Walter Connally Co. v. Hopkins

195 S.W. 656, 1917 Tex. App. LEXIS 559

• Court: Court of Appeals of Texas
• Decided: May 18, 1917
• Docket: No. 1795.
• Status: Published

Opinion

WILLSON, C. J.

(after stating the case as above). The controversy between Hopkins on the one side and Connally & Co. on the other side was as to which of them had the superior right to the part of the-proceeds of the policy representing insurance on the machinery the latter sold to Wilson and Patten. In determining that controversy it was immaterial whether the lien on the machinery claimed by Hopkins was superior to that claimed by Connally & Co. or not; for a lien on the machinery of itself conferred no right on the holder thereof to the proceeds of the policy. A contract of fire insurance is personal to the insured, is for his indemnity, and not for the indemnity of the holder of a lien on the property insured. Cameron v. Fay, 55 Tex. 59; Ward v. Goggan, 4 Tex. Civ. App. 274, 23 S. W. 479; Gassaway v. Browning, 175 S. W. 481; 1 Cooley’s Briefs on Law of Insurance, 82, 83 ; 2 Id. 1064, 1065 ; 4 Id. 3699. Therefore whether the claim of Hopkins to said proceeds was superior to that of Connally & Co. or not depended upon whether he had acquired a right thereto by contract with the insured (Wilson), and, if he had, whether the right he so acquired was supe-riorto the right thereto which Connally & Co. had acquired (1) by contract with said Wilson, and. (2) by the garnishment proceedings against the insurance company in their suit against Wilson and Patten in the district court of Smith county.

In determining the controversy we will first consider the claim- of Connally & Co., in so far as it was based on (1) the contract covering the sale by them of the machinery to Wilson and Patten, and (2) the mortgage to them by Wilson and Patten would keep the machinery fully insured against fire, the loss, if any, payable to them (Connally & Co.) as their interest appeared, until notes representing purchase money thereof were paid, and of the stipulation in the mortgage that Wilson would, upon their request, insure the machinery for an amount equal to his indebtedness to them, the loss, if any, payable to them as their interest appeared, was to entitle them to said part of the proceeds of the policy. That the stipulations had the effect claimed, unless the contentions made by Hopkins presently to be noticed should be sustained, is well settled by the authorities. 4 Cooley’s Briefs on Law of Insurance, 3703 et seq. and authorities there cited; Wheeler v. Ins. Co., 101 U. S. 439, 25 L. Ed. 1056. “An agreement,” said Mr. Cooley,

“between the mortgagor and mortgagee, by which the mortgagor is charged with the duty of taking out insurance for the benefit of the mortgagee, will charge the proceeds of any insurance taken out by the mortgagor with a lien in favor of the mortgagee.”

And in the Wheeler Case the Supreme Court said:

“It is settled by many decisions in this country that if the mortgagor is bound, by covenant or otherwise, to insure the mortgaged premises for the better security of the mortgagee, the latter will have an equitable lien upon the money due on a policy taken out by the mortgagor to the extent of the mortgagee’s interest in the property destroyed.”

One of the contentions of Hopkins, referred to above, is that the contract of sale and the mortgage should be treated as one' instrument, and that, construed 'as parts of one and the same instrument, the stipulations did not bind Wilson to insure the machinery for Connally & Co.’s benefit unless the latter requested him to do so. Hopkins refers to the finding of the court that Con-nally & Co. did not request Wilson to so insure the property, and insists it therefore appeared that they did! not acquire a right to the insurance on the machinery by reason of the stipulations. But, while the court found that Connally & Co. “never requested Wilson to have said property insured for their benefit,” he also found that “they [Connally & Co.] did inquire of him [Wilson] on one occasion whether or not he had the property insured, and were informed that it was insured.” If the two instruments should be treated as one, and the stipulations as meaning what Hopkins contends they meant, we think the facts found by the court showed a request within such meaning. The conclusion of the court from the facts he found, that Connally & Co. did not request Wilson to insure the property for their benefit, was not, we think, warranted. Under the circumstances of the case, we think Connally & Co.’s asking Wilson if he had insured the machinery should have been construed as a request to insure it for their benefit as he had agreed to, and Wilson’s reply as an assurance that he had so insured it.

The other contention made by Hopkins is that the stipulations did not create an equitable lien in favor of Connally & Co. because it appeared, as found by the court, that Wilson did not know when he procured the insurance that the contract and mortgage contained such stipulations. As supporting this contention, Hopkins cited Dunlop v. Avery, 89 N. Y. 592, and Stearns v. Ins. Co., 124 Mass. 61, 26 Am. Rep. 647. We regard the contention as unsound, and do not think the cases cited, when their facts are considered, support it. No reason appears in the record before us why Wilson, having executed the contract and mortgage, should be heard to deny knowledge of stipulations they contained as a basis for relief against the effect of such stipulations.

It follows from what has been said that we are of the opinion Connally & Co., by virtue of the stipulations referred to, had a lien on the part of the proceeds of the policy which represented insurance on the machinery they sold to Wilson and Patton.

