144 A. 36 | Conn. | 1928
On September 12th, 1924, the defendant Schancupp owned certain real estate in Ansonia which he had mortgaged to the plaintiff for $3,000. He had insured the property against fire for $5,000, by one policy for $2,000 with the Girard Fire and Marine Insurance Company and another for $3,000 with the North River Insurance Company. On this date he sold and conveyed the property to the defendant Rindone, who assumed and agreed to pay the $3,000 mortgage indebtedness; the insurance policies were also transferred to the name and benefit of Rindone. The latter was the owner and possessor of the premises when, on or about December 20th, 1925, the large brick building which stood on the lot was damaged by an explosion and fire.
Both the fire insurance policies contained the standard mortgagee clause, making the loss payable to the plaintiff mortgagee as its interest may appear and containing, inter alia, a provision that "this insurance, as to the interest of the mortgagee only therein, shall not be invalidated by any act or neglect of the mortgagor or owner of the within described property, . . . nor by the occupation of the premises for purposes more hazardous than are permitted by this policy"; also that "whenever this company shall pay the mortgagee any sum for loss or damage under this policy and shall claim that, as to the mortgagor or owner, no liability therefor existed, this company shall, to the extent of such payment, be thereupon legally subrogated *591 to all the rights of the party to whom such payment shall be made, under all securities held as collateral to the mortgage debt, or may at its option, pay to the mortgagee the whole principal due or to grow due on the mortgage with interest, and shall thereupon receive a full assignment and transfer of the mortgage and of all such other securities; but no subrogation shall impair the right of the mortgagee to recover the full amount of [its] claim."
Both insurance companies denied liability to the owner, Rindone, for the loss occasioned by the explosion and fire, on the grounds that although the building was insured as a dwelling it was partly occupied for mercantile purposes, and that the fire was caused by the explosion of a still operated in the building contrary to law, and Rindone did not pursue a claim against either of the insurers until after the time for filing formal claim for the loss had expired.
Subsequently the plaintiff mortgagee took up the matter with the insurers, and the amount of the loss occasioned by the fire was appraised at $1,368.49, the liability, if any, being apportionable sixty per cent to the North River Company and forty per cent to the Girard Company, and each insurer agreed to pay the plaintiff such share of the loss, on condition that the plaintiff would agree to reimburse the company for the amount so advanced out of the moneys ultimately realized in satisfaction of its mortgage. The plaintiff so agreed and the North River Company paid to it $821.09 and the Girard Company $547.40. These proceedings were had without Schancupp's consent or knowledge.
The plaintiff did not apply these payments to the payment of the mortgage note, but brought this foreclosure action for the full amount, $3,000, and interest. The defendant Schancupp set up, as a defense, the *592 transactions between the plaintiff and the insurance companies and claimed that it was incumbent upon the plaintiff to appropriate the insurance money, so received by it, to the payment of the note. Upon the agreed facts the trial court held that the plaintiff received the insurance money as the proceeds of collateral security for the mortgage indebtedness, that the defendant Schancupp stood in the relation of surety for the payment of the mortgage debt, and, as such surety, was entitled to have the payments credited upon that debt, and while finding the amount due from Rindone to be $3,541.99, deducted therefrom, as to Schancupp, the $1,368.49 and interest, making the amount due $2,056.50. It is as to the validity of this deduction, only, that the plaintiff's appeal relates.
The distinction which the court made between Schancupp and Rindone, as to the amount of the debt, was based upon its holding that the former was, not only as to the latter but also as to the plaintiff, surety for the payment of the mortgage debt, and that the money received by the plaintiff from the insurance companies was to be regarded as the proceeds of collateral security, to the benefit of which Schancupp, as such surety, was entitled. The appellant challenges the legal correctness of these conclusions.
As to the first, the rule in this State is that a conveyance, by the mortgagor, of mortgaged property to one who assumes and agrees to pay the mortgage debt creates, as between the mortgagor and such grantee, the relation of surety and principal, but does not, of itself, and apart from the effect of subsequent dealings between the mortgagee and the grantee, change the relationship of the mortgagor to the mortgagee. The former remains liable to the latter as a principal debtor; both the mortgagor and the assuming purchaser are, as to the mortgagee, principals. Boardman *593
v. Larrabee,
The reason that the relation of suretyship between a mortgagor and his grantee, created by the conveyance with assumption, by the latter, of an obligation to pay the mortgage debt, does not, of itself, affect the relations between such mortgagor and the mortgagee lies in the clear distinction between a suretyship which is created with the express consent of the creditor — as in an original contract — and one which arises in a later transaction to which the creditor is not a party. "In the former case the creditor is, by his own act, bound to recognize all the distinctive rights of the surety, whose obligation to him exists in no other capacity, from the beginning. He must therefore do nothing which may lessen the surety's recourse, or chances for indemnification, in the event of his having to pay the debt. But in the latter case he has voluntarily assumed no such duty. It becomes a question, then, whether the law can cast it upon him without his consent, and thus, in effect, alter the terms of his original contract. . . . There is no difficulty about this. Between the principal and surety, questions of reimbursement or indemnity may arise, with which the creditor has nothing to do. These must, of course, be determined by the relations existing between the parties interested, either of whom may yet stand in a different relation with the creditor. As to him, both may be principal debtors." Connecticut Mut. LifeIns. Co. v. Mayer,
The main question presented by the appeal relates to the nature of the payments made to the plaintiff by the insurance companies under the circumstances above set forth, including inquiry whether they are to be regarded as the proceeds of collateral security for the mortgage indebtedness, for which Schancupp was entitled to credit, as the trial court held. The answer depends largely upon the nature and effect of the mortgage clause in the policies, provisions of which have been quoted in the statement of facts. It has been denominated the "union" or, more commonly, "standard" mortgage clause, and provides, in substance, that no act or default of the mortgagor or owner shall operate to defeat the mortgagee's right of recovery, but that, in case of payment to the mortgagee for a loss which the insurer would not have been liable to pay to the owner, the insurer may have subrogation, to the extent of its payments, to the rights of the mortgagee. It is generally held that the effect of these special provisions, upon the happening of events bringing them into operation, is to resolve the policy contract from being primarily one insuring the mortgagor and making the mortgagee an equitable assignee, into an insurance of the interest of the mortgagee, as *595
such, and into a personal contract with the mortgagee, in which the mortgagor has no interest. 1 Jones on Mortgages (8th Ed.) § 506; 3 Cooley's Briefs on Insurance (2d Ed.) p. 2390; Collinsville Savings Society
v. Boston Ins. Co.,
From the agreed facts it definitely appears that Rindone has forfeited any right, on his part, to recover upon the policies; no claim is made that the provisions of the mortgage clause were not entirely applicable, and Schancupp's legal situation and rights are to be determined accordingly. For the reasons above stated, he is not entitled to have the benefit, as a credit upon his indebtedness as original mortgagor, of the payments made to the plaintiff by the insurers pursuant to the provisions of that clause. The amount due from Schancupp should have been adjudged to be the same as that due from the defendant Rindone, without deduction on account of the insurance payments; viz: $3,000 and interest. *598
There is error, the judgment is set aside, the cause is remanded, and the Superior Court is directed to enter judgment in accordance with this opinion.
In this opinion the other judges concurred.