The Ci/ramt Judge:
The contract of insurance is emphatically one of indemnity. It is not the thing that is insured, but the person in regard to the thing, and he is to be indemnified against loss.
Hence it becomes a pertinent and material inquiry on the trial of insurance cases, what interest had the claimant in the thing destroyed, and has he been damnified by the destruction.
The policy in this case having been assigned to Cummings, it has been insisted for the defendants that the only inquiry was, what interest he had at the time of the trial; and it is claimed that, as his whole debt has been paid, independent of the insurance, he has not been damnified. As mortgagee he had an insurable interest, and if he had insured as mortgagee this consideration must have barred his recovery. But it was [214]*214not him, it was McLaren who was insured, and the moment his debt was paid, the policy which had been assigned to him to secure that debt reverted back and belonged to McLaren; so that the proper inquiry is, not what interest had Cummings, but what interest had McLaren, in the assured premises, and that depends upon the question how far his title was divested by the sale which took place before the fire, but was not completed by the delivery of the deed until afterward.
This question involves two considerations:
1. Upon general principles governing the contract of insurance, requiring that the assured, at the time of the loss, shall have an interest in the property insured.
2. Upon the terms of the contract, viz., the seventh clause of the conditions, which declares that the insurance shall be void and cease in case of any transfer or change of title.
An insurable interest does not mean merely the legal title, but the having an interest which can gain or lose by the fire —the having a property in the subject insured, so that he can sustain loss and be entitled to indemnification. The object of the contract is not to replace the thing destroyed, irrespective of its owner or possessor, but to indemnify and save harmless the person in respect to loss from the destruction of the property. (Lynch v. Dalzell, 3 Bro. P. C. 497; 2 Marsh, 787; Sadler’s Co. v. Babcock, 2 Atk. 554; Parke, 502.)
As has already been suggested, this was not an insurance of Cummings, the mortgagee. If it had been, he would have been the absolute owner, and the policy would have ceased the instant his debt was paid, and simply because from that moment he could sustain no loss. But it was the insurance of the mortgageor; and by the assignment to Cummings there were two owners, or, in other words, two persons interested in the insurance—Cummings first, to the amount of his debt, and McLaren afterward, in whatever the insurance or loss should exceed that debt, or whenever the debt should be paid, then to the whole amount of the loss. In the language of Carpenter v. Prov. Wash. Ins. Co. (16 Peters, 507), the policy was designed by the parties to be on account of the owners, [215]*215and for their benefit, and it was only collateral security to the mortgagee to the extent of any interest he might have therein in case of fire. In this view, it operated as a security to the owners against the entire loss.
If Cummings’ debt had been less than the amount insured and the amount of loss, there would have been two persons in the first instance who had a claim to be indemnified — the mortgagee to the amount of his debt, and the mortgageor for the excess. But as his claim was always larger than the amount insured, the claim of the mortgageor was not to any such excess, but to the amount when the debt should be paid.
Hence the question, whether Cummings had an insurable interest at the time of the loss, depends upon this, whether his debt was paid by the sale under the foreclosure, which took place before the fire, though not completed till afterward; and whether McLaren had an insurable interest depends on this, whether that sale, thus incomplete at the time of the loss, though perfected afterward, worked a change or transfer of title.
As to Cummings, two things are to be remarked:
1. That the amount of the sale was not enough to discharge his whole debt; there was still a balance left, which was afterward paid by the mortgageor: pro tomto then, this deficiency, he had a continuing insurable interest.
2. That although the sale to Quackenbush was so far perfected that a specific performance could be enforced (notwithstanding the deterioration in value by the fire, Revell v. Hussey, 2 Ball & Beatty, 281; Poole v. Shergold, 2 Br. Ch. R. 118), and was, in fact, afterward completed; yet at the time of the loss only $500 had been paid toward the purchase, and there was, at that time, a much larger amount due on the mortgage than the amount insured.
The doctrine of. equitable conversion, to which I am referred, does not prevail at law. If it did, and to the extent claimed, it would involve this absurdity, that although Quackenbush might never perform his contract of sale, and although Cummings might not, from that sale, ever realize more than [216]*216the $500 on his mortgage, yet the sale is to he regarded as completed, so as to destroy Cummings’ insurable interest, and so that Cummings should not be able to get his money on the sale because it fell through, nor on the insurance, because the sale is to be regarded as complete. This would be giving an effect to a fiction in equity, which would hardly commend its introduction into legal proceedings. At law, we are to regard things as they are, and not as they are to be; and the fact is, in this case, that at the time of the loss, Cummings had a subsisting claim on his mortgage still unpaid, to an amount exceeding that covered by this policy, and this suit being brought for his benefit, he has a right to recover, unless that sale caused a change or transfer of title, and brought the case within the seventh clause of the conditions, and worked a forfeiture of the policy.
