Dowling v. Sollie & Sollie, 4 Div. 940

• Decision Date: 07 October 1937
• Docket Number: 4 Div. 940
• Citation: 234 Ala. 630,176 So. 340
• Parties: DOWLING v. SOLLIE & SOLLIE et al.
• Court: Alabama Supreme Court

176 So. 340

234 Ala. 630

DOWLING v. SOLLIE & SOLLIE et al.

4 Div. 940

Supreme Court of Alabama

October 7, 1937

Rehearing Denied Oct. 28, 1937

Appeal from Circuit Court, Houston County; D.C. Halstead, Judge.

Bill in the nature of a bill of interpleader by Sollie & Sollie and others against H.H. Dowling and others. From the decree named respondent appeals.

Affirmed.

J Robert Ramsey, of Dothan, and Steiner, Crum & Weil and Alex C. Birch, all of Montgomery, for appellant.

Sollie & Sollie, of Ozark, and Farmer, Merrill & Farmer, of Dothan for appellees.

GARDNER Justice.

Complainants are the members of two law firms, Sollie & Sollie, and Farmer, Merrill & Farmer, who held in trust the sum of $52,500 collected by them in compromise of some eleven insurance policies, totaling the sum of $76,000, issued upon the property of the Rainbow Manufacturing Company, Inc., an insolvent corporation, whose property was destroyed by fire and containing simple or open mortgage clauses.

Three of these policies, aggregating $18,500, were held by H.H. Dowling, appellant here, payable to him as his interest might appear. Dowling held the first mortgage on the property, as well as some retention title notes, which latter indebtedness, it is insisted, was novated by the execution of a chattel mortgage on the same property; a question we consider immaterial for determination here.

The Ozark National Bank held no mortgage, but had policies totaling $9,500, with loss payable clause in its favor.

To some of the directors the Rainbow Manufacturing Company was indebted in a sum less than $6,000 for money advanced, and all directors had indorsed or guaranteed the indebtedness of the corporation in a sum in excess of $60,000, to secure which a junior mortgage had been executed to them by the corporation, and a short time before the fire, as further security, insurance policies totaling $26,000 were issued to the corporation, with loss payable clauses in their favor, to some of the directors; among them, J.D. Holman. The Panama City National Bank, to secure a line of credit of $30,000, held the remaining policies, and a second mortgage on the property, wherein the Dowling mortgage was expressly recognized.

After the fire, these eleven policies came into the hands of complainants for proof of loss and collection. A compromise was effected, and the above-stated sum of $52,500 was to be held in trust and deposited by them in bank, less the agreed fee of $5,000, and to be paid out when conflicting claims were settled, either by agreement of parties or decree of court.

These conflicting claims are made fully to appear by the pleadings, and need not here be detailed, as they were each adjusted, with the exception of appellant Dowling, by compromise agreement in open court, and decree of distribution rendered thereon.

Appellant assumes the bill is one of strict interpleader requiring an assertion of perfect disinterestedness as an essential ingredient on the part of complainants as mere stakeholders, indifferent between the conflicting claimants, and cites Missouri State Life Ins. Co. v. Robertson Banking Co., 223 Ala. 177, 134 So. 800; Steele v. First National Bank, 233 Ala. 246, 171 So. 353, wherein is noted also First National Bank v. McKee, 227 Ala. 573, 151 So. 444.

As originally presented, it is clear enough the bill met all requirements, and we are not prepared to say that as the cause progressed complainants, trustees of the fund and charged with its proper distribution, were prevented by the rule of disinterestedness to present to the court the true status in regard to the Dowling claim, though it be in opposition thereto. But that question may be put to one side and left undetermined, as we entertain the view the bill comes within the influence of the principle recognized in Wilkes v. Teague, 224 Ala. 283, 140 So. 347, and may properly be denominated as one in the nature of a bill of interpleader, wherein the matter of disinterestedness is not essential. See, also, Pomeroy Eq.Jur. (4th Ed.) § 1481, and 33 Corpus Juris 423, with authorities cited in note.

The compromise agreement with the insurance companies amounted to a payment of 70 cents on the dollar.

