Morrison's Adm'r v. Tennessee Marine & Fire Ins. Co.

• Decision Date: 31 March 1853
• Citation: 18 Mo. 262
• Parties: MORRISON'S ADMINISTRATOR, Respondent, v. TENNESSEE MARINE AND FIRE INSURANCE CO., Appellant.
• Court: Missouri Supreme Court

18 Mo. 262

MORRISON'S ADMINISTRATOR, Respondent,

v.TENNESSEE MARINE AND FIRE INSURANCE CO., Appellant.

Supreme Court of Missouri.

March Term, 1853.

1. An absolute assignment or sale of insured property after insurance is effected, takes away the insurable interest of the vendor, and creates a bar to the right of action on the policy, unless by some means its existence has been preserved for the benefit of the assignee.

2. Where A. effected an insurance on property, and afterwards sold and conveyed it to B., who reconveyed it to a trustee to secure to A. the payment of the purchase money, it was held that A. retained an insurable interest, and after a loss might recover on the policy to the extent of his actual loss, not to exceed the sum insured.

3. The failure of the insured to disclose the state of his title, or the extent of his interest in the insured property, will not avoid the policy, unless there is a fraudulent concealment or misrepresentation. If the insurer deems this information material, he may protect himself by inquiry, or by the conditions of his policy.

4. The right of a surety to be subrogated to the securities of his principal, does not arise until he has paid the principal's debt. Thus the insurance company could not be subrogated to A's rights against B. until it had paid the insurance, if at all.

Appeal from St. Louis Court of Common Pleas.

E. & B. Bates, for appellant.

I. The sale by Morrison passed away his interest in the premises insured, and therefore discharged the underwriter.

II. If Morrison's conveyance and the deed of trust for the security of the notes to him be considered as one transaction and merely a change of his interest in the premises insured, yet it is such a change of interest as releases the underwriter. For the contract of insurance was made with Morrison as the owner of the premises, and the change so diminished his interest in the premises and in its protection from fire, as to alter the whole basis of the contract and destroy the underwriter's inducement to its formation. (16 Pet. 495; 3 Denio, 301.) It is immaterial whether a change of interest enhanced the risk or not; it is the change which discharges the underwriter. It is analogous to a deviation in marine insurance. (Tennessee Marine and Fire Ins. Co. v. Scott & Mudge, 14 Mo. 46; Walsh v. Homer, 10 Mo. 6, particularly 14 and 15.)

III. The contract with Morrison was only to indemnify him for any loss or damage he might sustain, and he has sustained no loss nor damage. His only interest in the premises, at the time of the fire, was as a collateral security for the payment of his notes, and that security being still ample, he has sustained no loss whatever.

The contract is not that the assurer will pay the assured for every injury to the property which may happen by fire, but only that it will pay such loss as the assured may sustain by fire. (2 Pet. 25, particularly 48-9; Columbus Insurance Co. v. Lawrence, 2 Comstock, 210, particularly 216; 5 Barr. 183, particularly 192; Ellmaker v. Franklin Insurance Co., 5 Pick. 34, 76; 16 Pet. 495; 1 Phil. on Ins. 1, 2, 3; 16 Wend. 385, particularly 397.)

IV. The defendant should have been subrogated to the plaintiff's rights in the debt and its security, to the extent of the recovery. (Carpenter v. The Providence U. Ins. Co., 16 Pet. 495.) If the defendant is entitled to be subrogated to the plaintiff's stead, no judgment should go against it, for it never contracted that, in case the house were burnt, it would buy the notes secured on the land, or to advance to the plaintiff payment of notes not yet due, and which were not even in existence when the contract was made. And if it is not entitled to be subrogated, the result is, either that the plaintiff gets his debt paid twice, or his vendee has the benefit of the payment by the defendant, with whom it had no contract or privity whatever.

F. M. Haight and Todd & Krum, for respondent.

I. The conveyance of the property by Morrison to Bowman, retaining a lien for the purchase money. did not divest the interest of the former. (Howard v. Albany Ins. Co., 3 Denio, 301; Am. Law Reg. No. 1, p. 18; 7 Barbour, 570; 5 Pick. 76; ib. 19; 1 Phill. on Ins. 67, 72; 4 Mass. 330; 16 Wend. 385, 397; 6 Cow. 316; 10 Pick. 40; 13 Mass. 67.)

II. Whether this is a case for subrogation or not, has nothing to do with this suit. If this right ever arises, it can only be on payment of

the money. (Theobald on Principal and Surety, ch. 10, p. 186; 2 Phil. on Ins. 282; 5 Paige's Ch. 296; 2 Vt. Ch. 408; 16 Pet. 501.)

III. It is no defence to this suit, that Bowman remains able to pay, or that the land on which the burnt building stood is still ample security for the debt. (3 Sumner, 141, 142.)

SCOTT, Judge, delivered the opinion of the court.

This was an action on a policy of insurance against fire, on a dwelling house. The action was begun by the assured, J. S. Morrison, and he dying, the suit was prosecuted in the name of the respondent, his administrator. It is averred in the petition, that while the said policy was in full force, and before its expiration, Morrison, in consideration of the sum of sixty-six thousand one hundred and sixty-six dollars, conveyed the ground on which the insured buildings were and the building thereon, with other lands, to S. M. Bowman; that no part of the consideration money was paid to Morrison, but at the time of said conveyance, the said Bowman executed and delivered to Barton Bates, trustee for Morrison, a deed or reconveyance of the same premises, conditioned to pay the said Morrison the consideration money of said sale. To this petition there was a demurrer, which was overruled, and a judgment was rendered for the plaintiff. The defendant maintains, that Morrison, by his conveyance to Bowman, was divested of all interest in the subject matter of the insurance, and therefore could maintain no action on the policy; or if the transaction with Bowman did not produce that effect, it at least so changed the interest of the assured and diminished its value, as to release the underwriter.

1. The general principle is, that an absolute assignment or sale, after the insurance is made, takes away the insurable interest of the vendor, and creates a bar to the right of action on the policy, unless by some means its existence has been preserved for the benefit of the assignee. After the assured has parted with all his interest in the property insured he stands as though he never had any right in the subject of the insurance, and therefore cannot effect a valid policy upon it. The contract of assurance is no longer a contract of wager; it is a contract of indemnity, and nobody can recover in respect to the loss, who is not really interested. This principle is too obvious to require a citation of authorities in its support.

2. But notwithstanding a conveyance of the subject matter of a policy, if it be in the nature of a mortgage, or in trust, with a resulting trust to the insured, so that he has an insurable interest in the property, he may, nevertheless, recover to the extent of his actual loss, provided it does not exceed the sum insured. The transfer of the property will only prevent a recovery on the policy by the assignor, so far as it deprives him of his insurable interest, without regard to the inquiry, whether the interest which remains after the assignment, be of the same nature and character as that which existed before it was made. Hence it has been held, that the owner of real estate, which he has sold after an assurance, who retains the legal title as a security for the purchase money, may maintain an action for a loss after the contract of sale. (Trumbull v. Portage Ins. Co., 12 Ohio, 305; Stetson v. Massachusetts Mutual Ins. Co., 4 Mass. 330.) In the case of Higginson v. Doll, (13 Mass. 96,) it was held that a mortgage on a vessel at the time of effecting the policy, did not deprive the assured of his insurable interest, nor of his right of recovery on the policy. In the case of Gordon v. Ma. F. Ins. Co. (2 Pick.) the vessel insured was afterwards conveyed away to others but as the purchasers at the time of sale, by a memorandum, promised and subsequently, by a covenant, undertook to apply the proceeds to the discharge of debts due to them from the...