REPORTER.
; case, but in thisc/tse; as iq. th$t, tbe stateeourt has, $ftel' bearing the parties, a separate controversy as to the defenddecided that the bill doea ant 1\Uey. Xhe reasQusfor remanding the cQ,B6stated in the case of Beadleston are applicable here, and the same result must follow. The motion to remand is granted.
EtLIE! f7. INSuRANCE
Co.
OF NORTH AMERICA.
(OircuitOourt, S. D. linea, E. D. 1887.) 1. A policy of insurance, under which plaintiff brought an action to recover for the loss by fire of ptoperty incumbered by mortgages, stipulated that if the interest of the assured in the pr'operty "does not amount to the entire, sole, and absolute ownership, it must in every such case be so represented to the company, and' clearl?: expressed in the body of the policy, otherwise there will be no liability' thereunder, as to such property or limited interest. Held, that the stipulation does not refer to the matter of incumbrance,but to the character and quality of the th.e, whether that of a fee simple or leasehold or otherwise. Oil' 011' ENTIRE INTEREST.
2. SAME-FoRFEITURE-COVENANT-AsSIGNMENT. A policy of insurance covering property incumbered by mortgages executed subsequent to its issuance was assigned to the purchaser of the property with the consent of the company, "subject to all the terms and conditions of insurance mentioned and referred to" in the policy, which provided that the acquiring by a third party of all insurable interest in the property by virtue of a mortgage executed by the assured subsequent to the date thereof Elhould cause the immediate termination of the policy, unless otherwise provided by special agreement expressed in the body of the policy. Neither the company nor the purchaser and assignee had any actual knowledge of the existence of the at the time the company gave its consent, or when the purchase and aSSIgnment were made. Held, that the consent of the company to the transfer of the policy was the creation of a new. contract, and the assignee took it free of all vitiating circumstances, and upon the same terms as those upon which it was originally issued to the and that the company was estopped from denying its validity, either on the grounds of ig-no1 rance or for want of consideration.
Motion for New Trial. . William L. Ellis, as assignee of certain policies of insurance, brought suit against the Insurance Company of North America to recover for the loss by fire of a stock of goods and building under four policies issued by the said compny, to E. R. Ellis & Co.,a firm composed of E. R. Ellis alone. The first policy was issued June 10, 1881, insuring a stock of merchandise for $500. The second policy on said stock was for $500, and dated October 10, 1881. The third policy l dated August 20,1881, lIt has been held in'Iowa,in ahactionbrought by the assignee of an insurance policy, which had been transferred with the cOllsent of the company, that the latter was 110t precluded frOID setting up the defense that the policy had become void in the hands ofthe assignor by reason of a violation of the condition against" incum,brances," the . existence of the incumbrance not having come to the knowledge of the compar.y at the tim'll of the assignment. Ellis v. 1nsura11ceOo., 27 N. W. Rep. 762. But see dissenting opinion. Id. 765.
ELLIS 'V. INSURANCE CO.
647
the
insured the building containing the stock. The fourth policy was one for $1,000 on the stock, and was dated December 8, 1881. Each of the policies contained· the following terms and conditions of insurance therein. '
"(a) If insurance is desired '" '" '" on property '" '" '" on leased ground, or on property of any kind in which the interest of the applicant for insurance does not amount to the entire, sole, and absolute ownership, it must in every such case be so represented to the company, and clearly expressed in the body of the policy, otherwise there will be no liability hereunder as to such property or limited interest. . h(b) The procuring of insurance on said property for more than Its cash value, 01 the. having of other insurance thereon, or any part thereof, valid or invalid, prior or SUbsequent, not made known to this company, and consented to hereon, '" '" '" will render this policy null and void. "(0) TheacqtJiring bya third party of an insurable interestin the property, or any part thereof, by virtue of a mortgage or deed of trust executed by the a!lsured subsequent to the date hereof, '" '" '" or any change whatever in title or right of possession, not herein specified, successi.on by reason of the death of the assured excepted, shall each and all cause .the immediate termination: of this policy, unless otherwise provided. by special agreement. clearly expressed in the body of the policy. . "(d) Agents of the company have no authority to bind the company in violation of any of the printed terms or conditions of insurance as herein expressed; and no printed or written condition or restril;tion hereof, which by its terms may be subject to waiver, shall be deemed to have been waived, except by a distinct specific agreement, clt>.arly expressed in the body of the . policy. "(e) If the assured shall, by voluntary transfer or conveyance, dispose of the property covered by this policy, or 'of an undivided interest tllerein"or a change shall take place in the membership of the firm or copartnership for whose benefit the insurance hereunder was effected, this policy may be assigned to the party or parties succeeding to the ownership of the property, providing the company shall first consent thereto by indorsement thereon, otherwise this insurance shaH cease from the date of such change in ownership. ... ... '" This policy shall be subject to cancellation at anytime, at the request of the assured, the company to retain earned premium, reckoned at the usual short rates for the time expired. The policy may also be at any time canceled by the company on refunding or tendering to the assured his, the time expil'ed," her, or their age'nt, a ratable portion of the premium
The first three policies were issued by the duly-authorized agent ·of the company, at Albia, Iowa; the last by its agent at Des Moines, who had no actual knowledge of the existence of the prior policies, though they had been reported to the company. December 6, 1881, E. R. Ellis executed and filed for record a chattel mortgage covering all the goods described in the policies. December 5, 1881, E. R. Ellis made a mortgage upon the lot and building covered by the policy, dated August 20th,which: mortgage was recorded the same day. December 15, 1881, E. R. Ellis sold and conveyed to William M. Ellill, the plaintiff,' the lot and building aforesaid, and December 20,1881, the entire stock of goods therein contained· was also transferred to him. An assignment of the p()licies was duly made December 23d,' and the consent of the. company thereto 'wa.s indorsed lipon each, as follows:
648
FEDERAL REPORTEIt.
