Appeal from District Court, Taylor County; H. M. Towner, Judge.
LADD, J.
Plaintiff became a member of the defendant, a mutual assessment insurance association organized under the laws of Iowa, and received from it two policies of insurance covering the same property, one April 26, 1909, for $3,000, and the other November 22d of the same year, for $2,000. This property burned April 6, 1910, during the life of these policies, and it was conceded on the trial that the loss exceeded the amount of both, and that timely proofs of loss in due form were furnished the defendant; that insured's property was on ground along the tracks of the Chicago, Burlington & Quincy Railroad Company leased by that company to the plaintiff, the lease containing the following stipulation: “The lessee further agrees to cause during the continuance of this lease, and any extension thereof, the policies of fire insurance on the said grain elevator, corncribs and coal sheds and other improvements upon the demised premises, and upon contents thereof to be so written that in the event of any destruction or damage by fire, no insurance company shall have recourse against the railroad company.” The written application for insurance disclosed that the property was on leased ground, but not the terms of the lease, and each policy provided that: “If this association shall claim the fire was caused by the act or neglect of any person or corporation, private or municipal, this association shall, on payment of the loss, be subrogated to the extent of such payment to all rights of recovery by the insured for the loss resulting therefrom, and such rights shall be assigned to this association by the insured on receiving such payment. No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity until after full compliance by the insured of all the foregoing requirements.”
The plaintiff sued on the two policies, and also based his claim for judgment on an alleged adjustment of the loss. The defendant denied liability, for, as it alleged, the fire which consumed the property was set out by the above-named railroad company, and plaintiff, by the clause in the lease quoted, had breached the condition of the policy set out before the loss; and also defendant had tendered the full amount of the policies on “condition plaintiff would assign to defendant a right of action against said railroad company,” which plaintiff was unable to do because of having released it from liability. Subsequently plaintiff offered in writing a written assignment of any cause of action he had against the railroad company, but this was not accepted. The trial court found: “As a matter of law, the defendant company was bound by the terms and conditions of the lease at the time that it accepted the application and issued the policies of insurance. Knowing that the said property was upon leased ground and held by leasehold right, it made no investigation as to what were the terms of the lease, and accepted the application and issued the policies without making further investigation. Under these circumstances, in law, it ought to be bound by the terms of the lease. The right of subrogation is not a right that insures the recovery upon any claim that might be made, but is merely the right to substitute the defendant for the plaintiff, as to the rights that he might have in and to the claim for damages against the railroad company occasioned by their negligence. There being no proof that the fire was occasioned by the railroad company's negligence, that there would have been a right of recovery if prosecuted, and the defendant having failed to comply with the conditions which are conditions precedent to their right of subrogation, namely, the payment of the loss, and the plaintiff having at all times held himself in readiness to grant them every right which he might have had against the railroad company in accordance with the provisions of the said contract of insurance, there is no forfeiture of the plaintiff's right of recovery as against the defendant upon the said policies of insurance. The claim and loss for insurance, having been fully settled and adjusted by the parties upon a written agreement which was entered into by them, consisted of a proposition by the defendant and an acceptance by the plaintiff, is binding upon the association, and the plaintiff is entitled to recover thereon.”
There was considerable parley as to plaintiff prosecuting an action against the railroad company, but no agreement was reached, and subsequently defendant, with knowledge of the clause in the lease, made written tender in words following: “To WilliamGerlach: Whereas you are the holder of policy 35186 of the Grain Shippers' Mutual Fire Insurance Company and 31998 for five thousand dollars ($5,000) covering property at Sharpsburg, Iowa, said property being elevator and grain and lawn swing factory, and whereas you sustained a loss on said property which the insurance company are claiming was caused by the C. B. & Q. Railroad, through negligence and allowing sparks from their engine to come in contact with the property, and whereas under the terms of the policies above referred to the company upon making such claim is entitled to subrogation of your right to recover against the railroad up to the amount of insurance paid, whereas subrogation is to be due upon the payment of the loss: We hereby tender to you the sum of five thousand dollars ($5,000), the amount due on the policies above referred to, and demand subrogation of you to your right of recovery against the C. B. & Q. Railroad for negligently setting the fire. Grain Shippers' Mutual Fire Insurance Association, by Johnston Bros.”
On the next day, this offer was accepted in a letter addressed to defendant, saying: “I hereby accept that offer on the part of Mr. Gerlach, and assure you that we are ready to assign to you our cause of action against the railroad, to the extent of the amount which you pay, and immediately upon the receipt of this amount we will execute a written assignment providing you think a written assignment is necessary to be made from him. Respectfully yours, Wm. Gerlach, by W. M. Jackson, His Attorney.”
[1] Had the property been consumed by a fire set out by the railroad company, its liability would have been primary, and the liability of the insurance company in the nature of that of a surety. Upon payment of indemnity by the latter, it would be entitled to all the remedies of the insured. This “right is based upon the equitable doctrine that where one has been obliged to pay money to another, by the nonfeasance or misfeasance of a third, who, being at fault, ought to bear the loss, the party so paying, as by his direct obligation towards the party suffering the loss he may be compelled to do, shall be allowed indirectly, and through the right which the injured party had, to compel the wrongdoer to bear the burden which was imposed by his fault, although between him and the wrongdoer there is no direct relation upon which to found a cause of...
