Dutton v. N. E. Mutual Fire Ins. Co., 29 N.H. 153 (1854) - Opinion

Dutton v. N. E. Mutual Fire Ins. Co.

A mechanic’s lien upon property is lost hy discharging the debt which created the lien, and taking the note of a third person in payment.

Where E. & D., partners, were indebted to H. & E. for labor and materials which might be a lien upon their buildings, and H. & E. discharged the debt against E. & D. and took the note of D. in satisfaction — held, that the lien, if any existed, was thereby lost.

If an applicant for insurance against fire states truly the title of the property, and the incumbrances on the same at the time of making the application, and there is no provision in the charier or hy-laws requiring notice of subsequent incumbrances, a mortgage upon the property, executed after the making of the application and before the issuing of the policy, will not, in the absence of fraud, make void the policy.

Where A. made a written application, on the fifth of October, for an insurance against fire, and a policy was issued on the 11th of the same month; and on the same day, (the eleventh,) he executed a mortgage upon the property— held, in the absence of fraud, and of any provision in the charter or by-laws requiring notice oí subsequent incumbrances, that the policy was not void.

Assumpsit, upon a policy of insurance issued to Henry Dutton on the 11th day of October, 1847; and on the 26th day of August, 1848, assigned to the plaintiff, Marcia Dut- • ton, and the assignment approved by the company,

The insurance was for $1000, on the steam saw mill belonging to said Henry Dutton, of Bangor, Maine, situated as set forth in Dutton’s application for insurance, and including two upright saws, clapboard and shingle machine, and all the machinery and fixtures belonging to the mill.

On the third day of June, 1849, the mill, together with the clapboard and shingle machine, was consumed by fire.

In answer to the 18th question of Dutton’s application, the question being as follows: “ Is the property incumbered ?” the applicant gave “ $300.” This incumbrance was a mortgage to his mother, Marcia Dutton; the mortgage bearing date September 1, 1846.

The machinery and iron work, in part, of the steam saw mill, insured as before stated, were furnished to one Eastman and the said Henry Dutton, as copartners, by Messrs. Hinckley & Egery, of Bangor, whose account with Eastman & Dutton commenced in October, 1846. From the first, it was the agreement of the parties, that Hinckley & Egery were to be secured the payment therefor, by a mortgage on the land and steam mill, machinery and iron work. But Hinckley & Egery having promises from time to time from Eastman & Dutton of a payment of part of the money due on the account, no mortgage was fully executed. These promises were not fulfilled, Hinckley & Egery in the mean time relying upon the “ mechanic’s lien ” upon the goods furnished. This alleged lien was not disclosed in the application.

In September, 1847, Eastman sold his interest in the mill to Dutton, and on the 26th of September, 1847, Dutton.gave to Hinckley & Egery his note for the balance of acicount rendered, as follows:

Eastman Sf Dutton to Hinckley Sf Egery, Dr.

Sept. 26, 1847. To labor and materials on their-steam saw mill and machinery, in October, No- member, December, and January,' February, March, April, May, June, July, August, and September, 1847, as per account rendered,..... $996,91

To amount of Samuel Eastman’s note of February 17, 1845, and interest, (given up,)......... 153,79

$1150,70

Hinckley & Egery having thoughts of making Dutton a loan additional to the amount of the existing claim, a mortgage to secure the payment of the note, though agreed upon, was not fully executed by Dutton to Hinckley & Egery till the 11th day of October, 1847.

The application for insurance by Dutton was made October 5, 1847, and the policy was issued on the 11th day of October, 1847. On the same day that the policy was issued, a mortgage was duly executed by the said Dutton to Hinckley & Egery; the said mortgage being upon the land and steam saw mill, the steam engine, boilers and machinery connected therewith in the mill, being the property upon which the policy in suit was issued, to the amount of $1128, and which was recorded October 14, 1847. The mortgage which was then signed, originally bore a prior date, which at that time was erased at the instance of Dutton, and the 11th of October substituted therefor, Dutton assigning as a reason that he had made application for insurance subsequent to the first date.

It did not appear whether the mortgage was executed before or after the policy was issued, the date of both instruments being the same.

Dutton never gave the company any notice of this mortgage thus executed on the 11th of October, 1847; and subsequently, in the summer of 1850, Hinckley & Egery took possession of the mortgaged property under the mortgage; and of this fact the company never had any notice.

The application, with its covenants, and the policy, with the charter and by-laws of the company, were made a part of the case, as regulating and defining the liability of the defendants.on this policy.

The sixth section of the charter provides that “ the buildings, with the land whereon they stand, and the property insured therein, shall be held by the company as security for any deposite note which they may hold of the member for whom they are insured, and the policy of insurance to any member of said company upon his buildings, or other property, shall of itself create a lien upon the same for the sum of any such deposit note, and the cost which inay accrue in collecting the same; and such lien shall continue during the existence of said.policy, and the liability of the assured thereon, notwithstanding any transfer or alienation thereof.”

The eighth section of the by-laws was as follows: “ Applications for insurance must be made in-writing, and specify all the facts and circumstances touching the character of the risk, within itself, or by the surrounding objects, whether it regards the subject of insurance, or the building containing the same; and also the applicant’s interest therein. The applicant alone is responsible for the correctness of the application.”

It was agreed between the parties that unless the forego ing facts should, in the opinion of the court, constitute a defence to the action, judgment should be rendered in favor of the plaintiff. And the questions arising upon the case were transferred to this court for determination.

