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be put on the ground of subrogation. There is no payment of the mortgage debt, for no one could pay it but the mortgagor. But to have subrogation it is necessary that the debt should be extinguished at law. The right must, therefore, be put upon some other ground.

It is said that a contract of insurance is a contract of indemnity, and that the company here has agreed to insure the defendant against loss upon his debt; and that practically the only way of adjusting such a loss is the method here proposed by the company. It seems, however, a conclusive answer to this, that the parties never contemplated insuring the debt, nor would the company, probably, have authority to insure a debt. The defendant was insured against the loss of certain property; and it is for such loss that the company must pay. Excelsior Ins. Co. v. Royal Ins. Co., 55 N. Y. 343. If the debt had been the thing insured it would be necessary to find in each case how much the mortgagor’s ability to pay the debt had been lessened by the fire; and that would be the measure of damages on the policy. Such, however, is not the course pursued.

In fact, the debt has nothing to do with the case. The defendant acquired his interest in the premises through the mortgage deed; and that instrument alone, not the mortgage debt, concerns this case. By the deed the defendant acquired an insurable interest in the property, equal, even in equity, to the amount of the mortgage debt. It is for the loss that has happened to his property that he recovers, and the company, having paid only what it agreed to pay, has no equity to claim the debt, and thus to deprive the defendant of the profits of his investment. (Bunyon, Insurance, 3d ed., p. 243.) If any one has an equity to have the insurance money applied in payment of the debt it is the mortgagor, not the company; and this equity would arise only upon maturity of the debt. The defendant had a right to recover the insurance money, and he has now a right to hold both the money and the debt. This right is recognized by the best late authorities. Wood, Insurance, p. 782; Insurance Co. v. Boyden, 9 All. 123; King v. Insurance Co., 7 Cush. 1.


These notes were taken by students from lectures delivered as part of the regular course of instruction in the school. They represent, therefore, no carefully formulated statements of doctrine, but only such informal expressions of opinion as are usually put forward in the class-room. For the form of those notes the lecturers are not responsible.

Wrongful Conversion of a Trust Fund. Rights of the Beneficiary. — (From Professor Ames’ Lectures.) — Where a trust fund is misappropriated and converted into other property, the delinquent fiduciary may be charged as a constructive trustee of the newly acquired property.[1]

If, however, the defrauded cestui que trust cannot trace the trust fund, directly or indirectly, into any specific property or fund, the trust, for want of a res to which it can attach, is extinguished, and the cestui que trust becomes a creditor.[2]

But, although the trust is gone, the circumstances may be such as to give the defrauded cestui que trust the position of a preferred

  1. Ames, Cas. on Trusts, 321, 325 n. 1.
  2. Ames, Cas. on Trusts, 331, 332 n. 1.