Court Opinion

ID: 7938847
Source: CourtListenerOpinion
Date Created: 2022-09-08 23:12:34.503215+00
Date Added: 2024-06-11T16:33:38.514512
License: Public Domain

ON REHEARING.
Hooker, J.
The Lansing Lumber Company, a corporation engaged in the manufacture of lumber, being unable to meet its obligations, in May, 1893, made a trust deed of its property to the Michigan Trust Company for the benefit of its creditors, the provisions of which need not be stated. See First Nat. Bank of Ionia v. Michigan Trust Co., 105 Mich. 107. A part of the property *522included in the trust deed was logs and lumber at the sawmill of the grantor, at. Dodge, Mich., a portion of which was cut from lands held by the Lansing Lumber Company under two land contracts in which the complainants were vendors, and which forbade the cutting of timber. Much cutting was done without authority, and further cutting was permitted under a subsequent contract between the complainants and the Lansing Lumber Company, which provided that the title to all logs which had been or might thereafter be cut, and to lumber made or to be made from logs taken from said lands, should remain the property of complainants until the land should be fully paid for, and which also contained the provision that—
“The first parties \i. e., the complainants] may insure same in their own names, or otherwise, as they may deem advisable, and second parties shall pay the expense thereof; and in case second party shall fail to pay for such insurance, and first party shall pay the same, second parties shall pay to first parties such cost and expense of insurance, together with interest thereon at the rate of 7 per cent, per annum, which amount shall be added to the sums to become due and payable under this contract, and be considered as a part thereof.”
This contract was executed on September 24,1890. The Lansing Lumber Company manufactured the logs into lumber, which was destroyed by fire, with other lumber and the sawmill, on the 10th day of March, 1894, after it had come into possession of the Michigan Trust Company. At this time there was insurance upon the mills and lumber to the amount of nearly $70,000, of which about $62,000 was collected by the Michigan Trust Company. Of the amount collected about $52,000 or $53,000 was paid for loss upon the lumber. At the time of the fire there was due to the complainants upon these contracts about $12,000, and they asked the Michigan Trust Company that they be paid from the amount received for insurance, and the decree of the circuit court practically so ordered, from which the defendants have appealed.
*523The record shows that after the contract of September 24,1890, was made, the complainants requested the Lansing Lumber Company to send the insurance policies. At that time the Lansing Lumber Company had insurance, procured in June previous, and, after obtaining an indorsement that the loss, if any, should be made payable to the complainants as their interest should appear, it forwarded policies to the amount of $65,000 to the complainants. In June, 1891, this insurance was renewed, but the policies were held by the Lansing Lumber Company until December 11, 1891, when complainants wrote that, in looking over the matter, they found their insurance had expired, and asked that it be renewed. Mr. Eenyx, the secretary of the lumber company, wrote that they were properly made out and filed in the office of the lumber company, and Mr. Fisher, one of the complainants, wrote back, asking that the policies be sent to him, which was done to the amount of $37,250. From that time until after the fire no further request for or inquiry about insurance was made by complainants. These policies expired in June, 1892, and at a later time policies were issued to O. F. Barnes, as trustee, and subsequently to the Michigan Trust Company, no mention of complainants being made in either instance. The testimony shows that the fire destroyed about 1,000,000 feet of pine, worth $14 per M. feet, and 7,000,000 feet of other lumber, worth from $9 to* $10 per M. feet, about half of which came from the lands bought of the complainants. The Michigan Trust Company claims that it was not aware that complainants had title to any of this lumber, but, however that may have been, it seems clear that it had never seen the contract providing for insurance, or had any information that complainants ever had insurance, or claimed that they were entitled to any; and apparently it procured insurance to protect itself and the creditors whose bonds were secured by the property, in the usual and prudent course of business.
