Donaldson v. Sun Mut. Ins. Co.

• Decision Date: 16 September 1895
• Parties: DONALDSON v. SUN MUT. INS. CO.
• Court: Tennessee Supreme Court

32 S.W. 251

95 Tenn. 280

DONALDSON v. SUN MUT. INS. CO.

Supreme Court of Tennessee.

September 16, 1895

Appeal from chancery court, Hamilton county; T. M. McConnell Chancellor.

Action by W. E. Donaldson, receiver, against the Sun Mutual Insurance Company, on a policy of fire insurance. From an order overruling a demurrer to the complaint, defendant appeals. Affirmed.

Daniels & Garvin, for appellant.

Watkins & Bogle, for appellee.

McALISTER J.

This is a suit upon a policy of fire insurance. The chancellor pronounced a decree in favor of complainant for the full amount of the policy. The company appealed, and has assigned errors. The policy upon its face insured the Kimball Town Company, as the owner of a certain hotel building, in a sum not exceeding $1,500; but the loss was made payable to W. E Donaldson, receiver for the New York & New Orleans Coal & Iron Company, as his interest may appear at that time. The original bill is filed in the name of Donaldson, as receiver against the insurance company, as defendant. It alleges, among other things, that "at the time said policy was issued, and at the time of said fire, as hereinafter stated, the New York & New Orleans Coal & Iron Company, and this complainant, as its receiver, was a creditor of said Kimball Town Company to the extent of over thirteen thousand dollars, and indorser on its paper for other large sums, and was also a stockholder in said Kimball Town Company to the amount of more than ten thousand dollars, and that he, as such receiver, is still such creditor and stockholder." It appears from the proof that this hotel building had been previously insured for the benefit of the Kimball Town Company. When that policy expired, the insurance agents notified Donaldson, the secretary, and Richardson, the local treasurer, of the town company, whereupon these officers caused a renewal of the policy. Donaldson, it appears, explained to the insurance agents at the time of the renewal that the town company owed the land company about $13,000, and he desired the policy to protect the interests of the land company. The premiums on this policy were paid by Donaldson, as receiver. Donaldson was at that time not only receiver of the land company, but was also general counsel, secretary, and resident manager of the town company. Richardson, who was present when the policy was renewed, was acting treasurer of the town company, and approved the action of Donaldson. Donaldson also notified the president of the town company, by letter, of his action, and, after the loss, advised him in person of the renewal of the policy for the benefit of the New York & New Orleans Coal & Iron Company, and he approved the action of Donaldson. The defendant company demurred to the bill, upon the ground that, if any right of action existed on said policy, it was in the Kimball Town Company, and not in complainant, and that, in any event, said Kimball Town Company was a necessary party to the suit. The demurrer was overruled. The company answered, and, among other defenses, averred that complainant, in procuring this policy, was not acting under authority of the town company, but was acting solely in his capacity of receiver for the coal and iron company, and that neither the receiver nor the coal and iron company had an insurable interest in the said hotel building.

The first assignment is that the court erred in overruling defendant's demurrer. It is insisted in behalf of the demurrant that this suit could only be maintained in the name of the Kimball Town Company, because, first, the loss is made payable to the complainant "as his interest may appear at that time; that under this clause he must have an insurable interest in the subject of the insurance, and none is alleged in the bill. It is insisted that a simple contract creditor, one who has no lien upon the particular property by contract or judgment, or otherwise, has no insurable interest in the property of his debtor. If this clause in the policy was intended to refer to the interest of the appointee in the subject of the insurance, the bill alleged that he was both creditor and stockholder in amounts greatly in excess of the amount of the policy. It has been decided that a stockholder has an insurable interest in the specific articles of tangible property belonging to the complainant. Riggs v. Insurance Co. (N. Y. App.) 25 N.E. 1058; Warren v. Insurance Co., 7 Am. Rep. 160. But we are of opinion that the clause "as his interest may appear at the time" does not refer to the interest of the appointee in the property, but to his interest as a creditor or otherwise in the Kimball Town Company. The interest insured in the property was the interest of the Kimball Town Company. Hayes v. Ferguson, 15 Lea, 1; Cone v. Insurance Co., 60 N.Y. 621; Insurance Co. v. Hulman, 92 Ill. 154. If the interest of Donaldson, as receiver of the coal and iron company, in this property, had been insured, it would, of course, have been necessary to show that he had an insurable interest; but it is not necessary that the appointee to whom the policy is made payable should have an insurable interest in the property insured. The clause, "loss, if any, payable to Donaldson as his interest may appear at that time," was tantamount to an assignment of the policy by the Kimball Town Company, with the consent of the insurance company, to Donaldson, as receiver. 2 May, Ins. § 399, D; Franklin v. Insurance Co., 43 Mo. 491-496; Pratt v. Insurance Co., 64 Barb. 589.

It is admitted by counsel for the insurance company that, when a policy contains a clause making the loss payable to a third person unconditionally, such third person may maintain a suit upon it in his own name; but the insistence of counsel is that, when the policy provides for the payment to a third person "as his interest may appear," the assured, and not such third person, must bring the suit. In support of this position the following authorities are cited: 2 May, Ins. §§ 446, 447, 459; 1 Wood, Ins. p. 299, § 119; Thatch v. Insurance Co., 11 F. 29; Insurance Co. v. Davenport, 37 Mich. 609-613; Insurance Co. v. Felrath, 77 Ala. 194; Minnock v. Insurance Co., 90 Mich. 236, 51 N.W. 367. We have examined these cases so far as they have been accessible, and found that in all of them the appointee affirmatively appeared to have a less interest than the sum insured. He was therefore entitled to only a portion of the proceeds of the policy, and an individual suit by him involved a splitting up of a single cause of action. This is the cardinal differential attribute of all the cases cited by defendant's counsel.

In the case of Insurance Co. v. Davenport, 37 Mich. 609 cited by counsel for the company, the court said, viz.: "No one can dispute the right of parties to a...