127 Minn. 256 | Minn. | 1914
Defendant Bennett owned lots 4 and 5 in Way’s plat of tbe Town-site of Be Beau, South Dakota, together with a hotel then situated on lot 4. June 15, 1908, be borrowed $1,000 of tbe intervener, Jennie 3VL Thompson, and gave her bis note for said sum payable in two years with six per cent interest. He and bis wife executed and delivered to tbe intervener a mortgage to secure tbe note covering lot 4, which mortgage was recorded June 16, 1908. A year later and on July 19, 1909, Bennett, for value received, executed and delivered a second $1,000 note to tbe intervener, payable in two years, with seven per cent interest. July 30, 1909, Bennett and bis wife executed and delivered to tbe intervener a mortgage to. secure this note; this mortgage covered lots 4 and 5, and was recorded October 15, 1909. Tbe mortgage of June, 1908, contained no agreement by tbe mortgagor to keep tbe buildings on tbe premises insured, but there was a clause in tbe mortgage of July, 1909, by which tbe mortgagor agreed to keep tbe premises insured to tbe extent of $1,000 for tbe benefit of tbe mortgagee.
Between June 1 and November 10, 1909, plaintiff sold and delivered to defendant Bennett building material for use by him in tbe construction of improvements and additions to the hotel. Bennett gave two notes to plaintiff for tbe material furnished, one for $937 on June 1, 1909, and tbe other for $589.05 on November 10, 1909. Plaintiff, on November 10, 1909, filed with tbe proper officer what would correspond to a lien statement under tbe laws of Minnesota, and admittedly then bad under tbe South Dakota laws a lien on lots 4 and 5 for tbe amount due and unpaid for tbe materials furnished.
September 6, 1910, the garnishee insurance company issued to Bennett a policy insuring him against loss or damage by fire to the building then situate on lots 4 and 5 to tbe extent of $2,000, and against loss or damage to the personal property then contained in
Plaintiff then commenced this action against tbe defendant Bennett, asking judgment against him in tbe sum of $1,423.04, judgment that tbe assignment to intervener was fraudulent and void, and that tbe court impress tbe insurance money with an equitable lien and require it to be turned over to plaintiff to tbe full extent of bis claim. Tbe insurance company was garnished, and disclosed an indebtedness to defendant of $2,500, but subject to tbe claim thereto of Jennie M. Thompson. This money was paid into court. Mrs. Thompson filed a complaint in intervention, claiming tbe whole of tbe insurance money. Plaintiff filed its answer and cross-bill alleging tbe assignment from Bennett to Mrs. Thompson to be fraudulent and void, and claiming an equitable lien upon tbe insurance money paramount to any claim of tbe intervener.
A trial of tbe issues thus made resulted in a decision that tbe in-tervener was entitled to tbe insurance money to tbe extent of her claim, $2,000 and interest, and that plaintiff was entitled to the balance. Findings were filed both in the main action and in the garnishment action. Plaintiff moved for amended findings and conclusions, and for a new trial. These motions were denied, and plaintiff appealed from the orders.
The first contention of plaintiff is that the intervener established no right or claim to the fund, and therefore that plaintiff was entitled to be paid in full out of it, because of the garnishment. If the premises are correct, the conclusion would follow. The question therefore is: Had Mrs. Thompson, prior to the garnishment, a valid claim against this insurance money ?
The main contention of plaintiff on this branch of the case is that the indorsement of this clause, together with the assignment by Bennett to the intervener of all the former’s claim to the insurance money, was fraudulent in law and in fact, as against Bennett’s creditors. It is argued that Bennett was insolvent when he made the assignment; that the assignment was of $2,500, whereas he was under no obligation to secure Mrs. Thompson for more than $1,000, and that it was understood that Bennett should get back the balance of the $2,500 after the debt to Mrs. Thompson was paid. The trial court found as a fact that there was no fraud. There was a preference, it is true, but we are clear that the circumstances are not such that we can say the finding is not sustained by the evidence, or that there was fraud in law. The debt to the intervener was an honest one and was overdue. Bennett, at the time of the transfer, had insurance aggregating $6,000, though he in fact collected but $4,000. The assignment was undoubtedly given as security. The intervener had no knowledge of any fraudulent intent, and in fact Bennett had no such intent. It is well settled in this state that the payment of or securing an honest debt by a debtor is not deemed fraudulent in law, though it operates as a preference, and though it does in fact hinder and delay other creditors, unless some insolvency or bankruptcy law makes such transfer invalid, and then only in aid of an
As there was no actual intent to' defraud, we hold that the assignment by Bennett to the intervener was valid as against plaintiff, and entitled intervener to payment of her claim out of the fund garnished, unless plaintiff had an equitable lien on such fund that was paramount tó the claim of the intervener.
Under the laws of South Dakota, plaintiff had a lien on the building. This lien was clearly superior to the lien of the intervener’s second mortgage, and apparently, under the statutes of South Dakota, superior to the lien of the prior mortgage. This may be conceded for the purposes of this case. This conclusion makes it unnecessary to consider the point that the second mortgage was not entitled to record, as, whether this is true or not, we start with the premise that plaintiff’s lien on the building was paramount to the intervener’s lien under either mortgage. The question is whether, when the building was destroyed by fire, plaintiff’s lien attached in equity to the proceeds of the insurance. If it did, it would follow that the assignment by Bennett to the intervener could not operate to destroy this lien. If the lien did not in equity attach to the insurance money, the intervener’s claim is clearly superior.
Plaintiff relies upon the principle that a court of equity, whenever it is necessary in order to prevent justice being defeated, will treat the money derived from property as it would the property itself. This principle has been frequently applied to cases where property upon which there was a lien has been sold under a paramount lien, under legal or judicial process or under a testamentary power paramount to the lien. Ness v. Davidson, 49 Minn. 469, 52 N. W. 46, is a good illustration of this doctrine. There real estate upon which there was a mechanic’s lien was sold under a testamentary power that was paramount to the lien, the execution of which power discharged the lien from the land. It was held that the sale was in effect a conversion of the land into money, and that the proceeds should be charged with the payment of the debt. But plainly the principle has no application to a case where the property is insured
Orders affirmed.