Fowler v. Atlantic Mutual Insurance — 21 N.Y. Super. Ct. 332

Majority

p. 332

John W. Fowler, Plaintiff, v. The Atlantic Mutual Insurance Company, Defendants.

Headnote

1. It seems that where an agent for several part owners of a vessel who are tenants in common, is by them instructed to keep their respective interests insured, but without any more specific directions, and he takes out various policies in his own name for the benefit of whom it may concern, he may appropriate the policies to the benefit of the respective owners severally, so as to give each a policy for his own benefit to the exclusion of the others.

2. But in such a case, one part owner, to whom a policy, covering an amount corresponding to his interest, has been appropriated by the agent and transferred by the written consent of the Insurance Company, cannot maintain an action on the policy in his own name alone, against the objection of the company, that other part owners are still interested in the policy, not having assented to such appropriation, and that, therefore, they are necessary parties to a determination of the controversy.

3. An answer setting up the non-joinder of parties, alleged to be necessary co-plaintiffs in an action on contract, may be sustained by proof that some of the persons named for this purpose, are parties in interest. The defect of proof in not showing that all those named are such, presents a case of variance only, which may be disregarded unless the plaintiff has been misled.

(Before Bosworth, Oh. J., and Monomer and White, J. J.)

Heard, May 9 th;

decided, June 29th, 1861.

Oase, heard upon exceptions, directed by the Judge at

p. 333

the Trial Term, to be heard in the first instance at the General Term, and the judgment in the meantime suspended.

In 1857, Messrs. Stanton & Thompson were agents of the vessel Knickerbocker, and authorized by several part owners to keep their interests in the vessel insured at a valuation of $50,000. Mr. Stanton, of the firm of Stanton & Thompson, was a part owner in the vessel to the amount of J-6. The other part owners were Eouse Babcock r6, Simon Y. Peabody x-6, Joshua Aiken and Joshua Aiken, Jr., A, John W. Fowler, (the plaintiff in this action,) Jo, Mr. Forgay J6, John Connor J-0, Thomas Collyer J-6.

Stanton & Thompson had verbal authority from the part owners to effect insurance to cover their interests. Ko particular instructions were given as to what companies or what amounts, except that it should be at a valuation of $50,000. These instructions were given by the several owners separately. Stanton & Thompson effected insurances in several different companies, and one of the policies which they took out covered an interest of J-6. This policy was issued by the defendants.

The intention of Stanton & Thompson, as it appeared by the testimony, was that these insurances were effected for the joint account of all concerned, and on taking out the policy in question, they passed it merely as a matter of clerical convenience, as one of them testified, to the account of Mr. Fowler, (the present plaintiff,) Mr. Forgay and Mr. Connor, who were each owners of J6 interest.

On January 20th, 1858, Mr. Peabody, who owned tit, died and the plaintiff in this action became his administrator. On April 9th, 1858, on the application of the plaintiff, and the indorsement by him of the premium note, Stanton & Thompson indorsed and delivered to Mr. Fowler the policy in suit, as covering his interest, and that of Peabody, his intestate; and at the same time the defendants, in consideration of Mr. Fowler’s indorsing Stanton & Thompson’s note given for the premium, made a marginal agreement on the face of the policy, transfer

p. 334

ring the same to him, in part as administrator, and in part for himself.

On the maturity of the note, it was not paid by Stanton & Thompson, but was protested, and then paid by plaintiff, less a credit by reason of a partial loss receipted on the note by the defendants.

The vessel was lost before the maturity of the policy; and the plaintiff now sued thereon, claiming to recover one-third in his own right, and two-thirds as administrator.

At the time of the loss, including the policy in suit, there was the full line of $37,500 of insurance on the f of the Knickerbocker, effected bjr Stanton & Thompson, who subsequently, retaining two of the policies themselves, transferred the others to the other owners for whom they were agents, except in the case of two such owners, James Oonnor and William Forgay, who declined to receive the policies tendered them, claiming that to the extent of the two-thirds the amount covered by the policy in suit it was taken out specially for, and belonged to them by reason of Stanton & Thompson having charged them with two-thirds the amount of the premium note given for the policy, as if taken out directly for them. For the one-third of that premium note Stanton & Thompson had charged Mr. Fowler, against whom no one makes any claim to the one-third of the amount covered by the policy sued .for in this action; the other owners, to whom Stanton & Thompson transferred policies, having put them in suit.

