79 Vt. 390 | Vt. | 1907
Lead Opinion
for the majority of the Court.
The question raised in this case is, must the mortgagee receiving money on a fire insurance policy procured by the mortgagor for his benefit, hold that money until some part of the mortgage debt is due and thereafter apply it as fast as it falls due and no faster \ 1 I
At the time the money was received by the mortgagee no part of the principal nor interest was then due upon the mortgage indebtedness, which then consisted of six promissory notes of two* hundred dollars each, bearing date November 16, 1901, and made payable six, seven, eight, nine, ten and
Applying this rule to- the case at bar, it follows that the orator had no right to apply the money as he did, but that he should have held it until a part of the mortgage debt fell due, and then should have applied it to- the part which had fallen
The master has found that if such application is made, there was nothing due on the mortgage debt at the time the petition was brought and that the petition should be dismissed.
Some question was made on the trial of this cause before the master respecting the defendant’s failure to insure the buildings on the mortgaged premises in accordance with the condition of the mortgage, and the master has found that the mortgagor failed in some respects to insure strictly in accordance with that condition; but he also' finds that such failure was the. result of a misunderstanding on the part of the mortgagor, and his inability to perform the condition in that respect any sooner than he did, after he learned that the insurance had expired and the buildings were not insured as the condition of the mortgage required. He also finds that no damage was occasioned the orator in consequence of this failure, and that after the insurance was effected, the orator has had the possession of that policy and still has it.
In view of the fact that the orator has made in his brief no point of this failure to keep the buildings on the mortgaged premises insured strictly in accordance with the condition of the mortgage, and no- damage having resulted from it, we consider it unnecessary to< say anything respecting that matter; but pass by it as the orator has done.
Decree reversed with costs in this Court, and cause remanded with mandate that the bill be dismissed.
Dissenting Opinion
dissents.
As a general rule, dissenting opinions are more harmful than beneficial; for the opinion of the majority is usually correct, and in many instances would settle the law upon a
The question stated in the opinion of the majority and restated here is, must the mortgagee receiving money on a fire insurance policy procured by the mortgagor for his benefit, hold that money until some part of the mortgage debt is due and thereafter apply it as fast as it falls due and no faster?
It is somewhat remarkable that only a few: cases can be found in which a question of so much importance has been considered. The question of the application of insurance money, as between the mortgagor and mortgagee, in various circumstances, has quite frequently been before the courts; but I am unable to' find many in which the exact question raised in the case at bar, has been passed upon or which contain principles closely analogous to the principles involved in the case at bar. Statements in text books, as well as in numerous cases, can be found strong enough, perhaps, to’ justify a conclusion that such insurance money must be applied to the mortgage debt as fast as the same falls due, if we consider only the language of the statement made or rule laid down, independent of the cases wherein they are made or from which the rule is taken; but, if the investigation goes down into’ the cases in search of the source of such statements and the foundation upon'which they rest, the conclusion must follow, that they do not hold that such insurance money must be so applied.
If this rule is considered in connection with the general subject it will be noticed that the author intended that this rule was subject to limitations, especially those stated in other parts of the work. The rule, if taken strictly literal, would require the mortgagee to make the application as soon as the money was received, whether the debt was or was not then due, and whether the mortgagor did or did not consent to such application; but this the author .did not intend, for in another part of his work he lays it down as settled law, that the mortgagee cannot make such application without the consent of the mortgagor, and this last statement has the 'sanction of all the authorities, in cases free from agreements and modifying provisions upon that subject. Hopkins on Real Property, p. 198; Gordon v. Ware Sav. Bank, 115 Mass. 588; Fergus v. Wilmarth, 117 Ill. 542 (7 N. E 508); Naquin v. Tex. Sav. & R. E. Invest. Association, 58 L. R. A. 711.
To know the value of any rule or statement of law it is necessary, to know whence it sprang and upon what it rests, so I have attempted to. trace out to some extent the source from which some of these statements and rules have been taken.
