Wood v. Rutland & Addison Mutual Fire Insurance

Aldis, J. Nathan Wood and Austin Johnson were partners under the firm of N. Wood & Co. By their articles of partnership Wood had the right, upon a dissolution of their partnership, to take the goods, pay Johnson for them and carry on the business. On the 13th of August, 1851, the defendants executed to N. Wood & Co. a policy insuring them for six years, five hundred dollars upon grain, and twenty-five hundred dollars upon goods that might be in their store during that time. The agreement as to Wood’s right upon dissolution to buy the goods and continue the business was not stated in the application, nor made known to the defendants. In June, 1852, Johnson died, and Wood thereupon, according to the right reserved to him in the articles of partnership, bought all the interest which Johnson’s estate had in the goods, and carried on the business in his own name, and thereafter bought goods on his sole account. The business was carried on in the same store, and in the same way by Wood, that it had been by N. Wood & Co. In September, 1854, the store was burned, and there was a Toss upon the goods of about three thousand dollars. All of these goods, except about three hundred dollars worth, had been purchased by Wood after the decease of Johnson. The plaintiff insists that he can recover in this action for the loss of these subsequently purchased goods. I. He claims this right independent of any assent or agreement by the defendants to be liable to him, and to confirm and ratify the policy to him as assignee and purchaser. He puts his right upon the ground, that by the parnership articles he had the right upon the decease of Johnson to buy the goods and carry on the business alone ; that he did so, making no change that could vary or increase the risk; that the change was but a variation of relative interest, increasing the share of one partner and diminishing that of the other. Upon the death of Johnson the plaintiff, as surviving partner, became vested with the legal title to the goods of the firm insured — 563 — by the policy, and was by operation of law the legal assignee of the policy. In case of loss lie alone could sue for a breach of the contract of insurance. So long as Wood continued in the care and disposition of these goods as surviving partner, we think the policy continued in force as to them, notwithstanding the decease of Johnson. But it is not for these goods alone, or for a loss while managing the business of the late firm as survivor, that the plaintiff seeks to recover]; but for goods bought on his own account and used in his private business. This is not a mere change of relative interest. It is a new business and a new party, and to make the defendants liable to Wood alone, it must be shown that they have contracted with him. A contract with Wood & Johnson can not be transferred into a contract with Wood without their consent. Such a change in the contract, and the business, the defendants can not be supposed to have contemplated when they issued the policy. They may have contemplated that if one partner should die during the term of the policy, it should be kept in force while the survivor closed the business of the firm. That is reasonable. But it is unreasonable to extend it to a new business, and a new firm. Hence, when one partner sells to his associates, there can be no recovery by the old firm for a subsequent loss; Tillou v. The Kingston Mut. Ins. Co., 1 Seld. 406; Murdock et al. v. The Chen. Co. Ins. Co., 2 Comst. 210; 3 Denio 301. This has sometimes been put upon the ground that at the time of the loss the old firm had no insurable interest in the property. But we think where there is a voluntary change of the firm, the insurance company may also well say that the new firm is not the party with whom they contracted. They might consider the risk increased as much by the departure of one of the assured from the firm as by the introduction of a new party; and when such a change is voluntary, it is a risk which they did not contemplate. They might be willing to insure Wood while connected in business with Johnson, and wholly unwilling to insure or deal with him alone. The rights and liabilities of Wood & Johnson might be very different from those of Wood alone. They might be solvent and he insolvent. The fact, that by the partnership articles, the plaintiff ffad the right to purchase the stock and continue the — 564 — business, upon the dissolution of the firm of Wood & Co., can not alter the rights of these parties as to the extension of the insurance. The clause in the articles was not made known to the defendants, and therefore could not bind them. Even if known, we think it could have had no effect, unless it had been incorporated into the contract by express words. Without the assent or agreement of the defendants to treat the policy as a policy to Wood alone, we do not think he can recover for these subsequently purchased goods. II. The more important question next arises, as to the effect of the evidence excluded by the court. The plaintiff, in his declaration, alleges the execution of the policy, the agreement in the partnership articles, the death of Johnson, the purchase of the goods by Wood, and an agreement of the defendants with Wood that in consideration of his paying all subsequent calls upon the premium note, “ the policy should inure to his benefit, and stand as a policy to him for the insurance of his sole goods and property, kept in the store and employed in the prosecution of the business,” and performance by the plaintiff relying on this promise of the defendants, whereby the defendants became liable, etc. The evidence excluded by the court tended to prove such an agreement entered into with the