McDonald v. Daskam

JENKINS, Circuit Judge (after stating the facts as above). The objection that the oral agreement respecting the insurance wa’s supplanted by the written agreement in the note of May 15, 1899, and had no application to the transaction as finally consummated, cannot be sustained. The total amount of the loan had been received by the bankrupt prior to the giving of the note. The real estate mortgage had been assigned as early as March 1, 1899, having in fact been deposited as collateral prior to that date. .At the time of giving the note the loan was consummated pursuant to the oral agreement. The change in the manner in which the agreement was practically carried into effect is immaterial. Equity looks for the substance of things. As contemplated and as carried out, Daskam was surety for the money advanced to the bankrupt,—strictly so as between himself and the bankrupt, although technically as between him and the bank he may have stood as principal. It remain’s, however, that the loan was made and received under the arrangement that the insurance should stand as security for the indebtedness; and it is quite immaterial, with reference to his right to the insurance fund, whether Daskam gave his own note to the bank, or indorsed the paper of the bankrupt. In either event, as between himself and the bankrupt, he was surety, and entitled as such to all the rights which the oral agreement gave to him or to the bank. ° Having paid the debt for which he was bound to the bank, he is entitled to be subrogated to all rights and securities held by it. If, however, it may be held that the oral agreement under which the loan was made must be said to have become merged in the written note of May 15th, the evidence of the oral agreement is not in contradiction, but in explanation, of the note. It is manifest that the note was drawn upon a blank form of note, to be accompanied with deposit of collateral, with power of sale. It, perhaps, was inapt to the purpose, but it is not meaningless. It is at most indefinite. [280] We gather from the expression, “Fire insurance policies, should fire occur,”-that certain insurance, in case of loss by fire, was equitably assigned as collateral security, not that fire insurance policies had actually been deposited, for in such case the expression “should loss occur” is without purpose. The evidence of the oral agreement makes clear what otherwise might be doubtful,—the intention of the parties. Such parol evidence is admissible to explain the meaning of indefinite'' terms. The advances had been wholly obtained under and upon the faith of the parol agreement. The note was given upon the closing up of the matter, and, read in the light of the oral agreement, clearly discloses the intention of the parties. It declares that the insurance, if fire should occur, should stand as security for the payment. We cannot consider this agreement as a common-law pledge, and void because the policies were not given into the possession of Daskam or the bank. It was not a pledge of marketable security or of salable property. Whether we consider the verbal arrangement or the written note, it was an agreement for a beneficial interest in a chose in action,—a personal contract between the insurer and the insured. Under the modern rule, such an equitable interest may be created by parol as well as by deed. The transaction, in equity, amounts to an appropriation of any claim under the policies for any loss by fire which might occur. Nordyke & Marmon Co. v. Gery, 112 Ind. 535, 13 N. E. 683, 2 Am. St. Rep. 219. In Baillie v. Stephenson, 95 Wis. 500, 502, 70 N. W. 660, 661, the court, Speaking to the question whether certain transactions amounted to an assignment, said: “It, in the final analysis, all depends on the intention of the parties. If they intended it to be an assignment of the fund, equity will so treat it. In order to constitute an assignment in equity of a debt or chose in action, no particular form is necessary. Any order, writing, or act which makes an appropriation of the fund amounts to an equitable assignment of the fund. No writing is necessary. It may be by parol as well as by deed. It is sufficient if it amounts to a distinct appropriation of the fund by the debtor, and an agreement that the creditor shall be paid out of it.” See also Skobis v. Ferge, 102 Wis. 122, 78 N. W. 426. It is true that the statement in the note does not indicate the particular insurance; but that is made clear by the evidence, which shows that all the policies were in the keeping of the insurance agent for the parties interested, and that in all of them the los's was made payable to Edward Daskam, mortgagee, and that the clause in the note clearly referred to all the insurance upon the mill covered by these policies. That is also in accord with the letter of January 12th, under which the money was advanced. Subsequent to this oral agreement and to the note, and a few days before the fire, in July, 1899, the bankrupt caused to be indorsed upon two of the policies, “Loss payable to R. W. Roberts as his interest may appear.” Mr. Roberts at that time was a creditor of the bankrupt. The chief officer of the bankrupt intended by this to secure Mr. Roberts, subject to the claim of Daskam and the bank, under the mortgage, and for the $4,000 debt. It is conceded by counsel that the policies so indorsed were not delivered to Roberts until after the fire. This security wa's for an antecedent debt. Assuming Mr. Roberts to have had no knowledge of the equitable [281] rights of the bank and of Daskam upon this insurance over and above the amount of the mortgage debt, it still remains that Mr. Roberts parted with nothing upon the faith of this security, and gave no indulgence with respect to the debt upon the faith of the transfer. His equity, therefore, cannot outrank the equitable lien of Daskam and the bank. He simply stands, as respects this insurance, in the shoes of the bankrupt, taking that to which the bankrupt would have been entitled in case of loss after payment of the debts theretofore secured upon this insurance. It is claimed by the trustees with respect to the claims of both claimants to the fund that they constitute unlawful preferences created within four month's of the bankruptcy in favor of parties having reasonable cause to believe the insolvency of the bankrupt. It is only necessary to say with respect to Daskam and the bank, the equitable liens acquired by them respectively date, if bottomed upon the oral agreement, from January, 1899, and, if upon the note, from May 15, 1899,—more than four months before the bankruptcy,—and do not date from the actual delivery of the policies to the bank, after the fire; actual delivery and possession of the policies being not indispensable to the equitable lien. Spring v. Insurance Co., 8 Wheat. 268, S L. Ed. 614. As we are constrained to the conclusion that, the claim of Mr. Roberts must be subrogated to the claim of Daskam, it is unnecessary to consider the contention of the trustees with respect to him. The decree is affirmed.