insurance avoids the policy, without regard to whether the statement warranted relates to a material or an immaterial fact. In 1895 the legislature passed a law (§ 20, chap. 175, Laws 1895) which is now § 3300, Gen. Stat. 1913. It reads as follows: "No oral or written misrepresentation made by the assured, or in his behalf, in the negotiation of insurance, shall be deemed material, or defeat or avoid the policy, or prevent its attaching, unless made with intent to deceive and defraud, or unless the matter misrepresented increases the risk of loss."

This statute does not in terms mention warranties, and, had it never been construed, the question whether it should be held to change the common-law rule as to warranties would be an interesting one. This statute has, however, been construed in previous decisions of this court, and that it applies to warranties is no longer an open question. In Price v. Standard Life & Acci. Ins. Co. 90 Minn. 264, 95 N. W. 1118, it was inferentially held that this statute applies to warranties, and in Johnson v. National L. Ins. Co. 123 Minn. 453, 144 N. W. 218, Ann. Cas. 1915A, 458, this court expressly so held. Speaking of this statute, this court said: "Our statutes, and statutes like them, were intended to put warranties upon substantially the basis of representations, and to do away with defenses made by incorporating conditions and terms in policies, making them by agreement material representations or warranties, and controlling on the right of recovery. As we construe the statute a material misrepresentation, made with intent to deceive and defraud, avoids the policy. A material misrepresentation not made with intent to deceive or defraud does not avoid the policy, unless by the misrepresentation the risk of loss is increased. If a material misrepresentation increases the risk of loss, the policy is avoided, regardless of the intent with which it was made. An immaterial representation, though

made with intent to deceive and defraud, does not avoid the policy."

See also McAlpine v. Fidelity & C. Co. 134 Minn. 192, 158 N. W. 967.

Defendant cites Cerys v. State Ins. Co. 71 Minn. 338, 73 N. W. 849. In that case § 3300 was not considered or mentioned. The same is true of Aiple v. Boston Ins. Co. 92 Minn. 337, 100 N. W. 8, and Rupert v. Supreme Ct. U. O. F. 94 Minn. 293, 102 N. W. 715. The case of Farm v. Royal Neighbors, 145 Minn. 193, 176 N. W. 489, cited by defendant, involved a case to which § 3300 does not apply, but the language of the decision could not aid defendant in any event.

We hold, following the decision in the Johnson Case, that the alleged breach of warranty Insurancewill not avoid the warranty-efpolicy unless made

fect of statute.

with intent to deceive and defraud, or unless the matter misrepresented increases the risk of loss.

Trial-absence of fact.

2. Defendant contends that the alleged false statement was made with intent to deceive, and that the necessary result was an increase of the risk. No such facts were pleaded. The trial court made no finding on either proposition and was not asked to do so. In view of these facts, and, if anything further need be said, in view of the evidence of expenditures upon the car in addition to the purchase price, we cannot assume either intent to deceive or increase of risk.

3. Defendant contends that plaintiffs, mortgagees, are bound by the adjustment made by agreement between the insurance company and Lavick, the mortgagor. The insurance company knew of the mortgage. It is stipulated that the policy should be treated as though it, in fact, contained a rider making loss, if any, payable to the mortgagees. Defendant's counsel, with commendable frankness, gives to the court a citation of the authorities on both sides of this proposition. Collinsville Sav. Soc. v. Boston Ins.

American Ins. Co. (1893) 14 Ky. L. Rep. 859. See also Bergman v. Commercial Union Ins. Co. (1891) 12 Ky. L. Rep. 942.

Massachusetts.

Harrington V. Fitchburg Mut. F. Ins. Co. (1878) 124 Mass. 126.

Minnesota.-FIRST NAT. BANK V. NATIONAL LIBERTY INS. Co. (reported herewith) ante, 380.

Mississippi.-Georgia Home Ins. Co. v. Stein (1895) 72 Miss. 943, 18 So. 414. See also Etna Ins. Co. v. Cowan County (1916) 111 Miss. 453, 71 So. 746.

New Hampshire.-Hall v. Fire Asso. of Phila. (1887) 64 N. H. 405, 13 Atl. 648.

New York.-Hathaway v. Orient Ins. Co. (1892) 134 N. Y. 409, 17 L.R.A. 514, 32 N. E. 40; McDowell v. St. Paul F. & M. Ins. Co. (1913) 207 N. Y. 482, 101 N. E. 457 (dictum); Leslie v. Firemen's Ins. Co. (1908) 60 Misc. 558, 112 N. Y. Supp. 496.

Rhode Island.-Brown v. Roger Williams Ins. Co. (1858) 5 R. I. 394.

