Greenwich Bank v. Hartford Fire Ins. Co. of Hartford

• Decision Date: 31 December 1928
• Parties: GREENWICH BANK v. HARTFORD FIRE INS. CO. OF HARTFORD, CONN., et al.
• Court: New York Court of Appeals Court of Appeals

250 N.Y. 116

164 N.E. 876

GREENWICH BANK

v.HARTFORD FIRE INS. CO. OF HARTFORD, CONN., et al.

Court of Appeals of New York.

Dec. 31, 1928.

Action by the Greenwich Bank against the Hartford Fire Insurance Company of Hartford, Conn., and others. A judgment of the Trial Term on a directed verdict for plaintiff (127 Misc. Rep. 408, 216 N. Y. S. 315), the jury being waived, was reversed as matter of law, and a new trial ordered, by the Appellate Division (222 App. Div. 219, 225 N. Y. S. 615), and the named defendant appeals.

Affirmed, and judgment absolute ordered against defendant on stipulation.

Appeal from Supreme Court, Appellate Division, First Department.

Frederick T. Case and Francis X. Hanley, both of New York City, for appellant.

Frank C. Laughlin, Thomas G. Frost, and Joseph W. Kirkpatrick, all of New York City, for respondent Greenwich Bank.

Henry C. Burnstine and George E. Netter, both of New York City, for other respondents.

CRANE, J.

The Alexandre Works, Inc., a domestic corporation, was engaged in business on Stewart avenue, Garden City, Long Island, N. Y., as dealer in and manufacturer of fur novelties. Its plant consisted of a number of brick buildings, containing machinery and personal property of considerable value. The insurance amounted to $369,000. On January 9, 1922, it went into bankruptcy, and Percival Wilds on that day was appointed receiver, going into possession on January 14, 1922. The insurance was reduced to $293,500, covered by 39 policies in various companies. On January 29, 1922, a fire occurred, causing slight damage, and on February 17, 1922, another fire occurred, resulting in total loss. Thirty of the policies, amounting to $240,500 insurance, had been transferred to the name of the receiver. The proportionate part of the loss due under these policies has been paid. The remaining 9 policies has been paid. this action; they were not transferred into the name of the receiver. Payment has been resisted under two main contentions: One, that immediate notice of loss was not given to the companies; the other that possession had been transferred out of the insured into the receiver, contrary to the terms of the policy.

The nine policies insured the Alexandre Works, Inc.: ‘Loss, if any, payable to the Hempstead Plains Company, the Greenwich Bank, and the New Netherland Bank of New York as their respective interests may appear.’

The Hempstead Plains Company was a motgagee under 2 mortgages covering the property of the Alexandre Works, Inc., and 5 of the policies contained a mortgagee clause. The Greenwich Bank and the New Netherland Bank of New York did not have a mortgage. ‘They owned some of the merchandise; it was given on trust receipts.’ The claims of the banks and of the mortgagee, the Hempstead Plains Company, are the ones which are involved in this lawsuit, although the trustee in bankruptcy is a party representing the Alexandre Works, Inc.

In reviewing the defenses made by the insurance company, I shall deal with the questions in the following order: First, the rights of the mortgagee; second, the transfer of possession to the receiver; and, third, the notice of loss given to the companies.

The Hempstead Plains Company, as to 5 of these policies, was a mortgagee, protected by a mortgage clause in the policies. This clause does not appear in the record. Only one policy is given in full (Plaintiff's Exhibit 10), which does not contain this clause. The other exhibits are abbreviated, 5 of the statements reading: ‘Same assured, payable to same companies as appears in Plaintiff's Exhibit No. 10 (mortgagee clause with respect to Hempstead Plains Company attached).’ The brief for the insurance companies refers to this clause as the ‘extended standard mortgagee clause,’ and says that it gave the Hempstead Plains Company a separate contractual right, not affected by any act or neglect of the mortgagor or owner. If this mortgagee clause has become standardized, the provisions of subdivision 3, section 121 of the Insurance Law (Consol. Laws, c. 28), must have been complied with. We may fairly assume, therefore, that the copy of the clause contained in one of the other briefs is accurate. The following are its provisions:

‘Loss or damage, if any, under this policy, shall be payable to Hempstead Plains Company as first mortgagee (or trustee), as interest may appear, and this insurance, as to the interest of the mortgagee (or trustee) only therein, shall not be invalidated by any act or neglect of the mortgagor or owner of the within described property, nor by any foreclosure or other proceedings or notice of sale relating to the property, nor by any change in the title or ownership of the property, nor by the occupation of the premises for purposes more hazardous than are permitted by this policy: Provided, that in case the mortgagor or owner shall neglect to pay any premium due under this policy, the mortgagee (or trustee) shall, on demand, pay the same.’

