Opinion
Argued December 20th, 1870
Decided January 24th, 1871
John Ganson, for the appellants. E.C. Sprague, for the respondent.
The parties to the policies of insurance have, by the terms of their contract, avoided some of the questions which have embarrassed the courts, and led, in some instances, to an apparent conflict of opinion, if not of decision. The rights of the mortgagees are protected against the effect of certain acts of the mortgagor in derogation of the policies, by an agreement that the policies, as to the interest of the mortgagee, shall not be invalidated by any act or neglect of the mortgagor, with the qualification, however, that if the mortgagee fail to notify the insurers of any change of ownership after the same shall have come to his knowledge, the policies shall be void. They have definitely determined the question, perhaps not definitely settled by adjudication, as to the right of subrogation by an agreement making part of the contract of insurance, that, whenever the insurers shall pay to the mortgagee any sum for loss, for which loss the company would not have been liable to the mortgagor or owner, the insurers shall be subrogated to the rights of the mortgagee, and entitled to an assignment of the mortgage. This provision is probably in accordance with the legal and equitable rights of the parties, regarding the policy from the time it might become void as to the mortgagor as an insurance, existing only in favor and for the benefit of the mortgagee, and as an insurance upon his interest as mortgagee, and not as an insurance upon the property generally; although the doctrine has been questioned in King v. State Mutual Ins. Co. (7 Cush., 1, § 2); Phil. on Insurance, §§ 1512, 1712; Kernochan v. N.Y. Bowery Fire Ins. Co. ( 17 N.Y., 428); Roberts v. Traders' Ins. Co. (17 W.R., 631); Carpenter v. Washington Ins. Co. (16 Peters, 495); Tyler v. Ætna Ins. Co. (12 W.R., 507); and S.C., 16 W.R., 385, per Chancellor.
If, then, the mortgagor, who was the party primarily insured, could not, for any reason have enforced the policies, and recovered thereon for his own benefit, either as owner or as having an insurable interest as the mortgagor, personally liable for the payment of the mortgage debt, he is precluded, by the terms of the policies, from claiming the benefit of the insurance in satisfaction of the mortgage debt, and the insurers are entitled to be subrogated to the rights of the mortgagee. The mortgagee was equitable assignee of the policies, containing a provision which, upon the happening of certain events, should absolutely vacate and avoid the insurance as of the property generally and as a contract of indemnity to the mortgagor, and resolve it into an insurance of the interest of the mortgagee as such, and make it a personal contract with her, in which the mortgagor would have no interest. (Per SHAW, C.J., King v. State Mutual Fire Ins. Co., 7 Met., 1; Per STORY, J., Columbia Ins. Co. v. Lawrence, 10 Peters, 507.) Ferris, the grantee of the premises and owner of the equity of redemption, can, as the representative and equitable assignee of Allen, claim no greater rights under the policies than his grantor and assignor, Allen, could have claimed. ( Grosvenor v. Atlantic Fire Ins. Co., 17 N.Y.R., 391.)
The policies were made and accepted by Allen, the insured, with full knowledge of and subject to all the terms and conditions expressed therein, and he had personal knowledge of every fact and circumstance affecting their validity existing at the time they were made, and was a party, and assenting to every act which has been alleged as breaches of the conditions of the policies, and as avoiding them as to him, and all (except the mortgagees) claiming under him. One of the conditions of each of the policies was, that in case of any change or transfer of title in the property insured, the policy should be void and cease. A contract of insurance, like every other contract, must be so construed as to give effect to the intent and understanding of the parties, and the language employed must be taken in its ordinary popular sense, unless it appears to have been used in a technical sense, or custom, or usage has impressed a different meaning upon it. (1 Phil. on Ins., § 122, and see Whiton v. Old Colony Ins. Co., 2 Met., 1; Mutual Safety Insurance Co. v. Hone, 2 Comst., 235.) Every part of a policy should be read and construed in obedience to this rule. There was a change and transfer of the title of the property, which was the subject of the insurance after the insurance was effected, and before the loss. If the words employed were used in their popular sense, this condition of the policy was violated, and the policy as an insurance of the property, generally, and for the benefit of the mortgagor and owner ceased. Had the parties intended only to provide for a change in, or transfer of the interest of the assured, which in one sense is "the property assured," it may be assumed that language more appropriate to express the idea would have been chosen. An insurable interest may exist without any estate or interest in the corpus of the thing insured. As guarantor of the mortgage debt, personally liable for its payment, Allen probably had an insurable interest in the buildings upon the mortgaged premises. ( Gordon v. Massachusetts Fire and M. Ins. Co., 2 Pick., 249.) But it was an interest that would not ordinarily and popularly be classified as "property;" and any change in such insurable interest, would not be spoken of as a change in, or transfer of title.
