Case ID: tenn_33/html/0444-01.html
Source: Caselaw Access Project
Author: {"author": "\n      TotteN, J.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Hobbs & Henly, use &c. vs. Memphis Ins. Company.
    1. Insurance. Assignment of policy. The title of the subject of the policy remaining in the assignor. Although a policy of insurance is not negotiable, ancl the assignment of it does not pass the legal title to the assignee, yet it is a chose in action assignable in equity, and this equitable interest will be recognised and protected as in other cases, where dioses in action are assigned. But such assignment will be of no value to the assignee, unless the subject insured or an interest therein be also assigned.
    2. Same. Action upon assigned policy. The action at common law upon a policy of insurance in the hands of an assignee, can only be maintained in the name of the legal owner, the assignor, for the use of the equitable owner, the assignee, and the insurer will be entitled to all defenses as set off or otherwise, that exist in his favor against the original assured.
    3. Same. Sale of the subject of the policy. As affecting the policy. A sale of the subject insured, does not operate as an assignment of the policy. So if the subject insured be assigned, and not the policy also ; and a loss happen, neither the original assured or the assignee of the property can recover indemnity of the underwriters.
    4. Same. Same. Same. If the party assured under a policy which contains a provision that it shall become void by assignment, without the consent of the underwriters, make a voluntary assignment of his entire interest in the property insured, he cannot without such consent, also assign the policy so as to continue the risk upon the underwriters; but the risk will cease, unless the property insured be reassigned, during the time limited for the continuance of the policy.
    5. Same. Effect of an assignment of part of the property insured. Illustration of the rule. If a part only of the property insured be assigned, the risk will continue upon the insurers as to the residue. So where two partners in trade took insurance upon their stock of goods, and during the continuance of the policy, one of said partners sold and assigned his interest in the stock of goods to the other, the risk continues as to the interest of the assignee in the goods which he owned at the time of the insurance, and he may recover in an action brought in the name of the firm, for his use and loss of his original interest, but not for a loss to the interest of his co-partner so assigned to him, for that has ceased to be covered by the policy.
    FROM DAVIDSON.
    This' suit was instituted in tbe circuit court of Davidson, by Hobbs & Henly for tbe use of Henly, upon a policy of insurance against loss by fire, effected with tbe Memphis Insurance Company. It seems that on tbe 9th of January, 1852, tbe defendants insured Hobbs & Henly, then partners in trade under tbe firm name, to tbe amount of $3,000, upon their stock of groceries, then kept in their front store-room fronting Market street and Sewanee alley, in tbe city of Nashville. The insurance was to continue for one year. On tbe 1st of April, thereafter, Hobbs sold bis interest in tbe goods to Henly. On tbe 12th of June, 1852, tbe groceries were destroyed by fire, and this action was brought in the name of Hobbs & Henly for the use of Henly, for tbe whole amount of insurance. There is a provision in the policy that it shbuld not be assigned by the assured, without the consent of the company, “expressed, by endorsement thereon,” and “in case of assignment without such consent, whether of the whole policy or of any interest in it, the liability of the company in virtue of such policy, shall thenceforth cease.” The defendant pleaded the sale by Hobbs to TIenly on the 1st of April, 1852, and that Hobbs had no interest in the policy. The plaintiffs replied that the defendant after the sale by Hobbs, had notice thereof and assented thereto. To this replication there was a demurrer, which the court (Hon. N. Baxter presiding) sustained, giving judgment thereon for defendant, from which the plaintiff appealed-.