Appellant Dowling held policies totaling $18,500 for a debt slightly less. His policies, as well as all others, provided, in case of loss, the insurers should pay only three-fourths of the cash value of properties destroyed, and that losses should be prorated among them. He was slow to join other policyholders in the employment of counsel and payment of any expenses incident to collection. He insisted he held a first mortgage and was entitled to payment in full of his claim. And when he turned over to the Farmer firm his policies for collection, he requested a receipt stating his insistence upon full payment, and that additional insurance did not affect his rights; the receipt reciting that he held a first mortgage on the property insured. And when the compromise checks for his policies were received, he requested, and was given, another written statement to the effect that upon collection of the checks the full amount would be paid to him less his share of fees and other items, including cost in garnishment proceedings, and that sums of money on other insurance checks would be deposited in bank so as to avoid any suggestion of waiver on his part to claim additional sums of money as first mortgagee, and so held until his rights as first mortgagee had been adjusted and adjudicated.

And in the decree of distribution rendered pursuant to settlement between all parties, except appellant, there was reserved the right of appellant to litigate as to his insistence for full payment, and the sums ordered paid to some of the parties (Manget Brothers Company, First National Bank of Troy, Schell-Longstreth & Co., and the trustee in bankruptcy of J.D. Holman) were to be held within the jurisdiction of the court either in cash or withdrawal bonds, to await the matter of adjudication of appellant's claim, "as shown by the pleadings in this cause." At that time the pleading of appellant, his answer, disclosed only that his claim rested upon a first mortgage and transfer of retention title notes.

More than a year after this decree of distribution, appellant for the first time based his claim upon a verbal agreement of the mortgagor to insure for his benefit, and a resolution of transfer by the directors of the Rainbow Manufacturing Company of all interest in the policies issued in their favor, which occurred some nine months following said distribution decree.

Appellant now chiefly relies upon these assertions of claim, with particular reference to the alleged verbal agreement of the mortgagor to insure the property for his benefit in a sum sufficient for his protection. He relies upon the recognized principle, as stated in Commonwealth Ins. Co. v. Terry, 230 Ala. 125, 159 So. 822, 825, that, "if by contractual relations between mortgagor and mortgagee the insurance should have been taken out for the mortgagee's benefit, equity, treating that as done which ought to have been done, may, in a proper case, declare an equitable lien on the proceeds in favor of the mortgagee." See, also, 8 Couch on Insurance § 1936-c; Cooley's Briefs on Insurance (2d Ed.) page 6290.

And it has been held that a valid verbal agreement by the mortgagor to effect such insurance will suffice. 8 Couch on Insurance, supra, note 5. And there are authorities also to the effect that as such a situation creates in the mortgagee only a latent equity, that the equitable lien is not enforceable as against an assignee for value and without notice. 8 Couch on Insurance, § 1936-c; 7 Cooley's Briefs on Insurance (2d ed.) pp. 6294, 6295; Juneau County State Bank v. State Bank of Mauston, 181 Wis. 430, 195 N.W. 396; First National Bank v. Commercial Union Assur. Co., 40 Idaho 236, 232 P. 899; Miller v. Aldrich, 31 Mich. 408.

And appellant's chief reliance for recovery of additional sums from the proceeds of the policies, issued to the mortgagor and payable to the directors as their interest may appear, is based upon the insistence that the mortgage to the directors was intended only as indemnifying against loss and not against liability (King v. Capitol Amusement Co., 222 Ala. 115, 130 So. 799), and that as the directors became bankrupts without having paid or suffered any loss, nothing was due.

While on the other hand, appellees insist that the mortgage to the directors was due and payable on a day certain; that as sureties the directors had the right to proceed against the principal independently of their prior payment of the debt, and that the obligation to the directors was absolute; citing Cooper v. Parker, 176 Ala. 122, 57 So. 472; Smith v. Gillam, 80 Ala. 296; Searcy v. Shows, 204 Ala. 218, 85 So. 444; Daniel v. Hunt, 77 Ala. 567.

But the conclusion here reached renders unnecessary a consideration of these several insistences. They are stated as merely disclosing in part a brief outline of the various contentions of ...