Summary
In Aetna Ins. Co. v. Natchez Hotel Co., 160 Miss. 818, 134 So. 582 (1931), the insurance company withheld payment of the adjusted loss under an insurance policy because of the intervention of a third party who claimed the money.
Summary of this case from Commercial Union Insurance Company v. ByrneOpinion
No. 29410.
May 18, 1931.
1. INSURANCE.
After adjustment of losses under fire policies, relation between insurers and insured and its mortgagee was that of debtor and creditor.
2. INSURANCE.
Expenses incurred in resisting unfounded claim to insurance did not affect amount of insurer's admitted liability.
3. INSURANCE.
Fire insurers held not entitled to reimbursement of expenses incurred in resisting unfounded claim.
4. INSURANCE.
Fire insurers held properly charged with interest from date of filing original bill to date principal was paid into court.
5. INSURANCE.
Where decree against insurance company included interest to time funds were paid into court, decree properly provided that amount due should bear interest (Code 1930, section 1949).
6. COSTS.
Where insured instituted proceedings against insurers and others primarily to enjoin latter from prosecuting another suit, insurers should not have been taxed with costs other than those incurred by them incident to disposition of counterclaim they asserted.
APPEAL from chancery court of Adams county; HON. R.W. CUTRER, Chancellor.
Brandon Brandon, of Natchez, and J.C. Hollingsworth and R.W. Leche, both of New Orleans, La., for appellants.
A garnishee is a kind of stakeholder; he has no right to enter into the contest between the plaintiff and defendant in the suit, nor to change his position towards either, after notification of the attachment. He is to render a true and faithful account, and can contest only in relation to what he is owing contradictory with both parties, and pay to the one entitled to receive the balance found due.
Bean v. The Mississippi Union Bank, 5 Robinson 333.
Brandon Brandon, of Natchez, for appellants.
A person in the legal possession of money or property acknowledging a trust with the assent of the cestui que trust becomes from that time a trustee, if the acknowledgment be founded on a valuable consideration. So if before a declaration of trust a party be a mere debtor, a subsequent agreement recognizing the funds as already in his hands, and stipulating for its investment on the creditor's account, will have the effect to create a trust.
26 R.C.L., section 38, page 1201; Hamer v. Skidway, 124 N.Y. 538, 27 N.E. 256, 21 A.S.R. 693.
The garnishee is in fact a trustee and particularly in this case where trust funds were the subject of the garnishment.
12 R.C.L., section 2, page 775.
The effect of service of process of garnishment upon a party is to impound the funds in the hands of the garnishee.
Farmington v. Fleming Comm. Co. et al., Merchants' Bank of St. Joseph, Intervenor, 94 Neb. 108, 142 N.W. 297, 47 L.R.A. (N.S.) 742.
No particular expressions are necessary to create a trust. Any language clearly showing the settler's intention is sufficient if the property and disposition of it are definitely stated.
Lamar v. Sidway, 12 A.L.R. 472.
A person in the legal possession of money or property acknowledging a trust with the assent of the cestui que trust becomes from that time a trustee, if the acknowledgment be founded on a valuable consideration. His antecedent relation to the subject, whatever it may have been, no longer controls.
2 Storey Eq. Jur., section 972.
If before a declaration of trust a party be a mere debtor, a subsequent agreement recognizing the fund as already in his hands and stipulating for its investment on the creditor's account will have the effect to create a trust.
Day v. Roth, 18 N.Y. 448.
"Resulting Trust" or trusts deducible from the nature of the transaction, although unexpressed by the words of the parties are superinduced upon the terms of the transaction by the operation of law as a matter of security for the purpose of carrying out the presumed intention of the parties in order to protect their rights, independent of their intention in fact.
Mays v. Sisters of Mercy at Vicksburg, 135 Miss. 505, 99 So. 468.
The trustee holds the trust estate for the cestui que trust and to effect the purposes and objects declared by the trust instrument, and it is incumbent upon him to preserve and protect the trust property for all the beneficiaries and to administer it strictly in compliance of the terms of the trust. Failing to perform this duty he is liable for any injury sustained by any person beneficially interested.
26 R.C.L., section 131, page 1281.
Under no circumstances can the garnishee who is innocent in the proceedings be by operation of the proceedings against him placed in any worse condition than he would be if defendant's claim against him were inforced by the defendant himself.
