Hanover Fire Insurance v. Alexander Brown & Sons

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. *71The decree for foreclosure has disappeared from our practice, being entirely superseded by the more convenient decree for sale, which is however sometimes, though inaccurately called, a foreclosure decree.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 *72read 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 insured came to an end. It was not intended that he should have a right of recovery for the destruction of property which he did not own. But it could not have been the purpose to forfeit the policy while his ownership continued. The sale under a deed of trust mentioned in the policy means a consummated transaction by which the interest of the insured was divested. The sale made by the attorney was finally ratified by the Court after the fire had occurred. Before this ratification the proceeding was merely an unaccepted, proposition for a purchase and no change had taken place in the title. The property was occupied by a tenant of Hammond, the insured, and his occupancy was in law the possession of his landlord and it continued to be vested in him until the change of title had been accomplished. , ’

The fourth prayer presents a question of some interest. If- all the insurers had bound themselves by their policies to pay the entire loss and one or more of them had paid it, those so paying would have had a right of action against the others for a ratable proportion of the amount paid by them; because they would have paid a debt which was equally and concurrently due by the other insurers. As all were equally bound, all ought equally to contribute to the payment; they were in a position similar to that of one surety who pays a debt for which other sureties are bound jointly with him. But in the different policies concerned in this case there is no concurrent liability. Each insurer by the distinct terms of his contract makes himself liable for a certain and definite fractional part of the loss to be calculated in the manner stipulated in the policies. In this case the defendant contracts to pay the proportion of the loss *73which the amount insured by it bears to the whole sum insured on the property in all the policies; and it is stated in the evidence that the other policies had substantially the same stipulation. The contracts are entirely separate and independent of each other. Each insurer binds himself to pay his own proportion of the loss without any reference to what may be paid by the others. If they pay more or less than they are bound to pay, or if they do not pay anything, it in no manner concerns him. If in this case the other insurance companies had paid the whole loss they would have had no right of contribution from the defendant; and neither would such payment have discharged any portion of the defendant’s liability to the insured. Lucas vs. Jefferson Insurance Company, 6 Cowen, 635, was an action on a fire insurance policy with a clause exactly similar to the one now in question. The Court decided as follows: “Where there are several policies containing this clause they are all, and each, liable to pay the ratable portion mentioned in the clause, though it happen that' some have paid more than their share; and even enough to cover the whole loss, and this whether they had knowledge of all the policies at the time or not. There is no contribution between policies containing this clause. * * * When there are several polices on the same subject, without this clause, it is double insurance; they are all deemed hut one policy, the insured can recover but one indemnity; and contribution prevails between the insurers.” And it was considered perfectly well settled in cases where policies did not contain this clause and the insured recovered against one or more of them the amount of his loss, that lie could not maintain his action against any of the other insurers. The reason was that he had recovered full indemnity from parties who stood in the position of co-insurers and who had a right of contribution against the makers of the other *74policies. The doctrine of Lucas’ Case was fully approved in Whiting, use of Sun Mutual Insurance Company vs. Independent Mutual Insurance Company, 15 Md., 297, where the same principles were applied to a different state of facts presented in a suit on a marine policy. It will he seen that it was an error in the fourth prayer to suppose that the payment of the whole loss would exonerate the defendant, inasmuch as it was not liable for contribution to the insurers who are alleged to have made the payment. We are now prepared to decide the question of evidence in the first exception. The assignments of their rights of contribution made by the other insurance companies were entirely futile, as they had no right of contribution against the defendant. The admission of the evidence introduced into the case an element of responsibility which could not be properly asserted against it. The plaintiffs’ insurable interest was the debt secured by the mortgage. A portion of this debt had been j>aid before the suit was brought, as shown by the auditor’s report which distributed the proceeds of the sale, and there still remained due more than thirteen thousand dollars. The defendant was liable for its due proportion of this amount and nothing more.

We have reserved the consideration of the demurrers until the last. The first, second and third replications refer to documents which did not appear in any previous pleadings, and it is prayed that they may be considered as parts of these replications. It is the object of pleading to place on the record the facts which make Tip the plaintiff’s cause of action, and the defendant’s ground of defence. If it is desired to show to the Court the contents of a paper not already spread on the record, it may be done by exhibiting it, or by averring the legal effect of its contents; but it is totally inadmissible by reference to incorporate into a pleading the contents of a paper which is not produced. In determining the *75validity of the pleadings, it is not competent for the Court to consider anything which does not appear on the record. There are some redundancies and erroneous legal deductions in the first replication; hut.it substantially avers that there was no sale of the insured property within the meaning of the policy, as is averred also hy the second and third replications. We must look to the substance of the pleadings, and not hold them insufficient because of the informalities which have been mentioned. There is no error in the fourth and fifth replications. The sixth replication is to the defendant’s fourth plea. This plea avers such insurance hy other companies, and payment in full by them as would exempt the defendant from a suit hy the plaintiffs, according to what we have said in a previous part of this opinion. There is no reference in the plea to the clause stipulating for a proportionate liability among the insurers, and it does not appear in the declaration. Without this clause we have seen those who did not pay would he liable for contribution to those who had paid the amount insured. We must take the plea as averring insurance by policies which did not contain this clause. The replication to the plea does not aver that the other insurers had paid more than their ratable portion of the loss; but it avers a compromise with them and an acceptance of a smaller sum than the amount claimed by the plaintiffs, and an assignment to the plaintiffs of their claim against the defendant, in satisfaction of the larger sum demanded from them. They would have no right of contribution unless they had paid more than their ratable share of the loss. Moreover, the declaration in the cause is on a policy of insurance, and avers a direct liability to the plaintiffs on the contract contained in the policy, and this replication brings forward a new and distinct cause of action founded on several assignments of claims for contribution alleged to he due to other *76insurance companies. This is the error which is called a departure in pleading. The replication was bad on demurrer. It will be seen, however, that both plea and replication were dealing with supposed policies of insurance different in character from those which were after-wards offered in evidence; that is to say, with such as did not contain the stipulation for proportionate liability. The sixth replication, though erroneous, would have caused no injury to the defendant in itself; but it furnished the occasion for the admission of the incompetent evidence in the first exception.

(Decided 19th January, 1893.)

Judgment reversed, and neto trial.