Patapsco Insurance v. Smith

Stephen, J. delivered the opinion of the Court. This action of assumpsit was instituted in Baltimore county court, by The Pafapsco Insurance Company against the defendants, to recover the sum of SI 351 25, the premium stipulated to be paid for the insurance of the cargo of the British brig Ann, at and from Bzienos Ayres to Baltimore. The application for insurance is in the following Words: liLyde Goodwin wants insurance for self and others on cargo pr. the British brig Ann, Anderson, master, at and from Buenos Ayres to Baltimore,” <^c. This application was accepted by tlie office, the policy executed, and on the same day Goodwin, with a certain George P. Stevenson, as his surety, (who was not in any manner interested in the subject matter of the insurance,) gave their negotiable promissory note for the payment of the premium of the [169] policy of insurance to the plaintiffs. Payment of this note, on its arrival at maturity, was legally demanded, and not being paid, a protest was made by a notary public, in the usual manner, for nonpayment. It is admitted, in the case stated, that no notice was given to the defendants of the nonpayment of the note, or any-demand made on them by the plaintiffs for payment of the premium of insurance, until the day the note became due. That the defendants, before the above mentioned note became due, paid to Goodwin their respective proportions of the premium of insurance, without the knowledge or privity of the plaintiffs. That Goodwin, at the time he applied to the office for in» mirancc, did not disclose the names of the owners of the cargo of the Jinn, and that the parties interested in the insurance, or in other words the defendants, were not known as such to the insurers, until some time after the policy had been executed. On the nonpayment of the promissory note, given for the premium of insurance, this action was instituted to recover the same from the, defendants, on the ground of an assumpsit legally implied to pay the same) and the question which this court is called upon to decide is, whether such a suit, under the particular circumstances of the case, can be sustained upon the established principles of law? In a state, at present highly respectable for its standing in a commercial point of view* and promising, by a gradual developement of its faculties, to make still further advances in that respect at no very distant day, questions relating to the laws of trade and commerce must at all times be deemed of the highest importance. It is therefore much to be desired, that in judicially deciding upon such principles, especially in the dernier resort, the utmost accuracy should be attained, and the doctrine of the law merchant settled upon the firmest and most stable foundation. The first question, to the consideration of which the mind is forcibly drawn in this case is, what was the effect of the note given by Goodwin and Stevenson upon any legal liability which might have attached upon the defendants in the absence of such note? The law is clear, that where a debtor gives his promissory note on account of a pre-existing simple contract debt, such note does not merge or extinguish the debt due on simple contract; but that the creditor, on nonpayment of the note, may resort to the original cause of action, and sue upon it; [170] This doctrine is founded upon the principle, that bcitli causes of áct'iort áre of equal dignity in the eye of the law,; and, therefore; iti legal construction, the one does not merge or extinguish the other. This principle is too well áettíéd to need thé aid of authority to support it. Where á party, at the time of contracting a debt, assigns, the note of a third person to the véñdéf; such note does not extinguish the original cause of action, unless it was received as payment or Satisfaction of the original contract; to this effect see the case, of Clark vs. Young, 1 Cranch, 181. Tlie principle iiére established goes to prove, that á promissory note executed by the debtor and a third person at the timé the debt is contracted, does riot wholly extinguish thé simple contraót or original Cause of action. In this! cáse the note passed by Goódwin and Stevenson to the insurance company was a negotiable instrument, payable to' order. If the note had been passed away or endorsed by the company,'the law is clear, that no action could be sustained upon the primary cause of action; but it appears,' from the case stated, that at the time the notebé’came payable, it remained in the possession of the payees, arid had not, at that time, been negotiated. In support of the1 doctrine here stated, Harris vs. Johnston, 3 Cranch, 311, and Holmes vs. D’Camp, 1 Johns. Rep. 34, are referred to: In th'e-last of which cases the judge says, that “technically speaking a negotiable note is not an extinguishment of an antecedent debt, yet it has been deemed an extinguishment sub modo.” He further goes on to remark, that where a négotiablé note has be'eri given.for a prior debt, the plaintiff should not be suffered to recover on the original consideration, unless he shows the note to have been lost, or produces and cancels it at the trial. As before remarked, the fact in this cáse is admitted to be, (at least the contfary does not appear,) that the nbte. remained iff the possession of the party at the time it was 'due, and of course coffld not afterwards be negotiated, without subjecting-the' party receiving it to every defence which might bé set off' against the person to whom it was originally payable. From these principles, and the authorities referred to in support' of them', it results that the note given by Lyde Goodwin and Georg'e, P. Stevenson would not per se be sufficient to' extinguish the simple contract debt, if under the circumstances of the case the law would imply a promise on' the [171] part of the defendants to pay the premium of insurance to the plaintiffs. The Question, however, still arises, did the law imply such promise? It n admitted, that at the time Goodwin applied for insurance his application was made, for himself and others. He did not disclose at that time, xxor was he requested to do so, who those .persons were for whose benefit, as well as his own, the insurance was applied for. The insurers were therefore manifestly satisfied with the responsibility pf Goodwin and Slevensor^ and did not intend to look to the other defendants for payment. It is most evident that the insurance was effected by. Good\ win, as their agent, and not as copartner; and it fully appears that he was so considered by the assured themselves, because, befoie the premium note became due, the defendants paid to Goodwin, their agent, their respective proportions of the premium. In Patterson vs. Gandasequi, 15 East, 62, the law is clearly settled to be, that if the vendor of goods, knowing that the buyer who deals with him in his own name is in truth the agent of another, elect, to give the credit to the agent, he cannot afterwards recover the value against the principal; but if the principal be not known at the time of the purchase, when discovered, he or the agen t may he sued at the election of the seller. It is true that the defendants in this case were not named to the plaintiffs, but sufficient was disclosed to the insurers to appr'r/.e them that the insurance was not for the benefit of Goodwin alone, but for himself and others, which was sufficient to put the insurers on inquiry, if they had not been satisfied with the liability of Gopdivin &nd Stevenson. alone. Grose, Justice, says, “I think that the plaintiffs in this case might have elected whom they would have for their debtor; and here they seem to have made their election.’5. The coartare therefore of opinion, that there is £0 error in the judgment of the court below. JUDGMENT AFFIRMED.