Merchants' Insurance Company of Providence v. Abbott

• Decision Date: 13 September 1881
• Citation: 131 Mass. 397
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: Merchants' Insurance Company of Providence v. Charles W. Abbott & others. Hanover Fire Insurance Company v. Charles W. Abbott & others. Hartford Fire Insurance Company v. Same. National Fire Insurance Company v. Same. Lamar Insurance Company v. Same

131 Mass. 397

Merchants' Insurance Company of Providence v. Charles W. Abbott & others.

Hanover Fire Insurance Company v. Charles W. Abbott & others.

Hartford Fire Insurance Company v. Same.

National Fire Insurance Company v. Same.

Lamar Insurance Company v. Same

Supreme Court of Massachusetts

September 13, 1881

Argued February 27, 1879

Middlesex.

Judgment for the plaintiffs against Abbott alone.

The cases were argued in February 1879, by H. W. Suter, (F Dabney with him,) for Denny, Rice & Company, by C. R Train & E. W. Hutchins, for Browne, Steese & Clarke, and by J. P. Treadwell, for the plaintiffs; and were reargued in March 1881, by F. Dabney, (H. W. Suter with him,) for Denny, Rice & Company, by A. S. Wheeler & E. W. Hutchins, for Browne, Steese & Clarke, and by W. G. Russell & J. P. Treadwell, for the plaintiffs.

Gray C. J. Devens & Allen JJ., absent.

OPINION

Gray, C. J.

These actions are in the nature of assumpsit for money had and received, with special counts alleging that the plaintiffs were induced to pay the money by fraud and mistake. The five cases were tried together, but are not exactly alike.

In the first action, which is brought by the Merchants' Insurance Company of Providence, R. I., against Charles W. Abbott and the members of the firm of Denny, Rice & Company, the material facts are shown by the report of the presiding justice and the special findings of the jury to be as follows:

On March 17, 1876, a woollen mill was destroyed by fire, upon the contents of which Abbott held a policy of insurance from the plaintiffs in the sum of $ 2500, payable in sixty days after satisfactory proofs and adjustment of loss, and providing that any fraud or false swearing in the proofs of loss, should avoid the policy. Soon after the fire, Abbott made and delivered to the plaintiffs proofs of loss, and they, after a reasonable investigation, which disclosed no grounds for a refusal to pay, and in ignorance of any fraud on Abbott's part, adjusted the amount of the loss in accordance with such proofs.

Denny, Rice & Company offered evidence of the following facts: At the time of the fire Abbott was indebted to them in the sum of about $ 4000. In the latter part of April 1876, Abbott paid them about $ 1500 in cash, and, as security for the payment of the rest of his debt, executed an instrument in writing under seal, by which, after reciting the issuing of the policy, and that a claim for loss had arisen under it, he assigned to them all his "claims upon said insurance company for loss under said policy," and authorized them to demand and sue for the same in his name, if necessary, and the proceeds to enjoy to their own use, and generally to do all and every act in and about the premises which he might do if this assignment had not been made.

In June 1876, at the expiration of the sixty days allowed by the terms of the policy, the plaintiffs, in good faith, and not knowing of any fraud on Abbott's part, paid to Denny, Rice & Company the amount of the loss as adjusted, and took a receipt signed by them in this form: "Boston, May 25, 1876. Received of the Merchants' Insurance Company of Providence $ 2478.80 in full satisfaction and discharge of all claim for loss and damage under this policy by fire March 17, 1876, and this policy is hereby cancelled and surrendered." The sum so paid exactly extinguished the debt of Abbott to Denny, Rice & Company, and they never paid any part of it to him.

The mill and its contents, as the jury found, were burned with the knowledge and at the instigation of Abbott, and his proofs of loss were false and fraudulent. The plaintiffs did not learn that they had been defrauded until May 1877, and then at once placed the case in the hands of legal counsel for investigation, and for prosecution if investigation should warrant it; and on January 16, 1878, brought this action. The other defendants had no knowledge of any fraud, nor was any demand for the money made upon them before this action was commenced.

On June 5, 1877, Abbott filed a petition in bankruptcy, and on October 3, 1877, obtained a certificate of discharge, and no dividend was paid out of his estate.

The justice presiding at the trial ruled that Abbott's certificate of discharge was no bar to this action; and, holding that the facts offered to be proved by the other defendants constituted no defence, directed a general verdict for the plaintiffs, and reported the case for such disposition and judgment as the full court should determine.

