George W. Soule and wife vs. The Union Bank

George W. Soule and wife vs. The Union Bank. Where a mortgagee charges the mortgagor with the premium for an insurance on his life for three years, and includes the amount in the mortgage, as a part of the principal, he is bound to keep the policies alive; and if, in consequence of his neglect to pay the premiums, the policies become extinguished, he is himself liable as an insurer. If the mortgagee he a hank, and it is claimed that therefore it can not he an insurer, for want of power, then it may he held liable for its negligence in not keeping the insurance in force. In either case parties interested in the mortgaged premises are entitled to have the amount of the insurance credited on the bond, and the land exonerated to that extent. nnHIS cause was tried at special term, before Justice Muli- lin, without a jury. From his judgment directing a dismissal of the complaint, the plaintiffs appealed. The facts presented by the findings and evidence, are as follows: The plaintiff, Ellen W. Soule, in February, 1859, by virtue of a conveyance for a valuable consideration, from Jacob H. Mott and wife, held and owned all of Mott's interest in the lands belonging to the estate of John Hopper. Being such owner on 16 th February, 1859, Mrs. Soule, in-com junction With her husband -the plaintiff, (leo. W. Soule, released to the defendant all her right, title and interest in such lands, so that a mortgage to be contemporaneously dated and executed by J acob H. Mott and wife to the defendants might be a lien. This mortgage was given in part settlement of a debt the defendant claimed to have against J acob H. Mott, and was payable one year after his mother, Mrs. Winifred Mott’s death. In compliance with a condition of the settlement exacted by the defendant, Mott agreed to include, and did include, in the mortgage on the lands, agreed to be released by Mrs. Soule, the sum of $3465.33, which 'was the premium of the insurance on his life, for $55,000 during the probable duration of his mother’s life, as indicated by the ¡Northampton tables, and which was fixed at a little over three years. Policies on which the annual premium was $1125 were thereupon effected by the defendant on the life of the said J acob H. Mott, in case he should die before his mother, in the aggregate amounting to $55,000. The first year’s premiums were paid by the defendant, but when they became due for the succeeding year, the defendant determined to take the risk itself and not continue the'policies, and .by non-payment of the annual premiums said policies became extinguished. Jacob H. Mott died May 13, 1861, when, for the first time, Mrs. Soule, who executed this release on the faith of this insurance, discovered that these insurances were not in force. ' The defendant claiming that the mortgage given by Mott and wife was a lien on Mrs. Soule’s lands for the full amount, this suit was commenced. The relief prayed for was that the mortgage executed by Mott and wife to the defendant might be declared to be satisfied and discharged, or to be no lien on the premises mentioned in the plaintiffs’ release to the defendant, executed February 16, 1859, and that such release might be delivered up to be canceled, &c. The defendant’s position, as taken in its answer, was, that this insurance might have been collected without any obligation on its part to account therefor to Mott or any one. The learned Justice refused to find, as matter of fact, that the release of Mrs. Soule was executed, as she claimed, on the faith of the defendant’s agreement to insure Mott’s life, and the plaintiffs excepted. On the facts which he did find, he was requested to find, as matter of law, either— 1. That the defendant having' neglected to keep this insurance alive, the lien of the mortgage was discharged. 2. Or that the amount of the insurance should be credited on Mott’s bond, and the land of Mrs. Soule exonerated to that extent. But the learned Justice refused so to find, holding that, as the plaintiffs had failed to prove an express promise to insure, there could be no recovery. Thomas C. T. Buckley, for the appellants. I. Where a mortgagee insures his own interest, at his own cost, for his own protection, any money.received from that source does not reduce the mortgage debt, but the defendants having charged Mott with the premium, and included it in the mortgage given by him, are estopped from claiming that the insurance was merely an additional security, which they took for their own benefit, and which they could relinquish or not as they pleased. If the policies had been kept alive, and the insurance paid, it would have extinguished Mott’s debt to the amount received, and exonerated to that extent Mrs. Soule’s land. That the defendant saw fit, for purposes of gain, to take the place of the insurance companies, can make no change in its liability, if the principle above contended for is sound. (Fisher on Mort. § 1153, note h. Law Lib. N. S. vol. 78, 427. Ex parte Andrews, 2 Rose, 410. Morland v. Isaac, 20 Beavan, 389. Fowley v. Palmer, 5 Gray, 551.) II., But if these policies were only in the nature of an additional security for the payment of Mott’s debt, the defendant could not annul that security to the prejudice of Mrs. Soule, who had given her property as surety for that debt. (1 Story Eq. Jur. §§ 325, 326.) If the creditor has any security from the debtor, and by his negligence it is lost, the surety is discharged, at all