California Insurance Company v. Union Compress Company

This is an action at law, brought in the circuit court of the United States for the eastern district of Arkansas, by the Union Compress Company, an Arkansas corporation, against the California Insurance Company, of San Francisco, a California corporation, to recover on a policy of insurance against fire, issued by the latter company to the former company on he 2d of November, 1887. By the policy the California Company insures the Compress Company, for the term of 30 days from November 2, 1887, at noon, to December 2, 1887, at noon, against all direct loss or damage by fire, except as hereinafter provided, to an amount not exceeding ten thousand dollars, to the following-described property, while located and contained as described herein, and not elsewhere, to-wit 'Form of cotton policy. $10,000 on cotton in bales, their own, or held by them in trust or on commission, while contained in the frame shed, 112 to 122, inclusive, & in b'ck shed & yard, 115 to 123, inclusive, North Main street, & on platforms adjoining & in street immediately between the sheds, Sanborn's map of Little Rock, Ark's & it is agreed and understood to be a condition of this insurance that this policy shall not apply to or cover any cotton which may at the time of loss be covered in whole or part by a marine policy; & it is further agreed to be a condition of this policy that only actual payment by bank-check or otherwise for cotton purchased shall constitute a delivery of cotton from the seller to the buyer; and it is further agreed that this company shall be liable for only such proportion of the whole loss as the sum hereby insured bears to the cash value of the whole property hereby insured at the time of fire; and it is further agreed that tickets, checks, or receipts delivered to bearer shall not be considered as evidence of ownership. Other insurance permitted without notice until required. * * * In case of loss or damage to the property insured, it shall be optional with the company, in lieu of paying such loss or damage, to replace the articles lost or damaged with others of the same kind and quality. * * * This entire policy, unless otherwise provided by agreement indorsed hereon, or added hereto, shall be void * * * if any change * * * take place in the * * * possession of the subject of insurance. * * * In case of any other insurance upon the property hereby insured, whether to the same party, or upon the same interests therein, or otherwise, whether valid or not, and whether prior or subsequent to the date of this policy, the insured shall be entitled to recover from this company no greater proportion of the loss sustained than the sum hereby insured bears to the whole amount insured thereon, whether such other insurance be by specific or by general or floating policies, or by policies covering only in excess of specified loss; and is it hereby declared and agreed that in case of the assured holding any other policy in this or any other company on the property insured, or any part thereof, subject to the conditions of average, this policy shall be subject to average in like manner. * * * If this company shall claim that the fire was caused by the act or neglect of any person or corporation, private or municipal, this company shall, on payment of the loss, be subrogated to the extent of such payment to all right of recovery by the insured for the loss resulting therefrom, and such right shall be assigned to this company by the insured on receiving such payment. * * * In case of loss on property held in trust or on commission, or if the interest of the assured be other than the entire and sole ownership, the names of the respective owners, shall be set forth, [in the proofs of loss], together with their respective interests therein."

The complaint alleges that on the 14th of November, 1887, the plaintiff was engaged in the business of compressing cotton, which it received or held on its own account, or on commission, or in trust for others, at its warehouses and compress buildings, and adjoining sheds and platforms, situated at the foot of Main street, in the city of Little Rock, Ark.; that it had on hand at that date about 2,800 bales of cotton, delivered to it to be compressed, and belonging to divers parties, the value of which equalled the sum total of the insurance thereon; and that such cotton, whether owned by the plaintiff, or held by it on commission, or in trust for others, was insured against loss or damage by fire in 28 insurance companies, which are named, in the several amounts stated opposite their respective names, amounting in the aggregate to $142,500, which included the defendant for the sum of $10,000. It then sets forth the issuing of the policy by the defendant to the plaintiff, a copy of which is annexed to the complaint, an that on the 14th of November, 1887, all the cotton in bales, contained on said premises, and so insured, was destroyed by fire, 'together with a large quantity of other cotton in possession of plaintiff at said place, which was not insured by plaintiff.'

