On defendant's rule to show cause why judgment for plaintiff should not be satisfied of record.
For the plaintiff, Joseph T. Lieblich.
For the defendant, Arthur T. Vanderbilt.
Before Justices Heher and Perskie.
The opinion of the court was delivered by
HEHER, J. The point in controversy is whether moneys paid by the defendant insurer, in discharge of its liability to the mortgagee under a fire insurance policy, shall be credited upon the judgment subsequently recovered against the former by the assured owner. The facts have been stipulated.
The insurer issued to plaintiff owner (hereinafter referred to as the plaintiff) a policy in the sum of $2,000, covering a dwelling house encumbered by a mortgage in the principal sum of $600. The policy carried the standard mortgagee clause. It was therein stipulated that the protection thus accorded to the mortgagee was not subject to impairment or forfeiture by the act or neglect of the mortgagor or owner of the insured property; and that if, upon payment under the terms thereof of any loss sustained by the mortgagee, the insurer "shall claim that, as to the mortgagor or owner, no liability therefor existed," it "shall, to the extent of such payment, be thereupon legally subrogated to all the rights of the party to whom such payment shall be made, under all securities held as collateral to the mortgage debt, or may, at its option, pay to the mortgagee the whole principal due or to grow due on the mortgage with interest, and shall thereupon receive a full assignment and transfer of the mortgage and of all such other securities." The insured property was destroyed by fire on April 16th, 1932.
Upon the occurrence of the loss, the mortgagee made claim on the insurer for the amount of his mortgage; and the latter, invoking the cited provision of the contract, disclaimed liability to him, "in part on the ground that the loss had been occasioned in part by a preceding explosion." A settlement of the claim was negotiated. The insurer undertook to pay $350 in full satisfaction thereof, in consideration of the mortgagee's general release and an assignment to it "of a partial and subordinate interest in the mortgage to the extent of" the sum so agreed to be paid. This agreement was not consummated until May 21st, 1934. Meanwhile, on the application of plaintiff, the mortgagee had been made, first, a party defendant, and then, a party plaintiff.
In August, 1934, the mortgagee filed a bill to foreclose his mortgage; and therein he alleged the balance due to be $250 with interest. The insurer, having refused to become a party complainant in the foreclosure suit, was made a party defendant, "by reason of its subordinate interest in the mortgage," and filed an answer setting up the interest acquired by the assignment.
Upon the trial of the instant action, plaintiff proved the payment of $350 by the insurer to the mortgagee, and the giving of the release and assignment. The insurer thereupon moved for and was granted a nonsuit as to the mortgagee. The jury awarded plaintiff the full amount of the policy, with interest. Thus it was determined by the judgment entered upon this verdict that the right of subrogation did not arise under the mortgagee clause, and the insurer acquired no interest in the mortgage by virtue of the assignment. Plaintiff thereupon tendered to the mortgagee the balance due on the mortgage, and, by an order entered on his motion in the foreclosure suit on December 24th, 1935, the bond and mortgage were canceled. And so, plaintiff received credit for the payment made by the insurer in satisfaction of its liability to the mortgagee under the policy.
Plaintiff invoked the process of the court to execute the judgment herein; whereupon the insurer deposited a sum sufficient to liquidate the judgment, and now, by the rule to show cause, ...