The contract of insurance is eminently a personal one, not merely because it aims at indemnifying the person insured, but because it involves, in an unusual degree, personal confidence. During the duration of the risk, the subject-matter of the insurance is under the control, not of those who assume the risk, but of those for whose benefit it is assumed; and it is therefore not only the duty of courts to maintain this confidence, but it is a right of the insurers strictly to be guarded, to choose in whom they will place their confidence. It is therefore that the clause under consideration becomes material. But for this, it would be of no consequence who owned the property covered by the policy, and by this clause the insurers have protected themselves in the enjoyment of this right.
Like many other accustomed clauses in the contract of insurance, it is not so carefully worded as to leave no room for cavil. Strictly construed, it would be confined to a change or transfer of legal title, however controlling might be the equitable interests, or however absolute the possession of others; and I am not certain that such minute strictness ought not to be insisted upon here, because whatever works a forfeiture is always to be strictly construed.
Taking, however, the intention of the parties as the true [217]
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The Ci/ramt Judge:
The contract of insurance is emphatically one of indemnity. It is not the thing that is insured, but the person in regard to the thing, and he is to be indemnified against loss.
Hence it becomes a pertinent and material inquiry on the trial of insurance cases, what interest had the claimant in the thing destroyed, and has he been damnified by the destruction.
The policy in this case having been assigned to Cummings, it has been insisted for the defendants that the only inquiry was, what interest he had at the time of the trial; and it is claimed that, as his whole debt has been paid, independent of the insurance, he has not been damnified. As mortgagee he had an insurable interest, and if he had insured as mortgagee this consideration must have barred his recovery. But it was [214]*214not him, it was McLaren who was insured, and the moment his debt was paid, the policy which had been assigned to him to secure that debt reverted back and belonged to McLaren; so that the proper inquiry is, not what interest had Cummings, but what interest had McLaren, in the assured premises, and that depends upon the question how far his title was divested by the sale which took place before the fire, but was not completed by the delivery of the deed until afterward.
This question involves two considerations:
1. Upon general principles governing the contract of insurance, requiring that the assured, at the time of the loss, shall have an interest in the property insured.
2. Upon the terms of the contract, viz., the seventh clause of the conditions, which declares that the insurance shall be void and cease in case of any transfer or change of title.
An insurable interest does not mean merely the legal title, but the having an interest which can gain or lose by the fire —the having a property in the subject insured, so that he can sustain loss and be entitled to indemnification. The object of the contract is not to replace the thing destroyed, irrespective of its owner or possessor, but to indemnify and save harmless the person in respect to loss from the destruction of the property. (Lynch v. Dalzell, 3 Bro. P. C. 497; 2 Marsh, 787; Sadler’s Co. v. Babcock, 2 Atk. 554; Parke, 502.)
As has already been suggested, this was not an insurance of Cummings, the mortgagee. If it had been, he would have been the absolute owner, and the policy would have ceased the instant his debt was paid, and simply because from that moment he could sustain no loss. But it was the insurance of the mortgageor; and by the assignment to Cummings there were two owners, or, in other words, two persons interested in the insurance—Cummings first, to the amount of his debt, and McLaren afterward, in whatever the insurance or loss should exceed that debt, or whenever the debt should be paid, then to the whole amount of the loss. In the language of Carpenter v. Prov. Wash. Ins. Co. (16 Peters, 507), the policy was designed by the parties to be on account of the owners, [215]*215and for their benefit, and it was only collateral security to the mortgagee to the extent of any interest he might have therein in case of fire. In this view, it operated as a security to the owners against the entire loss.
If Cummings’ debt had been less than the amount insured and the amount of loss, there would have been two persons in the first instance who had a claim to be indemnified — the mortgagee to the amount of his debt, and the mortgageor for the excess. But as his claim was always larger than the amount insured, the claim of the mortgageor was not to any such excess, but to the amount when the debt should be paid.
Hence the question, whether Cummings had an insurable interest at the time of the loss, depends upon this, whether his debt was paid by the sale under the foreclosure, which took place before the fire, though not completed till afterward; and whether McLaren had an insurable interest depends on this, whether that sale, thus incomplete at the time of the loss, though perfected afterward, worked a change or transfer of title.
As to Cummings, two things are to be remarked:
1. That the amount of the sale was not enough to discharge his whole debt; there was still a balance left, which was afterward paid by the mortgageor: pro tomto then, this deficiency, he had a continuing insurable interest.
2. That although the sale to Quackenbush was so far perfected that a specific performance could be enforced (notwithstanding the deterioration in value by the fire, Revell v. Hussey, 2 Ball & Beatty, 281; Poole v. Shergold, 2 Br. Ch. R. 118), and was, in fact, afterward completed; yet at the time of the loss only $500 had been paid toward the purchase, and there was, at that time, a much larger amount due on the mortgage than the amount insured.
