7 52   OF INSURED

"Where the agreement to keep insurance for the benefit of the mortgagee was merely verbal, but the mortgagor had acted upon it by obtaining such insurance, and his grantee, having knowledge of the agreement, subsequently surrendered this policy, and took another, which was not payable to the mortgagee, it was held that he was nevertheless entitled in equity to have the insurance money applied in payment of the mortgage debt."

In this case the mortgage stipulated, "If the insurance is not kept up thereon, then this conveyance shall become absolute." To explain this provision, it was competent for Chipman, the mortgagee, to prove, if he could, that there was a verbal agreement between the mortgagors and the mortgagee that the insurance referred to in the mortgage was for the benefit of the mortgagee. This agreement would not vary or contradict the terms of the mortgage. It would tend to explain the language of the mortgage and show what the parties intended thereby. Again, if there was no insurance clause in the mortgage, yet if, to obtain the loan secured by the mortgage, it was verbally agreed between the parties that insurance was to be kept up on the mortgaged property by the mortgagors for the benefit of the mortgagee as additional security, and subsequently the mortgagors, acting upon this agreement, obtained insurance, with loss payable to the mortgagee, and, after this expired, took out another policy, not payable to the mortgagee, the latter would be entitled to an equitable lien on the proceeds of the policy, if any loss by fire occurred. The court committed error in refusing to receive the evidence offered tending to show the verbal agreement, if any, at the time of the loan between the parties, concerning the application of the insurance, which was to be kept up on the mortgaged premises.

It is insisted that, as the mortgage was merged in the judgment, any agreement to keep up the insurance on the premises for the benefit of the mortgagee lapsed. The agreement to keep insurance for the benefit of the mortgagee, if any such agreement was made, was for the protection of the mortgagee, or rather, as an additional security for his debt. The judgment did not extinguish the mortgage debt, either in whole or iii part. The mortgagee, after his mortgage was merged in the judgment, was as much interested, in protecting the property by insurance as prior thereto, and if the mortgagee would have had an equitable lien upon the proceeds of the policy if taken before judgment, he would clearly have a lien upon the proceeds after judgment, if no sale had taken place. * *

The claim that the proceeds of the policy are exempt, because obtained from a policy upon the homestead, is not tenable. If the dwelling house had not been destroyed by fire, it and the premises with which it was connected could have been sold in satisfaction of the judgment, as both the husband and wife jointly executed