Summary
In Reid v. McCrum (91 N.Y. 412) it was held that a covenant by a mortgagor to insure the buildings on the mortgaged premises does not run with the land.
Summary of this case from Miller v. ClaryOpinion
Argued January 25, 1883
Decided March 6, 1883
Jos. A. Burr, Jr., for appellant.
Rufus L. Scott for respondent.
In the case of Dunlop v. Avery ( 89 N.Y. 592), it was held that a covenant to insure contained in a mortgage was not a covenant running with the land; that it was entirely personal in its character and did not affect the land and was collateral and incidental to the remaining covenants in the mortgage. That decision is a complete answer to the claim made by the appellant's counsel, that the covenant to insure contained in the mortgage in this case runs with the land, and the question must be regarded as res adjudicata, unless some reason exists why the case cited should not be followed and adhered to. Authorities are cited in support of that decision, and no doubt is expressed in the opinion in regard to the correctness of the rule there laid down, nor is there, we think, any ground for claiming that the question at issue was not involved in that case, as the point was distinctly presented, and if the covenant to insure was a covenant running with the land, then the plaintiff was clearly entitled to recover.
It is true that the question of imputed notice was an important and material point in that case, and the trial court and the General Term held that the defendant took his mortgage with notice and knowledge of the covenant, to insure which was contained in the record of the plaintiff's mortgage. As the plaintiff's right would have been maintained if the covenant had been one running with the land, there is no ground for claiming that the question was not presented to, and decided by, the court. The fact, that in the case cited the land was still in the hands of the original obligor, can make no difference, and we think the position of the appellant's counsel that because no one had bought no one could be affected by it, did not affect or impair the right of the mortgagee to claim the benefit of the covenant, if it was one running with the land. In the above case the plaintiff claimed, as senior mortgagee, and that the covenant to insure entitled him to the insurance money, and the defendant claimed as a junior mortgagee. If the covenant ran with the land the plaintiff clearly had an equity which was superior and prior to that of a subsequent incumbrancer, and this by virtue of the covenant which gave him the prior right and which could not be disturbed or destroyed by an assignment of the policy to a junior mortgagee. We are, therefore, unable to perceive why the case cited is not a direct authority upon the question under consideration, and we think the remarks in the opinion therein on this point are not obiter dictum, as claimed. Assuming, however, that the question is before us we are of the opinion, after an examination of the elaborate brief of the counsel for the appellant and the authorities cited, that the covenant in question did not run with the land. There is a distinction between a case where there is a covenant to rebuild or repair upon the destruction of the property by fire, and where there is no such covenant, and while there may be some reason, perhaps, for sustaining the former covenant as running with the land, there is none whatever for upholding the latter. It may be remarked that as the question is not presented here we are not, therefore, called upon to express an opinion in regard to the effect of a covenant which contains the provision referred to as to rebuilding and repairing. A careful examination of the authorities presents no case where it has been distinctly held that a simple covenant of insurance runs with the land. The counsel for appellant claims that he is entitled to recover on four of the policies, amounting together to the sum of $1,050 on the buildings, if not the full amount of all the policies. This position is based upon the ground that an indorsement was made in September, 1880, upon these policies by direction of the agent of the defendant. "Loss, if any, payable to John Reid, mortgagee." It appears that in December, 1880, John J. McCrum, the agent above named, procured the indorsement to be erased and instead thereof the following to be made: "The mortgagee's interest having ceased, the loss, if any, is now payable to Hugh McCrum as owner." Upon these facts the question arises whether the alteration made changed the disposition to be made of the insurance money. The respondent's counsel insists that the original indorsement was made without the authority of the owner; that the policies were never delivered to Reid, and that he had no knowledge of them previous to the fire in May, and that they covered stock and machinery upon which Reid claimed no lien, and that they covered over five times in amount on stock and machinery more than on buildings.
As a general rule, where a policy is taken out, with loss payable to a particular individual, such person is entitled to the amount of the policy in case of loss. Could this direction be revoked without the consent of the person for whose benefit it appeared to have been made? On its face it was a contract of the insurance company to pay the money in case of loss to the person named, and if it had remained unrevoked, such person would clearly have been entitled to the same. The appellant never consented to the change of indorsements, and the court so found. The original indorsement would not be an absolute assignment of the policy, nevertheless the mortgagee would be entitled to the benefit of such indorsement if made on his behalf, and if there was authority to direct the indorsement the plaintiff would be entitled to any loss on these policies, so far as it occurred on the buildings insured. The court, however, found that the indorsement was made by the direction of John J. McCrum, without the knowledge, authority or assent of the defendant Hugh McCrum. This finding, we think, is not supported by the evidence. The testimony shows that John J. McCrum was the general agent of Hugh McCrum and also his agent in regard to insurance, the same as in reference to the business of Hugh, which was under his charge. There is also evidence, which is not contradicted, that John made a statement to the plaintiff's intestate to the effect that policies were issued in the name of Mr. Reid. It appears that the four policies named in the ninth finding were in accordance with this statement. If these policies had been delivered to Mr. Reid or to his agent, or to any person on his behalf, there would be no question but that he would have been entitled to the amount of the loss upon the same; that they were not delivered, we think, can make no difference. They were left with the insurance agent evidently for the benefit of Mr. Reid. The contract was thus in effect partially executed, and being thus executed the defendant Hugh McCrum is estopped from claiming that it could be changed afterward without the assent of Mr. Reid. The agent was acting within the scope of his authority in obtaining the policies, and as he contracted that the loss be made payable to Mr. Reid, and as this was done and the policies left for the benefit of Mr. Reid, we think it cannot be urged that he exceeded his power. The statement of the agent that the policies should be issued in the name of Mr. Reid, without any thing being done to carry it out, presents a different question, and it is not apparent how such an arrangement, entirely unexecuted, could bind the principal, without direct proof of authority to that effect.
When, however, the contract has been carried into effect it cannot be said that the indorsement was made on the four policies without the knowledge, authority or assent of the defendant, and that the agent was authorized subsequently to direct the alteration which was made. We think there was no question as to notice of the existence of the covenant to the defendant arising in this case which requires examination. Nor is there sufficient evidence of any agreement to assign the policies by the defendant which entitles the plaintiff to the avails thereof. The court refused to find in this respect as requested by the appellant's counsel, and we are not prepared to say that such refusal was erroneous.
The other questions presented have received due attention and do not require comment.
For the error stated the judgment should be reversed and a new trial granted, with costs to abide the event, unless the defendant stipulates that the decree be modified so as to allow the plaintiff the amount of loss upon the real estate which was adjusted upon the four policies which were made payable to John Reid, mortgagee. In which case the judgment as modified should be affirmed, without costs of appeal in this court to either party.
All concur.
Judgment accordingly.