dissenting. As I understand this case, the result actually turns upon whether appellees had an equitable lien on the insurance proceeds and, if so, whether it was prior and superior to the rights of appellants. I do not think they did. They could not have had any more than an equitable lien, since they were not named in the loss payable clause. The chancery court’s decree was based, at least in part, upon a finding that the insurance money represented the mortgaged property and that there was, in effect, an equitable conversion of the mortgaged property. This is not entirely consistent with our decisions. See Whitley v. Irwin, 250 Ark. 543, 465 S.W. 2d 906; Langford v. Searcy College, 73 Ark. 211, 83 S.W. 944; McDonald v. Rankin, 92 Ark. 173, 122 S.W. 88; National Union Fire Ins. Co. v. Henry, 181 Ark. 637, 27 S.W. 2d 786. We have even held that a mortgagee who effects insurance upon mortgaged property at his own expense and for his own benefit is entitled to the proceeds of the insurance without applying the proceeds to the mortgage debt. Ponder v. Gibson-Homans Co., 166 Ark. 591, 266 S.W. 682. It is true that we have said that the proceeds of insurance procured in compliance with the terms of a mortgage and collected by the mortgagee represented the insured property and constituted an equitable conversion of it, so that the mortgagee was entitled to apply the insurance proceeds to the mortgagor’s debt as he saw fit rather than in a manner which would benefit an endorser of some of the notes secured by the mortgage. Kissire v. Plunkett-Jarrell Grocer Co., 103 Ark. 473, 145 S.W. 567. The same principles were followed in Sharp v. Pease, 193 Ark. 352, 99 S.W. 2d 588. In that case, however, the mortgagor and the mortgagor’s successor in interest had failed to have a loss payable clause inserted for the benefit of the mortgagee, but the mortgage contained a specific provision that the absence of a loss payable clause or an assignment of the policy taken out pursuant to the terms of the mortgage would not affect the right of the mortgagee to the policy proceeds. The rights of third parties were in nowise involved there, because the litigation was between the mortgagee and the administrator of the estate of a purchaser from the mortgagor, and both the mortgagor and the purchaser had contracted to keep the property insured for the benefit of the mortgagee. The court based its holding in favor of the mortgagee upon the premise that had the purchaser lived and collected the insurance herself she could have been held accountable to the mortgagee. The proceeds were actually paid to her administrator.
On January 27, 1971, Gale Clark executed an assignment of the insurance proceeds in consideration of the assignees’ withholding of further legal proceedings to collect certain judgments. The assignment was to Trantham and Knauts for the use and benefit of the following in the sums set opposite their names:
National Bedding & Furniture Industries, Inc.
$3,571.87
Forsyth Williams Company 270.49
Mid-South Bedding Company 662.62
Authentic Furniture Products 126.25
William R. Moore, Inc. 399.97
Cooke’s Mfg. Co., Inc. 435.16
Rawleigh, Moses & Co., Inc. 209.94
Lampcraft Industries, Inc. 118.44
Hi-Lo Ind., Inc. 360.48
Total Assignment $6,155.22
Notice of this assignment was given to Maryland Casualty Company.
A lien on real or personal estate will be enforced in equity against the owner of the property and against anyone who afterwards takes the estate with notice of it, on the basis that the lien is in the nature of a trust which equity will compel the holder of the legal title to perform. Talieferro, Executor v. Barnett, 37 Ark. 511. It might well be that as between the son and the parents there was an enforceable lien against the insurance proceeds. But it does not follow that the lien is enforceable against the assignees who withheld collection procedures in consideration of the assignment.
The equitable lien actually depends upon the insurance having been procured pursuant to the covenant or agreement as to insurance in the security agreement. I submit that the evidence clearly preponderates against such a finding. The policy was not issued until October 13, 1970, more than three years after the execution of the security agreement. Even then appellees were not mentioned in the loss payable clause, which was in favor of Hupp Credit Corporation and GAC Corporation. The debt to the former was paid out of the policy proceeds. The debt to the latter must have been paid before the fire. There was no evidence that the policy was taken out pursuant to the security agreement or that the parents ever knew about it or the insurance company about them. The action of Clark in making the assignment relied upon by appellants is certainly inconsistent with the theory that the policy was obtained in compliance with the security agreement. Certainly there is no reason to believe that, by doing so, he intended to defraud his parents who had furnished original financing for his business venture. Other pertinent facts are that there is no evidence that the parents ever requested the delivery of any insurance policy, or that they availed themselves of the right to obtain insurance as the son’s agent, as they had a right to do under the security agreement. As a matter of fact, there is nothing in the record to show that there was no other insurance which inured to the benefit of appellees.