The complaint then proceeds as follows: '[That at the time that said cotton came to the possession of the plaintiff it was engaged in the business of compressing cotton at its compress in the town of Argenta, opposite Little Rock, and on the north side of the Arkansas river, and that said cotton was deposited with the plaintiff for compression by various owners thereof, who delivered the same at the sheds and yards and adjacent grounds in the said city of Little Rock, as described in said policy, with directions that the same should be transported to said compress by the plaintiff, or some carrier employed for that purpose by it, and that on the receipt of any bales of said cotton by said plaintiff it gave a receipt for the same to the owner thereof, and that, according to a custom known to said depositors, to the plaintiff, and to the St. Louis, Iron Mountain & Southern Railway Co. and the Missouri Pacific Railway Co., of which it was a part, and the Little Rock & Memphis Railroad Company, which were common carriers, having and operating railroads of which both Argenta and Little Rock were stations, said owners transferred said receipts to either one or the other of said carriers, and received from said carriers bills of lading for the transportation by said carriers of said cotton to various places to which said cotton was then and there shipped by said owners, with an agreement with said railway companies that said cotton should not be shipped until it had been compressed by the plaintiff. There was a standing and continuing agreement between said plaintiff and said railway companies that the plaintiff should proceed to compress said cotton, and all cotton thus received, and should insure the same, after notice of the execution of said bills of lading by said railway companies, against loss by fire during the time that said cotton should be in the hands of the plaintiff, for the purpose aforesaid, for a price averaging from sixty to sixty-five cents per bale, to be paid by said railway companies, respectively, when said cotton should be compressed and delivered to said railway companies on their cars at Argenta for transportation under said bills of lading, at which time said carriers should surrender to plaintiff the said receipts, issued, as aforesaid, at the time that said cotton was deposited with the plaintiff for compression by the owners, as above stated; that all of said cotton was in the custody of plaintiff at the time of said loss, under and by virtue of said custom and agreement, and that it was lost by the negligence of the servants, agents, and employes of said railway companies, and that since said loss said St. Louis, Iron Mountain & Southern Railway Company has been sued in this court by two of said consignees for the value of part of said cotton above named, to-wit, the York Manufacturing Company and Hazard & Chapin, and said railway company defended said actions on the ground that said loss was not occasioned by the negligence of said railway company, or its servants and employes, and on a trial of said firstnamed cause it was adjudged by this court that said York Manufacturing Company and said Hazard & Chapin recover from said railway company the value of said cotton sued for, as aforesaid, and that since said adjudication said railway company has paid said judgment, and the value of a large part of the cotton, for which it had issued bills of lading as aforesaid, and that several suits are now pending in this court against said Little Rock & Memphis Railroad Company, brought by the consignee of portions of said cotton, for the recovery of damages for the loss of said cotton by reason of the negligence of said railroad company, which said suits are now pending and undetermined. On said 14th day ofN ovember, 1887, the plaintiff had in its possession, at its sheds and premises above mentioned, for purposes of compression, a large amount of cotton, to-wit, over 3,000 bales. That of this number 2,700 bales of cotton were held by this plaintiff for the St. Louis, Iron Mountain & Southern Railway Company and the Little Rock & Memphis Railroad Company. By said contract and agreement between plaintiff and said railroads this plaintiff took out the policies of insurance above set out for the purpose of indemnifying this plaintiff against loss and liability, and the said railroad companies against loss and liability, by reason of the destruction of said cotton while it was being held by plaintiff for purposes of compression. The St. Louis, Iron Mountain & Southern Railway has been adjudged, as aforesaid to pay a large sum of money, to-wit, $_____, and, in addition, has paid a still larger amount because of its liability for such loss, amounting in all, up to this date, to $72,209.58* and has made demand therefor against the plaintiff for reimbursement of said losses.]' It also avers that the loss by fire on the cotton equalled the insurance on it, and that the plaintiff has performed all the conditions of the policy; and prays judgment for $10,000, with interest. The defendant moved to strike from the complaint the words 'together with a large quantity of other cotton in possession of plaintiff, at said place, which was not insured by plaintiff,' and also the foregoing part included in brackets. It also demurred to the complaint on the ground that it did not state facts sufficient to constitute a cause of action; and also demurred separately to that part of it which is so included in brackets, on the ground that the facts therein stated did not tend to constitute a cause of action. The court overruled the said motion, and also the demurrer, and the defendant excepted to both of those rulings. The defendant then filed its answer, admitting the issuing of the policy, and that at the fire 112 bales of cotton, belonging to one Hanger, and held by the plaintiff in trust for Hanger, were burned, for the loss of which the insurance companies named in the complaint had paid the plaintiff $4,826.59, in full satisfaction thereof, and of which sum the defendant paid its full portion of the loss.