Where a mortgage contains a covenant that the mort*524gagor will keep the premises insured for the benefit of the mortgagee, and does not, equity will compel the former to pay over moneys collected upon policies payable to himself. And this court has held that—
“Where C. agreed to give M. a mortgage upon a dwelling, and to insure it for the benefit of the mortgagee, in consideration that M. should become C.’s surety on a note, which arrangement was carried out by the execution of the papers, and the procurement of the insurance as promised, a surrender of the policy by C., without M.’s knowledge or consent, and the issue of a new policy to A., who took with notice upon his purchase of the property, was collusive and fraudulent, and relief was afforded upon the ground that, while C. may have had a legal right to surrender the policy taken out for M.’s protection, he had no equitable right to do so; and, as A. knew all the facts, and took his new policy on a wrongful surrender of one which protected M., and for a sum which precluded M. from insuring in his own behalf, M. had an equitable interest in the new policy to the extent of his lien, whether A. did or did not expressly agree with C. that such should be the case, as C. testified that he did.” Miller v. Aldrich, 31 Mich. 412, and cases cited in note on page 408.
But, as there said:
‘ ‘ If there is no covenant or agreement in the mortgage that the premises shall be insured for the benefit of the mortgagee, and no verbal agreement to that effect, which has once been acted upon as in the principal case, the mere fact that the mortgage covers the property insured, and that the insured is personally liable for the debt, gives the mortgagee no claim upon the policy, or upon the proceeds thereof in case of loss.” Id.
The letter of the contract did not require the Lansing Lumber Company to keep the property insured, nor did it fix the amount of insurance to be carried. It merely gave the complainants the right to insure at the expense of the Lansing Lumber Company. Under this provision they might insure or not, and the cost of procuring an amount reasonably adequate for their protection might be charged to the Lansing Lumber Company. If there *525were nothing in the nature of a contract with regard to insurance between the parties, the complainants would have no standing here, unless upon the broad proposition that, as owners of the title to the property, they should have a right to such insurance as the vendee might effect and collect upon it, or sufficient to pay their claim, or at least make it good after the application of the land thereto. We know of no authority that would support the proposition that mere ownership of the legal title gives the exclusive right to insure, or the right to collect insurance procured upon the property by others, especially where such others have equitable interests which they may find underwriters willing to insure.
It is a common practice for music dealers and others to sell instruments and machines upon installments, reserving title in the vendor until full payment. In such cases we have supposed that the vendor has no concern with, or claim upon, any insurance that the purchaser may procure to protect himself upon his interest arising out of the payments made. The vendor would have to be satisfied with the security afforded by his contract, viz.: First, the obligation of the purchaser to pay the price; second, the retention of title as security for payment ; and, if the contract should provide that the vendor might procure insurance at the expense of the purchaser, in the name of one or the other, the fact that upon request the purchaser procured and sent him policies on two occasions would hardly relieve the vendor from looking after the insurance and requesting policies thereafter, if he desired them, and make it incumbent upon the purchaser to provide insurance, and see that it was kept up, at the peril of having the insurance procured for his own protection appropriated to the payment of the claim, through the establishment of an equitable lien. We see no equity in holding in such a case that the vendor of the piano should be relieved, and the loss allowed to fall upon the vendee, when due to the neglect or disinclination of the vendor to avail himself of his right under the con*526tract. We have seen no case that has gone to that extent. It is not the province of courts to make or enlarge contracts. Such case would seem to be upon all fours with this in all substantial particulars involved in the discussion of this question. We are therefore of the opinion that, had this question arisen between the original parties, the complainants could not sustain their claims to the insurance on the basis of a covenant. But force is added to this by the fact that the Michigan Trust Company is the assignee of the Lansing Lumber Company’s interest, not as an assignee for the benefit of creditors in the ordinary sense, but as the representative of the creditors who have taken Lansing Lumber Company bonds, as collateral security for- which it holds this title. It and the creditors took the title in ignorance of this contract to pay for insurance, giving, as consideration for the same, an extension of time, and release of an indorser upon the lumber company paper held by such creditors respectively; and, if it be said that they took it subject to the contract obligations, it was under circumstances which do not justify anything in the nature of an enlargement of such obligations. If the Michigan Trust Company had not insured the lumber, and the entire stock was therefore a total loss, could the complainants ask that its loss be made good? If the trust company was under obligation to see that insurance was provided for complainants’ benefit, it would seem to follow that an action would lie for the failure, and that the amount of the claim would be the measure of damages. If, on the other hand, it could escape such liability on the ground that the contract did not require it to do more than to pay for such insurance as the complainants saw fit to procure, how is the situation changed by the fact that it had insured the property for its own benefit ? But there is nothing in the trust deed that imposes the burden upon the Michigan Trust Company to see that the property was insured.