The right of Hopkins to the part of the proceeds in question must be referred, we think, entirely to the assignment to him indorsed by Wilson on the policy November 13,1915, after the fire occurred. It cannot be referred to the stipulation in the trust deed to Armstrong that Wilson and Patten would insure the property he (Hopkins) had conveyed to them and transfer the insurance to the trustee, Armstrong, with loss, if any, payable to him as his interest appeared, because the part of the insurance in controversy was not insurance on that property, but was insurance on property Connally & Co. had conveyed to Wilson and Patten. 4 Cooley’s Briefs on Law of Insurance, 3702, and authorities there cited. Nor can a right in Hopkins be referred to Armstrong’s possession of the policy before and at the time the fire occurred. The claim that such possession conferred such a right on Hopkins is predicated upon the finding by the court that Armstrong, after issuing the policy (to Wilson) as agent of the insurance company, retained possession thereof in his capacity as trustee until after the fire occurred. The finding is attacked by Connally & Co. on the ground that there was no evidence to support it. We think there was none. It appeared from the testimony that Armstrong, after he issued the policy as the agent of the insurance company, instead of delivering it to Wilson, retained possession of it, 'but there was no testimony showing or tending to show that he ever held possession of it in his capacity as trustee in the deed to him from AVil-son. The policy could not have become a pledge in Armstrong’s hands as trustee without some action on the part of Wilson indicating a desire that as trustee he should hold it as security for the indebtedness specified in the trust deed. We have found no testimony in the record showing, or tending in the least to show, that Wilson ever authorized Armstrong, who held the policy for delivery to him, to hold it instead as the trustee named in the deed and as a pledge to further secure the indebtedness to Hopkins.

So, it appears, the claim of Connally & Co. to the part of the proceeds of the policy in controversy was based otn a lien which attached thereto the moment the loss of the machinery by fire occurred, an'd that the claim of Hopkins was based on an assignment to him of the policy made by Wilson on the day after the fire occurred. The nature of the respective claims being as stated, it is clear, we think, that the right of Connally & Co. to the proceeds in question was superior to that of Hopkins, unless the latter was entitled to claim protection as an innocent purchaser of the claim evidenced by the policy. AVithout respect to the question as to whether he was without notice of Connally & Co.’s right or not, the fact that the consideration for the assignment to him was then existing indebtedness of Wilson to him would, it seems, be sufficient reason for denying him such protection. 4 Cooley’s Briefs on Law of Insurance, 3706.

Hopkins insists, however, that if Connally & Co.’s right as lienholders to the fund in question was superior to his, they were es-topped from assarting it as against him. The contention is that Connally & Co. had a choice of remedies for the collection of the debt Wilson and Patten owed them, and that they waived the one they had because of the stipulations in the contract of sale and mortgage, when they sued out the writ of garnishment against the insurance company and made Hopkins a party to the proceedings at an expense to him of more than $200. If it should be conceded that Connally & Co. had two dif- ierent coexisting remedial rights, we think they were not inconsistent, and therefore that the doctrine of election of remedies invoked by Hopkins did not apply. As we understand it, the effect of the stipulations in the contract and mortgage referred to was to create a lien in favor of Connally & Co. on the part of the proceeds of the policy representing insurance on the machinery, and not, as Hopkins assumes, to transfer those proceeds to them. “All actions,” said the writer of the article in Cyc. 267,

“which proceed upon the theory that the title to property remain in plaintiff are naturally inconsistent with those which proceed upon the theory that title has passed to the defendant. But there is no inconsistency between different legal remedial rights, all of which are based upon claim of title to property in plaintiff or all of which are based upon the affirmance of title in defendant.”

But we think Connally & Co. did not have a remedy 'by garnishment. The court found that the land and machinery purchased by Wilson and Patten of Hopkins, and the machinery purchased iby them of Connally & Co., which,.he further found, had become realty, was Wilson’s homestead at the time the fire occurred.

The property being homestead, the insurance on it was not subject to garnishment during the six months following the time when Wilson had a right to demand it of the insurance company. Article 3787, Vernon’s Statutes; Cameron v. Fay, 55 Tex. 59; Ward v. Goggan, 4 Tex. Civ. App. 274, 23 S. W. 479; Ins. Co. v. Jameson, 6 Tex. Civ. App. 282, 25 S. W. 307; Chase v. Swayne, 88 Tex. 218, 30 S. W. 1049, 53 Am. St. Rep. 742; Geise v. Ins. Co., 107 S. W. 555; Stratton v. Ins. Co., 182 S. W. 4; Griffin v. Williams, 142 S. W. 981; McLane v. Haydon, 160 S. W. 1146; Rowell v. Smith, 123 Wis. 510, 102 N. W. 1; Zimmerman v. Robinson, 128 Iowa, 72, 102 N. W. 814, 5 Ann. Cas. 960; 15 Cyc. 262.

It may not be out of place to say here that, had the proceeds of the policy not been exempt from garnishment, the service of the writ on the insurance company would have conferred upon Connally & Co. a right to the part of same in controversy superior to the right thereto in Hopkins. Gause v. Cone, 73 Tex. 239, 11 S. W. 162.

The judgment will be reversed, and judgment would be rendered here if the amount of the part of the proceeds representing insurance on the machinery described in the contract of sale between Wilson and Patten and Connally & Co. and in the mortgage from Wilson to Connally & Co. sufficiently appeared from the record sent to this court. As it does not, the cause will be remanded, with instructions to the court below to ascertain the amount and render judgment for Connally & Co. therefor, or such part thereof as may be necessary to satisfy the indebtedness of Wilson and Patten to said Connally & Co.