The answer denies the material allegations of the complaint, and avers that the greater portion of the cotton alleged to have been lost at the fire was received by the plaintiff from the owners thereof after the issuing of the policy; that the cotton burned was first delivered by its owners to the plaintiff, and the plaintiff gave to the owners receipts for it, which provided that the plaintiff should not be liable for the loss of it by fire; that after wards, and after the policy was issued, the cotton was sold to various persons, who became its owners, and the Missouri Pacific Railway Company, the Little Rock & Memphis Railroad Company, and the Little Rock, Mississippi River & Texas Railway Company, common carriers of cotton for hire, issued their bills of lading for the same to the purchasers, which provided that the carriers should not be liable for the loss thereof by fire, and at the same time such railroad companies took up the receipts issued by the plaintiff to the original owners, and surrendered them to the plaintiff, whereby the possession of the cotton was changed, contrary to the provisions of the policy, without any consent of, notice to, or knowledge by the defendant; (7) that it is provided in the policy that it shall not apply to or cover cotton which was at the time of loss covered in whole or in part by marine policies, and at that time 2,172 bales of the cotton alleged to have been burned, and of the value of $101,973.73, were covered by marine policies, theretofore issued to the respective owners of the cotton; (8) that after the railroads had issued their bills of lading for the cotton, and before and at the time of the fire, it was kept n a grossly negligent manner in a dangerous public place, without being covered or sprinkled, and but a few feet from a railroad track, where locomotives of the Missouri Pacific and the St. Louis, Iron Mountain & Southern Railroads, emitting sparks, were constantly passing, by which sparks the fire was kindled, and the cotton was destroyed by a fire which occurred in broad daylight, at about four o'clock P. M., and which fire those two railroad companies, by the use of ordinary care, could have extinguished by removing the bales first ignited, or by putting out the fire by water from the hydrants which were close by; and that none of the cotton was destroyed by the negligence of the Little Rock & Memphis Railroad Company or its employes. The plaintiff demurred to certain paragraphs of the answer, and, among them, paragraphs 7 and 8, as not stating facts sufficient to constitute a defense. The court overruled such demurrer as to two of the paragraphs, and sustained it as to paragraphs 7 and 8; to which latter ruling the defendant excepted. Thereupon the case was tried by a jury, which found a verdict for the plaintiff for $9,491.96, on which a judgment was accordingly entered, to review which the defendant has brought a writ of error.

