Rosenstein v. Traders' Insurance

Hiscock, J.:

This action was brought to recover upon a policy of insurance issued by the defendant to the respondent Rosenstein and containing a clause in favor of the other respondent, The Brockport Loan, and Building Association, as mortgagee. The defense urged upon the trial and upon this appeal was and is that said policy became invalidated through a violation of a clause therein contained respecting a change of title without notice to or consent by the company. The learned trial justice held • that the evidence dis*483closed no such violation of said clause as invalidated said policy and, therefore, rendered judgment in favor of plaintiffs. We think that he committed such error in so ruling as requires a reversal of the judgment appealed from.

The clause contained in-the policy, which is material, provides that the entire policy shall be void if any change other than by the death of the insured should take place in the interest, title or possession of the subject of insurance, whether by legal process or judgment, or by voluntary act of the insured, or otherwise.” The subject of the insurance was real property. After the policy was issued, without any notice to the defendant, the plaintiff and insured Rosenstein and his wife executed to their son a warranty deed of the premises, which was thereafter delivered to him, and still later by the father duly placed upon record in the county clerk’s office. Thereafter the fire occurred, which occasioned the loss in question.

There was no dispute in the evidence concerning the execution of this transfer and in regard to what took place in connection therewith. It seems that a judgment had been recovered against the plaintiff Rosenstein about ten years before the execution of this deed. He desired to so place the real estate covered by the policy of insurance that the judgment could not be enforced against it. His son took counsel with an attorney, and in accordance with advice received had a deed prepared, which he took to his fathér, who thereafter executed the same, his wife joining in the execution, and who still later placed the same upon record. The son knew of the execution of the deed, had it in his possession after execution, understood it was to be recorded, and was informed by his father that it had been so recorded. The deed recited a consideration, but as a matter of fact neither the sum stated nor any other sum was paid by the son to his father therefor, and no change took place in the possession or control of the property.

Under these circumstances, as above stated, the trial justice held that there was no such change in interest, title or possession as invalidated the policy. The respondents, in seeking to sustain this decision, place essential reliance upon the case of Forward v. Continental Insurance Co. (142 N. Y. 382), and we may assume that such case was largely relied upon by the trial justice is reaching the conclusions which he did.

*484. In that case the subject of insurance was personal property, and the insured, before the policy was issued, had given a purported bill of sale thereof, which was placed on file in the town clerk’s office. As a matter of fact, no consideration for this purported transfer was ever given, and there was no change or thought or expectation of change in the possession, control and real ownership of the property. The purported transfer was nominal and the instrument was colorable and executed apparently for the purpose merely of impeding creditors. It was claimed by the defendant in that case that this purported transfer came within the provisions of a clause in the policy that the same should “ be void * * if the interest of the insured be other than unconditional, sole ownership.” The court held, a majority of the judges concurring, that the transaction described was not a violation of said clause.

We do not, however, regard a fair construction of that case as sustaining the claim made by respondents in this action. It seems to us that the two cases may clearly be distinguished. Without stopping to dwell upon the fact that there was another answer to defendant’s defense in that action than that furnished by overruling its contention with reference to the violation of the clause in the policy, we think there were features which plainly distinguished that case from this one.

The property which was the subject of the purported transfer in the Forward case was personal property. Nothing was done to • make a transfer thereof, except ■ to execute and place upon file a written bill of sale. Change in possession or control of the property, which under all ordinary circumstances is so essential an element to a transfer of the ownership of personal property, was entirely wanting. As stated by the court, “Nothing was done except to execute and file a paper. There was no intention in fact to transfer the title or vest any beneficial interest in the nominal vendee. * * * It was a mere paper transfer without consider^ ation, and without delivery of possession, and while it had the form it had none of the legal elements necessary, even between the parties, to constitute a valid contract of sale. In legal effect, it was * * * the same as an unexecuted gift.”

In the case at bar the property is real estate. All that was necessary to be done to accomplish an absolute and perfect change of title *485from the grantor to the grantee was done when the deed was duly-executed and placed on record. An alteration in the possession of the property was, to say the least, no such essential element to a complete transfer as it would have been in the case of personal property. Upon the execution and recording of the deed the son, as grantee, became vested with what was under the statutes and law governing the subject a perfect record title. He was in a position to deal with the subject of his deed by conveyance. A person desiring to negotiate with him upon the faith of his title would have been under no such necessity to investigate the subject of possession as would at least have been natural and prudent in the case of a paper transfer of personal property. Upon the undisputed evidence we believe that he would have been entitled to enforce his conveyance as against his grantor, the insured.

