2. Of Equities attaching upon policies.

It may be sufficient to state, that at present it appears that no equity attaches upon the proceeds of policies in favor of third persons, unless there be some contract, or agreement, or trust to that effect. A policy of insurance against fire is a distinct independent contract between the party effecting an insurance and the insuring.

(a) In general,no equity between landlord and tenant.—In Brown v. Quilter Amb. 619, the plaintiff leased premises of the defendant for a tern of years, and in the lease covenanted to repair, &c. (accidents by fire excepted,) the defendant, covenanting in the usual manner for quiet enjoyment; the house was burnt down, the defendant having insured for £500 and received the insurance money. The defendant neglected to rebuild the house, and the plaintiff refused to pay the rent, which become due after the house was burnt; and the defendant having brought an action for the rent, the plaintiff brought a bill for an injunction, and to compel the defendant either to rebuild the house or pay the insurance money to the plaintiff towards satisfaction of his loss. The defendant insisted upon his right to the insurance money, and to be paid the rent without rebuilding the house, but offered to discharge the plaintiff from his lease Lord Northington, (Ld. Chancellor) seemed to be of opinion, that in this case though the covenant did not extend to oblige the defendant to rebuild, yet that when an action is brought for rent after the house is burnt down, that was a good ground of equity for an injunction till the house was rebuilt. The case, however, was afterwards compromised, and it does not amount to a decision; whatever of authority may attach to it, has been very much shaken by Hare v. Groves, 3 Anstr. 687, and Holtzapfell v. Baker, 18 Ves. 115.

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Brown v. Quilter, however, differs from these latter cases, inasmuch as the landlord, who had insured, had received the insurance money, and therefore had the value of the thing, which was the subject of the contract with the lessee, and as to him therefore no loss had happened. But, as was urged in argument in Holtzapfell v. Baker, it is extremely difficult to conceive how that distinct contract, merely for the advantage of the lessor, with which the lessee had no concern, can effect the right as between them. It was thrown out by the Ld. Chancellor (Eldon) in the course of the argument, that some of the fire officers reserving the option of paying the money or laying it out themselves, which may make a considerable difference, as that option ought to affect the lessee;" but to this it was objected, that this option is reserved merely for their own protection against fraud, and not for the benefit of the tenant. Although the cases cited do not go precisely to the point of equities attaching upon policies, but to the question of payment of rent by lessees for premises after they have been burnt down, yet from the observations scattered in them, we may come to the conclusion, that the contract of insurance is confined to the parties, and that as a general principle, no other person has any right in equity to the proceeds.

The doctrine has been confirmed in a much later and stronger case. Leeds v. Chatham 1 Sim. 149. The defendant by indenture of March 25, 1810, demised to the plaintiff a cotton factory, with the steam-boiler, for twenty one years, &c., reserving a yearly rent: the plaintiff covenanted to pay the rent during the term, and to repair and keep repaired the inside of the factory, the offices, fixtures, out-houses, and additions, and the steam-boiler, engine, and apparatus thereto belonging, so long as the same would last, or could be rendered workable by repair; the defendant covenanted to maintain the outside brick work, plastering, slating, tiling, and all other outer parts of the premises in good substantial and tenantable repair. There was no exception in respect of accidents by fire either in the covenant for payment of rent, or in the covenant to repair, on June 22, 1825, the factory, buildings, and premises were destroyed by fire. After the lease was granted, the defendant insured the factory and buildings for £500., the steam-engine for £100., the engine-house for £60., and the gearing for £40., so that the total amount of the sums insured was £ 700.; and shortly after the fire he received that sum. The defendant had commenced an action against the plaintiff for a year's rent, ending the 24th of June, 1826. The bill prayed that it might be declared that the defendant was bound to lay out and apply the £700., or a competent part thereof, together with the old materials, in and towards the rebuilding, and reinstating the factory and premises, the steam-boiler, steam-engine, &c., and that he might be decreed forthwith to lay out the same accordingly, the plaintiff offering to make good out of his own monies, what the £700 and the old materials should be insufficient for the purpose, to such extent as he should be deemed liable; and that it might also be declared, that the plaintiff was not bound to pay the rent during such time as the factory, &c., should continue unbuilt and unrestored; and that the defendant might be restrained from farther proceeding in the action. The defendant demurred to the bill for want of equity.