plaintiff, upon fall notice of all the facts, both by the agent and the directors of the defendants’ company. But it was not claimed that the agreement was in writing. The evidence showed that it was express, but verbal with the agent, assented to by the directors, and had been acted upon by both parties. A policy of insurance is a mere chose in action, and not assignable at common law so that the assignee can sue in his own name, and though like a bond, it may be made payable to the insured and his assigns, still, if a loss happen, the equitable assignee must sue in the name of the original assured; Skinner v. Somes, 14 Mass. 107; Jessel v. Williamsburgh Ins. Co., 3 Hill 88; 7 Wend. 72; Phil. on Ins. p. 61; 9 Wend. 404. In the charters of modern insurance companies and usually in policies of insurance, there is a provision that a sale of the property insured shall avoid the policy; but that the vendee having — 565 — the policy assigned to him, on application to the company within some limited period of time, may have the policy ratified and confirmed to him, so that he may be substituted for the original assured, and have all his rights and liabilities. In New York it has been held that the vendee and assignee, under such a policy, must sue in his own name and not in that of the assignor ; Mann v. The Herk. Co. Ins. Co., 4 Hill. 188; 1 Hill. 71. As to the form of bringing the action the question is not important in this case, for the plaintiff is both vendee and assignee, and also as surviving partner the only one who can sue as the original party insured. And as under our decisions he might join his own individual claims with those as surviving partner (2 Vt. 569; 4 Vt. 26), the question as to who should sue does not arise. In the charter of this company, section 12, it is provided that when a house or building is alienated the policy shall be void ; but that the vendee having the policy assigned him may within thirty days have it confirmed to him, etc. There is nothing in the charter as to the alienation of goods. Nor is there any provision in the charter or by-laws specifying how the policy shall be confirmed to the vendee, or that it shall be in writing. The first and second sections of the eighth article in the by-laws enable the vendor of goods insured to have his policy cancelled in whole or in part. They have no further application. As, therefore, there is nothing in the charter, by-laws or policy, to' determine the effect of consent by the company to an alienation of his interest in the goods by one of the assured to his associate, nor how the vendee or assignee may have the policy' ratified to him so as to inure to his benefit, we are obliged to recur to the general principles of the law of insurance to determine the point here in issue. The general rule of the common law is, that a chose in action can not be assigned, so that the assignee can sue in his own name, unless there is an express promise by the debtor, upon suffir cient consideration, to pay the assignee. It has been held in this State that the Iona fide assignment of a debt, and notice, constitute a sufficient consideration for a promise by the debtor to pay the assignee. Moar v. Wright, 1 Vt. 57, contains an elaborate opinion of Judge Royce on this point. It — 566 — has been since followed in this State; 7 Vt. 197; 11 Vt. 82; see also 18 Maine 122; 21 Maine 484; 4 N. H. 69; 4 Cow. 13; 3 Hill. 88; 9 Wend. 317. In Mowry v. Todd, 12 Mass. 283, Parker, Ch. J., says, “whatever may be the effect of handing over a written contract to a party to whom it is intended to be transferred, without a recognition of the transfer by the person bound by the contract, and a promise to pay to the holder, we are satisfied that with such recognition and promise the assignment is sufficient without the name of the assignor. It amounts to the substitution of one creditor for another, by the consent of the two creditors and the debtor ; and an action may be maintained by the assignee in his own name, founded on the assignment and the express promise to pay.” In England it has been held, that to make the consideration sufficient there must be something more than the mere assignment of the debt, such as release of another’s liability, or forbearance; 4 B. & C. 163 and 166; 8 B. & C. 402 and 395. In applying this general rule to the law of insurance, Mr. Phillips, in his treatise on insurance, p. 61 and 62, says, “If the underwriter has agreed to account and make payment to an assignee, the latter may commence proceedings in his own name, where nothing remains to be done on the part of the assignor, and all his interest in the contract has ceased; and if the assignment taken in connection with the policy plainly transfers the assured’s whole interest, the underwriter’s assent to it is evidently equivalent to his agtmrient to be directly answerable to the assignee. In such case the suit may be in the assignee’s name, and he becomes to all intents and purposes the substituted party to the contract.” The 8 Mass. 515, seems to recognise the rule as thus expressed. The Correctness of the rule is indisputable so far as it is founded on an express promise by the insurer to pay. Nor does it seem an unreasonable conclusion, that the assent of the insurer to the assignment and continuing validity of the policy and to the alienation of the property, where alienation avoids the policy, should be held equivalent to an express promise, since without such consent the policy would be void. The assent of the insurer in such case is nothing unless it amounts to an 'express — 567 — promise, for he knows that assent or agreement with one who has parted with all his insurable interest in the property insured, would be null, a mere gaming policy. We think the rule as expressed by Mr. Phillips, is founded upon good sense and the fair analogies of the law. The case of Bodle v. The Chenango Co. Ins. Co., 2 Comst. 