McLaughlin v. Park City Bank

• Decision Date: 10 December 1900
• Citation: 22 Utah 473,63 P. 589
• Court: Utah Supreme Court
• Parties: EDWARD McLAUGHLIN, EXECUTOR, ETC., PLAINTIFF, v. PARK CITY BANK, DEFENDANT. THOMAS CUPIT, INTERVENOR, APPELLANT, v. D. C. McLAUGHLIN, RECEIVER OF THE PARK CITY BANK, RESPONDENT. [1]

63 P. 589

22 Utah 473

EDWARD McLAUGHLIN, EXECUTOR, ETC., PLAINTIFF, v. PARK CITY BANK, DEFENDANT. THOMAS CUPIT, INTERVENOR, APPELLANT, v. D. C. McLAUGHLIN, RECEIVER OF THE PARK CITY BANK, RESPONDENT. ^[1]

Supreme Court of Utah

December 10, 1900

Appeal from the Third District Court Summit County. Hon. Ogden Hiles, Judge.

By this action Thomas Cupit, intervenor and appellant, seeks to obtain the proceeds of certain fire insurance policies in the hands of the receiver of the Park City Bank, and received by him at a time when Cupit, by virtue of his attachment levy had a lien upon the property, upon which the buildings afterwards burned, were situated, claiming that the receiver was a trustee for his benefit to the extent of the funds received. From a judgment denying the application of the intervenor the intervenor appealed.

Affirmed.

W. I Snyder, for appellant.

"The rule is well settled that no equity attaches upon the proceeds of a fire policy in favor of third persons who, in the character of grantee, mortgagee or creditor may have sustained loss in the absence of some trust or contract to that effect." Judge Lurton in Quarles v. Clayton, L. A. R. 173; May on Insurance, 456; 10th ed. Kent, Vol. 3, 499; 11th ed. Kent, Vol. 3, 376.

The receiver, as such, had an insurable interest, but what was it? It could not attach for the general creditors until Cupit's debt was paid. His interest was limited, so far as it related to the general creditors, it was not unlike a warehouseman or carrier as to them, except that in such case their interest would be paid first, while here the general creditors' interest must be paid last.

As was said by the Supreme Court of the United States:

"It was lawful for plaintiff to insure in its own name goods held in trust by it, and it can recover for their entire value, holding the excess over its own interests in them for the benefit of those who intrusted the goods to it." Cal. Ins. Co. v. Union Compass Co., 133 U.S. 387, and cases, L. ed., p. 736; see, also, Waring v. Ins. Co., 45 N.Y. 606; Herkimer v. Rice, 27 N.Y. 180; Pennefeather v. Packet Co., 58 F. 481; Quarles v. Clayton, 3 L. R. A. 170, 173.

McLaughlin's possession all this time was subject to the lien of Cupit, therefore, it was quasi wrongful to that extent as against him, excepting in so far as Cupit sees fit to ratify his action; and to that extent, and pro hac vice, Cupit is a superior cestui que trust for the amount of his claim. The same equity which follows trust funds and property through all mutations, and gives them to the cestui que trust in their present form, gives the insurance money in this case to Cupit. 2 Pom. Eq. Jur. Sec. 1058; Diamond Match Co. v. Taylor (Md.), 34, A. 1015; Kinnel v. Dickson, 5 Dak. 221, 25 L. R. A. 309.

This property, in the form of money, is still in the hands of the receiver, a dividend not having been paid since the fire. It is not dissipated and may be traced and appropriated to Cupit's superior claim. Ferchen v. Arndt, 26 Or. 121, 37 P. 161; Cavin v. Gleason, 105 N.Y. 262, 11 N.E. 504; Williams v. Lilley, 67 Conn. 50, 37 L. R. A. 150, 155; Fanning v. Insurance Co., 46 Ill.App. 215.

This money represents that property. Williams v. Lilley, 67 Conn. 5 p. 37 L. R. A. 150; In re Pet. Cavin v. Gleason, 105 N.Y. 262, 11 N.E. 504; Farchen v. Arndt, 26 Oregon, 121, 37 P. 161; Fanning v. Ins. Co., 46 Ill.App. 215; Kimmel v. Dickson, 5 S. Dak. 221, 25 L. R. A. 309; Grange Mill Co. v. Western A. Co., 118 Ill. 398, 9 N.E. 274; People Ry. Co. v. Spencer, 156 Pa. St. 85, 27 A. 113; Diamond Match Co. v. Taylor, (Md.) 34 A. 1015.

And the rule of equity in such cases is, that the proceeds go to the one who has suffered the loss, and in the order the property would have gone, regardless of who effected the insurance. Williams v. Lilley, 67 Conn. 50, 37 L. R. A. 150; Gilbery v. Port, 28 Ohio St. 276; Pennefeather v. Baltimore S. P. Co., 58 F. 481; Insurance Co. v. Warehouse Co., 93 U.S. 527.

Suppose the insurance company had exercised the right reserved in the policy, to rebuild. Would not Cupit, without question, thus receive the benefit of the insurance money? Williams v. Lilley, supra; Washington Nall v. Smith, 45 P. 736; Waring v. Indemnity F. Ins. Co., 45 N.Y. 606, and cases; Wyman v. Wyman, 26 N.Y. 253; Herkimer v. Rice, 27 N.Y. 163; High Rec. Sec. 442; Beach Rec. Sec. 205.

This policy ran to the receiver, a more comprehensive description could not have been selected, and it inures to those only who, in equity, were cestuis que trust of the receiver, as to this particular property. Waring v. Ins. Co., 45 N.Y. 606; Williams v. Lilley, supra; Gilbert v. Port, 28 Ohio St. 276.

