204 N.W. 528 | Minn. | 1925
In August, 1921, plaintiff contracted with Knutson to convey to him a Marshall county farm in exchange for other real estate. The *493 contract remained executory. Deeds were placed in escrow pending examination and approval of titles. They were never delivered, for plaintiff claimed and established fraud on the part of Knutson and succeeded, by action, in having the contract rescinded and the ownership and right to possession of his farm restored to him. The rescission did not become effective until some time after December 22, 1922.
In the meantime, plaintiff had put Knutson in possession of the farm. While so in possession, as plaintiff's vendee under the executory contract, Knutson procured insurance on the buildings and certain personal property of his own from defendant insurance company. The policy was effective during February, 1922, when the insured dwelling, together with certain personal property of Knutson's, was destroyed by fire. This, it will be observed, was while the contract between plaintiff and Knutson was still in effect; that is, the fire occurred and the resulting rights became fixed before the rescission of that contract.
Defendant Knutson seems not to be making any claim, for himself or plaintiff, to the insurance on the dwelling. He is joined as a party defendant simply in order to have his rights, if any, determined. The insurance company's liability to Knutson for the loss of his personal property was recognized by payment, but the claim under the same policy for the loss of the dwelling is resisted upon two grounds, viz: (1) That defendant Knutson had no insurable interest in the real estate of which the dwelling was a part, and (2) plaintiff cannot recover because he had no contractual relation, under the insurance policy or otherwise, with defendant insurance company, upon which to predicate the desired recovery.
1. A vendee in possession under an executory contract of sale has an insurable interest. Holbrook v. St. P.F. M. Ins. Co.
2. But it doesn't decide the case to hold that Knutson had an insurable interest, for recovery is now sought by his vendor. In favor of the latter there was no insurance, and under the contract to convey there was no obligation on Knutson to insure — for the benefit of the vendor or otherwise. Plaintiff did not protect himself and the insurance now in question was procured by his vendee for his own protection.
Long ago, it became "too well settled to be questioned, that policies of insurance against fire are personal contracts with the assured, which do not attach to the realty, or in any manner go with the same, as incident to a conveyance or transfer of the title to lands." Culbertson v. Cox,
The case of Mitchell v. McDougall, twice in the supreme court of Illinois (
The case went back for trial on the merits and, plaintiffs prevailing against both McDougall and the insurer, the latter alone appealed, so presenting squarely its defense against the vendor's right to recover from it. The decree was affirmed (
The subject is discussed in notes appearing in 37 L.R.A. 150 and 13 L.R.A. (N.S.) 909. The latter note is appended to the report of Zenor v. Hayes,
That is our holding here. Plaintiff is entitled to Knutson's claim against the insurance company as a substitute in equity for the dwelling now destroyed and as "part and parcel of the property" which it was the duty of Knutson to restore to him upon the rescission of their contract.
The theory of constructive trusteeship is frequently applied to the relationship of vendor and vendee, the former being considered as trustee of the legal title and the latter of the unpaid purchase price. Because of that trusteeship, the vendor in many cases has been compelled to give the vendee credit on unpaid purchase money for insurance procured for his own benefit. State Mut. Fire Ins. Co. v. Updegraff, 21 Pa. St. 513; Reed v. Lukens, 44 Pa. St. 200, 84 Am. Dec. 425. "So far as the vendor is secured the purchase money by a policy of insurance, the vendee is correspondingly benefited towards the payment of it." Hill v. Cumberland Valley Mutual Protection Co. 59 Pa. St. 474. See also 5 Pomeroy, Eq. (2d ed.) § 2283.
If that is the rule as against a vendor obligated to convey to his vendee, it certainly should operate with equal facility upon a vendee who, because of a rescission for his fraud, has become obligated to restore the premises to his vendor. In such a situation, the vendee has ceased to be a trustee of the purchase price, the obligation to pay which has vanished, and has become instead a trustee of the property itself. The duties of that trusteeship relate back, through the rescission, to his going into possession originally. Therefore he holds for the beneficiary, the vendor, any insurance on the buildings which have been destroyed during his possession.
However personal a contract may be, a matured money claim under it is ordinarily the subject of assignment. It is a chose in action, property, subject to all the mutations from time to time undergone by that kind of property. The transfer of it may be voluntary or by operation of law through such processes as attachment, equitable assignment, subrogation or its subjection to a constructive trust.
Because of his having procured its possession through fraud, Knutson was, during his possession, a trustee ex maleficio, of plaintiff's property. And since when has a trustee been entitled to retain the *497 proceeds of insurance on trust property upon returning to the beneficiary the remaining corpus of the trust estate? Whatever the situation might have been had there been no fraud, we hold that while he retained the fraudulently procured possession, Knutson was a trustee, and that insurance in his favor on the trust property, which on rescission he was obligated to return, now stands as a substitute for the property destroyed, and, as such, the plaintiff is entitled to the benefit of it.
That is not making the insurance company the insurer of plaintiff. It is rather the simple holding that its obligation to Knutson, fixed and liquidated by the fire, will now be laid hold of, as a substitute in Knutson's hands for the burned dwelling, for the benefit of plaintiff, who as owner of the property is in equity and good conscience entitled to what is now the only substitute for it. The opposing argument fails of its mark, in our opinion, because, while a fire policy is personal as between insurer and insured, yet, as between the latter and one entitled to the property, the insurance may stand in lieu of it and therefore be impressed with a trust.
That is but another way of putting the idea that the matured right of an insured to collect insurance is a chose in action and as such the property of the insured with the disposition of which, particularly by operation of law, the insurer is not much concerned. The supposed authorities contra fail of application because they lack the element, present here, of an insured in the position of a trustee, by reason of his fraud, for the vendor seeking the benefit of the insurance. The ordinary vendee is not a trustee of insurance for his own benefit.
For example, in McCutcheon v. Ingraham,
Judgment affirmed.