53, has been cited to show that no action at law will lie. That was a bill in equity, and the court of appeals held that it was well brought, and that the orators had no remedy at law. There Jona Bodle sold to James Bodle an undivided interest in the goods insured, and the insurance company agreed that the policy should remain good to Jona Bodle on the store for six hundred dollars, and to Jona and James for fourteen hundred dollars on the goods. The charter of the company had the usual provision that the grantee having the policy assigned to him might, on application, have the same ratified so that he should be substituted for the original assured. The case seems to have been considered only in the one view, whether the orators had complied with the provisions of the charter so that they might sue at law; and the court held that there was no assignment of the policy or any part of it by James to Jona, so as to enable them to sue as assignees under the provision in the charter. If the suit had been by James and Jona Bodle on the express promise to pay the fourteen hundred dollars to them, and had set forth their application to have the policy continued and ratified as to them, and the agreement of the company to do so, and the entry of Jona Bodle’s name as a member, we think a sufficient consideration and a valid contract would have been shown so as to have sustained the action at law. But this view of the case does not appear to have been presented. In the case at bar Wood, by the decease of Johnson, became the legal assignee of the policy, and had the sole care and disposition of the property insured. He purchased the beneficial interest which Johnson’s estate had in the goods, and thus became the legal owner of both the goods and the policy. Johnson’s estate had nothing in either. Being thus the legal assignee of the policy and vendee of Johnson’s interest in the goods, he applied to the general agent of the company to ratify and continue — 568 — the policy to him alone, and for his sole goods, during the period for which the policy by its terms was to continue. The agent did expressly agree to this proposition. If he had authority to so agree, he thereby bound the company. But whether he had or had not we do not consider material, for the case states that the directors, with notice of the death of Johnson and that the plaintiff was continuing the business, assented to this agreement, and treated the policy as so continuing. The agent had authority to receive the proposal of the plaintiff, and if not authorized to accept it, it was his duty to communicate with the directors. As the plaintiff had no communication with the principals, but did the whole business through the agent, he could not be expected to have proof of an express promise- Or of an express assent by them. If they treated the agreement he had expressly made with the agent as valid, and acted upon it for more than two years and up to the time of the loss, we think such conduct a sufficient ratification of the agreément,- and fully sufficient to support and confirm it, although no direct and express language of affirmance is shown. Circumstantial evidence which establishes such assent to the agreement, has all the force of a positive agreement in words. Assent that the policy should continue in force for Wood’s sole benefit, excludes all idea of its continuance for the. benefit of Wood & Johnson, Johnson being dead, and the policy and the goods being vested in Wood, an assent that the policy should continue in force for his sole benefit, must be deemed equivalent to an express promise to pay him the insurance money in case of loss. Indeed, this may be considered not so much an assignment of a chose in action, as a ratification of the policy upon sufficient consideration by the insurer to the plaintiff as the party insured; the plaintiff thereafter holding the policy not by assignment, but as a party substituted by contract upon sufficient consideration, for the original party. * It was not necessary that the substitu- — 569 — tion should he pursuant to the provisions of the twelfth section, for that applied only to buildings, and not to the alienation of goods. The agreement of the plaintiff to remain liable on the premium note was a sufficient consideration. It is objected also by the defendants, that such an assignment or substitution can not be by parol, but must be in writing. There is nothing in the charter, by-laws or policy, requiring the assent of the company to such substitution to be in writing. It is well settled that the promise to assume a chose in action, made by the debtor to the assignee, enabling the latter to sue in his own name, need not be in writing; 3 B. & C. 842; Chitty on Cont. 532 and notes. This can not be deemed the creation of a contract of insurance by parol evidence, but only the ratification and confirmation of an existing policy to a new party having an interest in the subject matter of the insurance. Though such confirmations are in many insurance companies required by charter or by-law to be in writing, yet it is obvious that in the absence of any statute requiring such act to be done only by writing, parol evidence that it has been done and acted upon is admissible; 5 Fost. 169, Goodall v. N. E. M. F. Ins. Co.; 22 Conn. 575, Peck v. New Lon. Co. Mut. Ins. Co. We do not deem it necessary to consider the question whether an oral contract of insurance, when it has been acted upon, is binding between the parties. As the evidence offered was admissible as tending to prove an express promise, or what was equivalent to it, a new trial must be had. Judgment reversed.