    Mei&s, for the plaintiff in error.
    The action having been first in the name of Hobbs & Henly for the use of Henly, the question is made, whether the action will lie, Hobbs having, as is said, no interest in the property ? For the plaintiffs it is answered, that the sale of Hobbs’ interest to his partner is not a formal assignment of the policy, but only vests Henly with the beneficial interest in what previously belonged to the firm, with a right to use the firm’s name in a suit on the policy. Meigs’ Dig., 1402, last ¶; 141; also 28.
    In 8 Annual Dig., p. 228, No. 26, is an abstract of Howard vs. Albcmy Insurmice Go., 3 Denio, 301, to this effect; that, if one of two owners of property insured conveys his interest to the other, and the property is destroyed by fire, a joint action cannot be maintained. So in 5 IT. S. Dig., p. 202, I 6, tbe case of Wilson vs. Hill, 3 Mete,, 66, is cited as settling, that if' a person insured parts with his interest in the- property before lost, the benefit of the insurance does not go to the purchaser. But 3 Kent, last ed., p. 452, note 1, and 453, note a, 2 (top paging) 7 Barb. S. C. R., 570, is cited, to the effect, that “ a sale by one of several owners to the other owners is not such an alienation as will avoid the policy.” That is the point of chief interest. All the rest relates merely to the form of suing.
    A sale of the subject is an equitable assignment of the vendor’s interest in the policy. Phillips on Insurance, ch. 1, § 10, sub-section 76-108. As to the mode of proceeding, sub-section, 82.
    A. EwiNG, with whom was Russell Houston-, for defendants in error,
    who said :
    1. There can be no doubt, that there must be a subsisting interest in the plaintiffs, at the time of the loss in suits of this kind, in order to give any claim against underwriters for indemnity. lt Phillips on Ins., 2 ed., p. 421. This suit is brought in the name of Hobbs & Henly. It cannot be sustained in their names, because Hobbs has no interest in the policy-, and no interest m the subject matter of the suit. In 1 Phillips on Ins., p. 62-63, it is said, “that if property insured is sold, so that the insured retains no interest in it, and is subject to no- risk or responsibility on account of it, and no assignment or agreement for the assignment of the policy is made, and afterwards a loss happens, and after the loss the policy is assigned to the vendee, the assignment will be ineffectual in respect to such, loss, and neither the party originally insured nor his assignee, can recover the loss; the original assured can recover nothing, for, not being the owner of the property at the time of the loss, he has sustained no injury; nor can the assignee recover anything, because, at the time of the loss, he was not the party insured.”
    2. This is a stronger case against the plaintiffs, because there never was any assignment of the policy, either before or after the loss. If the property had never been assigned, and the policy had been i legally assigned after the loss, this suit might possibly be sustained, but such was not the fact.
    3. The foregoing propositions clearly apply where all of the assured, have assigned their interest in the property insured before a loss, to a stranger.
    4. And the same doctrines and principles apply to a case when two or more persons are jointly insured upon joint property, and one of them, before the loss, assigns all of his interest in the subject of the insurance to the other. 3 Denio’s.Hep., 301. 2 Comstock’s K., 210.
    5. This suit is on the policy. It cannot be sustained by both, for the reasons stated. It cannot be sustained by Henly alone on the policy, for the policy was for the benefit of two. And if this suit is to be regarded as Henly’s suit, being for his use, it cannot be sustained. The replication alleges notice of the sale to Henly, and the assent to it by the company. If such facts give Henly a right of action against the Company, it would be because of a new contract, upon which the suit should have been brought, and not upon the policy. Wilson vs. Sill, 3 Metcalf, 66.
   TotteN, J.,

