Lawlor purchased a small house from Cloutier at a price of $80 000. She paid $15 000 in cash and…

Lawlor purchased a small house from
Cloutier at a price of $80 000. She paid $15 000 in cash and gave Cloutier a
first mortgage for the balance. A year later, when Lawlor had reduced the principal
amount of the mortgage to $52 000, she suffered financial reverses that made it
impossible for her to continue to repay mortgage principal as required.
Cloutier brought an action against Lawlor and on May 15 obtained an order for
foreclosure, with the deadline for payment by Lawlor specified as November 15.
On July 10, the insurance of $50 000 on the house expired and Lawlor renewed it
while she

Lawlor purchased a small house from
Cloutier at a price of $80 000. She paid $15 000 in cash and gave Cloutier a
first mortgage for the balance. A year later, when Lawlor had reduced the principal
amount of the mortgage to $52 000, she suffered financial reverses that made it
impossible for her to continue to repay mortgage principal as required.
Cloutier brought an action against Lawlor and on May 15 obtained an order for
foreclosure, with the deadline for payment by Lawlor specified as November 15.
On July 10, the insurance of $50 000 on the house expired and Lawlor renewed it
while she was seeking to refinance with a new mortgagee. A few weeks later, the
house was seriously damaged by fire; the insurance adjuster appraised the loss
at $35 000. Both Cloutier and Lawlor immediately claimed the insurance money.
The insurance company refused to pay Cloutier on the grounds that the insurance
policy contained no mortgage clause that would have assigned to him rights in
any claim in so far as his interest may appear. The insurance company also
refused to pay any part of the loss to Lawlor on the grounds that she had no
insurable interest in the property. Discuss the validity of the claims of Cloutier
and Lawlor. Assume that there is no evidence to show that the fire was other
than accidental in its origin.