Anderson Trust Co. v. Am. Life Ins. Co., 25.

• Decision Date: 08 September 1942
• Docket Number: No. 25.,25.
• Citation: 5 N.W.2d 470,302 Mich. 575
• Parties: ANDERSON TRUST CO. v. AMERICAN LIFE INS. CO. et al.
• Court: Michigan Supreme Court

302 Mich. 575

5 N.W.2d 470

ANDERSON TRUST CO.

v.AMERICAN LIFE INS. CO. et al.

No. 25.

Supreme Court of Michigan.

Sept. 8, 1942.

Suit by Anderson Trust Company against American Life Insurance Company and others for accounting of money received by named defendant as a condemnation award. From a decree fro plaintiff, defendants American Life Insurance Company, John Emery, receiver of American Life Insurance Company, Eugene P. Berry Commissioner of Insurance and Permanent Liquidating Receiver of the American Life Insurance Company, and City of Detroit appeal.

Decree of dismissal entered.Appeal from Circuit Court, Wayne County, in Chancery; Robert M. Toms, judge.

Before the Entire Bench, except WIEST, and BUTZEL, JJ.

Butzel, Eaman, Long, Gust & Bills, of Detroit (Thomas G. Long and David A. Howell, both of Detroit, of counsel), for appellant American Life Ins. Co. and others.

Shields, Ballard, Jennings & Taber, of Lansing, for appellant Insurance Commissioner.

Paul E. Krause, Corp. Counsel, and James H. Lee, Asst. Corp. Counsel, both of Detroit, for appellant City of Detroit.

Herbert M. Weil, of Detroit (Butzel, Levin & Winston, of Detroit, of counsel), for appellee.

NORTH, Justice.

Plaintiff filed a bill in chancery for relief under Compiled Laws 1929, § 14349 (Stat.Ann. 27.1117) which in part provides that upon foreclosure of a mortgage by bill in chancery wherein personal service is not obtained: ‘* * * such defendant or his representative may, at any time within seven (7) years after the decree ordering such sale, file a bill against the plaintiff of his representatives, to account for all moneys received by him or them by virture of such decree, over and above the amount justly due on the mortgage, and costs of suit; and the court shall proceed on such bill, according to the equity of the case.’ After issue was framed and upon hearing on the merits, plaintiff had a decree for $57,702.96. The defendants, American Life Insurance Company and City of Detroit, have appealed.

In 1928 George Simons was the fee owner of property in the city of Detroit having a fifty-seven foot frontage on Woodward Avenue and extending easterly through to John R. Street, there being an intervening alley between the two streets. In July, 1928, Simons gave a first mortgage on the property to the American Life Insurance Company for $130,000. He also gave a second mortgage on the property for $72,500 to plaintiff as trustee to secure payment of outstanding notes in that amount. The second mortgage obligation has not been paid. There was default under the first mortgage, and it was foreclosed by a chancery decree entered December 20, 1932. At the foreclosure sale on February 10, 1933, the mortgagee purchased for $130,000. This resulted in a deficiency of $18,302.81 for which decree was taken. Plaintiff herein, a foreign corporation, was made a party defendant in the foreclosure proceedings. Personal service was not obtained on this defendant and it did not enter its appearance in the foreclosure case. However, substituted service was obtained, and its default entered.

Condemnation proceedings had been commenced by the city of Detroit for the widening of Woodward Avenue on November 17, 1927, which was approximately eight months prior to the taking of the mortgage on these premises by the American Life Insurance Company. Seemingly in anticipation of payment being made for a portion of the mortgaged property which might be taken in the condemnation proceedings during the life of this mortgage, it provided:

‘It is further stipulated and agreed that if said property, or any portion thereof, is taken by condemnation proceedings, that all of the proceeds of whatever award may be made in such condemnation proceedings shall belong to and be paid to said American Life Insurance Company, and credited on the principal of said mortgage, and all of the proceeds of any such condemnation proceedings is hereby assigned to said American Life Insurance Company.'

