International Trust Co. v. Boardman

C. Allen, J. There are two questions in this case: first, whether the plaintiff must apply the insurance money upon its claim; and secondly, whether the plaintiff is entitled to enforce the agreement of the assignee. 1. It has often been declared by this court, that where a mortgagee, at his own expense and without any agreement or understanding with the mortgagor, obtains insurance upon his interest as mortgagee, and collects the money from the insurer after a loss, he is not bound to account for it to the mortgagor, nor is the insurer entitled to be subrogated to the mortgagee's claim against the mortgagor. The insurance is a wholly collateral contract, which the law allows the mortgagee to make. White v. Brown, 2 Cush. 412. King v. State Ins. Co. 7 Cush. 1, 4. Foster v. Equitable Ins. Co. 2 Gray, 216. Loomis v. Eagle Ins. Co. 6 Gray, 396, 401. Suffolk Ins. Co. v. Boyden, 9 Allen, 123. Clark v. Wilson, 103 Mass. 219, 221. Haley v. Manufacturers’ Ins. Co. 120 Mass. 292, 296. Washington Mills v. Weymouth Ins. Co. 135 Mass. 503, 506. The defendant assumes that the insurer is not entitled to subrogation, and asks us to reconsider and overrule the doctrine that the mortgagee is not bound to account for the insurance money to the mortgagor; but we remain satisfied with the rule, and the reasons given for it in the cases above cited. The defendant then seeks to distinguish this case from the case of a mortgagee; but we see no valid distinction. A mortgagee is a creditor with the security of a mortgage. The plaintiff was a judgment creditor with the security of an attachment followed by a levy of the execution begun but not completed. [162] As such creditor, the plaintiff obtained the insurance, and after a loss by fire collected the insurance money. The debtor was in no way privy to this transaction, and could not have been made-chargeable with the premium, and stood no better than a mortgagor. 2. The present defendant, the new assignee, contends that the agreement of Mr. Boardman was unlawful, as promising to give to the plaintiff the benefit of property not attached. The consideration of the agreement was sufficient, it being the release by the plaintiff of its lien upon the real estate. The agreement did not have for its object the withdrawal of property from the general creditors, but the saving of property for them. It is conceded that the motives of Mr. Boardman were good. The agreement therefore was not unlawful because of any improper motive but if unlawful, it was so because it was ultra vires. This argument, if carried out, must go to the length that an assignee has not the power to put at risk any property, however small, for the purpose of securing any advantage, however great. But this proposition could not be maintained in its full length and breadth; an assignee must be at liberty, within reasonable limits, to expend money for the purpose of benefiting the estate. The statutes require this, by allowing him to prosecute doubtful claims, to avoid preferences and fraudulent conveyances, and to accept and hold under leases. Pub. Sts. c. 157, §§ 26, 46, 51, 96, 98. It must necessarily be within the power of an assignee to enter into some contracts for the benefit of the estate, although they may involve'disbursements. Abbott v. Stearns, 139 Mass. 168. But, moreover, the statutes expressly provide that “ the assignee may redeem all mortgages, conditional contracts, pledges, and liens of or upon any goods or estate of the debtor, or sell the same subject to such mortgage or other incumbrance.” Pub. Sts. c. 157, § 46. The plaintiff’s attachment and levy constituted a lien, and the statute is broad enough to have authorized the assignee to pay off the lien, or to sell the property subject to it. Of course judgment and discretion must be used, but we have no concern here with the question what his liability might be, upon the settlement of his accounts, in case of negligence or otherwise. Since the assignee had power to [163] pay off the lien before making sale of the property, he had power to promise to pay it off after making such sale, and that includes the power to make such promise, not absolutely, but limited by the amount that certain specified property should bring when sold. We cannot, therefore, say that the contract was invalid because ultra vires. There is another view of the case which leads to the same result. Let it be assumed that the assignee had not the power to promise to apply the proceeds of the unattached property to the payment of the plaintiff’s claim; yet that part of the contract is severable from the rest. The assignee was not under the agreement bound to sell the whole property, both that which was attached and that which was unattached, for one integral sum, without discriminating how much of the price was for attached property and how much for unattached. Under this state of things, the consideration being lawful, and the lawful part of his promise being severable from that which was unlawful, he might be held upon so much of his promise as was lawful. Rand v. Mather, 11 Cush. 1, 7. Bishop v. Palmer, 146 Mass. 469, 475, and cases there cited. Gelpcke v. Dubuque, 1 Wall. 221. Odessa Tramways Co. v. Mendel, 8 Ch. D. 235. Pickering v. Ilfracombe Railway, L. R. 3 C. P. 235, 250. It was therefore his duty to keep the proceeds separate. He could not by mixing them up enable himself or his successor in office to say that his agreement was unlawful in part, and that therefore there should be no liability whatever upon it. The duty rested upon him to keep that fund for which he was accountable separate from that for which he was not accountable; and if by reason of his failing to do so he was unable to show how much of the proceeds of the sale he was entitled to keep, he must account for the whole. Lupton v. White, 15 Ves. 432. Cook v. Addison, L. R. 7 Eq. 466, 470. Lewin on Trusts, (8th ed.) 273. The new assignee, who makes this defence, stands in the place of the original assignee, and is substituted to his rights and liabilities in this respect. Decree affirmed.