Case Name: FREEMAN a. FULTON FIRE INSURANCE COMPANY
Court: New York Supreme Court
Jurisdiction: New York
Decision Date: 1862-09
Citations: 14 Abb. Pr. 398
Docket Number: 
Parties: FREEMAN a. FULTON FIRE INSURANCE COMPANY.
Judges: 
Reporter: Abbott's Practice Reports
Volume: 14
Pages: 398–407

Head Matter:
FREEMAN a. FULTON FIRE INSURANCE COMPANY.
Supreme Court, Second District; General Term,
Sept., 1862.
Pleading.—Requisites of Complaint upon an Insurance Policy.
Every thing which was necessary to sustain a plaintiff’s case at common law, unless made unnecessary by statute, must be alleged in his complaint.
Wager policies of fire insurance are void at common law, irrespective of any statute.
In an action upon a fire insurance policy for the amount of the loss, the complaint must allege that the plaintiff had an interest in the thing insured at the time of the loss ; unless the claim was assigned to him afterwards, or unless he sues as trustee of an express trust.
If the plaintiff sues as trustee or agent, he must allege in his complaint the existence of such trust, and show his authority to collect the amount of the insurance.
A complaint in such an action, which alleges an insurance effected by the plaintiff with the defendant, but shows no interest in the thing insured existing in the plaintiff at the time of the loss, and no authority conferred upon him by the owner, except to pay the premium, is bad on demurrer.
Appeal from an order at special term, overruling a demurrer to the complaint, on the ground that it did not contain facts sufficient to constitute a cause of action.
The action was upon a policy of insurance against loss by fire, issued by the defendants, April 26,1861, upon the steamer “ Cataline.”
The complaint stated: “ That at the time of the issuing of the policy,, Charles A. Stetson, Jr., was the owner of the ‘ Cat-aline.’ That in consideration of the payment by the plaintiffs, who thereto were employed by and therein acted as agents of the said Stetson, to the defendants, of the premium of six dollars and eighty-eight cents, the defendants made and issued their policy......and delivered it to the plaintiffs, for the account of whom it might concern ; by which the defendants insured the plaintiff’s, or whom it might concern, against loss or damage by fire to the amount of $2,500, on the steamer Cataline,’ &c., while running, &e., from the 26th day of April, 1861, until the 26th day of July, 1861, with privilege of effecting other insurance to the amount of $17,500, without notice until required ; and in and by said policy agreed to pay the loss, if any, to the plaintiffs, under their firm-name of M. M. Freeman & Co.and that said Charles A. Stetson, Jr., was, at the time of the issue of said policy, and up to the time of the fire continued to be, the person or party for whom said insurance was effected and whom it concerned.”
The complaint further stated, “ That at the time of the insurance, and from thence until the fire, Stetson had an interest in said insured property, to an amount exceeding the whole amount of insurances ($20,000), and was the owner of the property, the cash value whereof was $24,000. That on the 2d day of July, 1861, the vessel was burned, &c. That Stetson and the plaintiffs had fulfilled all the conditions and requisitions of the policy on their part to be performed ; that the plaintiffs had demanded payment of the defendants of said $2,500, which the defendants refused to pay.”
John Owen and Thomas G. Shearman, for the appellant.
I. All actions are now to be brought in the name of the real party in interest (Code, § 111), with an exception in favor of trustees of an express trust, &c. (Ib., § 113.) The plaintiffs do not claim as trustees for Stetson, but in their own right. The rules of equity in relation to parties are adopted by the Code (Corning a. Greene, 23 Barb., 44; Brownson a. Gifford, 8 How. Pr., 395 ; Hollenbeck a. Van Valkenburgh, 5 Ib., 284; Secor a. Keller, 4 Duer, 419), and in equity a mere nominal party was not allowed to sue. (Rogers a. Traders’ Ins. Co., 6 Paige, 598 ; Field a. Maghee, 5 Ib., 539.)