The first four assignments of error on the part of the defendant relate to the overruling of its motion to strike out part of the complaint, the overruling of its demurrer to the complaint, and to part thereof, and the sustaining of the demurrer of the plaintiff to paragraphs 7 and 7 of the answer. At the trial, the plaintiff offered evidence tending to prove that it was engaged in the business of compressing cotton at the town of Argenta, which is on the north bank of the Arkansas river, directly opposite the city of Little Rock; that it received cotton for compression at Argentaand also at the premises described in the policy, at Little Rock; that for cotton received at either place it issued receipts to the depositors,-red receipts at Argenta, and green receipts at Little Rock,-a blank form of which, as it appears in the bill of exceptions, if filled out, would read thus: 'Little Rock, Arkansas, Nov. 1, 1887. Received by the Union Compress Company. From John Smith. Account of John Doe. For compression. Storage after ten days will be charged. Not responsible for any loss by fire. Marks X, Y, Z. No, bales cotton, 65. RICHARD ROE, Superintendent;' that the holders of such receipts took them to the freight offices of one or the other of the two railway companies, the Missouri Pacific Railway Company and the Little Rock & Memphis Railroad Company, and those companies issued bills of lading for cotton, which specified the number of bales and the marks, agreeing to deliver the cotton at an address specified in the bill of lading; that the same bills of lading covered cotton which was received by the plaintiff at Argenta, and which actually was at Argenta, and cotton received at Little Rock, and which actually was at Little Rock; that one form of bill of lading was issued by the Missouri Pacific Railway Company and two forms by the Little Rock & Memphis Railroad Company; that it was claimed that each form covered a portion of the cotton burned; that each form, by its terms, exempted the carrier from liability for loss or damage by fire; and that, as the cotton might pass through the custody of several carriers before reaching its destination, each of them provided that the legal remedy for loss or damages occurring in transit should be only against the particular carrier in whose custody the cotton actually might be at the time of the happening thereof. The Missouri Pacific Railway Company in its bills of lading reserved to itself the privilege of compressing all cotton signed for on the bill of lading. The Memphis & Little Rock Railroad Company did not reserve that privilege, but in one of its two forms, which was a through bill of lading to England, it stipulated for the benefit of any insurance that might have been effece d on the goods. There are five of such foreign bills of lading, covering 158 bales of lost cotton. Bills of lading covering 1,460 bales, alleged to have been burned, were issued by the Missouri Pacific Railway Company. The loss claimed on behalf of the latter company was for 1,463 bales. The bills of lading issued by the Memphis & Little Rock Railroad Company were for 992 bales, but the loss claimed was for 1,211 bales. By the bills of lading issued by the Missouri Pacific Railway Company on the lost cotton 884 bales were covered after the date of the policy, and by those issued by the Memphis & Little Rock Railroad Company 255 bales were covered after that date. It also appears by the bill of exceptions that, on the issuing of the bills of lading, the respective railroad companies notified the plaintiff of their issue, and ordered the cotton designated therein to be compressed at Argenta; that all of the cotton transported from Little Rock to Argenta was carried on the track and by the cars of the Missouri Pacific Railway Company; that the Little Rock & Memphis Railroad Company had no track, and ran no cars, near the premises described in the policy; that the plaintiff paid the Missouri Pacific Railway Company an agreed price for the transportation of the cotton from Little Rock to Argenta; and that the cotton was to be compressed after it arrived at Argenta, and was there to be loaded on the cars of such of the two railroad companies as its marks and the bills of lading called for, to be transported by them to its destination. The bill of exceptions further states that the plaintiff offered evidence tending to prove that 2,670 bales of cotton, covered by said bills of lading, were burned at the fire in question, while in the hands of the plaintiff for compression, after the bills of lading were issued, and at the place described in the policy. The plaintiff also proved that in October and November, 1887, there was an accumulation of cotton at the premises described in the policy, owing to the fact that the Missouri Pacific Railway Company had not sufficient cars to transport the cotton to Argenta as fast as it was received; that the cotton-sheds were open sheds, and were at the time of the fire full of cotton, which had no tarpaulin or other cover over it, and stood within three or four feet of the track of the Missouri Pacifice Railway Company, over which locomotives and trains passed several times daily; that after the sheds were full the cotton was stored, in the street, leaving a passage-way some four feet wide for foot passengers; that the two railroad companies had no control over the cotton while so stored, and could not obtain actual possession of it until the Missouri Pacific Railway Company transported it to Argenta for compression; but that that company could take it at any time across the river for compression.

