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In Wilder v. Watts (D. C.) 138 Fed. 426, it was held:
"Where an alleged bankrupt before insolvency arranged to borrow money to purchase goods under an agreement that he would have the goods insured, and assign the policies to the lenders as collateral security, and loans were made to him, the agreement operated as a valid equitable assignment of the policies, although they were not delivered when issued, nor actually assigned until after loss, when the borrower was insolvent."
Judge Brawley said:
"Here the debtor agreed to insure for the protection of his creditor, in order to obtain the money loaned. He could not have obtained the advances otherwise, and the agreement to transfer the policy of insurance was not an asset on the faith of which he received other credit. There was no proof that other creditors sold him goods on the faith of the insurance policy. It was not an asset available for creditors until the fire, and an effective transfer of the policy could not have been made before the fire, because most of the standard forms of policy forbid an assignment before a loss."
Judge Brawley refers to Swearingen v. Insurance Company, 52 S. C. 315, 29 S. É. 723, in which Chief Justice McIver said:
“While a policy of insurance is purely a personal contract between the insurer and the assured, and hence the mortgagee of the premises insured, merely as such, has no interest, either in law or equity, in a policy of insurance taken out by the mortgagor in his own name and for his own benefit, yet if the mortgagor is bound, either by covenant in the mortgage or otherwise for example, by a valid verbal agreement—to keep the property insured, as a further security for the payment of the mortgage debt, then the mortgagee is entitled to an equitable lien upon the money due on the policy of insurance, even though taken out in the name of the mortgagor."
In Stearns v. Quincy Insurance Co., 124 Mass. 61, 26 Am. Rep. 647, the action was one of contract to recover upon a policy of fire insurance.
The court said: "The plaintiff relies on the rule that where a promise is made by one person to procure insurance upon property, in which another has some interest, for the benefit of the latter, and then the promisor, with the intention of performing his promise, obtains a policy of insurance in his own name, the party intended to be benefited will have an equitable lien on the policy and its proceeds, which he may enforce against the insurer or the promisor, or may maintain against the creditors of the latter. This rule, and the lien thus created, it is said, will be regarded and enforced both at law and in equity. * In all the cases found which support the claim of the mortgagee to insurance obtained by the mortgagor in his own name, the facts were such as to justify the conclusion, by èstoppel or otherwise, that such insurance was obtained by the latter as the agent of, or with intent to perform the obligation he had assumed to, the former.” Richardson v. White, supra; James V. Newton, 142 Mass. 366, 8 N. E. 122, 56 Am. Rep. 692; Exchange Bank V. McLoon, 73 Me. 508, 40 Am. Rep. 389; Providence County Bank v. Benson & Trustees, 24 Pick. (Mass.) 204; In re J. F. Grandy & Son (D. C.) 146 Fed. 318; Long v. Farmers' State Bank, 17 Am. Bankr. Rep. 103, 147 Fed. 360.
I have already called attention to In re Little River Lumber Company, supra, and the line of cases which hold that the record of the equitable lien is not necessary.
On a careful examination of the law and of the evidence shown in the record before me, I have no hesitation in concluding that the case shows a clear and distinct oral agreement on the part of Hicks that he would insure the property received from Blake & Co. until his indebtedness was paid in full; that he confirined this oral agreement by three letters; that he did insure a part of the property in question in the Liverpool & London & Globe Insurance Company, and a part in the Capital Insurance Company; that an equitable lien in favor of Blake & Co. existed upon such policies, and is impressed upon the fund arising from them, to secure the payment of the indebtedness due to that company. The renewal policies were merely substitutes for the original policies. The fact that Mrs. Hicks' name was inserted as beneficiary in the Liverpool & London & Globe policy at the time of its renewal cannot affect the equitable rights of Blake & Co. As to the effect of inserting her name in the policy, I refer to Wittenberg Veneer & Panel Co. (D. C.) 108 Fed. 593; Ames v. Richardson, 29 Minn. 330, 13 N. W. 137; McDonald v. Daskam, 116 Fed. 276, 53 C. C. A. 554; Fairbanks v. Sargent, 104 N. Y. 108, 9 N. E. 870, 6 L. R. A. 475, 58 Am. Rep. 490.
Although these claimants were not inserted as beneficiaries in the final renewals of the policies, equity treats as done what ought to have been done, and what it was clearly the intention of the parties to do. Nordyke & Marmon Co. v. Gery et al., 112 Ind. 535, 13 N. E. 683, 2 Am. St. Rep. 219.
The court finds, then, that an equitable lien is impressed upon the insurance fund to secure the claim of W. L. Blake & Co. to the extent thereof, namely, in the sum of $597.11, due on the 2d day of January, 1904, and interest thereon, making their full claim the sum of $723.70.
3. In respect to the claim of Arabella Hicks, the wife of the bankrupt, the case shows that Hicks assigned to his wife his claim against the Capital Fire Insurance Company. The assignment was originally dated August 28, 1903, and afterwards changed to August 25, 1903. Mrs. Hicks testifies that the assignment of this policy was made to protect her from loss for money which she had loaned her husband, and that her husband thought she ought to be secured.
