Lazarus v. Commonwealth Insurance

Putnam J. delivered the opinion of the Court. This action was tried many years ago, and the verdict for the plaintiff was set aside and a new trial granted at March term 1827, as the report in 5 Pick. 76 states, because the verdict was given “ without evidence of a probable surplus after paying the debts for which the property was assigned.” The cause was tried a second time at the last November term, when a verdict was again returned for the plaintiff for the whole amount of the loss claimed by the plaintiff, deducting the salvage which he had received. The cause has now been very ably argued by the counsel on both sides, on the motion for a new trial in behalf of the defendants, on various grounds, which will now be considered. 1. They contend that the plaintiff had, by his assignment to Street, made the policy void. Such a result could not have been intended ; for the effects and choses in action were assigned upon the express trust to be appropriated to the payment of the debts of the assignor, the surplus, if any, to be paid to himself. It would be absurd for a man to tear off the seal or cancel the bond or policy, at the same time that he assigned the instrument with the intent of having the money due upon it collected for his own benefit. All deeds and other instruments and agreements are to be construed according to the legal intent of the parties ; and a construction which necessarily involves great folly and absurdity will not be favored. We propose to consider this point, upon the ground on which the defendants place it, viz. that if the plaintiff assigned the policy without the written consent of the assurers, it would make the policy void. Be it so, for the purpose of this argument. An assignment of it would be as destructive to the policy — 92 — as the burning it up would be. Then it would seem to follow, that the policy never had any effectual assignable quality. We say effectual, because, although the form of words which constitute a valid assignment should be written upon the policy, no benefit would arise to the assignee, upon the ground taken by the defendants. The act of sealing the assignment would be considered as an act of cancelling the policy. So it was in truth a policy which was not assignable. But the plaintiff cannot be supposed to have intended to destroy the policy. He could have no motive to do so, and he had every motive of interest to preserve it. If it was included in the description of “ all policies,” it was with the express intent that the money which should become due upon it, should be collected and paid or appropriated for his benefit. But as upon the defendants’ hypothesis that effect cannot take place, then it follows, that if it is to be considered as being contained in the assignment, the policy thereby became utterly void, and the plaintiff cannot recover. On the other hand, if it is not contained in the assignment, then this objection is invalid. It is a familiar rule, that the generality of the words employed in agreements should be restrained, if that should be come necessary to ascertain and carry into effect the legal intent of the parties. Now there are other reasons than those which are before suggested, tending to satisfy us that this policy was not included in the assignment. At the time when it was made, the policy was in the bands of Smith & Stewardson, who were then in advance to the plaintiff. They procured it to be made, and the defendants agreed to pay the money to them in case of loss. They might have maintained an action upon this policy in their own names against the defendants. Now it would seem that the plaintiff could not have deprived them of the benefits secured to them by this contract, without their consent. It is true that the plaintiff afterwards paid bis debt to them ; but that circumstance does not show that the defendants might not have been liable to them for any loss upon this policy which might have happened after the assignment and before they received their payment from the plaintiff If the policy was made void, it was avoided by the act of assignment; and if it were so avoided, it would follow that Smith & Stew — 93 — ardson’s rights, which were secured by the policy, would ha/e been destroyed, without their consent. It was held in the time of Edward 3d, that a grant by one of omnia bona sua, should pass not only goods which he had in his own right, but those which he had as executor or administrator, because in some sense those were his goods. But the law is held otherwise now, unless the party granting had no goods but as executor or administrator, and if that were the case, then ut res magis valeat, &c. the goods which he had as executor or administrator would pass. Hutchinson v. Savage, 2 Ld. Raym. 1307. A release of all errors, actions, suits, and writs of error whatsoever, will not discharge an action of debt upon a bond, and yet the release is, among other things, of all actions. So in a writ of annuity, it was pleaded, that the plaintiff released the defendant from payment for half a year, and released to him all actions, suits and demands. And it was held, that the release did not bar the plaintiff but of the arrearages of a year. Mree’s case, Hetley, 15. In the above cases the generality of the words were restrained by the obvious intent. It would be easy to give a page of citations which sustain this general position. We will cite only one more. An obligor by bond agreed, when and so soon as he should become possessed of, or entitled to, any commission, post, place, salary, pension or pay whatsoever, that then he would immediately execute a proper assignment thereof to the plaintiff. It was argued for the obligor, that the condition was void, inasmuch as it extended to all offices ; and