Assigned Estate of Zehring

Opinion by

Willard, J.,

On the 4th of April, 1883, William Zehring received a deed for a farm in East Hanover township, Lebanon county, Pa., from J. H. Mease, executor of Daniel Mease, deceased, in which Elizabeth Mease, the widow of Daniel Mease, had a dower interest amounting to the sum of $3,000, upon which she was to receive the sum of $180 interest per annum during her life, and at her death the principal was to be paid to the legal heirs and representatives of Daniel Mease, deceased. Zehring purchased the farm subject to the dower interest, agreeing to pay the $180 annually during the life of Mrs. Mease, and the principal to the heirs at her death, as provided in the will. Zehring paid the annual interest up to the first dajr of April, 1894, and’ then stopped payment. On May 7, 1895, Mrs. Mease, through her son, Dr. J. H. Mease, applied to the City Mutual Fire Insurance Company of Lebanon, Pennsylvania, for a policy of insurance in the sum of $1,000, to protect her dower interest. The negotiation for the policy was between Mr. S. H. Bentz, secretary of the company, and Dr. Mease acting for his mother. It was thought by Bentz that as the legal title to the farm was in Zehring, he would have to make the application, and at the solicitation of Dr. Mease, Zehring accompanied him to the insurance office and signed the application, with a distinct understanding that he (Zehring) was not to pay the premium, but the premiums and all assessments would be paid by Mrs. Mease. The policy was issued nominally to William Zehring as the assured, which contained the following clause: “ Loss, if any, payable to Elizabeth Mease, widow, as her dower interest may appear.” This policy was delivered to Dr. Mease who paid the premium and policy fee. Mrs. Mease subsequently paid an assessment on the policy on notice to her from the insurance company. On the 21st of May, 1895, William Zehring, joined by his wife made an assignment to Thomas H. Capp in trust for the benefit of creditors.

On the 19th of August, 1895, the barn and several of the outbuildings were destroyed by fire, the insurance thereon being the sum of $500. After the fire, proofs of loss were made out which Zehring signed and swore to after consultation with his counsel. The property was subsequently sold by the assignee to C. Capp for $1,147.63 subject to Mrs. Mease’s dower interest. After the fire the insurance was claimed by Mrs. Mease and T. H. Capp the assignee of William Zehring, the money being paid by the insurance company to Mrs. Mease, the company first requiring her to give a bond of indemnity against all claims by the assignee and other persons. A suit was brought and is now pending in Lebanon county wherein Thomas H. Capp, assignee, is plaintiff, and the City Mutual Fire Insurance Company is defendant, for the $500 insurance paid to Mrs. Mease. Upon the filing of the assignee’s account, Mrs. Mease filed exceptions thereto on the ground that the accountant had applied the moneys in payment of judgments posterior to her claim of $360, which'was for .two years’ interest on her dower from April 1, 1894, to April 1,T896. The account was referred to C. H. Killinger, Esq., as an auditor to make distribution. The auditor disallowed the claim of Mrs. Mease for the reason that she had already received a larger amount from the insurance company. Exceptions were filed to the report of the auditor, which exceptions were overruled by the court in an opinion filed December 9, 1896, and an appeal taken to this court.

The dower interest of the appellant in the farm that belonged to her husband in his lifetime was settled upon her in his last will and testament for her support. It was valued at $3,000, with a proviso that the interest on that sum, to wit $180 per annum, should be paid to her annually on the 1st day of April, and after her death the principal sum to go to the heirs at law of her husband. The annual interest for two years is withheld from her by the report of the auditor and the decree of the court below for the reason that she had received 1500 upon an insurance policy placed by her upon certain buildings upon the farm and destroyed by ñre during the life of the policy. Was the court below right in thus withholding from this appellant her annuity, is the question for our consideration. To properly determine this question it is necessary to ascertain in the first place upon what facts the auditor and court based their legal conclusions. The specific findings of fact by the auditor, numbered two, three and four, are here inserted as found by him :

“ 2. In the spring of 1895, Dr. J. H. Mease, executor of the estate of Daniel Mease, the grantor, acting on behalf of his-mother, Elizabeth Mease, widow of the said Daniel Mease, the person named in said charge, thinking it desirable to protect the interest of his mother by insurance upon the buildings of said farm, approached S. H. Bentz, secretary of the City Mutual Fire Insurance Company to procure such insurance. In the language of the secretary — ‘ Dr. Mease was uncertain whether he would sign this application for his mother or whether Mr. Zehring should sign it, and I thought Mr. Zehring should sign it.’ All dealings in regard to this application and policy except as hereinafter stated, were between the company’s secretary, S. H. Bentz, and Dr. Mease. At the time of the application Dr. Mease informed the secretary that the company should look to him for the payments of assessments.

