Traders' Ins. Co. v. Mann
| Decision Date | 12 August 1903 |
| Parties | TRADERS' INS. CO. OF CHICAGO v. MANN. |
| Court | Georgia Supreme Court |
Syllabus by the Court.
1. A suit on a policy of insurance must be brought in the name of the holder of the legal title.
2. Where, after a fire, a debtor transfers such a policy to a creditor for the purpose of making a preference, and is thereafter adjudicated a bankrupt, and the creditor, in order to share in the general estate, surrenders the policy to the trustee without reassigning the same to him in writing, the latter holds the beneficial interest in the policy, and can by amendment substitute the holder of the legal title as plaintiff suing for his use.
3. That the adjudication in bankruptcy was based on the fact of such preference having been made did not of itself authorize the trustee to ignore the assignment; but it would have been necessary to have the same set aside, or secure a reassignment in writing, before he could sue on the policy in his own name.
4. The fact that the creditor physically surrendered the policy without proper transfer in writing was not necessarily an admission that his title was void. It may have been to his interest to surrender the collateral, even if legally held and prove his claim as an unsecured debt.
5. Under the bankrupt act (Act July 1, 1898, c. 541, 30 Stat 544 [U. S. Comp. St. 1901, p. 3418]), a trustee in bankruptcy may institute suit in the state court for the collection of debts without first obtaining an order so to do from the court of his appointment.
6. The constitutional right to be heard in the courts is granted defendants as well as plaintiffs, and a defendant will not be charged with expenses of litigation except in cases where he has acted in bad faith.
7. This refers to "bad faith" in the transaction out of which the cause of action arose, rather than to the motive with which the defense is being made.
Error from City Court of Macon; W. D. Nottingham, Judge.
Action by J. T. Mann, trustee, against the Traders' Insurance Company of Chicago. Judgment for plaintiff, and defendant brings error. Modified.
Hardeman Davis, Turner & Jones and Smith, Hammond & Smith, for plaintiff in error.
Erwin & Callaway and M. W. Harris, for defendant in error.
This was a suit by a trustee in bankruptcy on a policy of fire insurance which had been previously transferred by Screws, the debtor, to Everett, Ridley, Ragan & Co., one of his creditors, and by them surrendered to the trustee, under the provisions of the bankrupt act (Act July 1, 1898, c. 541, § 57g, 30 Stat. 560 [U. S. Comp. St. 1901, p. 3443]), with a view of having their debt proved as an unsecured claim. The insurance company demurred on the ground that from the allegations it appeared that the legal title was in Everett, Ridley, Ragan & Co., and would there remain until it was reassigned in writing; that a physical surrender of a chose in action would not put title in the trustee so as to authorize a suit in his own name. By amendment the trustee set out that the transfer of the policy had been the very act of bankruptcy for which Screws, the debtor, had been adjudicated a bankrupt; that Everett, Ridley, Ragan & Co. had physically surrendered the policy, abandoning all claim thereunder, and proved their claim in the bankrupt court as an unsecured creditor. They were thereupon substituted by amendment as plaintiffs suing for the use of the trustee. The insurance company again demurred on the ground that there was no cause of action in the trustee or in Everett, Ridley, Ragan & Co.; that if the transfer by Screws to them had been in violation of the bankrupt act (Act July 1, 1898, c. 541, 30 Stat. 544 [U. S. Comp. St. 1901, p. 3418]), and the very reason for his being adjudicated a bankrupt, the transfer was absolutely void; that the transferees got no title, and could not maintain a suit in their own name or for the use of the trustee. In effect, the company claimed that while, under the facts alleged in the amendment, the trustee could have continued the suit in his own name, yet, by substituting as plaintiffs those who claimed under a void transfer, he had amended himself out of court.
