Hanover Fire Insurance v. Alexander Brown & Sons

A motion was made by the appellees for a re-hearing of the foregoing case, and in support of the motion they filed a brief. The motion was resisted by the appellant. The Court overruled the motion, and delivered the following opinion through Judge Bkyan: ■ We have carefully considesed the opinion in this case, and find no reason to change it in any respect. In National Fire Insurance Company vs. Crane, 16 Md., 261 , a policy of fire insurance had been issued to Gray and Brother which contained these words: “Loss, if any, payable to W. Crane & Co. as per application,” and it was decided by this Court that by reason of these words the policy should be regarded as having been at its inception assigned to Crane & Co. The endorsement on the policy in this case made by the insurance company at the time it was issued was in these words: “Loss, if any, payable to Alexander Brown & Sons, as interest may appear.” We, therefore, thought that it was to be considered as assigned to Brown & Sons, to protect their interest in the insured premises as it might be shown to exist.

The effect of an assignment of a ⁷⁷ policy of insurance is well known; when the insurance company assents to it, a new contract arises between it and the assignee, having all the terms and conditions of the policy; the assignee being substituted in the place of the party originally insured, and becoming the owner of the policy. In the case of a fire insurance it is not questioned any where that the policy holder cannot recover unless he has an interest in the property insured, and that his recovery cannot be more than the amount of his loss. In Lynch vs. Dalzell, Lord King is reported in 2 Marshall on Insurance, 803, to have said: “These policies are not insurances of the specific things mentioned to be insured, nor do such insurances attach on the realty, or in any manner go with the same, as incident thereto, by any conveyance or assignment. But they are only special agreements with the persons insured, against such loss or damage as they may sustain.

The party insured must have a property at the time of the loss, or he can sustain no loss, and consequently can be entitled to no satisfaction.” His decree was affirmed by the House of Lords in 4 Brown’s Gases in Parliament, 431, and has always been considered as having finally settled the law. The mortgage debt due to Brown & Sons was the extent of their interest in the insured property, and they had a right to recover the unpaid portion of this debt, provided it did not exceed the sum insüred. Their damage by the fire could not be more than the amount of the debt which remained due. If the morning after the fire their debtor had paid them in full, no one could suppose that they had not been indemnified.

In the record of this case the evidence showed that by the auditor’s account the balance due the mortgagees Was about thirteen thousand dollars. When we spoke of this sum as the amount due, we necessarily intended to be understood as speaking in reference exclusively to the evidence as stated in the record, and ⁷⁸ not as determining a question of fact which, would conclude either of the parties on a subsequent trial. It would have exceeded our jurisdiction to find facts on this bill of exceptions; but it was legitimate to assume for the purposes of the discussion the verity of the evidence therein stated, and make it the basis of our opinion on the questions of law which it presented. If in point of fact the auditor's report has not been ratified, the conclusion which we founded on that hypothesis, of course, falls to the ground.

We consider it just in this case to regard Brown & Sons in the same position by virtue of the assignment, as if they had originally insured their mortgage debt, and as therefore sole owners of the policy. We have examined the authorities cited in the argument and briefs of counsel; it is shown by them that in some jurisdictions the endorsement on the policy would not work an assignment of it. But in this State the law on this point has been settled by Crane’s Case in 16 Md.; and we consider our decision as a legitimate deduction from the principles of that case. We feel great respect for the opinions of the learned Courts which we have examined on the questions here involved, but we cannot follow them where our own law prescribes a different rule of decision.

Motion overruled. ■ (Filed 22nd June, 1893.) Bryan, J., after stating the case, delivered the opinion of the Court. ■’:The passing or entry of a decree of foreclosure is one of the causes which according to the terms of the policy would make it void; and it is maintained by the defendant that the proceedings for a sale under the mortgage were equivalent to the entry of such a decree within the meaning of the policy. A mortgage is in law a conditional sale. The mortgagor in consideration of so much money sells the property to the mortgagee, upon the condition, however, that the sale is to be void, provided by a given day the mortgagor, repays the money with interest. If the mortgagor fails to repay the money with interest at the time stipulated, the mortgagee’s title to the property becomes absolute at law, because the condition subsequent which was to defeat it has not been performed.

But Courts of equity give to the mortgagor what is called the equity of redemption; that is they allow him to redeem his forfeited mortgage by repaying notwithstanding the default the sum mentioned therein. And the only way for the mortgagee to prevent this redemption is to file a bill in equity in which he calls upon the mortgagor to repay the money, or be forever foreclosed of his equity of redemption. The Court, in due course, passed a decree appointing a day for the money to be paid, and declaring that if it is not paid at or before that time the mortgagor’s right of redemption shall be forever taken away. Upon the failure to pay at the designated time the decree is made final and absolute.

This is a decree of foreclosure and it was the ordinary proceeding in behalf of mortgagees before the Act of Assembly, which authorized Courts of equity to decree that the property should be sold. ⁷¹ The decree for foreclosure has disappeared from our practice, being entirely superseded by the more convenient decree for sale, which is however sometimes, though inaccurately called, a foreclosure decree. The proceeding in this case was not a decree of any kind, but an advertisement and sale under a power contained in a mortgage. To be sure the sale under such a power would he as effective as a sale under a decree of a Court i>f equity and so would anj other sale lawfully made. But if we could consider it as equivalent within the meaning of the policy to a decree, we could not disregard the difference between a decree for a sale and a decree of foreclosure.

A sale nuder a decree does not pass the title unless it is ratified and confirmed. The Court is the vendor acting through its agent the trustee who has been appointed to make the sale. He reports to the Court the offer of the bidder for the property; if the offer is accepted, the sale is ratified, and thereupon, and not sooner, the contract of sale becomes complete. Before ratification the transaction is merely an offer to purchase which has not been accepted.

On the other hand a decree of foreclosure ipso facto extinguishes the mortgagor's right of redemption and vests the entire title in the mortgagee. Another cause which would render the policy void is a sale under a deed of trust, or any change in the title or possession of the property. It was necessary that the sale made by the attorney named in the mortgage should he reported to a Court of equity, and when it was reported, the same proceedings were required, as if it had been made by a trustee under a decree. Code, Article 66, section 9, Public General Laws.

We have seen that the sale was not a complete contract, and that when reported, it was merely an offer to make a purchase which had not been accepted by the only authority competent to accept it; that is to say the Court. If we ⁷² read the whole of this clause containing the causes of forfeiture it is evident that the purpose was to provide that the insurance should cease t.o he effective as soon as the title of the