Boston Ice Co. v. Boston & M. R. R.

• Decision Date: 04 March 1913
• Citation: 86 A. 356,77 N.H. 6
• Parties: BOSTON ICE CO. et al. v. BOSTON & M. R. R.
• Court: New Hampshire Supreme Court

86 A. 356

77 N.H. 6

BOSTON ICE CO. et al.

v. BOSTON & M. R. R.

Supreme Court of New Hampshire. Merrimack.

March 4, 1913.

Transferred from Superior Court, Merrimack County; Plummer and Chamberlin, Judges.

Action by the Boston Ice Company antl others against the Boston & Maine Railroad. Demurrer to declaration on case transferred without decision to the Supreme Court from the superior court. Demurrer sustained.

Case against the defendant railroad and 10 insurance companies for the use and benefit of the Queen Insurance Company of America, a duly organized corporation doing business in New Hampshire. The declaration alleges that on October 9, 1909, certain property of the Boston Ice Company located near the tracks of the defendant railroad was destroyed by fire communicated thereto by a locomotive negligently managed and operated by the defendant railroad so as to emit an unusual and unnecessary quantity of sparks and hot coals; that the Queen Insurance Company, by reason of a policy of insurance issued by it upon said property and its destruction by fire, became liable to pay and has paid to said ice company $2,757.60, and brings this action to recover of the defendant railroad the amount so paid; that the other defendants are all corporations duly organized and doing business in the state, and each had in force at the time of the fire policies of insurance upon the property destroyed. The defendant railroad demurred. Subsequently all the other defendants joined as plaintiffs by leave of court, and the-railroad renewed its demurrer.

Remick & Jackson, of Concord, for plaintiff Queen Ins. Co. of America and others. Robert W. Upton, of Concord, for plaintiff Niagara Fire Ins. Co. and others. Robert Jackson, of Concord, for plaintiff Boston Ice Co. Streeter, Deinond & Woodworth and William W. Thayer, all of Concord, for defendant.

PARSONS, C. J. "Sec. 29. The proprietors of every railroad shall be liable for all damages to any person or property by fire or steam from any locomotive or other engine upon their road.

"Sec. 30. Such proprietors shall have an insurable interest in all property situate upon the line of their road which is exposed to such damage, and they may effect insurance thereon for their own benefit.

"Sec. 31. Such proprietors shall be entitled to the benefit of any insurance effected upon such property by the owner thereof, less the cost of premium and of expense of recovery. The insurance shall be deducted from the damages if recovered before the damages are assessed, or if not, the policy shall be assigned to the proprietors, who may maintain an action thereon."

If the foregoing sections of chapter 159 of the Public Statutes are valid, and are to be interpreted according to the ordinary rules of the English language as to the meaning and use of its terms, the insurance companies who claim by subrogation a right to maintain this suit cannot recover. The basis of their claim is that they have paid to the nominal plaintiffs, in performance of contracts of insurance made by them, the sums they seek to recover for damages occasioned to the property of such plaintiffs by Are from a locomotive upon the defendants' road. By the statute the defendants are subrogated to any right of the insured against the insurance companies. If the defendants are compelled to pay because of the damage, the statute authorizes them to recover of the insurance companies. The result is that the right of subrogation, if it belongs to the insurer in other cases, is annulled by the statute as to losses of the class described in the legislation. Lyons v. Railroad, 181 Mass. 551, 64 N. E 404.

The answer of the plaintiffs in interest is (1) that the statute is unconstitutional, and (2) that the statute was not intended to apply where the damage was caused by the negligent operation and management of the locomotive from which the fire was communicated. Upon the first ground, as the statute was enacted long before the contract of insurance was made and before any of the companies were organized or permitted to do business in this state, and as the companies had no title to or interest in the property injured, except that created by the contract of insurance, the only constitutional ground which is suggested for the invalidity of the statute, so far as the insurance companies are concerned, that is entitled to notice, is the claim that it impedes their freedom of contract.

