McLaughlin v. Park City Bank , 54 L.R.A. 343 ( 1900 )

After stating the facts,

Miner, J.,

delivered the opinion of the court:

By his petition Thomas Cupit. seeks to obtain the proceeds of the fire insurance policies amounting to $5,000, in the hands of the receiver of the Park City Bank, and received by him at the time when Cupit, by virtue of his • attachment levy had a lien upon the property upon which the buildings were burned, and claims that McLaughlin, the receiver, was a trustee and a representative of a court of equity, and whether he was Cupit’s trustee for any other purpose than merely to see that this insurance money should go in satisfaction of the debt which the property it represented would have paid, and to see justice done, he was certainly Cupit’s trustee for that purpose and should be held liable for the insurance money; that as the court had possession of the property through its receiver, whose title is fraudulent as to Cupit, equity will convert him into a trustee to prevent fraud and to restore the insurance money to the lienor; that because Cupit had rights under the attachment as a creditor of the bank and because the insurance was upon the property he had attached, although his equity of redemption had not expired, he was still entitled to the insurance money, although he paid nothing towards the premiums, and refused to recognize the rights of the receiver in the prémises.

We cannot concede such asserted rights upon the part of Mr. Cupit, the intervenor. At the incéption of the assignment Mr. Cupit was one of a class of creditors, who were entitled to its benefits, and had he accepted it and cláimed under it, he would have been entitled to the rights of a general creditor. So, also, after the attachment proceedings against the property of the debtor, if they had proved unavailing, or when they were abandoned, a creditor may, under certain circumstances, still assent and take under the assignment. But the petitioner did not accept or claim under the assignment; on the contrary he rejected the assignment, and has continually refused to claim under it, and has obtained a decree of court which, as to him, rendered the assignment void.

The right of a creditor to share in the benefits of an assignment is based in part upon bis assent. This is one of the conditions upon which he takes under an assignment, and this assent is presumed unless his repudiation is made known. While a creditor is under no obligation to accept the provisions of an assignment made for his bene-' fit, yet he cannot hold an assignment good in part and bad in .part. If he ratifies'it at all he must stand by it. He cannot accept that part which is beneficial to him, and repudiate the balance of it. Nor can he receive the benefits of the assignment while he is in actual hostility to it, claiming in the courts that it is fraudulent and void and refusing to accept its benefits. He cannot claim benefits under it and at the same time attack it for fraud, and utterly destroy its validity as to him. Burrill on Assignments, Secs.- 476-17-79; Jeffries Appeal, 33 Pa. St. 39; Valentine v. Decker, 43 Mo. 583; Beifield v. Martin, 37 Pac. 32; Alder v. People’s Bank, 46 S. W. 536; O’Brien v. Glenn, 17 S. W. 1030.

If a creditor accepts the benefits of an assignment knowing the facts he cannot, ordinarily, impeach or repudiate ifi thereafter, on the ground that it is illegal and fraudulent. So, having repudiated it altogether, he cannot take under its provision as other creditors would do who have accepted it. The reason of this rule is that he is not entitled to two inconsistent, adverse or conflicting rights. One is necessarily a denial of the other. Burrill on Assignments, (6th ed.) 441; Alder v. Bank, 46 S. W. 536.

Because of the continued, open and hostile acts of the petitioner towards the assignment, and his continued refusal to accept its terms he is not in a position to claim benefits under it as other creditors who have assented to it are entitled to.

But Mr. Cupit still claims that he is entitled to the $5,000 insurance obtained by the receiver on a policy of ■ insurance procured by said receiver when he held an attachment lien upon the property.

’The property in question was assigned by the bank. The receiver had possession of it and received the rents and repaired it as receiver. As to the creditors of the bank who had accepted the assignment, the receiver had title and was entitled to take charge of the property and hold it until such time as Mr. Cupit’s attachment lien would ripen into title by sale thereunder, and until the time for redemption from the sale should expire. The receiver had the same right to the property that the bank would have had had no assignment been made. As such receiver he had the right to insure the property for the benefit of the creditors of the bank, and to pay the premiums from any assets in his hands. He had an insurable interest in the property and was entitled to use it, receive rents from it, repair it, and preserve it from loss the same as any other owner would have, and this right would continue until the title was lost by sale on the execution and the time for redemption had expired. So, Mr. Cupit as attaching or execution creditor, and owner of an equity of redemption, had an insurable interest in the property. 1 May on Ins., Sec. 83; International Trust Co. v. Boardman, 149 Mass. 158; Ins. Co. v. Stinson, 103 U. S. 25; Carpenter v. Ins. Co., 16 Peters. 495.

