An insolvent debtor has a right to prefer one creditor to
another in payment by an assignment
bona fide made, and no
subsequent attachment or subsequently acquired lien will avoid the
assignment.
Such an assignment may include choses in action, as a policy of
insurance, and will entitle the assignee to receive from the
underwriters the amount insured in case of a loss. It is not
necessary that the assignment should be accompanied by an actual
delivery of the policy.
Upon a bill of interpleader filed by underwriters against the
different creditors of an insolvent debtor, claiming the fund
proceeding from an insurance made for account of the debtor, some
on the ground of special liens and others under the assignment, the
rights of the respective parties will be determined. But on such a
bill, those of the co-defendants who fail in establishing any right
to the fund are not entitled to an account from the defendant whose
claims are allowed of the amount and origin of those claims.
On a bill of interpleader, the plaintiffs are in general
entitled to their costs out of the fund. Where the money is not
brought into court, they must pay interest upon it.
An insurance broker is entitled to a lien on the policy for
premiums paid by him on account of his principal, and though he
parts with the possession, if the policy afterwards comes into his
hands again, his lien is revived unless the manner of his parting
with it manifests his intention to abandon the lien. In such a
case, an intermediate assignee takes
cum onere.
But in the case of other liens acquired on the policy, if it be
assigned
bona fide for a valuable consideration while out
of the possession of the person acquiring the lien, and afterwards
return into his hands, the lien does not revive as against the
assignee.
Evidence that a subscribing witness to a deed had been
diligently inquired after, having gone to sea and been absent for
four years without having been heard from, is sufficient to let in
secondary proof of his handwriting.
Page 21 U. S. 269
This was a bill of interpleader filed by the South Carolina
Insurance Company in the court below on 25 April, 1816, against the
appellants and Gray & Pindar, William Lindsay, and John
Haslett, praying that they might file their answers and interplead
so that it might be determined to whom the proceeds of a certain
policy of insurance should be paid. It appeared by the pleadings
and the evidence in the cause that this policy had been made on 6
May, 1811, by the respondents, the South Carolina Insurance
Company, upon a vessel called the
Abigail Ann, then lying
at Savannah, on a voyage to Dublin or a port in St. George's
Channel for account of John H. Dearborne and the respondents, Gray
& Pindar, the latter of whom were merchants residing at
Charleston, South Carolina, and at that time part owners of the
ship, but on 27 May, 1811, sold their interest therein
Page 21 U. S. 270
to Dearborne. On 5 July, 1811, the vessel sailed on the voyage
insured. It appeared that the respondent, Lindsay, as the agent of
the parties, had procured this policy to be underwritten. It also
appeared that Lindsay had delivered the policy to Gray &
Pindar, for the use of Gray & Pindar and Dearborne, without at
the same time expressly claiming any lien upon it.
After the sailing of the
Abigail Ann, Dearborne and
Gray & Pindar jointly purchased and loaded another ship called
the
Levi Dearborne, of which vessel and cargo Dearborne
owned two-thirds and Gray & Pindar one-third. In September,
1811, this vessel sailed from Savannah for Europe, and Dearborne
went in her. Before sailing, D. had drawn bills on England, some of
which were endorsed and negotiated by Lindsay, which were returned
protested for nonacceptance, and Lindsay was compelled to pay them.
Haslett also made advances to Dearborne and took his bills on
England, secured by a bottomry bond on the ship
Levi
Dearborne. These bills also returned protested.
Before Dearborne left Savannah, certain misunderstanding arose
between him and Gray & Pindar which it was agreed should be
referred to arbitrators. On 21 September, 1811, the arbitrators and
one Harford, as umpire, awarded that Gray & Pindar should
execute a bill of sale of the ship
Abigail Ann to
Dearborne and deliver to him the policy of insurance thereon
without unnecessary delay. Before he sailed, Dearborne directed
Harford to transmit to his wife, in the
Page 21 U. S. 271
District of Maine, to the care of Seth Spring & Sons, the
bill of sale and policy of insurance which had been thus awarded to
him. The policy was subsequently sent by Harford to Lindsay, to be
put in suit against the South Carolina Insurance Company.
