Brown v. Commercial Fire Insurance

21 App. D.C. 325, 1903 U.S. App. LEXIS 5486

• Court: Court of Appeals for the D.C. Circuit
• Decided: March 4, 1903
• Docket: No. 1230
• Status: Published

Opinion

Mr. Justice Shepard

delivered the opinion of the Court:

1. The first question arising under the case stated is: Was the plaintiff’s action barred by the special limitation clause of the policy because not commenced within twelve months nest after the fire ?

This is one of the specially assigned grounds of the motion to direct the verdict for the defendant, but does not seem, from the brief statement of the opinion of the learned justice, who presided on the trial, to have been sustained by him. From his failure to assign this as one of the grounds of his action, the inference is that he did not regard it as well founded. It has, however, been pressed on the argument as an additional reason why the judgment should not be disturbed.

Assuming the binding effect of the limitation clause, we are of the opinion that it is not enforceable under the conditions and circumstances disclosed by the record. The evidence on behalf of the plaintiff shows that the defendant,' first, through the action of its secretary, admitted the plaintiff’s right, and then received proofs of loss without objection or denial of liability. Subsequently it conducted negotiations with the plaintiff leading him to entertain hopes of final payment, which were not terminated until April 24, 1895, by its then communicated denial of liability. This was a waiver of the stipulation. 13 Am. & Eng. Encyc. of Law (2d ed.), 390.

2. Another ground that has been urged in support of the judgment, is the forfeiture of the policy through the execution of the trust deed incumbering the insured property, without the knowledge or consent of the insurer. 'This wras not made a ground of the motion upon which the judgment was rendered, and under a strict construction of the rule governing hearings on appeal, might not be considered as now involved. It will, however, be considered, in view of the practice prevailing in the trial courts which permits a defendant after his motion to direct a verdict shall have been overruled, to introduce his own evidence and ask a submission of all issues raised thereby, under appropriate instructions to the jury.

Granting that the execution of the trust deed could have been availed of as a forfeiture, by the terms of the policy, we are of the opinion that the forfeiture has been waived by the recognition given to the policy through the defendant’s indorsement thereon, antedated for the express purpose of removing doubt as to its validity, and its subsequent conduct inducing the plaintiff to incur some trouble and expense on the faith of that act. Titus v. Glens Falls Ins. Co., 81 N. Y. 410, 418; Insurance Co. v. Norton, 96 U. S. 234, 241.

3. The next matter of inquiry is, whether the contract of insurance, upon which the plaintiff brought his action in assumpsit, is an instrument under seal. After expressing some doubt, the learned trial justice concluded that it was, and this was the real ground upon which he directed the verdict for the defendant. Upon that view of the nature of the instrument nothing remained but to grant the motion. “ There is no principle of the common law better settled than that an action of assumpsit will not lie upon a sealed obligation for the payment of money or the performance of a duty.” Magruder v. Belt, 7 App. D. C. 303, 311.

Now, whether an instrument has been executed under seal or not, is a question to be determined by the court upon an inspection. Jacksonville, etc., Ry. Co. v. Hooper, 160 U. S. 514, 519. By agreement of the parties, a photo-lithographic copy of the policy has been brought up for that purpose, and what it shows has been described as definitely as possible in the preliminary statement. As a result of inspection, our conclusion is that- the policy is not a sealed instrument, and hence that an action of assumpsit can be maintained upon it by the proper party. Whether the present plaintiff is tbe proper party is a question that will be considered hereafter.

The decided modern tendency, as illustrated by the practices of the business world, by frequent legislation, and by many decisions of the courts, has been towards minimizing the old distinctions between sealed and unsealed instruments. Corporations which formerly were considered incapable of contracting save under seal, now commonly act, in the great mass of their obligations, through the signatures of officers and agents without its addition. In determining, in case of uncertainty, whether the instrument of a corporation, in a given case, shall be regarded as sealed or unsealed, stress is ordinarily laid upon the form and character of the paper and the purposes of its execution.

Hence, the impression of a regular corporate seal in connection with the execution or indorsement of a note, negotiable in form, is not now generally regarded as, of itself, changing its character so as to prevent or arrest negotiability. Clark v. Bead, 12 App. D. C. 343, 350, and eases cited.

And in such cases, where the paper does not recite that it is signed and sealed, the impression of a seal has been considered as a mere mark of genuineness and nothing more. Jackson v. Myers, 43 Md. 452, 465.

