Hare v. Headley

54 N.J. Eq. 545 | New York Court of Chancery | 1896

Emery, ~V. C.

(after stating the facts).

On the above facts I reach the following conclusions:

First. As to the assignment of the claim of the fire insurance companies to complainant, I can see no objection to its validity, nor have counsel referred me to any authority calling in question the assignability of a chose in action of this character.

Second. The claim of defendant that the money received by the life insurance company for the insurance was credited on the decree, does not seem to be well founded in point of fact. Since the point was raised at the argument, I have examined the record and proceedings in the foreclosure suit which were offered in evidence, and this record plainly shows that no credit of the insurance money was made upon the decree by the life insurance company, but that on Headley’s application, and without notice to the fire insurance companies or complainant, the credit was made by order of the court, in order that the dispute between Headley and the complainant might be settled on the application for surplus money. The complainant is certainly entitled, under these circumstances, to raise the question as to his right to subrogation, and has not been deprived of it by any act of the life insurance company.

Third. As to the main question in the cause — the complainant’s right to subrogation — this must clearly rest, as it seems to me, upon the establishment of two propositions — -first, that as between the fire insurance companies and the owner insured, the policies were in fact void, by reason of acts or neglects of the mortgagor or owner which avoided the policy; and second, that an agreement between the fire insurance companies and the mortgagee, providing for the payment of loss to the mortgagee in case of such invalidation of the policy by act of the owner, is valid, although not incorporated within the policy itself but is an independent existing agreement, becoming applicable to all policies as they are assigned to the mortgagee.

The defendant disputes both of these propositions and also claims that as to the alleged forfeiture by the acts and neglect of the owner, these were waived by the adjustment and payment of the loss to the mortgagee as the appointee of the owner under the policy. The question of forfeiture is one of fact, and several acts of forfeiture are relied on by complainant at the argument, one of the grounds alleged in the bill not being pressed. This was the claim that the insured were not the unconditional owners of the insured property, by reason of conveyances previously made to one Domenick and F. Butterfield. & Company. These deeds, on their face, were clearly mortgages, and, under the doctrine settled in Carson v. Jersey City Insurance Co., 14 Vr. 300 (New Jersey Supreme Court, 1881), and other cases cited, were no violations of the condition in question. The forfeitures relied on as against the owner are — (1) the seizures and levies on the property under the attachments; (2) the commencement of foreclosure proceedings with knowledge of the insured; (3) the failure of the owners to give immediate notice of the loss, or to give any notice thereof; (4) their failure to render statements or proofs of loss within sixty days, and (5) the failure to commence suit on the policy within twelve months. There is no basis for this last claim, as it appears to me, because the whole loss secured by the policy having been in fact paid within the twelve months to the mortgagee, there could be no other recovery by the owner on the policy if suit were brought. This results from the mere fact of payment, and is the ease whether the payment made to the mortgagee be considered as made to him simply as appointee of the owner, under a policy in force in favor of the owner, or as a payment in favor of the mortgagee only, made under the independent contracts.

As to the other alleged forfeitures, my view is that the seizures and levies under the attachments were a change in the interest of the insured in the insured property, by legal process, within the terms of the policy.

In relation to the second ground of forfeiture relied on, the owner’s knowledge of the commencement of foreclosure proceedings, the facts relied on to prove such knowledge are that prior to the commencement of the suit the solicitor of the mortgagee mailed a notice to the owners that the suit would be commenced unless interest was paid, and that the notices to absent defendants were mailed to them to the correct address in New York city. No direct proof is made of receipt of the letters by the owners, nor, on the other hand, has any proof been made by the defendant that the letters were not received. The question on this point, therefore, is, whether the general rule of evidence that a letter properly mailed is presumed to have reached its destination at the proper time and to have been received by the person to whom it was addressed, is applicable to a case where, if presumed to have been received, the effect will or may be to result in a forfeiture. That courts construe strictly statutes, contracts and other sources of obligations, where the forfeiture of rights under them depends upon construction, is and always has been the undoubted rule, but the question here relates to the rule of evidence and not of construction, and is whether a rule of evidence, generally applicable in relation to the prima facie proof of a fact, is made inapplicable by reason of the effect on property rights of the operation of the rule. The weight of authority is that the rule of evidence must operate without regard to the contents of the letter or its effect. Rosenthal v. Walker, 111 U. S. 185, 193, 194 and cases cited.

