Badger v. Platts , 68 N.H. 222 ( 1894 )

Platts is the holder of the two notes assumed by Badger and the mortgages securing them. It is agreed that the amount due upon the $1,800 note was $506.15 on January 23, 1893. The only question, therefore, is whether the payment of the amount due upon the $1,500 note to Clough as mortgagee, by Champlin as agent of the North British Mercantile Insurance Co., and the assignment by Clough to Champlin of the mortgage securing the note, was a payment of the mortgage debt for the benefit of the mortgagor, or a purchase by the company which subrogated them to the rights of the mortgagee. There is due to Platts the full amount of the Clough note, or nothing.

The use of naphtha on the premises without the knowledge or agency of Clough, or any one claiming under him, had no effect upon the policy of insurance as to him, and his interest as mortgagee was insured at the time of the fire. By the terms of the policy, the company had the right to protect themselves by paying the amount due upon the mortgage note and taking an assignment of the mortgage, which they did. By virtue of the assignment the company was invested with the rights of Clough as mortgagee, and could have proceeded to foreclose the mortgage against Badger, the owner of the equity of redemption. The note having been purchased by Platts and the mortgage assigned to him, he stands in the place of the company.

Badger having purchased the equity of redemption and accepted an assignment to himself of the policy issued to Thurber, the assignment having been made with the company's assent, stands in the same position as if he had applied for the policy and made the contract of insurance with the company. It is immaterial whether he knew naphtha was used in the building. Its use was prohibited by the terms of the policy, and it was the duty of Badger, who must be held to have contracted that it should not be used, to know whether that condition was complied with. The use of naphtha by the tenant invalidated the policy so far as Badger was concerned, whether he knew of its use or not. Wheeler v. Insurance Co., 62 N.H. 326 and, 450.

At the time of the fire, the policy was void as to Badger and valid as to Clough. By accepting an assignment of the policy containing the provision that no act or default of any person other than the mortgagee, or his agents, or those claiming under him, should affect his right to recover in case of loss, Badger became bound by that contract, and party to the agreement that the company, if they should so elect, might pay the mortgagee's claim and take an assignment of the mortgage. This payment was not intended or understood to be such as would extinguish Badger's debt and discharge the mortgage, but operated to satisfy Clough's claim and assign the mortgage to the company, leaving it in full force against Badger.

In Allen v. Insurance Co., 132 Mass. 480, the policy provided that the insurance "as to the interest of the mortgagee only therein" should not be invalidated by the acts of the mortgagor; and that when a loss after a forfeiture was paid to the mortgagee, the company should be subrogated to his rights under the mortgage to the extent of such payment, and might pay the full amount of the debt to the mortgagee and receive an assignment of the mortgage. The court say: "The policy provided that the amount due for it loss after it forfeiture shall not be a fund for the payment of the mortgage debt, but that, upon payment of the loss, the mortgage shall be it fund for the reimbursement of the defendant. The contract is, that after a forfeiture the insurance shall be exclusively for the benefit of the mortgagee; that the mortgagor and those claiming under him shall have no beneficial interest in the policy, and that payment to the mortgagee shall not discharge the mortgage, but subrogate the defendant to the mortgagee's right in it. It was a contract which the parties were competent to make, and we know no reason why they should not abide by it." To the same effect are Elliot Savings Bank v. Commercial Union Co.,142 Mass. 142, and Springfield Ins. Co. v. Allen, 43 N.Y. 389.

As the amount paid to Clough by the insurance company was not paid in discharge of the mortgage, Platts's claim under the mortgage is the amount of the mortgage note.

Case discharged.

All concurred.