Ellis v. Kreutzinger

1. The deposit of a policy of insurance with a creditor of the assured as a security for the debt gives such creditor a lien upon the proceeds of the policy, a lien binding upon the assured, the insurer and upon all who, with’ notice of such lien, take an interest in the policy from the assured. 2. The clause in a policy which prohibits an assignment of the policy without the consent in writing of the insurance company, does not apply to a deposit of the policy by way of pledge.

Appeal from, St. Louis Court of Common Pleas. One Kreutzinger was indebted to the firm of Ellis & Ca-vender, as a security for which said firm held a mortgage on his stock of goods. Kreutzinger also delivered to said firm, as a security for said indebtedness, a policy of insurance on said stock of goods, executed in his favor by the St. Louis Mutual Fire and Marine Insurance Company of St. Louis. Said Kreutzinger was also indebted to the firm of Douglass, Gazzam & Co. and to that of Fallenstein & Gauss. The goods were lost by fire. After the loss, an assignment of the policy was made upon the books of the company to one Meyer in trust for the two firms last named. This assignment, it is contended by plaintiffs, was made with notice, on the part of the company, the trustee, and the cestuis que trust, of the rights of plaintiffs and in fraud of those rights. The company paid the loss to Meyer, who appropriated the sum received in payment of the debts due the firms of Douglass, Gazzam & Co. and of Fallenstein & Gauss. The plaintiffs pray for judgment against Kreutzinger for the debt due them, and that the other defendants be required to refund and pay over to plaintiffs the sums received by them on the policy. The plaintiffs asked and the court refused the following declaration of law: “ If the court is satisfied from the evidence that the defendant Kreutzinger deposited the policy in question with the plaintiffs in pledge for the further security of an existing indebtedness from him to them; that at the time of such deposit an indebtedness existed and still subsists unpaid from said Kreutzinger to the plaintiffs to the amount claimed by them, and that said defendant Meyer, as trustee of said firms of Douglass, Gazzam & Co. and Fallen-stein & Gauss, at the time of the payment of the proceeds of said policy to him as such trustee, had notice of such pledge, then the plaintiffs are entitled to recover of said firms the amount of such indebtedness, not exceeding the amounts received by them, to be contributed and refunded by said firms in the proportion of the amounts received by them respectively out of the proceeds of said policy; and, further, if said Meyer, at the time of the payment of said proceeds to him as aforesaid, had knowledge that the said policy was in some way charged or affected in the hands of the plaintiffs, that is constructive notice of all the facts and instruments to a knowledge of which he might have been led by an inquiry after such charge or circumstances affecting the policy.” The court gave the following instruction at the instance of defendants : “ If the assignment of the policy of insurance read in evidence was made to Meyer to secure debts due by Kreutzinger to Douglass, Gazzam & Co. and Eallenstein & Gauss, and no notice given to the insurance company or said Meyer of any other assignment of said policy to any other person or persons, and that said Meyer, before the bringing of this suit, paid over the proceeds to the creditors of said Kreutzzinger, then the plaintiffs can not recover.” The court found for the defendants. I. The deposit of a policy of insurance in pledge for the security of a debt gives a lien in equity on the proceeds of the policy as against the assured making the deposit and all persons claiming the fund under him with notice. (1 Phill. Ins. 68 ; 2 Duer on Ins. 61, 57, § 35 ; 10 S. & R. 412; 2 McMul. 237 2 Story on Eq. § 1047,1258, 1250.) The clause in the policy which provides that it shall not be assigned without the consent in writing of the insurance company has ■ reference only to an actual assignment of the instrument on a change of property in the subject insured previous to a loss, and is inteded merely for the protection of the company against an alienation of the subject insured. It has no application here. (2 Duer on Ins. § 40 ; Arnold on Ins. 1249; 1 Phill. on Ins. 34, 58.) III. There was no assignment of the policy before a loss to Meyer. The assignment to Meyer was an assignment of the proceeds of the policy, all the parties having notice of the prior equity of the plaintiffs. (2 Duer, 65 ; Arnold on Ins. 1249; 1 Phill. on Ins. 39; 8 Hall, 372.) The doctrine of constructive notice applicable was correctly enumerated in the plaintiffs’ instruction. (Jones v. Smith, 1 Hare, 43; 1 Sto. Eq. § 399, 400, 408 ; 3 Sugd. on Vendors, 471.) The instruction given for defendants was erroneous.