The Appleton Iron Co. v. The British America Assurance Company
| Decision Date | 01 January 1879 |
| Citation | 50 N.W. 1100,46 Wis. 23 |
| Parties | THE APPLETON IRON COMPANY and others v. THE BRITISH AMERICA ASSURANCE COMPANY |
| Court | Wisconsin Supreme Court |
APPEAL from the Circuit Court for Winnebago County.
The complaint alleges, in substance, that on the 28th of June 1876, defendant, in consideration of a certain premium paid to it by the Appleton Iron Company, one of the plaintiffs issued to that company a policy insuring it against loss by fire, to the amount of $ 3,260, on certain lots of wood in Outagamie county; that by said policy defendant agreed to pay the plaintiffs Donkersly, Smith and Smith the moneys which should become payable upon any loss, to the extent of the interest of said plaintiffs in the property; that, during the life of the policy, property covered thereby was destroyed by fire, to the value of $ 4,421; that the Iron Company duly performed all the conditions of the contract on its part that, at the time of said fire, said Donkersly, Smith and Smith had a valid interest in the property destroyed, by virtue of a mortgage thereon executed to them by the Iron Company, to an amount exceeding that of the insurance; and that defendant has made default in payment, etc., and is indebted to plaintiffs, by reason of the premises, in the sum of $ 1,200, with interest, for which judgment is demanded.
The policy contains the following condition: "That if the property insured be sold or transferred, or if any change takes place in the title or possession, whether by legal process or judicial decree, or voluntary transfer or conveyance, then in every such case said policy shall be void." There was also a provision that if the policy should be assigned before loss, without the consent of the insurance company indorsed thereon, it should be void. The answer alleges that, before the loss occurred, the Iron Company was, on its own petition, adjudicated a bankrupt by the proper federal court; that, pursuant to the terms of the bankrupt law and in accordance with a resolution of the creditors, a trustee was appointed to hold and distribute the estate; and that the bankrupt, "by order of said court did, by deed of assignment in writing, duly convey, transfer and deliver all the property and effects (including the property in said policy described)" to the trustee, to be applied for the benefit of the creditors of the bankrupt. It is further alleged that the trustee accepted the trust that, "by virtue of said assignment or conveyance and the proceedings under said act, the title to said property became vested" in the trustee, and so remained at the time of the fire; that the transfer of the property to him was without the knowledge of the defendant or its consent indorsed upon the policy; and that defendant had never ratified such alienation, or waived the forfeiture thereby created. It is further alleged that the policy sued upon "was specifically described in said petition in bankruptcy, and was mentioned in said petition as part of the estate and assets" of the bankrupt; and that, by virtue of the assignment and the proceedings under the bankrupt act, "the property and effects of the bankrupt, and the policy . . . became and were assigned to, and the title thereto became and was vested in," said trustee, and so remained at the time of the fire. It is also alleged that the bankruptcy proceedings are still in force.
Plaintiffs demurred to the answer as not stating a defense; and defendant appealed from an order sustaining the demurrer.
Order affirmed.
For the appellants, there was a brief by Finch & Barber, and oral argument by Mr. Barber:
1. Under the conditions of the policy, the alienation of the property before the loss avoided the contract. Keeler v. Ins. Co. , 16 Wis. 523; Hinman v. Ins. Co., 36 id., 164. In the case of a trustee created under the bankrupt act, the title to the property vested in him is the same in all respects as the title vested in an assignee appointed in bankruptcy proceedings (Re Williams, 2 Bank. R., 229); and in case of such an assignee, title to all the bankrupt's property vested in him by operation of law. R. S. of U.S. § 5044, and cases cited in marginal note thereto. The adjudication in bankruptcy, and the assignment of the property to the trustee, constituted, therefore, a transfer and change of title both by voluntary transfer and by judicial decree, within the meaning of the policy, and avoided it. Perry v. Ins. Co., 6 Lans., 201; S. C., 61 N. Y., 214, and 5 Bennett's F. Ins. Cases, 597; Adams v. Ins. Co., 29 Me., 292, and 3 Bennett's Cases, 30; A. & A. on Ins., 237; May on Ins., 289; Flanders on Ins., 479, and note; Young v. Ins. Co., 14 Gray, 150, and 4 Bennett's Cases, 417; Hazard v. Ins. Co., 7 R. I., 429; Reynolds v. Ins. Co., 34 Md., 280; Wood on Ins., § 316. 