II. It is absolutely essential, in order to recover upon a policy, that the person insured should have an interest in the property at the time of the loss. The contract is one of indemnity; and if the insured is not damnified, he cannot recover. (Murdock a. Chenango County Mutual Ins. Co., 2 N. Y., 216 ; Howard a. Albany Ins. Co., 3 Den., 301; Shotwell a. Jefferson Ins. Co., 5 Bosw., 261; Grosvenor a. Atlantic Ins. Co., 17 N. Y., 392 ; Kernochan a. Bowery Ins. Co., Ib., 442.)
III. It was necessary, even at common law, and entirely irrespective of any statute, that the person insured should have an interest in the property, in all cases of fire insurance. (Lynch a. Dalzell, 3 Bro. P. C., 497; Sadler’s Co. a. Badcock, 2 Atk., 554. See Ruse a. Mutual Benefit Ins. Co., 23 N. Y., 523.) A distinction was taken between fire and marine policies, which accounts for some cases which are loosely cited as holding an averment of interest unnecessary. All these cases, without a solitary exception, will, on examination, be found to arise upon marine or life policies. And they have all been overruled by the Court of Appeals, which has just decided that wager policies of every description are void at common law, on grounds of public policy. (Ruse a. Mutual Benefit Ins. Co., 23 N. Y., 516.)
IV. The importance of the fact that an insurance without interest was void at common law becomes manifest in this case. 1. It is an undoubted rule that the plaintiff must allege every thing in his complaint, which at common law or in equity it is necessary for him to prove at the trial. (Prindle a. Caruthers, 15 N. Y., 427; Bank of U. S. a. Smith, 11 Wheat., 174; Safford a. Drew, 3 Duer, 632 ; McMillan a. Saratoga R. R. Co., 20 Barb., 455; McKyring a. Bull, 16 N. Y., 297.) The cases which hold it unnecessary to allege that a contract was made in writing, &c., proceed upon the ground that acts valid at common law, but regulated by statute, may be pleaded in like manner as before the enactment of the statute. (Stephen on Pleading, 373 ; Hilliard a. Austin, 17 Barb., 141; Dewey a. Hoag, 15 Ib., 368 ; Stern a. Drinker, 2 E. D. Smith, 406.) 2. The Court of Appeals has explicitly declared, that in all actions upon insurance policies, the plaintiff must “ aver and prove the interest of the plaintiff. It is an indispensable part of the plaintiff’s case, to be made out affirmatively at the trial.” (23 N. Y., 527.) 3. The plaintiff is therefore bound to allege in his complaint that he had an interest in the thing insured. (Ruse a. Mutual Benefit Ins. Co., 23 N. Y., 527; Williams a. Ins. Co. of North America, 9 How.Pr., 365; Peabody a. Washington County Mutual Ins. Co., 20 Barb., 339; Cousins a. Nantes, 3 Taunt, 513.)
V. The reason of the rule that a wager policy is void, as stated in several places, is, that it is deemed unsafe to permit any one to have a direct pecuniary advantage to gain by the commission of arson. If this reason is sufficient to prevent A. from recovering on an insurance made for his benefit without interest, why does it not apply with equal force to prevent him from recovering on a policy made by him for account of B., the real owner, with loss payable, not to B., nor to A. for the benefit of B., but to A. in his own right, and for his own benefit ? The authorities are uniform and explicit that an assignment of the policy, in order to be of any benefit to the assignee, must be accompanied with a transfer of some kind of interest in the .subject of insurance. (Ellis on Ins., 69; Marshall on Ins., 800 ; Phillips on Ins., § 77 ; 3 Kent's Com., 395 ; Hooper a. Hudson River Fire Ins. Co., 17 N. Y., 424 : Peabody a. Washington County Mutual Ins. Co., 20 Barb., 339, 341.) In like manner, Roosevelt, J., in Kernochan a. N. Y., Bowery Fire Ins. Co. (17 N. Y., 442), declares it to be a “ principle of public. policy, that no man should be allowed to bargain for an advantage to arise from the destruction of life or property.”
