St. Louis Railway Company v. Commercial Union Insurance Company/Opinion of the Court

At the very foundation of this action lies the objection of the defendant that the plaintiffs could not acquire or enforce any rights under or by virtue of the contracts of insurance made by them within the state of Arkansas, because they had not complied with the statute of Arkansas of April 4, 1887, c. 135, entitled 'An act to prescribe the conditions upon which foreign corporations may do business in this state,' and containing the following provisions: 'Section 1. Before any foreign corporation shall begin to carry on business in this state, it shall, by its certificate under the hand of the president and seal of such company, filed in the office of the secretary of state, designate an agent, who shall be a citizen of this state, upon whom service, summons, and other process may be made. Such certificate shal also state the principal place of business of such corporations in this state. Service upon such agent shall be sufficient to give jurisdiction over such corporation to any of the courts of this state. Sec. 2. If any such foreign corporation shall fail to comply with the provisions of the foregoing section, all its contracts with citizens of this state shall be void as to the corporation, and no court of this state shall enforce the same in favor of the corporation.' But a comparison of that statute with other legislation of the state of Arkansas clearly shows that it was not intended to include foreign insurance companies. That statute was the earliest one of the kind in Arkansas, concerning foreign corporations generally. But a counterpart of that statute, (embodied in Mansf. Dig. c. 83,) concerning foreign insurance companies, had for years been in force, which, after establishing an 'insurance bureau' in the office of the auditor of state, and making it the duty of the auditor to see that all the laws of the state respecting insurance companies were faithfully executed; declaring it to be unlawful for any person, company, or corporation to solicit or make any contract of insurance within the state without complying with the provisions of this act; and requiring every insurance company or association, domestic or foreign, doing business in the state, to transmit to the auditor, annually, or oftener if requested, statements of its condition, business, and receipts, -provided as follows: 'Sec. 3831. No person shall act as agent or solicitor in this state of any insurance company of another state or foreign government, in any manner whatever relating to risks, until the provisions of this act have been complied with on the part of the company or association, and there has been granted to said company or association by the auditor a certificate of authority, showing that the company or association is authorized to transact business in this state.' 'Sec. 3834. No insurance company not of this state, nor its agents, shall do business in this state, until it has filed with the auditor of this state a written stipulation, duly authenticated by the company, agreeing that any legal process affecting the company, served on the auditor or the party designated by him, or the agent specified by said company to receive service of process for the company, shall have the same effect as if served personally on the company within this state.' This statute als pr ovided, by sections 3832, 3833, that such companies should report to the auditor annually the amount of premiums received within the state, and certify to the auditor the names of 'the agents appointed by them to solicit risks, issue policies, or receive applications in this state,' and that no such agent should transact business until he had procured a certificate from the auditor; and, by section 3835, that any foreign insurance company, or any person or corporation transacting business for it, without being authorized under this act, should be fined $500 a month, and be prohibited from doing business in the state until the fines were paid. On March 26, 1887, only nine days before the passage of the statute concerning foreign corporations, on which the defendant relies, the same legislature passed an act 'for the better regulation of the business of insurance in this state,' (St. 1887, c. 84,) containing the following provisions: 'Sec. 3. Before any corporation or company organized under the laws of any other state shall be permitted to do business in this state, they shall, in addition to filing the bond required in section one of this act, be required to file with the auditor of state a statement of the commissioner of insurance of the state under whose laws they are organized, as to their condition, responsibility,' etc.; 'and, if there be no such commissioner, the auditor may require said company to exhibit to him a statement of their finacial condition, responsibility,' etc.; 'and, if it appears that said company is a responsible company, said auditor shall issue a certificate to them, as hereinafter provided. Sec. 4. When any insurance company shall have complied with all the provisions of this act, it shall be the duty of the auditor of state to issue to said company a certificate to that effect, which shall entitle them to do business in this state; and if any person shall attmept to solicit or transact any busineses for and in the name of any such company, which company has not complied in all respects with the requirements of this act, he shall be guilty of a misdemeanor,' and be fined not exceeding $500.