The ship
Levi Dearborne was obliged to put into New
York by stress of weather, and there Dearborne, on 28 October,
1811, made an assignment of the
Abigail Ann and of his
interest in the ship
Levi Dearborne and of the policies
upon both vessels, to S. Spring & Sons, to secure the payment
of a debt due by Dearborne to them, amounting to about $16,000. The
handwriting of Dearborne and of the subscribing witness to the deed
of assignment were both proved, and one Maria Teubner, who
testified to that of the subscribing witness, swore that she was
one of his creditors and had taken pains to obtain information of
where he was, but without success. The last account of him was that
he had entered on board of an American privateer during the last
war, and had not been heard of for four years. The assignment was
made subject to pay out of the cargo of the
Abigail Ann,
if it reached the hands of his correspondents in England, certain
bills which he had drawn on them in the confidence that they would
be paid out of the cargo of the
Levi Dearborne. Nothing
was realized from that vessel and cargo, and the
Abigail
Ann was lost at sea. An action was brought upon the policy on
the
Abigail Ann in the names of Dearborne and Gray &
Pindar
Page 21 U. S. 272
against the South Carolina Insurance Company, and judgment
obtained against the latter in 1815 for the sum of $9,800.
Dearborne died in March, 1813. On 24 February, 1812, Lindsay, on
the return of the bills endorsed by him, issued an attachment under
the laws of South Carolina against Dearborne, who was then absent
from that state, and served a copy upon the South Carolina
Insurance Company. On 21 May, 1812, Haslett also issued an
attachment against Dearborne and served a copy on the South
Carolina Insurance Company. No appearance was entered for Dearborne
in these attachment suits, and judgment was obtained on Lindsay's
on 19 April, 1813, and on Haslett's on 10 June, 1815.
At the hearing in the court below, after the depositions and
regularly proved exhibits in the cause had been read, an order
signed by Harford, as agent for Dearborne, and S. Spring &
Sons, on Lindsay, in favor of Haslett, was read in evidence,
without notice to the appellants, or an order for its being read at
the hearing.
The circuit court decreed that the demand of Lindsay should be
first satisfied and paid out of the fund; that of Gray & Pindar
next; that of S. Spring & Sons next; that Haslett was entitled
to the surplus, if any; and that S. Spring & Sons should
account and prove their claims against Dearborne either by filing a
cross-bill or by answering upon interrogatories.
From this decree an appeal was taken by S. Spring & Company
to this Court.
Page 21 U. S. 282
MR. JUSTICE LIVINGSTON delivered the opinion of the Court, and
after stating the case, proceeded as follows:
In reviewing these proceedings, the first question necessary to
decide is to whom the policy mentioned in the complainant's bill
belonged at the time of commencing the action on it. It does not
appear that the names of the parties interested in the
Abigail
Ann were disclosed to the Company at the time of applying for
insurance, or that their names were inserted in the policy. There
is, however, no doubt that when it was effected, Gray & Pindar,
and John H. Dearborne were the owners, but in what proportions does
not appear, nor is it material now to be known, for whatever
interest was held by Gray & Pindar was regularly transferred to
Dearborne by their bill of sale dated 27 May, 1811. This bill of
sale is for the whole ship, and its consideration is $5,000.
Sometime after in the same year, Gray & Pindar delivered to
Henry Harford, as agent of Dearborne, the policy of insurance which
had been made on it. Dearborne being thus sole proprietor of the
Abigail Ann and policy, on 28 October, 1811, executed a
bill of sale for the vessel, containing an assignment also of the
policy for valuable consideration to John Spring, of the firm of
Seth Spring & Sons. Some objections were made to the proof of
the execution of the instrument, but
Page 21 U. S. 283
they were not listened to below, nor are they regarded as well
founded by this Court. The proof was such as is required where a
party to a deed and the subscribing witness are both dead. The
handwriting of both was proved, and Maria Teubner, who testified to
that of the witness, left no reasonable ground to doubt of his
death. She was a creditor of this witness, and had taken some pains
to obtain information where he was, but without success; her last
account of him was that he had entered on board an American
privateer, and had not been heard of for four years. The credit of
this witness, although the subject of some animadversion, is not
impeached by any testimony in the cause or by anything which she
herself has testified. It follows, then, that on 28 October, 1811,
Seth Spring & Sons became proprietors of the ship
Abigail
Ann, and of the policy mentioned in these pleadings, and
prima facie entitled to the whole of the moneys recovered
on it, although the policy itself was not at the time put into
their hands. Our next inquiry will be whether any of the other
parties who are now before us have a lien on it or any other title
to these moneys or to any part of them.