Thus, under a policy taken out by the mortgagor, providing for an arbitration upon request of either party, which he delivered to the mortgagee with an indorsement that the loss, if any, should be payable to the latter, an arbitration by the mortgagor and the insurer, without notice to the mortgagee, does not affect the mortgagee's rights. Bergman v. Commercial Assur. Co. (Ky.) supra, the court construing the term "parties," as used in the arbitration clause, as meaning the parties in interest, which, in a policy of this character, directing the proceeds to be paid to the mortgagee, is the mortgagee, and not the mortgagor. Quoting from the opinion: "The loss was made payable to him, the mortgagee, by the act and consent of the companies and the insured. The act was equivalent to an assignment of the losses to him, which places him in as favorable a position as assignees generally, where the obligor has notice of the assignment. And it is well settled in such cases that the obligor and obligee can do nothing, without the consent of the assignee, that will affect the interest assigned As long

as the mortgage debt that the assignment of the loss was intended to additionally secure remains unpaid, the mortgagee's right to the full and fair value of the property destroyed cannot be controlled by any act of valuation by the insured and the company, made without the mortgagee's consent. The arbitration made by them without the mortgagee's consent was a valuation of the property and the disposi tion of the mortgagee's right without his consent. Natural justice forbids that the mortgagee's rights shall be arbitrarily disposed of in that way."

A similar conclusion was reached in Morris v. German-American Ins. Co. (1893) 14 Ky. L. Rep. 859, where it was held that under an insurance policy payable to the mortgagee, "as her interest may appear," the mortgagor and insurer could not, by agreement to which the mortgagee was not a party, bind her to abide by arbitration, although the policy provided for determining a loss in this manner upon the written request of either party.

A declaration in an insurance policy that the loss was to be payable to the mortgagee is, in legal effect, an assignment of the policy, concurred in by the insurer, by virtue of which the mortgagee alone was entitled to receive the amount of loss, and "as long as his debt remains unpaid, the mortgagee cannot be concluded as to the amount of the loss under such a policy by an award made under a submission of the mortgagors and the insurers, to which he was not a party, and to which, neither by prior authority nor subsequent ratification, he had assented." Brown v. Roger Williams Ins. Co. (R. I.) supra. The court said: "In common justice his interest in the policy required his assent to the adjustment of the loss, in order to make it binding upon him, whether the adjustment were made directly, or through the intervention of arbitrators appointed to make it. Arbitration is certainly a very proper mode of ascertaining the amount of a loss under a fire policy, and, as such, is contemplated by the instrument itself; but who must be the parties to the

submission, to make the award binding in any particular case, unless the case be provided for in the policy, depends upon principles altogether independent of the policy, and which certainly do not allow the assignor of the policy substantially to affect the interest of the assignee therein by a submission of this sort, made without the assent of the latter, subsequent to the assignment. As well might the mortgagor and his grantee of the equity conclude, by an award to which they alone had submitted, the amount due to the mortgagee upon his mortgage, as the mortgagor and the insurance company, by an award submitted to exclusively by them, bind him as to the amount due upon his policy. Mortgage and policy are both collateral securities for the mortgage debt; but the value of neither can, in general, be impaired by an act of this sort, done without the assent of the mortgagee."

And in the reported case (FIRST NAT. BANK v. NATIONAL LIBERTY INS. Co. ante, 380) it is said that the mortgagee has, under a simple loss-payable clause in an insurance policy, a legal right to participate in the adjustment of the loss, so that he will not be bound by an adjustment between the insurance company and the property owner.

So, in Harrington v. Fitchburg Mut. F. Ins. Co. (1878) 124 Mass. 126, it was said that under a policy made payable to the mortgagee in case of loss, his rights were fixed at the time of the loss, and the mortgagor could no more adjust the amount of the loss with the insurer than he could release it. However, in Collinsville Sav. Soc. v. Boston Ins. Co. (Conn.) infra, it was said that, prior to this case, Massachusetts had, by a statute, adopted a standard form of policy embodying a so-called union mortgage clause, which was probably the type of policy involved in the Fitchburg Mut. F. Ins. Co. Case; that, however, does not appear from the opinion.

And in Hall v. Fire Asso. of Phila. (1887) 64 N. H. 405, 13 Atl. 648, the court held that although a policy, by its terms payable to the mortgagee,

38 A.L.R.-25.

as his interest might appear, might have been avoided by the mortgagor's breach of conditions of the mortgage, yet, from the moment of the loss, the rights of the parties were fixed, and whatever amount was secured by the policy, to the extent of the mortgage debt, became due the mortgagee, to whom the insurer was bound to pay it, and the mortgagee would not, therefore, be bound by an adjustment between the insurer and the mortgagor, made without the mortgagee's knowledge, consent, or authority, for the mortgagor could no more adjust the amount of the loss than he could release it.

