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FACTORING & DISCOUNT #2, INC. v. CENTRAL MUT. INS.

January 29, 1954

FACTORING AND DISCOUNT #2, Inc., Plaintiff,
v.
CENTRAL MUTUAL INSURANCE COMPANY, Defendant



The opinion of the court was delivered by: RYAN

Plaintiff moves after answer for summary judgment.

Plaintiff, a resident corporation, in this suit seeks recovery as assignee of an insured mortgagee for a collision loss to a 1949 Mack motor truck owned by the mortgagor, Borough Haulage Co., Inc., payable under policy of insurance issued by defendant, an Ohio corporation.

 Jurisdiction is predicated on diversity and New York law is applicable.

 The following appears undisputed by defendant, Central Mutual Insurance Company:

 On January 11, 1952 Borough Haulage mortgaged the 1949 Mack truck, one of its several pieces of motor equipment, to Rokeach Sales Corporation (not a party to this litigation) for $ 1,500. This mortgage was duly filed in the Register's office of the appropriate county.

 On May 2, 1952 Borough Haulage gave to plaintiff, Factoring and Discount #2, Inc., as security for monies advanced and to be advanced to the amount of $ 52,500 a mortgage upon its motor equipment, including in the schedule of the mortgaged properties the 1949 Mack truck previously mortgaged to Rokeach Sales. It is claimed by defendant that at the time it was orally agreed by Factoring and Discount and Borough Haulage that in the event that the prior lien holder was not paid off, the mortgage to plaintiff would not apply as to that equipment so encumbered. (See paragraphs 13, 14 and 15 of answer). The amounts of the various liens to be paid off by plaintiff were deducted from the proceeds of the loan and Borough Haulage received the loan after such deductions. Thereafter, Factoring tendered $ 1,500 to Rokeach but the latter refused to accept this or to satisfy the mortgage it held.

 The mortgage given to Factoring by Borough Haulage was duly filed in the office of the Register of Kings County on May 2, 1952. It was discounted and assigned by Factoring to People's industrial Bank in May, 1952, who held it until September 30, 1952 when it was reassigned to Factoring. It is the claim of the defendant that the assignment to the 'Bank' by Factoring was 'a colorable one and in fact invalid.'

 On June 14, 1952 defendant issued to Borough Haulage its automobile policy covering along with other equipment the 1949 Mack truck against risk of fire, theft and collision. The policy was in effect for one year from June 9, 1952. When issued it provided by usual form of rider for loss payable 'as interest may appear to insured, and Factoring & Discount Corp. #2 and/or Peoples Industrial Bank'; however, on July 1, 1952 further endorsement was added reading

 
'Interest of Factoring & Discount Corp. #2, as Loss Payee, having ceased, it is understood and agreed loss, if any now payable to assured and Peoples Industrial Bank.'
 
'All other terms and conditions remain the same.'

 On July 9, 1952 Borough Haulage claimed collision loss under the policy to the 1949 Mack truck; on July 28, 1952 Rokeach notified Central Mutual of its claim to an unpaid mortgage. Central Mutual on September 5, 1952 issued its draft for $ 3,900 -- which was subsequently paid-payable to Borough Haulage and Rokeach, who by agreement between themselves apportioned this by payment of $ 750 to Rokeach on account of balance due it from Borough Haulage, and $ 3,150 to Borough Haulage. During its investigation of the loss claim and before payment on it, defendant had notice of the making of the mortgage by Borough Haulage to Factoring but not of the assignment of the mortgage by the latter to Peoples Industrial Bank.

 On October 28, 1952 Factoring notified Central Mutual by letter that it was the owner of the Borough Haulage Mortgage of $ 52,500 and that 'Peoples Industrial Bank have assigned all their right * * * in the said mortgage and all claims arising therefrom' to Factoring; it then made demand for payment to it of the collision loss on the Mack truck.

 It appears undisputed that on July 9, 1952 the date the admitted collision loss of $ 3,900 fell there was an indebtedness of Borough Haulage on the mortgage in excess of $ 3,900.

 On October 22, 1952 Peoples Bank assigned to Factoring its right to receive any loss payable to it under the ...


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