delivered tbe opinion of the court.

Action on a fire policy. On the 9th of January 1852, the defendant insured the plaintiffs, Hobbs <md Henley, aga/mst loss a/nd damage by fire, to the amount of three thousand dollars, upon the plaintiffs stock of groceries, in the store room then occupied by them in Nashville, the policy to continue one year.

It was provided in the policy that it was not assignable unless by defendants’ consent, expressed by endorsement made thereon, and if assigned in whole or in part without such consent, the liability of defendants was to cease. After the insurance was effected, Hobbs assigned all his interest in the subject insured to Henley, his partner, and thereafter, on the 12th of June 1852, the store room and groceries insured were consumed by fire, to the loss and damage of the plaintiff, six thousand six hundred dollars. The defendant refused to pay the indemnity stipulated for in the policy, and this action was instituted in the name of Hobbs and Henley for the use of Henley, to recover it. To the defendants’ plea that Hobbs had assigned his interest in the subject insured to Henley, the -plaintiffs replied that the assignment was by defendants’ consent. To this replication defendants demurred; on which there was judgment for defendants, and plaintiffs appealed.

Counsel for defendant insist that there must be a subsisting interest in the plaintiffs at the time of the loss, to entitle them to maintain a suit against the insurer for the indemnity stipulated for in the policy. That there was no subsisting interest in Hobbs, one of the plaintiffs, as he had assigned his interest in the subject insured to Henley, the other plaintiff, and therefore the action cannot be maintained in their joint names.

It is further argued, that said assignment avoided the policy under a provision contained in it to that effect, and that the risk of defendant therefore ceased. Now a policy of insurance is not' negotiable, and an assignment of it will not pass the legal title to the assignee. But it is a chose m action assignable in equity, and this equitable interest will be recognised and protected as in other cases where dioses in action are assigned. The action at common law must be in the name of the assignor, the legal owner, for’ the use of the assignee, the equitable owner, and the insurer will be entitled to all defenses, as set-off, or otherwise, that exist in his favor, against the original assured. 4 Kent Com., 261, 375. 1 Phil, on Ins., 61. But the -assignment will be of no value to the assignee unless the subject insured or an interest therein be also assigned. 3 Kent Com., 375. And, therefore, if the subject insured be assigned, and not the policy also, and a loss happen, neither the original assured, nor the assignee of the property can recover indemnity from the underwriter, the former not being owner of the property, has sustained no loss, and the latter had 'acquired no interest in the policy, for a sale of the subject insured does not operate as an assignment of the policy. 1 Phil. on Ins., 62. But in the present case the policy contains a provision against its assignment, unless it be with the consent of the insurer.

A restriction in a policy that it shall become void by assignment without the consent of the underwriters, is not void as an unlawful restraint upon the transfer of property, but is to be strictly construed, 1 Phil. on Ins., 73. 5 Pick. R., 75. And being so construed, the restriction does not apply to a transfer by act of law, nor to a transfer to a trustee for the benefit of tbe assured and bis creditors, nor to a transfer by will. 3 Kent Com., 375. 1 Phil. on Ins., 74. But if the assured make a voluntary assignment of his entire interest in the subject vnswred, he cannot, also, under this provision assign the policy so as to continue the risk upon the underwriters; but the risk will cease, unless the subject insured be re-assigned during the term limited for the continuance of the policy, and in that case it may perhaps revive. The assignment of the property insured does not render the policy void, but it leaves no interest in the assured upon which it can operate. But if a part only of the property be assigned, the risk will continue upon the insurers as to the residue; for in such case, the risk is less than that which the contract imposed. As to this there can be no question. Mow if two persons insure property and one assign his interest to the other, can the rule be different? Meare of opinion that it cannot. In principle the cases are the same. But the assignee cannot recover for a loss of interest assigned to, him, for that has ceased to be covered by the policy. But there can be no reason why he may not recover for a loss of the residue, which he owned at the time of the insurance and at the time of the loss.

It is true as argued, that the assured must have an interest at the time of the loss, and his recovery will be limited by the extent of that interest and loss. If part of the subject insured be assigned, there can be no recovery for that, but only for the residue as we have seen. Reed vs. Cole. 3 Burr, 1512. Stetson vs. Mass. Ins. Co. 4 Mass. 330. Now as to the remedy, we think it clear that the aetion must be in the name of both the plaintiffs, for in them the legal interest is vested. We have seen that the policy is a mere chose in action, and where there is no prohibition against its assignment, the assignee takes only an equitable interest, and his remedy must be in the name of the legal owner. In the present case there is an assignment of part only of the subject insured, and for the loss of that the action must be in the name of both the assured. If the underwriters did not consent to the assignment, the recovery will be limited as we have seen, to the loss of the residue of the property insured, which had not been assigned. But if the underwriter consented to the assignment, and that the policy should continue as before, the right to recover would extend to the property assigned also, for that would be a waiver of the prohibition contained in the policy. The consent to be expressed according to the terms of the prohibition, by endorsement on the policy.

The cases of Murdock vs. Chenango Mutual Insurance Company, 2 Comstock R., 216, and Howard vs. Albany Ins. Co., 3 Denio R., 302, relied upon by defendants’ counsel, we have carefully considered, and we deem it necessary only to say, that we do not concur in the doctrine of those cases, nor consider it founded ih principle or authority.

Let the judgment be reversed, and the cause be remanded.

Judgment reversed.