Phelps v. Gebhard Fire Insurance — 22 N.Y. Super. Ct. 404

Majority

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Jane G. Phelps, Executrix, &c., of Anson G. Phelps, Jr., deceased, Plaintiff and Respondent, v. The Gebhard Fire Insurance Company of the City of New York, Defendants and Appellants.

Headnote

1. Executors, to whom real property is devised by their testator’s will, have an insurable interest therein by virtue of the trust; and where the insurers issue a policy to the testator in his life time, which does not require him to show that he was owner in fee, nor forbid an assignment of the property, and after his death they-renew the insurance in favor of his executors, without inquiry or representations as to their interest, the executors may recover thereon, although before the rertewal their interest has been, without the knowledge of the insurers, but in good faith, changed to a mortgage interest, by their selling the property, and taking back, at the same time, a purchase-money mortgage.

2. Thus, where an insurance company of the City of Hew York, insured a resident of the city upon a house, described as “his dwelling house ” in another state, but without any representations or inquiries as to its occupancy, or as to the nature of his interest; and after his death, of which they were informed, they issued to his executors, also residents of Hew York, áldessive annual renewal receipts, in the name of the estate or of the executors, and before the last of such renewals, which was given to the sole surviving executrix, she, in good faith, but without notice to the company, had sold the property, taking back a purchaser-money mortgage:

Held, 1st. That under these circumstances, and upon a fair construction of the provisions of the policy, a change in the nature or extent of the

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insured’s interest in the property would not invalidate the policy, the interest having been continuous and the risk not increased.

2d. That his death did not terminate the policy.

3d. That the renewals having been granted to the executors, without inquiry or representations, the company must be held to have insured such interest in the property as had become vested in the executors by the will, and by their acts as executors; and that the surviving executrix was entitled, by virtue of her interest as mortgagee, to recover, upon a loss.

(Before Bosworth, Ch. J., and Barbour and Monell, J. J.)

Heard, April 21, 1862;

decided June 21, 1862.

The plaintiff brought this action upon a policy of fire insurance and successive renewals thereof issued by the defendants.

By the original policy, which was issued to the plaintiff’s testator, in his lifetime, the defendants insured him “ against loss or damage by fire, to the amount of one thousand dollars, viz.: $500 on his frame dwelling house, and $500 on his frame barn, situate about two and a half miles distant from the town of Dover, Morris county, Sew Jersey.” And the company thereby agreed “to make good unto the said insured, Ms executors, administrators and assigns, all such loss or damage, not exceeding in amount the sum insured, as shall happen by fire to the property as aboye specified during one year.”

After testator’s death the policy was renewed from year to year, by renewal receipts, given to the plaintiff and her co-executor. Before the last of these receipts was given, the co-executor died, and the plaintiff, as executrix, sold and conveyed the property insured, and took back a mortgage to secure a part of the purchase-money; after which the dwelling house insured, was burned. The plaintiff,, on demanding payment of the loss, offered to assign the-mortgage to the company, but they refused to pay, on the ground that the change in the interest was without their knowledge or assent.

The provisions in the policy and in the conditions annexed, which they relied on, and the only provisions having any bearing upon the question, were the following: “ This insurance [the risk not being changed] may be

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continued for such' farther term as shall be agreed on, provided the premium therefor is paid and indorsed on this policy, or a receipt given for the same.”

“ The interest of the insured in this policy, is not assignable, unless by consent of this corporation, manifested in writing; and in case of any transfer or termination of the interest of the insured, either by sale or otherwise, without such consent, this policy shall from thenceforth be void and of no effect.”

“ If any person insuring any building or goods in this office, shall make any misrepresentation or concealment; or if, after insurance is effected, either by original policy or by the renewal thereof, the risk shall be increased by any means whatever within the control of the assured; or if such building or premises shall be occupied in any way so as to render the risk more hazardous .than, at the time of insuring, such insurance shall be void and of no effect.”

“ Property held in trust, or on commission, must be insured as such, otherwise the policy will not cover such property; and in case of loss, the names of the respective owners shall be set forth in the preliminary proofs of such loss, together with their respective interests therein. Goods on storage must he separately ancl specifically insured.

“ If the interest in property to be insured be a lease-hold interest, or other interest not .absolute, it must be so represented to the company, and expressed in the policy in writing, otherwise the insurance shall be void.

“ Hote.—By ‘ property held in trust,’ is intended, property held under a deed of trust, or under the appointment of a Court of law, or property held as collateral security; in which latter case, this company shall be liable only to the extent of the interest of the assured in such property.” “ Insurances once made may be continued for such further time as may be agreed on, the premium required therefor being paid and indorsed on the policy, or a receipt given for the same; and all insurances, original or renewed, shall be considered as made under the original representation, in-so far as it may not be varied by a new representa

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tion in writing, which in all cases it shall be incumbent on the party insured to make, where the risk has been changed, either within itself or by the surrounding or adjacent buildings; and if, at or before the time of renewing any policy of insurance on property where the risk has been increased by the erection of buildings, or by the use or occupation of the premises insured or of the neighboring premises, the assured shall fail to give information thereof, said policy and renewal shall be void and of no effect.”

