Marine Ins. Co. v. St. Louis, I.M. & S. Ry. Co.

• Decision Date: 10 February 1890
• Citation: 41 F. 643
• Parties: MARINE INS. CO. v. ST. LOUIS, I. M. & S. RY. CO.
• Court: U.S. District Court — Eastern District of Arkansas

41 F. 643

MARINE INS. CO. v. ST. LOUIS, I. M. & S. RY. CO.

United States Circuit Court, E.D. Arkansas.

February 10, 1890

This suit was brought to recover the value of certain cotton destroyed by fire in the city of Little Rock on the 14th day of November, 1887. The plaintiff, Marine Insurance Company, a corporation created by the laws of Great Britain, brought the suit against the defendant, the St. Louis, Iron Mountain & Southern Railway Company, a corporation created by the laws of this state, and alleged that prior to the 20th day of September, 1887, the Union Compress Company was engaged in compressing cotton bales for transportation; that its compress was located in Argenta, immediately opposite Little Rock, on the north side of the Arkansas river; that the defendant was a common carrier, owning and operating a railway that formed a connection between certain sheds of the compress company situated at the intersection of Main and Water streets, in Little Rock, and its compress, in Argenta; that prior to that time the defendant had agreed with the compress company that it would transport the cotton in bales that might be received at said sheds in Little Rock, across the river, to the compress, for compression; that, for the purpose of realizing and increasing the compensation thus agreed upon, the defendants made said sheds a receiving station for all cotton, in common or uncompressed bales, that might be delivered there, giving bills of lading for all cotton deposited there, upon application of consignors, to any point in the United States or Europe, to which it might be consigned, reserving in the bills of lading the right to have the cotton compressed; that while this contract was in force R. E. Douglas & Co. and the Howell Cotton Company placed certain bales of cotton in said sheds, for future compression and shipment, and took out policies of insurance against loss or damage by fire on the same from the plaintiff; that the defendant did not remove the cotton that was received at the sheds from time to time, but suffered it to accumulate until the sheds became full, and the cotton was piled outside clear across Main street, leaving only a narrow passage-way for footmen, with bales of cotton on either side, thus creating a public nuisance in the street; that defendant neglected and refused to remove the cotton thus accumulated until thr 14th day of November, when the pile of cotton in the street caught fire, from accident or otherwise, and extended thence to the sheds, which were burned, together with the insured cotton above named; that the insurance covered the full value of the cotton, which had been paid by the plaintiff to the insured. The defendant demurred to the complaint because the insured, Douglas & Co., and the Howell Cotton Company, were not made parties.

U. M. & G. B. Rose, E. W. Kimball, and Sanders & Watkins. for plaintiff.

John M. Moore and Dodge & Johnson, for defendant.

CALDWELL J., (after stating the facts as above.)

Our statute requires that 'every action must be prosecuted in the name of the real party in interest. ' Mansf. Dig. Sec. 4933. It also provides that, 'where the assignment of a thing in action is not authorized by statute, the assignor must be a party, as plaintiff or defendant. ' Section 4934. The latter section has no application to the present case. The complaint does not allege any assignment. The right of the insurance company that has paid a loss to recover of the wrong-doer, after payment of the loss, does not depend upon contract, agreement, stipulation, or privity. Sheld. Subr. Sec. 1. The right of subrogation is sometimes spoken of as an 'equitable assignment,' but that is only a convenient figure of speech. From the time of the insurance the insurer has a pecuniary interest in the thing insured, and he becomes entitled to a legal remedy whenever he suffers a loss by reason of that interest, and it appears that the loss has been occasioned by the wrongful act of another. Of course, he has no right of action until he has paid the loss to the insured, because until that time he has suffered no damage. In Deshler v. Doge, 16 How. 622, the plaintiff brought replevin for bills that had been assigned to him, and it was held that he was not suing in the character of assignee. So it has been held that, when a note is made payable to bearer, a transferee thereof does not hold by assignment, and that an executor holding under a will of his testator does not hold as assignee. Bushnell v. kennedy, 9 Wall. 387, and cases cited. In Insurance Co. v. Insurance Co., 129 U.S. 462, 9 S.Ct. 469, the court say:

'From the very nature of the contract of insurance, as a contract of indemnity, the insurer, upon paying to the assured the amount of a loss, total or partial, of the goods insured, becomes, without any formal assignment, or any express stipulation to that effect in the policy, subrogated in a corresponding amount to the assured's rights of action against the carrier, or other person responsible for the loss, and in a court of admiralty may assert in his own name that right of the shipper.'