“ 3. The application was drawn from information furnished by Dr. Mease. Dr. Mease saw Zehring and said to him, ‘ we want to take out a policy to protect my mother’s interest. Of course we don’t expect you to pay this but it seems that it is necessary for you to sign the application, for you have the legal title, so the insurance'agent says.’ Zehring said ‘all right.’ They crossed the street to the secretary’s office and Zehring signed the application May 4,1895. The application contains, inter alia, the following clause, ‘Forvalue received and in consideration of the policy of insurance to be issued by the City Mutual Fire Insurance Company, of Lebanon, Pa., upon the approval of my application for insurance in said company of this date, I propose to pay the company such sum or sums of money and at such time or times as the board of directors of said company may for the purpose of paying losses by fire and the necessary expenses of said company require, payable within thirty days after notice.’

“4.- The company issued its policy of insurance May T, 1895. It was delivered to Dr. Mease who paid the premium and policy fee of $3.00. Zehring was never asked to pay and never paid anything. The policy insured William Zehring and continued, inter alia, ‘In consideration of the further stipulation (inter alia) that the insured promises to pay the company such sum or sums of money as may be assessed by the board of directors from time to time for the payment of losses and the necessary expenses of the company may require.’ It also contains the following stipulations: ‘ To be void . . . . if any change other than by death of an insured takes place in the interest, title or possession of the subject of insurance .... whether by legal process or judgment or by voluntary act of the insured, or otherwise.’ Also, the following: ‘ If with the consent of this company an interest under this policy shall exist in favor of a mortgagee or of any person or coloration for an interest in the subject of insurance, other than the interest of the insured as described herein, the conditions hereinbefore contained shall apply in the manner expressed in such provisions and condition of insurance relating to such interests as shall be written upon, attached or appended hereto.’ Dr. Mease agreed to the issuing of the policy in tins form.”

In addition to the above findings an extract from the uncontradicted testimony of Mr. Bentz, the secretary of the insurance company, is here inserted as throwing light upon the transaction: “ In addition to other reasons for refusing Mr. Zehring insurance, I knew he was involved, and also that he had enemies, and therefore considered the risk undesirable; I knew Mr. Zehring was financially embarrassed for a year previously to his assignment; as a matter of fact I considered Elizabeth Mease the person really insured, to whom we looked for payments; at the time, Dr. Mease did not know whether he could get Zehring to sign the application.”

From the above facts we are forced to the conclusion that the appellant was the real party insured, and that William Zehring was only a nominal party to the contract. The printed and oral arguments of counsel were directed to what appeared to be the vital question in the case, to wit, whether there was sufficient evidence to justify the reformation of the contract of insurance, and to warrant a chancellor in striking the name of William Zehring therefrom.

As we view this case and the well settled principles of law governing it, it is unnecessary to discuss this question. The contract required no reformation in order to afford entire protection to the party entitled thereto.

The first question is, what was the policy issued for? To this there can be but one answer under the facts. It was for che protection of the dower interest of this appellant.

The second question is, bad she an insurable interest in the property insured? That question is answered by Mr. Justice Mer-cub, in Louden v. Waddle, 98 Pa. 242, where it is said : “ A widow’s dower is not merely a lien, but an estate in the land.”

The third question is, could the appellant sustain an action upon this contract in her own name ? If she could, then the payment 4o her by the company was a good payment-and a pro tection to the company.

There is no principle better established than that the person from whom the consideration moves has a direct right of action against the party receiving the consideration and stipulating for indemnity in the contract expressing the consideration. The appellant paid the consideration, the indemnity was payable to her as her interest might appear, and that interest far exceeded the amount of indemnity stipulated and paid for and actually received by her. The right of this appellant to maintain an action in her own name is also supported by most respectable authority. In Biddle on Insurance it is said, “Where the payee, himself alone, as, for example, a mortgagee, in the name of a mortgagor, makes the contract with the insurer, though in another’s name, or becomes, to a certain extent, a contracting party, then the courts seem unanimously to permit a suit in the name of the payee.” In Ostrander on the Law on Fire Insurance at paragraph 385 it is said: “ The rule appears to be, however, that suit should be in the name of the assured, except where the property has been sold and the policy assigned by the consent of the company, or where the insurance is taken with the understanding of the parties that the assignee, payee or mortgagee, is the real party insured, in which case, of course he will be the proper person to sue.”

It is said, also, by the same author at paragraph 390, “ when the owner of the property is only nominally’the insured, the policy being issued in his name, but procured and paid for by the mortgagee, and containing a clause directing, without qualification or restriction, that the loss be paid to the latter, he may recover in a suit brought in his own name.” In Hadley v. New Hampshire Fire Insurance Company, 55 N. H. 110, “ the plaintiff, interested as mortgagee obtained the policy in suit in the name of the general owner, with his consent paying the premium himself; and the policy being made payable to him in case of loss to the extent of his mortgage interest, the whole amount of insurance being less than his mortgage debt, it was held that he might maintain an action in his own name to recover the whole amount.” In Aurora Fire and Marine Insurance Company v. Hopkins Manufacturing Company, (Supreme Court of Michigan) 11 Ins. Law Journal, 341, plaintiffs had a mortgage upon real estate to secure the payment of a certain bond, which among other conditions, provided that the building should be kept insured. The mortgagor having failed to so insure, the mortgagees insured their interest, the policy issued being, in form, to the owner, but paj^able to the mortgagees, as their interest should appear. The consideration passed directly from the mortgagees to the insurance company. The policy was delivered to the mortgagees and covered no more than their interest. Held, that an action thereon was properly brought in the name of the mortgagees. To the same effect is Chamberlain v. New Hampshire Fire Ins. Co., 55 N. H. 249, West Chester Fire Ins. Co. v. Foster, 90 Ill. 121, Meriden Savings Bank v. Home Mutual Fire Ins. Co., 50 Conn. 396, Maxcy v. New Hampshire Fire Ins. Co. of Manchester (Supreme Court of Minnesota), 22 Ins. Law Journal, 830, and Palmer Savings Bank v. The Insurance Company of North America, 166 Mass 189.