- By Ms will the testator devised the rest, residue and remainder of his real and personal estate, (including the premises on which .the buildings insured by the defendants were erected,) to his executors, who should qualify, in trust to manage,' sell and convey the same, for the purposes in the will named, and gave an absolute power of sale to such of his executors as should qualify.

The cause was tried before Mr. Justice Barbour and a Jury, on the 13th of January, 1862; and at the close of the trial the Oourt directed a verdict for the plaintiff. The defendants duly excepted, and now appealed from the judgment entered on the verdict.

Bowen Whiting, for defendants, appellants.

I. The only interest insured by the policy was that of Anson G-. Phelps, as owner of the fee.

The renewals, from the necessity of the case, as well.as their own terms, operated simply to keep the original insurance in being, as to all its incidents. (Baptist Church v. Brooklyn Fire Ins. Co., 19 N. Y. R., 305.)

II. Plaintiff had no insurable interest, except as executrix, vested with the fee.

As mortgagee she took simply a chattel interest, and "all the interest and estate wMch was insured she had formally conveyed, with warranty, at the time of the last renewal. (Curtis v. Leavitt, 1 Smith, 9.)

III. Plaintiff having conveyed and taken a mortgage, without notice to or consent of the defendants, the policy,

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"by its terms, became void. (Grosvenor v. The Atlantic Fire Ins. Co. of Brooklyn, 17 N. Y. R., 391; Dey v. Poughkeepsie Mut. Ins. Co., 23 Barb., 623 ; McLaren v. The Hartford Fire Ins. Co., 1 Seld., 151; Smith v. Saratoga M. F. Ins. Co., 1 Hill, 497 .)

John M. Mason, for plaintiff, respondent.

I. The last certificate was a renewal of the original policy,, and the interest of Mr. Phelps, which was absolute, continued so in his devisees under the will, to the extent of their mortgage interest. The granting of a deed and taking back a mortgage did not change the nature of the insurable interest, to the extent of the mortgage. (Ellis on Fire Ins., [Shaw’s ed.,] 69; Etna Ins. Co. v. Tyler, 16 Wend., 397 ; Gordon v. Mass. F. & M. Ins. Co., 2 Pick., 249 ; Jackson v. Mass. Mut. Fire Ins. Co., 23 Id., 18; Tittemore v. Vermont Mut. Ins. Co., 20 Vt. R., 546.)

II. If the policy became void, the certificate was a new insurance of the interest of the executrix, whatever that might be, whether owner or mortgagee.

III. It is not necessary that any representation should be made as to the interest of the insured, if no inquiries are made. (Pars. Merc. Law, 509; Traders’ Ins. Co. v. Robert, 9 Wend., 404 ; Locke v. N. A. Ins. Co., 13 Mass. R., 61 ; Williams v. Smith, 2 Cai., 253 ; Niblo v. N. A. Ins. Co., 1 Sandf. S. C., 551; Etna Ins. Co. v. Tyler, 16 Wend., 388 ; Kernochan v. N. Y. Bowery Ins. Co., 5 Duer, 1 ; 17 N. Y. R., 428; Turner v. Burrows, 5 Wend., 546 ; Ellis on Fire Ins., 69; Bartlet v. Walter, 13 Mass. R., 268 .) If the insurer deems it material to know the interest, he should make special inquiries. (Strong v. The Manf. Ins. Co., 10 Pick., 40 ; Fletcher v. Commonwealth Ins. Co., 18. Pick., 419; Niblo v. N. A. Ins. Co., 1 Sandf. S. C., 551.)

At the date of the policy (December 4,1857,) the assured resided in the City of Hew York. The policy does not so state, nor is the fact directly proved. He died on the 18th of May,

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1858, having left a last will and testament, which was duly proved before the Surrogate of the County of Kew York, and letters testamentary were issued thereon to the execu-. trix and executor therein named, July 30th, 1858. The plaintiff and John L. Mason, (since deceased,) qualified as executrix and executor. The fact of the residence of all these parties in the City of Hew York was so well known that no mention appears to be made of it, either in the policy, pleadings, proofs, or points made on this appeal. Of course the insured property was not supposed to be occupied by the testator personally when the policy was made, but it'was known that it was not.

It does not appear that any representation was made that the testator owned it in fee, nor does it appear that any questions were asked on the subject. The description of the property, in the policy as “ his frame dwelling house” and “Ms frame barn,” would not in case of a loss in his lifetime, make it indispensable to his right to recover, that he should prove he owned them in fee. (The Ætna Fire Ins. Co. v. Tyler, 16 Wend., 385 .)

