagee claiming it under an agreement to insure contained in bis mortgage. Tbe mortgage is on tbe land on which tbe house stood, and was given to tbe complainant by Van Horn on tbe 12th of December, 1872. It is for $4,000 and interest, and is wholly unpaid. Tbe assignee claims tbe money by virtue of tbe assignment, which was made on tbe 25th of June, 1873. The time for delivering tbe claims of creditors to tbe assignee expired in September, 1873. Tbe complainant, relying on the security of bis mortgage, did not exhibit bis claim to tbe assignee. It appears that, irrespective of tbe insurance-money in question in this suit, tbe estate of Van Horn will pay only about thirty-three and one-third per cent, of tbe claims against it [92] in the hands of the assignee. The mortgaged premises have been sold under foreclosures, but nothing was realized therefrom on the complainant’s mortgage, the -amount which they brought at the sale being no more than sufficient to pay the prior encumbrances. The mortgage contains a covenant whereby it was declared to be agreed by and between the parties to the mortgage that the mortgagor should and would keep the buildings erected and to be erected upon the land thereby mortgaged insured against loss or damage by fire, in some safe and responsible insurance company or companies, to an amount not less than-dollars, and assign the policy and certificate thereof to the mortgagee as collateral security for the payment of the principal and interest of the mortgage, and that, in default thereof,, it should be lawful for the mortgagee to effect such insurance, and the premium or premiums paid for effecting the same should be a lien on the mortgaged premises, added to the amount of the bond, and secured by the mortgage, and payable on demand, with interest. A contract for insurance against fire is, as a general rule, a mere personal contract between the insured and insurer, to indemnify the former against the loss he may sustain. But the insured may, undoubtedly, by an agreement to insure for the protection and indemnity of another, person having an interest in the subject of the insurance, give such third person an equitable lien on the money due upon the policy to the extent of such interest. In the case before me there was a covenant to insure the buildings erected and to be erected upon the land mortgaged for the protection and indemnity of the mortgagee.' The amount of insurance is not fixed, but it is to be presumed that the parties intended to stipulate for such an amount of insurance upon the buildings as would be necessary to the complete security of the mortgagee. Surely, under the covenant, the mortgagee might, if the mortgagor had refused or neglected to obtain insurance to such an amount, have obtained it to that [93] amount for himself, and could have recovered the premium under the mortgage. The mortgagor, indeed, denies that there was any agreement for insurance, but the covenant in the mortgage is conclusive on that head. And besides, the complainant swears that the mortgagor, when he agreed to give the mortgage, told him that there was on the property a large barn and hovel, in good repair, and a new house, which he had just been building (the lumber for which, to the amount of about $600, it appears, the complainant had furnished) ; that the house and out-buildings were insured, and that he had a policy of insurance of $2,000 on the new house in the Hillsborough company, which would make the mortgage secure for the amount in case of fire. Again, it appears that with the mortgage two policies of insurance were delivered, one of which was on the old house which had been torn down in order to build the new one; but neither of those policies was issued by the Hillsborough company. Both of them were assigned by the mortgagor to the complainant as collateral security for the payment of the mortgage by assignment of even date with the mortgage. The insurance on the old house was of course worthless. If the mortgagor was under obligation to assign to the mortgagee the policy on the house which was on the premises, then it was- manifestly a fraud to assign to him the policy on the house which had been torn down, and retain the policy on the new house in his possession, for his own benefit. That he was under such obligation is clear. The policy was, as appears from the proof, necessary for the mortgagee’s protection. Thére were at that time prior encumbrances on the property to the amount of $7,400, besides interest. The land, of which there were about ninety-eight acres, was then worth only about $12,000, including the buildings. According to the complainant’s testimony, it was expressly understood between him and the mortgagor that the policy in question should be security for the money secured by the mortgage. Indeed, the mort [94] gagor does not positively deny this. He says he does not think that anything was ever said between them about the policies, and that nothing was said about putting an insurance clause in the mortgage, but the fact that the clause is in the mortgage, and that the policies of insurance were assigned by him, as before mentioned, expressly as collateral security to the mortgage, and were delivered with the mortgage to the mortgagee, presumably in pursuance of its requirements, is evidence that he is mistaken. He also says he does not think that he had the policy on the house when he gave the mortgage. He is mistaken in this, for the policy is dated on the 12th of November, 1872, and ran from the 31st of October, 1872, and the mortgage is dated the 6th of December, in that year. It appears that the two policies of insurance which were delivered to the complainant with the mortgage, were, when they were handed to him, folded in that instrument, and were so received by him, and that the attorney from whom he received them informed him, as the complainant testifies, that he had had the mortgage recorded, and that the insurance papers were in it. 'The complainant further testifies that he put the papers in his safe, and never looked at them until after the fire had taken place, when, having heard of it, he took them out of the safe. He subsequently found that he had not received the policy on the new house. ' He has an equitable lien on the insurance-money in question, and there will be a decree accordingly. The complainant, by his bill, made claim to another policy, issued by the Hudson Insurance Company, but that claim is abandoned.