Bell, for the plaintiff, took the following positions:

I. Hinckley & Egery had no lien upon machinery insured, by the laws of Maine. Rev. Stat. of Maine, 558.

II. The plaintiff is entitled to recover notwithstanding the mortgage executed by Henry Dutton to Hinckley & Egery, October 11, 1847. This is no violation of any warranty in the policy or application. The warranty in relation to incumbrances refers to the condition of things at the time <of the application, October 5, 1847. 3 Kent’s Com. 374.

A mortgage is not an alienation. Stetson v. Mass. Ins. Co., 4 Mass. Rep. 330; Conover v. Mu. Fire Ins. Co. of Albany, 3 Den. 254; Jackson v. Mass. Ins. Co., 23 Pick. 418; Lane v. Mutual Fire Ins. Co., 3 Fairf. 418.

If the representation in relation to mortgages could be supposed to refer to the date of the policy, October 11th, the burden of proof would be upon the defendants to show, as matter of defence, that the mortgage was executed before the policy; and this is not shown. 1 Phil. Bv. 195, and cases cited.

There was no suppression or want of good faith on the part of the plaintiff which should avoid the policy. An intention or agreement to make a mortgage need not be disclosed. Wheeling Ins. Co. v. Morrison, 11 Leigh, 354; Trumbull v. Mutual Fire Ins. Co., 12 Ohio Rep. 203.

In cases of fire insurance the insured is, in general, only •required to disclose the matters inquired about, and not the particulars of his title, in relation to which he is not interrogated. Arnold on Insurance, 572; Strong v. Manf. Ins. Co. 10 Pick. 40; Curry v. Commonwealth Ins. Co., 10 Pick. 535; Bixby v. Franklin Ins. Co., 8 Pick. 86; Fletcher v. Commonwealth Ins. Co., 21 Pick. 162; Locke v. North American Ins. Co., 13 Mass. Rep. 61; Bartlett v. Walter, 13 Mass. Rep. 267.

And in cases of marine insurance, where it is held that the insured must communicate facts after the application and before the execution of the policy, it is held that the •defendants must show that the insured might, by reasonable diligence, have communicated such facts, and that they were material as to the risk or rate of insurance; and these are not matters of law, but of fact to be found by the jury. They are not agreed to in this case as facts. Grant v. How. 3rd Ins. Co., 5 Neill, 10; McLanahan v. Universal Ins. Co. Pet. 179, 187; Jefferson v. Cotheal, 7 Wend. 72, and cases cited,

We wish to make one more suggestion in regard to the mechanic’s lien, and that is, that there is no lien upon property of this kind.

Hadley, with whom was Whipple, for the defendants.

I. The policy was void because of misrepresentations* and non-representations of Henry Dutton in his application.

He represented the property to be his subject only to a mortgage to Marcia Dutton.

He did not state, though asked, that his interest was incumbered by a mechanic’s lien to Hinckley & Egery.

He did not disclose, though inquired of, the existence of a mortgage to Hinckley & Egery; nor any circumstances pertaining thereto.

A mechanic’s lien existed. Rev. Stat. of Maine, ch. 125, §§ 37, 38. The lien had not been removed; and a mechanic’s lien is an incumbrance.

The final execution of the mortgage to Hinckley & Egery was contemporaneous with the issuing of the policy. It was a change of circumstances happening before the contract of insurance was complete, which the company was entitled to know.

The answer of the applicant was a warranty, and if it failed at the moment of the insurance the contract failed. 3 Kent’s Com. 288; Duncan v. Sun Ins. Co., 6 Wend. 488; Burritt v. Saratoga Co. Mutual Fire Ins. Co., 5 Hill, 188; Fowler v. Etna Ins. Co., 6 Cow. 673; Jefferson Ins. Co. v. Cotheal, 7 Wend. 72; Wood v. Hartford Ins. Co., 13 Conn. Rep. 533; Carter v. Boehm, 3 Burr. 1905, 1909.

If inquiry is made, the representation of title must be true. 1 Phil, on Ins. 285; Locke v. N. American Ins. Co., 13 Mass. Rep. 61. Or, in other words, the applicant is bound to state all matters materially affecting the nature, extent and duration of the title, and the incumbrances on it» This principle is clearly stated and sustained in Addison v. Kentucky and Lou. Ins. Co., 7 B. Mun. 470; Columbian Ins. Co. v. Lawrence, 2 Pet. 48; Illinois M. F. Ins. Co. v. Marseills Manf. Co., 1 Gil. 236; Catron v. Tennessee Ins. Co., 6 Hump. 176. And the 8th section of the by-laws requires it.

The same doctrine is fully recognized in the following cases. Etna Ins. Co. v. Tyler, 16 Wend. 385; Strong v. Manf. Ins. Co., 10 Pick. 40; Niblo v. N. American Ins. Co. 1 Sandford’s Sup. Ct. Rep. 551; Burritt v. Saratoga Co. Ins. Co., 5 Hill, 188; Kittredge v. Roch. Mu. Fire Ins. Co., 2 Law Reporter (N. S.) 418.

II. The policy was void on account of fraud on the part * of the applicant. The court will see fraud in examining the case, and will so find it.

III. The sixth section of the charter provides that the company shall have a lien on the real estate of the insured, and the incumbrances diminished the security of the company for assessments.