Trs. of Thayer Acad. v. Corp. of the Royal Exch. Assur. of London

• Decision Date: 30 November 1932
• Parties: TRUSTEES OF THAYER ACADEMY v. CORPORATION OF THE ROYAL EXCHANGE ASSUR. OF LONDON, ENGLAND.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

281 Mass. 150

183 N.E. 264

TRUSTEES OF THAYER ACADEMY

v.CORPORATION OF THE ROYAL EXCHANGE ASSUR. OF LONDON, ENGLAND.

Supreme Judicial Court of Massachusetts, Norfolk.

Nov. 30, 1932.

Report from Superior Court, Norfolk County; Wilford D. Gray, Judge.

Suit by the Trustees of Thayer Academy against the Corporation of the Royal Exchange Assurance of London, England. On report.

Judgment for defendant.

G. W. Abele, of Boston, for plaintiff.

B. A. Brickley, of Boston, for defendant.

DONAHUE, J.

The plaintiff, a corporation, has brought suit to recover damages for loss by fire to premises described in a policy of fire insurance in the Massachusetts standard form issued by the defendant corporation in December, 1926, insuring the then owners for a three-year period against loss or damage by fire in the sum of $4,000 payable in case of loss to the plaintiff ‘mortgagee, as interest may appear under the present or any future mortgage.’ Two years later the plaintiff foreclosed its mortgage and became the owner of the property by purchase at the foreclosure sale. The defendant thereupon attached to the policy and delivered to the plaintiff a rider dated December 13, 1928, stating that the plaintiff having foreclosed its mortgage, ‘on and after date this policy shall attach in the name and for the benefit of Trustees of Thayer Academy.’ After having been the owner in fee of the property for about seven months, the plaintiff sold and deeded it to one Cantanos and took back from him a mortgage in the sum of $4,000. At that time, July 12, 1929, another rider entitled ‘Transfer of Title’ was attached to the policy by which the plaintiff transferred, assigned and set over unto Cantanos ‘all title and interest in the within Policy, and all advantages to be derived therefrom.’ This was assented to by the defendant. On the same day the plaintiff's treasurer told an employee of an agent of the defendant that the plaintiff had taken back a mortgage. No contract either oral or in writing was made by the defendant covering the plaintiff's interest as mortgagee. At some time later and before the fire, which was on December 4, 1929, Cantanos conveyed the property to one Frank, but the policy was never assigned to the latter and he acquired no interest under it. At some time prior to the fire, another insurance company had issued a policy of $3,000 on the property to the then owner which was made payable in case of loss to the plaintiff as mortgagee. The fire loss was appraised at $6,715. On November 15, 1929, the plaintiff's treasurer called at the office of the defendant's agent, talked with an employee who had authority to make oral contracts of insurance for reasonable periods, told him that the property was about to be transferred, that the plaintiff continued to hold its mortgage on the property and took away with him the proper slips to be filled out and attached to the policy in order to protect the then owner of the property and the plaintiff as mortgagee, as well as other junior mortgagees, but these slips were not returned, or assented to by the defendant, before the fire. The judge found no oral contract of insurance was made and found for the defendant. The judge ruled that the original contract insuring the plaintiff's interest as mortgagee was terminated on December 13, 1928, when the plaintiff became the owner of the property and made a new contract with the defendant by which the policy thereafter attached ‘in the name and for the benefit of’ the plaintiff, that the language of the original policy ‘payable in case of loss to Trustees of the Thayer Academy, Mortgagee, as interest may appear under the present or any future mortgage’ did not cover the plaintiff's interest under the mortgage taken after December 13, 1928, and excluded the following question which was put by the plaintiff to an expert witness called by it: ‘Is there a custom, a recognized custom, in the ‘Street’ generally among insurance companies to pay fire losses where transfers have not been assented to, provided the hazard has not been increased that is, the amount of the mortgage, for instance, where there is no suspicion in regard to the fire?' The case comes before us on a report which presents for determination the correctness of these rulings.

The policy as originally issued contained a contract of insurance between the defendant and the then owners and a contract of insurance between the defendant and the plaintiff as mortgagee ‘as interest may appear under the present or any future mortgage.’ There contracts were different in important respects. Palmer Savings Bank v. Ins. Co. of North America, 166 Mass. 189, 195, 44 N. E. 211,32 L. R. A. 615, 55 Am. St. Rep. 387;Union Institution for Savings V. Phoenix Ins. Co., 196 Mass. 230, 232, 81 N. E. 994,14 L. R. A. (N. S.) 459,13 Ann. Cas. 433. For example, by the terms of the policy certain specified acts or defaults of the owners would render the policy void as to them but not as to the mortgagee; if the policy should become void as to the owners by reason of their act or default the defendant had the right to pay to the plaintiff mortgagee the amount secured...