Since 1840. wnen railroads were first operated in this state, they have had, by statute, an insurable interest in the property along their lines, for whose damage by fire they were made liable (Laws 1840, c. 561), but which would doubtless have been theirs without the statute. 1 May, Ins. (3d Ed.) §§ 94, 94a; Eastern R. R v. Insurance Co., 98 Mass. 420, 423. As both the railroad and the owner were liable to suffer loss by the destruction of the property by fire, a uolicy payable to the one upon whom the loss should fall would not offend the law of insurance or contracts. The situation is analogous to that between carrier and shipper, where the carrier may insure against loss by himself or jointly with the shipper. Jackson Co. v. Insurance Co., 139 Mass. 508, 2 n. E. 103, 52 Am. Rep. 728; Phcenix Ins. Co. v. Transp. Co., 117 U. S. 312, 6 Sup. Ct. 1176, 29 L. Ed. 873. As the plaintiffs in interest could legally have made the contract of insurance in accordance with the statute, their right of contract is affected only if the statute compels them to so contract. If such a construction of the statute were an unconstitutional infringement of the general right of contract, such construction would not be given to it, if some other meaning, which would not violate the Constitution, could be found in its terms. The contract of insurance being made within this state to be executed in this state, the laws of the state upon the subject are necessarily within the contemplation of the parties, and must be looked to to ascertain the terms by which they agreed to be bound. Kimball v. Express Co., 76 N. H. 81, 79 Atl. 492; Mac-Donald v. Railway, 71 N. H. 448, 450, 52 Atl. 682, 59 L. R. A. 448, 93 Am. St. Rep. 550. If the Legislature had not power to prohibit the parties from making a contract which should not inure to the benefit of the railroad, the statute might be understood to mean that such should be the construction of the contract, unless the parties otherwise agreed. So far as appears, the contracts of insurance involved do not attempt to exclude the railroad from the beneficial interest secured by the statute. The voidability of such a provision as against the statute, or the validity of the statute, if intended to declare such a stipulation invalid, are questions not presented by the case. If they were, the power of the state to regulate and impose conditions upon the business of corporations which it creates or permits to act within it, and especially to regulate the business of insurance, is too well settled to permit of discussion. Dyer v. Railroad, 99 Me. 195, 58 Atl. 994, 67 L. R. A. 416, 2 Ann. Cas. 457; People v. Formosa, 131 N. Y. 478, 483, 30 N. E. 492, 27 Am. St. Rep. 612: Hooper v. California, 155 U. S. 648, 652, 15 Sup. Ct. 207, 39 L. Ed. 297; Orient Ins. Co. v. Daggs. 172 U. S. 557, 19 Sup. Ct. 281, 43 L. Ed. 552: Waters-Pierce Oil Co. v. Texas, 177 U. S. 28, 43, 20 Sup. Ct 518, 44 L. Ed. 657; Hancock Ins. Co. v. Warren, 181 U. S. 73, 21 Sup. Ct. 535, 45 L. Ed. 755; Fidelity Ins. Co. v. Mettler, 185 U. S. 308, 22 Sup. Ct. 662, 46 L. Ed. 922.

The contention of the plaintiffs, that having been permitted to do insurance business in this state they have the constitutional right to make a contract which the statute of the state forbids, in effect is a claim that they may make such contracts as they please, and, if sound, would practically nullify all the insurance legislation of the state. That as corporations the plaintiffs in interest have only such rights of contract as the state permits; that as the result of legislation the business of insurance is no longer a private right, but a matter of public concern, a franchise subject to regulation by the state for the public good (2 Spell. Ex. Rem. §§ 1807, 1808); and, finally, that the plaintiffs do not show any contract in contravention of the statute—answers the first objection to the statute.

The second claim is that section 31, c. 159, Public Statutes, should be read with the insertion after the first sentence of the limitation, "except when the damage is occasioned by the negligence of such proprietors, their servants or agents." But there is no such language in the act. If it had been intended that damage so occasioned should not be attended by the general right of subrogation given, no sufficient reason appears why the limitation was not expressed. See Hooksett v. Railroad, 38 N. H. 242, 245. Nor does the history of the legislation aid the plaintiffs. Prior to 1840 there were only five and a quarter miles of "railroad in operation from Nashua to the state line, though the Boston & Maine and Eastern were put in operation that year. The legislation of June, 1840, was therefore probably founded upon Massachusetts' experience, or the legislation of that state in March, 1840, rather than upon the results of railroad operation here.

The act of 1840 provided: "Every railroad corporation or company now established, or which may hereafter be establisned within the limits of this state, shall be deemed and held liable to pay fully for all damages which shall hereafter accrue to any person or property within the same, by reason of fire or steam from any locomotive or other engine, used or to be used upon such roads, respectively, for purposes of transportation or otherwise; provided, however, that the said railroad corporations are hereby empowered to effect insurance upon any property situate upon the line of said railroads belonging to individuals and exposed to damages as aforesaid for their own...