that some offices were not by law assignable. But it was held by Lord Mansfield, that the bond was good as to all offices which were assignable, but void as to those which were not. So here, the plaintiff had a policy which was not assignable, and he had one or more policies which were assignable, and he assigns all his policies. It seems to us, that such policies only as the plaintiff could legally and effectually assign, were intended to be included in the conveyance. We are of opinion that this objection cannot prevail. The loss of the steamboat by a peril insured against, hap pened on the 22d of April, 1825, within the time covered by — 94 — the policy. The transfer of the boat by the plaintiff to Timo thy Street on the 23d of December preceding, and the assignment of the plaintiff’s property, including the boat, to Street, which was on the same day, were admitted. And the defendafits contend, 2dly, that the assignment of the vessel before the loss left no insurable interest in the plaintiff, at the time when the loss happened. This steamboat and all the other property of the plaintiff were assigned to Street in trust to pay the expenses of the administration of the fund, and then to pay the plaintiff’s creditors as set forth in the assignment, and in the last place, to pay the balance then remaining in the hands of Street, the trustee, for the sole use and benefit of the plaintiff, his executors, administrators or assigns forever, freed and discharged from all further and other "trusts. Now the jury have found that there was a surplus of property after paying the creditors who had released the plaintiff, without resorting to any amount due upon this policy. The evidence upon which the verdict was found, will be a subject hereafter to be considered. But assuming it to be correct, we proceed to consider the objection of the defendants on the ground of a want of insurable interest. And it seems to us to be perfectly clear, that the transaction amounts to a pledging or mortgaging of the plaintiff’s property, giving the pledgee or mortgagee a power to sell and dispose of the same, he being to account for the proceeds to the pledgor or mortgagor. Now the plaintiff had certainly a contingent interest in this vessel. If the trustee should be able, from the trust fund, to pay all the claims under the assignment, and so should have relieved this vessel, if she had not been lost, from the pledge or mortgage, then it would seem to be very clear, that the plaintiff would have been entitled to have the vessel returned, or the proceeds of it paid to him if it had been sold by the trustee. And the same reasoning applies to the plaintiff’s claim against the defendants for the loss under the policy. To whom does it belong ? Not to the creditors, for they have been paid without any recourse to this property ; and besides, it was not assigned to them or to Mr. Street for their use. It seems to us, that it belongs to the plaintiff. If he should — 95 — recover, he will have the money for his own use ; if not, he must alone sustain the loss. Now it is perfectly clear to us, that the plaintiff had an interest to the extent of the whole amount insured. He wanted to make a provision for the payment of his debts. His property consisted in a great measure of ships and merchandise, exposed to marine perils. If they arrived in safety, they would be appropriated for the general object; if they should be lost, the loss would fall upon the plaintiff, unless he secured himself by getting insurance against the perils to which they were exposed. The cases cited by the plaintiff are conclusive to show that the mortgagor has an insurable interest. We refer especially to Smith v. Lascelles, 2 T. R. 188; Locke v. N. American Ins. Co. 13 Mass. R. 61; Gordon v. Mass. F. & M. Ins. Co. & Pick. 258. The plaintiff’s title to the steamboat was good against all the world excepting the assignee. It was transferred to him upon a condition, which has been performed, so that the title of the assignee has been divested. Now it is perfectly clear that a cestui que trust has an insurable interest, as well as the trustee. It is not contended but that the plaintiff had an insurable interest at the time when the policy was effected. It is certain that he has not divested himself of his interest absolutely, but only conditionally ; and that this property has been relieved from the assignment by the performance of the condition. If the steamboat had not been lost, but should now arrive in good safety, the law would give the plaintiff ample means to obtain and hold the vessel. The defendants would keep their premium, and nobody could maintain that the plaintiff should not have his boat. So if she had not been lost, but had gone into the hands of the assignee and been sold and the proceeds distributed according to the assignment, the defendants would have held their premium, and the plaintiff would have had the benefit of the vessel, in the increased amount of the surplus remaining, after the payment of the debts. But the policy now represents the vessel. The defendants are just as liable to pay the money for the loss, as Street, the trustee, would be to account to the plaintiff for the vessel if she had arrived and had remained specifically after the creditors were paid. — 96 — But it has been further contended, 3dly, for the defendants, that if the plaintiff had any insurable interest in the vessel, it was only such a proportion of her agreed value as the surplus, if any, of the assigned effects, remaining after paying the debts of the releasing creditors, bore to the whole value of the assigned property. For example, suppose the whole assets to amount to $ 115,000, the insurance to be for $ 10,000, the debts to amount to $ 100,000. The plaintiff’s claim would be cut