It thus appears that the state of Arkansas has established and maintained a distinct system with regard to foreign insurance companies, under the superintendence of the state auditor, by which every such company was required to file with the auditor a stipulation for the service of process upon it, as well as to make full returns of its condition and business to that officer, to report to him the names of all its agents within the state, and to receive from him certificates of authority for itself and for each of its agents; evidently contemplating that a foreign insurance company would have no principal place of business within the state, but would transact its business in the usual manner through agents at different places. Such being the settled policy of the state with regard to foreign insurance companies, they cannot reasonably be held to be governed by the act concerning foreign corporations generally, which required a certificate to be filed with the secretary of state, designating an agent upon whom service might be made, and stating the principal place of business of the corporation within the state. To construe that act as including foreign insurance companies would require the drawing of one of two equally impropable inferences,-either that the only stipulations of such companies for service of process upon them should be filed in a different public office from that in which all other returns and documents relating to such corporations are preserved, or else that their stipulations for such service must be filed both with the auditor and with the secretary of state. For these reasons we are satisfied that the omission of the plaintiffs to file in the office of the secretary of state the certificates required by the statute of Arkansas of April 4, 1887, c. 135, was no bar to this action, and that the fourteenth instructio re quested was rightly refused.

It is not contended that the plaintiff's contracts were void for want of compliance with the provisions of the statutes of Arkansas concerning foreign insurance companies, and it does not even appear whether they had or had not complied with them. The validity of the contracts of insurance being established, there can be no doubt of the nature and extent of the rights acquired by the plaintiffs under those contracts. In fire insurance, as in marine insurance, the insurer, upon paying to the assured the amount of a loss of the property insured, is doubtless subrogated in a corresponding amount to the assured's right of action against any other person responsible for the loss. But the right of the insurer against such other person does not rest upon any relation of contract or of privity between them. It arises out of the nature of the contract of insurance as a contract of indemnity, and is derived from the assured alone, and can be enforced in his right only. By the strict rules of the common law, it must be asserted in the name of the assured; in a court of equity or of admiralty, or under some state codes, it may be asserted by the insurer in his own name; but in any form of remedy the insurer can take nothing by subrogation, but the rights of the assured; and if the assured has no right of action, none passes to the insurer. Hall v. Railroad Cos., 13 Wall. 367, 370, 372; Railway v. Jurey. 111 U.S. 584, 593, 4 Sup. Ct. Rep. 566; Phoenix Ins. Co. v. Erie & W. Transp. Co., 117 U.S. 312, 321, 6 Sup. Ct. Rep. 750, 1176; Liverpool, etc., Steam Co. v. Phenix Ins. Co., 129 U.S. 397, 462, 9 Sup. Ct. Rep. 469; Connecticut Fire Ins. Co. v. Erie R. Co., 73 N. Y. 399; Platt v. Railroad Co., 108 N. Y. 358, 15 N. E. Rep. 393.

The principal question in the case, therefore, is whether Samuel O. Smith & Co., the owners of the 340 bales of cotton, had any right of action against the defendant railway company for the loss of this cotton by fire. As sufficiently appears by the bill of exceptions in this case, and more fully by an opinion delivered by the court below in the similar case of Marine Ins. Co. v. St. Louis, etc., Ry.Co., 41 Fed. Rep. 643, 651, 652, the rulings and instructions under which the plaintiffs obtained a verdict proceeded upon the theory that, if the cotton had been suffered to accumulate in the sheds and in the street until, by reason of the danger of its taking fire, it endangered the property of the plaintiffs and others in the immediate vicinity, it was a public nuisance, and the defendant, as matter of law, was guilty of aiding in creating and maintaining that nuisance, and responsible for its consequences, upon three grounds: (1) That the defendant had not removed the cotton as soon as delivered by the owners to the compress company, as it was authorized and required to do by its contract with that company; (2) that the defendant must be conclusively presumed to have been in possession of so much of the cotton as it had issued bills of lading for; (3) that the defendant had made the cotton sheds a receiving station for its railroad, and the compress company its agent to receive and hold the cotton.

