
    ANNA BARRY, Appellant, v. HAMBURG-BREMEN FIRE INSURANCE CO., Respondent.
    
      Fire insurance— Clause in policy against transfers.
    
    Where a policy of fire insurance contains a clause avoiding the policy in case of a sale, transfer, or change in title or possession, by voluntary conveyance without consent, a deed absolute in form, although intended and given as a security for a debt, whether such intention is evidenced by a written defeasance, dehors the deed, or by an' oral arrangement in the nature of a defeasance accompanying the conveyance, constitutes a transfer or change in title by voluntary conveyance within the clause, and avoids the policy.
    Before Sedgwick, Ch. J., Truax and O’Gorman, JJ.
    
      Decided May 3, 1886.
    Appeal by plaintiff from judgment, entered upon verdict for defendant, directed by the court.
    The action was upon a policy of insurance which insured against loss by fire ‘ ‘ Julia Clark, as owner—loss, if any, payable to Anna Barry, mortgagee.” The policy by its terms became void, “if the property be sold or transferred,- or any change take place in the title or possession, whether by legal process, judicial decree, or voluntary transfer, or conveyance, without the consent of this company written hereon.”
    Julia Clark, with the consent of the company, conveyed the property in fee to Maria Sleight. The defendant indorsed upon the policy, “This company hereby agrees to recognize Maria Sleight as owner.” On the trial, defendant proved that Maria Sleight executed and delivered a conveyance of the premises, apparently in fee, to Michael Moloughney, and that afterwards Moloughney executed and delivered a like deed to John H. Corwin. Both deeds were recorded. The plaintiff then offered to prove that Maria Sleight, at the time of the deed made by her, was indebted in a certain sum to Moloughney, the grantee, and that the absolute conveyance in form was intended by both parties to be only security for the payment of the indebtedness ; and also offered to prove that Maria Sleight, being also indebted to Corwin, the grantee of Moloughney, procured Moloughney to relinquish his security, under the deed to him, and to execute to Corwin the deed made to him, which, although absolute on its face, was intended to be only a security for the payment of the indebtedness to Corwin. The plaintiff also offered to show that Maria Sleight remained in possession down to the action. Upon the objection of the defendant that such proof would be inadmissible, the court sustained the objection, and directed a verdict for defendant. To this the plaintiff excepted.
    
      B. McLean Shaw, attorney, and of counsel, and W. E. Osborn, of counsel for appellant,
    on the questions considered in the opinion, argued :—I. A deed though in form an absolute conveyance, yet in fact intended and given only as security for a debt, is a mortgage, and is therefore not a “transfer or conveyance,” or a “sale or transfer of the property,” nor does it change the title (Howe v. Keteltas, 46 N. Y. 605 ; Odell v. Montross, 68 Ib. 499 ; Dunham v. Dey, 15 John. 555 ; Clark v. Henry, 2 Cow. 322; Murray v. Walker, 31 N. Y. 401; Carr v. 
      Carr, 52 Ib. 251; Walton v. Cronly’s Admr., 14 Wend. 63). A distinction should here be noted between mortgage and a trust, the courts holding that while a deed, absolute in form, may be shown to have been intended as, and should therefore, have the effect only of a mortgage, a trust in favor of the grantee in such deed cannot be established by parol (Sturtevant v. Sturtevant, 20 N. Y. 39). “Under the Code of Procedure, parol evidence is admissible to show that the assignment of a lease though absolute in terms, was intended as a mortgage ” (Despard v. Walbridge, 15 N. Y. 374).
    II. The court upon the trial of this cause, held in substance, that because these deeds were absolute upon their face, therefore, they constituted, per se, both a transfer, and a change of title within the meaning of the policy, although we were able to prove and should prove, that they were in fact given, and intended as mortgages only, thus applying to a policy of insurance a different rule of construction, and to the words used therein, a more restricted interpretation and meaning than are applicable to other kinds of contracts. That this was clear error was conclusively shown by the decision of the court of appeals in the case of Hodges v. Tennessee Marine & Fire Ins. Co. (8 N. Y. 416).
    
      Salomon & Dulon, attorneys, and Edward Salomon, of counsel for respondent,
    on the questions considered in the opinion, argued :—The deeds of conveyance, absolute upon their face, were both a “transfer” and a “change of title ” of the property insured which terminated the policy, although given to secure debts (Stoddard v. Rotton, 5 Bosw. 378). The clause in question is that if any change take place in the title or possession, the policy shall become void. Certainly, these conveyances were changes of title, and were intended as such, although as security for debts. The plaintiff’s counsel in the court below relied much upon the case of Hodges v. Tennessee Marine 6 Fire Ins. Co. (8 N. Y. 416). The decision, however, is only to the effect that an absolute conveyance given as security for a debt still leaves in the grantor an insurable interest. That is not the question in the case at bar. So the other cases which hold as the established doctrine in this state, that in equity, parol evidence may be admitted to show that a deed, absolute upon its face, was intended as security, do not help the plaintiff’s case, because, while under them, it might be proper to show, that notwithstanding the conveyance and transfer of her legal title, Mrs. Sleight retained a certain equitable interest in the property, those cases are very far from establishing the doctrine that an actual transfer of a legal title is not a change of title under the provisions of the policy in question. Although there has probably been no direct adjudication upon the precise point here presented, yet the following authoritative adjudications strongly bear upon it : Oakes v. Manufacturers’ Fire & Marine Ins. Co., 131 Mass. 161 ; Tomlinson v. Monmouth Mut. Fire Ins. Co., 67 Me. 232 ; Foote v. Hartford Ins. Co., 119 Mass. 239 ; Farmer’s Ins. Co. v. Archer, 36 Ohio State Rep. 608 ; Savage v. Howard Ins. Co., and Savage v. Long Island Ins. Co., 52 N. Y. 502. The case of Hitchcock v. Northwestern Ins. Co. (26 N. Y. 68), referred to in the foregoing case, turned upon a provision in the policy that it should be void in case of transfer or termination of the interest of the assured in the property insured, and as the plaintiff, after the conveyance, retained an insurable interest under the mortgage, there was no breach of the condition. In Kitts v. Massasoit Ins. Co. (56 Barb. 177), the case of Hitchcock v. Northwestern Ins. Co., was wrongly understood and applied. The distinction between a termination of the insurable interest and a change of title was not borne in mind. Van Deusen v. Charter Oak Fire & M. Ins. Co. (1 Rob. 55), and Hennesy v. Manhattan Fire Ins. Co. (28 Hun, 98), were simple mortgage cases, the mortgagors remaining in possession, and in so far as the language of the courts arguendo, seems to be opposed to that of the court of appeals in Savage v. Howard Ins. Co., the latter must prevail.
   Per Curiam.