There is nothing whatever in the nature and purposes of contracts of insurance, which it seems are generally executed, by corporations without a seal, to suggest setting them apart from the great mass of simple contracts relating to the payment of money. There is no recital or declaration in this policy that it was intended, or expected to be executed under the corporate seal, and the subscriptive clause does not raise the presumption that the signatures of the subscribing officers were to be accompanied thereby. “Attested ” — the word used therein • — ■ does not mean sealed.

These circumstances are to be regarded as significant. Metropolitan Life Ins. Co. v. Anderson, 79 Md. 375, 379.

Were it not for the impression of what is said, though not proved to have been, the corporate seal on this policy — which appears in the upper corner of the same, as far removed as possible from the signatures below — there could be no pretense for declaring that it was executed and delivered as a sealed instrument. It is true that the character of an instrument has. often been determined by the use of a ■seal in signing it, notwithstanding that the purpose of affixing it has not been indicated by any recital or declaration therein; and that a seal, to be given effect as such, need not necessarily be in j axtaposition with the signature subscribed thereto. It is equally true, however, that the mere impression of a seal, at some time and upon some unusual part of the paper, is not to be accepted as necessarily determining its character. The impression of the assumed corporate seal on this policy over certain figures not forming a part of the policy, but corresponding in amount with the sum total of the insurance written, may well have been made after the signature, by some one acting in a clerical capacity, for the sole purpose of protecting those figures from alteration. Considering all the circumstances, such an inference seems reasonable.

4. It remains to consider whether the action can be maintained upon the instrument, as a simple contract, by the plaintiff, as trustee, by virtue of the indorsement on the face of the policy signed by the defendant’s assistant secretary, as follows: “Dec. 23, 1893. Loss if any payable, as interest may appear, to Chapin Brown, trustee.”

The following conditions enter into this consideration: (1) The unpaid debt secured on the property largely exceeds the combined value of the concurrent insurance. (2) The stock, added after the date of the trust deed, was also covered by the insurance. (3) It is assumed that the after-acquired stock was not covered by the terms of the conveyance in trust. (4) Neither Barker and Walker, nor their trustee in a general assignment subsequently executed, set up any claim to the benefit of the insurance, or made proofs of loss. They apparently delivered the policy to Brown for his benefit, and with the intention that he should receive the entire proceeds.

In this connection it is to be borne in mind, also, that .Brown, as trustee, had an equitable lien upon the proceeds of the policy through the express stipulation in the trust deed that tire property should be kept insured to the amount of $7,500 for the better security of the loan. Wheeler v. Insurance Co., 101 U. S. 439; Eastern Trust, etc., Co. v. American Ice Co., 14 App. D. C. 304, 334.

The contention of the appellant is that the legal effect of the delivery of the policy to the plaintiff, and the indorsement of the defendant thereon with full knowledge of all the surrounding circumstances, was to constitute him not a mere appointee to receive payment, but the assignee of the-policy with right of action thereon.

Notwithstanding there is some conflict of authority in respect of the right of a mortgagee, to whom a policy issued to-the mortgagor has been made payable as his interest may appear, to bring an action thereon in his own name, we concur in the soundness of the appellant’s contention.

This is unquestionably the doctrine which prevails in-Maryland, from whence our practice has been chiefly derived. National Fire Ins. Co. v. Crane, 16 Md. 260, 290 v. Coates v. Pa. Fire Ins. Co., 58 Md. 172, 178; Metropolitan Life Ins. Co. v. Anderson, 79 Md. 375. In the case first cited the policy was issued to Gray — loss, if any, payable to Crane & Co., mortgagees.

Discussing the action of the company in making the policy payable to Crane & Co., it was said: “ It was an admission by it that they had an interest in the contract, and were-to receive the benefit of it. As observed by the judge below, the policy may be regarded as having been at its inception assigned to them with the assent of the company.” In support of its view the court cited a decision of the Supreme Court of Rhode Island, from the opinion in which we have-taken the following extract: “In legal effect this was an assignment of the policy, concurred in by the insurance company, to the plaintiff as mortgagee, by virtue of which he alone was entitled to receive the amount of the loss, as additional collateral security for his debt.” Brown v. Roger Williams Ins. Co., 5 R. I. 394.

Substantially tbe same rule prevails in Massachusetts. King v. State Mut. Fire Ins. Co., 7 Cush. 1, 6; Fogg v. Middlesex Ins. Co., 10 Cush. 337, 346; Palmer Sav. Bank v. Insurance Co., 166 Mass. 189, 192.