On February 16, 1932, a jury by its verdict fixed the award for damages for taking a part of the mortgaged property at $67,936.58. The award was confirmed July 21, 1932. It was subsequent to the last mentioned date that the American Life Insurance Company took its decree of foreclosure. The Detroit City Charter, Title VIII, Chap. 1, § 16, gives the city council one year after condemnation to ‘set apart and cause to be provided in the treasury’ the amount required to make compensation and when the necessary sum ‘ is actually in the treasury,’ the city treasurer is required to make and sign in duplicate certificates to that effect, and the city may then ‘enter upon and take possession of and use’ the condemned property. The city failed to comply with the above provision within the year limitation; but subsequently and on December 5, 1934, funds were set aside to satisfy this award, and later the award, less delinquent taxes and the amount of a lien on the condemnation award hereinafter noted, was paid with accrued interest to the American Life Insurance Company. Such payment was made on December 24, 1934. The period of redemption from the mortgage foreclosure had expired on August 10, 1933, subject to a moratorium which terminated March 19, 1934.

In the mortgage foreclosure decree of December 20, 1932, the court took cognizance of the condemnation suit and recited in the decree that a part of the premises had been ‘condemned and taken in said condemnation proceedings by the said city of Detroit’ and an award of $67,936.58 had been confirmed; and the court thereupon decreed that subject to a $1,875 lien of certain intervenors for legal services in the condemnation proceedings, the insurance company should be ‘solely entitled to all of the balance of said award.'

Briefly stated, it is plaintiff's theory and contention that since the total of $130,000 paid by the American Life Insurance Company for the property at the mortgage foreclosuresale plus the amount received by the insurance company from the condemnation proceedings exceeded by a substantial amount the total sum which accrued under the American Life Insurance Company's mortgage and the cost of foreclosure, plaintiff is entitled to an accounting for this excess under the statute hereinbefore quoted.

Among other claims asserted by the American Life Insurance Company in its defense, it urges that plaintiff cannot rightfully claim any interest in or right to the condemnation award because at the time title to the condemned property passed to the city of Detroit plaintiff's interest as the holder of a second mortgage had been wholly terminated by the foreclosure proceedings and the prior expiration of the period of redemption. In short, the claim is that at the time title to the condemned property passed to the city, the American Life Insurance Company was the sole owner of the property for which the award was paid, that plaintiff had no interest therein, and that therefore plaintiff cannot successfully assert a claim to the award paid or any portion thereof. If this contention is sound, the decree entered in the circuit court must be reversed.

As against the contention of the American Life Insurance Company just above noted, plaintiff asserts that title to the condemned property became vested in the city as condemnor at the time the award was confirmed, July 21, 1932; and that since the foreclosure of the American Life Insurance Company mortgage had not then been decreed, plaintiff had and now has a right to have applied in payment upon its then past due second mortgage whatever residue remained of the award after sufficient was taken therefrom, together with the $130,000 subsequently bid by the mortgagee at the mortgage sale, to satisfy the amount due on the American Life Insurance Company's mortgage and the cost of foreclosing same.

The conflicting contentions of the respective parties squarely present the question of law as to when title passes in condemnation proceedings under the law governing this case. Does it pass at the time the award is confirmed or at the time payment of the award is made or secured in manner provided by law? Article 13, § 1, of the Michigan Constitution provides:

‘Private property shall not be taken by the public nor by any corporation for public use, without the necessity therefor being first determined and just compensation therefor being first made or secured in such manner as shall be prescribed by law.'

The Detroit City Charter contains provisions in substantial accord with Compiled Laws 1929, § 3801 (Stat.Ann. 8.58). In part the city charter provides:

‘Within one year after confirmation of the verdict of the jury, or after the judgment of confirmation shall on appeal be confirmed, the council shall set apart and cause to be provided in the treasury, unless already provided, the amount required to make compensation to the owners and persons interested for the private property taken as awarded by jury * * *. And it shall be the duty of the treasurer to securely hold such money in the treasury for the purpose of paying for the property taken, and paying the same to the persons entitled thereto, according to the verdict of the jury, on demand, and not pay out the money for any other purpose whatever. * * * Whenever the necessary sum is actually in the treasury for such purpose, the treasurer shall make and sign duplicate certificates, verified by his oath, showing that the amount of compensation awarded by the jury is actually in the treasury for such purpose * * * and shall cause one of the certificates to be filed in the office of the clerk of the court in which the proceedings were had and the other to be filed with the city clerk, which certificate shall be prima facie evidence of the matters herein stated. Whenever the amount of the compensation is in the treasury and thus secured to be paid, the council may enter upon and take possession of and use such private property * * *.’ Detroit City...