Century Ins. Co. v. First Nat. Bank

• Citation: 102 F.2d 726
• Decision Date: 21 March 1939
• Docket Number: No. 8956.,8956.
• Parties: CENTURY INS. CO., Limited, v. FIRST NAT. BANK OF HUGHES SPRINGS, TEX., et al. FIRST NAT. BANK OF HUGHES SPRINGS, TEX., et al. v. CENTURY INS. CO., Limited.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

102 F.2d 726 (1939)

CENTURY INS. CO., Limited, v. FIRST NAT. BANK OF HUGHES SPRINGS, TEX., et al.^* FIRST NAT. BANK OF HUGHES SPRINGS, TEX., et al. v. CENTURY INS. CO., Limited.

No. 8956.

Circuit Court of Appeals, Fifth Circuit.

March 21, 1939.

Albert P. Jones and G. G. Gannon, both of Houston, Tex., for appellant.

Hugh Carney, of Atlanta, Tex., Austin Y. Bryan, Jr., of Houston Tex., and O. D. McReynolds, of Sherman, Tex., for appellees.

Before SIBLEY, HOLMES, and McCORD, Circuit Judges.

HOLMES, Circuit Judge.

This action was instituted against appellant, in the state court, by the First National Bank of Hughes Springs, to recover a portion of the proceeds of an insurance policy issued to the A. E. Hervey Bonded Warehouse. The policy covered about 4000 bales of cotton which were destroyed by fire on the morning of October 7, 1937. The case having been removed to the federal court, the appellant filed its answer and plea in the nature of a bill of interpleader, admitting liability in the sum of $123,201.75, which sum was tendered into court, and which, disregarding the endorsement hereinafter mentioned, represented the face of the policy, $125,000, less the amount of unpaid premiums.

The interpleader was in the nature of a class suit in which the plaintiff, First National Bank of Hughes Springs, and a number of other parties, were made cross-defendants, as representatives of the owners and holders of warehouse receipts issued by Hervey upon cotton stored in the warehouse. The owners and holders of the receipts intervened, and claimed that the policy of insurance provided a limit of $175,000, which was $50,000 more than the amount admitted by the appellant. The total damage to the cotton was agreed to be $150,000.

On November 3, 1937, A. E. Hervey, who operated the warehouse as an individual, filed a voluntary petition in bankruptcy, and was duly adjudged a bankrupt. C. D. Pierce was appointed trustee in bankruptcy of this estate, and became a party defendant to the bill of interpleader, contending that he was entitled to recover the entire proceeds of the policy, and that the fund should be administered in the bankruptcy court. The other cross-defendants sought payments directly to themselves, so as to avoid the expense of an administration in bankruptcy. A general verdict was rendered against appellant, and a judgment entered thereon in favor of the trustee in bankruptcy for the full amount claimed. In addition, the trustee was awarded the fund tendered into court by appellant; and the holders of the warehouse receipts were denied any recovery in their individual capacity.

We think the judgment should be reversed and the verdict set aside, as the appellant tendered into court the full amount due by it upon the policy. The issue as to the amount of the policy turns upon the authority of the soliciting agent to bind the company by executing an endorsement, on the day before the fire, which increased the insurance from $125,000 to $175,000. This policy was known to the trade as brokerage business, which means that it emanated from an agent not representing the company in which it was written. Viewing the facts in evidence most favorably to the appellees, we are convinced that the soliciting agent did not have the authority, either real or apparent, to execute the endorsement. As the Texas decisions control, it will suffice for us to cite the case of Home Ins. Co. v. Lake Dallas Gin Co., 127 Tex. 479, 93 S.W.2d 388, which announces the rule in Texas applicable to this branch of the case before us.

We think the court erred in denying the claims of cross-appellants with respect to the interpleader. It was interposed in the answer in an action at law, as an equitable defense, under authority of Section 274b of the Judicial Code, 28 U.S. C.A. § 398. In such case the defendant was entitled to the same rights and remedies as if it had filed a separate bill seeking the equitable relief prayed for in its answer. The decree under review was entered before the new rules took effect, and we are deciding the case without applying them, but, on its remand to the district court for...