events, to the value of the thing so lost. The collateral must he held as well for the security of the creditor as the indemnity of the surety. (Hayes v. Ward, 4 John. Ch. 130. Hawks v. Hinchcliff, 17 Barb. 492. Newton v. Charlton, 10 Hare, 651. Capel v. Butler, 2 Sim. & Stuart, 457, commented on and approved in 5 Barb. 592, 593. Pearl v. Deacon, 24 Beavan, 186, 191. Watts v. Shuttleworth, 5 Hurl. & Norman, 247.) The above cases hold that it is immaterial whether the surety knew or not that the creditor had taken the additional security. The last cited holds that the surety’s rights do not depend on actual contract. III. An agreement to insure, if necessary as a ground of recovery, need not be expressly proven, but may be inferred. ([Morland v. Isaac, 20 Beavan, 389.) There is proof in the case, from which, as respects Mrs. Soule, the court would be warranted in finding an agreement to insure, and the learned Justice should have found as requested. See the evidence of Mrs. Soule, which is supported by the evidence in relation to the proposition for settlement, and its terms, by the inclusion of the premium in the mortgage; and by the subsequent action of the defendant in taking out the policies. S. A. Foot and W. E. Curtis, for the respondent. I. In' order to render the security as perfect as the mortgagor could make it, because there was a question whether his interest in the mortgaged premises was a vested remainder to take effect in. possession after the death of his mother, or a contingent remainder depending upon the contingency of his surviving his mother, the defendant required for its own security and benefit as a condition of the discharge of Jacob H. Mott from custody, that there should be included in the mortgage a sum equal to the premium on the life of Jacob H. Mott during the life of his mother on the amount of $44,333.88, and interest from the time Jacob H. Mott fraudulently ahstracted it from the defendant. This arrangement was made by the defendant and Jacob H. Mott entirely irrespective of any obligation to insure, or to give him the benefit of any insurance; and there is no evidence showing that the defendant incurred any such obligation, or agreed to give him the benefit of any insurance. It was left at the option of the mortgagees whether to insure or not. A mortgagee can not insure and collect premiums paid, unless the mortgage makes provisión for insurance; and when it does it raises no obligation on the part of the mortgagee to insure. II. If the insurance had been made by the bank, and the money received, the bond and mortgage would still have been a valid and effective security, except so far as the security would have been impaired or destroyed by Jacob H. Mott’s dying before his mother. It would not have canceled the mortgage. III. The evidence shows that Mrs. Soule is in error in respect to the alleged interviews with John Foot; and even if they had occurred, it is undisputed that he had no authority from the defendant or otherwise, to make any terms or enter into any arrangements on its behalf for the discharge of Jacob H. Mott, other than those contained in the written proposition. IV. The evidence shows that the defendant entered into no other arrangement, agreement or condition for the discharge of Jacob H. Mott from custody, than appears and is written in the proposition marked A, and the instruments marked B and 0, attached to the defendant’s answer, being a memorandum of the agreement between Mott and the defendant, and the release of Mrs. Soule to the bank; and that it was not privy to any other, nor did it by any act or omission of its own enter into or become privy to any other. V. Mrs. Soule, the plaintiff, errs in claiming that she occupies the relation of surety, or was a surety for the payment of the mortgage. 1. Her release to the defendant upon its fg.ee shows tjb.at it wp.? a conveyance for a considpratipp therein stated, and neither directly or hy inference does it show that it was anything else than a release. 2. It ivas given in accordance with the terms of the proposition contained in Schedule A, (attached to answer) which thus provides, “ Mrs. Soule to release to the banlc so as to clear the title,,” and in accordance with which she thus released. 3. The evidence shows that the conveyance by Jacob H. Mott to his wife’s mother, Mrs. Soule, was made under suspicious circumstances, and after the discovery of the frauds, and it was proper that she should release so as to clear the title, VI, There is no force in the view taken by the plaintiffs, because there was no agreement by the mortgagees to keep the life insured, and no obligation to do so arises by implication, The defendant has not been guilty of any wrongful act, nor has it omitted to do any act which its duty enjoined it to do, or which it was requested to do by Mrs. Soule in Mott’s lifetime. The plaintiffs are mistaken in assuming that the consideration for Mrs. Soule’s release was the proposed insurance on Mott’s life. Schedules A and 0, (attached to answer) show the contrary, and no such consideration can be inferred from the evidence, The same mistake occurs when they assume that Jacob H. Mott provided the funds requisite to pay the premiums, and base their reasoning on the fact that Mott’s giving a bond for “a sum equal to premium on his life during tlie lifetime of his mother,” is not a providing' of funds to pay premiums. The establishment of such a doctrine as is claimed by the plaintiffs would