Minnesota Title Insurance & Trust Co. v. Drexel

CALDWELL, Circuit Judge, after stating the case as above, delivered the opinion of the court. The only error assigned is the overruling of the demurrer to the complaint. The contention of the learned counsel for the plaintiff in error is that the foreclosure of the mortgages by notice and sale, and the purchase of the mortgaged premises by the mortgagee for the full amount of the mortgage debt, “canceled the mortgage debt as completely as though it had been paid in cash,” and that such satisfaction of the mortgage debt inures to the benefit of the insurer, and absolves it from liability on its policy as fully as if the mortgage debt had been extinguished by a cash payment made by the mortgagor. The contention is not sound. The cases cited by counsel to support this contention have no application to this case. The case at bar depends upon the construction of the policy of insurance, and the same liberal rules of interpretation that apply to fire and other policies of insurance are applicable to the policy in suit. The policy in suit, on the point in question, is not ambiguous, nor its meaning doubtful; but if there was room to doubt as to its proper interpretation, the doubt would have to be resolved in favor of the insured, according to the settled canon of construction applicable to such contracts. National Bank v. Insurance Co., 95 U. S. 673, 678; Thompson v. Insurance Co., 136 U. S. 287, 297, 10 Sup. Ct. 1019; 2 Whart. Cont. 670; Kahnweiler v. Insurance Co., 14 C. C. A. 485, 67 Fed. 483. The insurer is not a surety. The defendant company, for an adequate consideration, agreed to “indemnify, keep harmless, and insure” Drexel, the mortgagee, “from all loss or damage, not exceeding |55,000,” the amount of the mortgage debt, which he or his assigns might sustain by reason of defects in the title to the mortgaged premises, or by reason of liens or incumbrances thereon existing at the date of the policy. The contract is plain and explicit on .this point. In a word, it is a guaranty that the mortgagee should not suffer any loss or damage by reason of defects in the title to the property, or liens or incumbrances thereon, existing at the date of the policy. Under this guaranty, if the mortgaged property, with a clear title and free from incumbrances, was worth the amount of the mortgage debt, the mortgagee could confidently rely upon the sufficiency of his security. The mechanics’ liens upon Avhich the mortgaged property was sold were liens upon the property at the date of the policy. The defendant company, nevertheless, refused either to pay these prior liens, or to pay the insured the amount bid for the property at the foreclosure sale, which was the amount of his mortgage debt, thus forcing the insured, in order to protect his security and his title, to redeem the property from the sale on the mechanics’ liens. [199] The policy provides that, where by foreclosure the insured has acquired the title to the properly, the price to be paid by the insurer “shall be the amount bid at said foreclosure sale.” The defendant, was obligated, by the terms of the policy, either to pay this amount, or to relieve the property from all liens existing thereon at the date of the policy. It refuses to do either, and seeks to escape all liability by putting the burden of freeing the property from-the liens existing- thereon at the date of the policy upon the mortgagee, on the ground that, at toe sale of the property under the mortgages, the mortgagee bid the full amount of his mortgage debt, and thereby himself assumed the burden of paying off the mechanics’ liens. Under the terms of the policy, the mortgagee had a right to look to the defendant for the extinguishment of all liens upon the property which existed at the date of the policy, and to gauge his bid on the assumption that the defendant would discharge its obligation in this regard. The contention of the defendant is in toe teeth of a very plain provision of the policy which declares: “Payment, discharge, or satisfaction of said mold gage indebtedness (except by foreclosure of said mortgage) ~ * * shall fully terminate, annul, and avoid this policy, and all liability of the company thereunder.” The case at bar falls directly within this exception. We need not consider what effect this provision would have where the property was purchased by a stranger at the foreclosure sale. Beyond controversy, it includes and binds the parties to the contract, and is 'applicable to every case where the mortgagee, insured, becomes the purchaser of the property at the foreclosure sale for the amount of his mortgage debt. The judgment of the circuit court is affirmed.