The claim of Haslett may be considered as out of the question,
it having been postponed by the circuit court to that of the
appellants and there being no appeal from this part of the
decree.
Lindsay's demand will first be examined. This is made up of the
premium paid for effecting the insurance -- of an indemnity claimed
by him for
Page 21 U. S. 284
endorsing two bills of exchange for Dearborne amounting to 400
pounds sterling, and for having become his bail -- of the customary
commissions for his trouble and attention in conducting the suit
against the underwriters, and of the amount of a judgment which he
obtained on 19 April, 1813, against Dearborne, on an attachment
issued out of the Common Pleas for the District of Charleston, and
which had been served on the complainants. This attachment was sued
out on 24 February, 1812.
No evidence is perceived in the proceedings in support of any
one of these claims except that which is founded on the judgment in
the attachment. In his answer, Lindsay says that the policy was
effected on his application, but nowhere pretends or alleges that
he paid the premium for insuring the
Abigail Ann, nor is
there any proof
aliunde of this fact. On the contrary,
Gray & Pindar, in their answer, expressly state that it was
paid by them, and was probably allowed in their account against
Dearborne, in making up the award hereinafter mentioned. Haslett,
in his answer, asserts that it was advanced by him. Now although
the answer of one defendant be no evidence against another, yet in
the absence of all proof to the contrary, and where a party
observes a profound silence on a subject to which his attention
could not but be excited, such answer, not varying from any
allegation on his part, furnishes some evidence that he could not
make the assertion, because the fact was, in reality,
otherwise.
Page 21 U. S. 285
If this fact of the payment of the premium had been made out,
the court would have been disposed to award Mr. Lindsay payment out
of the proceeds of the policy, for although he had once parted with
it, yet, coming to his hands again, to be put in suit, his lien for
the premium would revive and be protected unless the manner of his
parting with it had manifested an intention in him altogether to
abandon such lien. His claim for a commission for conducting the
suit against the underwriters is inadmissible, it appearing from
the testimony of Harford, who transmitted the policy to him, and
who is the only witness on this subject, that he has no right to
make any such charge. Harford considers himself entitled to this
commission, and has accordingly charged it to Dearborne in an
account annexed to his deposition. Now as this is the witness on
whom all the defendants except Seth Spring & Sons principally
rely, they cannot complain if his testimony, when unfavorable, is
allowed its full operation against them. It is evident, then, from
the declaration of this witness that he considered himself as the
merchant who was prosecuting the suit, and that Mr. Lindsay was
only employed to deliver the policy to a professional gentleman to
bring the action. There is another obstacle in the way of this
claim, which is that Lindsay, in the business of this suit, acted,
as Harford himself says, as his (Harford's) agent. Now there is not
only no evidence of Harford himself being authorized by the owners
of this policy to bring any action on its, but it appears that his
detention of it was a violation of duty,
Page 21 U. S. 286
and that the action he brought was more to answer his own
purposes and those of the other defendants than to advance the
interest of those whom he knew at the time to be assignees of the
policy. In this state of things, nothing would be more unjust than
to permit this fund to be encumbered, as against Seth Spring &
Sons, with the heavy charge of 5 percentum in favor of any one of
the parties who, throughout the whole business, have had in view
exclusively their own interest and were acting in open hostility to
those from whom they now demand this compensation. With what
propriety can they now claim a commission from these gentlemen,
when it is entirely or principally owing to their interference that
they have not to this day received any benefit from a judgment
which was recovered for their use nearly eight years ago?
Lindsay's claim to receive any part of this fund, on account of
the two bills of exchange for 200 pounds each, is equally
unfounded. That he would have had a lien on the policy for this
transaction, without an express contract (and none appears), even
if he had never parted with its possession, is a proposition which
may well be controverted, but if such lien ever existed (which is
not asserted), it is not like that for the premium advanced for an
insurance; the latter may well revive in some cases on a broker's
being restored to the possession of a policy, which had once been
out of his hands, it being no more than reasonable that whoever
acquires an interest in it should generally take it subject to such
a charge. It
Page 21 U. S. 287
does not, however, follow that liens which may once have existed
for other advances or on other accounts, whether by agreement of
the parties or by the operation of usage or of law, should be
placed on the same favored footing. If, while a policy is out of
the hands of the insurance broker, as was the case here, it is
assigned for valuable consideration and
bona fide, it
would be unjust, on its returning to his possession, to revive
encumbrances of which the assignee could have had no notice nor no
certain means of finding out, for he could not reasonably suspect
that such liens had ever existed in favor of one who had parted
with the possession of the only thing by which they could have been
enforced. Nor can it make any difference whether the policy had
been actually delivered to the assignee, provided the transfer were
bona fide made, while out of the possession and power of
the insurance broker. Upon the same principle it is that a
consignor loses his right to stop goods
in transitu,
although the consignee have become insolvent, after such consignee,
having power to sell, has disposed of them before their arrival to
a third person unacquainted with any circumstance to taint the
fairness of the transaction.