The foregoing rule or statement from the “Cyc.,” rests upon the following authorities cited in the note: Home Ins. Co. v. Marshall, 48 Kan. 235, (29 Pac., 161); Concord Mut. Fire Ins. Co. v. Woodbury, 45 Me. 447; Sterling Fire Ins. Co.
An examination of the foregoing cases shows that the questions and facts involved are not similar to the question and facts involved in the case at bar.
In Home Ins. Co. v. Marshall, supra, the question of application arose upon a suit by the insurance company against the mortgagor to recover the full amount of the mortgage debt, the insurance company having paid the mortgagee the full amount and taken an assignment from him after the buildings were destroyed by fire; in which suit the company sought to deprive the mortgagor of all benefit of the insurance which had been effected and maintained at his own expense. What is said in that case about the application of insurance money, is said with reference to its application by the mortgagee when called upon to account for it in a case in which he is liable to account. The only question here was whether he was liable to account. If he was liable to account, there was no- question but that it should be accounted for in that case in reduction of the mortgage debt.
In Concord Mut. Fire Ins. Co. v. Woodbury, supra, the mortgagee effected the insurance, and upon’ payment of his mortgage by the insurance company after the property was destroyed by fire assigned the mortgage and debt to them. Afterwards they brought suit against the mortgagor for the possession of the mortgaged premises, and it was held that the action could be maintained. What is said about the application of insurance money is not called for by any question raised in the case, and is based on King v. State Mut. Fire Ins. Co., 7 Cush. 1. This case simply holds that a mort
Sterling Fire Ins. Co. v. Beffrey, supra, was a foreclosure proceeding by the insurance company, to- whom the mortgage had been assigned by the mortgagee, under a stipulation in the policy that he should do so upon payment to- him. of the amount due on his debt. The assignment was made after the buildings were destroyed by fire. The Court held, that, under the terms of this mortgage and the policy and in the circumstances of that case, the mortgagor could not compel the application of the insurance money. All that there is in the case to support the statement in the “Cyc.” is what is said outside of the question raised and determined.
In McDowell v. Morath, supra, the case showed, that the plaintiff gave the defendant a Writing, in legal effect held to be a'mortgage, securing a loan upon real property, conditioned to keep the buildings upon said real estate insured for the benefit of the defendant. Upon the expiration of the policy which the plaintiff first took out, and after his failure to- re-insure and keep the buildings on the mortgaged premises insured according to contract, the defendant caused them to- be insured at the expense of the plaintiff, by a policy limiting the
In Smith v. Packard, supra, one standing in the place of the mortgagee received ion the insurance policy more than enough to pay the mortgage debt and interest. It was held that he was liable for the excess above the sum due on his' debt.- In this case presumably the debt was due, and being due, the mortgagor, or one standing in his place, had a right to' pay the debt and have the mortgage discharged. A part of the mortgaged property then being in cash, it would be useless and therefore unnecessary for the person redeeming the entire property, to redeem that money with other money. This case, in its peculiar circumstances, supports the author’s statement; but it does not support the doctrine, as it seems to me, that the mortgagee receiving such money before any part of his debt is due, must hold it, unless the mortgagor consents, and apply it as the debt falls due. The redemption of the mortgaged property by payment of the whole debt when due produces an entirely different result from a redemption after default to pay part of the debt when due, leaving a part not then due and still unpaid. In the former case the mortgagee’s title is extinguished, while in the latter it remains unaffected. In the former the mortgagee is compelled to re
The next and last citation by the “Cyc.” is Vol. 28 Cent. Dig., sec. 1447. That authority cites all the cases cited in the “Cyc.,” and in addition it cites under the head of “Application of Proceeds of Insurance to Debt,” Conn. Mut. Life Ins. Co. v. Scammon, et al., C. C. 4 Fed. 263, and Ulster Comity Sav. Inst. v. Decker, 11 Hun. 515. The latter case was overruled by Same v. Leach, 73 N. Y. App. 161, and requires no further comment.