12 R.C.L., section 92, page 850.
All the courts seem to agree that a garnishee who is not in fault should be protected in some manner from being compelled to pay the same debt twice and from being harrassed by a multiplicity of processes.
12 R.C.L., section 100, p. 853.
Payment under a void garnishment proceeding is no defense and if the judgment be obtained through the wilful default of the garnishee, payment of the same will not protect him.
12 R.C.L., section 856.
It is the duty of the garnishee when garnished in a foreign jurisdiction on a void contract to make defense, or, if practicable to notify the debtor to do so; otherwise, a judgment against the garnishee is of no protection to him.
Stewart v. Northern Assurance Co., 45 W. Va. 734, 32 S.E. 218, 44 L.R.A. 101.
Failure to interplead or assert the right of a third party in the debt may make the garnishee liable to both the plaintiff in garnishment and the third party.
Hardy v. Hunt, 11 Cal. 343, 70 Am. Dec. 787.
A garnishee should assert the rights of a third party and on the failure of the court to interplead the third party or to require the third party to come in and defend the action, it is the duty of the garnishee to make the defense.
12 R.C.L., sections 104, 105, p. 858; Russell v. Allen, 110 Miss. 772, 70 So. 890; Airey and Stouse v. Hoke, 164 La. 998, 115 So. 60.
A rule which has been applied in a great variety of cases affecting the administration and execution of trusts is that the trustee has the right whenever necessary to the proper administration, preservation, and execution of the trust and the prosecution and defense of actions, to employ counsel and to be reimbursed from the trust estate for whatever sums he has paid for the services of such counsel. The rule is applicable even though the cestui que trust employed counsel to represent the same interests, and although to a certain extent, the private and personal interest of the trustee may also be involved in the litigation. Counsel fees are a charge on the trust fund, however, only when they are reasonable and necessary, and contributed to the due administration of the trust. In determining the liability of the trust estate, the number of attorneys employed, the necessity of their employment and the reasonableness of the fees paid or agreed to be paid, are proper subjects for consideration.
39 Cyc., par. E, 339.
The rule has been sanctioned both in England and in this state to allow persons acting in a fiduciary capacity all reasonable counsel fees paid in prosecuting or defending suits for the estate in the bona fide assertion or protection of its interests; and this rule is equally applicable to trustees.
Shirley v. Shattuch, 28 Miss. 2; Gwin v. Fountain, 126 So. 18.
It is the general rule that a trustee will be reimbursed from a trust estate for all necessary and reasonable expenditures which he has made, including payments made by virtue of the express authority of the trust instrument, all necessary and reasonable expenses incurred in carrying out the direction of the instrument and all reasonable expenses incurred in protecting and preserving the trust property.
26 R.C.L., sec. 132, pages 1281-1282.
That service (that of the attorney involved in the suit) was rendered in bringing the funds back within the jurisdiction of the only tribunal competent to deal with them and dispose of them for the benefit of the parties entitled. Such service contributed to the legal preservation of the funds and a reasonable compensation to them is a proper charge on the funds. The facts furnish a novel application of the rule, but one within the principle of the rule.
Tishomingo Savings Institution v. Allen, 76 Miss. 114, 23 So. 305.
In a broad sense any fund against which an allowance for attorney's services may be charged on the theory that all interested in the fund have been benefitted by the services, is a trust fund and allowance is often said to be made for services in the protection of a common trust fund.
49 A.R.L., pages 1149-1197.
Interest should not have been allowed and decreed against these appellants in this cause. Immediately upon a disposition being made of the Louisiana proceedings the funds and amounts were deposited with the clerk of of the chancery court of Adams county, Mississippi, in this cause. The funds did not bear interest as a matter of contract, such as would have been the case in an indebtedness on a promissory note bearing interest.
28 C.J., secs. 342, 343, 344, 345, 346, pages 247-249.
The interest, if allowable at all on this judgment, should not have been calculated into the face of the judgment and then interest allowed on the total, for so to do compounds the interest, and it is not comtemplated in the statute that interest on interest should be paid by a debtor.
Tierman v. Minghini, 28 W. Va. 314; Boardman v. Patterson, 1 Gil. M.D. 372.
