Salmon G. Cone, Respondent, v. The Niagara Fire Insurance Company, Appellant

Salmon G. Cone, Respondent, v. The Niagara Fire Insurance Company, Appellant. (Argued February 11, 1875; decided February 23, 1875.) One whose premises have been sold on execution has an insurable interest therein, so long as the right of redemption continues; and this interest continues, after his, own right to redeem has lapsed, while a right remains in judgment creditors. While this right continues it is possible for him to procure a loan, and confess judgment as security therefor, and thereby create a right to redeem; and this is an interest affected by the loss of, or damage to, the building by fire. Where an insurance is procured by an owner, loss, if any, payable to an incumbrancer, the fact that the latter has realized from other securities the whole or a portion of his interest in the property does not entitle the insurer, in an'action by the incumbrancer upon the policy, to a deduction from the amount of the policy, or to a subrogation to the plaintiff’s securities. The policy insures the interest of the owner, not of the incumbrancer. The only interest defendant has, in the fact of the existence of a lien, is to have it ascertained if plaintiff has a claim entitling him to sue. There is no equity which will permit defendant to succeed to plaintiff’s rights, or to make inquiry into the state of the accounts between him and the owner. So, also, it is not required that the owner be joined as a party; the incumbrancer alone can" sue. He has a right to recover the whole loss sustained by the owner’s insurable interest, holding the amount recovered, after payment of his lien, as trustee for the owner. If it appear that the owner claims in hostility to the plaintiff, defendant may interplead. This was an action to reform a policy of insurance, and to recover thereon as reformed. (Reported below, 3 N. T. S. O. [T. & 0.], 33.) The policy' was issued by defendant to one Palmer; loss, if any, payable to plaintiff. The period of risk was for three years from June 1st, 1870. The policy contained this clause : “ If the premises are, at the time of insuring, or during the life of the policy, vacant, unoccupied, or not in use, and remain thus for over ten days, * * * without the company’s consent is indorsed hereon, this insurance shall be void and of no effect.” The reformation sought was to have such consent indorsed upon the policy. The referee found, in substance, that it was known to the defendant and its agent, at the time of issuing the policy, that the building insured was vacant, and would probably remain so ; that it was expressly understood that it would remain vacant until September, to which the agent consented; that the said condition was in fine print, and that Palmer and plaintiff were ignorant that it was contained in the policy until after the loss. As a conclusion of law, he found that the condition was waived, and that defendant was estopped from setting up that the policy was void in consequence of the consent not having been indorsed, and that plaintiff was entitled to have the policy reformed as prayed for in the complaint. Held, no error. At the time the policy was issued, the premises upon which was the building insured was subject to two mortgages in favor of plaintiff, and to two judgments in favor of other parties. It had been sold June 9th, 1869, on execution issued upon one of the judgments, and the sheriff’s certificate had been assigned by the purchaser to plaintiff. On the 22d of April, 1870, plaintiff and Palmer had entered into an agreement, under seal, which recited the sale; that the right of redemption in Palmer would expire June 9th, 1870, and that Palmer desired to occupy a portion of the premises until April 1st, 1871; and it was agreed that he should occupy a house (not the one insured) and garden spot without rent, and have the use of certain other portions, with various privileges ; and to put in crops on certain other portions on shares, the residue of the premises to be surrendered to plaintiff; and it was further agreed that, in case plaintiff got title, Palmer’s wife would release her dower right, and plaintiff would discharge and release his bonds and mortgages, and one of the judgments, and indemnify Palmer against another bond outstanding against him. Under this agreement Palmer had surrendered a portion of the premises, including the building insured. The house insured was destroyed by fire August 2d, 1870. The policy contained this clause: “ Any interest in the property insured not absolute, or that is less than a perfect title, or if a building is insured that is on leased ground, the same must be specifically represented to the company, and expressed in this policy, in writing, otherwise the insurance shall be void.” Defendant raised these points, on appeal: First. That the policy was void by its terms, as Palmer’s interest was not absolute, and the policy did not express that he had not a perfect title. Fourth. That