Juneau Cnty. State Bank v. Steckling

• Decision Date: 16 October 1923
• Citation: 181 Wis. 430,195 N.W. 396
• Parties: JUNEAU COUNTY STATE BANK v. STECKLING ET AL.
• Court: Wisconsin Supreme Court

181 Wis. 430

195 N.W. 396

JUNEAU COUNTY STATE BANK

v.STECKLING ET AL.

Supreme Court of Wisconsin.

Oct. 16, 1923.

Appeal from Circuit Court, Juneau County; Emery E. Crosby, Judge.

Action by the Juneau County State Bank against Arthur E. Steckling and others. Judgment for defendants, and plaintiff appeals. Reversed and remanded, with directions.

Action to foreclose a mortgage for nonpayment of interest and part of principal, and to establish the right of plaintiff to a sum of money in the hands of the Lindina Town Insurance Company. The complaint alleged two causes of action.

The first cause of action alleged the execution of four promissory notes of $500 each by defendant Steckling to the plaintiff, and the giving of a mortgage on certain described premises as collateral security. The mortgage was in the usual form, containing a clause giving the bank the right to declare the whole sum due for failure to pay interest or an installment of principal, and a clause requiring the mortgagor to keep the buildings insured in the sum of $2,000 or over; the policies to be payable to plaintiff, and to be in the possession of plaintiff. It was then alleged that Steckling had failed to pay $500 of principal due on January 31, 1921, and the interest on $2,000 due on that date. Judgment of foreclosure was asked.

The second cause of action alleged, in addition to the foregoing, that, after the making of the mortgage, Steckling secured insurance policies which contained a clause providing for payment to the mortgagee in case of loss, and delivered them to plaintiff; that on March 2, 1921, these policies expired, and Steckling took out two new policies in the Lindina Town Insurance Company, one for $4,050, and the other for $3,800, but that he failed to have attached to them the mortgage clauses providing that the loss, if any, should be paid to plaintiff. It was then allegedthat on March 27, 1920, Steckling and his wife gave a mortgage in the sum of $2,800 to the defendant State Bank of Mauston on the premises in question, the mortgage containing a clause making it subject to the first mortgage; that on January 8, 1921, another mortgage in the sum of $1,000 was given to defendant bank; that these mortgages contained covenants on the part of the mortgagor to insure for the benefit of the mortgagee in the sums of $1,800 and $1,000 respectively; that on the 29th of August, 1921, the buildings were totally destroyed by fire.

It was further alleged that the defendant bank had actual notice of plaintiff's mortgage and the clause therein relative to insurance before Steckling's mortgage to it was executed; that, notwithstanding, the defendant bank procured certain assignments of the money due on the policies, and now claims to be entitled thereto. Judgment was asked declaring that plaintiff had an equitable lien on the money in the hands of the insurnce company to the extent of plaintiff's mortgage.

The State Bank of Mauston answered, in substance, that it had knowledge of the prior mortgage of plaintiff, but denied that it had any knowledge of the insurance clauses above mentioned, and alleged that in September, 1921, defendant, for the purpose of securing the amount it had advanced on the mortgages, procured assignments to it of the money due on the policies.

It appeared in evidence that each of the mortgages was recorded soon after its execution; that Winsor, president of the defendant bank, had been register of deeds, and was familiar with the printed mortgage forms used by both banks, and that the mortgaged premises had little value apart from the buildings and personal property. Winsor testified that he knew of the $2,000 mortgage to plaintiff, but knew nothing about the insurance policies protecting the loan; that “he had every reason to believe they had one”; that, after the fire, when he was figuring up Steckling's assets and liabilities he included, in addition to the policies actually issued, one for $2,000, which he thought the plaintiff bank held; and that he did not know, until Steckling told him, that the plaintiff bank had no policy. Steckling testified that when he gave the mortgage to the defendant bank he told Winsor that he had two policies at the other bank.

The trial court found that the defendant bank had no actual notice of the insurance clause in plaintiff's mortgage; that the president supposed the plaintiff bank had a policy for its protection; and that the plaintiff bank was guilty of laches in remaining without the insurance policies.

Judgment was entered ordering the indebtedness of defendant bank to be first paid out of the insurance money.

McFarlane & Loomis, of Mauston (H. H. Thomas, of Madison, of counsel), for appellant.

Grady & Farnsworth, of Portage, and John B. Miller, of Mauston, for respondents.

JONES, J. (after stating the facts as above).

[1] The mortgagor charged himself with the duty to take out insurance for the benefit of the plaintiff, and was not absolved from that duty by his failure so to do, nor by taking insurance in his own name. It is agreed by counsel for both parties that in such a case the mortgagee, as between himself and the mortgagor, is entitled to an equitable lien upon the money due on the insurance policy, although it is made in terms payable to the mortgagor. This is the well-settled rule. Lichtstern v. Forehand (Wis.) 194 N. W. 421;Butson v. Misz, 81 Or. 607, 160 Pac. 530, 4 Cooley, Insurance, 3703, and cases cited.

But it is claimed by the defendant bank that, since it held existing policies at the time of the fire, any lien the plaintiff may have had was lost when the mortgagor assigned his interest in the insurance moneys payable on the policies taken in his own name. Plaintiff's counsel claim the prior right to this fund first, because the defendant bank had constructive notice of the equitable lien, and second, because it had actual notice, and therefore took the assignment subject to plaintiff's rights; that since notice of the prior mortgage was conceded, notice of its contents must be imputed. To this proposition the following authorities are cited: Brinkman v. Jones, 44 Wis. 498;Pringle v. Dunn, 37 Wis. 449, 19 Am. Rep. 772; Gibbs M. Co. v. Niagara Ins. Co. (S. C.) 111 S. E. 805, 21 A. L. R. 1460;Keller v. Fenske, 123 Wis. 435, 101 N. W. 378, 1055;Dailey v. Kastell, 56 Wis. 444, 14 N. W. 635;Weeks v. Milwaukee L. S. R. Co., 78 Wis. 501, 47 N. W. 737;Perkinson v. Clarke, 135 Wis. 584, 116 N. W. 229; Warvelle, Abstracts (4th Ed.) § 355.

Respondents' counsel argue that these cases only hold that a recorded mortgage is notice of all its contents so...