down to about $ 1300. It should be remembered, that none of the transactions under the assignment have the slightest bearing upon the risks which the defendants have assumed by their policy. We know of no rule of law which calls for the establishment of such an apportionment of the plaintiff’s interest, and it seems to us that such a rule would be as inequitable as it would be novel. But the defendants contend, 4thly, that the reports of the auditors ought not to have been received, the first, because it was made ex parte by one of the auditors, and the second, because Mr. Nichols, one of the auditors, examined the books of Street in Charleston without the knowledge of the defendants. Now we all think, that the objections which were made against the reports, are without any reasonable foundation. We are satisfied that Mr. Nichols conducted himself with perfect propriety and fidelity. The parties waived the right to be present with him while he examined the books and made the first report. His examination of Street’s books in Charleston came fairly within the scope of his original authority. The examination might possibly have led to some result unfavorable to the plaintiff, but not to the defendants. But we are satisfied that the result operating one way or the other made no difference in Mr. Nichols’s conduct. It was suggested that Mr. Nichols had made his mind up, before he heard the parties and' made the second report with Mr. Goodwin. But it seems to us, that he had made up no opinion which was not well vouched by books and documents. He could not make himself believe that two and two made only three; and that seems to be the extent of his prejudging. We have examined the reports; They contain the administration of a trust exceeding two hundred thousand dollars, involving an immense number — 97 — rod variety of concerns. The result of the first examination was eomsr imicated to the defendants. They had ample time and iTiSiins to disprove it. They were heard before both auditors on the second examination, which proceeded in a different course from that which Mr. Nichols took in .the first; and the difference between the first and second examination amounted to $ 12-96. It should be remarked, that the reports do not deal in generalities. If they are wrong, they refer to the books and documents with great particularity, to the end that the errors might be corrected. Besides, if Mr. Nichols had any bias, the defendants should not have submitted to the second hearing, but another auditor should have been appointed. But they took their chance and cannot now complain. Fox v. Hazleton, 10 Pick. 275. These reports, we think, were properly admitted on the trial. But it is contended for the defendants, that the judge should have instructed the jury, that the reports of the auditors were not evidence of the facts or inferences therein stated as derived from the evidence in the case, but only of the result of the accounts, if such facts were otherwise proved to exist. But the judge ruled otherwise, and instructed the jury that the reports were, without the introduction of the evidence on which they were founded, prima facie evidence of a- surplus in the hands of the assignee, after paying the debts of the releasing creditors, and that it was competent for the defendants to impeach the reports by other evidence. And the jury were directed to take into their consideration all the evidence produced by the defendants, including the books of the plaintiff produced at the request of the defendants, and by them given in evidence, and also the statement of Mr. Nichols ; and to find their verdict according to the result of such evidence, taken in connexion with the reports. Now we all think that this ruling was perfectly correct ; and that it does not require any argument or illustration either in support or explanation of it. It was also contended, 5tbly, for the defendants, that by the agreement of the 31st of January, 1832, the plaintiff abandoned all claim to the whole property, including the vessel in question, and that thereby it is proved that he had no insurable — 98 — interest. The creditors recite that they had agreed to give the plaintiff a discharge upon receiving the whole of ths remaining assets as set forth in the assignment. Be it so. How .was it set forth in the assignment ? Why, all the effects were transferred, but there was a resulting trust therein contained for the plaintiff, and the trustee, Street, did not understand the agreement as the defendants’ counsel now insist that it should be construed. He undertook with these creditors to administer the trust fund until all the creditors were paid. He would be accountable for the surplus under the resulting trust of the original assignment, to which this agreement expressly referred. Street’s words are, “I will undertake the trust in their behalf, of collecting, receiving and realizing the said remaining assets now deposited with me, and placed in my charge, for their entire use and benefit until all are paid.” But he goes no fur ther. If any thing remained after they were all paid, it would clearly fall into the resulting trust contained in the assignment, and Street would thereby be held accountable to the plaintiff for the same accordingly. ' . Independently of this reasoning, the plaintiff was not a party to this agreement. It was made between the creditors and Street long after this action was brought. We are satisfied that this agreement cannot be construed so as to divest the plaintiff of any surplus funds, or to affect his right to recover upon this policy. We have now examined and considered all the objections which have been argued for the defendants, and are all very clearly of opinion that the plaintiff is entitled to judgment according to the verdict.