Palmer, at the time of the fire, had no insurable interest. Seventh. That plaintiff having realized the whole or a larger part of his interest in the property, defendant is entitled to a deduction from the sum claimed on the policy, or a subrogation to plaintiff’s sureties. Hinth. That Palmer should have been joined as a party. As to the first point, the court held that the answer did not specifically set up the defence, nor was it raised upon the trial, or by any exceptions to findings or to refusal to find, and that therefore it could not be raised on appeal. That portion of the opinion relating to the other points above stated, is as follows: “ The fourth point is, that at the time of the fire Palmer had no insurable interest in the premises burned. Without stopping now to consider whether, if this were so, the interest of Cone would not sustain the policy and this action on it, we state our opinion to be, that when the policy was issued Palmer had an insurable interest in the premises, which continued until after the fire occurred. An insurable interest is that property or right of the assured in respect to which he is liable to loss. The assured has an insurable interest, when he has an interest in the subject insured, and the happening of the event insured against, might bring upon him pecuniary loss. Herkimer v. Rice (271ST. Y., 163), goes as far as, or farther, than this, it is not necessary that the event would, of a certainty, inflict loss ; it is enough that it might so do. This is general language, but with limitation by the facts of this case it is sufficiently particular, blow, when the policy was contracted for and issued, insuring the interest of Palmer, his right to redeem the premises from the sale by the sheriff had not lapsed. This was a right of some value. (Stephens v. III. Mut. Ins. Go., 43 111., 327; Strong v. M. Ins. Go., 10 Pick., 41.) Its value was made up, in part, by the existence of the insured building upon the lands. A destruction of that building lessening the value of the premises, would lessen the value of that right to redeem. (Buffum v. Bowditch Mut. Ins. Go., 10 Cush., 540.) And so when the fire came, although the right of Palmer to redeem, as owner of the fee, had gone, there was a right to redeem in subsequent judgment cj editors, if any. Palmer’s title had not yet been divested (2 R. S., 373, § 61), and though all the subsequent liens made known by the proofs had centered in Cone, who also held the sheriff’s certificate, there was yet a possible right and power in Palmer to create other judgment creditors. It was possible for him, at any time within the fifteen months (<Cheney v. Woodruff.45 N. Y., 98, 100, 101, and cases cited), to procure an advance or loan from some friend or speculator, and confessing to him a judgment, thereby create in him a power and right to redeem from Cone. This was an interest affected by the continuance of the insured building on the one hand, or by its loss by fire on the other. Again, by the agreement with Cone, the latter was bound, if he acquired title, to discharge Palmer from his personal liability for certain mortgage and judgment debts, by. having them satisfied of record, and thus to relieve Palmer. The inducement and consideration for Cone to make perfect his inchoate title, and to carry out the other parts of his agreement, was greater or less as the premises remained unimpaired in value, or were injured by fire. All this constituted an interest in Palmer in this building, which was an insurable interest. If the loss of the building by fire should turn away Cone from the fulfillment of his agreement to effect the release of Palmer from his personal liability, then there might be, almost assuredly would be, a damage to Palmer. ( Waring v. Loder, 53 N. Y., 581; Franlclin Fire Ins. Go. v. Findlay, 6 Whart., 483.) Palmer did not, by the agreement with Cone, in terms, give up his own right to redeem, or his right and power to create a j udgment creditor who might redeem. He, probably, did not have any purpose to do either, and sought, by the agreement, somewhat of an equivalent for them. But, either by the possession of this right and power, or by the benefit contracted for in the agree ment, he had a beneficial interest in the preservation of the buildings, which was an insurable interest. The contingency gave him an interest in the continued existence of the buildings, which was an insurable interest. It thus appears that Palmer had not, at the time of the fire, been divested of all interest in the premises. He had an interest, similar to, if not as great and as perfect, as a possessor of the legal title to real estate who has entered into a valid contract of sale with a responsible vendee put into possession, who has not yet paid over the purchase-money. Be the vendee ever so responsible, the vendor has still an interest in the premises sold, which is the subject of insurance. Palmer had this interest certainly until the last day of the fifteen months for judgment