Gordon v. Mechanics' & Traders' Ins. Co.

• Decision Date: 16 December 1907
• Docket Number: 16,810
• Citation: 45 So. 384,120 La. 441
• Parties: GORDON v. MECHANICS' & TRADERS' INS. CO. In re MECHANICS' & TRADERS' INS. CO
• Court: Louisiana Supreme Court

45 So. 384

120 La. 441

GORDON v. MECHANICS' & TRADERS' INS. CO.

In re MECHANICS' & TRADERS' INS. CO

No. 16,810

Supreme Court of Louisiana

December 16, 1907

Certiorari to Court of Appeal, Parish of Lincoln.

Action by Jacob Gordon against the Mechanics' & Traders' Insurance Company. Judgment for plaintiff, and defendant brings certiorari or writ of review to the Court of Appeal by which the judgment had been affirmed. Affirmed.

Price Roberts & Warren (Parkerson, Bruenn & Breazeale, of counsel) for applicant.

Clayton & Hawthorn, for respondent.

OPINION

NICHOLLS, J.

This case was tried and decided in the lower court upon the following statement of facts:

(1) That the defendant issued to plaintiff its policy of insurance on plaintiff's stock of goods while contained in the one-story frame building with shingle roof at No. 409, block P, Sanborn's map, in the town of Ruston, La., for the amount of $ 1,000 as alleged in plaintiff's petition, which policy is herewith filed and marked "Exhibit A."

(2) That plaintiff began to place his goods in the said store building on or about the 2d day of September, 1904, and began business as soon thereafter as his goods could be placed and straightened; that it is agreed that the affidavit of plaintiff hereto attached, and marked "A, 1," shall be received in evidence without objection as to form or manner of taking. The book referred to in said affidavit is filed herewith and marked "Exhibit B."

(3) That plaintiff from time to time entered into a book kept for that purpose the invoices for all the merchandise bought after opening up business at Ruston, La., as a merchant; said book being filed herewith, and marked "Exhibit C."

(4) That said plaintiff kept a record or account of his daily cash sales made each day in a cash book; said cash book being filed herewith and marked "Exhibit D."

(5) That on February 1, 1905, plaintiff filed a voluntary petition in bankruptcy in the United States District Court for the Western District of Kentucky, in the city of Louisville, Ky., and on said petition on said date said plaintiff was adjudicated a bankrupt. Certified copies of said petition and said decree adjudicating said plaintiff a bankrupt are filed herein, and marked "Exhibits E and F."

(6) That on February 2, 1905, the stock of merchandise belonging to plaintiff while situated in said building was destroyed by fire, which originated in the building occupied by Freyer & Goldberg adjoining that occupied by plaintiff.

(7) That on February 3, 1905, George L. Martin was appointed and qualified as receiver of the plaintiff, bankrupt, and on February 15, 1905, the said Martin was appointed trustee, and on February 17, 1905, qualified by having his bond approved. Certified copies of said orders and decrees being filed herewith and marked "Exhibits G, H, I, and J."

(8) That on May 13, 1905, a decree was entered by the judge of the United States District Court for the Western District of Kentucky, confirming a composition offered by plaintiff to his creditors; said decree being filed herewith, and marked "Exhibit K."

(9) That the policy sued on herein is and was a part of the assets of the plaintiff in the hands of the trustee, and reconveyed to plaintiff by the trustee by virtue of the decree of confirmation of composition above referred to.

(10) That the stock of merchandise named in said policy and insured thereunder was worth at least $ 7,000 at the time of the fire, and that the total concurrent insurance, including the policy sued on herein, did not exceed $ 5,000.

The clause of the policy upon which the defendant relies reads with some inapplicable omissions as follows:

"The entire policy unless otherwise provided by agreement indorsed hereon or added hereto, shall be void * * * if the interest of the insured be other than unconditional and sole ownership * * * or if any change other than by death of an assured takes place in the interest, title or possession of the subject of insurance whether by legal process or judgment or by voluntary act of the insured or otherwise, or if this policy be assigned before a loss."

Defendant contends that at the moment of the adjudication in bankruptcy the title to the property involved passes at once out of the bankrupt, and vests in the trustee to be appointed by the creditors, in due course under the provisions of the federal statute; that a transfer to an assignee by decree of court under the bankrupt laws of the United States, upon the bankrupt's petition, divests the bankrupt of all title to his property, which title becomes immediately vested in the assignee. Defendant's counsel say section 70 of the bankruptcy act of 1898 concerning the question at issue reads as follows (with certain unimportant omissions):

"The trustee of the estate of a bankrupt upon his appointment and qualification * * * shall be vested by operation of law with the title of the bankrupt as of the date he is adjudged a bankrupt * * * to all * * * property which prior to the filing of the petition he could by any means have transferred."

Construing the clause of the statute under consideration, the court said in Re Burka (D. C.) 104 F. 327:

"Properly interpreted the trustee is by operation of law vested with the title as of the date the bankrupt was adjudged to be a bankrupt."

See, also, In re Elmira Steel Company (D. C.) 109 F. 472, and authorities there cited.

The court in Re Abrahamson, 1 Am. Bankr. Rep. 44, well said:

"From the time of filing the petition in a case of voluntary bankruptcy the bankrupt's estate is 'in custodia legis,' and upon the general power and general jurisdiction conferred upon a court of bankruptcy, which powers are to be exercised by the referee to whom the matter in bankruptcy is referred, it is the duty of the court upon its own motion to take actual possession and custody of the bankrupt's estate through a receiver or by direction to a marshal."

See, to same effect, Carter v. Hobbs (D. C.) 92 F. 597.

Counsel quote Young v. Insurance Co., 14 Gray (Mass.) 150, 74 Am. Dec. 673, Adams v. Insurance Co., 29 Me. 292, and Perry v. Insurance Company, 6 Lans. (N.Y.) 201, as declaring:

"That the proceedings may be stayed, and thus the property become revested in him is a contingency too remote to be considered the foundation of a remaining insurable interest in the bankrupt. He has no power to reclaim the property, and has no right in law or equity by any contract executed or executory."

And Dey v. Insurance Co., 23 Barb. (N. Y.) 623, and Hazard v. Insurance Company, 7 R.I. 429, as holding that "a voluntary assignment for the benefit of creditors is a transfer."

Plaintiff's counsel contend that a voluntary petition in bankruptcy and an adjudication thereon is nothing more nor less than an expression of willingness on the debtor's part to consummate and deliver to the creditors his property already legally pledged to them; that the adjudication merely means the court's willingness to accept it whenever a trustee shall have been appointed to take charge of it; that the mere expression on the part of the insured debtor to deliver to the trustee in bankruptcy and the assent of the court to accept it through the trustee when appointed does not and cannot...