VI. The assignee or appointee must, under the principles stated in the preceding points, have, and aver in his complaint, an interest in himself in the thing insured. There are cases decided under the old practice which tend to show that at common law, the person named in the contract might sue, without having any interest, for the benefit of the real party in interest. These cases have no doubt misled the plaintiffs. A different rule is established by the Code, and an action not only may, but must, be brought by, and in the name of, the real party in interest. (§ 111.) And even before the Code, it was held in the Court of Errors that “ it must appear” in an action upon a policy made “ for whom it may concern,” that “ the policy was made in behalf of the persons who claim to recover.” (Pacific Ins. Co. a. Catlett, 4 Wend., 79.) All the cases of fire insurance policies since the Code, in which an appointee in like manner with the plaintiffs has been allowed to recover, have been cases in which the appointee was expressly described as mortgagee, thus showing a power coupled with an interest.
VII. It will be argued that the defendants, by issuing the policy to the plaintiff, admitted their interest in the subject of insurance. The answer is twofold: 1. The doctrine has no-foundation in reason, and it has been expressly overruled by the Court of Appeals. (Ruse a. Mutual Benefit Life Ins. Co. 23 N. Y., 527.) 2. If there were any thing in the point, the plaintiffs have expressly negatived all presumption of interest in them by their complaint, in which they set up Stetson’s exclusive interest.
VIII. The case of Fowler a. N. Y. Indemnity Ins. Co. (23 Barb., 143), upon which the plaintiffs rely, does not aid them. 1. All it really decides is, that the word “ his,” prefixed to the description of the thing insured, is a sufficient averment of ownership in the plaintiff. 2. The remarks of Judge Strong, to the efféct that an averment of interest is unnecessary, are not authority, nor can they be sustained on principle. He Cites no authority for his suggestion, nor could he. The doctrine is expressly repudiated by the Court of Appeals. (23 N. Y., 527.) He goes on to say, that “ hence” it has been held that an averment of interest is unnecessary. For this proposition he cites three cases, one of them having been reversed on error (3 Taunt., 513), though he did not know it, none of them based upon the argument to which he refers by the word “ hence,” and all of them being cases of marine insurance, which we have shown were governed by a distinct class of rules, and in which wager policies were assumed to be valid at common law.
IX. If the plaintiffs sue as agents for Stetson, the owner of the property insured, they ought to state the fact in their complaint. An agent sues as a trustee (Code, § 113 ; Considerant a. Brisbane, 22 N. Y., 389), and stands on the same footing with executors, receivers, &c. He sues in the right of another. And, therefore, in order to conclude that other on the record, he must allege his agency, and seek relief in his representative capacity. Otherwise the suit must be taken to be his own. (See Gould a. Glass, 19 Barb., 185 ; Sheldon a. Hoy, 11 How. Pr., 14; Ogdensburgh Bank a. Van Rensselaer, 6 Hill, 241; Henshall a. Roberts, 5 East, 151.)
X. The complaint nowhere shows that the plaintiffs were agents for Stetson, except for the single purpose of procuring the insurance and paying the premium. They were, as they say, employed by Stetson, and acted as his agents, to pay the premium—nothing more; which, by any freedom of construction, cannot be held to imply an agency to do more than procure the insurance, which, by Story’s definition (Agency, § 28), constituted them simply brokers. They had no power to effect an insurance in their own name, much less to make the loss payable to themselves.
XI. It is not alleged that the loss was payable to them as agents of Stetson, or that they act as Ms agents in demanding the money, or in bringing this action. It is in this view that this case differs from Considerant a. Brisbane (22 N. Y., 389). There the contract was expressly with the agent as such.
XII. To sustain this action, it is clearly necessary that the plaintiffs should allege that they are the agents of Stetson, and authorized to effect and recover this insurance in their own name, and that they, as such agents, are the parties whom it concerned, and that this action is for account of Stetson. (See Myers a. Machado, 6 Abbotts' Pr., 198.)
Henry Nicoll, for the respondents.
I. By the terms of the policy, the defendants expressly undertake, in case of loss, to pay the same to the plaintiffs. At the common law this would be held to be a contract with the plaintiffs, upon which they would be entitled to bring an action in their own name, although the beneficial interest in the subject-matter of the contract might be in another. (Harp a. Osgood, 2 Hill, 216 ; Sargent a. Morris, 3 Barn. & Ald,., 277; Ennis a. Harmony Fire Ins. Co., 3 Bosw., 516; Grosvenor a. Atlantic Fire Ins. Co., 17 N. Y., 391; Considerant a. Brisbane, 22 Ib., 389.)