"The property hereby insured having been purchased by William M; Ellis, the Insurance Company of North America hereby consents that the within policy may be assign'ed to said PurClll\Ser,subject to aU the terms and conditions of insurance herein mentioned and to. Dated Albia, Iowa, this twenty-third day of December, 1881. M. CAlmIER, Agent." December 21st, William M. Ellis and wife executed and delivered a mortgage upon the lot whereon the building and goods were situated, whioh mortgage was filed for record December 24th thereafter; at the time of the l.\.Ssignment Of the policies, and the consent of the company given, neither the plaintiff nor the company had actual knowledge of the mortgages given by E. R. Ellis.' The property was destroyed by fire, Decem,ber 27, 1881; and,the defendant failing to comply with plaintiff's demimds for adjustment, suit was cO,mmenced in the state court,but afterwards transferred to the United States circuit court, where the case was tried before Judge LOVE without ajury. The court found and entered judgment for plaintiff, whereupon a motion was made for a new trial i the defendant claiming that the first three policies were avoided by the mortgltgefjof December pth and 6th, and that the policy of December 8th was void because Ellis, being a mortgagor, was not the entire, sole, and absolute owner of the property. BREWER,;T. Two questions have been presented and argued; one of them of great difficulty as well as of someimp'ortance. The first question arises upon these facts: One E. K. Ellis was the owner of property upon which he had taken out insurance policies, one of them that in suit. He sold that property to the plaintiff, William Ellis, and assigned the policy. The consent of the company was given to the assignment. At the time of the assignment there was an incumbrance upon tbe property in the shape of three or four mortgages. The policy provides that it shall be void if the insured is not the sole, absolute, and unconditional owner; and it is insisted that ownership is not equivalent to the mere matter of title, but goes to the interest held in the property, and that if tba,t interest is subject to any condition the policy is vitiated. Plaintiff's ownership is held subject to this <;londition, that he pays the mottgage'. '.Vherefore it is not an unconditional ownership. Weare all familiar with the fact that applications for insurance poli. oies usually contain two series of inquiries, independent in their ,nature, -one as to the matter of title, and the other as to that of incumbrance. Of course,ditferent policies have different forms of stating these two lines of inquiry, but they are entirely independent. In one there is provision as to any incumbrance, its nature and extent; in the other there is inquiry and provision as to the character of the title, fee-simple or otherwise. It is further known that the policies and the blanks for application are prepared by the insurance companies, and it is familiar law that the stipulations and provisions therein are to be construed strictly against the insurer; that if there is any fact respecting which information is desired, or, any provision which it is deemed necessary to insert, it is the duty, because it is interest, of the insurer to see that there is
ELLIS V. INSURANCE' CO.