The receiver and the attaching creditor had an insuraable interest and could insure the property for their own benefit. Under such circumstances the insurance would be a personal contract between the insurance company and each party insuring, and unless there be some contract or trust relation between the insured parties to the contrary, each would hold the money derived by loss of the property by fire in their individual or official right. In such cases the contract is personal and does not run with the title to the property. As held in Carpenter v. Ins. Co., 16 Pet. 495, the insurance is a mere special agreement with a party seeking to insure himself against apprehended loss on account of his interest in a particular subject matter and not at all incidental to and transferable with the subject matter, and in case of loss satisfaction must be to the person insured. 2 May on Ins., Sec. 6; International Trust Co. v. Boardman, 149 Mass. 158; Plimpton v. Insurance Co., 43 Vt. 497; King v. Insurance Co., 7 Cush. 1; McDonald v. Black, 20 Ohio, 185; Quarrels v. Clayton, 3 L. R. A. 170.

There are many cases holding that as between a vendor and vendee the insurance money in case of a distribution of the property represents the property itself because of some express or implied contract relation existing between 'the parties.' Many cases hold because of a contract, express or implied, existing between the parties. In this case no such relation is shown or exists. See Grange Mill Co. v. Western Ins. Co., 118 Ill. 596.

Had the petitioner insured the property in his own right to cover his interest therein it could not be claimed that the réceiver would have any right therein. So where the receiver insured it and paid the premiums out of funds in his hands belonging to the estate, the insurance became a personal indemnity to the receiver for the benefit of the creditors of the estate he represented.

Mr. Cupit is not one of the creditors who had acquiesced" in the assignment. He had never consented to the assignment in any manner, and has continually opposed it on all occasions, and still continues to do so. He is not now asking to come in as a common creditor and receive his just proportion of the estate, including the insurance money, in accordance with the provisions of .the assignment, but he now demands at the hands of the court the entire fund received under the policy of insurance while refusing to acquiesce in the assignment, and while still holding the proceeds of the sale of the real estate under his execution.

The property of the bank was in effect conveyed in trust for such creditors of the bank as should come in and accept the provisions of the assignment. The assignee and receiver no doubt held the property in trust for such creditors, and this trust relation could not exist between the receiver and ,a creditor who wholly repudiates the assignment as well as the trust relation. There was no contract relation between the receiver and Mr. Cupit. The real estate, in controversy was rightfully held by the receiver with the right to the use, rents and profits thereof for the befinet of the estate until Cupit should acquire title by a sale on his execution. He held an equity of redemption and had, and would have the same rights as the bank would have, had no assignment been made.

An execution creditor is not. entitled to possession and rents of the property levied upon before sale and before the time for redemption has expired.

The case of Cupit v. Bank, 20 Utah 292, 58 Pac. 839, is not in conflict with this position. In that case it was no doubt the intention of the court to hold that the receiver acquired no title to the property that conflicted with the right of Cupit under his attachment lien, and it did not intend to hold that Mr. Cupit would have the right to the title of the . property and the possession thereof before sale upon his execution. Under such circumstances Cupit had no right to charge the receiver with the rents and use of the premises which at most would about cover the expense of operating and keeping the building, etc., in repair, nor has he any right to recover the insurance money claimed in this case.

As said in Collumb v. Reed, 24 N. Y. 515, “If the plaintiff and the other creditors had affirmed the assignment, the trustee would have been compelled to account for these rents,,according to its provisions; - but the plaintiff, claiming in hostility to it, must treat the trustee as a stranger, whose only fault has been in suffering himself to be made an'instrument, by means of which the debtor has been enabled to apply .the rents towards the payment of other creditors.”

The receiver was not a trustee for Mr. Cupit in the sense that it was his duty to see that the money collected on these insurance policies should be held for the benefit and paid over to Mr. Cupit to satisfy the execution which the property might have paid' if the building had not been consumed by fire.

After careful consideration of the very able arguments and briefs of counsel we can arrive at no other conclusion than as before expressed.

The judgment of the district court is affirmed, with costs.

BaskiN, J. and McCarty, District Judge, concur.