Employers' Fire Ins. Co. v. Ritter
| Decision Date | 16 February 1933 |
| Parties | EMPLOYERS' FIRE INS. CO. v. RITTER et al. |
| Court | New Jersey Court of Chancery |
Syllabus by the Court.
1. Standard mortgagee clause in fire policy is an independent contract of insurance for the separate benefit of the mortgagee.
2. Under standard mortgagee clause in fire policy, mortgagee's purchase at her own foreclosure sale is not "change of ownership" which will invalidate policy, unless notice is given to insurer.
3. When the mortgagee clause provided that the interest of the mortgagee would not be invalidated by foreclosure, it must have contemplated foreclosure terminating by a purchase of the property by the mortgagee, since purchase by any other person would divest the insurable interest of the mortgagee.
4. When the contract of insurance provides "that no subrogation shall impair the right of the mortgagee to recover the full amount of her claim" and the mortgagee by the exercise of her legal right by foreclosure becomes the owner of the premises, no new person becomes party to the insurance contract, and there is no change of risk except by the withdrawal of the interest of the mortgagor and the increase of the amount of interest of the mortgagee. The parties to the contract are the same after the sale.
5. The equitable right to subrogation rests not in the contract, but results from the circumstances of the case. Under the terms of the standard mortgagee clause, the equitable right of subrogation is subject to the exercise by the mortgagee of her legal right, and where such legal right is exercised by foreclosure of the mortgage, the equitable right which had not then come into existence is extinguished.
Suit by the Employers' Fire Insurance Company against Barbara Ritter and others. Bill dismissed.
Carr and Carroll, of Camden, for complainant.
Henry P. Brown, of Newark, for defendant Barbara Ritter.
STEIN, Vice Chancellor.
The defendants Carmela Bornacci and Joseph Bornacci, owners of property situate at Westfield, Union county, N. J., mortgaged same to Barbara Ritter. Complainant issued its fire insurance policy to the owners. Attached to the policy was a standard mortgagee clause, loss payable to Barbara Ritter as first mortgagee, as her interest may appear.
The mortgagee foreclosed and at the sale bought the property. The sheriff's deed is dated July 21, 1930, and was recorded August 13, 1930. There was due on the mortgages at the time of the master's report March 18, 1930, for principal and interest the sum of $6,132.50.
May 12, 1931, a fire occurred. Carmela Bornacci and Joseph Bornacci, no longer the owners of the property, filed a proof of loss reciting that they were the owners, and the loss was payable to Barbara Ritter as first mortgagee.
Complainant by draft to the order of Carmela Bornacci, Joseph Bornacci, Barbara Ritter, and the People's Adjustment Bureau, paid the fire loss in the sum of $2,525. The defendant Barbara Ritter procured indorsement on the draft of the other payees and retained the proceeds.
Decree pro confesso was entered against the Bornaccis.
The bill charges that complainant did not receive notice of the foreclosure and sale to Barbara Ritter, and so it issued its draft in payment of the loss in ignorance of that fact, believing at the time that the Bornaccis were still the owners. It charges the proof of loss furnished was false and made with the willful and delilierate intent to gain an unfair and unjust advantage; that by reason of the sale of the premises, the contract of insurance set out in the mortgagee clause became void as to Barbara Ritter; that the filing of the proof of loss with the statements therein contained was a fraud upon complainant; that the foreclosure proceedings and the sale thereunder operated to extinguish the interest of the mortgagee and created a situation where complainant could not demand to be subrogated to the mortgagee's rights to the extent of the payment made to her; and that this was a violation of complainant's rights and an estoppel from denying its right to subrogation.
Complainant seeks a lien upon the premises and prays sale of the...
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...subrogation, "if it exists, rests not in the contract, but results from the circumstances of the case." See Employers' Fire Insurance Co. v. Ritter, 112 N.J.Eq. 418, 164 A. 426, 428. This is also the rule in Rhode Island, where this insurance policy was entered into, at least where the poli......
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