H. It is wholly immaterial to the plaintiffs’ right of recovery, whether they have an interest or not in the property insured; it is sufficient if the parties forwdiose benefit, as owners, the policy was taken out, had such interest at the time of loss. This would be held to be so in the case of an assignment of a policy by the party insured to a third person; a fortiori must this be so where in the contract itself the defendants expressly undertake, in case of loss, to pay the same to another. Policies of insurance, taken out in the names of brokers, factors, or trustees, have always been held valid, and capable of being enforced by them, if the parties beneficially interested have sustained a loss. (Angell on Fire Ins., 114, § 73 ; Burke a. Chesapeake Ins. Co., 1 Pet., 163; De Forest a. Fulton Fire Ins. Co., 1 Hall, 84; Fowler a. N. Y. Indemnity Ins. Co., 23 Barb., 143; and cases before cited.)
III. In stating a cause of action upon a policy of insurance, no averment of an interest in the insured is necessary. But for the statute against wagers, a policy of insurance, without interest, would he a valid contract. It will not be presumed that a contract valid at common law is within the provisions of a prohibitory statute. (Fowler a. N. Y. Indemnity Ins. Co., 23 Barb., 143; Dykers a. Townsend, Ct. of Appeals, Dec., 1861.)
IY. Independently of the question of interest, the plaintiffs, within the terms of sections 111 and 113 of the Code, are clearly trustees of an express trust, being persons with whom and in whose name the contract was made for the benefit of those who are interested in the loss as owners of the vessel, and, as such, are entitled to bring the action. (Considerant a. Brisbane, 22 N. Y., 389 ; Grinnell a. Schmidt, 2 Sandf., 705.)

Opinion:
By the Court.—Emott, J.
If the case of Fowler a. N. Y. Indemnity Ins. Co. (23 Barb., 143); decided that an averment of interest in the insured is unnecessary in declaring on a fire policy, it cannot be sustained. The cases to which Judge Strong refers to sustain his remark to that effect will be found, all of them, to be cases of marine insurance. In such cases, an averment of interest was unnecessary, for such policies were valid as wager policies, although the plaintiff had, in fact, no interest in the subj ect insured. Of course, therefore, neither an averment nor proof of interest could be required to sustain a recovery on such a policy. (Buchanan a. Ocean Ins. Co., 6 Cow., 318.) If the doctrine stated by Judge Strong, in the case to which I refer, could be sustained, it could only be on the ground that no interest in the property insured was requisite to sustain a policy of insurance against fire, which certainly is not the case under the statute against wager policies, or else, because a policy of that description would be valid at common law, and is only defeated by the statute. This latter view was urged with ability by the plaintiff's counsel on the present argument. If it were true that wager policies of fire insurance, or policies of insurance against fire, where the insured had no interest, in the property insured, would be valid were it not for the statute, there would be force in his argument, that no interest need be averred in the plaintiff in declaring on them. Where a contract is valid at common law, but is forbidden by a positive statute only, it may not be necessary for a plaintiff in declaring upon it to negative an exception made by the statute, or to aver that it is not within its prohibition. It is unnecessary, however, to consider how far this is the rule of pleading, or how far the present case would be controlled by such a rule, since the premise upon which the whole argument rests—to wit, that a contract of insurance against fire would be valid at common law, although the insured had no interest in the premises—cannot be sustained. In Buse a. Mutual Benefit Life Ins. Co. (23 N. Y, 516), it was held by the Court of Appeals, that a policy of insurance upon the life of another, obtained by one who has no interest in the life, is void at common law. The same rule must apply to fire policies, and indeed, in the case I have just referred to, Judge Selden shows that such is the rule recognized by authority, and that the contrary statements in some cases, which have misled even judges, as well as text-writers and makers of digests (see, for instance, 3 Abbotts' Dig., 414), are all made in reference to marine policies. The cases recognize ah exception in the case of policies of marine insurance, although the reason for the exception is not apparent, and its extent is confined to this class of insurances. It must be considered well settled at present, that at the common law, as well as under the Statute of Betting and Gaming (1 Rev. Stat., 662, § 8), a policy of fire insurance is void, unless the party insured has at the time an insurable interest in the property insured. It follows that a complaint in an action on the policy must contain an averment of such an interest, in order to state a cause of action.