His death did not terminate the policy. (Burbank v. Rockingham Mut. Ins. Co., 4 Foster, 550.) If he had conveyed the property in his lifetime, taking back, eo instanti, a mortgage to secure the purchase-money, he would, notwithstanding, have had a continuous interest in the property. That fact would not have forfeited the policy, under the clause, which declares that “in case of any transfer or termination of the interest of the insured ” in tMs policy, “ either by sale or otherwise,” without the consent of the corporation, manifested in writing, “this policy shall from thenceforth be void and of no effect.” The provision in this policy, on this subject, is in the words of that in Smith v. Saratoga M. F. Ins. Co., ( 1 Hill, 497 ,) and it was there construed to refer to a transfer of interest in the policy» and not to a change of interest in the property insured.

Hor would a conveyance by the assured in his lifetime, and taking back, eo instanti, a mortgage to secure the pur

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chase-money, have been a bar to a recovery, in case of a subsequent loss in his lifetime, and during the term for which the property was insured. (Morrison v. Tennessee M. & F. Ins. Co., 18 Missouri, 262; Norcross v. Insurance Companies, 17 Penn. St., 429 .)

There is no provision in the policy which, in terms, declares that it should, in such a contingency, become null and void. On general principles, the fact of a change in the nature or extent of the assured’s interest in the property, would not invalidate the policy, the interest having been continuous, from the inception of the policy to the time of the loss, and the risk not having been increased.

We think that the rights of the present plaintiff to recover, are quite as clear, if not more free from doubt, than those of the testator would have been were he living, and a certificate of renewal had been issued to him after conveying, and taking a mortgage of the premises to secure the purchase-money, and a loss had occurred after such renewal.

After the death of the testator, and on the third of December, 1858, the company issued a certificate of the renewal of the policy for one year, on a receipt of the premium therefor, from “ the-estate of Anson G. Phelps, Jr.”

On the 30th of November, 1859, a further or second certificate of a renewal of the policy for one year from the fourth of December, 1859, was executed and delivered, on a receipt of the premium therefor from “ Mrs. Jane G. Phelps, Executrix, and John L. Mason, Ex'r of A. G. Phelps, Jr.”

On the 3d of December, 1860, (John L. Mason having died in the meantime,) the company issued a further certificate of the renewal of the policy for one year from the 4th of December, 1860, on the receipt of the premium therefor “ from Mrs. Jane G. Phelps, &c.”

The loss occurred on the 14th of February, 1861.

Ho representations were made, and no questions were asked at the time of either renewal, as to the nature or

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extent of the interest designed to be protected by extend ing the policy and continuing it iu force.

The company knew that Anson G. Phelps, Jr., was dead, and the renewals' were not granted, to keep him insured on property owned by him in fee; whether the estate had been devised by his will, to his executors, in fee, upon specified trusts, or whether they had been clothed with authority to sell, and had exercised that authority, and in so doing had taken a mortgage to secure the purchase-money, "the company did not consider it important to inquire. The plaintiff did not misrepresent, and has not practiced bad faith, and has done nothing subsequent to any renewal to increase the risk.

Since the renewal granted to “Mrs. Jane G. Phelps, &c.,” alone, there has been no change in her condition as to the property; she was then a mortgagee of the premises, under a mortgage to her as executrix, and continued to be such up to the time of the loss.

Executors, as such, are merely representatives of the personal property of a deceased; as mere executors, they have no interest in or control over the real estate of their testator. When property is devised to executors in trust, they act quo ad hoc as trustees, and account for their acts in regard to the real estate so devised, as trustees, (2 R. S., 82, § 6; Id., 94, §§ 65 and 66.) By chap. 272, of the Laws of 1850, the powers of the Surrogate were extended, in the matter of settling the accounts of trustees created by a last will and testament.

Whatever may be the legal effect of granting the several renewals, under the circumstances under which they were made; and whatever may be the obligation thereby imposed on the insurance company, there are no words found either in the policy or in the renewal certificates which, (being construed in their usual acceptation,) declare in terms, such legal effect, or the nature and extent of such obligation.

Looking at the parties intended to be insured by the graht of the renewal certificates, and considering the facts,

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that executors merely as such, can have no interest in the real estate owned by the testator at the time of his decease, but may be made by the will trustees of the real estate, with a power to sell on credit, or may be invested with a naked power to sell and convert, and to sell wholly or in part on credit, and that no representations were made or questions asked; the insurance company must be deemed to have intended to insure, and to have insured such interest in the real estate in question as had become vested in the executors by the terms of the will, and 'by their lawful acts in the due exercise of the powers conferred on them thereby and the grant of letters testamentary to them thereon.

The risk originally taken not being increased by this construction of the policy, and this construction not being opposed to anything expressed in it, or by the fair import of either of its provisions, this construction should be maintained, as obviously conforming to the intent of the insurer and insured, manifested by their acts and thé' circumstances under which they were performed.

The judgment should be affirmed.