Smith v. Packard

| Superior Court of New Hampshire | Dec 15, 1849

Woods, J.

On or about the 6th of April, 1847, the trustee bought up, at a sheriff’s sale, for $21, the equity of redemption in the lands and buildings, mortgaged by the defendants, about a year previously, to John C. and Stephen Pillsbury, and on the thirteenth of the same month, took an assignment of the mortgage, and of a policy of insurance upon the buildings, as collateral to the mortgage, for the security of the debt; or, in the words of the assignment, from the defendants to the parties under whom the trustee holds, “ as collateral security for the performance of the condition of the mortgage.”

The buildings protected by the insurance were consumed by fire, on the 9th and 10th of June, and the mortgage foreclosed on the 8th of August following.

The sum of $1,322, to which the rightful holder of the policy became entitled, by the casualty of the 9th and 10th of June, was afterwards paid over to the trustee, and exceeded somewhat the amount of the notes and interest secured by the mortgage and the assignment of the policy.

The question that is made is, whether this trustee is chargeable at the suit of the creditors of the defendants by reason of the premises.

It may be presumed that the trustee, in taking an assignment of the policy of insurance simultaneously with the assignment of the mortgage, furnishes evidence that the latter was bought as and for a security for the debt, and not for the purpose of being merged in the equity of redemption which he then held, and of consummating his title to the land ; and that evidence is confirmed by his statement that the mortgage was foreclosed on the 8th of August following. Thus it appears that, by his own intent and understanding, he held both the land and the policy from the 13th of April till the 8th of August, at least, not as his own, but as security for the payment of the debt of $1,000, due from the defendants.

Whether the defendants, since they'had lost the right of redemption or general property in the land, could in equity have required the trustee first to exhaust that fund towards the payment of his debt, before applying the avails of the policy, supposing their interest in the latter to have still existed, need not be determined now, because, in point of fact, he did foreclose the mortgage before realizing any part of the avails of the policy. And this he did voluntarily, by adopting, in the act of purchasing the mortgage, the proceedings then in progress to that end.

By this foreclosure, the debt became extinguished, to the extent of the value of the land at the moment of foreclosure, Such is the familiar and well established law on that subject. What the value of the land at that moment was, need not, at this time, be inquired, nor whether any evidence to conclude the trustee in that regard, is to be derived from his own act in purchasing the equity of redemption, at a price somewhat too large to be deemed merely nominal. The land finally came to him, depreciated to a considerable amount, by the destruction of the buildings.

To provide against this very event, the policy of insurance had been assigned to him, not absolutely, but as a security for his debt, in case the event should happen while the debt existed, which alone could entitle any one to receive any thing upon the policy. If the words of the assignment had been less plain and significant in that particular, it would be difficult for any one to be convinced that the parties to that act, intended or expected any thing different, and that the mortgagee, whose utmost claim did not exceed $1,000 and interest, should appropriate the entire avails of the policy, which might have amounted to nearly twice that sum,

Upon the burning of the buildings, therefore, the trustee became entitled to receive of the company the stipulated indemnity. He did receive it, not for his own use, but in trust, after satisfying the objects for which the power to receive it was committed to him, for the defendants, the general owners of it. This object was, as has been shown, the payment of so much of the debt as should remain unpaid-upon the foreclosure of the mortgage, deducting from the debt and its incidents the value of the land at the time of the foreclosure.

We are unable to admit the proposition in the argument, that the title to the policy attended the title to the land, vesting and becoming absolute when that vested and became absolute.

It passed not because the land passed from party to party, but by virtue of the assignments alone, and, of course, not otherwise than as they provided. The policy was originally the property of these defendants, and might, for any thing that appears in the case, have remained theirs, notwithstanding the mortgage, for a mortgager Has unquestionably an insurable interest in property mortgaged. But whatever the terms of the policy might or might not have permitted, it is clear that no greater interest in the policy than was actually assigned by these defendants, could have passed to the other parties, and this interest was simply that of a pledge.

On the whole, we see no ground to doubt that but for this suit, the defendants might have recovered of the trustee the excess of the money which he received upon the policy, after satisfying'the balance remaining due to him, over and above ihe value of the land at the time of the foreclosure.

The trustee is, therefore, chargeable in this suit, to that extent.

Trustee chargeable.