Since as between vendor and vendee the insurance money represents the property itself, and goes to the one entitled thereto, the same rule must apply as between a receiver and a creditor whom he in his trust capacity represents, and who has during all the receivership a superior lien on the corpus of the property, which equity follows into the insurance money. Grange Mill Co. v. Western Assur. Co., 118 Ill. 398, 9 N.E. 274; Reed v. Larkins, 44 Pa. St. 200; Hill v. Cumberland Co., 59 Pa. St. 474; People's St. Ry. Co. v. Spencer, 156 Pa. St. 85, 27 A. 113; Gleason v. Bank, 13 F. 719, 721; Pennefeather v. Baltimore Steam Packet Co., 58 F. 481; Home Insurance Co. v. Warehouse Co., 93 U.S. 527; Hawes v. Lathrop, 38 Cal. 433; Nat'l Bank of D. O. Mills v. Ins. Co., 26 P. 509.

McLaughlin was a trustee for all the creditors at the time of this last policy, which of course must have been taken out within a year previous to the fire; he insured it as receiver of the Park City Bank, for the benefit of this trust as such; that gives him no right to apportion the money; and the loss therefore inures to the benefit of those creditors who would take the property, and in the order that they would take it. Perry on Trusts, Sec. 487; Mosher v. Lansing Lumber Co., (Mich.) 71 N.W. 161; Lerow v. Wilmarth, 9 Allen, 382; London & North-western Ry. Co. v. Glyn, 1 El. & El. 652; Pennefeather v. Baltimore Steam Packet Co., 58 F. 481; William v. Lilley, 67 Conn. 50, 37 L. R. A. 150.

Where a trustee as such insures property in his hands, the law applies it to the beneficiaries as their respective interests appear in the insured property, and according to the same priorities. California Ins. Co. v. Union Compress Co., 133 U.S. 387; and authorities, L. ed. 33 Book, p. 736.

Since the lien holder is entitled to the property and its fruits until the entire amount of his claim is satisfied, rents collected by a general receiver in the meantime go to the lien holder in satisfaction of his claim. Loos v. Wilkinson, 110 N.Y. 195, 18 N.E. 99; see, also, 15 Am. & Eng. Enc. 1 ed. 819; Williams v. Bartlett, 4 Lea (Tenn.) 620; Young v. Hail, 6 Lb. 179, 182, 20 Am. & Eng. Enc. Law, 1 ed. p. 37; Home Ins. Co. v. Balt. Warehouse Co., 93 U.S. 542.

Messrs. Brown & Henderson, for respondent.

When no assignment for the benefit of creditors is made which is for the equal benefit of all the creditors alike without condition (as in this case) the consent of the creditors will in the first instance be presumed until the contrary appear. Burrill on Assignments (5th ed.) p. 427-428-492, Sec. 284; Hasley v. Whitney, 4 Mason, 206; Lawrence v. Davis, 3 McLean, 177.

"But a creditor cannot hold an assignment good in part and bad in part, if he ratifies it at all he must stand by it." Burrill on Assignments, p. 762, Sec. 476; Burrill on Assignments, p. 766, Sec. 479; p. 769, Sec. 482.

In the case at bar the intervenor has not only made his election but is still standing upon it. Beifeld v. Martin, 37 P. 32 (Colo.); Valentine v. Decker, 43 Mo. 583; Jefferris's Appeal, 33 Penn. St. 39; Fellows v. Greenleaf, 43 N.H. 421; Adler, etc., Co. v. Peoples Bank, 46 S.W. 536 (Ark.); O'Bryan v. Glenn, 17 S.W. 1030 (Tenn.)

An attachment creditor has an insurable interest which he can insure for his own protection. 1st May on Insurance, Sec. 83 p. 150; International Trust Co. v. Boardman, 149 Mass. 158; Ins. Co. v. Stinson, 103 U.S. 25.

The owner of the equity of redemption also has an insurable interest to the full value of the property notwithstanding it may be incumbered by a mortgage or other liens. Carpenter v. Ins. Co., 16 Peters, 495.

Where real property is encumbered by mortgage or execution, or attachment levy, both the owner of the equity of redemption, and the mortgagee, attachment or execution creditor each have an insurable interest in the property, and each may insure for their own benefit; the owner of the equity of redemption can insure for the full specific value of the property, and the mortgagee, or attachment, or execution creditor, can insure to the full amount of their lien not exceeding the specific value of their property, and where they so insure and a loss occurs they each have a right to recover the full amount of their insurance respectively without accounting in any way to the other. The insurance under such circumstances is a personal contract between each insured and the insurers, and unless there is some contract between the debtors and creditors to the contrary, they each hold their insurance in their own right. Carpenter v. Ins. Co., 16 Peters, 495-501; International Trust Co. v. Boardman, 149 Mass. 158; Plimpton v. Insurance Co., 43 Vt. 497; White v. Brown, 2 Cush. 412; King v. Ins. Co., 7 Cush. 412; Suffold Ins. Co. v. Boyden, 9 Allen, 123; Carter v. Rockett, 8 Paige, 437; 1st Jones on Mortgages, section 401; McDonald v. Black, 20 Ohio 185; 2 May on Ins., section 449; Ames v. Richardson, 29 Minn. 333; Nichols v. Baxter, 5 R. I. 491.

MINER, J., delivered the opinion of the court. BASKIN, J. and McCARTY, District Judge, concur.

OPINION

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