Moreover, it was clearly the intention of the parties that there' should be a change in the title to this real estate. That was necessary to carry out the plan formulated in their minds of withdrawing the property from any pursuit which the judgment creditor might attempt to make. Very likely they intended that this change in title should be utilized and claimed only in a qualified degree. As between themselves it was doubtless the intention that at some time, in some way the father should be reinvested with the title to or get the benefit of this real estate. But for the time being, and certainly as against the judgment debtor, it must be assumed that their purpose was to insist that this conveyance was valid and effective for the purpose of transferring the title from the judgment debtor to his son. We think it is no violent presumption to assume that if this action were a proceeding by the judgment creditor to reach this property, both the father and the son would be upon the stand pointing to this conveyance as a valid and effective one to take the title to the property away from the lien of the judgment. The question of where this title is may perhaps be tested by other illustrations. If it were necessary to bring an action of ejectment to recover the possession of the real estate, and that action should be instituted in the naine of the father with this deed on record running to the son, we apprehend that no court would hesitate to declare against the right of the former to maintain the action. If the father, having made a contract of sale of this property, should attempt to enforce *486specific performance by the vendee with the deed in question upon the record to his son, we again apprehend that no court would be willing to indorse by a favorable decision his right to maintain such action..

These considerations and others which might be urged, lead us to the conclusion that the transfer in this case cannot, like that of the personal property in the Forward case, be regarded as a mere nominal, colorable and unexecuted transfer.

When we come to the consideration of the respective clauses in the two cases claimed to have been violated, we find what seems to us to be a wide difference. As already stated, the clause in the Forward case called for an absolute, unconditional ownership of the property by the insured, and, as already indicated, the court found that such ownership existed. In this case, the clause provides against a change in the “ interest, title or possession ” of the subject, of insurance. Those words to our minds are very comprehensive and explicit. They guard against a change in the interest of the insured, and likewise against any alteration or modification of the title or possession. The wording clearly indicates an intention to have the policy avoided if a change should occur in either the. “ title or possession.” The concurrence of both was distinctly rendered unnecessary by the language employed. While it is true that there has been no change in the actual, physical possession of this real estate, we scarcely see how it can be claimed with the warranty deed duly executed and spread upon the records of the county clerk’s office conveying the real estate from the father to the son,that there has been no change in the title.

We do not lose sight of the contention made by respondents that this deed was not intended eventually to be effective as between the father and the son, but that it was only executed for a qualified purpose ; that the spirit and intention of the clause in the policy of insurance such as is under consideration here, is to guard against any moral hazard involved in changed relations to the insured property, and that there is no such change here as supplies the basis for such a hazard. We are, however, unable to agree with this argument. The defendant had a right to say in its policy that the same should be invalidated by a change in the title, and having done this we think that upon the facts developed in this case it is entitled to insist that a violation has oecurrred. Further than that, however, we do ■ not *487think that the transaction between the father and son was entirely free from those features which would entitle the defendant to insist that it had an equitable and meritorious right to object to the change in the situation brought about by the parties. We think that, under the clause quoted, it might fairly insist that it should not be held liable for property subject to a shifting and uncertain title, which at one time for one purpose would be claimed to be in one person and at another time for another purpose would be claimed to be somewhere else. We certainly do not feel that there is any such lack of merit in the defendant’s defense in this case as should lead us to put a strained and unnatural construction upon the clause in order to relieve the insured from the difficulties created by him.

It is further urged that, so far as the loan association is concerned, it is harsh to deprive it as a mortgagee which took no part in the transfer from the protection of the insurance. In support of this contention the learned counsel for the respondents calls our attention to the standard mortgagee clause framed pursuant to the insurance statutes of this State (Laws of 1886, chap. 488, as amd. by Laws of 1887, chap. 429, and revised by Laws of 1892, chap. 690> § 121) which provides that the “insurance as to the interest of the mortgagee (or trustee) only therein shall not be invalidated by any act or neglect of the mortgagor or owner of the within described property.” We think that this argument discloses its own weakness. The law provided a clause for the benefit of the mortgagee which it might have insisted upon, and which would have amply protected it from the loss which it is now suffering. It failed and neglected to insist upon this clause and to have it inserted in the policy and thus secure the protection afforded, and this court is powerless to relieve it from the consequences of its omission.

In accordance with these views, the judgment - appealed from should be reversed and a new trial granted, with costs to the appellant to abide event.

Williams and Nash, JJ., concurred; dissenting opinion by McLennan, J., in which Spring, J., concurred.