I am inclined to adopt this view, supported as it is by another consideration, viz., that the method of mailing notices of foreclosure to absent defendants at their post-office addresses, having been adopted and enforced by the legislature and the courts as a method of fulfilling the obligation to give the notice necessary in every judicial proceeding, such method, in view of its continued public recognition for such purposes, must be considered as sufficient prima facie proof that the notice required by law accomplished the object of the law and was received. But the determination of this question is not necessary for the decision of this cause, for, in my opinion, there are two remaining causes of forfeiture which are made out as against the owner, and these are his failure to give notice of the loss and the failure to render proofs, as required by the policy. Such failure, if not waived by the company, avoids the policy. Dwelling-House Insurance Co. v. Snyder, 34 Atl. Rep. 931 (New Jersey Supreme Court, June, 1896).

The. defendants, not controverting these failures of the owner to comply with the conditions of the policy, rely upon the subsequent adjustment and payment of loss to the mortgagee as a waiver of these failures. -This contention is not well founded, because this payment, under the circumstances of this case and in view of the contract existing between the companies and the mortgagee, must be taken as made by the companies under the claim that they were satisfying an obligation to pay the mortgagee which existed after the obligation to pay the owner ceased. Such payment so made to the mortgagee, who held this additional contract for payment, cannot be held .as intended by the companies to be a payment in waiver of the owner’s violation. Waiver as between persons entitled to insist on the performance of conditions ultimately depends on the intention of the parlies, and if the act relied on as indicating the intention is referable to other causes or reasons than a waiver of a right, it should not be construed to be such waiver.

The contention of defendant on this point, if valid, would of necessity make the mortgage clause nugatory, for the main object of this clause is to provide for a continuance of the policy as to the mortgagee, when it has been avoided by the neglect of the owner, and for a payment to the mortgagee after such avoidance as to the owner. To treat the payments made or claimed to be made under this mortgage clause, and while the.company deny the obligation to the owner, as having the effect of reinstating the policy in favor of the owner, under the theory of waiver, is to hold that the mortgage clause cannot practically be carried out as against the owner. I conclude, therefore, that the policies were void as between the owner and the fire companies, and the next question is whether a payment of the loss to the mortgagee, who has been appointed by the owner to recover the loss, if made after the policy is void as against the owner, operates to the benefit of the owner and his subsequent mortgagees. This depends upon the question whether the contract between the mortgagee and the companies is valid as against the owner, or whether the payment, although voluntarily made, so far as the owner is concerned, must, when received by the mortgagee, be credited upon the debt which the policy was assigned to secure.. If there were no mortgage clause, either in the policy or independent, and the fire insurance companies were under no other obligation to the 'mortgagee than to the owner, then such payment made to the mortgagee would, as it seems to me, clearly operate for the benefit of the owner, and the mortgagee would hold the money received for insurance in trust to apply it to the debt.

The question, therefore, as I view this part of the case, is narrowed down to the simple one, whether the contracts in this case, independent of the policies and unknown . to the owner, are, as against him, valid contracts, payments under which are to be considered as payments made to the mortgagee, not under his appointment by the owner, but as made to it in an independent right with which the owner was not concerned.'

Mortgage clauses, so called, continuing the insurance covered by a policy, in favor of a mortgagee, where they are void as to the owner or mortgagor by reason of his acts or defaults, have for many years been used' and acted on in connection with policies, and where the clause is either incorporated in the policy itself, or otherwise attached by the consent of all parties (owner, mortgagee and insurance companies), no plausible gro.und can be urged against their validity, and the uniform opinion of the courts has sustained them. The reason is that the interest and relations of the mortgagee and of the owner, to the insured property, are, in some respects and to a certain extent, so distinct that the parties being competent to make the contract may provide that the _ policy may be good to the mortgagee, although not to the owner. Hastings v. Insurance Co., 73 N. Y. 141 (1878), an earliest and leading case. Allen v. Watertown Fire Insurance Co., 132 Mass. 480 (1882); Syndicate Insurance Co. v. Bolm, 65 Fed. Rep. 165, 172 &c. (U. S. Circuit Court of Appeals, 8th case, 1894)- The validity of such clause, if included in the policy, was assumed in a late case in the supreme court. Kase v. Hartford Fire Insurance Co., 29 Vr. 34