The Vice Chancellor.-" There being in the lease no exception as to the case of accident by fire, the plaintiff at law continues bound also by his covenant to keep in repair the inside work of the factory, the steam-engine, and the other apparatus, and all the out-buildings and fixtures which were on the premises. On the other hand, the defendant, for want of the exception as to accident by fire, continues bound by his covenant to repair the outer part of the buildings, and also by his covenant to replace the steamboiler and other apparatus during the last fourteen years of the term, and when from long use they are no longer workable, under these covenants, the defendant is bound to rebuild the factory, and to cover the same with proper roofing, and slating or tiling; and the plaintiff is bound to rebuild the out-buildings, and to do all necessary works to complete the inside work of the factory when it is built and covered in by the defendant. It appears to me, that in this respect, equity must follow the law. The plaintiff might have provided in the lease for a suspension of rent in the case of accident by fire, but not having done so, a Court of Equity cannot supply that provision which he has omitted to make for himself; and it must be intended

that the purpose of the parties was according to the legal effect of the contract, with respect to the equity, which the plaintiff alleges to arise from the defendant's receipt of the insurance money, there is no satisfactory principle to support it. The defendant, having so contracted with the plaintiff as to render himself liable to rebuild the outer work of the factory in case of accident by fire, has very prudently protected himself by insurance from the loss he would otherwise have sustained by such an accident. But upon what principle is the plaintiff's situation altered by the precaution on the part of the defendant, with which the plaintiff had nothing whatever to do? The plaintiff has sought his protection in the contract by the covenant which he has required from the defendant, and to those covenants he must alone resort.” (b) If the insurance money, as secured by a policy against fire, is made payable to the insured, his executors, administrators, and assigns; and houses and buildings in fee are insured, which afterwards descend to the heir, and are burnt during the continuance of the policy. The executors of the insured, and not the heir, will be entitled to receive the proceeds of the policy. A decision Mildmay v. Holgham, 3 Ves. 472, to this effect has been made with reference to the constitution and policy of the Hand in Hand Office, by one of the articles of which it was declared, that the interest of a member dying should survive to his executors, administrators, and assigns; and by an order of the society, reciting that every insurance became void at the time when the property of the person insured expired, it was ordered, that upon applying at the office and declaring their property in the houses insured to be expired, any persons may have their accounts adjusted and deposites due paid to them; and that if they do not apply nor assign the policy to the person having the property of the house insured, the person possessed of the property may insure the house notwithstanding the former policy be not expired. The policy was made payable to the insured, her executors, administrators, and assigns; and it was declared, that when any assignment of the policy be made, such assignment should be entered in the office books within forty-two days, or else the assignee shall have no benefit. Under the circumstances before mentioned certain houses had descended to the heir, one of the houses was burnt, the policy not being expired, and no assignment to him had been made, the directors of the office refusing to pay upon his application; he filed his bill, which was dismissed with costs. It was contended, amongst other points, that the executor was a trustee for the heir.

The Lord Chancellor.-"It is utterly impossible to make the executor a trustee. It seems to me perfectly clear upon the plan of this society, which was formed in 1696. In general, however, policies are not made payable to the insured, his heirs, &c., but to the executors, administrators, &c. that it is not like the other insurance offices since established, but that it is a personal contract not connected with the real property nor affecting the real property. No person can have the benefit of the policy but the personal representative, with whom they make up the account, and who is entitled to the dividend.” (c) If, however, by the act of the insured, or the party entitled to the benefit of the proceeds of the policy, those proceeds should become clothed with

the character of real estate, (Norris v. Harrison, 2 Mad. 268) or with a trust, the party entitled to the real estate, as heir or devisee, will become entitled to them, in preference to those who may claim them as personalty.