In tbe case last cited, tbe decisions of tbe several States were reviewed by Chief Justice Field, who delivered tbe opinion of tbe court, and tbe result summed up as follows: “ It is tbe practice of tbe States of this country generally, though not universally, in such a case as tbe present, to permit tbe mortgagee to sue in bis own name. ' In some States, it is true, a person for whose benefit a simple contract is made, although not a party to it, is permitted to sue upon it. In some a joint action by tbe mortgagor and mortgagee is permitted, where tbe mortgage debt does not exhaust tbe insurance; in some a distinction is taken between a policy where tbe loss is payable to a mortgagee without any limitation, and one where tbe loss is payable to a mortgagee according to bis interest; and in some tbe mortgagor and mortgagee each can sue according to bis interest.”

After stating tbe usual practice in Massachusetts respecting insurance for tbe benefit of mortgagees, which, save as regards a provision of tbe statute law protecting mortgagees from forfeiture by acts of tbe mortgagor, is substantially that which prevails elsewhere, be proceeds: “ When a mortgagor, under an obligation expressed in tbe mortgage- to insure the property to a certain amount for tbe benefit of tbe mortgagee, in satisfaction of this obligation, procures insurance on tbe property, and makes tbe loss payable to the mortgagee to tbe extent of bis interest, tbe mortgagor in fact acts both for himself and for tbe mortgagee. Tbe mortgagee is not an entire stranger to tbe consideration, because tbe mortgagor in effecting the insurance has only performed a duty which be was under toward tbe mortgagee, and for tbe performance of which be was paid by tbe loan which was secured by tbe mortgage. * * * If tbe interest assigned equals or exceeds tbe amount of tbe insurance, it would be tbe common case o| an assignment, and the promise of tbe debtor to pay tbe debt when it bficomes payable to the assignee.” It is true, that he also limits the right of recovery by the mortgagee to the extent of his interest, leaving to the mortgagor the right to recover the remainder. In recognizing this right of two actions upon the same policy he overcomes the objection to splitting the debt or action, which is the ground of the decision in Fire Ins. Co. v. Felrath, 77 Ala. 194, 197 — a case strongly relied on by the appellee here — saying: “While there are objections to splitting a debt without the consent of the debtor, these objections never have prevailed where the debtor has consented ‘to it. An assignment of part of a debt is valid against the debtor if he assents to it, and the assignee can sue for the part assigned in his own name if the debtor has promised to pay it.”

This question as to splitting the action is of no importance in this consideration, because, in the ease at bar, the secured debt far exceeds the amount of the total insurance. Nor is it of any consequence that -the chattel trust may not, under strict construction, have attached to the after-acquired stock. There is no reason why the same old policy, though covering also the additional stock, replacing from time to time that which was daily sold in the course of business, should not remain under the equitable lien created by the express covenant of the mortgagors to keep up insurance to the extent of $7,500, by way of further or bettor security.

In this connection it is to be borne in mind that the words of the indorsement — “as interest may appear” — do not refer to the interest in the property, but to the amount of the mortgagee’s debt.

At any rate, none but creditors or subsequent mortgagees • — ■ and apparently there are neither — who might, possibly, under certain conditions, impress a trust upon the proportion of the insurance applying to the after-acquired stock, in the hands of the plaintiff, would be permitted to make the claim. The insurance company is not bound to others, and is protected by the judgment. That plaintiff may be liable to others as possible beneficiaries is of no concern to the defendant. King v. State Mut. Ins. Co., I Cush. 1, 6; Brown v. Roger Williams Ins. Co., 5 R. I. 394; Cone v. Niagara Fire Ins. Co., 60 N. Y. 619, 624.

The right of the mortgagee to maintain the action, where the loss is made payable to him generally, or as his interest may appear, is apparently upheld by the great weight of authority.

In addition to authorities above cited see: Maxcy v. N. H. Ins. Co., 54 Minn. 272, 275; Franklin v. Nat. Ins. Co., 43 Mo. 491, 496; Bidwell v. St. L. Floating Dock Co., 40 Mo. 42, 46; Motley v. Manuf. Ins. Co., 29 Me. 337; State Ins. Co. v. Maackens, 38 N. J. L. 564, 568; Flanagan v. Camden Mut. Ins. Co., 25 N. J. L. 506, 518; Tilley v. Conn. Fire Ins. Co., 86 Va. 811; Travelers Ins. Co. v. Cal. Ins. Co., 1 N. Dak. 151, 153; Blasinghame v. Home Ins.Co., 75 Cal. 633, 636; Colby v. Parkersburg Ins. Co., 37 W. Va. 789, 794; Bartlett v. Iowa St. Ins. Co., 77 Iowa, 86; Hartford Fire Ins. Co. v. Olcott, 97 Ill. 439, 454; Donaldson v. Insurance Co., 95 Tenn. 280; Burlington Ins. Co. v. Lowery, 61 Ark. 108, 114; Westchester Fire Ins. Co. v. Coverdale, 48 Kans. 446, 451; Georgia Home Ins. Co. v. Stein, 72 Miss. 943; Lowry v. Insurance Co. of N. A., 75 Miss. 43, 44.