The original petition, failing to allege that the policy had been reassigned in writing, did show that the trustee could not sue in his own name. The amended petition, however, does not sustain the proposition that Everett, Ridley, Ragan & Co. were not holders of the legal title. The adjudication in bankruptcy was not binding on them. As a judgment in rem, it conclusively fixed the status of Screws as a bankrupt, but Everett, Ridley, Ragan & Co. had still a right to be heard on the validity of the transfer. They might have been able to show that it was not made within four months before the filing of the petition in bankruptcy, or that they had acted in good faith, without notice of insolvency, and purchased the policy for full value. Even if preferences are void under the bankrupt act, the trustee cannot treat them as such for all purposes. He must first establish that fact in proceedings instituted to have them set aside. Neither was the fact that the holders abandoned and surrendered the policy an admission that the original assignment was void. It may have been perfectly valid, and yet the condition of the estate may have been such as to make it to their interest to prove their claim as an unsecured debt. To do that, they were required to surrender whatever collateral they already held. Having abandoned the policy and proved their claim, the trustee was thereafter beneficially interested in the proceeds of the policy; but, as they had reassigned it in writing, they could, as the holders of the bare legal title, sue for his use. The insurance company had an interest in the suit being properly brought, and by a party where a judgment would be to it an ample and final protection. Certainly for the suit to proceed in the name of the holders for the use of the trustee can in no way injuriously affect the defendant. The Civil Code of 1895 (section 5105) permitted them to be substituted as plaintiffs suing for the use of the beneficial owner, and thereby implied that, even though the original petition may have been brought by an improper party, there was enough to amend by.
The company contends, however, that, even if the trustee could have instituted a proceeding which could be amended into a perfect cause of action, this could only be true in a case where the beneficial owner was in a position lawfully to begin the action, but that the attempted suit here was utterly nugatory, since the trustee could only commence a suit by virtue of an order from the bankrupt court; that in this respect he stands on the same footing as a receiver, who is only authorized to sue when directed so to do by the chancellor administering the estate. There is a marked difference between the two. The powers of a receiver are not fixed by law, but by the order of appointment. His duties vary in each case. In some instances they are active. He must operate a railroad, sell a stock of goods, manage a farm, or collect rents. He is often a mere stakeholder to preserve the property until final decree. He has no fixed duty or inherent power. Unless authorized so to do, he has no right to bring suit. Civ. Code 1895, § § 4900, 4906. But the duties of a trustee in bankruptcy are fixed by statute. "They shall collect and reduce to money the property of estates for which they are trustees"--words as fully warranting him to sue as an administrator, with the same power and duty. The fact that this is to be "under the direction of the court" no more requires a preliminary order to sue than it would necessitate a special order to authorize him to go in person and present a note and demand payment. The money, when collected, after suit or without suit, and the use to be made thereof, was to be "under the direction of the court." But being bound to collect, he was not obliged to secure a special order to bring a suit necessary to collect. As to actions by or against the bankrupt pending at the time of the adjudication, the act requires him to obtain instructions from the court before intervening. But the express requirement that he must obtain an order in such instances, while being silent as to the necessity therefor in cases like this is conclusive that special permission was not necessary where he had to sue in order to collect a debt due the estate. The fact that the original bankrupt act (Act March 2, 1867, c. 176, 14 Stat. 517) required this action to be brought in a state court is his sufficient authority to begin this proceeding. Section 23b, 30 Stat. 552 [U. S. Comp. St. 1901, p. 3431].
The plaintiff claimed attorney's fees under the Civil Code of 1895, § 3796; setting out no particular facts entitling him thereto, further than that "the refusal to pay was in bad faith, and for the purpose of hindering, delaying annoying, and damaging petitioner." Attorney's fees under this section of the Code have usually been asked for by the plaintiff in actions ex delicto, as will appear from the following cases: For damages to person and property. Mayor of Savannah v. Waldner, 49 Ga. 316. Damages to live stock. Selma R. Co. v. Fleming, 48 Ga. 514. For deceit. Smith v. Dudley, 69 Ga. 78. For wrongfully suing out bail trover. Farrar v. Brackett, 86 Ga. 463, 12 S.E. 686; Wall v. Johnson, 88 Ga. 525, 15 S.E. 15. Wrongful seizure of property. Jutcher v. Boehm, 67 Ga. 535. Loss of goods by a carrier. R. & D. R. Co. v. Spencer, 86 Ga. 203. Johnson v. East Tenn. R. Co., 90 Ga. 812, 17 S.E. 121. Capricious refusal by hotel keeper to deliver either check or baggage. Carhart v. Wainman, 114 Ga. 632, 40...
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