This is all that need be quoted for the purposes of this opinion. Under this clause, therefore, as to these 5 policies, the appointment of the receiver and the transfer of possession to him or the failure of the insured to give immediate notice of loss would furnish no defense to the companies as against the Hempstead Plains Company. Heilbrunn v. German Alliance Ins. Co., 140 App. Div. 557, 125 N. Y. S. 374, affirmed 202 N. Y. 610, 95 N. E. 823.

In this connection, however, another question has arisen. All the policies contained the subrogation clause. It reads: ‘On payment to such mortgagee of any sum for loss or damage hereunder, if this company shall claim that as to the mortgagor or owner, no liability existed, it shall, to the extent of such payment be subrogated to the mortgagee's right of recovery and claim upon the collateral to the mortgage debt, but without impairing the mortgagee's right to sue or it may pay the mortgage debt and require an assignment thereof and of the mortgage.’

The only benefit of this clause to the companies is in case they are liable to the mortgagee, but not liable to the insured; that they have a defense against the insured which for some reason, possibly the mortgagee clause, is not good as against the mortgagee. In this case, as I shall show later, the companies have no defense, as against the insured, for the reason that there was no transferof possession within the meaning of the policy, and that the notice of loss was given in time.

As to these five policies, therefore, the insurance companies were liable to the Hempstead Plains Company under the mortgagee clause. Judgment should have been directed in its favor.

The Greenwich Bank and the New Netherland Bank of New York were not mortgagees, and did not come within the benefit of this mortgagee clause as to these five policies. They held trust receipts, the nature of which is not stated in the record. They had some right of property in the merchandise. Apparently the Alexandre Works, Inc., held the merchandise, the title remaining in the banks. As between the banks and the company, this may have been in the nature of a conditional sale or a chattel mortgage. Matter of A. E. Fountain, Inc. (C. C. A.) 282 F. 816. Under the terms of the policies of insurance, however, the banks were not mortgagees; the policies refer to those who are mortgagees in fact, and not by mere construction of law. McDowell v. St. Paul F. & M. Ins. Co., 207 N. Y. 482, 101 N. E. 457, dealt with a mortgagor and the mortgagee, and a clause which made the loss payable to John McDowell, as mortgagee; that policy so stated; this was the contract.

In the nine policies in this case, the banks are not referred to as mortgagees, and in the evidence it appears that they are not mortgagees. The Greenwich Bank and the New Netherland Bank of New York, therefore, under these policies, stood in no better position than the insured. Moore v. Hanover Fire Ins. Co., 141 N. Y. 219, 36 N. E. 191. Whatever rights they have, they must derive by and through it. The Hempstead Plains Company, as to the 4 policies which did not have annexed the ‘standard from extended mortgagee clause’ is probably in a better position than the banks, because it does appear from the evidence to be a mortgagee in fact, and, therefore, comes within that provision of the policy headed, ‘Mortgage Interests.’ This is not a standard mortgagee clause, but is a part of the policy itself. A similar provision was construed by us in the McDowell Case, and no doubt that case is applicable to the Hempstead Plains Company, in so far as the facts here support the application. I will not, however, pause to deal with this distinction, but treat the rights of the banks under the 9 policies and the rights of the Hempstead Plains Company under the 4 policies as though they were the same.

Was there a transfer of possession by the appointment of the receiver within the meaning of the policies? The policies provided: ‘This entire policy shall be void * * * (d) if any change, other than by the death of an insured, take place in the interest, title or possession of the subject of insurance (except change of occupants without increase of hazard).’ The insurance companies insist that the appointment of the receiver in bankruptcy a month and a half before the fire made void this policy. We are not dealing with title, but with this clause regarding possession. Title to the property passed to the trustee in bankruptcy after the fire, March 24, 1922. The question now is solely one of possession. The word ‘possession’ has various meanings. We speak of one having title to property as possessing such property; it may also have a very broad meaning when applicable to tax litigation. U. S. v. Whitridge, 231 U. S. 144, 34 S. Ct. 24, 58 L. Ed. 159. Here it is used in a contract, and the question is: What meaning have the parties given to it? What is the possession, the transfer of which voids the contract?

Occupancy is possession, and...