Appleton Iron Co. v. British America Assurance Co. , 46 Wis. 23 ( 1879 )

The following opinion was filed at the August term, 1878:

Cole, J.

The question is, whether the policy was avoided by the proceedings in bankruptcy and the assignment or transfer made by the bankrupt to the trustee under the order of the district court. ' The counsel for the defendant insists that it was; that there was a transfer- or change of the title of the wood by legal process or judicial decree, within the meaning of the policy.

When considered with reference to the facts in this case, we can give no such effect to the bankrupt proceedings, for this reason. By the terms of the1 policy, the loss was made payable to the plaintiffs Smith, Donkersly cfe Smith, as their interest should appear. It is admitted that their interest ex- . ceeded the amount of the policy. They were the mortgagees of chattels; the whole legal title of the wood was vested in them conditionally, leaving no such interest in the bankrupt as would pass to the trustee under the deed of assignment. It is the settled law of this state, that the mortgagee of chattels has the legal title to the property mortgaged, even before the debt is due, and he may take immediate possession of the property, unless, by express stipulation, the mortgagor is permitted to retain possession. It is unnecessary to refer to the decisions of this court where these principles in regard to chattel mortgages are affirmed or recognized. It is sufficient to say that it is well established that such are the rights of the mortgagee of personal property. Consequently, we think the assignment by the mortgagor to the trustee, under the circumstances stated in the answer, really worked no change in the title or possession of the wood. The title remained in the same persons as before the assignment, and as when the property was insured. The interest of the parties in the same was unchanged, and the insurance company was not released thereby from its liability to pay the loss. Bragg v. The New England Mut. Fire Ins. Co., 25 N. H., 289. There is a plain ground for discrimination between this case and such cases as Adams v. The Rockingham M. F. Ins. Co., 29 Me., 292; Young v. Eagle Fire Ins. Co., 14 Gray, 150; Hazard v. Franklin M. F. Ins. Co., 7 R. I., 429, and Perry v. Lorrillard F. Ins. Co., 61 N. Y., 214; where it is held that an adjudication in bankruptcy against the insured, andan assignment under the bankrupt law, or an assignment by the insured under proceedings in insolvency, is an alienation or transfer of property within the meaning of such clauses in the policy, and defeats a recovery upon it. In those cases the insurance was upon real estate, and an assignment by the insolvent or bankrupt might well be held to operate as a transfer or change of title. A mortgage of real estate, under the modern doctrine in this country, does not convey the fee to the mortgagee, and in that regard is distinguishable from a mortgage of chattels, which passes the entire legal title conditionally to the mortgagee. It is, therefore, not necessary in this case to deny the correctness of the proposition that a transfer or assignment by a mortgagor of real estate under insolvent or bankrupt pi’oceedings does work a substantial change in the title of the insured property, and put an end to the policy, where it contains a condition similar to the one before us. But here nothing passed by the assignment to the trustee; neither the legal title nor the beneficial interest. It is clear that, had the trustee attempted to interfere with the wood, he would have been a trespasser and liable as such, the deed of assignment affording him no protection.

Of course, the insurance company will not be heard to say that the Appleton Iron Gomparvy had no insurable interest in the wood when it issued the policy. For it knew that the wood was mortgaged at the time, and agreed to pay the loss to the mortgagees. It is manifest that the insurance was for the benefit of the Iron Company; for it might pay the mortgage debt and become the owner of the wood. At all events, we must assume that when the contract was entered into, all the facts connected with the title were known to the insurance company, and it saw fit to issue the policy with full knowledge of the precise interest which the parties had in the property. Nothing, in fact, has occurred since the policy was issued, which in any way affects the rights of the parties, or has any bearing upon the liability of the company to pay for the loss, except the proceedings in bankruptcy already alluded to. Under these circumstances, we think the defendant is estopped from saying that the Iron Company had no insurable interest in -the wood when it issued the policy. Such company certainly had an equity of redemption, a right to defeat the title of the mortgagees by performance of the conditions of the mortgage.

There is a still further fact stated in the second defense, upon which considerable stress is laid by defendant’s counsel. It is alleged that the policy of insurance was specifically described by the Iron Company in its petition in bankruptcy; was mentioned as a part of its estate, and was transferred to the trustee by the deed of assignment. There is a clause in the policy that, if it should be assigned before loss, without the consent of the company indorsed thereon, this should avoid the policy. It is claimed that the deed of assignment transferred the policy, within the meaning of this clause. But we think otherwise. It does not appear that the policy was ever delivered to the trustee, or that there was any actual assignment of it. A general assignment by the bankrupt, under the circumstances, would not have the effect to transfer the policy to the trustee.

We therefore think that the demurrer to the answer was properly sustained.

By the Court. — Order affirmed.