David Bradley & Co. v. Brown

Ames, C. Fred E. Brown was a retail dealer in farm implements and machinery at Albion, Nebraska, where he owned and conducted a general store of such goods. In August, 1904, he received into his store building from the plaintiffs, David Bradley & Company, and as a part of his stock in trade, and to be disposed of and accounted for pursuant to a written contract between the parties, a considerable number or quantity of implements. The contract stipulated, in effect, that the goods should remain the property of Bradley & Company, and that Brown should sell them as their agent, retaining a specified compensation for his services, and contained the following paragraph: “In consideration of party of the first part (Bradley & Company) carrying said stock of goods subject to sale, apd at [837] the expense of interest for value and special terms given, party of the second part agrees’to be fully_ responsible for all damage or loss by fire, or otherwise, to any and all goods shipped under this contract.” BroAvn procured policies of fire upon the goods, Avhich were destroyed by fire a short time afterAvards, and later he was adjudged a bankrupt, and the defendant Spear was appointed trustee of his estate. This is a suit begun by Bradley & Company against Brown and the insurance companies to recover the amount of the loss. Spear, after the adjudication in bankruptcy, was substituted for Brown. The insurance companies do not resist payment, but have filed an ansAver in the nature of an interpleader, praying that the court deterfhine to whom the money is OAving. There is no dispute in regard to the facts which were settled by stipulation. The district court awarded the fund to the trustee, and the plaintiffs have appealed. Each of the policies recited that it should protect property belonging to the insured, and that “held in trust by him, or on commission, for which he may be legally liable.” It is not disputed that the property in question falls under this description, and counsel for plaintiffs contends for the application of the rule that, where an agent in the possession of personal property insures it against fire, the money due upon the policy after the loss belongs to his principal, who may recover it directly from the insurance company, and that if it is paid to the agent the .latter holds it in trust, merely, for the benefit of the party ultimately entitled. Authorities to this effect are not wanting, and in our opinion are sound. Snow v. Carr, 61 Ala. 363; Home Ins. Co. v. Baltimore Warehouse Co., 93 U. S. 527; California Ins. Co. v. Union Compress Co., 133 U. S. 387; Johnston v. Abresch, 123 Wis. 130; Stillwell v. Staples, 19 N. Y. 401; 1 Wood, Fire Insurance (2d ed.), sec. 293; Hyde v. Hartford Fire Ins. Co., 70 Neb. 503. With the foregoing general proposition of law we understand counsel for the trustee to be also satisfied, but he contends that it is inapplicable to this case, for the reason [838] that, by the above quoted stipulation in the contract, Brown became himself an insurer of the goods against loss or damage by fire, and became instantly indebted for their value, upon the happening of the loss, irrespective of whether he had procured insurance upon them or not, and that the case is not like one where a debtor agrees to insure for the benefit of a mortgagee, or a factor for the benefit of his principal. The argument appears to us to be sound. The parties cannot be supposed to have contracted with a view to future insolvency. They had seen fit to fix their rights and obligations in event of a loss or damage by fire. Brown was bound to respond absolutely and unconditionally, and it follows, as it seems to us, that the insurance he procured upon the goods was for his own benefit and advantage exclusively. The moment the goods were destroyed by fire, the relation of principal and agent ceased, and that of debtor and creditor supervened. If he had not become bankrupt, and the insurance money had been paid to him, such payment would neither have created a trust fund in favor of the plaintiffs nor have affected the liability he had already incurred under the terms of the contract by the happening of the loss. The money would have been his, subject to his disposition, or to seizure for his debts, in like manner as other moneys and property of his estate, and he would have been liable to the plaintiffs upon his common law obligation of contract, as in other .like cases. It is not doubted that the trustee stands in the shoes of Brown, or that his rights are measured by those of the latter, and we therefore recommend that the judgment of the district court be affirmed. Oldham and Epperson, CO., concur. By the Court: The judgment of the district court is Affirmed.