It is unquestioned, however, that this assignment was to secure a prior existing indebtedness. The assignment was made on August 25, 1903. Hicks' petition in bankruptcy was filed in this court December 2, 1903. The assignment was clearly a preference, and was in violation of sections 60a and 60b of the amended bankruptcy act of February 5, 1903 (32 Stat. 1799, c. 487 [U. S. Comp. St. Supp. 1905, p. 689]). Mrs. Hicks had no legal claim. She has no equitable lien upon any fund now before the court.
4. The claim of Edward A. Holbrook: The learned counsel for Holbrook contends that his claim to the proceeds of the remnants of the plant and the proceeds of the insurance policy is paramount; that he is a real estate mortgagee to the extent of his claim of $2,000 and interest, and, as such, he was given a statutory lien upon the proceeds of the insurance policy; that, although he made no agreement in writing to convey to Hicks the land on which the mill and plant were erected, yet the oral agreement to that effect, coupled with Hicks' possession, gave Hicks a vested equitable title; that the mortgage from Hicks to Holbrook was a real estate mortgage, and, as such, was properly recorded in the registry of deeds for Washington county; that, although the mortgage did not mention the land, the conveyance
of the buildings carried with it the mortgagor's equitable title to the land.
The learned counsel for this respondent claims, however, that, if Holbrook cannot be held to have a prior claim as a real estate mortgagee, he still has an equitable lien upon the insurance fund.
(a) What are the rights of Holbrook as a real estate mortgagee?
The learned counsel for Holbrook contends that the mortgage from Hicks to Holbrook was intended to be a mortgage of real estate, and that it operated as such a mortgage. He cites the case of Hatch v. Brier, 71 Me. 542, in which the Supreme Judicial Court of Maine held that a deed of the westerly part of a dwelling house and onehalf of the cellar conveys the land under the part of the dwelling house conveyed. In this case, in speaking for the court, Mr. Chief Justice Appleton cites Cunningham v. Webb, 69 Me. 93, and says that, in that case, Libby, J., uses this language:
“A grant of a house standing on a lot of land, fenced and used as a house and garden, conveys, not only the house, but the lot of land on wbich it stands, unless it appears from the deed, or the facts and circumstances existing at the time applicable to the estate, that that was not the intention of the parties.”
The Maine cases cited by the learned counsel are in line with Cheshire v. Inhabitants of Schutesbury, 7 Metc. (Mass.) 566, 568, where, in speaking for the court of Massachusetts, Judge Wilde said:
"By the grant of a dwelling house the land under it passes as necessary to its use and enjoyment.” Greenwood v. Murdock, 9 Gray (Mass.) 20, 22, 69 Am. Dec. 272.
I will not now discuss the question whether, under certain recent decisions of the federal courts, the above cases have any applicability in a court of bankruptcy. It is enough to say that in any court they cannot be decisive of the question now before me. In those cases the grantor of the building was the owner of the land upon which the building stood; and the court held that, in conveying the building, he conveyed, not only the building, but the land on which it stands, unless it appears from the deed, or from the circumstances, that such was not his intention. But in the case before the court the land in question was owned by Holbrook and his co-tenant. Hicks was under an oral agreement with them respecting the purchase of that land from them, upon which he intended to erect a mill. The paper which is not claimed by Holbrook to be a real estate mortgage was a mortgage upon the building and machinery placed upon Holbrook's land. The cases in the Supreme Judicial Court of Maine have no applicability to such a state of facts. Clearly Holbrook cannot be heard in court to say that this mortgage in question is a mortgage of real estate, when he himself holds the title to the real estate. Under the legal aspect of the case, the mill, when erected, must have become a part of the realty.
In Milton v. Colby, 5 Metc. (Mass.) 78, it was held that: "Where A., the owner of land, agrees to sell it to B., and to convey it to him by deed when B. shall erect a bouse thereon, and B. agrees to erect a house thereon, and that he will, on receiving a deed of the land, mortgage it to A. to secure the purchase money, B. does not, by erecting the house, acquire any property therein, but the same becomes a part of the realty; and a mort
gage of the house by B. before he receives a deed of the land conveys nothing to the mortgagee.”
In delivering the opinion of the court, Mr. Chief Justice Shaw said:
"The court are of opinion that the plaintiffs took no interest by the mortgage made to them by Diggles of the house in question. * * * The general rule is that the erection of a building on the land of another makes it part of the realty, and, of course, it becomes the property of the owner of the soil; and it is only in virtue of an express agreement between the owner and builder that one can have a separate property in a building, as a chattel, with a right to remove it. The agreement between these parties, so far from being such an agreement, was in legal effect an agreement that the building and soil should be united and held together as one tenement, and the security of the builders was in the personal agreement of the owner, by which they could require him, on complying with the terms of the agreement on their part, to convey the fee to them, by which they would obtain a legal title to the buildings with the soil." Hemenway v. Cutler, 51 Me. 407; Kingsley v. McFarland et al., 82 Me. 231, 19 Atl. 442, 17 Am. St. Rep. 473 ; Lapham v. Norton, 71 Me. 83; Westgate v. Wixon, 128 Mass. 304; Eastman v. Foster, 8 Metc. (Mass.) 19.
