although another person was in occupation of the premises, under an agreement from the assured to convey the same to him. Davis vs. Quincy Mut. Fire Ins. Co., 10 Allen, 113.

One of five trustees of a church effected an insurance upon the church building, in his individual name. The policy provided that in case of loss the amount should be paid to a creditor of the insuring trustee, to whom however the church was not indebted. The premium was paid by the insuring trustee, out of his own funds but on the account of the parish, and with the consent of the other trustees: held, that the company was liable upon the policy, it being a matter immaterial to the insurers, (supposing the risk to be the same,) whether the person appointed by the insuring trustee to receive the money retained it to his own use, or paid it to the trustees. A trustee, as such, has an insurable interest in the trust estate. Ins. Co. vs. Chase, 5 Wallace, 509.

Where the insured has no interest in the property at the time of the loss, the policy is void, although the loss is, by the terms of the policy, made payable to a third person, and such third person at the time of the loss has an interest in the property. Tallman vs. Atlantic Fire and Marine Ins. Co., 29 How., (N. Y.) 71.

C.

Insurable Interest of Mortgagor and of Mortgagee.

We have seen that the mortgagor and mortgagee may each insure his several interest in the same building. The particular interest of each need not be described in the policy, unless required by the conditions thereof, but it may be described generally as the property of the assured. But where the mortgagee insures solely on his own account, it is but an insurance of his debt, and if his debt is afterwards paid or extinguished, the policy from that time ceases to have any operation, and even if the premises insured are subsequently destroyed by fire he has no right to recover for the loss, for he sustains no damage thereby. Neither can the mortgagor take advantage of the policy, for he has no in

terest therein, it having been effected by the mortgagee, on his own account and at his expense. On the other hand, if the premises are destroyed by fire before payment or extiguishment of the mortgage, the insurers are bound to pay the amount of the debt to the mortgagee, if it does not exceed the insurance. Whether, upon payment of the debt of the mortgagee,—or rather upon payment of insurance to the mortgagee to an amount equal to the mortgage debt,-the mortgagor is entitled to be subrogated to the place of the mortgagee, by an assignment of the debt and mortgage, has been the subject of much discussion, and cannot be deemed to be settled in any State in which it has not been passed upon by the highest judicial tribunal.

It will, perhaps, be instructive and useful, to state at some length the various opinions of elementary writers, and the decisions of the different courts of highest resort in several of the States, so that one may see, at a glance, and without the trouble of referring to a considerable number of books, (some of which may not be easily accessible to all,) what are the different views and what reasons are given in support of them. Angell (Angell on Fire and Life Insurance, 102, says, "if the premises are destroyed by fire, before payment or extinguishment of the mortgage, the underwriters are bound to pay the amount of the debt," &c. "But then, upon such payment, the underwriters are entitled to an assignment of the debt from the mortgagee, and may recover the same amount, either at law or in equity, according to circumstances; for the payment of the insurance by the underwriters does not, in such case, discharge the mortgagor from the debt, but only changes the creditor."

The same doc

trine is stated in a note to the third volume of Kent's Commentaries, at page 476, but the Editor, in the later editions, refers in a note to the recent cases which throw much doubt upon the question.

This may be deemed a sufficiently accurate statement of the views expressed by other elementary writers, but as the decisions in which different views are expressed are quite modern, the authority of these learned writers will not be

deemed controlling, as the ultimate source of our law upon such questions is judicial decisions of the highest courts.

The nature of a mortgagee's interest, how he may insure and what he may recover, are discussed by the late Chief Justice Gibson of Pennsylvania, with his usual clearness and force, in the case of Smith vs. Columbian Ins. Co. He says, "the nature of a mortgagee's interest is a special, but an insurable one; and it may at his option be insured generally or specially; generally, when he says nothing about his mortgage and insures as the entire owner; specially, when the nature of his interest is specified in a memorandum. By the first, he pays a premium proportionate to the risk of absolute ownership; by the second, a premium proportionate to the risk of a less and derivative ownership. In the one case, and in the other, the subject of insurance is apparently the corpus of the thing insured, but actually the interest of the party insured in it.

If the absolute owner be insured, he recovers the full value of the thing lost, because his interest in it is commensurate with its value. If the owner of a limited interest in it is insured, he recovers only to the extent of his interest. Each may insure separately and recover separately to the extent of his interest.