It has been suggested herein that the terms of the trust *527deed need not be referred to, but in one view it may be well to look at the situation of the parties. The trustee took this deed by way of security, and it has been treated and adjudicated upon as a mortgage. See Michigan Trust Co. v. Lansing Lumber Co., 103 Mich. 392. By its express terms it contemplated that the Lansing Lumber Company should retain possession until default. The trust deed contemplated that the lumber company might, by continuing business with the mortgaged property, he able to pay its debts, in which case the trust deed would be satisfied, and it is apparent that until default the trust company had no right to interfere with the property, or to take it into possession; and, after the fire had destroyed the property, this court held that the lumber company had not defaulted, and that the trust company was not entitled to the possession. But said trust deed did empower the trust company to make payment upon property held under land contracts from funds in its hands, and it was authorized to borrow money for the purpose, with a view to preserving its security, if necessary, which power was construed in First Nat. Bank of Ionia v. Michigan Trust Co., 105 Mich. 107; and it may be contended that said company agreed to pay this claim of Mosher and Fisher in consideration of forbearance. If this is true, it is not because of the fact that the trust company insured its interest, and the agreement must have been such that, if it had not insured the property,', it would still have created an obligation upon the trustee to pay the claim, to the exclusion of all other creditors, and whether it ever realized a dollar from the Lansing Lumber Company’s property or not; and the remedy would have been at law. The bill seems not to have been framed on such a theory; but, if it be conceded that such a contract would have been within the authority given by the deed, it must still appear that it has made such a contract. If such contract has been made, it was by virtue of the correspondence between Mosher and Fisher and Mr. Withey. The first letter of the series was one which was written to Mr. O. M. Barnes, *528by Mosher and Fisher, and which is not before us. We may suppose it urged payment, and threatened seizure of the lumber, as subsequent letters did. The first letter written by the trustee was in answer to this, and it said that it did not understand that the land contracts covered not only standing timber, but the logs and lumber on hand. It stated further that it had been busy, and had not gone into the details in relation to the various claims, but would give the matter immediate attention. ' It con-' eluded as follows:
“The condition of the money market at the present time is such that no one is warranted in being very impatient over delays in collections, and so long' as parties have ample security we do not think there would be any justification in taking so severe measures as you suggest, and we trust that you will treat the Lansing Lumber Company with such leniency as the times will seem to warrant.”
The next letter was addressed to the Michigan Trust Company, and insisted on payment, to which the following reply was made:
“ Gentlemen: Replying to yours of the 3d inst., would say that we have not the slightest doubt but that the Lansing Lumber Company would have been able to have made good their assurances to you had not the general panic and hard times overtaken the country, but all promises which were made in those days are declared off now by every one, and they are no exception to the rule. At that time they were doing a fine business, but at the present time they are not able to collect money enough to meet their pay rolls, and have been seriously considering the proposition of closing down the mill at Dodge City; hence you will see that it is utterly impossible for them to comply with your request; and, as they cannot borrow any money, we see no other way than that you will have to be patient until the present stringency eases off. Your security is perfectly good, and that is a good deal more than most creditors have in these days; so we shall expect that you will be patient, and not press payment of the matter at the present time.”
*529In another letter, written September 38th, Mr. Withey uses this language:
“Gentlemen: In reply to your favor of the 35th inst., would say that we do not see how the Lansing Lumber Company are going to be able to make you any considerable payment on your claim right away, as during the months of July ánd August they were not able to sell anything, and consequently two months of the very' best of the season were dropped out of their business, and the money which they otherwise would have had at this time is invested in lumber. It is unnecessary for us to explain to you the reasons, because every business man can understand just how the panic has affected us all. We think that the affairs of the Lansing Lumber Company are brightening up very much, and hope, in a reasonable time, to be able to pay you something on your claim. We will call the attention of the people at Lansing to your matter, and ask them to do something for you as soon as they can.”
And again he wrote December 3d:
‘ ‘Dear Sir: Replying to your esteemed favor of the 39th ult., would say that, since, money matters eased up, the Lansing Lumber Company have been doing considerably better. They have been able to meet the interest on their bonds which matured on November 1st, and now propose to take care of such matters as yours just as rapidly as possible. They have considerable amounts due them from two parties who have been unable up to the present time to pay them, but they are expecting to get it in almost any time, and when they do these funds can be applied on your matter.”