In Georgia Home Ins. Co. v. Stein (1895) 72 Miss. 943, 18 So. 414, where the policy was, by its express terms, payable to the mortgagee, the court held that the mortgagee was the real party in interest, and was not bound by an arbitration and award by arbitrators appointed by the mortgagor and the insurer, since the mortgagor had no more power to reduce the amount due and payable to the mortgagee, directly or by arbitration, than she had to surrender the policy and release the company from all obligation.

And in Etna Ins. Co. v. Cowan County. (1916) 111 Miss. 453, 71 So. 746, where a policy of insurance taken out by the property owner was payable to the county treasurer, as his interest might appear, and, after a loss by fire, an appraisement of the loss was made by arbitrators appointed by the insured and the insurance company, to which appraisement the treasurer was not a party, the court stated that the effect of a failure on the part of the insurance company to make the county a party would be to make the arbitration void as to it. And on a later appeal of this case (Etna Ins. Co. v. Pelham (1917) 115 Miss. 229, 76 So. 153), the position that the appraisement to which the county was not a party was not binding on it was reaffirmed.

So in Leslie v. Firemen's Ins. Co. (1908) 60 Misc. 558, 112 N. Y. Supp. 496, the court said that under a policy payable to a mortgagee, as his interest

may appear, the mortgagee's rights are fixed by the policy, and cannot be affected by any adjustment between the owner and the insurance company without the mortgagee's knowledge or consent; and in that case, it was held that the owner of the property could not, at the instance of the insurer, be compelled to elect whether he would rely upon the policy or upon an adjustment between such owner and the insurer, made without the knowledge of the mortgagee, since the mortgagee should not be put in a position to be prejudiced by a possible election by the plaintiff to proceed upon the adjustment.

And since the mortgagee in a policy payable to him "as his mortgage interest may appear" acquires the right to recover damages not only by the appointment of the mortgagor, but by the policy, the contract entered into between the owner of the fee, the mortgagee, and the insurer, his rights cannot be defeated by an accord and satisfaction between the insurer and the owner of the premises. Hathaway v. Orient Ins. Co. (1892) 134 N. Y. 409, 17 L.R.A. 514, 32 N. E. 40. The court states: "Upon principle and authority it seems to be clear that the defendant [insurance company] in this case had no authority to agree with the owner as to the amount of the damages, and determine as between him and the mortgagee what sum was payable to each; and the accord and satisfaction entered into between the insurer and the owner is not a bar to a recovery by the mortgagee of his damages." And this case was approved in McDowell v. St. Paul F. & M. Ins. Co. (1913) 207 N. Y. 482, 101 N. E. 457, where it was said that it was unreasonable that the interest of the mortgagee should be subjected to the caprice of the owner after the loss occurred, and that this was equally true whether there was a mortgage clause or merely an indorsement of the interest in the policy to the mortgagee.

And in Agricultural Ins. Co. v. Hamilton (1895) 82 Md. 88, 30 L.R.A. 633, 51 Am. St. Rep. 457, 33 Atl. 429, it is said that when a loss happens

that is covered by a policy issued to the mortgagor, but payable to the mortgagee, as his interest may appear, controversy may arise as to whether a payment can be rightly made to the insured, and that in such cases it has been held that the insured has no authority to defeat the right of the mortgagee by an accord and satisfaction between himself and the company, and Hathaway v. Orient Ins. Co. (N. Y.) supra, is cited. However, the question in this case was whether the fact that a policy is made payable to the mortgagee; as his interest may appear, prevents a breach of the condition of the policy by the mortgagor from rendering it void as to the mortgagee.

But, on the other hand, under an open mortgage clause, or a simple loss-payable clause, some courts have extended the general rule (see annotation following Hill v. International Indemnity Co. ante, 367) that a mortgagee is bound by any act of the mortgagor affecting the validity of the policy prior to the destruction of the property, to the act of the mortgagor in adjusting the loss with the insurer without the knowledge, acquiescence, or consent of the mortgagee, and hold that since the latter, under such a policy, is not in contractual relations with the insurer, he is bound by the adjustment between the insurer and the mortgagor. Collinsville Sav. Soc. v. Boston Ins. Co. (1905) 77 Conn. 676, 69 L.R.A. 924, 60 Atl. 647; Chandos v. American F. Ins. Co. (1893) 84 Wis. 184, 19 L.R.A. 321, 54 N. W. 390; Haslam v. Equity F. Ins. Co. (1904) 8 Ont. L. Rep. 246.

In Chandos v. American F. Ins. Co. (1893) 84 Wis. 184, 19 L.R.A. 321, 54 N. W. 390, the court, arguendo, said: "The interest of the mortgagor and mortgagee are not the same, but adverse; and if both are joined in the suit, or if they have equal power in the adjustment of the loss, they might disagree. The mortgagor has at least the right to be present when the amount due on the mortgage, and the mortgagee's interest in the insurance moneys, are determined. Irreconcilable conflict between them might ocOne or the other must have full

cur.