In the Arkansas, foreign insurance companies are governed by the
statute of March 26, 1887, requiring such companies to file with
the auditor of state stipulations for the service of process upon
them, and not by the statute of April 4, 1887, which requires
foreign corporations to file such stipulations with the secretary
of state.
The right of an insurer, upon paying for a total loss of the
goods insured, to recover over against a third person responsible
for the loss is derived by way of subrogation from the assured, and
can be enforced in his right only.
A railroad corporation which has contracted with a compress
company to receive and transport all cotton brought by its owners
to the warehouse of that company and neglects to do so, by reason
of which, and of the consequent accumulation of cotton at the
warehouse, so large a mass of cotton is piled and kept by the
compress company in the adjoining street as from the danger of
taking fire to become a public nuisance, and is there destroyed by
fire from an unknown cause, is not responsible for the loss to
owners of part of such cotton for which it has given no bills of
lading if it has in fact assumed no custody or control of any of
the cotton, or of the place where it was kept, before it was put
upon the cars, although it has, as a matter of convenience, given
to the owners of other parts of such cotton bills of lading in
exchange for the warehouse receipts of the compress company, and
although it is prohibited by statute, under a penalty, from issuing
bills of lading, except for goods actually received into its
possession.
Page 139 U. S. 224
This was an action at law brought September 21, 1889, against a
railroad corporation of Arkansas by three insurance companies,
corporations of other states or of England to recover the sum of
$17,000 which the plaintiffs had insured on 340 bales of cotton to
Samuel O. Smith & Co., the owners thereof, and had paid to them
upon a loss of the cotton by fire, in consequence (as the complaint
alleged) of the defendant's negligence.
A plea of nonjoinder of Samuel O. Smith & Co. was filed and
overruled, and the defendant answered to the merits.
The evidence introduced by the plaintiffs at the trial tended to
prove the following facts:
Before September 20, 1887, the defendant, whose railway extended
from Little Rock in Arkansas across the Arkansas River to Argenta
and beyond, had made an oral contract with the Union Compress
Company, which was engaged in compressing bales of cotton for
transportation, to receive all cotton in bales that might be
brought by its owners to the sheds of the compress company at the
foot of Main Street in Little Rock, and to transport it over its
railway across the Arkansas River to the compress of that company
in Argenta, a distance of a mile and a half, for $2 a carload.
Immediately in front of the sheds was a platform along the railway
track and habitually used by the compress company for the purpose
of loading cotton on the cars.
While the contract was in force, 340 bales of uncompressed
cotton were placed by Samuel O. Smith & Co. at the sheds and in
the care and custody of the compress company, which gave them a
receipt stating that the cotton was "received by the Union Compress
Company for compression; storage after ten days will be charged;
not responsible for any loss by fire," and afterwards, by reason of
an accumulation of cotton in the sheds owing to the neglect of the
defendant railway company, though often requested by the compress
company, to furnish transportation according to the contract
between them, the compress company piled and kept these bales and
much more other cotton in the street adjoining.
The defendant railway company, as a matter of convenience
Page 139 U. S. 225
to all parties and at the request of owners of cotton, often
gave them, in exchange for the receipts of the compress company and
before the cotton was put on the cars by the latter, through bills
of lading to its ultimate destination after being compressed, and,
after so issuing such bills of lading, gave written notice to the
compress company stating the fact of their issue and directing the
compress company to ship the cotton on the railway by a certain
route and to a certain address, and the compress company, on
receiving such notice, insured the cotton in behalf of the railway
company and put the cotton on the cars, compressing it at Argenta
for the convenience of further transportation.
The railway company gave such bills of lading for most of the
other cotton, but it gave no bill of lading for the 340 bales in
question, and unless through its dealings with the compress company
as aforesaid, it in fact exercised no custody or control of the
sheds and the street, or of any of the cotton, before it was put on
the cars by the compress company.
The plaintiffs, on October 17 and 19 and November 11, 1887, by
their agents at Little Rock, without having complied with the
provisions of 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," severally issued
policies of insurance to Smith & Co., amounting in all to
$17,000, on the 340 bales of cotton, describing it as in the sheds,
on the platform, and in the street. The value of these bales was
$18,179.
On November 14, 1887, the cotton piled in the street, including
the 340 bales, was wholly destroyed by fire from an unknown cause,
and the plaintiffs afterwards paid Smith & Co. the sums
insured.
The defendant requested the court to give, among others, the
following instructions to the jury:
"5th. If at the time said cotton was burned, on November 14,
1887, at the foot of Main Street, it was in the custody, possession
and control of the Union Compress Company, and upon premises over
which the defendant railway company had no control, and if it owed
no duty as a common carrier in
Page 139 U. S. 226
"
relation to said cotton, and if, while in such custody and
control, the cotton was set on fire by the act of some unknown
person, with whom the defendant had no connection and of whom it
had no knowledge, then the defendant railroad company cannot be
held liable in this action.