2. If the Iron Company had no insurable interest in the property when the loss occurred, there can be no recovery (Wood on Ins., § 250; Fowler v. Ins. Co., 26 N. Y., 422; Sweeny v. Ins. Co., 20 Pa. St., 337, 342; Sawyer v. Ins. Co., 37 Wis. 504); a distinct averment of such interest in the complaint is necessary ; and for want of such an averment the complaint here fails to state a cause of action. But the answer shows that the Iron Company had no insurable interest at the date of the loss; for whatever interest that company previously had, whether it was a legal or only an equitable interest, had passed by virtue of the assignment to the trustee in bankruptcy. A mortgagor of chattels, even after condition broken, has an interest in the property, which he may assign, and which his creditors may reach. Frisbee v. Langworthy, 11 Wis. 375; Cotton v. Watkins, 6 id., 629, and case cited in note. No change of possession of the property was necessary to effect a change of the title to such interest; but if it were, under the averments of the complaint, such change of possession must be presumed, on demurrer. True, if, after the debts shall be paid in full, there shall be any residue of the property, it will be reassigned to the bankrupt; but the court will not presume that there will be such a residue. Unless the existence of a surplus appears affirmatively, courts invariably hold that this bare contingent interest of the bankrupt is not insurable. Lazarus v. Ins. Co., 5 Pick., 76; Hodgson v. Glover, 6 East, 316; Eyre v. Glover, 16 id., 218. 3. The assignment of the policy to the trustee, in violation of the condition, forfeited it. R. S. of U.S. § 5044; Flanders on Ins., 481; Wood on Ins., § 341; May on Ins., 456-7; Sadlers' Co. v. Badcock, 2 Atk., 554; Smith v. Ins. Co., 1 Hill, 497; Dey v. Ins. Co., 23 Barb., 623; Ferree v. Ins. Co., 67 Pa. St., 373. 4. If the Iron Company cannot recover, the other plaintiffs, claiming only as mortgagees, are in no better position. Grosvenor v. Ins. Co., 17 N. Y., 391; Perry v. Ins. Co., 61 id., 217; Loring v. Ins. Co., 8 Gray, 28; Young v. Ins. Co., 14 id., 150; Pupke v. Ins. Co., 17 Wis. 381, 392; Wood on Ins., §§ 342, 506.
Chas W. Felker, for the respondents, argued that the condition of the policy relied upon by defendant must be strictly construed, both because inserted by defendant itself (Western Ins. Co. v. Cropper, 32 Pa. St., 351; Ins. Cos. v. Wright, 1 Wall., 468; May on Ins., 182; 5 Ben. F. I. Cas., 328), and because it provides for a forfeiture (30 Wis. 540); that, so construed, there had been no sale or transfer of the property within the meaning of its terms (1 Phill. on Ins., § 107; 2 Parsons on Con., 451; Starkweather v. Ins. Co., 5 Ben. F. I. Cas., 328; Bragg v. Ins. Co., 5 Foster, 289); that the words "legal process" in the policy must be understood of the usual and ordinary writs, used, according to the course of the common law, for transferring title or possession in invitum; that neither those words nor the words "judicial decree" have any relevancy to an order made by a register in bankruptcy or a judge sitting in bankruptcy (Burrill's and Bonvier's Law Dics., title "Decree"); that, on the other hand, the making of a deed of assignment by the bankrupt in pursuance of such an order is not a voluntary assignment, even where the petition in bankruptcy is a voluntary act. 2. He further argued that the legal title to the wood in question, with the right of possession, was in the mortgagees (Byron v. May, 2 Chand., 103; Cotton v. Marsh, 3 Wis. 221; Frisbee v. Langworthy, 11 id., 375; Cotton v. Watkins, 6 id., 629; Wilson v. Gray, 2 Stockt., 323; Butler v. Miller, 1 N. Y., 496-500; Fox v. Burns, 12 Barb., 677-8; Hilliard on Mort., 314, sec. 3); that such title therefore did not pass by the assignment in bankruptcy; and that the answer does not claim that the trustee ever went into possession, and there is no presumption that he did so, as he had no right to the possession as against the mortgagees. 3. There was no forfeiture by reason of an assignment of the policy. (1) Construing strictly against the insurer, the provision of the policy as to such an assignment does not apply to an assignment to a trustee for the benefit of creditors. (2) It is extremely doubtful whether a mere contract for an indemnity (such as a policy of insurance is) will pass under a mere general assignment. People v. Duncan, 41 Cal., 507; Re Ely, 1 N. Y. Leg. Obs., 131; 10 Johns., 63; id., 289. (3) The agreement in the instrument that any loss should be paid to the mortgagees to the extent of their interest, was an assignment of the policy to them pro tanto; and, as it appears from the pleadings that their interest exceeded the insurance, it was an assignment of the whole policy to them. May on Ins., § 378; Keeler v. Ins. Co., 16 Wis....
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