The present complaint states no such interest in the plaintiffs, but it is further contended that the action may be supported by them upon the averment which it contains of the interest of Charles Stetson, under the provisions of sections 111 and 113 of the Code. In the case of Considerant a. Brisbane (22 N. Y., 389), the Court of Appeals held that where a contract was made, ¿ontaining a promise to pay A. B. as " executive agent" of C. D., A. B. might maintain an action upon the promise, although the consideration moved wholly from C. D., and A. B. had no interest in the contract. A person who is described, or who describes himself, as the agent of another, in making a contract for the benefit of such other person, and in which the latter alone is interested, according to the reasoning in the case of Considerant a. Brisbane, falls within that class of persons who, by the 113th section of the Code, shall be construed to be trustees of an express trust. He is a person with whom, or in whose name, a contract is made for the benefit of another. We are now to see whether this rule will include such a case as is stated by this complaint.
We have seen that the plaintiffs cannot maintain an action upon this policy of insurance, if made for their own benefit, for the want of interest in the subject-matter insured. It follows as a corollary from this conclusion, applied to the facts which appear in the complaint, that the only person by whom, or for whose benefit a valid policy of insurance upon this steamboat could have been effected, was Charles A. Stetson. The question, therefore, is, does this complaint show a valid contract, made with the plaintiffs, or in their name, for the benefit of Charles A. Stetson. The policy of insurance is alleged to have been delivered to the plaintiffs for the account of whom it may concern, and the defendants are stated by their contract, to have insured the plaintiffs, or whom it may concern. It is also averred that Charles A. Stetson was at the time of the issue of said policy, and up to the time of the fire continued to be, the person or party for whom said insurance was effected, and whom it concerned. It will be observed that the policy was not made to the plaintiffs for, or on behalf of, or as the agents or trustees for whom it might concern.
The contract is in the alternative—to insure either the plaintiff, or whom it might concern. Taking the other allegations that Charles A. Stetson was the person or party whom it concerned, it might follow that this was a contract with, or insurance of, Charles A. Stetson. Then the question would arise, whether Stetson himself could sue upon such a contract. But in so far as this policy or contract was with the plaintiffs, it is not stated, and does not appear, that they were or acted as the agents of Charles A. Stetson. The loss, if any, was made payable by the policy to the plaintiffs,—not as agents or trustees of Stetson, or whom it should concern,—but in their individual character. The premium was paid by the plaintiffs who are alleged thereto, that is in respect to such payment, to have been employed by, and therein to have acted as the agents of, the said Stetson. But there is no allegation that the plaintiffs made the contract as agents of Stetson, or that the money was payable to them in that character. The allegation of agency is confined to the single act of paying the premium. Under the case of Considerant a. Brisbane, if the plaintiffs procured the insurance as the agents or for the benefit of Stetson, that fact should have been stated, and the further question would then have arisen, whether parol proof of such a trust or agency could be given, when it was not declared, or stated, in the written contract. But the present complaint is, in my opinion, defective for the want of any positive and issuable averment of such a trust or agency. It does not appear whether the insurance was made or is to be enforced for the benefit of the plaintiffs individually, or by them as trustees for Stetson. Assuming that the latter state of facts may be true, that it is not inconsistent with the facts stated, yet it does not positively appear to be the truth. Where the person with whom the contract was made, and who brings an action upon it, has no interest in the property which would authorize or enable him to make such a contract himself, he is bound to state affirmatively that he acted as the agent of another, whose interest was sufficient to sustain the contract. The allegations of this complaint leave it, to say the least, in uncertainty whether this contract was made by the plaintiffs for themselves or for the benefit of another. If it was made on their own account, they should have had and should have averred an insurable interest in themselves; if for Stetson, that should have been positively stated. They should have alleged that the policy was made to and with them for the benefit of Stetson, and as his agents or trustees.
I am of opinion that the present complaint is defective, that it does not state a cause of action, either in the plaintiffs individually, or as trustees of an express trust, and that the demurrer should have been allowed.
The judgment should therefore be reversed.
All the judges concurred in this opinion.
Judgment reversed, and demurrer allowed.