Mark v. Liverpool & London & Globe Ins. Co., 23907.

• Decision Date: 09 May 1924
• Docket Number: No. 23907.,23907.
• Citation: Mark v. Liverpool & London & Globe Ins. Co., 159 Minn. 315, 198 N.W. 1003 (Minn. 1924)
• Court: Minnesota Supreme Court
• Parties: MARK v. LIVERPOOL & LONDON & GLOBE INS. CO., Limited (NORTHERN TITLE CO., Intervener).

159 Minn. 315

198 N.W. 1003

MARK

v.LIVERPOOL & LONDON & GLOBE INS. CO., Limited (NORTHERN TITLE CO., Intervener).

No. 23907.

Supreme Court of Minnesota.

May 9, 1924.

Appeal from District Court, St. Louis County; C. R. Magney, Judge.

Action by George Mark against the Liverpool & London & Globe Insurance Company, Limited, in which the Northern Title Company intervened. Judgment for plaintiff, and intervener and defendant appeal. Affirmed.

Syllabus by the Court

A contract for the sale of land, part of the purchase price being paid and possession taken, vests in the vendee an equitable title in fee. The legal title in fee is retained by the vendor as security, and upon payment he holds it in trust for the vendee. A policy of insurance issued to the vendor with a condition of forfeiture in the event that the property is sold without the assent of the insurer is not forfeited by his subsequently making such a contract.

The evidence justifies the finding of the court that the intervener, a mortgagee, requested the defendant to make certain insurance policies, issued to the plaintiff, the mortgagor, who covenanted in the mortgage to keep the property insured for the benefit of the mortgagee, payable in case of loss to it as mortgagee, and that it agreed to do so but did not. Under such finding the intervener is entitled to share in the policy.

The evidence sustains a finding of total loss. George H. Spear, and Jas. E. Gardner, Jr., both of Duluth, for appellant.

W. F. Dacey, of Duluth, for respondent.

Rollo N. Chaffee, of Duluth, for intervener.

DIBELL, J.

Action on two policies of fire insurance aggregating $3,000 issued by the defendant to the plaintiff on a building in Duluth. The Northern Title Company, a mortgagee of the plaintiff, intervened, claiming that the insurance company agreed but failed to attach a mortgage clause to the policies, making the insurance payable to it, and asked a reformation. The trial court found that the loss was total, decreed a reformation, and directed judgment for the plaintiff for one sum and for the intervener for another, the two sums aggregating $3,000 and interest. The defendant appeals from the judgment.

[1] 1. The policies are of the Minnesota standard form. They provide for forfeiture ‘if without such assent [of the insurer] the situation or circumstances affecting the risk shall, by or with the knowledge, advice, agency, or consent of insured, be so altered as to cause an increase of such risks, or if, without such assent, the property shall be sold or this policy assigned. * * *’ G. S. 1913, § 3318. The issue between the plaintiff and the defendant is whether the property was ‘sold’ within the meaning of the policy. There is no claim that there was an assent by the insurer.

The facts are not in dispute. One policy was dated February 26, 1921; the other March 31, 1921. The property was destroyed by fire on August 18, 1921. On May 13, 1921, the plaintiff entered into a contract of sale with one Radovich for $3,680. He paid $400 in cash, assumed two mortgages made by the plaintiff to the intervener, aggregating $1,800, agreed to pay the balance of $1,480 in monthly installments, and took possession. The plaintiff endeavored to sell to the People's State Bank. He was engaged in building and selling houses and wanted to buy property and build. The bank refused to purchase but offered to advance the money due on the contract if Radovich would make a note directly to the bank, and the plaintiff would indorse it. The plaintiff accepted. The bank paid $300 in cash. The balance was represented by two lots deeded to the plaintiff by an officer of the bank. The plaintiff, his wife joining, executed a deed of the insured property, the name of the grantee blank, and delivered it to the bank to be delivered to Radovich when his payments were completed. Such a transaction passes the equitable title in fee to the vendee leaving the legal title in fee in the vendor as security; and when the contract is performed the vendor holds the legal title as trustee. This is settled law in Minnesota. Shraiberg v. Hanson, 138 Minn. 80, 163 N. W. 1032, and cases cited; In re Consolidation, etc., 146 Minn. 403, 178 N. W. 892, and cases cited. The vendee is a freeholder within G. S. 1913, § 6656, defining ‘estates of inheritance’ as freeholds. In re Consolidation, etc., 140 Minn. 475, 168 N. W. 552. So is the vendor. In re Consolidation, etc., 146 Minn. 403, 178 N. W. 892. The interest of each is subject to a judgment lien. Minneapolis & St. L. Ry. v. Wilson, 25 Minn. 382;Reynolds v. Fleming, 43 Minn. 513, 45 N. W. 1099;Hook v. N. W. T. Co., 91 Minn. 482, 98 N. W. 463. The interest of the vendor is as stated though it passes as personalty upon his death. State v. Probate Court, 145 Minn. 155,176 S. W. 493. If the contract of sale does not forfeit the policy the depositing of a deed in escrow, to be delivered on completion of the payments, does not. Moore v. St. P. F. & M. Ins. Co., 176 Iowa, 549, 156 N. W. 676. The deposit in escrow does not make the contract of sale anything more. The plaintiff remained liable on the mortgage notes. In the mortgage he had agreed to procure insurance for the protection of the mortgagee. He was liable on the Radovich note of $1,480. He was in reality borrowing from the bank. He had an insurable interest in the property; so had Radovich. See Banner Laundry Co. v. Great Eastern Casualty Co., 148 Minn. 29, 180 N. W. 997, and authorities cited; National Fire Ins. Co. v. Itasca Lumber Co., 148 Minn. 170, 181 N. W. 337; 2 Joyce, Ins. §§ 977, 983; Cooley, Briefs on Ins. & Supp. 188-190; 14 R. C. L. 916.