This correspondence showed a willingness that this claim should be paid from funds expected to come into the hands of the lumber company. Mosher and Fisher, and possibly Barnes, seem to have labored under the impression that by bringing a pressure upon the trustee the payment of the claim could be hurried, and Mr. Withey apparently excused the delay of the lumber company, and expressed his opinion as to its ability to pay, and sources from which it might receive money which it could *530apply to the purpose. The letters do not indicate an intention to assume such payment. On the contrary, that of August 5th expressly alludes to the impossibility of payment by the lumber company; that of September 28th says he will ask the lumber company to pay; and the last —that of December 2d—says that the lumber company (not the Michigan Trust Company) “is expecting money, which, when received, can be applied upon the matter.” This is the extent of anything in the nature of a promise by the Michigan Trust Company, and, in our opinion, was not such a promise to pay as fastened a liability upon it.
Again, what was the consideration for such promise? There is nothing to show that Mosher and Fisher agreed to extend the time for payment. They did not surrender any security on the strength of a promise. They merely waited, and did not at once enforce their lien. It was like any other case of clemency. It seems clear that, if the property were not destroyed, Mosher and Fisher could not sue and recover against the Michigan Trust Company upon this contract, but would be compelled to look to their security; and, if so, it is not different because of the destruction of the lumber. We think it patent that neither party understood that such a contract was made, and the contention, if made, would be likely to find its chief support in a real or imaginary equity, arising out of the fact that through clemency, and accident which they could not foresee, Mosher and Fisher were placed in a position where loss must fall upon them unless the trust company, which may be said to have desired to have the co ntract performed, can be made to bear the burden. The Lansing Lumber Company, too, has suffered a loss, and is still under obligation to pay the claim. The lands are still holden for this debt, and it is not clear to us that the creditors, who have not received this property, or (as we have shown) sufficient insurance to cover it, should be equitably chargeable with the loss.
*531It is suggested on behalf of the complainants that they have lost their security, and that the Michigan Trust Company has the value—practically the proceeds—thereof, but is this so? As stated, the lumber is shown to have been worth from $77,000 to $84,000. The sum of $53,000 in round numbers has been received from it, leaving from $24,000 to $31,000 loss. On the basis of $77,000, the cotnplainants had, equitably, an interest of $12,000, and the defendants $65,000. It will therefore be seen that the defendants, having received only $53,000 of the $65,-000 interest, must, in any event, lose at least $12,000, and as much more as complainants shall be able to collect from the lands covered by the contracts, and from their distributive share of the property covered by the trust deed, if they are secured thereby,—a question not before us, and upon which we have no knowledge or opinion. It seems to us, therefore, that it cannot be said that the defendants have the proceeds of the complainants’ property in an equitable- sense. We are driven to the conclusion that the complainants’ security has been destroyed and lost to them through unavoidable accident, and that -they have not superior equities in the fund arising from the insurance by the trustee of its interest.
The decree of the circuit court determined the amount due to the complainants from the Lansing Lumber Company to be $13,709.60, with interest at 7 per cent, from the 5th day of June, 1895, and awarded execution against the Michigan Trust Company therefor. We understand that the amount of the obligation is not disputed, and we are of the opinion that the amount found by the circuit •court to be due from the Lansing Lumber Company was correct, and the decree should be so far affirmed, but that in so far as it declares the Michigan Trust Company to be liable therefor it was erroneous, and should be reversed; any intention to determine complainants’ rights to a distributive share under the trust deed being hereby disavowed. The complainants are entitled to a decree authorizing, in default of payment of the amount herein *532decreed within 30 days after notice of the decree, the sale, as in case óf foreclosure, of the lands described in said bill, or so much thereof as may be necessary to the payment of the amount of said debt and interest, and costs of the circuit court, less the costs of the defendants in this court to be taxed; and that, in the event of the payment of said sum by the defendants, or either of them, the complainants should forthwith execute and deliver to the Michigan Trust Company a proper and sufficient deed or deeds of said lands, in accordance with the terms of said contracts. As the complainants did not appeal, the decree of foreclosure would not be made in the absence of the consent of the defendants, inasmuch as it formed no part of the decree of the circuit court. We think that the complainants were entitled to it, and it should be included upon the understanding that it is consented to.