In the case last cited it was held that: "A building erected on the land of one who has given a bond to the builder to convey the land to him, on his paying a certain sum within a certain time, is not the personal property of the builder, within the meaning of Rev. St. C. 74, § 5, so as to require a mortgage thereof, given by the builder to the owner of the land, to be recorded in the town clerk's office, in order to render it valid as against the creditors of the mortgagor, nor so as to cause a forfeiture of the building to the mortgagee, under Rev. St. c. 107, § 40, in 60 days after breach of the condition of the mortgage.” King v. Johnson, 7 Gray (Mass.) 239; Butler v. Page, 7 Metc. (Mass.) 40, 39 Am. Dec. 757.
Under any fair consideration of the rights of the parties, it cannot be held that the mortgage was a mortgage of real estate. As to its being a mortgage of personal property, the language of Chief Justice Shaw in Eastman v. Foster, supra, seems to apply to this mortgage. It was not a pure mortgage of personal property "to be redeemed or forfeited as ordinary chattels mortgaged by the owner.” In another branch of this opinion I have stated the attitude of the law in regard to unrecorded chattel mortgages. Without entering upon the question of the effect of the nonrecording of a mortgage of personal property, I do not find that there is sufficient in the case to impress the fund of $225, arising from the sale of the remnants of the mill, with an equitable lien for the benefit of the claimant Holbrook.
It should be further observed that the allowance of the claim of Holbrook to these funds has been most strenuously opposed by counsel for the other respondents, who contend that the statutes of Maine, which give a mortgagee of real estate a lien upon the insurance placed thereon by the mortgagor, have no application to the present cause, because there is no evidence that shows, or tends to show, that Holbrook ever adopted any measures to entitle him to the benefit of the statutes referred to.
It is likewise contended that Holbrook, having the fee to the real estate upon which the improvements were placed, and having taken a mortgage of such improvements, is thereby estopped from setting up that such mortgage is not a chattel mortgage, for the reason that such claim is inconsistent with the language of the mortgage and the rights of the parties thereunder. With equal earnestness, they urge that this court should apply the rule, which is frequently adopted in the federal courts, that, when the language of a contract is ambiguous, the practical interpretation of it by the parties is entitled to great, and sometimes to controlling, influence. District of Columbia v. Gallaher, 124 U. S. 505, 8 Sup. Ct. 585, 31 L. Ed. 526; Constable v. National Steamship Co., 154 Ù. S. 51, 14 Sup. Ct. 1062, 38 L. Ed. 903; Topliff v. Topliff, 122 U. S. 121, v Sup. Ct. 1057, 30 L. Ed. 1110.
In applying this rule to the case at bar, they urge that as both Hicks, the mortgagor, and Holbrook, the mortgagee, have dealt with the improvements as if they were personal property, the court should treat the mortgage as one of that class. Great stress is also laid upon the fact that the mortgage was originally recorded in the town clerk's office at Vanceboro, and after the institution of proceedings in bankruptcy it was recorded in the town clerk's office at Calais, and it is urged that this fact shows that the parties continued to regard the mortgage as one relating to personalty. There is force in these contentions. But, in view of the conclusions which the court has reached, it becomes unnecessary to consider or pass upon them.
(b) Did Holbrook have an equitable lien upon the insurance fund?
Of the $2,000 representing his claim, a large part was expended in the construction of the mill which was covered by the insurance. The case shows that, after the mortgage, there was an agreement that Hicks should insure the property for Holbrook's benefit. He was not made beneficiary in any insurance policy, as in the Young claim. There was no agreement with reference to any particular policies under which he should have the benefit, as in the claim of Blake & Co.; but there was an agreement that he should be protected by insur
After the satisfaction of the claim of Mrs. Young in respect to one policy upon which she has an equitable lien, and after the satisfaction of the claim of Blake & Co. upon the two policies on which their claim is impressed, there still remains a balance of the insurance fund. The evidence tends to show that the agreement with Holbrook to protect him by insurance was made before the last policy was issued under which Blake & Co. claim. I allow Holbrook to have his claim upon the insurance money after the satisfaction of the claims of Mrs. Young and of Blake & Co.
My conclusion, then, is that the proceeds arising from the sale and disposition of the remnants of the mill property are not impressed with any equitable lien in favor of Mynia A. Young, W. L. Blake & Co., Arabella Hicks, or Edward A. Holbrook; but, for the reasons which I have given, they vest in the complainant as trustee in bankruptcy.
In accordance with the foregoing opinion, I hold that Mynia A. Young has an equitable lien upon the fund arising from the adjustment of the insurance under policy No. 6,603,308 in the Liverpool & London & Globe Insurance Company, for the amount of her claim and interest thereon, amounting in all to the sum of $763.20; that W. L. Blake & Co. has an equitable lien upon the fund arising from the adjustment of the insurance under policy No. 6,603,363 in the Liverpool & London & Globe Insurance Company, and under policy No. 13,971 in the Capital Insurance Company, for the amount of its