There can be no doubt of the liability of Abbott in this action. If the money had been paid by the plaintiffs to him, it could be recovered back as money paid under the influence of a mistake between them and him as to the existence of a state of facts that would entitle him to the money. ^[*] Kelly v. Solari, 9 M. & W. 54. Townsend v. Crowdy, 8 C. B. (N. S.) 477. Pearson v. Lord, 6 Mass. 81. Stuart v. Sears, 119 Mass. 143. Welch v. Goodwin, 123 Mass. 71. 2. Phil. Ins. §§ 1816, 1817. Although Abbott has not in fact received the money, the payment of the money by the plaintiffs at his request in discharge of his debt to the other defendants is equivalent to the receipt by Abbott of so much money, and is sufficient to enable the plaintiffs to maintain the action against him upon the special count, if not upon the general count for money had and received. Emerson v. Baylies, 19 Pick. 55. Perry v. Swasey, 12 Cush. 36. This liability of Abbott to the plaintiffs, being a debt created by his own fraud, is not barred by his certificate of discharge in bankruptcy. U.S. Rev. Sts. § 5117. Turner v. Atwood, 124 Mass. 411. Mudge v. Wilmot, 124 Mass. 493, and 103 U.S. 217.

As to the other defendants a different question is presented. If, before receiving the money from the plaintiffs, they had known the true state of facts, and had participated in Abbott's fraud, they would have been liable to refund the money. Martin v. Morgan, 3 Moore 635; S. C. 1 Brod. & Bing. 289; Gow, 123. Mason v. Waite, 17 Mass. 560. But the report states that there was no evidence offered, nor was it contended at the trial, that they had any knowledge of the fraudulent conduct of Abbott, but it was conceded that they were wholly innocent parties.

As to them, therefore, assuming the truth of the facts which they offered to prove, the case stands thus: They held a valid debt against Abbott. The assignment by Abbott to them was made in consideration of that debt, and to secure the payment thereof. The previous existence of the debt does not make the assignment the less a conveyance for value. Blanchard v. Stevens, 3 Cush. 162. Culver v. Benedict, 13 Gray 7. Ives v. Farmers' Bank, 2 Allen 236. Railroad Co. v. National Bank, 102 U.S. 14, 58, 59. There is no question of the validity or of the genuineness of the assignment. Having been made after the fire, and after the amount of the loss had been adjusted between the plaintiffs and Abbott, it was in legal effect an assignment of a claim of Abbott upon the plaintiffs for a certain sum of money. That claim, not being negotiable in form, could not have been sued by these defendants except in Abbott's name, and subject to any defences which these plaintiffs had against him. But the plaintiffs, at Abbott's request, and without any suit, paid the amount of the loss, as adjusted between themselves and Abbott, directly to these defendants, who were wholly ignorant and innocent of the fraud of Abbott.

The plaintiffs do not stand in the position of resisting a claim of Denny, Rice & Company on an alleged promise of the plaintiffs, in which case Denny, Rice & Company would have to prove a valid contract of the plaintiffs to pay to them or to Abbott, their assignor. But the plaintiffs are seeking to recover back from Denny, Rice & Company a sum of money which the plaintiffs have voluntarily paid to them, and which the plaintiffs assert to be wrongfully withheld from them by these defendants, and which they are therefore bound to prove that, as between these parties, the plaintiffs have the better right to, and it is inequitable and unjust that these defendants should retain.

The only contract of the plaintiffs was with Abbott, and the only mistake was as between them and him. The money was voluntarily paid by the plaintiffs in discharge of Abbott's supposed claim upon them under their policy, and to these defendants as the persons designated by Abbott to receive it, and was in legal effect a payment by the plaintiffs to Abbott. These defendants received the money not in satisfaction of any promise which the plaintiffs had made to them, (for the plaintiffs had made no such promise,) but under the agreement of Abbott with these defendants that they might receive it from the plaintiffs and apply it to the satisfaction of Abbott's debt to themselves. In other words, the money was paid by the plaintiffs to these defendants, not as a sum which the latter were entitled to recover from the plaintiffs, but as a sum which the plaintiffs admitted to be due to Abbott, under their own contract with him, and which at his request and in his behalf they paid to these defendants, who at the time of receiving it knew no facts tending to show that it had not in truth become due from the plaintiffs to Abbott. This payment by the plaintiffs to these defendants at Abbott's request was a satisfaction of Abbott's debt to these defendants, and might have been so pleaded by him if sued by them upon that debt. Tuckerman v. Sleeper, 9 Cush. 177. As between the plaintiffs and these defendants, there was no fraud, concealment or mistake. These defendants had the right to receive from Abbott the sum which was paid to them. The assignment which they presented to the plaintiffs was genuine, and...