In respect of parties plaintiff, the first section of our Civil Code above cited renders our practice similar to that prevailing in the admiralty courts. It has been held under its provisions that the holder of a promissory note payable to order might sue on it without joining the payee, though the latter had never indorsed it. Heartman v. Franks, 36 Ark. 504. And it is held that, under the reformed codes of procedure, the action of the insurance company, in cases of this sort, may be brought in the name of the insurer. Sheld. Subr. Sec. 230; Swarthout v. Railway Co., 49 Wis. 625, 6 N.W. 314; Insurance Co. v. Railway Co., 73 N.Y. 405. Where the value of the property destroyed exceeds the insurance money paid, then the suit must be brought in the name of the insured, (Insurance Co. v. Railroad Co., 3 Dill. 1;) though doubtless, under our system of practice, the insurer might be joined where the joinder would not oust the jurisdiction of the court, (Crandall v. Transportation Co., 16 F. 75.) But, as it is alleged in the complaint in this cause that the plaintiff has paid the insured the full value of the property destroyed, it is plain that the latter have no interest in the present controversy, and hence that they are not necessary parties.

That the plaintiff is suing in its own right, and not as assignee of the insured, although its title may be in some sense derivative through them, is a proposition that is made equally obvious by the decision in Railroad Co. v. Dow, 120 U.S. 287, 7 S.Ct. 482. In that case Dow and others, acting as trustees under a mortgage, had expended money in taking up a prior mortgage, given to secure a debt bearing the conventional rate of interest of 10 per cent, per annum, the legal rate being 6 per cent. per annum. The trustees brought suit, claiming that they were entitled to enforce the prior mortgage, and that, standing in the shoes of the mortgagee, they should be allowed interest on the debt secured by the mortgage at the conventional rate; but the court refused to entertain this view, and held that after payment the trustees could claim no more than 6 per centum per annum. The court said: 'The right of subrogation is not founded on contract. It is a creature of equity, is enforced solely for the purpose of accomplishing the ends of substantial justice, and is independent of any contractual relations between the parties. ' And in Johnson v. Barrett, 117 Ind. 551, 19 N.E. 199, the court say: 'Subrogation is the substitution of another person in place of a creditor, so that the person substituted will succeed to all the rights of the creditor, having reference to the debt due him. It is independent of any merely contractual relations between the parties to be affected by it, and is broad enough to include every instance in which one party is required to pay a debt for which another is primarily answerable. ' The demurrer was overruled.

The defendant then filed an answer, admitting the contract between it and the Union Compress Company; but it denied that it had made the cotton sheds in Little Rock a receiving station for the shipment of cotton; asserted that the cotton in the sheds was solely in the possession and under the control of the compress company; denied that it ever induced shippers to deliver cotton at the sheds, or that it ever permitted cotton unreasonably to accumulate at that place; denied that it had participated in the creation of a public nuisance in the street; denied al carelessness; and asserted that the insured were stockholders and officers of the compress company, and that by storing the cotton in the sheds they had contributed to the loss thereof. The defendant pleaded further that the plaintiff was a foreign corporation, doing business in the state of Arkansas, and that at the time of the issue of the policies it had never complied with the requirements of a statute of that state mentioned in the opinion of the court.

The cause was tried before a jury, when the following facts appeared in evidence: The cotton sheds referred to were located on the corner of Main and Water streets, in Little Rock two streets that cross each other at right angles; the latter street running parallel with the Arkansas river, which was near by. At that point Main street approaches the river by a steep descent, and is therefore rarely used, except by footmen, by whom it was much used, mainly in going across Water street to a clubhouse built near the river, and for the purpose of crossing the river on several skiff ferries that landed at the foot of Main street. On Water street the defendant operated its railroad, which had a switch made for the purpose of...