Ames v. W. Manufacturers' Mut. Ins. Co.

• Decision Date: 25 July 1882
• Citation: 29 Minn. 330,13 N.W. 137
• Parties: AMES AND ANOTHER v WESTERN MANUFACTURERS' MUTUAL INS. CO. AND ANOTHER.
• Court: Minnesota Supreme Court

29 Minn. 330

13 N.W. 137

AMES AND ANOTHERvWESTERN MANUFACTURERS' MUTUAL INS. CO. AND ANOTHER.

Supreme Court of Minnesota.

Filed July 25, 1882.

Appeal from district court, fourth judicial district, county of Hennepin, from order denying motion for new trial.

Perkins & Whipple, for respondent.

Koon, Merrill & Keith, for Richardson, appellant.

BERRY, J.

On December 16, 1879, Cochran, being owner of a piece of land in this state, insured a mill, machinery, and fixtures therein against damage by fire in the Western Manufacturers' Mutual Insurance Company for $2,000. December 18, 1879, he borrowed of defendant $5,200, for which he gave his promissory note on five years, secured by a mortgage of the land mentioned, which was duly recorded December 22d. By the terms of the mortgage Cochran covenanted with Richardson that at all times during its continuance he would keep the buildings on the premises “unceasingly insured” for at least $5,200, payable in case of loss to Richardson, to the amount then secured by the mortgage. December 28, 1879, Cochran insured the mill, machinery and fixtures for $1,500 in one company, and for $2,000 in another, and, by indorsement upon each of the two policies issued to him, the loss was made payable to Richardson, as her interest might appear. On July 9, 1880, while the three insurances were in force, the insured property was totally destroyed by fire. Before this Richardson had no knowledge of the first insurance. The loss was adjusted by Cochran and the three insurance companies at $4,298.03, as the true value of the property destroyed. The result was that the losses payable to Richardson were scaled from $3,500 (the face of the last two policies) to $2,442.20, and this sum was paid to her and applied on the note. The loss under the first insurance was scaled and adjusted at $1,317.70, and that sum agreed to be paid Cochran accordingly. This was done July 19, 1880, and on the same day the certificate which had been issued to Cochran by the Western Manufacturers' Mutual Insurance Company, in lieu of a policy, was for a valuable consideration duly assigned to the plaintiffs. They brought this action against the insurance company to recover the amount of the loss as adjusted at $1,317.70. Nothing having been paid upon Richardson's note and mortgage other than the sum of $2,442.20 before mentioned, and the whole debt having been declared due under a provision in the mortgage, there remains due and unpaid thereon something over $3,000. Richardson laying claim to the money ($1,317.70) realized from the full insurance, the company paid it into court, and Richardson was substituted as defendant in the company's place. The question is, who is entitled to this money-plaintiffs or Richardson?

It is well settled that in the absence of an agreement by a mortgagor to insure for the benefit of his mortgagee, the latter has no right to any advantage whatever from an insurance upon the mortgaged property effected by the former for his own benefit. 1 Jones, Mortg. 401; Nichols v. Baxter, 5 R. I. 491;Plimpton v. Ins. Co. 43 Vt. 497; May, Ins. §§ 449, 456; Carter v. Rockett, 8 Paige, 437.

It is equally well settled that an agreement by the mortgagor to insure for the benefit of his mortgagee gives the latter an equitable lien upon the proceeds of a policy taken out by the former and embraced in the agreement. And when the agreement is that the mortgagor shall procure insurance upon mortgaged property, payable in case of loss to the mortgagee, and the mortgagor, or some one for him, procures insurance in the mortgagor's or a third person's name, without making it payable to the mortgagee, though this be done without the mortgagee's knowledge, or without any intent to perform the agreement, equity will treat the insurance as effected under the agreement, (unless this had been fulfilled in some other way,) and will give the mortgagee his equitable lien accordingly. This is upon the principle by which equity treats that as done which ought to have been done. That is to say, inasmuch as the insurance effected ought to have been made payable to the mortgagee, equity will give the mortgagee the same benefit from it as if it had been. In support of these general propositions we refer to Thomas' Ex'rs v. Van Kaff's Ex'rs, 6 Gill & J. 372; Carter v. Rockett and Nichols v. Baxter, supra; Wheeler v. Ins. Co. 101 U. S. 439;Cromwell v. B. F. Ins. Co. 44 N. Y. 42;Miller v. Aldrich, 31 Mich. 408; 1 Story, Eq. Jur. § 64g; 2 Am. Lead. Cas. (5th Ed.) 832-4; In re Sands Ale Brewing Co. 3 Biss. 175.

In the cases cited (with the exception of Baxter v. Nichols) the insurance was effected after the agreement to insure. In Baxter v. Nichols it...