The insurable interest would cease by a discharge of liability for the mortgage debt. "Title" has respect to that which is the subject of ownership, and is that which is the foundation of ownership, and with a change of title, the right of property, the ownership passes. "Property" is a thing owned, that to which a person has, or may have a legal title. Both words are inappropriate to describe the insurable interest which exists solely by reason of the personal liability of the insured for the payment of a sum of money charged upon the building of goods insured. The word "property" may have different meanings depending upon the connection in which and the purposes for which it is used, as indicating the intention of the parties. In Whiton v. Old Colony Ins. Co. (2 Met., 1), it was used as a part of the description of the subject matter of the insurance, and was held to include current bank bills, as within the intention of the parties as manifested by the contract and the circumstances under which it was made. Acting upon the same principle of interpretation, it was held that an insurance of property did not cover freight, except as it was to be paid by a specific portion of lumber which was on board the vessel, and which the assured, as carrier, was to receive for freight. It was held that the contract gave the insured an interest in that part of the cargo coming within the term property, but that the freight upon the other parts of the cargo was not within the term as used. ( Wiggin v. Mercantile Ins. Co., 7 Pick., 271.) To the same effect in Holbrook v. Brown ( 2 Mass., 280). In the clause prohibiting double insurance, the prohibition is generally in terms so restricted in its application that "property" can mean nothing else but the interest of the assured, whatever that may be. As in the Massasoit policy before us, the condition is, "if the insured or his assigns shall hereafter make any other insurance on the same property," etc., thus preventing a double and possibly fraudulently excessive insurance of the same interest. Neither the policy of the law or the contracts of insurance forbidding, but permitting as many several insurances upon the same property as there are separate insurable interests. As mortgagor and mortgagee have several interests in the same property, and each may insure to the extent of his interest, the insurances will not be double, and neither will be in violation of the clause forbidding other insurances. Both will be valid. The policy of the law is to prevent insurances in excess of the value of the thing insured in favor of the same party and against the same risks, and hence the restrictive clause, whatever its form, unless its language clearly demands a different interpretation, should be held as operative to this extent only, and the term property in such clause means the interest of the assured. (2 Phil. on Ins., § 1250; The Traders Ins. Co. v. Robert, 17 W.R., 631; Godin v. London Assurance Co., 1 Burr, 489; Mutual Safety Ins. Co. v. Hone, 2 Comst., 235.)
The interest of Allen by reason of his personal liability for the mortgage debt, was properly insured by an insurance of the property, and it was not necessary that the particular interest should be specified. It was enough that he had a pecuniary interest in the preservation and protection of the property and might sustain a loss by its destruction. Neither was it necessary that the nature of the interest should be disclosed to the insurers. ( Tyler v. Ætna Ins. Co., 12 W.R., 507.) When the word property is used in the clause forbidding alienation, it is used to designate the thing insured, and not the interest of the insured. Where a special interest, rather than the general property, is the subject of insurance, no such condition is necessary to the protection of the insurer, for the reason that with a loss of interest the insurance ceases ( Carpenter v. Washington Ins. Co., supra), and an interest in the policy does not pass by a transfer of the interest insured. ( Columbia Ins. Co. v. Lawrence, 10 Peters., 507; 1 Phil. on Ins., § 86.) But if the owner is insured generally and transfers the property, retaining a lien for the purchase-money or other special interest, the insurance will continue to the extent of the interest remaining in the insured, if it does not contravene some condition of the policy. (1 Phil. on Ins., §§ 89, 90, 880.) As some evidence of the sense in which the term property is used in the clause under consideration, it is worthy of remark that when the policy is upon a special interest, as in favor of a mortgagee, and it is designed to save the policy from the effect of a breach of the condition forbidding a change of title, it is done by a special clause of exception, as in this case and in Graves v. Hampden Fire Ins. Co. (10 Allen, 281).
The policies before us are, in form, upon the property generally, and in favor of Allen as owner. In one of the policies the insurance is in his favor "as owner," and in both it is "upon his two four-story brick stores," etc., and the insurers had, as found by the judge on the trial, no notice or knowledge of any conveyance of the property by Allen. The insurers only knew Allen as owner, and the policies must be interpreted as if they were upon the interest of Allen as owner, and upon the property generally, in fact as they were in form. They were, then, insurers of Allen as owner and Miss Williams as mortgagee, to the extent of her mortgage debt, and both interests are represented and cared for in the policies.
The change or transfer of title in the property insured intended in the clause under consideration, was the title, the ownership of the thing insured, and upon such transfer or change the policy ceased and became void as to the principal party insured, and, but for the saving clause in favor of the mortgagee, would have been void as to her. ( Grosvenor v. Atlantic Fire Insurance Company, 17 N.Y., 391; and see Jackson v. Massachusetts Mut. F. Ins. Co., 23 Pick., 418; Tillou v. The Kingston Mut. Ins. Co., 1 Seld., 405.) The case last cited may be regarded as greatly shaken, if not overruled, by Grosvenor v. Atlantic Fire Ins. Co., supra, so far as it sustained a policy in favor of the mortgagee and equitable assignee, which could not have been enforced by the mortgagor or assignor, but upon the other points decided it has not been questioned. In the elementary treatises this clause is treated as relating to a transfer or alienation of the insured subject, the thing insured (1 Phil. on Ins., § 880), and the question has been as to what has constituted an alienation. (See cases cited in 1 Phil. on Ins., supra, in notes.)
The change of title to the property by the conveyance to Ferris was a breach of the condition which avoided the policies as to Allen, the mortgagor. It is first provided that upon an assignment without consent of the whole policies, or of any interest in them, the liability of the insurer shall cease, and then follows the very general clause prohibiting "any sale, transfer or change of title in the property;" and by another clause in the policies, it is provided that if the mortgagee should neglect to notify the insurers of any change of ownership of the property insured. after the same should come to her knowledge, the policy should be void; all indicating clearly that the parties used the term property in its popular sense, and that the change of title referred to was of the thing insured, of which the mortgagee might have no knowledge, and not of the mortgage interest, of which she would necessarily have knowledge.
The mortgagor could not have recovered upon the policies, and it follows that he is not entitled to have the moneys paid under the policies to the mortgagee, applied to the satisfaction of the mortgage.
The judgment should be affirmed with costs.
GROVER and PECKHAM, JJ., concurred in the result, on the ground that Allen was insured as owner when he was not such owner, and that the special interest should have been disclosed and stated in the policy.
CHURCH, Ch. J., did not vote. All the other judges concurring.
Judgment affirmed.