In Stearns v. Quincy Mutual Life Ins. Co., 124 Mass. 61, 26 Am. Rep. 647 (1878), the court held that a mortgagee was not entitled to recover the proceeds of a fire insurance policy procured by the mortgagor, even though the terms of the mortgage required the mortgagor to keep the property insured against fire for the benefit of the mortgagee. The insurance company issued the policy without any knowledge of the terms of the mortgage, although it knew that there was a mortgage in favor of the mortgagee. There was neither a loss payable clause nor an assignment of the policy or of the claim for loss. It was not shown that the mortgagee had any knowledge of the insurance until after the loss. The court fully recognized the doctrine regarding equitable liens in favor of a mortgagee on the insurance policy and its proceeds whenever the mortgagor procures insurance with the intention of performing his promise to obtain insurance for the benefit of the mortgagee. The court said:
In all the cases found, which support the claim of the mortgagee to insurance obtained by the mortgagor in his own name, the facts were such as to justify the conclusion, by estoppel or otherwise, that such insurance was obtained by the latter as the agent of, or with intent to perform the obligation he had assumed to, the former. * * *
In the case at bar, the facts agreed do not justify the inference that this policy was obtained with the intention, at the time, to perform the condition in the mortgage. That condition required insurance on the dwelling-house only, in a sum not less than $3,200, for the benefit of the mortgagee, at such offices in Massachusetts as he should approve. This insurance was obtained without his approval or knowledge, more than a year after the mortgage was made, for $2,000 in all, $500 of the same being on the mortgagor’s personal property not covered by the mortgage, and only $1,500 on the house. Both mortgagor and mortgagee had an insurable interest in the property, and each had the right to protect himself from loss by his own contract of insurance. So far as these facts go, the inference is that Stearns intended to insure only his own interest in the house as well as in the personal property. And the important element is lacking which is necessary to establish the claim of Andrews.
The Massachusetts court has pointed up the exact reason why the equitable lien doctrine has no application here.
Even if an equitable lien existed, it would not take priority over an assignment unless the assignee had notice of the existence of the lien. Maryland Casualty Co. v. Lincoln Bank & Trust Co., 40 F. Supp. 782 (D. C. Ky. 1941); Stepp v. McAdams, 88 F. 2d 925 (9th Cir. 1937); Prudential Ins. Co. of America v. Wetzel, 212 Wis. 100, 248 N.W. 791 (1933). See also, Beebe Stave Co. v. Austin, 92 Ark. 248, 122 S.W. 482, 135 Am. St. Rep. 172. I submit that the appellants are not chargeable with either actual or constructive notice.
Appellants gave valuable consideration for the assignment of the proceeds of the policy to them, in the form of forbearance of collection procedures, so they are not in the position of one claiming under a voluntary conveyance or transfer. Federal Compress & Warehouse Co. v. Hall, 209 Ark. 274, 189 S.W. 2d 922. They had no notice of the alleged equitable lien. The only basis upon which appellants could have been charged with any notice is the security agreement itself. They certainly were not charged with notice of the “assignment” of insurance proceeds in the security agreement because that is a matter specifically excluded from the operation of the code. Ark. Stat. Ann. § 85-9-104 (Add. 1961). Consequently, filing under the code cannot constitute notice as to the assignment even of insurance obtained in compliance with this security agreement. It could only constitute notice that appellees had a perfected security interest in the collateral. Furthermore, the proceeds of the insurance policy do not constitute “proceeds” of the collateral which the lien of the perfected security interest would reach. Ark. Stat. Ann. § 85-9-306 (Add. 1961); 4 Anderson, Uniform Commercial Code (2d Ed. 1971) 308; Quigley v. Caron, Me., 247 A. 2d 94 (1968); Universal CIT Corp. v. Prudential Invest. Corp., 101 R. I. 287, 222 A. 2d 571 (1966). The holding in the case just cited is premised at least in substantial part upon the rule so often recognized by our decisions, i.e., that an insurance policy is a personal contract which does not attach to or run with the property involved.1 The Rhode Island court also held that an involuntary conversion of property (loss by demolishment in an accident) cannot be a “sale, exchange, collection or other such disposition” under the code. In that case, a creditor, who was holder of an assignment made after the loss, prevailed over , the holder of a security interest.
Clearly, appellants are not chargeable with either actual or constructive notice of an equitable lien.
I respectfully submit that the cases cited by the majority do not support its result, and are clearly not contrary to my position. In Winneshiek Mutual Insurance Assn. v. Roach, 257 Iowa 354, 132 N.W. 2d 436 (1965), the court only held that the mortgagee’s pleading sufficiently alleged that the policy in question was taken out pursuant to agreement with the mortgagor and that a mortgagee clause furnished actually was intended to apply to the policy involved. In Abilene Truck Company v. Petrey, 384 S.W. 2d 211 (Tex. Civ. App. 1964), the only question involved was the effect of the absence of a loss payable clause. There is little room for doubt that the policy there was procured in compliance with the mortgage. At least no question was raised on this point. In Sumlin v. Colonial Fire Underwriters, 158 Fla. 95, 27 So. 2d 730 (1946), one policy involved was delivered by the mortgagor to the mortgagee, who had not presented it to the insurance company for endorsement and it contained no loss payable clause. Another policy had been taken out by the mortgagee without notice to the mortgagor before the delivery of the first policy. Both policies were for the insurable value of the property. The court merely affirmed a judgment requiring each insurance company to bear one-half of the loss and denying the right of the mortgagor to recover on one policy and the mortgagee on the other. I suggest that a different result probably would have been reached in this jurisdiction.
I would reverse the decree of the chancery court.
I am authorized to state that Mr. Justice George Rose Smith and Mr. Justice Brown join in this dissent.See Whitley v. Irwin, supra; Langford v. Searcy College, supra; McDonald v. Rankin, supra; and National Union Fire Ins. Co. v. Henry, supra.