The next charge which Lindsay attempts to fix upon this fund is
an indemnification for becoming bail for Dearborne. Now if a
responsibility so contingent and remote as one of this nature could
by any possibility, without a very positive and express agreement,
be turned into a lien on a policy of insurance, it does not appear
in what suits he
Page 21 U. S. 288
has thus become bail, nor whether he has not been released by
the death of the principal of all liability; and of course any
demand arising from such responsibility, if any ever existed, must
be laid out of the question. And the answer which has already been
given to his claim for endorsing certain bills of exchange will
also apply here.
The judgment obtained in the attachment suit may be as easily
disposed of. It is quite unnecessary to inquire whether these
proceedings abated by the death of Dearborne if he were dead at the
time, for at the time of issuing the attachment, and of course long
before judgment, Dearborne ceased to have any interest in this
policy, the same having been already assigned to John Spring, of
the firm of Seth Spring & Sons. No attachment, therefore,
against Dearborne, although served on the Company, could render the
property of another liable for his debts. The attachment of
Lindsay, it may incidentally be observed, furnishes some proof that
he had no great confidence in the liens which he now asserts
against this policy.
The title of Gray & Pindar remains to be examined. By their
answer they claim five hundred and two dollars as the premium paid
for insurance on the
Abigail Ann, and fifty dollars paid
as a commission for effecting the same. They likewise state that
large advances were made by them between 5 April and 7 August,
1811, on account of the said ship, her cargo, pilotage, and
repairs, and they also, it seems, became the bail of Dearborne in
two several actions, amounting
Page 21 U. S. 289
to one thousand dollars, which they have since become liable to
pay; they were also endorsers of the two bills of exchange which
were endorsed by Lindsay. After stating all these demands, they
say, that upon closing the account between Dearborne and
themselves, there was a balance in their favor of $1,430.16, for
which Dearborne gave them a bill of exchange on Logan, Lenon &
Co., of Liverpool; that feeling uneasy and insecure from the
responsibility resting on them, and aware that they could be
indemnified only by a specific lien, they would not deliver to
Dearborne the policy, but put it for safekeeping into the hands of
their friend, Henry Harford, for the express and avowed purpose of
protecting them against all losses on the accounts aforesaid, the
said policy being also intended as a security for certain debts due
by Dearborne to Harford. Now without looking any further than the
answer of these gentlemen, it is most manifest that none of the
demands or responsibilities which are stated in it were contracted
or entered into under any agreement or understanding with Dearborne
himself, as Harford would have us believe that they should be
secured by a lien on this policy, but that such lien is set up
solely on the ground of a subsequent understanding between them and
Harford, to whom it was delivered for the purpose of protecting
them against loss. To derive any benefit from such a delivery, or
such an assent on the part of Harford, it should appear (which is
not the case) that they had a right to exact, and Harford a right
to accept, of
Page 21 U. S. 290
the policy on these terms.
