Craig v. Insurance Co. of Pennsylvania

Vendor and Purchaser — Insurance—Equity—Fraud. Where, in pursuance of a written contract for the sale of land, the vendee procured insurance payable as the interest of the vendor might appear, but after the expiration of the policy procured another in his own name which, after the loss, he assigned to a third party, equity will enforce the agreement by declaring the proceeds of the insurance a trust fund and applying the same upon the land contract in payment of the balance due the vendor.

Appeal from Wayne; Rohnert, J. Bill by John Craig against the Insurance Company of the State of Pennsylvania, impleaded with Rose C. Delisle and Henry Lezotte to reform a policy of insurance, and to establish a trust. From a decree for complainant, defendants Delisle and Lezotte appeal. The trial court, in its decree, made the following findings: The court finds that, under the contract for the sale of real estate, by the complainant to the defendant, Henry Lezotte, the said Lezotte agreed to insure the buildings against loss by fire, in an amount approved by complainant, and to assign the policies to complainant; that said Lezotte did not so insure the premises; but that he did on August 3, 1908, take out insurance thereon, but made the same payable to himself, without any provision, as required by said contract, for the protection of complainant; that complainant trusted Lezotte to procure the insurance in accordance with the contract, and had no notice or knowledge that he had not done so until after the loss; that on September 14, Í908, said property was damaged by fire; that the loss thereon was subsequently adjusted as a total loss; that after such loss defendant Lezotte attempted to assign the proceeds of said insurance and other insurance to his sister, the defendant Rose C. Delisle, who had full notice and knowledge of complainant’s rights; that said assignment is void and of no effect as against the complainant; that said Rose Delisle brought suit on the law side of this court against the defendant the Insurance Company of the State of Pennsylvania on November 18, 1908, and on February 8, 1909, took judgment thereon without contest or trial; that thereafter, upon order of this court, the proceeds of said policy, to' wit, $1,150, were paid into the registry of this court to be held pending the determination of this case; that, by reason of the failure of said Lezotte to have the proper clause, rider, or provisions attached to the said policy to protect said complainant, the said Lezotte committed a fraud upon complainant and became a trustee as to any funds derived from said insurance; that the insurance moneys so paid into this court constitute a trust fund which should be devoted to the payment of the amount due to the complainant under the said contract upon the deposit by complainant with the said register of a conveyance of said land.