Callahan v. Linthicum , 43 Md. 97 ( 1875 )

Bartol, C. J.,

delivered the opinion of the Court.

The special facts and circumstances of this case as they appear in the record, I think take it out of the operation of the general rules which govern contracts of insurance made by a mortgagee for his own indemnity, and exclusively for the protection of his own interest in the property insured. Where such insurance has been effected by the mortgagee, it is very clear that the mortgagor has no privity with the contract, and can claim no benefit under it. In such case it is well settled, as stated by the Supreme Court “ that where the mortgagee insures solely on his own account, it is but an insurance of his debt; and if his debt is afterwards paid or extinguished, the policy ceases from that time to have any operation ; and even if the premises insured are subsequently destroyed by fire, he has no right to recover for the loss, for he sustains no damage thereby; neither can the mortgagor take advantage of the policy, for he has no interest whatsoever therein. On the other hand, if the premises are destroyed by fire before any payment or extinguishment of the mortgage, the underwriters are bound to pay the amount of the debt to the mortgagee, if it does not exceed the insurance. But, then, upon such payment, the underwriters are entitled to an assignment of the debt from the mortgagee, and may recover the same amount from the mortgagor, either at law or in equity, according to circumstances ; for the payment of the insurance by the underwriters does not, in such case, discharge the mortgagor from the debt, but only changes the creditor.” Carpenter vs. The P. W. Ins. Co., 16 Peters, 501; Insurance Co. vs. Woodruff, 2 Butcher, 541.

But such was not the nature of the insurance in the present case. It appears that the appellee, before the sale to the appellant, when he was absolute owner of the property, caused the same to be insured by the “ Mutual Fire Ins. Co. of Montgomery County.” This insurance was upon the property at the time of the sale, and by the charter of the company, sec. 4, the. premium note given by the&ssured continued to be a lien upon the property. When he sold and conveyed the property to the appellant,' received part of the purchase money, and took a mortgage to secure the balance, it appears that the insurance upoh the property was continued, under the same policy, in the same manner and/or tdie same amount as before. There is nothing on the face of the policy to indicate that it was continued as an insurance only upon the interest of the mortgagee, and intended merely to cover the mortgage debt. It is entirely consistent with its terms, to construe the policy as intended to cover to the extent of the sum therein named, the whole property, as well the interest of the mortgagor as of the mortgagee. If such was the intention and contract of the parties, the interest of the mortgagor would be protected, although, his name did not appear in the policy ; and that such was the understanding of all the parties, is clearly shown by the acts aud conduct of the parties themselves.

When the loss by fire occurred, though a part of the mortgage debt remained unpaid, the insurance company paid the amount due under the policy to the appellee, without any reference to the amount due upon the mortgage, and without claiming any right of subrogation with respect to the mortgage debt; and the appellee, expressly promised the appellant, that when the money should be received from the company, he would give it to the appellant, or allow it as a credit upon the mortgage debt. These facts are entitled t6 great weight in determining the true intent and meaning of the contract of insurance. As was said by the Supreme Court in Chicago vs. Sheldon, 9 Wal , 54:

“In cases where the language used by the parties to the contract is indefinite or ambiguous, and hence of doubtful construction, the ¡practical interpretation by the parties themselves is entitled to great, if not controlling influence.” The same principle of construction has been sanctioned by this Court in Citizens Fire Insurance, Security and Land Co. vs Doll, 35 Md., 107; where Judge Alvey speaking for the Court said, “Although it is very true, as contended by the appellee, that where an agreement is plain, and free from all ambiguity, it will not be construed by the acts and admissions of the parties with reference to it, yet where the intention is obscure or doubtful, and extrinsic evidence can be invoked, no evidence is more reliable or entitled to greater consideration, as manifesting what their intention was, than the acts and conduct of the parties themselves.”

Applying this rule of interpretation to the present case, it seems to be very clear, that the policy of insurance was continued upon the property, and held by the appellee after the sale, for the benefit of the appellant as well as himself, and as a security to each to the extent of their respective interests in the property.

While it may be conceded that this arrangement could not give to the appellant the right to sue at law upon the policy, for want of legal privity with the contract of insurance ; yet, under such circumstances, the mortgagee would be treated in a Court of Equity as trustee for the mortgagor, and in the event of the payment of the mortgage' debt by/the latter, he would be entitled to maintain a suit in equity, to recover the money received by the former under the policy of insurance. This has been expressly decided by the Supreme Court of Pennsylvania, in Insurance Co. vs. Updegraff, 21 Pa., 513, and that decision was followed by the same Court in Reed vs. Lukens, 44 Pa., 200, 202.

In those cases there was a contract of sale, no conveyance had been made and mortgage taken by the vendor, as in this case ; but that fact, does not in my opinion altei1' or affect the equitable rights of the parties. In those cases it was held that the insurance having been effected by the vendor ; not exclusively for his own security, but for the benefit of the purchaser also; being an insurance not merely of his own interest, covering only the debt due him for the purchase money; but being an insurance of the property itself, including the interest of the vendee therein, inured to the benefit of the latter. And the whole purchase money being paid, it was held that the vendor received the money from the insurance company as trustee for the purchaser, and was liable for it in equity to the latter. That principle applies to the present case.

(Decided 22nd June, 1875.)

. The appellee being liable in a Court of Equity, to the appellant for the money received by him from the insurance company ; such liability was a sufficient consideration to support his promise, which gives to the appellant a right to maintain this suit; and to recover the money received by the appellee from the company, subject to be abated by any necessary or reasonable costs and expenses incurred by the appellee in collecting the same, and any premium paid by the appellee under the policy after the sale.

For these reasons I think the judgment below is erroneous, and as Judge Miller concurs in this opinion and Judge Stewart is of the same opinion, for reasons assigned by himself, the judgment will be reversed and a new trial ordered.

Judgment reversed,, and new trial ordered.