The defendants in their answer admitted the making of the policy in question, and the loss, but averred that at the time of making the policy Stanton & Thompson were agents for the part owners abovenamed to the amount all together of Te, and that all these part owners, excepting the two named, authorized Stanton & Thompson to insure for their benefit, but none of them authorized them to insur<) upon their specific or individual interest separate from the other interests, and that no specific insurance of any particular interest was ever made by Stanton & Thompson, and that the policy in question was one of

p. 335

eight policies effected by Stanton & Thompson in various companies, and that this policy was for the benefit of all the parties authorizing such insurance, and was owned by them in common; and the defendants insisted that the various other part owners were still owners in the policy of insurance in suit, in common with the plaintiffs, and were necessary parties in this action.

Connor and Forgay, claiming that this policy had been originally appropriated to them and Fowler, by Stanton & Thompson, and their thirds of the premium note charged to them in account, declined to receive from Stanton & Thompson any other policy, and had brought a suit against the defendants in which Fowler was made a party defendant, claiming to recover two-thirds of the amount of this policy, on the ground of such original appropriation to them and Fowler, by Stanton & Thompson, which suit was still pending at the time of the trial of the present action.

Upon the trial of this action before Mr. Justice Bosworth and a Jury, the Court directed a verdict for plaintiff ; and Counsel on both sides consenting, it was ordered accordingly that the questions of law arising upon the facts be heard in the first instance at General Term.

John E. Parsons, for the plaintiff.

I. The transfer of the policy to him by Stanton & Thompson, gave plaintiff a right to recover. As between themselves and the plaintiff and defendants, innocent parties, without notice of claims on the part of others, they had the power to transfer the policy absolutely to the plaintiff.

1. The policy was in terms a contract between the defendants and Stanton & Thompson, made specially payable to them. They were responsible for the amount of the premium; could recover upon the policy in their own names. (Story on Agency, §§ 272, 394 ; 2 Phil. on Ins., §§ 1958, 1965 ; Kemble v. Rhinelander, 3 Johns. Cas., 130 ; Munson v. N. E. Mar. Ins. Co., 4 Mass. R., 88 ;

p. 336

Columbian Ins. Co. v. Black, 18 Johns., 149 .) They could cancel the policy before loss, by agreement with the company. (2 Duer on Ins., 193,194 ; Erick v. Johnson, 6 Mass. R., 196 .)

They could receive payment of any loss under the policy and discharge the defendants. (Story on Agency, § 103 ; 2 Phil. on Ins., § 1882 ; Todd v. Reid., 4 Bar. and Ald., 210 ; Russell v. Bangley, Id., 395.)

They were bound to do so on pain of personal liability for damages sustained by neglect so to do. (2 Duer on Ins., 247.)

They were the only persons the defendants were required to recognize as interested in the policy. They could, even after notice of interests in others, have set off against any claim on the policy claims in their favor against Stanton & Thompson personally. (Erick v. Johnson, 6 Mass. R., 196 , and comment on it in 2 Duer on Ins., 321 ; Stewart v. Aberdein, 4 M. & W., 228 ; 2 Duer on Ins., 307 ; note, 321 Id.) Or have been entitled to set-off in a suit by them against Stanton & Thompson personally, any amount due on the policy. (2 Duer on Ins., 317 ; The Columbian Ins. Co. v. Black, 18 Johns., 149 ; Parker v. Beasley, 2 Maul. & Selw., 423.)

And this is not because the policy so provides. Policies containing such a provision give a right to the company to set-off claims due them by the “ assured.” Where the policy is effected through an agent, his principal was assured. (2 Duer on Ins., 276.)

Stanton & Thompson could assign the policy so as to enable their assignee without value to discharge the defendants, on payment to him. (Story on Agency, § 227.)

And the defendants would be equally discharged, if, instead of paying on the policy, no payment being due at the time, they assumed a new and sufficient liability direct to such assignee. (Jell v. Pratt, 2 Stark. N. P., 67.)

An insurance broker to whom a policy is made payable, and in whose possession it remains, and specially as in this case where his principals remain unknown, is the trustee of a trust in favor of his several principals, himself

p. 337

being the party to the contract, in whom is the right at law, and having the same control of and power over the policy as if he were the sole one beneficially interested therein. (Vide, supra ; Story’s Eq. Jur., § 977 ; 2 Duer on Ins., 263 ; Gibson v. Winter, 5 B. & Ad., 96.)