The fourth question is, can the third finding of law by the auditor that “ the payment of the insurance to Elizabeth Mease must be treated as a satisfaction of the $360 interest on the dower charged in her favor,” be sustained on principle or-authority ? The assignor of the property had no real interest in the policy. It was merely nominal, and if he had none, Capp, his assignee, had none. On what principle then can this money be appropriated to the payment of appellant’s annuity ? Neither ■Zehring nor his assignee paid or contributed one dollar of the consideration for the indemnity, nor had they any interest in the dower right protected by the contract. It therefore follows that the auditor’s conclusion of law and the decree of the court, which in effect appropriated $360 of the appellant’s insurance money to the payment of her annuity, was erroneous. The appellant attempted to protect her entire dower interest and in this she stood on at least as secure ground as though she had been a mortgagee holding a mortgage of $3,000, and had procured and paid for herself an insurance of $1,000 on the mortgaged premises in the name of Zehring with his consent. Under such circumstances,' in case of loss she could have recovered the insurance in her own name without applying the money to the payment of the mortgage in the absence of an agreement to that effect between the mortgagor and mortgagee, nor could the mortgagor compel its application for that purpose. In Wood on Fire Insurance at page 863, it is said, “ the right of a mortgagee to insure the premises to the amount of his debt, is the lien given upon the property by the conveyance, as security for the payment of the debt, yet the insurance is in no sense the insurance of the debt, but of the mortgagee’s interest in the property as security for the debt. Except where the insurance is effected by the mortgagor, or under an arrangement with him, or he pays for the same, or agrees to do so, payment of a loss under the policy does not operate as a payment of the debt, or relieve the mortgaged premises from the lien, or the mortgagor from liability for the whole sum payable by the terms of the contract, nor does it estop the mortgagee from recovering both the insurance and the debt.”

In an insurance by the mortgagee for his own benefit it has been held that payment of the insurance money does not extinguish the debt as the mortgagor has no interest in the policy: Biddle on Fire Insurance, par. 255. The rule is stated in May on Insurance, par. 456, as follows: “ It may be stated, as a general rule, that no one, except the assured, or his assigns after loss, can claim either from the insurers or from the party to whom the loss has been paid, any part of the proceeds of a policy, unless by express agreement, or unless the policy covered property in which the claimant had an interest, and was intended or effected in part or in whole for his benefit and at his expense.” In Louden v. Waddle, supra, it was said by Mr. Justice Meecue, “the defendants claim that the insurance by a mortgagee of the interest in the premises intended to be for the amount of his debt, is an insurance of his debt, and in case of loss, receipt by him of that amount from the insurance company operates as a satisfaction of the mortgage. To support this view they cite Smith v. Insurance Company, 17 Pa. 253; Insurance Company v. Updegraff, 21 Pa. 513; Reed v. Lukens, 44 Pa. 200. It may well be doubted whether these cases sustain the view on the facts assumed .... The effect claimed from the mere insurance by a mortgagee for the amount of his debt is in conflict with elementary authority and many well considered' cases.”

In Louden v. Waddle the argument of the appellee was based upon the dictum in Smith v. Insurance Company, 17 Pa. 253, that an insurance by a mortgagee was but the insurance of a debt, a mortgage being but a lien upon and not an interest in land. While it has been held that an owner of a judgment has no insurable interest in the land upon which the judgment is a lien, the rule is otherwise as to the insurable interest of a mortgagee. Both mortgagors and mortgagees have insurable interests. As was said in Palmer’s Savings Bank v. Insurance Company of North America, supra, “Each can insure for his own benefit, the mortgagor for the full value of the property, and the mortgagee for the full value of his interest in the property, and neither can avail himself in any way of the money recovered from insurance by the other, unless there is some contract making it so available.”

In this farm the appellant had an estate ample to support her contract. Under its terms she received the sum of $500, and neither William Zehring nor his assignee or creditors can claim the money thus paid to her, nor compel its application in payment of her annuity, because there was no agreement that it should be so paid or applied, nor did William Zehring or his assignee have any interest in her dower estate, nor is there any evidence in this case that the policy was effected, in part or in whole, for the benefit of Zehring or at his expense.

The sum of $360 arrearages of dower due and unpaid to the appellant from April 1, 1894, to April 1, 1896, should have been distributed and paid to her out of moneys derived from the sale of the farm to C. Capp, in preference to any subsequent lien thereon.

The decree of the court below of December 9th, 1896, is reversed at the cost of the appellee, and the record remitted to the court below with directions that distribution be made in accordance with this opinion.