The learned counsel for appellant in support of the exception to the ruling, excluding the evidence offered, took the ground that a deed although in form an absolute conveyance, yet in fact intended and given only as a security for a debt, is a mortgage. This is not formally or strictly correct. The instrument of conveyance in its own nature is, and cannot but be what it purports to be, namely, a conveyance. The written defeasance, dehors the conveyance, or the oral arrangement in the nature of a defeasance, coupled with the conveyance make the mortgage, but the defeasance does not vary the terms of the conveyance. In Horn v. Ketaltas (46 N. Y. 610), the opinion says : “Therule does not conflict with that other rule which forbids that a deed or other instrument shall be contradicted or varied by parol evidence.” It has never been doubted that the case of Webb v. Rice (1 Hill, 606), declared the law of this state that “ oral evidence is not admissible in a court of law to show that a deed absolute on its face was intended as a mortgage.” It was only in courts of equity, that such evidence was admitted for such a purpose. Courts of equity did not attempt to destroy or vary the legal right, excepting that enforcing equitable obligations they proceeded to compel the defendant to use the legal right in an equitable way. Through the conveyance, the grantee, as mortgagee, held the legal title, or he held nothing, but equitably he was bound to use that legal title only for the payment of the debt, and beyond this to hold it for the use of the grantor or mortgagor. Any other use would be fraudulent and inequitable.

In Strong v. Stewart (4 Johns. Ch. 166), the chancellor decreed that the plaintiff had a right to redeem “on the strength of the authorities, and on the proof of the loan, and of the fraud on the part of the defendants in attempting to convert a mortgage into an absolute sale.” The authorities that were cited went on the ground that equitable obligations were to be enforced and fraud prevented. They were not all cases of absolute conveyances, with oral proof that they were intended as security for indebtedness. In Cotterell v. Purchase (Cases Temp. Talbot, 63), the chancellor said, “they who take a conveyance of an estate as a mortgage, without any defeasance are guilty of a fraud,” meaning no doubt, that it was a fraud to claim an absolute estate. In Maxwell v. Mountacute (Pre. in Ch. [Finch] 526), “So when a man treated to lend money on a mortgage and the conveyance proposed was an absolute deed from the mortgagor and a deed of defeasance from the mortgagee, and after the mortgagee had got the conveyance, he refused to execute the defeasance, yet my Lord Nottingham decreed it against him, on the fraud after the statute.” In Walker v. Walker (2 Atk. 98), it was decided that the defendant may be admitted to read parol evidence to rebut an equity set up by the bill. It was said, 1 ‘ Suppose a person who advances money should, after he has executed,” meaning received, “the absolute conveyance, refuse to execute the defeasance, will not this court relieve against such fraud?” In Young v. Paacky (2 Atk. 256), “there have been many cases even since the statute of frauds, where a person has obtained an absolute conveyance from another, in order to answer one particular purpose, but has afterwards made a use of it for another, that this court has relieved under the head of fraud, for a practice of this sort is a deceit and fraud, which this court ought to reheve against.” A large mass of authorities is given in Wh. & Tudor’s L. Cas. Eq. vol. 2, 1986, to support the proposition that 1 ‘ such evidence does not contradict the instrument or prevent it from passing the legal title, but simply establishes the existence of a superior equity which the grantee is not at liberty to disregard.”

It will follow, then, that the legal title to the house insured did pass from Sleight to Moloughney, and again from Moloughney to Corwin. A change took place in the title, although Moloughney and Corwin may have been equitably bound to use that title only as security for the payment of debts. The policy became void, as its terms provided it should, if there were any change in the title. It does not seem that Hodge v. Tennessee M. & F. Ins. Co. (8 N. Y. 416) calls for a different conclusion. The question of the case was, in the opinion of the court, whether the person originally insured had, at the time he assigned the policy to the plaintiff, an insurable interest. Contemporaneously with the assignment of the policy, the assignor conveyed to the plaintiff the insured premises by a deed, absolute upon its face. It was assumed that if this deed carried with it all the assignor’s interest in the premises, the policy fell. The court of appeals allowed the plaintiff to show by oral evidence that the conveyance was intended to be security for a debt to the plaintiff, and held that then it appeared that there remained in the assignee some interest in the property. It is consistent with this that the title had changed, but because the plaintiff’s right to use that title was of a limited kind, the assignor had the interest outside of that limited use. The policy "did not provide that it should be void upon a mere change of the title. •

Judgment affirmed, with costs.  