A policy of insurance has been, from the beginning, a rude and undigested instrument, whose legal effect, moulded by usage and judicial decision, is different from a strict interpretation of it. As the words of an execution with us are controlled frequently by an endorsement, so are the words of a policy, frequently, by a memorandum.

Notwithstanding the form of the contract, therefore, a mortgagee insures, whether generally or specially, not the ultimate safety of the whole property, but only so much of it as may be enough to satisfy his mortgage. It is not the specific property which is insured, but its capacity to pay the mortgage debt. In effect, the security is insured. The fallacy of the argument on the part of the defendant is, in assuming that the words in the policy, "to pay, make good and satisfy, all such damage or loss, which shall or may

happen by fire to the property," bind the insurer, in every case, to pay to the extent of the outside price for which it might be sold unincumbered in the market. What is the property insured? Not the thing, independent of the ownership; for, if the law were otherwise, a policy might be to some extent a wagering one. The beneficial interest in it is insured, and only to the value of it;-can the owner of it recover for a loss of it, because the contract of insurance is strictly a contract of indemnity? No one would pretend that the mortgagee of a house, who had insured it, could recover for the burning of a few shingles on the roof of it, though the unimpared value of the building might be much greater than the amount of the mortgage. Were the law otherwise, the mortgagee might recover from the insurer the value of the property lost, and the whole of his mortgage debt from the mortgagor of the property saved.

In reference to the clear value of the property insured, therefore, the existence of incumbrances is always material to the risk. Were it not, the holder of a mortgage, for hundreds, might insure and recover for thousands, on a gambling policy."

Mr. Phillips, in 2 Phillips on Ins., 2d Ed., 419, lays down the rule as to the relative rights of mortgagee, insurer, and mortgagor, as follows: that "the insurer, by payment of the loss, entitles himself to a proportionate interest in the debt secured by the mortgage ;" and that doctrine is sustained, in addition to the authorities already cited, by Judge Story, (of the Supreme Court of the United States), in the case of Carpenter vs. Providence Washington Ins. Co. 16 Peters, 495, and is also sanctioned by the late Chancellor Walworth, vs. Ætna Ins. Co. 16 Wend., 385. It is proper,

in Tyler

however, to say, that the question did not directly arise in either of the two cases last referred to, and the opinions expressed are, therefore, only entitled to the weight which they would have as individual opinions of the eminent men who enunciated them.

On the other hand, the point was presented and ably and exhaustively discussed, by Ch. J. Shaw, in King vs. The State

Mutual Fire Ins. Company, 7 Cush., 1. He strongly enforces the opposite view of the question, holding, that "when a mortgagee causes his interest in the property mortgaged to be insured at his own expense, against loss by fire, without particularly describing the nature of his interest, he is entitled, in case of a loss by fire before payment of his mortgage debt, to recover of the insurers the full amount of the loss to his own use, without first assigning his mortgage, or any part thereof, to them. That he is not bound to account to the mortgagor for any part of the money, so recovered, as in part payment of the mortgage debt; that it is not, in effect even, a payment, either in whole or in part, but that he still has a right to recover his whole debt of the mortgagor, and that when the debt is thus paid by the debtor, the money is not, in law or equity, the money of, or to be paid to, the insurer, who has already paid the loss." As these positions will be disputed by many, I will state the case and the reasoning, more fully than would be desirable if the question were not, not only important and interesting, but also an open and unsettled one, in general jurisprudence.

The plaintiff, in that case, made the insurance in his own name and for his own benefit, not describing his interest as that of a mortgagee, and paid the premium out of his own funds.

The insurance was for $300, on his interest in a two story wooden barn. That interest, in fact, was that of a mortgagee, under a deed previously made to him by one Murphy, conditioned for the payment of $400, which debt was outstanding and unpaid at the time of making the policy, the fire, and the demand of payment.

The defendant company admitted the loss by fire, and its liability, unless they had a right, as a preliminary condition to such payment, to demand an assignment of the plaintiff's mortgage interest, as set forth in the agreed facts, or of such proportion thereof as the amount to be paid by them would bear to the whole mortgage debt. The plaintiff declined to make such assignment, and brought his action to recover, as for a total loss. Upon that condition of facts, the Chief Jus