The matter of taxing of costs is a matter within the sound discretion of the court; but the action of the court below in taxing all costs of this proceeding to these appellants was an abuse of that discretion. These appellants have been and are innocent stake-holders throughout this litigation.
Kennedy Geisenberger, of Natchez, for appellees.
The true relation existing between parties to an insurance contract is that of conditional creditor and debtor, the condition becoming absolute upon damages or destruction of the subject matter of the contract by the forces insured against. The relationship is more nearly analogous to that of banker and depositor than to any other that can be instanced.
Vance on Insurance, page 78; Uhlman v. Insurance Co., 109 N.Y. 421, 17 N.E. 363, 4 Am. St. Rep. 482; People v. Security Life Insurance Annuity Co., 78 N.Y. 114, 34 Am. Rep. 522.
The payment of this fee, and the duty to pay it, should not be transferred to appellees. In contesting the garnishment in the Louisiana suit, the appellants through their attorneys, did that which should have been done for their protection but, having made the contest, they cannot recover attorney's fees therefor.
28 C.J., Garnishment, page 349.
Appellants could have stopped the running of interest at any time by tendering into court the proper amount, with interest, up to date of tender, but they did not do that, but, on the contrary, held the money in their own hands and had the full use and benefit thereof.
Willey v. St. Charles Hotel Co., 28 So. 182.
If a garnishee assumes the attitude of a litigant by resisting application of the debt due from him to the payment of plaintiff's claim against the principal defendant, he is liable subsequently to defendant for interest during pendency of the garnishment proceeding despite the general rule of his non-liability for interest recoverable only as damages for breach of contract by the detention of money.
28 C.J., section 347.
Whatever may be the rule in other states, it is distinctly settled in this state that a garnishee is liable for interest on the debt due by him pendente lite. Nor do we think that if it was question of first impression, we would be disposed to announce a different conclusion. A garnishee who admits the debt due, and is unwilling to retain the money on interest, can always escape the necessity of doing so by paying it into court; and if he does not do this, it is proper that the continued payment of interest should fall on him rather than that its loss should be suffered by the creditor who is legally entitled to receive, and cannot be deprived of it, where he has done nothing to subject him to such an impairment of the obligation of his contract.
Work v. Glaskins, 33 Miss. 539; Smith v. German Bank, 60 Miss. 69.
While there are some decisions in which a contrary conclusion has been reached, it has very generally been held that a judgment bears interest upon the whole amount thereof, although such amount is made up of interest on the original debt.
33 C.J., page 253, sec. 174.
The taxation of costs in suits in chancery lies largely within the discretion of the court, and a finding of the court will rarely be disturbed unless it is shown to be unconscionably unjust.
Sledge v. Obenchain, 59 Miss. 616; Liberty Mercantile Co. v. Allen, 134 Miss. 354, 98 So. 774; Sec. 672, Miss. Code 1930.
If appellants desired to relieve themselves of payment of costs, they should have, instead of contesting the appellee's demands, tendered the money into court under sections 563 and 564 of Mississippi Code of 1930, which, by virtue of section 474, of said Code, are made applicable to the proceedings in chancery as well as in courts of law.
Argued orally by Gerard Brandon and R.W. Leche, for appellants, and by W.A. Geisenberger, for appellee.
Another branch of this cause was before this court at a former term, and the opinion then rendered is reported in Davis v. Natchez Hotel Co., 158 Miss. 43, 128 So. 871; and reference is here made to that opinion for an outline of the pleadings, issues, and contentions of the parties up to the time of the first appeal, and the subsequent remand of the cause to the lower court. One additional statement in reference to the pleadings prior to the first appeal may be of value in explanation of the subsequent pleadings, and that is that the appellant insurance companies filed an answer to the bill of complaint, in which they denied all knowledge of any transactions between the complainants therein and the Natchez Hotel Company, and set forth in detail the facts in reference to the insurance contracts, and the adjustments of losses thereunder, the attachment and garnishment proceedings between Liza S. Davis and her husband A.V. Davis, and the Natchez Hotel Company, in the Louisiana court, and their answers thereto, in which they denied any liability to said hotel company, but averred that the sums of money admitted to be due were payable by statute, and by contract, to the Britton Koontz National Bank, as trustee for the bondholders, as the interest of the bank, as trustee, might appear. They further averred that immediately on service of summons on them in the Louisiana proceedings they notified the Britton Koontz National Bank and the Natchez Hotel Company of the suit, and that the effect thereof was that they could not voluntarily make payments to either of them, and calling upon them to appear in said suits and defend their rights therein as against the said Mrs. Liza S. Davis and her husband, and thereby protect and save harmless the said insurance companies as stake-holders, and relieve them of any cost or expense incident thereto; that the said hotel company and bank failed and neglected to do so, but did have their attorneys present in court at the trial of the traverse of the answer filed by them in the Louisiana proceedings.
