Miller v. Aldrich

• Decision Date: 13 April 1875
• Citation: 31 Mich. 408
• Court: Michigan Supreme Court
• Parties: John Miller v. D. Franklin Aldrich and another

31 Mich. 408

John Miller v. D. Franklin Aldrich and another

Supreme Court of Michigan

April 13, 1875

Submitted on Briefs January 28, 1875.

Appeal in Chancery from Clinton Circuit.

Decree modified in part and affirmed in part and no costs awarded in this court.

Spaulding & Cranson, for complainant.

Walbridge & Cook, for defendant Aldrich.

Cooley J. Campbell, J., concurred. Graves, Ch. J.

OPINION

Cooley J.:

The following facts we think are established by the evidence in this case:

Miller, the complainant, on the eighth day of August, 1871, became surety for Alpheus O. Chapman, on a note for three hundred dollars to Edward Paine, payable in two years from date with ten per cent interest. To secure him for doing so, Chapman orally agreed to give him a mortgage on a certain house and lot, and as the lot without the house was of little value, he also agreed to keep the house insured for Miller's benefit. This agreement was carried into effect so far as the giving of the mortgage was concerned, and a policy of insurance was also taken out for the sum of one thousand dollars, loss if any payable to Miller to the extent of his interest, but terminating August 19th, 1872. On the fourteenth day of March, 1872, Chapman sold the mortgaged premises to the defendant Aldrich, subject to this mortgage, and on an oral understanding that Aldrich should perform its condition. Instead, however, of having the insurance policy assigned to Aldrich, it was surrendered, and a new one taken out in the name of Aldrich, and without providing in terms for the protection of Miller. This insurance was for eight hundred dollars, which was quite as much as the value of the building would justify. Miller, when he was informed what had been done, called upon Aldrich and expressed apprehension about his security, but Aldrich quieted him by assuring him that in the event of loss he should be protected by the insurance money. The building was actually destroyed by fire in the December following, and the loss has been adjusted and is ready to be paid over, but Aldrich now refuses to apply any portion of the money to the protection of Miller. The purpose of this suit is to compel the application, and the circuit court has decreed that the insurance moneys, to the amount of the Paine note, shall be paid into court to be paid over to Miller on his discharging his mortgage.

In the main we think the decree correct. Though Chapman may have had a legal right to surrender the policy he had taken out for Miller's protection, he had no equitable right to do so; and as Aldrich knew all the facts, and took his new policy on a wrongful surrender of one which protected Miller, and for a sum which preclued Miller from insuring on his own behalf, we think Miller must be held to have an equitable interest in the new policy to the extent of his lien, whether Aldrich did or did not expressly agree with Chapman that such should be the case, as the latter says he did. The case is within the principle of Cromwell v. Brooklyn Ins. Co., 44 N.Y. 42 and it is not important whether Chapman had or had not legally bound himself to Miller to keep up insurance for his benefit, when by virtue of the oral understanding he had actually effected such insurance.

It is objected that Chapman should have been made a party to the suit, but we discover no necessity for it. The decree will incidentally protect him, and he might doubtless have been joined; but complete justice is done to all parties concerned, when complainant obtains the relief prayed for. Complainant's case is, that Chapman is wholly insolvent, so that complainant has no resource but this insurance money for his indemnity; and defendant certainly has no interest in having Chapman made a party, as in no contingency could he be entitled to any relief as against Chapman, and his satisfaction of complainant's equity will at the same time satisfy any equity of Chapman based on his oral promise to pay off this claim.

It is also objected that the decree is erroneous, inasmuch as it provides that insurance money to the amount of the Paine note shall be paid to complainant when the mortgage is discharged, though this may be done leaving the note outstanding. This was probably an inadvertence in drafting the decree, and the decree should be so modified as to make the payment of the insurance money secure the surrender or satisfaction of the note, together with satisfaction of the mortgage. We cannot say that the error was immaterial to Aldrich, as, under the agreement between Chapman and himself when the sale took place, the former would doubtless have a lien on the land for his protection in case the note was not met when due and should be taken up by himself. Under the circumstances, while modifying the decree as suggested, and affirming it in all other respects, no costs will be awarded in this court.