The leading facts which the evidence introduced by the plaintiffs at the trial tended to prove were as follows: The defendant railway company had made an oral agreement with the compress company to receive and transport all cotton in bales brought by its owners to the sheds of the compress company, and broke this agreement by neglecting to furnish transportation. For most of the cotton delivered by its owners to the compress company, the railway had issued bills of lading, but it had issued none for the 340 bales of Smith & Co. By reason of this neglect of the railway company to furnish transportation, and the consequent accumulation of cotton in the sheds of the compress company, a large mass of cotton delivered by its owners to the compress company, including the 340 bales, was piled and kept by that company in a public stree ad joining its sheds, and, while there, was destroyed by fire from an unknown cause. So far as concerned the 340 bales, the only contract of the railway company was with the compress company, and was to receive and transport the cotton. The neglect of the railway company to furnish sufficient transportation may have been a breach of that contract, for which the compress company might maintain an action; but it created no liability, in contract or in tort, to the owners or insurers of the cotton, or to any other person. This cotton, certainly, was in the exclusive possession and control of the compress company. The railway company had not assumed the liability of a common carrier, or even of a warehouseman, with regard to it; had given no bills of lading for it; had no custody or control of it, and no possession of it, actual or constructive; and had no hand in placing or keeping it where it was. The delay of the defendant railway company to furnish transportation according to its contract with the compress company was in no legal sense a cause of the destruction of the cotton. It was simply one of a series of antecedent events without which the loss could not have happened, for if the cotton had not been there, it would not have been burned. The cause of the loss was the fire, kindled by some unknown means, and in no way arising from or connected with the neglect of the defendant to furnish transportation. Upon principle and authority, that neglect was not the direct and proximate cause of the loss by fire, and did not make the defendant resposible for that loss to the owners of the cotton or to their insurers. Railroad Co. v. Reeves, 10 Wall. 176; Morrison v. Davis, 20 Pa. St. 171; Denny v. Railroad Co., 13 Gray, 481; Hoadley v. Transportation Co., 115 Mass. 304; Association v. Dubuque, 30 Iowa, 176; Daniels v. Ballentine, 23 Ohio St. 532.

The next question is how far the railway company's liability in this action is affected by the fact that it had issued bills of lading for other cotton forming part of the same mass accumulated in the street. The course of business was this: The compress company received the cotton from its owners, gave them warehouse receipts for it, and placed and kept it, as it saw fit, in its sheds or in the adjoining street. The railway company, whenever the owners requested, gave them bills of lading in exchange for the receipts of the compress company. After doing this, the railway company gave notice to the compress company, and directed that company to put the cotton on the cars, addressed accordingly; and the compress company then insured the cotton in behalf of the railway company, and put the cotton on the cars. There is nothing else in the case which has any tendency to show that the railway company had or exercised any control or custody of the cotton, or of the place where it was kept by the compress company, before it was put upon the cars by that company. The railway company evidently neither considered itself, nor was considered by the compress company, as having assumed any responsibility for the care or custody of the cotton, until it had been insured in its behalf and loaded upon its cars. The evidence warranted, if it did not require, the inference that the bills of lading were issued merely for the convenience of all parties, and with no intention of making any change in the actual or the legal custody of the cotton until it was so loaded. California Ins. Co. v. Union Compress Co., 133 U.S. 387, 415, 10 Sup. Ct. Rep. 365. Upon the facts of this case, it may well be doubted whether liability of the railway company as a common carrier began before the cotton had been received upon its cars, and had thereby come into its actual and exclusive possession and control. Railway Co. v. Knight, 122 U.S. 79, 93, 95, 7 Sup. Ct. Rep. 1132. But, however that may be, the court below clearly went too far in instructing the jury that the railway company, merely by giving bills of lading for the cotton, became responsible for a nuisance resultin fr om the manner and the place in which the cotton was kept by the compress company. It was suggested that, because by the statute of Arkansas of March 15, 1887, c. 60, all warehousemen and carriers were * prohibited, under a penalty, from issuing receipts or bills of lading, except for goods which had been actually received into their possession, the railway company must be conclusively presumed to have been in possession of the cotton for which it had issued bills of lading. But it might be argued, with equal force, that this statute prevented the bills of lading from binding the railway company before the cotton was actually received into its possession. If the statute has any bearing, it is only upon the question of fact whether the railway company had or had not any share in the custody and control of the cotton, for which bills of lading had been issued, before it was put upon the cars.

As to the hypothesis that the sheds of the compress company and the adjoining street had been made by the railway company one of its receiving stations, and that the compress company was the agent of the railway company, either in receiving or in holding the cotton, it is enough to say that, if the facts have any tendency to support that hypothesis, they fall far short of conclusively establishing it as matter of law.

The circuit court therefore erred in refusing to give the fifth, eleventh, and twelfth instructions requested, as well as in the instructions which were given to the jury. As for this reason the verdict must be set aside and a new trial ordered, at which an amendment in respect to parties may be allowed in the discretion of the court below, we express no opinion upon the question of pleading, under the Code of Arkanasas, (which is not free from doubt,) whether this action was rightly brought in the name of the insurance companies alone, or whether the assured should have been made a party, either as a plaintiff or as a defendant. See Mansf. Dig. §§ 4933, 4934; St. Louis, etc., R. Co. v. Camden Bank, 47 Ark. 541, 548, 1 S. W. Rep. 704. Judgment reversed, and case remanded, with directions to set aside the verdict and to order a new trial.

BROWN, J., not having been a member of the court when this case was argued, took no part in its decision.