In the case of Conn. Mut. Life Ins. Co. v. Scammon, supra, the facts disclosed, that the mortgage was conditioned that the defendant would keep the buildings thereafter erected on the mortgaged premises, insured and would assign and deliver the policy to- the plaintiffs, who should hold it as collateral security with the right to» collect and apply the money to» the restoration of the buildings destroyed. The buildings were burned, the money paid to the plaintiffs and by them handed over to one of the mortgagors to restore the buildings, who failed to» do- so» and who converted the money to his own use. Upon suit being brought to recover the debt, it was held, that as to the other two» defendants, the receipt of the insurance money by the plaintiffs must be held to» be a payment. Clearly this case does not lay down a rule regulating the general application of insurance money by the mortgagee. It is therein simply held, that not having- applied it as pro
Hilliard on Real Property, 3rd ed., Vol. 1, p. .260, lays the rule down as follows: “If the debt has not been paid, the money goes to pay it pro tanto, and is therefore so- applied to the mortgagor’s benefit.” The only authority cited in support of this statement is King v. State Ins. Co., supra, already commented upon.
In Jones on Mortgages, 2nd ed., Vol. 1, sec. 409, it is stated: “The mortgagee receives the proceeds to apply in the first place to the payment of the mortgage debt, and then he is trustee for the mortgagor for any balance left in his hands.” The author cites in support of this statement, Fowley v. Palmer, 5 Gray 549. In that case, the only question raised was whether the mortgagee was entitled to an allowance for premiums paid and expense of insurance of the mortgaged property, upon failure of the mortgagor to do so-, as stipulated in the condition of the mortgage. It was held that he was entitled to- have the same allowed on the accounting in that case, which was a proceeding to. redeem. What the learned judge said by way of argument in that case was without consideration of the subject of the application- of insurance money received by a mortgagee and no> authorities are cited by him in support of what he says and it was not called for by any question raised in the case.
■ In Washburne on Real Property, 3rd ed. Vol. 2, p. 216, the statement is made as follows: “And when the mortgagee is trustee for the mortgagor in respect to the insurance upon .the premises, as where the mortgagor effects the insurance payable to the mortgagee, or the mortgagee effects it at the
, No further comment need be made respecting Fowley v. Palmer, supra and King v. State Ins. Co., supra, as it has clearly been shown by what has already been said, that neither are authority for holding that the mortgagee must hold the money until some part of the debt is due and then apply it as fast as it does fall due.
In Graves v. Hampden Ins. Co., supra, which was a proceeding to redeem, the only question settled was as to the rights of the purchaser of the equity where the purchase was made after the insured buildings were burned, the owner of the equity, in pursuance of a provision in the mortgage, having taken out a policy upon the buildings on the mortgaged property, at his own expense, payable to the mortgagee, in which it was provided that no sale of the property should affect the rights of the mortgagee, but change in the title should determine the risk, and having sold his equity after the buildings had been burned and the policy being assigned to the insurance company by the mortgagee, upon the company paying to him the sum due on his mortgage, held that the purchaser of the equity might redeem the premises upon paying to the insurance company the balance due upon the mortgage after deducting the sum due on the insurance.
In Hopkins on Real Property on p. 8 the author states as follows on p. 198, viz: “In case of a loss under such a policy, the mortgagee must apply the insurance money to the mortgage debt, if it be due.” He bases this statement on the cases
All that is held in Waring v. Indemnity Fire Ins. Co., supra, is, that the insured may sustain an action against an insurance company for a loss by fire, notwithstanding that he has sold the property and received pay, but still holds the possession of the property, where the policy was issued to insure property “sold but not removed.”
