Merchants' Insurance Co. of Providence v. Abbott

131 Mass. 397, 1881 Mass. LEXIS 268
Massachusetts Supreme Judicial Court·Decided September 13, 1881·Published·Cited by 37 cases

Opinion

Gray, C. J.

These actions are in the nature of assumpsit for money had and received, with special counts alleging that the plaintiffs were induced to pay the money by fraud and mistake. The five cases were tried together, but are not exactly alike.

In the first action, which is brought by the Merchants’ Insurance Company of Providence, R. I., against Charles W. Abbott and the members of the firm of Denny, Rice & Company, the material facts are shown by the report of the presiding justice and the special findings of the jury to be as follows:

On March 17,1876, a woollen mill was destroyed by fire, upon the contents of which Abbott held a policy of insurance from [398] the plaintiffs in the sum of $2500, payable in sixty days after satisfactory proofs and adjustment of loss, and providing that any fraud or false swearing in the proofs of loss should avoid the policy. Soon after the fire, Abbott made and delivered to the plaintiffs proofs of loss, and they, after a reasonable investigation, which disclosed no grounds for a refusal to pay, and in ignorance of any fraud on Abbott’s part, adjusted the amount of the loss in accordance with such proofs.

Denny, Rice & Company offered evidence of the following facts: At the time of the fire Abbott was- indebted to them in the sum of about $4000. In the latter part of April 1876, Abbott paid them about $1500 in cash, and, as security for the payment of the rest of his debt, executed an instrument in writing under seal, by which, after reciting the issuing of the policy, and that a claim for loss had arisen under it, he assigned to them all his “claims upon said insurance company for loss under said policy,” and authorized them to demand and sue for the same in his name, if necessary, and the proceeds to enjoy to their own use, and generally to do all and every act in and about the premises which he might do if this assignment had not been made.

In June 1876, at the expiration of the sixty days allowed by the terms of the policy, the plaintiffs, in good faith, and not knowing of any fraud on Abbott’s part, paid to Denny, Rice & Company the amount of the loss as adjusted, and took a receipt signed by them in this form: “ Boston, May 25,1876. Received .of the Merchants’ Insurance Company of Providence $2478.80 in full satisfaction and discharge of all claim for loss and damage under this policy by fire March 17, 1876, and this policy is hereby cancelled and surrendered.” The sum so paid exactly extinguished the debt of Abbott to Denny, Rice & Company, and they never paid any part of it to him.

The mill and its contents, as the jury found, were burned with the knowledge and at the instigation of Abbott, and his proofs of loss were false and fraudulent. The plaintiffs did not learn that they had been defrauded until May 1877, and then at once placed the case in the hands of legal counsel for investigation, and for prosecution if investigation should warrant it; and on January 16, 1878, brought this action. The other defendants [399] had no knowledge of any fraud, nor was any demand for the money made upon them before this action was commenced.

On June 5, 1877, Abbott filed a petition in bankruptcy, and on October 3, 1877, obtained a certificate of discharge, and no dividend was paid out of his estate.

The justice presiding at the trial ruled that Abbott’s certificate of discharge was no bar to this action; and, holding that the facts offered to be proved by the other defendants constituted no defence, directed a general verdict for the plaintiffs, and reported the case for such disposition and judgment as the full court should determine.

There can be no doubt of the liability of Abbott in this action. If the money had been paid by the plaintiffs to him, it could be recovered back as money paid under the influence of a mistake between them and him as to the existence of a state of facts that would entitle him to the money.* Kelly v. Solari, 9 M. & W. 54. Townsend v. Crowdy, 8 C. B. (N. S.) 477. Pearson v. Lord, 6 Mass. 81. Stuart v. Sears, 119 Mass. 143. Welch v. Goodwin, 123 Mass. 71. 2 Phil. Ins. §§ 1816,1817. Although Abbott has not in fact received the money, the payment of the money by the plaintiffs at his request in discharge of his debt to the other defendants is equivalent to the receipt by Abbott of so much money, and is sufficient to enable the plaintiffs to maintain the action against him upon the special count, if not upon the general count for money had and received. Emerson v. Baylies, 19 Pick. 55. Perry v. Swasey, 12 Cush. 36. This liability of Abbott to the plaintiffs, being a debt created by his own fraud, is not barred by his certificate of discharge in bankruptcy. U. S. Rev. Sts. § 5117. Turner v. Atwood, 124 Mass. 411. Mudge v. Wilmot, 124 Mass. 493, and 103 U. S. 217.

As to the other defendants a different question is presented. If, before receiving the money from the plaintiffs, they had [400] known the true state of facts, and had participated in Abbott’s fraud, they would have been liable to refund the money. Martin v. Morgan, 3 Moore, 635; S. C. 1 Brod. & Bing. 289; Gow, 123. Mason v. Waite, 17 Mass. 560. But the report states that there was no evidence offered, nor was it contended at the trial, that they had any knowledge of the fraudulent conduct of Abbott, but it was conceded that they were wholly innocent parties.

As to them, therefore, assuming the truth of the facts which they offered to prove, the case stands thus: They held a valid debt against Abbott. The assignment by Abbott to them was made in consideration of that debt, and to secure the payment thereof. The previous existence of the debt does not make the assignment the less a conveyance for value. Blanchard v. Stevens, 3 Cush. 162. Culver v. Benedict, 13 Gray, 7. Ives v. Farmers’ Bank, 2 Allen, 236. Railroad Co. v. National Bank, 102 U. S. 14, 58, 59. There is no question of the validity or of the genuineness of the assignment. Having been made after the fire, and after the amount of the loss had been adjusted between the plaintiffs and Abbott, it was in legal effect an assignment of a claim of Abbott upon the plaintiffs for a certain sum of money. That claim, not being negotiable in form, could not have been sued by these defendants except in Abbott’s name, and subject to any defences which these plaintiffs had against him. But the plaintiffs, at Abbott’s request, and without any suit, paid the amount of the loss, as adjusted between themselves and Abbott, directly to these defendants, who were wholly ignorant and innocent of the fraud of Abbott.

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Merchants' Insurance Co. of Providence v. Abbott, 131 Mass. 397, 1881 Mass. LEXIS 268 (Mass. 1881).

131 Mass. 397 (Merchants' Insurance Co. of Providence v. Abbott) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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