649
'a clear and expressed question or stipulation covering the matter. With those two well-known facts before us, it seems to us that this stipulation must be held to refer, not to the matter of incumbrance at all, but to the character and quality of the title, whether that of a fee-simple 01' leasehold, or otherwise. And, as it appears unquestionably that the absolute title was in the party, we have with little hesitation come to the conclusion that the policy is not vitiated by these facts and thatstipuhtioo. . The other question is more serious and difficult. The policycoHtains a provision to this effect:- that if the insured incumbers the property the policy shall be vitiated. The original party insured did place incumbrances upon the property. They were in existence at the time he sold the property to the plaintiff, at the time the assignment of the policy was made to the plaintiff, and at the time the company gave its 'consent The company was ignorant of that fact, as was also the and putchaser. Now,the assignment was assented to bythe company sUbj'ect to' all the terms and conditions of the policy. And it is insisted, on the one hand, that the universal rUle in respect to transfers of allchoses in action or other contracts, with the single exception of negotiable paper transferred before maturity, is that the assignee simply steps into the shoes ofthe assignor; that he is subjected to all his burdens and liabilities, and has no other or higher rights than such assignor. Hence, as it is conceded, and there can be no doubt about it, that this policy while it remained with the assignor, his property,and before the s!1le and assignment, was vitiated by this incumbrance, was voidable at the 'instance of the insul'er, the assignee has no higher right than the assignor had, and the poli<iy is vitiated in his hands. On the other hand, it is insisted that this, which is called an assignment, has not the legal effect C?f a mere transfer of an existing right, but is equivalent to the creation of a new contract,-a contract springing into being at the moment the assignment is assented to between the assignee and insurer for the insurance of the property during the unexpired term. The authorities very generally say that where an assignment goes with an absolute sale of the property there is the creation of a new contract. If it is a new contract for one purpose, it i8 a new contract for all purposes. to the terms and conditions The assignment is expressed to be of the policy. What does that mean? It is equivalent to saying that the assignee takes the contract as of present writing, containing the same tenris and stipulations, binding him to the same duties, and- subjecting him to the same liabilities, that were imposed by the contract in the first instance upon the assignor. In no other way can it fairly be said that a new contract was made; tested by that rule the assignee agreed, as the assign.or had agreed in the first instance, that he would place no incumbrance upon the property, and that if he did the policy should fail. There is no pretense that he has violated that stipulation thus construed. It may well be doubted whether the useof the technical terms, "assignment," "assignor;" and "assignee," are apt to describe the actual transaction. When the insured sells the property, that moment the policy
650
,FEDERAL REPORTER.
falls. He has no interest. The policy ceases to have legal force as a policy. Can, it be said he is assigning that which is nothing, and that the insurance company contemplates and assents to the transfer of that which has no existence? Take this case.. Suppose a contract is made by which one binds himself to work for another for a period of one year a,t stipulated wages per month, with certain provisions .regulating his collduct, alldforfeiting his right to compensation in case of non-compliance therewith. Pending that contract he assigns it to another, which assignment is accepted by the other party, and this new party goes on and. does thllwork in the same manner during the balance of the year as was done by the party from whom he received this contract. In one sense of the term you may say there is an assignment, but really there, is substitution of a new party for the old, the creation of a new contract upon,Abe same terms as the old, containing the same conditions, but operative pnly in futuro, and not subjecting tbe party doing tbe, wor)t to, :the ,burdens and penalties, which had fallen on the .assignor previous under his contract for personal service. This is a practical question, and }Ve mustloo)t at these matters in a practica.l light. When the purchaser buys' the property, naturally the thought in his mind,is insurance. It being his, and the old policy being dead, he looks for insurance. He finds a policy which had been in force, dead because of his purch,a,se and ,cessation of the insurable interest in the assignor, which the insurance cornpanyis willing to have transferred to him. Would it not be an injustice to him if, after the insurance company has consented to that transfer,it ,turn back to acts done by the person from whqm he obtained the policy, and claim that those and ,rendered Hnot liable to tbeassignee? Many policies contain the stipulation that if house be left vacant for ,three months, the policy shall falL Suppose a pa,rty buys a house ignorant of its history during the time the,pl?licy has been running, and the company asse!lts to the policy; would it not be injustice for the insurance company to thereafter say that .thepolicywas voidable on account of the vacation of the llOuse for three months. an.d although he, the purchaser, has rested, in the faith that his property was insured, it will pay him nothing on thelos8? ,Ifauch were the ru.le the assignment of cies would,cease;, and parties WQuld take out in every instance !lew poli, . \ Eutit is said there is really no consideration for this contract on the pl1rt of the company; that the breacij of the policy by the assignor forfeited all right to the unearned premium; and therefore the companyreceived no consideration for any promise to insure for the unexpired term. The assignment of this policy is an assertion practically by the assignor of arightt9 an .unearned premium, and the. claim of such unearned premium,.presented to the assignee, is assented to. by the company when it consents ,to the .assignment. It matters not that there maybave been no actuaJrigllt:tosuch unearned premium, for the recognition and compromise ofa,Qlaim is consideration. Further than that, there would be the injuryw the assignee as well as the benefit to the insu.rer to be con-
ELLIS V. INiiU!tAN{;EOO.