In Waring v. Loder, supra, all that the Court decided was, that though the mortgage, or a judgment of foreclosure founded thereon, should be actually assigned to the insurer, it would not avail him, except so far as it was unpaid by the insurance. It is true that the Court say, that such money should be applied to the payment of the mortgage debt, but the statement is general and without limitation and was never intended as the announcement of a general rule to be applied in all cases, where insurance money was received by the mortgagee on a policy effected for his benefit ^without a contract express or implied as to how it should be applied. A statement similar to that used in the text books and cases to which attention has been called, can be found in a case in this State, Brighton v. Doyle, 64 Vt. 616, 25 Atl. 694, in which Judge Munson wrote the opinion wherein he says: “In collecting the insurance money he received it on the indebtedness for which the property was mortgaged, and it should have been so applied.” This statement separated from the facts in the cases might lead one to' the conclusion, that it was made as the declaration of a general principle governing the application of insurance money received by a mortgagee, where no contract for its application existed between the mortgagor and mortgagee. The most casual examination of the case shows
A few other minor cases of a similar nature, I have no doubt, can be found, in which the Court have said in a general way, that such insurance money must be applied to the mortgage debt. As has already been shown, and as I believe might be shown in any case which may exist and to* which attention has not been called, the general statement, that such insurance money should be applied to the mortgage debt, has been made by way of argument or as called forth by the peculiar circumstances and facts of the case in which they were made; and were not made by the Court in any of them as the statement of a general rule governing the application of insurance money received by the mortgagee, where no* contract for its application existed.
In certain circumstances the mortgagee does receive it to apply on the mortgage indebtedness; as where the debt is wholly due and the insurance money is enough to pay it, or as where the mortgagor tenders to the mortgagee a sum which with the insurance money is sufficient to* pay the mortgage debt; or as where the money is received by a mortgagee having a debt against the mortgagor other than the mortgage debt, as a payment with the consent of the mortgagor, without direction as to its application, or as it is received in other circumstances of a similar character, unnecessary to* enumerate here; but does he ever receive it before the debt is due, to hold and apply it as it falls due and no faster, where no* agreement to that effect exists, is the question.
In considering the rights of mortgagor and mortgagee to ■the insurance money received on a policy effected by the mortgagor for the benefit of the mortgagee under a condition in the mortgage that he should do so, where such money is received before any part of the debt is due, a distinction is to be carefully observed between their rights to money so received and money received upon a policy assigned to the mortgagee by the mortgagor, covering other property than the mart
Holding money received on an insurance policy in place of the mortgaged property destroyed, is the exercise of a right
On the part of the mortgagor, cases might arise in which the rule, that the mortgagee must hold the money until some part of the debt falls due and then apply it as fast as it thereafter becomes due, would be followed by results as serious to the mortgagor as in other cases it was to* the mortgagee. His entire property might be embraced in the property burned and the use of the insurance money might be necessary to restore it, and his ability to* continue in business might depend upon its restoration. The doctrine then, that the morgagee must hold the insurance money until some part of the debt falls due and then apply it as fast as it does fall due, will operate, in some cases, unjustly to. the mortgagee, and in others unjustly to the mortgagor.
Equity requires that justice should be done in all cases, if possible. Adopting the rule, laid down in Powers v. Ins. Co., supra; Sav. Bank v. Bedell et al., supra; Gordon v. Ware Sav. Bank, 115 Mass. 591; Naquin v. Texas Sav. & R. E. Invest. Association, supra; Fergus v. Wilmarth, 117 Ill., 547 and Williams v. Lilley, supra, which is that the insurance money received by the morgagee takes the place o*f the mort
In Gordon v. Ware Sav. Bank, supra, a case cited and approved of in Fergus v. Wilmarth, supra, the Court held that the mortgagee could appropriate the money to the restoration of the property destroyed and' in connection therewith used the following language: “The insurance was for indemnity to the mortgagor as well as to the mortgagee. To- the mortgagee it was protection of the security, no-t for payment of the debt. It was collateral to- the debt. Money received from insurance took the place of the property destroyed, and was still collateral until applied in payment by mutual consent, or by some exercise by the mortgagee of the right to- demand payment of the debt and upon default of payment to- convert the securities.”