CONCUR BY: Graves

CONCUR

Campbell, J., concurred.

Graves Ch. J.:

The main facts in this case, which are either conceded or so fully established as to exclude controversy, are as follows:

In August, 1871, one Chapman was the owner of a small lot at Shepardsville, in Clinton county, and nearly the entire value of the premises consisted of certain perishable erections.

He borrowed of one Paine the sum of three hundred dollars, to be paid in two years with annual interest at ten per cent., and in order to secure the payment, he procured complainant to join with him in a note to Paine for the amount, and in order to obtain this accommodation at the hands of complainant, he verbally agreed to secure him against liability on the note by means of a mortgage on the before-mentioned premises, and it being well understood that they would prove wholly insufficient security in case the erections should be destroyed, he likewise agreed with complainant that he would keep the buildings insured for complainant's benefit. In order to carry out this agreement, Chapman gave a mortgage, but in the form of an absolute security, for three hundred dollars, to become due at the same time as the note, and likewise shortly after procured from a local agent, one Frank J. Smith, a policy of insurance for one year for one thousand dollars in the Great Western Insurance Company of Chicago.

This policy seems to have been issued about the 24th of August, 1871, and it embraced the time from the 19th of August, 1871, to the 19th of August, 1872. It was made directly to Chapman, but provided on its face that the loss if any should be payable to John Miller, "mortgagee," as his interest should appear, to the amount of his claim, and the balance to the assured.

Such being the state of things, some time thereafter, and prior to the 14th of March, 1872, negotiations were begun between Chapman and defendant Aldrich for sale and conveyance of the premises by the former to the latter, subject to the mortgage given to complainant, the amount of which was to be taken out of the purchase price, as so much to be paid by Aldrich to Miller, instead of being paid to Chapman; and finally, at the time last mentioned, the bargain was closed, and Chapman conveyed to Aldrich, subject to the mortgage, and the amount of it was deducted from the purchase price and reserved to Aldrich. At this time it was understood between Chapman and Aldrich, that the latter should step into Chapman's shoes so far as the mortgage was concerned; but whether there was any express understanding that Aldrich should assume Chapman's position in respect to the arrangement made between Chapman and Miller for keeping the mortgaged buildings insured, or whether, indeed, Aldrich then had any actual knowledge of the existence of that arrangement, is disputed. Chapman swears one way, and Aldrich another.

In passing it may be observed that the mortgage is not in evidence, and there is nothing to show whether it contained or did not contain any covenants by Chapman to make payment; and only a portion of the before-mentioned policy is in the printed record, and the portion given contains no conditions, and no question has been made as to the effect on the insurance, of Chapman's conveyance, as a consequence of particular conditions in the policy. It would, of course, be correct to say that no insurable interest remained in him after the conveyance, unless it should be claimed that he had one in consequence of the existence of covenants in the mortgage binding him to pay the mortgage debt, and hence binding him to make good what the premises might fail to satisfy. But, as said before, the record does not disclose whether there were covenants or not.

It does not appear, then, that he could insure after his conveyance to Aldrich. But this is not very important.

On the same day of the conveyance to Aldrich, the latter went with Chapman to the insurance agent, Smith, and talked with him about having the old policy assigned to Aldrich, and it was then agreed that they would call the next day and have it done. Pursuant to this understanding, they went to the agent's office the next day and proposed to have the assignment made, but the agent then suggested, as a better course, the cancellation of the old policy, and the taking out of a new one to run directly to Aldrich. This scheme was at once approved by both Chapman and Aldrich. Miller was not present, and appears to have been ignorant that anything of the kind was meditated.

The agent proceeded to ascertain the amount back against Chapman on account of the old policy, and took a note therefor from Aldrich, the amount of which, some twenty dollars, it was understood should come out of the purchase price of the premises. The old policy was then present and was seen by Aldrich, and the proof is very strong to show that he knew...