The doctrine of. equitable conversion, to which I am referred, does not prevail at law. If it did, and to the extent claimed, it would involve this absurdity, that although Quackenbush might never perform his contract of sale, and although Cummings might not, from that sale, ever realize more than [216]*216the $500 on his mortgage, yet the sale is to he regarded as completed, so as to destroy Cummings’ insurable interest, and so that Cummings should not be able to get his money on the sale because it fell through, nor on the insurance, because the sale is to be regarded as complete. This would be giving an effect to a fiction in equity, which would hardly commend its introduction into legal proceedings. At law, we are to regard things as they are, and not as they are to be; and the fact is, in this case, that at the time of the loss, Cummings had a subsisting claim on his mortgage still unpaid, to an amount exceeding that covered by this policy, and this suit being brought for his benefit, he has a right to recover, unless that sale caused a change or transfer of title, and brought the case within the seventh clause of the conditions, and worked a forfeiture of the policy.
The contract of insurance is eminently a personal one, not merely because it aims at indemnifying the person insured, but because it involves, in an unusual degree, personal confidence. During the duration of the risk, the subject-matter of the insurance is under the control, not of those who assume the risk, but of those for whose benefit it is assumed; and it is therefore not only the duty of courts to maintain this confidence, but it is a right of the insurers strictly to be guarded, to choose in whom they will place their confidence. It is therefore that the clause under consideration becomes material. But for this, it would be of no consequence who owned the property covered by the policy, and by this clause the insurers have protected themselves in the enjoyment of this right.
Like many other accustomed clauses in the contract of insurance, it is not so carefully worded as to leave no room for cavil. Strictly construed, it would be confined to a change or transfer of legal title, however controlling might be the equitable interests, or however absolute the possession of others; and I am not certain that such minute strictness ought not to be insisted upon here, because whatever works a forfeiture is always to be strictly construed.
Taking, however, the intention of the parties as the true [217]*217criterion of construction, and bearing in mind that this clause was inserted for the purpose of enabling the insurers to exercise the right of determining in whom they will repose confidence, and that they have already exercised it so far as to put them confidence in the assured, the true test will be, whether any act has been done, that is, any act changing or transferring the title, which has changed the object of this confidence, and compelled the insurers, without their consent, to repose their trust in any person whom they have not selected. Such would have been the effect if McLaren had executed a voluntary conveyance to Quackenbush. But can that be regarded as the effect of an inchoate compulsory sale, like that which occurred before the loss in this case ? There had as yet been no change or transfer of the title; some steps toward such a change had been taken, but the change was not yet complete. One of those steps had been the execution of the mortgage; another had been the foreclosure and sale under it; but other steps were yet necessary, to wit: the enrollment of the decree, the payment of the consideration, and the execution and delivery of the master’s deed. Suppose those steps had never been taken—that the purchaser had been unable to pay the consideration, or that the court had set aside the sale and ordered a resale, or that any other of the numerous causes which operate to prevent the completion of such a contract of sale had occurred—upon what principle could it beheld that there was a transfer of title? Transfer from whom? Mot from McLaren, because in any of these events the title would be just as much in him, and he just as much the owner as he ever was. Transfer to whom? Motto Quackenbush, for in some of these events he might never take the title, but it might finally vest in some other person.
Upon no other principle can this sale be regarded as transferring the title than that of equitable conversion, which, as I have already said, does not prevail at law.
I am confirmed in this view of the case by the language of the Court of Errors, in Farmer's Loan, Co. v. Edwards (26 Wend. 560). Senator Verplanck, who delivered the prevailing [218]*218opinion, says, with great force and propriety, “There is a marked distinction, both in the familiar language of business and in that of the courts and statute book, between a contract for a sale of land and an actual sale—between an executory and personal contract and one acting upon the thing itself— between the perfected contract of sale and the contract for a sale hereafter.” And he refers to our statute wherein “ contracts for the sale of land ” are words used as distinguished from a “sale of land,” and to the decision of Tindal, C. J., in Bull v. Price (5 Moore & Payne, 2), that a negotiated and stipulated- sale, requiring future conveyances, is not a sale, which he defines to be a sale consummated and conveyance executed. -
In Bell v. Fireman's Ins. Co. of New Orleans (3 Robinson’s La. R. 426), the plaintiff had contracted to sell his boat, but had not delivered possession, nor received the price, and it was held that he had an insurable interest.
This being the rule in voluntary contracts for a sale of land, it seems to be even stronger in the cases of compulsory sale. The bidder is not considered the purchaser until the report is confirmed, and therefore he is not liable to any loss by fire, or otherwise, which may happen to the estate in the interim, nor is he, until the confirmation of the report, compellable to complete his purchase. And it has been held, that where a loss by fire happened to an estate sold by a master, and-the report had only been confirmed nisi, the loss would fall on the vendor. (Ex parte Minor, 11 Ves. 559, and see 1 Sugden on Vendors, 104, 469.)
Dnder this view of the case, the plaintiff must have judgment.
[This judgment was affirmed in the Court of Appeals. 5 N. Y. R. 151.]