As where A was tenant for life, remainder to B for life, remainder to A in fee, and during the life of A., houses on the estate, insured by him, were burned down, and the insurance money was paid to A, and was placed by him in the funds in his name. A by his will devised the estate to C in fee, (subject to B's life,) and his personal estate to B, and made B his executor, B applied part of the insurance money to repairing a house upon the estate; the insurance money unapplied remained standing in A's name. B, by his will bequeathed the residue of his personal property, after stating the circumstances as to the fund standing in his name, as follows: "Whereas, I am sole executor under the will of my brother, John Bell, Esq. late of Fluyder street, Whitehall, deceased, and there is now standing in the books of the Governor & Company of the Bank of England the sum of 11597. 16s. 7d. Three per cent. Reduced Bank Annuities, I hereby inform my executor & sister, Mrs. Lucy Bell, that the said sum is part of and belongs to what was the real estate of the said John Bell, of which real estate I am now possessed as tenant for life, &c.; and I do further declare for the information of my executors and others whom it may concern, that the said sum is the balance or remainder of monies paid by the Sun Fire Office to the said John Bell, for houses belonging to the said real estate, which were burnt down in the life time of the said John Bell, and were not rebuilt by him; and which monies so paid to the said John Bell were by him laid out in the purchase of 28171. 5s. 7d. Three per cent. reduced annuity, out of which last mentioned sum, after the decease of the said John Bell, when the house, No. 128, in Leadenhall street, then belonging to me, was burnt down, I took the sum [of 16571. 9s. Three per cent. Bank Annuities, and with the produce of that sum added to the sum of £1125 Sterling, which I received from the Hand in Hand Insurance Office for the said house, I built the present house, No. 128, in Leadenhall street, to the great improvement of the said estate," &c. The testator then bequeaths several sums of Bank stock, but not otherwise than aforesaid referring to the sum of 11597. 16s. 7d. Three per cents.: and it was held, that under these circumstances the sum was subject to the uses of the settlement, and passed to C. the devisee in fee.

So where a testator had devised and bequeathed all his real and personal estate to the defendant, the executrix, charged with an annuity to his widow, who filed a bill for an account and security of the annuity, and a house, the only real estate, was burnt down after the filing the bill, having been insured by the testator in his life time, and the policy having been renewed by the defendant; the Court (the Vice Chancellor) ordered the insurance money to be paid into Court, it being to be taken that the defendant had renewed in the character in which she was entitled to renew, viz. as executrix, and the proceedsas affected with a trust for the benefit of the parties interested in the estate. Parry v. Ashley, 3 Sim. 97.

(d) Of Equitable Subrogation or Substitution.

The principle of equitable substitution of the underwriters in the place of the assured, is recognized by every writer on the subject of insurance, and is constantly acted upon in courts of law as well as in equity; so that where the assured has any claim to indemnity for his loss against a third person who is primarily liable for the same, if the assured discharges such third person from his liability before the payment of the loss by the underwriters, he discharges his claim against them for such loss, pro tanto. Or if he obtains payment from such third person afterwards, it is in the nature of salvage, which he holds as trustee for the underwriters who had paid the loss. Per Chancellor, in 16 Wend. 397, 8; Gracie v. The New York Ins. Co., 8 J. R. 246; Godsall v. Bolders, 9 East, 72. In the case of Mason v. Sainsbury, referred to as a manuscript case by Mr. Marshall in his treatise on insurance, 2 Condy's Marsh. 794, and which is recognized as good law in the recent case of Clark v. The Inhabitants of Blything, in the court of K. B., the assured, who had received his whole demand from the underwriters for the loss sustained by a fire, was permitted to recover the same from the inhabitants of the hundred who were also liable to him upon the statute; or rather the underwriters were permitted to recover the same in his name, the suit being prosecuted for their benefit. The same principle as to the equitable right of the insurer to be subrogated to all the rights and remedies of the assured to obtain compensation for his loss from other persons, was acted upon by the Vice Chancellor in the recent case of The Atlantic Ins. Co. v. Storrow et al., where an attempt was made, by the master and owners of the vessel who were primarily liable for a loss of goods by thieves, to throw the loss upon the underwriters, and to deprive them of their remedy over against those who were liable to the assured to make good the loss; and the decision of the Vice Chancellor in that case was affirmed upon appeal. See 5 Paige's R. 285; 2 Phil. on Ins. 282. In the case in Paige, the insurance was against loss by theft :-Held, that though the shipowner or master was liable for the loss as well as the underwriters; yet, the former have not a claim in equity upon the latter for contribution; the assurers not being liable to contribute for a loss, for which the master or ship-owner are also liable to the assured;—their contract is a mere contract of indemnity to the assured. If the assured has received satisfaction in such case from the ship-owner, the latter cannot even upon an assignment of the policy recover against the insurers. The Chancellor also observed, (p. 294) " And upon an abandonment and payment, or upon a recovery, as for a total loss, the underwriters are entitled to subrogation, at least in equity, to all the rights and remedies which the assured has to the property which is not actually destroyed, including the spes recuperandi from any other source; unless the underwriters have relinquished that right by a stipulation in the policy." Again—" If it happened upon the trial of the suit at law that the assured had received a compensation for his loss from the ship-owners, or the master, and that the

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