be to impair all mortgages and securities which are sought to be strengthened by a privilege of insurance. . VII. The adding to the amount, which the mortgagor had fraudulently abstracted from the bank, a sum equal to the premium of insurance on the life of the mortgagor during the life of his mother, was done solely and simply as an equivalent for the uncertainty of the interest of the mortgagor in the mortgaged premises,’ and was justly added, as the security thereby was only rendered as perfect as the mortgagor could. make it, he being bound in law and equity to give the bank full and perfect security for the money he had taken from it. VIII. The only exceptions of the plaintiffs are at folios 95 and 198 to 202. The court did not err, but correctly stated the rule of evidence, that.though the husband may be competent to testify for himself, yet he is incompetent to testify as to the rights of his wife. (Schaffner v. Reuter, 37 Barb. 44. Shoemaker v. McKee, 19 How. Pr. 86. Draper v. Hensingsen, 16 id. 281.) IX. The court did not err in dismissing the complaint. The cause of action was alleged in the complaint to arise upon the agreement of the defendant to insure. There Was no evidence of any such agreement, and the complaint was properly dismissed. X. The court properly refused to find as requested by the plaintiffs, “ that the consideration moving the plaintiff, Ellen W. Soule, to the execution of said instrument, was the undertaking of the defendant to keep the life of Jacob H. Mott insured, &c.” as there was no proof to sustain such a finding. XI. The court held correctly in declining to find as matter of law, that on the evidence in the case, the defendant was equitably bound to have kept alive the policies of insurance, or to account for the amount secured thereby, if it elected to take the risk itself. • There is no equity when there is no promise; and there is no evidence showing any promise; and if the defendant did not choose to keep alive the policies, there is'no principle of law entitling the plaintiffs to have their land discharged from the lien of Jacob H. Mott’s mortgage, or entitling them to a credit for the amount of the insurance, on the bond of Jacob H. Mott, and to a release to that extent of the lien of the mortgage. [MAJORITY — By the Court, Ingraham, P. J.] By the Court, Ingraham, P. J. The release executed by the plaintiffs was only intended to operate on the wife’s estate in the premises so far as to allow the mortgage executed by Jacob H. Mott and wife to have priority over her interest, and the lien of the mortgage was the same as if they had executed it instead of Mott. The plaintiffs then had a right to all the defenses which Mott could make, and could claim the benefit of all payments which were made, whether received from Mott or themselves. If the insurance had been made in this case by the bank for its benefit, Mott would have had no claim to the proceeds, but the bank would have been entitled to the whole recovery. If Mott had made the insurance and transferred the policy to the bank as security, it would not be doubted for a moment that in case of a recovery upon it by the bank it would be bound to credit the amount received on account of fhe indebtedness due the bank. In the present case the bank charged Mott the whole premium for three years, and included the amount as part of the principal of the mortgage. This, then, if the policy had been obtained, would have been an insurance paid for by the mortgagor as additional security for the payment of the moneys due on the mortgage, and in case of loss he would have in like manner been entitled to credit for the amount recovered. The bank was bound to insure, having charged Mott with the premium. It did not do so for three years, but it is apparent it so understood its obligations, for it effected an insurance for $55,000 for one year. The Judge then finds that it elected to take the risk itself, neglected to pay the premium for the next year, and the joolicies expired. - The,bank under these facts must .be considered as insurer, and liable to the same extent as the insurance company would have been if the policies had been continued by payment of the premium for the succeeding year. If it should be said the bank could not be insurer for want of power, the answer is that it is immaterial whether the bank is Charged as insurer or as guilty of negligence in not making the insurance. The amount the plaintiffs are entitled to be credited on the mortgage would be the same. I think the Justice erred in not so finding, when requested by the plaintiffs’ counsel. Even admitting that the judge was right in holding there was no express agreement to insure, and therefore the defendant was not bound to insure (to which I do not assent,) still it is apparent the defendant has received from the plaintiffsj or claims to have a right to receive from them, a portion of the premiums to which it has no right, and which, if it was not hound to insure, would be a recovery of more than the debt due it and legal interest. If it was not hound to insure, it should at least have credited the plaintiffs with the premium not paid for insurance. [New York General Term, November 6, 1865. There is no view of this case in which the judgment can he sustained; on the contrary, I think the plaintiffs are entitled to the relief asked for. Judgment reversed, and a new trial ordered; costs to abide the event. Ingraham, Leonard and Geo. G. Barnard, Justices.] -0-0-