The same doctrine was enounced in an early case in Wisconsin, in which, as in the case at bar, the agent had indorsed on the face of the policy after its issue — “ Loss, if any, payable to Keeler, mortgagee.” Keeler v. Niagara Fire Ins. Co., 16 Wis. 550, 567. There the court said: “ There does not seem to have been any necessity for an assignment after the company altered the policy so as to make the loss payable to the mortgagee.” In a later case, however, upon which appellee relies, where the entry was —- “ Loss, if any, first payable to Jennie Perkins or assignees, as her mortgage interest may appear,” it was said that the words “ operated only a conditional appointment, or order to pay so much of the proceeds of the policy as might be equal to the amount due on the mortgage at the time of and in the event of a loss under it.” For what seems to be apt criticism of that case, see Lowry v. Insurance Co. of N. A., 75 Miss. 43, 45.

In an early ease in New York, also cited on behalf of the appellee, the mortgagee to whom the policy was made payable was declared to be u merely the appointee of the party insured to receive the money which might become due him from the insurers upon the contract. The provision in the policy in this respect had no more effect upon the contract itself than it would if it had been provided that the loss for which the insurers should become liable should be deposited in a specified bank to the credit of the party insured.”

The case itself did not involve the particular question as here presented, but it is unnecessary to explain the differences, because the doctrine, as stated, does not obtain in cases like the one at bar, as clearly appears from later decisions of the same court. Cone v. Niagara Fire Ins. Co., 60 N. Y. 619, 624, 625; Hathaway v. Orient Ins. Co., 134 N. Y. 409, 411, 412. In the case last named the policy had been issued to Breckton, with the indorsement on face: “ Loss, if any, payable to J. B. Harbison as his mortgage interest may appear.” The point was directly presented, and the court said: “ It is said that Harbison is the appointee of Breckton. He is; but he is not a mere appointee of Breckton and without an interest in the policy. He acquired his right to recover damages, not solely by the appointment of Breckton, but by the policy, a contract entered into between the insurer, the owner of the property, and the mortgagee. * * * Breckton, the owner, was not a necessary party plaintiff to an action for the recovery of the amount due from the defendant, for the whole amount was recoverable by an action brought by the mortgagee individually (Dakin v. L. L. & G. Ins. Co., 77 N. Y. 600), though a joint action by the-owner and the mortgagee could have been maintained. Winne v. Niagara Fire Ins. co., 91 N. Y. 185.”

In considering this question we have proceeded throughout upon the assumption that the indorsement was written when dated, namely, three days before the loss occurred.

That it was, in fact, executed two days afterwards does not materially affect the question. If anything, it would seem to strengthen the position of the plaintiff, because, with full knowledge that tbe policy had been delivered to him, and that be bad an equitable lien on its proceeds by tbe stipulations of tbe chattel mortgage, tbe defendant, recognizing bim as tbe real owner of tbe indemnity, expressly promised in writing to pay bim the entire loss.

Nor the reasons given tbe judgment will be reversed and tbe cause remanded, with direction to set aside the verdict and grant a new trial.

Tbe bill of exceptions in this case is not in conformity with the rules of this court regulating tbe preparation of bills of exceptions and transcripts. See Hule V and especially paragraphs 1, f-4-5.

Tbe bill of exceptions appears to be a literal copy of tbe stenographer’s report of tbe trial, with tbe insertion, verbatim, of instruments read in evidence. Nor example, tbe policy of insurance is set out in full, when all of it that is material might have been presented in a few short paragraphs.

One result has been a great and unnecessary addition to tbe costs not only of tbe transcript of tbe proceedings below, but of tbe printed record also. No objection has been made, by tbe appellee, on account of these conditions; but without such objection tbe court will, hereafter, decline to consider bills of exception which do not conform substantially to tbe rules, where tbe same shall have been settled after tbe notice given in tbe recent case of District of Columbia v. Frazer [ante, p. 154].

On account, however, of tbe breach of tbe rules in this case, recovery of costs will be denied tbe appellant, and each party will be taxed with the costs incurred by bim in this court. It is so ordered. Reversed.