Davis v. Insurance Co., 135 Mass. 251, the only case cited by counsel as questioning the validity of such clauses, does not have this effect and could not have been so intended, for it does not overrule or even call in question the previous direct decision in Allen v. Watertown Insurance Co., supra, expressly sustaining them. The objection pressed here against the validity of such an agreement between the mortgagee and the insurance company, is that it was not contained in the policy, but was a secret agreement of which the owner is ignorant, providing for the continuance of the policy in the mortgagee’s favor, after it has become invalid in favor of the mortgagor or owner by reason of his defaults. The validity of such independent contract between the mortgagee and insurance companies, existing at the time of the issuing of the policy, was expressly sustained in Ulster County Savings Institution v. Leake, 73 N. Y. 161 (1878), upon grounds which, as it seems to me, are solid and unquestionable. “The contract,” says Chief-Justice Church (atp. 165), “ does not affect or purport to interfere with rights of any mortgagor who may procure or for whose benefit an insurance may be procured. It merely provides for protecting the interest of the mortgagee after the interest of the mortgagor has ceased, and I am unable to perceive any valid reason why such a contract may not be made and enforced;” and again (atp. 166):

“ The mortgagor was not injured by this contract. If it had not been made she could not have received any benefit from the policy. It was an independent contract for the benefit of the mortgagee and the circumstance that the mortgagor also had a policy does not affect it when the contingency rendering it operative occurs.” These reasons, in my judgment, control this case. Defendants’ counsel insist that the owner is harmed, inasmuch as the expense of the insurance is borne by him. But his insurance premium is paid for his own insurance, under his own contract as to terms, conditions &c., and his bargain with the mortgagee for payment of insurance only binds him to continue the insurance of his own interest and under his own contract. So long as the owner has all the interest in the insurance policy which he has contracted and paid for, it is difficult to see how he can be said to suffer any legal harm because the premium which he has paid does not give him the benefit of an additional .insurance obtained by the mortgagee, to take effect after his interest has terminated. For this additional insurance, the mortgage has, in this case, given additional consideration, viz., its own personal obligation to the insurance company to pay ■the premiums on demand if the mortgagor did not. I conclude, therefore, that the contract is valid, so far as relates to the independent insurance of the mortgagee after the policy had become forfeited as against the owner by reason of their failure to give notice of loss, or to make proofs of loss, as required by the policy, and that the payments of loss having been made by the fire insurance company in satisfaction of the mortgagee’s separate insurance of his interest under the independent contracts, the insurance companies are entitled, by reason of such payments, to be subrogated to the mortgagee’s interests in the security, and that the subsequent mortgagee claiming under the owner is not entitled to have the payments credited on the decree. It was claimed by complainant’s counsel that the right to subrogation arose under the contract by mere claim of non-liability as to the owner. The contract does, indeed, so provide in terms, and, although it might, therefore, be good against the owner, if included in the policy or entered into by him, it clearly can have no effect on his rights, or of those claiming under him, when made between other parties. As to the owner, in such cáse subrogation can arise only as a right, given by law, upon facts proved, and the forfeiture in fact of the- policy as against him is the legal prerequisite to any independent insurance of the mortgage under this contract, and must be proved as one of the issues in the cause, which the owner and those claiming under him may require to be proved. If the policy was not in fact forfeited as to the owner at the time of the payment, then the payment to the mortgagee must be considered as a payment to the mortgagee as appointee of the owner, and not under the independent contract, and the owner would be entitled to have the payment credited on the mortgage debt.

Complainant is entitled to decree for payment of the surplus money to him, with costs against the defendant Headley.