The three cases last above cited show, that the ground of the Court in holding that the mortgagor or mortgagee has the reciprocal right to- apply insurance money, received on a policy effected by the mortgagor for the benefit of the mortgagee, rests upon the doctrine that such insurance money takes the place of the property destroyed.
If we admit that insurance money, received by the mortgagee, before any breach of the mortgage, under a policy effected by the mortgagor, for the benefit of the mortgagee, represents the mortgaged property, the conclusion, that the mortgagor or mortgagee may use it to- restore the original value of the mortgaged property, is irresistible; for, if no- part of the debt
As it seems to me, not only in principle but upon authority, insurance money received in the manner just described represents the property destroyed. This Court in express language has so held, in Powers v. Ins. Co., supra, wherein Taft, C. J., says: ^The effect of the provision is to give a mortgagee a lien upon the insurance money in case of loss, securing him by substituting the proceeds of the policy in place of the property.”
This Court in Brooks et al. v. Hubbard et al., supra, have held in express language, that the mortgagee receives damages for land taken for highway purposes in place of the land. The language used by Taft, C. J., is as follows: “The mortgagee would hold the damages as security for the mortgage debt in the same manner that it held the land.”
In Sav. Bank v. Bedell et al., supra, the Court by Judge Start substantially holds the same. It says: “The mortgagee did not hold the policy as a pledge or as collateral security.” If not held as a pledge or collateral security, it must have been held as a mortgage and the Court in this case evidently intended to follow its preceding holdings.
Outside of this State, I have already called attention to Fergus v. Wilmarth, supra; Gordon v. Ware Sav. Bank, supra,
Jones on Mortgages 2nd ed., Vol. I, sec. 410, practically holds the same and Wood on Fire Insurance, sec. no, p. 236, substantially supports the same. It must be upon this principle that it is said, in Jones on Mortgages, 6th ed. Vol. 1, §409: “If the holder of the mortgage receive the insurance money after the mortgage debt is due, and afterwards, without endorsing the amount received upon the mortgage note, assigns the note and mortgage, the mortgagor cannot maintain a bill to have this amount endorsed upon the note. His.remedy is to- redeem.”
Upon a careful search, I am unable to- find any authorities holding the contrary; hence it seems to' me that upon principle and authority such money represents the property destroyed by fire and is held 'under the mortgage as a part of the mortgaged property, and being so held it does not change its character by instalments, as the debt falls due, from mortgaged property to partial payments, and consequently, the mortgagee is not bound to so apply it.
I am unable to agree with the majority of the Court, that such money .should be applied as money received on a
The distinction between a pledge and a mortgage has been well defined in the following cases: Wood v. Dudley, 8 Vt. 43O; Conner v. Carpenter, 28 Vt. 237; Gifford v. Ford, 5 Vt. 532; Sampson v. Rouse, 72 Vt. 422, 48 Atl. 666; Sav. Bank v. Capital Sav. Bank & Trust Co., 77 Vt. 123, 59 Atl. 197. Very obvious reasons exist why money received by the pledgee should be applied as a payment to- the debt which it secures that does not exist where money is received by the mortgagee from the impairment or destruction of a part of the mortgaged property. In the former case the contract of pledge is that the pledgee may take his pay out of the pledge if the pledgor fails to pay as agreed. It is put into the pledgee’s hands for that very purpose; while in the latter case, the contract of mortgage is, that the mortgaged property is to become the property of the mortgagee upon failure of the mortgagor to pay as agreed, subject only to the mortgagor’s equity to redeem. The mortgagee may, however, treat it as a payment of any part of the debt which is due, but is not obliged to do- so, as has already been shown. Money received
All the authorities relied upon by the majority were suits in which the questions involved related to the application of money received on pledges. As it seems to me there is no analogy between the cases cited in support of the majority opinion and the case at bar, and that that opinion stands unsupported by principle or authority.
Because of the views herein expressed I would affirm the •decree below; as I believe it is equitable to both parties and is a fair and reasonable result of a natural construction of the mortgage contract, and is supported by principle and the weight of authority.