First Trust Joint Stock Land Bank of Chicago v. Duroe
| Citation | 237 N.W. 319,212 Iowa 795 |
| Decision Date | 20 June 1931 |
| Docket Number | 40854 |
| Parties | FIRST TRUST JOINT STOCK LAND BANK OF CHICAGO, Appellee, v. E. M. DUROE, Receiver, Appellant, et al., Appellees |
| Court | Iowa Supreme Court |
Appeal from Buena Vista District Court.--F. C. LOVRIEN, Judge.
Action in equity to determine whether the amount of $ 1000.00 paid by an Insurance Company on a loss by fire, should be paid to the defendant-receiver of the insured and the owner of the equity in the real estate, or should be applied upon the mortgage held by the plaintiff. The intervener, who was the holder of a second mortgage upon the real estate, joined with the plaintiff in asking the same relief. The trial court held that the plaintiff had an equitable lien upon the amount so paid by the insurance company, and that the same should be paid to the plaintiff and credited upon the mortgage note. The defendant-receiver appeals.
Reversed.
E. M Duroe, for appellant.
Ellis Stern and J. S. Whitney, for appellee.
WAGNER J. STEVENS, DE GRAFF, ALBERT, KINDIG, and GRIMM, JJ., concur. FAVILLE, C. J., takes no part.
The intervener, Ebbeson, holds a second mortgage upon the real estate. He joined the plaintiff in asking for the same relief and therefore his rights will necessarily be determined by our decision upon the merits as between the plaintiff and the receiver.
For the determination of the proposition submitted, it will be necessary to quite fully state the facts, which we now proceed to do. On October 29th, 1924, Vickrey was the owner of 120 acres of land in Buena Vista County; on that date, he procured a loan from the plaintiff in the amount of $ 6000.00, and to secure the payment of the same executed a mortgage upon the 120 acres of real estate. The mortgage was filed, indexed and recorded in Buena Vista County on the 8th day of January, 1925. By the provisions of the mortgage Vickrey, the mortgagor, covenanted and agreed to keep the buildings thereon insured to the full insurable value in insurance companies acceptable to the mortgagee, "and assign and deliver to it all policies of insurance on said buildings, and the renewals thereof; and in case of failure to do so, the said party of the second part (the mortgagee) or assigns, may effect such insurance; and the amounts paid therefor, with interest thereon from date of payment, at the rate of eight per cent per annum, shall be collectible with, as part of, and in the same manner as, the principal sum hereby secured. " On December 29th, 1924, Vickrey was indebted to the intervener-Ebbeson in the amount of $ 2000.00 and in order to secure the amount of said indebtedness he and his wife executed unto the intervener a mortgage upon the real estate. This mortgage contained a provision relative to insurance similar to the one contained in plaintiff's mortgage. Intervener's mortgage was duly filed, indexed and recorded in Buena Vista County on the 10th day of March, 1925. On March 1st, 1925, Vickrey made application to the Farmers Mutual Fire & Lightning Insurance Association of Buena Vista County for insurance upon the buildings situated on said real estate for the term of five years from and after the date of application. The application was accepted and Vickrey thereby became a member of said Mutual Insurance Company. The policy issued insured the barn in question in the sum of $ 1000.00. By the terms of the application, he agreed to make punctual payments of all dues and assessments for which he might become liable and to conform in all respects to the by-laws, rules and regulations of the association under penalty of forfeiture of the policy. No mortgage clause was attached to the policy. The company had no notice that the plaintiff and intervener were mortgagees and that they were claiming to be entitled to the insurance money until after the fire hereinafter mentioned. Vickrey failed to pay an assessment due the insurance company and by reason of that fact, in accordance with the by-laws of said company his rights as a member were forfeited and terminated on March 1st, 1926; so that after said date and until the time hereinafter mentioned, there was no enforceable insurance upon the buildings situated upon the real estate. F. H. Helsell and H. L. Farmer had been conducting a bank at Sioux Rapids, familiarly known as the Bank of Sioux Rapids, and in so far as this controversy is concerned, the interests of Farmer and Helsell and said bank are identical. In June, 1926, the bank and Vickrey made an exchange of real estate and Vickrey and his wife executed unto Helsell and Farmer a warranty deed for "all our equity in and to" (the 120 acres in question) "Said land being encumbered for a first mortgage of Six thousand dollars and a second mortgage of Two thousand dollars, and a lease expiring March 1, 1927." Vickrey assigned the insurance policy to Helsell and Farmer and when the latter presented the same to the company for their consent and approval they were informed that the policy was not in force, because of lack of payment of an assessment by Vickrey; that in order to accomplish the transfer of the policy, it would be necessary for the delinquent assessment to be paid. And thereupon, or a few days later, the amount of said delinquent assessment was paid by Helsell and Farmer and the consent and approval to the assignment obtained from the company. In this manner, Helsell and Farmer became members of the Mutual Insurance Company. It will thus be observed that there was no mortgage clause attached to the Insurance Policy and that there was no insurance in favor of Vickrey after March 1st, 1926. The result of the transaction between Helsell and Farmer on the one hand and the insurance company upon the other was the same as if Helsell and Farmer or the bank had made application to, and procured a new policy from the company. The bank, or those representing it, paid all subsequent assessments made upon it and thereby kept the insurance in force. The bank went into the hands of a receiver in November, 1926, and the rights of Duroe as receiver are identical with those of Helsell and Farmer and the bank. There was no assumption of, or agreement by Helsell and Farmer or the bank to pay, the prior mortgage indebtedness. The record discloses that the bank procured this insurance solely for the purpose of protecting its interest as the owner of the equity in the real estate. It is not shown that the indebtedness secured by the mortgages is due and there is no showing as to the value of the real estate covered by the mortgages. The barn was burned in 1929 and the company made no denial that it owed the sum of $ 1000 to some one, and it issued its check in the sum of $ 1000, which is held by the defendant-Whitney to be paid to whomsoever the court may determine is entitled thereto. The trial court held that the plaintiff has an equitable lien upon said fund of $ 1000.00 and rendered judgment ordering that the same be paid to the plaintiff, as the holder of the first mortgage. From this action by the trial court, the defendant-receiver has appealed.
The question for our determination is: Who, as between the plaintiff-mortgagee and the defendant-receiver, is entitled to the $ 1000.00? It is well settled, that when the mortgagor is bound by the terms of the mortgage to keep the premises insured for the security of the mortgagee, as between the mortgagee and the mortgagor an equitable lien arises in favor of the mortgagee for the money received upon the policy to the extent of the mortgage indebtedness, regardless of whether or not the policy is in express terms payable to the mortgagee, or whether or not it contains a mortgage clause making the same payable to the mortgagee, as his interest may appear. See Johnson v. Northern Minnesota Land & Investment Company, 168 Iowa 340, 150 N.W. 596; Dunlop v. Avery, 89 N.Y. 592. However, in the instant case, we are not dealing with the rights as between Vickrey, the mortgagor, and the plaintiff-mortgagee. The question for our determination is the right as between the mortgagee and the grantee of the mortgagor, which grantee did not assume and agree to pay the mortgage debt, and procured the insurance solely for the purpose of protecting its interest as the owner of the equity in the farm. While it is true, that the mortgagor assigned to his grantee the policy which he had in his possession,...
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