2. The security of the underwriters requires that this should be so.

And it does not operate injuriously against the shipowner, who can always protect himself by obtaining possession of the policy or notifying the underwriters.

3. Stanton & Thompson gave their note for the premium, and, as security for payment to them by the parties for whom they insured., had a lien upon and interest in the policy; they were, on defendants’ proof, interested, and this, being coupled with their possession of the policy through the permission of their principals, gave to them the right so to transfer the policy as to discharge all claim to or interest in it, of the persons for whom Stanton & Thompson acted. (2 Phil. on Ins., § 1959 ; Story on Agency, § 379 ; Reed v. The Pacific Insurance Co., 1 Met., 170 .)

4. The very terms of Stanton & Thompson’s agency empowered them to transfer the policy as against their principals.

If they kept all the interests represented by them always fully insured, though continually shifting the policies, canceling old and taking out new, or specially appropriating particular policies to particular interests, maintaining’ a sufficient line fully to cover the balance of interest, they did exactly what their agency required.

. II. The marginal agreement written on the policy by the defendants, sustained by the consideration furnished by Mr. Fowler’s indorsement of Stanton & Thompson’s premium note, and subsequent payment on it of an amount, ($204.79,) which was a very large premium for the unexpired term of the policy, operated as a new insurance by the defendants direct to the plaintiff for himself to the extent of one-third, and as administrator to the

p. 338

extent of the other two-thirds of the amount insured. It operates thus:

1. By a proper construction of the agreement itself.

2. By estoppel: for the plaintiff must be prejudiced if his right to recover on this policy be not sustained.

IH. The plaintiff was entitled to succeed on the ground that the policy was effected for his special benefit on his individual interest to the extent of one-third of the amount insured.

IV. The action is properly brought by Mr. Fowler individually, to recover his part of the amount due on the policy.

V. If the case show that plaintiff has a right, good as against defendants, their plea is not to be allowed on the score that if the other principals of Stanton & Thompson were parties, a judgment against them would bar suits by them against the defendants.

The defendants, on the evidence, must show that other parties have actual, not possible rights, for which purpose they could have given notice of the suit to any supposed claimants, have interpleaded them or examined them as witnesses.

Daniel Lord, for defendants.

I. A policy of insurance made in the name of a particular person, for whom it may concern, will be applied to the interest of the party or parties, and only to the party or parties for whom it is ordered. (Phil. on Ins., § 383, and cases.) And however general may be the description of the parties, no part of the amount insured can be applied in behalf of any other parties than those ordering the insurance, though the nominal assured consent so to apply it. (Baudny v. Union Ins. Co., 2 Wash. C. C. R., 391 ; Frierson v. Brenham, 5 La. An. R., 540.) The orders for the policy, and the interest, determine who are the concerned. (Buck v. Ches. Ins. Co., 1 Peters’ S. C. R., 151 ; 1 Phil. Ins., § 384 ; Seamans v. Loring, 1 Mason R., 127 ; Newson, &c., v. Douglass, 7 Har. & J., 417 ; Turner v. Burrows, 5 Wend., 541 .)

p. 339

II. By the terms of the policy, the defendants agreed to indemnify Stanton, Babcock, Oollyer, Fowler, Peabody, Connor and Forgay, against loss upon their interest in the ship, by reason of the perils mentioned in the policy, for they were the parties for whose interest the policy was ordered, id est, the parties to be indemnified, or the “ whom it may concern.” And these parties were liable for the premium. (Patapsco Ins. Co. v. Smith, 6 Har. & J., 166 ; Ins. Co. of Penn. v. Smith, 3 Whart., 521 ; 1 Phil. on Ins., § 508.)

III. The policy being upon the whole ship, and not upon any particular portion or individual interest, supports this view and, therefore, when the policy was executed and complete as a contract, the rights of all parties thereunder were fixed, and could not be divested without their consent. The several parties owned portions of the policy, just as much as they owned portions of the ship.

IY. The persons “ concerned” having been ascertained, and their rights under the policy fixed, no evidence is admissible to vary the terms of the contract, the policy must be interpreted by its language, and every one having an interest and ordering the policy, may claim the benefit of it. (16 East., 141 ; New York Ins. Co. v. Thomas, 3 Johns. Cases, 4 ; Burrows v. Turner, 24 Wend., 276 ; l Phil. on Ins., § 120.)

