Waring v. . Loder

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] The Lycoming Insurance Company, in respect to the right to enforce the judgment against the defendant Loder for the deficiency on the foreclosure sale, stands in the place of Waring, their assignor.

The assignee of a judgment takes it subject to the equities of the judgment debtor, and if the judgment could not have been enforced by Waring at the time of the assignment, the company hold it subject to the same disability. (Douglass v. White, 3 Barb. Ch., 621.)

The insurance in the Lycoming Insurance Company was effected by Minor, the mortgagee, under the authority contained in the mortgage. This is conclusively established, as against the plaintiff, by the record in the foreclosure suit. The complaint alleges that the premium paid is a part of the indebtedness secured by the mortgage. It was included in the amount reported by the referee to be due, and the judgment for the deficiency is increased by the amount of the cost of the insurance. The import of the transaction is, that the insurance was additional collateral security for the mortgage debt, furnished by the mortgagor at his expense, and procured by the mortgagee, acting as his agent and by his authority. The general rule, that the proceeds of collateral securities in the hands of the creditor are to be applied, when received by him, in the reduction of the debt (SHAW, J., in King v. The State Mutual Ins. Co., 7 Cush., 1), would require that the insurance money, when collected by the plaintiff, should be applied upon the judgment, and, if sufficient to pay it, should extinguish it. Nor do we see any ground for taking this case out of the operation of the rule. The mortgagee, it is true, owed no duty to the mortgagor to insure the property, and he could, in the absence of any agreement with the mortgagor, have insured the debt simply, so that the mortgagor in case of loss could have claimed no benefit from the insurance. But the mortgagor had an insurable interest. When the mortgage was given he had the legal title to the land on which the insured building stood. When he sold the land, he had still an interest in the preservation of the property, in order that his debt might be paid out of it, the land as between him and his grantee being primarily charged with its payment. And this was, we think, an insurable interest within the cases. (Crawford v. Hunter, 2 B. P. [N.R.], 269; Herkimer v.Rice, 27 N.Y., 163.)

The authority given in the mortgage was an authority to the mortgagee to procure an insurance for the benefit of both parties. This is its fair interpretation. It was immaterial to the mortgagor whether the insurance was in his name or in the name of the mortgagee, if the avails of it in case of loss should apply in reduction of the debt. The mortgagee had no interest to procure an insurance limited to his own protection merely where the expense was to be paid by the other party and was secured on the land. It has been held in several cases that insurance procured by a mortgagee upon the request or at the expense of the mortgagor is held by the mortgagee for the protection of both interests, and the implied obligation arising is that the insurance money when paid to the former shall apply upon the mortgage debt. (Holbrook v. American Ins. Co., 1 Curtis, 193; PRATT, J., in Buffalo Steam Engine Works v. Sun Mut. Ins.Co., 17 N.Y., 406; Clinton v. Hope Ins. Co., 45 id., 467.)

The loss by fire occurred intermediate the commencement of the foreclosure and the rendition of the judgment. The plaintiff received from the underwriter, after the judgment was entered, an amount sufficient to pay it, and upon the receipt the law giving effect to the contract between the mortgagor and mortgagee applied it in payment of the debt. The plaintiff then had no further claim under the judgment. It was extinguished, and he had nothing to assign to the underwriter.

It is immaterial, so far as the plaintiff's rights are concerned, that the assignment of the judgment was made a condition of the payment, by the company, of the loss on the policy. The company and the plaintiff could not by their agreement qualify the effect of the receipt by the mortgagee of the insurance money, as between the plaintiff and defendant.

It becomes unnecessary to consider whether the underwriter was by the form of the contract of insurance entitled to be subrogated (in the absence of any agreement between the mortgagor and mortgagee) to the mortgage security and to the claim against the mortgagor, or whether the company could have defended an action to recover for the loss, on the ground that the right of subrogation had been defeated by the act of the assured. (Kernochan v. New York Bowery Fire Ins. Co., 17 N.Y., 428.) Those questions are between other parties.

The plaintiff received the insurance money, and the defendant by this contract with the mortgagee is entitled to have it applied upon the judgment.

The order should be affirmed, with costs.

All concur.

Order affirmed.