Unfortunately for these gentlemen, the testimony of their friend
and witness, Mr. Harford, most incontestably establishes that they
were bound by the decision of persons of their own choice, of whom
Harford himself was one, to deliver the policy without annexing to
such an act any condition or terms whatever, and also that the
authority of Harford extended only to its receipt and transmission
to Mrs. Dearborne, the wife of Mr. John H. Dearborne. On 21
September, 1811, which is subsequent to all their advances,
endorsements, and engagements for John H. Dearborne, he and Gray
& Pindar submitted all their controversies to two arbitrators,
who, in conjunction with Harford as umpire, awarded that Gray &
Pindar should pay to Dearborne $66.77, and surrender to him the
policy on the
Abigail Ann without unnecessary delay. Now
this award could not have been signed by Harford if he knew of any
lien to which Gray & Pindar were entitled on this policy. It
was said that no notice could be taken of this award; but coming as
it does from a witness of the party, who was himself umpire, and
not being impeached, this Court cannot without injustice shut its
eyes upon it. If a bill for its specific performance might have
been entertained, which was not denied, what higher or better
evidence can the court have of the rights of the respective
parties, at the time of the transactions referred to in the answer
of Gray & Pindar? If judges of their own selection have
directed them, as they had a right to do, to surrender
Page 21 U. S. 291
this policy without delay and unconditionally to Dearborne, this
Court must now presume (and it is a presumption with which neither
Gray & Pindar, nor Harford, can be justly offended) that the
policy was delivered to the latter pursuant to the award, and if
not, that any condition with which they thought proper to accompany
such delivery, if not a breach of the arbitration bond, would at
least be a trespass on good faith, and that no assent or
understanding on the part of Harford, who was without authority for
this purpose, could confer any validity or give any sanction to
such an act. This award is also of importance to show how entirely
mistaken Gray & Pindar are in supposing Dearborne, at the time
they speak of, so largely in their debt, when it appears by this
instrument that the balance, although not a large one, was in his
favor.
As to Harford's power, it appears from his own letters that he
had no other authority than to transmit the policy, when received,
to the family of Dearborne. Accordingly, in a letter to Seth Spring
& Sons of 26 September, 1811, he transmits, for Mrs. Dearborne,
the bill of sale for the
Abigail Ann. And in another
letter of 3 November following, to the same gentlemen, he
apologizes for not sending on the policy, as it had not yet been
received from Charleston. After this unequivocal evidence of what
was his authority over this policy, it becomes quite unimportant to
inquire what agreements he may have made, or what orders he gave
Lindsay respecting the proceeds of it. It is not too much
Page 21 U. S. 292
to say, that the one of 13 May, 1813, in favor of Haslett, by
which the whole proceeds, after Lindsay's retaining for himself his
legal claim and expenses, was a palpable violation of duty, or
breach of instruction, towards Dearborne; and it was properly said
by the circuit court, "that to vest any interest, hostile to that
of Seth Spring & Sons, was certainly not in his power." Gray
& Pindar having been originally interested in this ship and
policy, on which there was some reliance by their counsel, places
them, as it regards a lien, in a condition less favorable than if
such ownership had never existed, for by such overt acts, as the
execution of a bill of sale of the vessel, and a delivery of the
policy, pursuant to the award, to the agent of Dearborne, they have
done all in their power to inform the world that they had no claim
on either for any demands against Dearborne.
There is error also, in that part of the decree, which directs
Seth Spring & Sons to account for their claims on Dearborne.
The complainants have no right to an account, and the defendants
being called here only to interplead, and having failed to
establish any claim on this fund, have as little right to such an
account. They cannot, at any rate, require it in the position in
which they now stand as co-defendants with Seth Spring & Sons.
It is but justice to remark that for aught that appears in the
present suit, there is no reason to suspect the integrity of the
assignment to Seth Spring & Sons; they appear to be respectable
merchants and to have been large creditors of
Page 21 U. S. 293
Dearborne. It is the opinion of this Court that the decree of
the circuit court be reversed so far as it postponed the demand of
the appellants to those of Lindsay and of Gray & Pindar and
directed them to account, and that instead thereof, a decree must
be entered in their favor for the whole amount recovered on the
policy, with interest (the money not having been brought into
court) at the rate of 6 percent per annum, from the time of
rendering the judgment, the complainants deducting therefrom their
costs of suit. The defendants must pay their own costs.
DECREE. This cause coming on to be heard and being argued by
counsel of the respective parties, it is ORDERED, ADJUDGED, and
DECREED that the decree of the Circuit Court for the District of
South Carolina in this case be and the same is hereby reversed and
annulled, and this Court, proceeding to pass such decree as the
said circuit court for the District of South Carolina should have
passed, doth further ORDER and DECREE that the complainants pay to
the defendant, John Spring, of the firm of Seth Spring & Sons,
the whole amount of the judgment recovered against them on the
policy on the ship
Abigail Ann, mentioned in the pleadings
in this cause, with interest, at the rate of 6 percentum per annum,
from the time of rendering such judgment, after deducting therefrom
their costs of suit, to be taxed. And it is further ORDERED,
ADJUDGED, and DECREED that the defendants in the said circuit
court, respectively, pay their own costs.