Y. It follows, that unless Stanton & Thompson had authority to assign the policy to the plaintiff, they could not divest the other owners of the policy of their property therein. The evidence fails to show any such authority; as ships’ husbands they would not have authority even to effect insurance. (Turner v. Burrows, 8 Wend., 144 .)

YI. Stanton & Thompson, holding the policy simply as trustees, and having no authority to assign it, the plaintiff took nothing by the assignment, and the defendants are not, by their indorsement, estopped to set up the title of the other parties.

1. The defendants were ignorant of the real assured on the 9th of April, and of the nature of. the contract between

p. 340

the owners and Stanton & Thompson. They only knew the latter, and had the policy itself as their protection, relying upon the principle, that if the assured gave authority to transfer the policy, they were protected, and if they gave no authority, the transfer was void.

2. Ho new liability was assumed by the plaintiff, nor did he part with anything upon the transfer, or in any manner damnify himself.

3. The plaintiff, as one of the assured, gave the power to Stanton & Thompson, which resulted in having these various policies effected. He with Stanton & Thompson, his agents, knew all the facts on the 9th of April; whereas the minds of the defendants were simply like a mirror, open to receive impressions, but, without aid, unable to give any.

4. By permitting the plaintiff to recover, Connor, For-gay, Babcock, and the others, may be divested of their property, without their consent, as, in case of the failure of the other policies, they might lose their entire interest in the vessel.

VH. As there are other parties than the plaintiff entitled in this policy, and the defendants are not estopped to set up their nón-joinder, the plaintiff is not entitled to maintain his action, without bringing all the parties before the Court.

1. This is an action of assumpsit. (2 Phil. on Ins., § 1958.)

2. In assumpsit, all the parties who have contracted must join,- and where joint contractors may join, they must join. (Chitty on Plead., 8, 9, and 11 ; 1 Saunders, 291, note f, and cases ; Ehle v. Purdy, 6 Wend., 629 ; Scott v. Godwin, 1 Bos. & Pul., 74.)

3. Where several persons jointly procure insurance on a vessel owned by them jointly, they cannot maintain sepaante actions, but all must join. (Blanchard v. Dyer, 21 Maine, [8 Shep.,] 111 ; Wright v. Post, 3 Conn., 142 ; 1 Phil, on Ins., § 396.)

4. The case is similar to that of tenants in common ■ suing for rent, &c., they must all join. (Hill v. Gibbs, 5

p. 341

Hill, 56 ; Putnam v. Wise, 1 Hill, 234 ; Sherman v. Ballou, 8 Cow., 304 ; Bradish v. Schenck, 8 Johns., 151 .)

VIII. Ho judgment can be given until all the parties are brought before the Court; there may be* some defense, that the defendants can "only avail themselves of when all the parties are in Court. The Code requires all the parties to be brought in. (§ 117.)

If they will not consent the Code provides a remedy. (§ 119.)

The testimony of the person who took out this policy, is that it “ was effected for the joint account of all concerned. That was the intention.”

On that state of facts, had there been no indorsement of the policy to Fowler by Stanton & Thompson, to whom by its terms the loss, if any, was to be paid; and had there been no transfer by the defendants of the policy to Fowler, and had the other part owners not accepted a transfer of other policies as being the policies effected to cover their interest; and had there been no appropriation of it by Stanton & Thompson, by the manner of keeping and rendering their accounts, an action on the policy must have been brought in the names of Stanton & Thompson, or in the names of all the part owners for whom it was taken, and who were insured by it. (21 Maine R., 111 ; 2 Arnould on Ins., 1250, note 2.)

William Forgay and John Connor each claim the ownership of one-third of this policy, and before this suit was commenced they brought an action upon it against the defendants, making Fowler a party, in which they claim to recover, severally, one-third of the sum insured by it. That action was pending and untried at the time this action was tried.

They were severally charged by Stanton & Thompson, in account current rendered to them from time to time, with one-third of the amount of the premium note given for the policy taken and continued in this Company,

p. 342

including the policy in question, and with one-third of the charg-e for the policy in question. Fowler was in like manner charged with the other third.

If Stanton & Thompson, after having obtained policies for the joint account of all the part owners by whom they were instructed to insure, could, by subsequent acts, appropriate any one policy to the exclusive use of some of such part owners only, their action in the matter and manner of keeping, their accounts, would be strong evidence of their having made such an appropriation of this policy, before they indorsed and delivered it to the plaintiffs.