creditors to redeem, for until the expiration of that last day it was a possibility for him to find some one who would make an advance of money, take a judgment, and make immediate redemption from Cone; and he also had the security of the additional inducement to Cone to fulfill his agreement. (See Lazarus v. Com. Ins. Go., 19 Pick., 81.) It is not sound to style the agreement between Cone and Palmer a conveyance of the title to Cone. It expressly looks to other action by Cone, or lack of action by others, by which Cone should get title, and, by the terms of the instrument, it was looked upon as a possible contingency, not an assured event, that Cone should get title. It is apparent that Palmer retained the legal title to the premises until the expiration of the fifteen months. As these did not expire until after the fire, his title continued until after the fire; and he, till after that event, had a pecuniary interest in the premises which was affected by their destruction by fire, without the indemnity of insurance. The seventh point is, that the plaintiff, having realized the whole, or a larger part, of his interest in the property, the defendants are entitled to a deduction from the sum claimed' on the policy, or a subrogation to the plaintiff’s securities. It is not found, specifically, that the plaintiff has realized, as is in this point assumed ; on the contrary, it is found that none of the claims or liens upon the property have been paid. It is found that the plaintiff has received $3,000 of insurance money from another company. There is proof that the whole premises, before that building was burned, were worth from $14,000 to $15,000, and that the plaintiff received a sheriff’s deed of them after the fire. It is found that the building destroyed was worth $8,000 ; and there is proof of the amount (about $7,000) of the liens held and owned by the plaintiff. So that there is matter in the proofs from which can be made an estimate whether the plaintiff, by the premises which he obtained by the sheriff’s deed and by the money which he obtained from the Glen’s Falls Insurance Company, is more than made good for the amount of his claims against the whole property. And it would result that he is. But if it is proper for this court to enter into such an inquiry and to arrive at that conclusion, are the relations of the plaintiff, the defendants and Palmer, such as that the defendants can maintain the position assumed in this point ? The policy did not insure Cone; it insured Palmer and his interest. It was the loss sustained by that interest which is to be paid to Cone, not that sustained by his own. Had he failed of a full indemnity the defendant would not have been affected by that; that he may have obtained more than a full indemnity gives them no right to resist his claim upon them. Had they insured his interest as a lienor, independently of any consideration of the interest of Palmer as the owner, and without the aid, concurrence or acquiescence of the latter, they would be in a better position to limit the amount of his recovery against them, and to set up a right of subrogation to his claims against the property subject to them, left undefrayed by the fire. But, having insured Palmer on his interest, with an agreement binding upon him and them to pay to Cone the loss which that interest should sustain, there is no-equity which will permit them to succeed to the right of Cone-against Palmer or the property, nor to make inquiry into the state of the debits and credits between Cone and Palmer. The ninth point is, that Palmer should have been joined as a party, and that his presence was absolutely necessary to determine the interest of Cone as against Palmer. It does not appear that Palmer has made any claim upon the defendants in hostility to Cone. If he had, the defendants could have had interpleader. Moreover, he was called as a witness-upon the trial, by the defendants, and made no dispute of the claims made by Cone. And an ample answer to the point is, that the loss was, by the terms of the policy, payable only to Cone, and he alone could sue upon it. As between him and the defendants and Palmer, Cone had the right to recover the whole loss sustained by the insurable interest of Palmer. After recovery he would hold the amount obtained for himself, to the amount of his liens upon that interest, and, as trustee for Palmer, for all above that amount. The only interest the defendants had in the fact that Cone had, or had not, liens, was to have it acertained, on the trial, whether or not he had some such claim, and was thereby entitled to sue. (See Olinton v. Hope Ins. Co., 45 N. Y., 544.)” Some questions as to the reception and rejection of evidence were also briefly discussed, but nothing of importance. Charles Tracy for the appellant. J. E. Dewey for the respondent. [MAJORITY — Folger, J.,] Folger, J., reads for affirmance. All concur; except Rapallo, J., not voting; Miller, J., not sitting, and Grover, J., who concurs in result.