The defendant offered in evidence the proof of loss furnished by the plaintiff to it, made out after the bringing of the suit, alleging the total destruction by fire of 2,687 bales of cotton, in addition to what was known as the Hanger cotton, and that the 2,687 bales were held by the plaintiff in trust or on commission, that is to say, to be compressed,-and were the property of various persons; the plaintiff being interested in the same to the extent of its charges, and stating the names of the consignees, and the number of bales and their value pertaining to each consignee, no allusion being made to any interest of the railroad companies.

1. The plaintiff offered evidence tending to prove that the policy in suit was taken out by it for the benefit of the railroad companies named in the complaint, and in pursuance of agreements between the plaintiff and those companies, by which the plaintiff agreed to take out such insurance. The defendant objected to such evidence, on the ground that it was incompetent, and in contradiction of the terms of the policy. The objection was overruled, and the defendant excepted.

The plaintiff also offered evidence tending to prove tha by agreement between it and the railroad companies it charged and collected from them 13 cents per 100 pounds for all cotton compressed by it, which charge was by agreement intended to cover, and did cover, the compression of the cotton, the loading of it on the cars at Argenta, and the cost of insuring it for the benefit of the railroad companies. The defendant objected to the evidence, on the ground that it was immaterial, irrelevent, and incompetent. The objection was overruled, and the defendant excepted.

The plaintiff also offered evidence tending to prove that the contracts and customs of business before stated were well known to shippers and the defendant when the policy sued on was issued, it having been stated to the agents of the defendant by an officer of the plaintiff, when the policy was applied for, that it was intended to cover the interests of the plaintiff and of the railroad companies. The defendant objected to this evidence, but the objection was overruled and the defendant excepted.

The plaintiff also offered evidence tending to prove that claims had been filed against the Missouri Pacific Railway Company by the owners of 1,463 bales of cotton burned at the fire, of the claimed value of $72,735.58; that since the commencement of this suit that company had paid such claims to the amount of $65,000; and that the balance had been adjusted by that company, and would be paid. The defendant objected to the evidence on the ground that it was immaterial, irrelevant, and incompetent, but the objection was overruled, and the defendant excepted.

The plaintiff further offered evidence tending to prove that claims had been filed against the Little Rock & Memphis Railroad Company by the owners of 1,211 bales of cotton burned at the fire, of the claimed value of $57,529.55, no part of which has been paid by that company, though suits had been brought on several of the claims, and were still pending. The defendant objected to the evidence, on the ground that it was incompetent, irrelevant, and immaterial; but the court overruled the objection, and the defendant excepted.

After the close of the evidence, the defendant requested the court to instruct the jury as follows: '(1) The policy of insurance of the defendant on which this action is brought covered all goods in possession of the Union Compress Company at the place designated in the said policy, at the date when said policy was issued, which were held by the said Union Compress Company under warehouse receipts issued to the owners of said cotton by said company, and also all cotton subsequently, and during the life of said policy, so received by the Union Compress Company. (2) The policy in question insures the goods of the Union Compress Company at the place designated. It also insures the Union Compress Company to the extent of its liens upon, or charges against, all goods held by it during the life of the policy, not its own, but held by it in trust or on commission. It also insures the interest of the owners of the legal title to such goods so held. It does not insure any one else. Any possible interest of any common carrier not an owner of the goods, or any of them, in the place designated, is not insured by said policy. (3) The jury are instructed to disregard all evidence in the case tending to show that the insurance in question was issued for the benefit of any railroad company not an owner of any of the goods destroyed by fire, for the value of which recovery is sought herein.' The court refused to give any of those three instructions, and the defendant excepted to each refusal.

E. W. McGraw and E. W. Kimball, for plaintiff in error.

[Argument of Counsel from pages 399-408 intentionally omitted]

John F. Dillon, U. M. Rose, and G. B. Rose, for defendant in error.

BLATCHFORD, J.