Vt. Mut. Fire Ins. Co. v. van Dyke

• Decision Date: 02 May 1933
• Citation: 165 A. 906
• Parties: VERMONT MUT. FIRE INS. CO. v. VAN DYKE.
• Court: Vermont Supreme Court

165 A. 906

VERMONT MUT. FIRE INS. CO.

v. VAN DYKE.

Supreme Court of Vermont. Washington.

May 2, 1933.

There was no contract between insurer and mortgagee, who was merely insured's appointee, and mortgagee's right to collect insurance was only derivative, and, because of insured's fraud, mortgagee could not maintain suit on policy for his own benefit.

Rule by which insurer's recovery would be permitted from insured is ordinarily limited to payments inter partes and is inapplicable to third person to whom debtor has paid what he supposed he owed his creditor.

Exceptions from Washington County Court; Allen E. Sturtevant, Judge.

Suit by the Vermont Mutual Fire Insurance Company against Claude Van Dyke. Judgment for plaintiff, and both parties bring exceptions.

Reversed and rendered.

Argued before POWERS, C. J., and SLACK, MOULTON, THOMPSON, and GRAHAM, JJ.

Theriault & Hunt, of Montpelier, for plaintiff.

Harry B. Amey, of Burlington, and Searlcs & Graves, of St. Johnsbury, for defendant.

POWERS, Chief Justice.

Romauld Paradis, the owner of certain farm buildings in East Hereford, P. Q., took out a fire insurance policy thereon in the plaintiff company. By its terms, any loss thereunder was payable to the defendant, as mortgagee, as his interest might appear. This provision was embodied in an "open mortgage" clause, so-called. The policy contained the usual provisions against incumbrances, change of title, and concealment or misrepresentation before or after loss— breach of which was to render the policy void. While the policy was in force and without change material here, some of the buildings covered were destroyed by fire. In due time, Paradis executed a proof of loss and therein made oath that there was no other insurance on the property except one policy which was mentioned in the plaintiff's policy. This was deliberately false. There was at that time a policy in the International Insurance Company, of Montreal, which Paradis had procured, covering a building insured by the plaintiff, to the amount of $3,500.

Paradis also swore in the proof of loss that there was no incumbrance on the property, except the mortgage to the defendant. This, too, was deliberately false. During the time the policy had been in force, Paradis had put three other mortgages onto the property covered, and these remained as incumbrances thereon at the time the proof of loss was executed.

Relying upon the facts set forth in the proof of loss, and knowing nothing to the contrary, the plaintiff paid its share of the loss by a check payable to Paradis and the defendant. Paradis indorsed the check and turned it over to the defendant. The latter indorsed it, and passed it to the Colebrook Guaranty Savings Bank to which he was indebted on a loan for which he had pledged the Paradis mortgage. The check was credited accordingly.

Eater on, the plaintiff discovered Paradis' fraud and false swearing; and having made an unsuccessful demand on the defendant for a return of the amount paid as aforesaid, brought this suit. The complaint is in the form of general assumpsit, with the money counts relied upon. On a general denial, the case was tried below by the court, and on facts found judgment was rendered for the plaintiff to recover the amount of the check referred to, with interest thereon. The defendant excepted. The plaintiff also excepted to the allowance of the defendant's exceptions taken during the trial, and to the refusal of the court to grant a certified execution.

The defendant claims that this policy covering property in the Dominion of Canada was to be governed by the Canadian law. To this we cannot agree. There being nothing in the policy indicating that the parties intended anything to the contrary, the ordinary rule that the law of the place where the contract was made is to govern its validity, its interpretation, and its construction, applies. Richards on Ins. § 76; 26 C. J. 38; Kustoff v. Stuyvesant Ins. Co., 160 Tenn. 208, 212, 22 S.W.(2d) 356; Liverpool, etc., S. Co. v. Phenix Ins. Co., 129 H. S. 397, 453, 458, 9 S. Ct. 409, 32 L. Ed. 788; Smith v. Anderson, 70 Vt. 424, 426, 41 A. 441; Hartford S. B. Inspection & Ins. Co. v. Lasher Stocking Co., 66 Vt. 439, 446, 29 A. 629, 44 Am. St. Rep. 859.

The policy was executed in Vermont and is a Vermont contract, though this fact makes little if any difference, as we view the case.

That the plaintiff could maintain a suit against Paradis to recover this money is too plain to be denied. That it made no contract with the defendant, that the hitter's right to collect the insurance was derivative, only, and that he was Paradis' appointee, are propositions fully established by Girard v. Vermont Mutual Fire Ins. Co., 103 Vt. 330, 154 A. 666. That, because of Paradis' fraud, the defendant could not have maintained a suit on the policy for his own benefit, necessarily results from that case. It is generally so held. Dawson v. Insurance Co., 192 N. C. 312, 317, 135 S. E. 34; Jaskulski v. Citizens' Mutual Fire Ins. Co., 131 Mich. 603, 605, 92 N. W. 98; St. Paul F. & M. Ins. Co. v. Ruddy (C. C. A.) 299 F. 189, 197; YVyley v. Federal Ins. Co., 136 Wash. 686, 689, 241 P. 292; Keith v. Royal Ins. Co., 117 Wis. 531, 538, 94 N. W. 295.

It does not follow, however, that this suit can be maintained. The rule by which a recovery could be had from Paradis is, ordinarily, limited to payments inter partes and has no application to third persons to whom a debtor has paid what he supposed he owed his creditor. The rule is thus stated by Prof. Williston: "When A, under a mistaken belief in his liability to B, on direction of the latter, pays C a claim which C has against B, A cannot recover the payment from C. If the payment was voluntarily and intentionally paid by A to C to satisfy the latter's claim against B, and C had a genuine claim against B, it seems clear that no recovery should be allowed. C is a purchaser of the money for value and in good faith." 3 Williston, Contracts, § 1574.

In such cases, when the money is received by C, his rights are just what they would be if he had received it from B, as we shall presently see.

This action of assumpsit is an equitable action; and before it can be maintained, it must be made to appear that the defendant has received money or its equivalent which, ex fequo et bono, belongs to the plaintiff. Claflin v. Godfrey, 21 Pick. (Mass.) 1, 6; Winslow v. Anderson, 78 N. H. 478, 102 A. 310, L. R. A. 1918C, 173, 175; Williamson v. Johnson, 62 Vt. 378, 385, 20 A. 279, 9 L. R. A. 277, 22 Am. St. Rep. 117.

This defendant was paid the amount of the check by appointment of Paradis. So far as the receipt of the money is concerned, he represented Paradis to the extent that in legal effect the payment discharged the plaintiff. But that is as far as the representation went. The defendant received the money as his own and to his own use. He received it from Paradis, by the hand of the plaintiff, as a payment of or on a valid debt. The plaintiff paid it to him, not by force of any contract it had with him, but because it was directed by Paradis so to do. In this respect, the case is like Atwell v. Jenkins, 163 Mass. 362, 40 N. E. 178, 179, 28 L. R. A. 694, 47 Am. St. Rep. 463, where Hoes induced Atwell to send money to Jenkins, Hoes' lawyer. Matters so turned out that the money was not used for the purpose intended, and Atwell sued Jenkins to recover it. "It hardly needs to be said," says Justice Holmes, "that this transaction made no contract between the plaintiff and the defendant. The plaintiff's advance was to Hoes. When the money was received by Jenkins it was received by Hoes, as between them and the plaintiff; and, if the defendant kept it, that was by some arrangement between him and Hoes, with which the plaintiff had nothing to do." Recovery was denied.

It must be kept in mind all along that this defendant has made no...