Stockton National Bank v. Home Insurance

The opinion of the court was delivered by Dawson, J.: This was an action to recover on a fire insurance policy. The late Henry Cooley, of Rooks county, purchased a policy of fire insurance upon his farmhouse and bam, and also upon his household goods. The farm was subject to a first mortgage in favor of J. R. Loomis, and with the insurance company’s consent the insurance on the farmhouse was to be payable to the mortgagee as his interest might appear. The plaintiff, The Stockton National Bank, held a second mortgage on the farm. Cooley died, and Loomis brought suit to foreclose his mortgage. The bank, as junior mortgagee, was impleaded and its second mortgage was also foreclosed. The sum of the two mortgages was about all that the farm was worth, and to protect its lien the bank bought the farm at the foreclosure sale. During the redemption period the farmhouse and its contents were burned. The widow of Cooley, [790] his administratrix, collected the insurance on the household goods, and the bank as purchaser at the foreclosure sale claimed to be subrogated to the interest of Loomis, the first mortgagee, and demanded payment of the insurance on the farmhouse. The insurance company denied liability. Action was begun, issues were joined, and the trial court gave judgment for defendant on the pleadings and upon the opening statement of counsel for the bank; hence this appeal. A majority of this court hold that the judgment of the trial court was correct. The purchaser of the insured property at the sheriff’s sale had no legal claim upon the insurance policy, which covered the property for the benefit of the mortgagor and mortgagee, nor was it subrogated to the rights of the mortgagee in the proceeds of the insurance. An insurance policy is a personal obligation between the insurance company and those with whom it chooses to bargain. It was willing to carry the risk for Cooley and his original creditor, and bound itself to do so; but it never did obligate itself to carry the fire risk on the property for any purchaser of the property at sheriff’s sale if the owner of it became so indifferent in regard to the property as to permit it to be sold under mortgage foreclosure. An insurance company may be perfectly willing to carry insurance on a mortgaged property, and also willing to protect the interest of the mortgagee, where the mortgagor is diligently caring for the property, keeping the interest paid up on the mortgage, keeping the taxes paid and the property in repair; but the insurance hazard is or may be much different and much greater when the mortgagor has so far defaulted as to permit the property to be sold by the sheriff under foreclosure proceedings. The insurance company is not bound to carry such a risk without expressly consenting thereto, and without the payment of a larger premium rate for the possibly greater moral hazard involved. The purchaser at the sheriff’s sale, although that sale was conditional and the property was subject to redemption, had an insurable interest which he himself might have protected by insurance (Deming v. Dickerman, 63 Kan. 728, 66 Pac. 1029; 2 Joyce on The Law of Insurance, 2d ed., § 981a) ; but that interest was not covered by the policy issued for the benefit of the mortgagor and the original mortgagee. [791] (Note, 6 L. R. A., n. s., 448; 2 Joyce on The Law of Insurance, 2d ed., § 1046.) The learned trial judge in this case delivered a written opinion, in which he noted that our reports had no precedent to govern this precise question. He was guided by the analogy and doctrine which he drew from the case .of Lett v. G, F. Ins. Co., 125 N. Y. 82, part of the syllabus of which reads: “A policy of fire insurance is a personal contract by which the insurer undertakes to indemnify the assured against loss, in a manner and subject to conditions therein described. The obligation does not pass with the insured property to an assignee or purchaser thereof without the consent of the insurer, and such consent alone can, in case of a transfer, keep in life the agreement. “Defendant issued a policy of insurance to B. upon his property, loss being made payable to A., as mortgagee. B. subsequently conveyed.the property subject to the mortgage, and his grantee conveyed to plaintiff; at the time of such conveyance, B. executed to plaintiff an assignment of his interest in the policy. No consent to the change of title was indorsed by defendant upon the policy, although such consent was made by the policy a condition of its continuance in force. On application of plaintiff for a consent, he was told by an officer of plaintiff that the policy had been canceled; this was not, in fact, true; thereupon plaintiff took out a policy for the same amount in another company, and demanded from B. a return of the allowance for premium made to him upon the transfer of the policy. In an action upon the policy, held, that it was invalidated by the failure to obtain defendant’s consent to the change of title, and that there was nothing from which such consent, or a waiver of the condition, could be inferred; also, that defendant acquired no interest by his assignment from B., as the latter had no interest at that time in the policy, it having become void by his act.” The judgment of the trial court is affirmed.