Their action would conclude themselves to the extent of their interests as part owners.

The premium note which the plaintiff was required to indorse before the defendants would transfer the policy to him, was for the sum of “ $938.75, due May 27,1858.”

The amount of the premium note charged in the account rendered to him, including the charge for the policy, was $250.41, in May, 1856; and $250.42, in May, 1857.

Hence, when the policy was indorsed to him by Stanton & Thompson, he had notice that it had not been effected on his own account alone; being for the sum of $9,375, and his interest in the insured valuation being only $3,125. And he had notice that such a premium note as was described in the account rendered to him had not been given, but one for a larger amount.

He might, nevertheless, very well have supposed, that the policy was taken out to cover his interest and that of S. Y. Peabody, unless he had previously seen the accounts rendered to him by Stanton & Thompson. It is not to be presumed that in these accounts rendered to Peabody, they charged him with any part of the premium note given for this policy, against proof of the whole amount having been charged to Fowler, Forgay.and Gonnor.

I see nothing in the testimony of Stanton, nor in the instructions, given to him and Thompson by either of the several part owners, as to the mode of insuring, which

p. 343

would put it out of the power of Stanton & Thompson to satisfy their whole duty to either part owner by having at all times a policy ready to be delivered to him, issued by a responsible company, sufficient in amount and in proper form to cover and protect his interest.

Kor do I see any practical difficulty or objection to their appropriating the policies they procured for the benefit of some of the part owners, to the exclusion of other part owners.

If the accounts kept with and rendered to each part owner, charged him with the premium on a designated policy, as being the policy procured for him under the instructions which he had given, and if no two were charged with the same premium, so that distributing the policies as designated in such accounts, each part owner would be insured for his interest precisely, it is not obvious why this appropriation would not conclude the several part owners as between themselves.

There is, therefore, much reason for concluding that Forgay & Connor, may be in a condition to assert successfully a claim to two-thirds ownership of the policy, viz., one-third by each.

Ko determination of this suit can effect Forgay or Connor. Their rights, as well as the plaintiffs’, and also the rights of the administrator of Peabody, should be ascertained, in order to have a complete determination of the matters in controversy. (Code, § 122.)

The answer alleges that all the part owners for whom the policy was obtained, should be made parties; and names those who are claimed to be necessary parties.

If all, except Forgay & Connor, have, with such knowledge of the facts as will conclude them, received other policies as the policies to which they are entitled, and if Forgay, Connor, and the plaintiff assent to such appropriation, then such part owners are not necessary parties.

But whether it is not essential to make them parties, with a view to conclude them by allegation and proof of

p. 344

the acts which are to estop them, is a question deserving of consideration.

Still if it should be conceded, that it is unnecessary to make them parties, it would not follow that the defendants have failed to sustain their plea in abatement.

Prior to the Oode, a plea in abatement of there being other joint promisers not made defendants, could not be sustained, if the evidence showed a greater or less number of joint promisers than the plea named. ( 24 Wend., 411 ; 2 Hill, 200 .)

But in an action on contract, if there were too many or too few parties plaintiffs, a nonsuit followed as a matter of course. (1 Chitty on Pleadings, 14.)

The plea, in question, is a plea of the non-joinder of necessary parties plaintiffs, who are required to be the actual parties in interest, whether original promisers or not. I am inclined to think, in such a case, that proof that some of the persons named as joint owners, were such is sufficient to sustain the plea. Such a defect of proof presents a case of variance only. This, the Oode, requires the Oourt to disregard, unless it be shown that the plaintiff has been misled by it to his prejudice, in establishing his cause of action. Ho such proof was offered nor fact suggested.

The evidence establishes that other part owners of the vessel, were, as the principals for whom the policy was obtained, joint owners of it, and in judgment of law the persons to whom the defendants promises were made.

To the proper determination of a suit, brought by only one of such promisees, claiming to recover on the ground that the interest, of the other promisees has been extinguished, it is necessary to make them parties, especially when it is not alleged that such interest has been extinguished or transferred to the plaintiff by any act done by such other original promisees or with their knowledge or assent.

In this view there was a defect of parties, and the defect having been set up by answer and established by proof,

p. 345

the complaint was properly dismissed at the trial and the defendants are entitled to judgment.

Judgment ordered accordingly.