Mechanics & Traders Ins. v. Boyce

Stevens, J., delivered the opinion of the court. Appellee, as plaintiff in the court below, instituted this action to recover from appellant six hundred dollars on a fire insurance policy. The policy was issued in favor of Miss A. Y. Marshall and on her property, with- the [172] usual standard mortgage clause in favor of appellee. The plaintiff sought to recover as mortgagee, and relied upon the contract evidenced hy the mortgage clause. Without setting out in detail either the notes and deeds of trust under which the plaintiff claims as mortgagee, or the several pleas of the defendant and demurrers thereto, it is sufficient to state that appellant defended mainly upon the theory that the notes and deeds of trust held hy the plaintiff had been .assigned to and deposited with the Planters ’ Bank of Bogue Chitto as collateral security for an indebtednes due by Mr. Boyce to this bank, and that inasmuch as this assignment was without the knowledge or consent of the defendant, and the securities were held by the Plánters’ Bank at the time of the fire, there was a breach of the covenants of the policy, and plaintiff could not recover. The issue presents for our consideration the question whether the pledging of the notes held by the plaintiff against Miss Marshall will defeat a recovery. We think not. While the pleadings show'that the Planters’ Bank held the notes at the time of the fire, they further show that plaintiff was the equitable owner thereof, that the notes due by Miss Marshall liad not been paid, and that, while Mr. Boyce was a debtor of the Planters’ Bank, the latter had not foreclosed the collateral which Boyce had pledged to the hank. It is further shown that the assignment or pledging of some of the notes was simply by delivery, and not hy written transfer. The plaintiff had not sold the Marshall notes outright, .but had simply used them in financing his own affairs, and in a transaction with the Planters’ Bank in which neither Miss Marshall nor the insurance company had any interest. Mr. Boyce, as mortgagee, relies upon his independent contract with the insurance company, by the terms of which there is no prohibition against the assignment, transfer, or pledge of the notes which the mortgage clause is designed to protect. Mr. Boyce, as mortgagee, has no direct- interest or estate in the mortgaged property, and unques [173] tionably any pledge of the Marshall notes conveyed no interest or estate in the property covered by the policy of insurance. The stipulation against any change in the interest, title, or possession of the subject of the insurance is intended to govern, and does in fact control, the conduct of Miss Marshall, the owner of the property, and not the mortgagee, provided only that the mortgagee shall notify the company of any change in the ownership or occupancy which shall come to his notice. This is the express agreement in the standard mortgage clause. The question is simple and so free of difficulty that any expression from us is really unnecessary. The case of Kase v. Hartford Fire Ins. Co., 58 N. J. Law, 34, 32 Atl. 1057, relied upon by appellant is not in point. In that case the plaintiff had conveyed his interest in the mortgage to a third party, and therefore at the time of the fire, as expressly held by the court,.had no interest to protect. Kase, the mortgagee, had assigned the mortgage, but had not assigned the policy of insurance. In reference to Kase the court observed: “He has not suffered any loss by reason of the injury to the mortgaged premises, for he had no interest in them when the fire occurred.” And as to Headley, assignee of the mortgagee, the court said: “So far as Headley, the assignee of the mortgage, is concerned, although if is true that the fire depreciated his mortgage security, and thereby inflicted pecuniary loss upon him, yet, as he had no interest in the policy of insurance at the time of the fire, he has no right to call upon the defendant company to make good the loss which he has sustained. A policy of insurance is a contract of indemnity, personal to the party to whom it is issued.” In the instant case Mr. Boyce did have an interest in the notes secured by the mortgage clause, and at the time of the fire enjoyed the right to pay the Planters’ Bank any indebtedness which he owed it, and thereby to redeem his notes altogether. He still possessed the [174] right of a mortgagee, and as such had an interest in the policy, and the right to recover under the terms of his contract. The business of the country is largely done on harrowed capital, and the right to pledge mortgages and commercial paper as collateral security is a valuable right, freely and frequently resorted to. We do not think, under the facts of this case, a. sale of the premises for taxes was a breach of the covenants of the policy. The two years within which the property might be redeemed had not exired, and the inchoate right or title of the tax purchaser had not ripened into a good title. Mr. Brister purchased at a tax sale made on the first Monday of May, 1915. He would not .be entitled to possession, and would in fact own no title, until the time for redemption under our revenue laws had expired. Affirmed.