Pearson Mfg. Co. v. Pittsburgh Steamboat Co
| Decision Date | 28 November 1932 |
| Docket Number | 226 |
| Citation | 163 A. 680,309 Pa. 340 |
| Parties | Pearson Mfg. Co. v. Pittsburgh Steamboat Co |
| Court | Pennsylvania Supreme Court |
Argued September 29, 1932
Appeal, No. 226, March T., 1932, by a creditor, W.J. Gilmore Drug Co., from decree of C.P. Allegheny Co., Jan. T., 1931 No. 761, awarding proceeds of insurance to mortgagees, in case of Pearson Manufacturing Co. v. Pittsburgh Steamboat Co. Affirmed.
Exceptions to account of receiver. Before PATTERSON, J.
The opinion of the Supreme Court states the facts.
Exceptions dismissed. Creditor, W.J. Gilmore Drug Co., appealed.
Error assigned, inter alia, was decree, quoting record.
The decree of the lower court is affirmed at appellant's cost.
Albert C. Hirsch, with him Ralph H. Demmler, J. Randall Thomas and Watson & Freeman, for appellant. -- All the creditors are entitled to participate in distribution of the fund arising from the insurance taken out after the receivership, in which the receiver was the only assured: Olyphant Lumber Co. v Ins. Co., 4 Pa. Superior Ct. 100; Seitz v. Bollinger, 37 Pa. C.C. 260; Columbia Ins. Co. v. Lawrence, 10 Pet. 508; Wheeler v. Ins. Co., 101 U.S. 439; McLaughlin v. Bank, 22 Utah 473.
The receiver was under no duty to fulfill the covenant in the mortgage to insure for the benefit of the mortgagees: Brown v. Warner, 78 Tex. 543; Reber v. Wagon Works, 19 Pa. Dist. 806.
It was the duty of the receiver to insurance for the benefit of all the creditors: Duplex Printing Co. v. Publishing Co., 213 Pa. 207.
The mortgagees are estopped because they failed to pursue the remedies prescribed under the mortgage: Farmers Loan & Trust Co. v. Plate Glass Co., 186 U.S. 434; Bailey v. Mfg. Co., 238 F. 257; Greenfield's Est., 14 Pa. 489; Little v. Fearon, 252 Pa. 430.
Gifford K. Wright, with him James K. Ruby and Alter, Wright & Barron, for appellee.
Before FRAZER, C.J., SIMPSON, KEPHART, SCHAFFER, MAXEY, DREW and LINN, JJ.
The question before us is: What parties are entitled to insurance money paid to the receiver of an insolvent corporation for the fire loss of the corporation's principal asset, a certain excursion boat called "Greater Pittsburgh?" The respective claimants are the corporation's general creditors and the holders of a mortgage on the vessel.
Defendant company, incorporated in 1929, conducted a carrying trade on rivers in the vicinity of Pittsburgh. Its business was unprofitable. Within a year of incorporation it became heavily indebted to some of its officers and stockholders. To secure them the company, by vote of its stockholders, agreed to give a mortgage on its steamer, the "Greater Pittsburgh." This mortgage for $62,500 was duly executed on March 7, 1930, and the Allegheny Trust Company was made trustee. The steamboat company became hopelessly involved financially and on petition of a creditor, a receiver was appointed for the company on October 23, 1930. The mortgage on the vessel contained a clause whereby the company agreed to insure it for the security of the trustee, to an amount satisfactory to the latter. The trustee was also authorized to place the insurance at the company's expense if the company failed to do so. In November, 1930, certain insurance on the vessel expired, but the receiver had no funds for renewal. He so informed the officers of the company, some of the beneficiaries under the mortgage, telling them that, if they would order the insurance and "arrange it in any way they please," he, as receiver, would pay for it if and when he subsequently came into funds. The insurance was placed in the name of the receiver as such, premiums being paid by the Allegheny Trust Company, and receipts were issued to the defendant company. The total amount of the insurance was subsequently reduced to $50,000. There was no clause in the policies directing payment to the mortgagees. The vessel was destroyed by fire on November 11, 1931, and the underwriting companies paid the adjusted loss, amounting to $49,000, to H. M. Oliver, receiver. The assets remaining in the hands of the receiver to satisfy unsecured claims against the corporation are negligible. The appellant is one of the unsecured creditors and he contends that the insurance proceeds are distributable to all the general creditors ratably. The holders of the mortgage on the destroyed property contend that it goes to them.
It is claimed that since the insurance policies themselves and all the accompanying documents and instruments refer to the receiver alone as the insured and make no reference to the interest of the Allegheny Trust Company and the trust beneficiaries in the insured property, the trust company has no right to the proceeds. It is averred that this result must follow from general principles of insurance and receivership law, such as, that the insurance contract was between the insurance company and the receiver, not between the company and the trustee under the mortgage (Lumber Co. v. Ins. Co., 4 Pa. Superior Ct. 100); that the obligation to insure was upon the insolvent company, not its receiver, who represented its creditors, not the company itself ( Duplex Printing Press Co. v. Clipper Pub. Co., 213 Pa. 207, 62 A. 841; Cushing v. Perot, 175 Pa. 66, 34 A. 447; Blum Bros. v. Girard Nat. Bank, 248 Pa. 148, 93 A. 940); and that since it was the receiver who took out the insurance, not the company, the mortgagee can show no equity to receive the proceeds ( Wheeler v. Ins. Co., 101 U.S. 439; In re San Joaquin Valley Packing Co., 295 F. 311; Stearns v. Quincy Ins. Co., 124 Mass. 61). The answer to that argument is that the facts show that the receiver did not take out the insurance for his own benefit or for that of the parties he represented. On the contrary, the insurance was actually placed and paid for by the trust company for its own benefit as trustee for the mortgagees. Appellant argues that the insurance was taken solely in the receiver's name and not in that of the company or for the benefit of the mortgagees. This was probably an oversight on the part of the trust company, but it in no way prejudices the general creditors and they cannot support their claim on such a frail foundation in the face of the manifest equities of the situation.
If no receivership question were involved, and if the policies in question had been taken out by the Pittsburgh Steamboat Company itself, pursuant to its covenant in the mortgage, there can be no doubt that the mortgagees would be entitled to the proceeds on the theory of an equitable lien, even though, as here, the policies contained no mortgagee clause. Authorities are abundant on this proposition: Wheeler v. Ins. Co., 101 U.S. 439; Juneau County State Bank v. Steckling, 181, Wis. 430, 195 N.W. 396; Farmers' & Merchants' Nat. Bank v. Moore, 135 S.C. 391, 133 S.E. 913, 47 A.L.R. 1001; 14 Ruling Case Law 1367 ("Insurance," section 536); 26 Corpus Juris, page 442 ("Fire Insurance," section 590); 8 Couch, Cyclopedia of Insurance Law, section 1936c; see also Peoples Street Ry. Co. v. Spencer, 156 Pa. 85, 27 A. 113; Ins. Co. of Pa. v. Phoenix Ins. Co., 71 Pa. 31.
The point made by the appellant is that the company, the mortgagor, did not take out the policies, but that they were placed in the name of the receiver representing the body of general creditors, with nothing expressed as to the mortgagees' beneficial interest in the proceeds. The question is: Does this fact affect the legal rights of the mortgagees? We think not. It is an undisputed fact that the receiver did not himself actually place the insurance; the mortgagees placed it and paid for it. The former knew the insurance had been issued, but...
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