Loy v. Home Insurance

Cornell, J. The policy on which this action is brought contains the following among other conditions : “If the property be sold or transferred, or any change takes place in title or possession, (except by reason of the death of the insured,) whether by legal process or judicial decree, or ¡voluntary transfer or conveyance, * * * this policy 'shall be void. ” The property insured consisted of a dwelling-house, and icertain furniture and wearing apparel therein contained, situate upon premises belonging to the respondent. After the ¡Issuance of the policy the respondent mortgaged the premises, ¡and the same were sold under a power of sale, upon a foreiclosure of the mortgage by advertisement, pursuant to the statute. After the sale, and before the period for redemption [317] had expired, the loss occurred, the respondent still being in possession of the premises. The question for consideration is, whether this foreclosure sale was “a sale, transfer, or change in title,” within the meaning of the foregoing condition, such as avoided the policy. In construing a condition of this character, if, upon a consideration of the whole contract, it is uncertain whether the language of the stipulation is used in an enlarged or restricted sense, or if it is fairly open to two constructions, one of which will uphold and the other defeat the claim of the insured to the indemnity which it was his object in making the insurance to obtain, that should be adopted which is most favorable to the insured, and most in harmony with such, the main purpose of the contract on his part. The reasons for this are two-fold: the tendency of any such stipulation is to narrow the range and limit the force of the underwriter’s principal obligation. It is also inserted by him for his own benefit and in language of his own choice. If any doubt arises as to its meaning the fault is his in not making use of more definite terms in which to express it; hence the rule of strict construction against him, and the liberal one in favor of the assured, which prevail under such circumstances. Hoffman v. Ætna Ins. Co. 32 N. Y. 405; Westfall v. Hudson Riv. Ins. Co. 2 Duer, 495; Ins. Co. v. Wright, 1 Wall. 456; West. Ins. Co. v. Crapper, 32 Pa. St. 351. Applying these principles, a correct interpretation of this condition of the policy would seem to be attended with but little difficulty. In the first place it makes a sale or transfer of the property a cause for avoiding the policy. Within the meaning of the stipulation this refers to an absolute and completed, and not a conditional or incomplete, sale or transfer; in other words, a sale that wholly divests the owner of the property of all insurable interest therein. The succeeding clause, which gives a like effect to any “change in title, * * * whether by legal process, judicial degree, or voluntary transfer or conveyance, ” has reference to [318] 'an- absolute transfer of the legal title in one of these ways,' though such transfer, as in the case of a conveyance in trust, or by a deed, absolute in terms, but intended merely as a security, might not operate to divest the owner of the property] of all his insurable interest therein. In our judgment nothing short of a complete transfer of the legal title comes within the prohibition of this stipulation. The mere creation of a lien or encumbrance upon the property insured cannot be regarded as effecting “any change in title,”' either in the legal sense or according to the ordinary and popular understanding. “In legal acceptation,” says Allen, J., in S. F. & M. Ins. Co. v. Allen, (13 N. Y. 389,) “title has. respect to that which is the subject of ownership, and is that! which is the foundation of ownership; and with a change of title, the right of property, the ownership, passes. ” As applied to real estate, it is defined to be “the means whereby the' owner of lands or other real property has the just and legal' possession and enjoyment of it;” “the lawful cause or ground of possessing that which is ours.” (2 Bouv. Law. Diet. 986.) In this sense, which is also the ordinary and popular one in which the word is used, a “change in title” is a change in ownership, which carries the legal right of possession and property, and it is in this sense we must understand the word as having been used in this clause. Although within the meaning of the registry laws a mortgage of real estate is defined to be a conveyance, yet under our laws it is not deemed a conveyance in the sense of passing any estate or interest in lands, or transferring any legal title thereto. The only interest which a mortgagee acquires is a lien upon the land in way of security, which, prior to the foreclosure of the right of redemption, is treated as personal property that goes to the administrator or executor, and not to the heirs. The legal title, with the right of possession, remains, with the mortgagor until a completed foreclosure is had by sale, and the same becomes absolute by the expiration of the [319] period for redemption. Until this time expires the purchaser at the sale has only a chattel and equitable interest. He has no legal title to the lands, nor any conveyable estate therein. The character of his interest is the same as that of - a mortgagee before foreclosure sale. Gen. St. c. 52, §11; Id. c. 75, § 11; Donnelly v. Simonton, 7 Minn. 110, (167;) Horton v. Maffitt, 14 Minn. 290-292. Neither is a foreclosure by advertisement “legal process” or a “judicial decree.” The proceedings in this kind of a foreclosure are carried on wholly outside of court, and without the aid of its process or decree. It is obvious, then, that neither the giving of the mortgage nor the sale of the premises .on foreclosure, the time for redemption not having expired, effected any change in title or possession in respect to the property insured, and did not, therefore, avoid the policy. Order affirmed.