651
sidered. Again, it is said that there can be no waiver without knowledge; that the insurance company was ignorant, (and that is admitted) of the fact of this incumbrance; and that it assented to the assignment and the transfer of the policy in ignorance of these facts; and therefore it should not be held to have waived its rights.. There may be estoppel without knowledge. Suppose the insurance company had given a contract to pay a certain sum of money, a non-negotiable contract, and the party holding that contract had transferred it, assigned it to this plaintiff, and prior to such assignment the plaintiff had gone tathe insurance company, and asked if that contraqt was in force, and the full amount due thereon, and he was told that it was; he could recover the full amount of that contract, although unknown to the insurance company, and before the transfer and assignment, the aSi;lignor, having collections, which he was authorized thus to use, collected money belonging to the insurance company, and applied it upon that debt. There would be an toppel by reason of its statement that the full amount was due on that contract, which had misled the purchaser, and yet a statement made in ignorance of the real facts. This consent to the assignment, though not in terms a like statement,' yet, dealing with things in a practical way, must be construed to have a similar effect. and as a statement by the insurance company that it recognized that policy as a valid instrument. Surelyit would be unjust to think that the insurance company put itself into the position of assenting to the transfer of a policy which had no validity, going throulI;h the form of consenting to that which had no legal existence and was worthless. These considerations, although we conthe question is one of not perfect transparency, lead us to the cede conclusion that this assignment must be taken, in the language of the text-books and the authorities, to create a new contract between the assignee and. the ,insurance companY,-a new contractembrac:lng, 3S of present writing, the same terms and stipulations as were embraced in the contract originally written between the assignor and insured. This being the case, these prior incum brances did not vitiate this policy, and the motion for a new trial must be overruled. LoVE
and SHIRAS,JJ., concur.
652
FEDERAL REPORTER.
LAIRD '11. CITY OF DE SOTO
and others. I
(Oircuie (}Qure, E. D. MissQuri, E. P. October 8, 1887.) JUDGMENT-RES ADJUDICATA-VALIDITY OF BONDS.
The petition in a suit upon a" railroad aid bond" issued by a city set out a qopy of the bond, from which the purpose of the issue. viz., the building of machine-shops. appeared. and in which there was a reference to the statute under which the city took its action. The answer set up a special defense of change in municipal organization. There was a verdict for the plaintiff. and the defendant. a new trial having been refused, moved in arrest of judgment on the ground that "the ,averments of the petition the recitals in the bond * * * showed that the bond was issued without authority of law." This motion was overruled,and a rehearing applied for, a brief being presented taking the same position, viz., that the use was not a public one. The rehearing was refused, but in his opinion the jndge discussed the defense raised by the answer only, and concluded as follows: "This being the only matter set , out in the plea. "etc. Held, in a sub-sequent action between the same parties. on other bonds of the same issue, that the question as to the validity of the bonds, because of the purpose for which they were issued, was r6S adJudicata.
At Law. motion for new trial. Mills & Flitcraft. for plaintiff. Joseph T·. Tatum, for defendant. BREWER,J., (orally.) In the case of Laird against the city of De Soto, an action on oertain bonds and coupons issued by the town of De Soto, of which this defendant has been adjudged the legal successor, a question of res jttdicata is presented. The bonds were issued to the Iron Mountain Railroad Company, to aid it in purchasing ground and building machine-shops. The purpose of the-issue was expressed on the face of the bonds. The .present plaintiff has instituted and succeeded in two suits on bonds and coupons of the same issue, and he now claims that the judgments therein work an estoppel upon the defendant. The defendant, on the other hand, insists that it has a defense which has not been presented to the court heretofore, which is a valid defense, and upon which it demands judgment. It pleads that these bonds were issued without authority, because issued to a corporation for a private purpose-the building of machine-shops; and it says that that question has never been submitted to or decided by the court in the prior cases. This suit is not upon the same causes of action as the prior suits, and the rule of estoppel in respect thereto has been finally and definitely settled by the supreme court in at least three cases. Cromwell v. Sac County, 94 U. S. 351; Russell v. Place, Id. 606; Enfield v. Jordon, 119 U. S. 680, 7 Sup. Ct. Rep. 358. That rule is this: that where the second suit is not upon the same causes of action, though between the same parties, the former judgment is conclusive as to matters which were in fact and necessarily decided, and is not conclusive as to matters which . might have been, but which were not, presented and decided. It is further held that we must look to the record of the former cause to see
On
ISee 22 Fed. Rep. 421; 23 Fed. Rep. 780 j and 25 Fed. Rep. 76.