This answer further averred that the plaintiff and and attaching creditor in the Louisiana suit traversed the answers filed by them; that, after a full trial in the Louisiana civil district court, a judgment was rendered against them for the amounts admitted by them to be due on the aforesaid insurance contract; that at various stages of the proceedings in Louisiana they repeated their request to the hotel company and Britton Koontz National Bank to defend their rights therein; that, following their failure or refusal to appeal from the judgment rendered by the Louisiana court, they (the insurance companies) perfected an appeal to the proper Court of Appeals, with supersedeas, and paid all necessary fees to perfect such an appeal; and that in these proceedings they were required to employ counsel and incur attorneys' fees in a large amount; and the answer was made a cross-bill, presenting as counterclaim the expenses and attorneys' fees incurred by them in the Louisiana suit, and in the proceedings now before this court.
While the cause was pending in this court on the appeal of Mrs. Davis and her husband, the several defendant insurance companies filed a supplemental answer and cross-bill, setting forth at length and in detail their position as stakeholders between the said Mrs. Davis and the Natchez Hotel Company and the Britton Koontz National Bank, and their acts in connection with the said Louisiana litigation, the expenses and attorneys' fees necessarily incurred therein, and also the expenses and attorneys' fees incurred in the present proceedings, all of which they propounded as counterclaims to be paid out of any money due by them under the said insurance contracts, and averred that on May 8, 1930, upon the motion and at the request of the plaintiff therein, Mrs. Liza S. Davis, the Louisiana suit against the Natchez Hotel Company was finally abandoned and dismissed; and thereupon, with this amended answer, they tendered into the chancery court of Adams county the several amounts due by them, and prayed that they be allowed out of the funds the expenses incurred in said suit, including an attorney's fee of one thousand dollars, and be relieved of all liability, costs, charges, and expenses, over and above the sums deposited in court; it being averred that such sums were paid into court with all reasonable dispatch, after the disposition of the Louisiana suit.
To the joint answer and cross-bill of the defendant insurance companies, the Natchez Hotel Company and Britton Koontz National Bank interposed demurrers, and, upon a hearing thereof, the court sustained these demurrers and dismissed the cross-bill; and the defendants Mrs. Liza S. Davis and A.V. Davis having withdrawn all answers and other pleadings filed by them in said cause, the court thereupon entered a final decree, directing the clerk to pay over to the Britton Koontz National Bank the sums and amounts which had been paid into court by the defendant insurance companies, and awarding a recovery from the said defendant insurance companies of the respective amounts admitted to be due by them under the several insurance contracts, with interest at the rate of six per cent per annum from February 6, 1929, the date of the filing of the original bill herein in the chancery court of Adams county, to May 26, 1929, the date of the payment of said sums into court, and all costs expended in this cause. From this decree the several said insurance companies prosecuted this appeal.
The appellants present three contentions which it will be necessary to pass upon in the disposition of this appeal; these contentions being, first, that the court below erred in refusing to allow them, out of the funds paid into court, the expenses and court costs incurred in the Louisiana litigation, amounting to one hundred forty-one dollars and thirty-three cents, and attorneys' fees incurred by them in the sum of one thousand dollars; and, second, that the court erred in awarding a decree against them for interest on the sum paid into court, from February 6, 1929, to May 26, 1930; and, third, that the court erred in taxing them with all costs of this proceeding.
Upon the contention of the appellants that they were entitled to be reimbursed out of the sums due by them under the contracts of insurance and the mortgage clauses attached thereto, their argument proceeds throughout on the theory that the money so due constitutes trust property, or a trust fund, in the protection, preservation, and proper application of which they had an interest, and a legal duty to perform.