We are not cited a case construing a policy with a condition of forfeiture in the precise language of the one before us. Some policies protect against an alienation; others against a sale or conveyance or incumbrance; others against a change in title, interest, or possession; and others avoid the insurance if the insurer is not the entire, unconditional, and sole owner.

In construing such or similar conditions some courts emphasize the change of moral hazard attendant upon a change of interest or a change of possession; others direct serious attention to the question whether the insured retains an insurable interest. Both are legitimate considerations. In King v. Hartford Fire Ins. Co., 133 Minn. 322, 158 N. W. 435, Ann. Cas. 1918D, 861, involving a Canadian policy forfeiting the insurance ‘if the property insured is assigned without a written permission indorsed hereon,’ it was held that an assignment of the property by way of security did not forfeit the insurance. Mr. Justice Bunn said:

‘The cases hold quite generally that what such a provision as the one under discussion is intended to provide against, is a transfer or assignment of the insured's entire interest in the property, so that he does not retain an insurable interest and that a chattel mortgage is not such a transfer or assignment.’

The plaintiff cites Gibb v. Philadelphia Fire Ins. Co., 59 Minn. 267, 61 N. W. 137,50 Am. St. Rep. 405. The policy contained a condition of forfeiture ‘if any change other than by the death of an insured takes place in the interest, title or possession of the subject of insurance.’ It was held that an executory agreement to convey under which the vendee took possession and paid a portion of the purchase price worked a forfeiture because of the change of interest. The court said:

‘It is held by the great weight of authority that, where the condition is against any change in the title, there is no breach unless there is a change in the legal title-that, as long as the insured retains the legal title and an insurable interest in the premises, the policy is not avoided by a transfer of the equitable title or of equitable interests; but we cannot apply this doctrine to a condition against any change of interest. The terms are not synonymous, as contended by counsel. The word ‘interest’ is broader than the word ‘title’ and includes both legal and equitable rights.'

Under a like condition it was held in Garner v. Ins. Co., 73 Kan. 127, 84 Pac. 717,4 L. R. A. (N. S.) 654, 117 Am. St. Rep. 460,9 Ann. Cas. 459, that such a contract did not avoid the policy either as affecting a change of title or a change of interest. And see Erb v. German Am. Ins. Co., 98 Iowa, 606, 67 N. W. 583,40 L. R. A. 845;Grable v. German American Ins. Co., 32 Neb. 645, 49 N. W. 713. In Brighton Beach Ass'n v. Insurance Co., 113 App. Div. 728,99 N. Y. Supp. 219, affirmed without opinion in 189 N. Y. 526, 82 N. E. 1124, it was held under a like provision that a contract of sale constituted a change both in title and interest and forfeited the policy. And see Grunauer v. Westchester Fire Ins. Co., 72 N. J. Law, 289, 62 Atl. 418,3 L. R. A. (N. S.) 107.

The plaintiff cites among other cases, and they directly or indirectly support his claim, Kempton v. State Ins. Co., 62 Iowa, 83, 17 N. W. 194;Grable v. German American Ins. Co., 32 Neb. 645, 49 N. W. 713;Browning v. Home Ins. Co., 71 N. Y. 508, 27 Am. Rep. 86;Hill v. Cumberland, etc., Co., 59 Pa. 474;Arkansas Fire Ins. Co. v. Wilson, 67 Ark. 553, 55 S. W. 933,48 L. R. A. 510, 77 Am. St. Rep. 129;Washington Fire Ins. Co. v. Kelly, 32 Md. 421, 3 Am. Rep. 149;Phenix Ins. Co. v. Caldwell, 187 Ill. 73, 58 N. E. 314, affirming 85 Ill. App. 104;National Fire Ins. Co. v. Three States Lumber Co., 217 Ill. 115, 75 N. E. 450,108 Am. St. Rep. 239.

The policy in the Kempton Case contained a condition of forfeiture ‘if said property shall be sold, conveyed or incumbered.’ It was held that an executory contract of sale did not work a forfeiture. Possession had not been taken at the time of the loss. The defendant urges that it is overruled by Davidson v. Hawkeye Ins. Co., 71 Iowa, 532, 32 N. W. 514,60 Am. Rep. 818, involving a policy with a like condition of forfeiture. The Davidson Case assumes to distinguish the Kempton Case. In Pringle v. Des Moines Ins. Co., 107 Iowa,...