"11th. If the jury find from the evidence that there was no
contract or arrangement between the railway company and the
compress company which contemplated the depositing of cotton in and
upon Main Street, but that the placing of cotton there and the
permitting of it to be placed there was the sole act of the
compress company and the owners of the cotton, and that the railway
company had no control over the premises where the cotton was
stored, then the defendant is not liable in this suit, even though
the depositing of cotton in and upon Main Street constituted a
public nuisance."
"12th. In order to make the defendant liable for the placing of
cotton in and upon Main Street, the jury must find from the
evidence that the defendant was a party to the arrangement or
agreement by which the cotton was deposited in and upon said
street, and the mere fact that an arrangement existed by which the
defendant issued bills of lading for cotton deposited in the
compress warehouses and had agreed to handle the same from said
warehouses to Argenta, this fact of itself will not make the
defendant liable for an injury which would not have happened except
for the placing of cotton on the street itself."
"14th If the jury find that the plaintiffs, at the time of the
issue of the policies of insurance introduced in evidence in this
cause, had not and have never up to this date filed in the office
of the secretary of state certificates designating an agent upon
whom service of summons and other process may be made or
certificates stating the principal place of business of each
plaintiff in this state, as required by the statute of the state,
it cannot maintain this action."
The court refused to give each of these instructions, and
instructed the jury that, by the agreement between the defendant
and the compress company, the defendant made the cotton sheds of
that company a receiving station for cotton to
Page 139 U. S. 227
be sent by anyone from Little Rock to the compress of that
company at Argenta, and
"it was the duty of said defendant to transport the cotton thus
received at said cotton sheds for shipment promptly to Argenta, and
that if the defendant failed to do so, and by reason of the
continued reception of cotton at said sheds and the continued
giving of bills of lading therefor as often as demanded by shippers
thereof down to the day of the fire, cotton was suffered to
accumulate at said sheds and on Main Street until it endangered the
property of others in the immediate vicinity and that mentioned in
the complaint, then the defendant was guilty of aiding in the
creation and maintenance of a public nuisance, and is liable for
the loss mentioned in the complaint,"
and that if the jury found that
"the defendant was guilty of aiding in erecting, maintaining or
continuing said nuisance as aforesaid, and the cotton mentioned in
said complaint was destroyed by reason thereof,"
and was at the time of the loss insured against fire by the
plaintiffs, and the plaintiffs since that time and before bringing
this suit paid the amount of the loss to the assured, the jury
should return a verdict for the plaintiffs for the sums so paid,
with interest.
The grounds of the rulings and instructions of the circuit court
appear in its opinion delivered in a similar action brought against
the same railway company by another insurance company, and reported
as
Marine Ins. Co. v. St. Louis, Iron Mountain & Southern
Railway, 41 F. 643.
The defendant duly excepted to the refusal to give each of the
instructions requested and to so much of the instructions given as
is above stated, and, after verdict and judgment for the
plaintiffs, sued out this writ of error.
Page 139 U. S. 231
MR. JUSTICE GRAY, after stating the facts as above, delivered
the opinion of the Court.
Page 139 U. S. 232
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:
"SEC 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 shall 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 Mansfield's Digest, 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
Page 139 U. S. 233
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 also provided, by §§ 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 § 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," Stat. 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
Page 139 U. S. 234
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
financial 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 attempt to solicit or transact any business 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
improbable inferences -- either that
Page 139 U. S. 235
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 instruction
requested 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,
80 U. S.
370-372;
Mobile & Montgomery Railway v.
Jurey, 111 U. S. 584,
111 U. S. 593;
Phoenix Ins. Co. v. Erie Transportation Co., 117 U.
S. 312,
117 U. S. 321;
Liverpool & Great Western
Co. v. Phenix Ins. Co., 129
Page 139 U. S. 236
U.S. 397,
129 U. S. 462;
Connecticut Ins. Co. v. Erie Railway, 73 N.Y. 399;
Platt v. Richmond &c. Railroad, 108 N.Y. 358.
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, Iron Mountain & Southern Railway, 41 F. 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:
1st, 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;
2d, 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; 3d, 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
Page 139 U. S. 237
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 street and 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 responsible for
that loss to the owners of the cotton or to their insurers.
Railroad Co. v.
Reeves, 10 Wall. 176;
Morrison v. Davis,
20 Penn.St. 171;
Denny v. New York Central Railroad, 13
Gray 481;
Hoadley v. Northern Transportation Co., 115
Mass. 304;
Dubuque 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.
Page 139 U. S. 238
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,
133 U. S. 415.
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.
St.
Louis, Iron Mountain & Southern Railway v. Knight,
122 U. S. 79,
122 U. S. 93-95.
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
resulting from 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
Page 139 U. S. 239
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 Arkansas -- 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 Mansfield's Digest, §§ 4933, 4934;
St.
Louis, Iron Mountain & Southern Railway v. Camden Bank, 47
Ark. 541, 548.
Judgment reversed and case remanded with directions to set
aside the verdict and to order a new trial.
MR. JUSTICE BROWN, not having been a member of the Court when
this case was argued, took no part in its decision.