The contention that, after the adjustment of looses under the policy contracts, the relation between these insurance companies and the policyholder and its mortgagee, under the mortgage clauses attached to the policies, was that of trustee and cestui que trust, is not maintainable. The relation was rather that of debtor and creditor, and the creditor to which the funds were, in fact, payable under and by virtue of the mortgage clauses attached to the policy contracts was not a party to the Louisiana attachment proceedings. The fortuitous circumstance that these appellants were required to incur expenses in protecting themselves from paying the funds to one asserting an unfounded claim thereto did not in any way affect the amount of their admitted liability to the mortgagee to which the funds were payable, and did not entitle them to reimbursement out of the funds so due for costs, expenses, and attorneys' fee incurred in protecting themselves from the danger of double payment of the amounts due.
The appellants next contend that it was error to charge them with interest on the amounts admitted to be due and owing to the Britton Koontz National Bank from February 6, 1929, the date of the filing of the original bill in this cause, to May 26, 1930, when the principal of said amounts was paid into court.
We have reached the conclusion that under the doctrine announced in the case of Work v. Glaskins, 33 Miss. 539, and reaffirmed in the case of Smith v. German Bank, 60 Miss. 69, the court below committed no error in allowing this interest. The adjusted losses under the policy contracts bore interest, as a legal incident, from the time they were due to be paid to the party entitled thereto by statute and contract, and the failure or inability of the appellants to pay was due to no act or fault on the part of the creditor. In the case of Work v. Glaskins, supra, the court said that:
"It [interest] is a right to which he is entitled by contract, and of which he cannot be deprived by the mere intervention of a third party, without fault or laches of his own. And however the question may be, in that class of cases where interest is allowed by courts upon the general equitable principle, of giving damages for the unjust detention of the creditor's money, and in which courts, in their equitable discretion, have held that parties, who have been prevented by legal process, from paying money due by them, should not be subjected to damages, as for an unjust and unconscientious failure to pay the debt, where the interest is by law a necessary incident to the contract, it is a right of which the creditor cannot be deprived but by his own conduct. For that would clearly be an impairing of the contract. The creditor holds his debtor's note, to which the law affixes the right of interest, in case of default of payment at maturity, as a part of the contract. He has done no act to forfeit that right; and yet because a third party has seen fit to interpose and claim the money unjustly, but by legal process to which he was not a party, it is claimed by the debtor, that the creditor must loose his just legal right. If so, where is his remedy, in case the party interposing fail in his claim? For he must surely have a remedy somewhere for the injury occasioned him. It cannot be against the party who has sought to appropriate the debt to his own use; for that proceeding did not necessarily prevent him from collecting his debt by law. It is manifest that his right must remain unimpaired against his debtor, according to the obligation of his contract."
The asserted hardship resulting from the application of this doctrine is more apparent than real; for the appellants retained this money throughout the pendency of the litigation in Louisiana, and, for aught that appears in this record, had the full and free use thereof during that time.
The decree against the appellants includes interest accrued to May 26, 1930, and provides that the amounts adjudged to be due shall bear interest at the rate of six per cent per annum from the date thereof, and the appellants contend that it was error to allow interest on the interest incorporated in the amounts decreed to be due by each of them. There is no merit in this contention. We have already held herein that interest on the principal sum due was recoverable, and by statute, section 1949, Code of 1930, all judgments and decrees other than those founded on the contract fixing the rate of interest shall bear interest at the rate of six per cent per annum.
The appellants next complain of the action of the court below in taxing them with all the costs of this suit. The appellee instituted this proceeding primarily against Mr. and Mrs. Davis, seeking to enjoin them from further prosecuting the suit in the Louisiana court, and in the final decree here appealed from this injunction was made perpetual, and we do not think these appellants should have been taxed with any of the costs of the suit other than those which were incurred by them, and which were incident to the disposition of the counterclaims asserted by them. Consequently, in so far as the decree of the court below taxed the appellant with all the costs of the suit, it will be reversed, and a decree will be entered here, taxing them with all the costs incurred by them in the court below, and all costs incident to the disposition of their counterclaims. In all other respects, the decree will be affirmed, and three-fourths of the costs of this appeal will be taxed against the appellants, and one-fourth against the appellees; and the cause will be remanded for such further taxation of the costs of the court below as may be necessary and proper.
Affirmed in part, and reversed in part, and remanded.