Opinion
No. 34224.
September 30, 1940.
1. CARRIERS.
Under bill of lading providing that carrier should have full benefit of any insurance on cotton which was shipped so far as it should not avoid the insurance contract, the carrier which had possession of the cotton when it was destroyed by fire would have been entitled to benefit of any insurance carried by the shipper in the absence of any contract to the contrary with the insurer.
2. CARRIERS.
Where fire policy covering cotton provided that insurer should be free from liability for destruction of cotton in possession of carrier which might be liable therefor or of cotton shipped under a bill of lading containing stipulation that carrier might have benefit of insurance thereon, agreement of insurer to advance to insured amount of loss sustained by destruction of cotton in hands of carrier as a loan, repayment thereof to be conditional upon and only to extent of any recovery from carrier, violated no right of carrier which had possession of cotton under bill of lading containing stipulation that carrier might have benefit of any insurance thereon, and making of loan by insurer did not relieve carrier from liability for destruction of cotton.
3. INSURANCE.
Where insurer made loan to insured pursuant to agreement attached to fire policy covering cotton, to advance to insured amount of any loss he might sustain by destruction of cotton in hands of carrier as loan without interest, the repayment thereof to be conditional upon and only to extent of any recovery from carrier, a recovery by insured against the carrier would inure to the benefit of the insurer.
APPEAL from the circuit court of Coahoma county; HON. WM. A. ALCORN, JR., Judge.
Watkins Eager, of Jackson, and Brewer Sisson, of Clarksdale, for appellant.
The undisputed proof in this case shows that on August 1st, 1938, the North British Mercantile Insurance Company, Ltd., issued its policy to the appellant, the policy being a blanket fire policy covering the cotton of insured in various locations. By the terms of the policy cotton shipped under a bill of lading containing a stipulation that the carrier may have the benefit of any insurance thereon was expressly excluded from the coverage of the policy. The policy also expressly excluded coverage of any cotton in the possession of any carrier or other bailee who may be liable for any loss or damage thereto.
The undisputed testimony is that appellant was not paid by the North British Mercantile Insurance Company, Ltd., but that appellant had been loaned the value of the cotton under the provisions of the policy.
The appellee and the lower court took the position that since appellant had received the value of the cotton it was an unconditional payment of the loss by the insurance company under a policy of insurance. Both disregarded the plain provisions of the policy. The first provision to the effect that there was no coverage on the cotton in question; the second provision of the policy providing for the loan which was made.
The only case relied upon by appellee in the lower court was that of Y. M.V.R.R. Company v. Blum, 124 Miss. 318, 86 So. 805. Appellant has no fault to find with the holdings in this case. The court will notice that in the Blum case the court did not have before it for consideration a loan provision. The provision in the bill of lading there, as here, gave the carrier the benefit of insurance which may have been effected on the property covered by the bill of lading. The provisions there, as in the instant case, also provided that such is true only "so far as this shall not avoid the policies or contracts of insurance." In the present case, as soon as the bill of lading was issued, the blanket policy ceased to cover the cotton in question. The court in the Blum case, in upholding the validity of the provisions in the bill of lading, stated, "The provisions of the bill of lading that the carrier shall have the full benefit of any insurance that may have been effected upon, or on account of, said property is valid, in the absence of fraud, or of any contract to the contrary with the insurer." The proof in the case at bar reveals a contract to the contrary with the insurer.
The leading case upholding the provision of a loan as in the case at bar is that of Luckenbach v. McCahan Sugar Ref. Co., 248 U.S. 139, 39 Sup. Ct. 53, 63 L.Ed. 170, 1 A.L.R. 1522. The carrier in the Luckenbach case made the same contentions as the appellee made in the case at bar. The court in the Luckenbach case had before it for construction both a provision in the bill of lading giving the carrier the benefit of any insurance, and a provision in the policy excluding coverage for goods shipped under a bill of lading giving the carrier the benefit of insurance, and a loan provision.
Mr. Justice Brandeis, in upholding the payment as a loan, most clearly covered the contention of the appellant in the present case.
In no jurisdiction, so far as appellant has been able to determine, has the loan provision been held invalid. In every jurisdiction where the courts have passed on the loan provision, they have held that the carrier was not relieved of liability, nor was the carrier entitled to off-set any payment made by an insurance company by way of a loan. The courts have universally held that payment under such provisions was a conditional payment or loan; and such a payment does not deprive an insurance company nor the insured of any rights they had prior to the payment.
Luckenbach v. McCahan Sugar Ref. Co., 248 U.S. 139, 39 S.Ct. 53, 63 L.Ed. 170; DeJean v. La. Western R. Co., 167 La. 111, 118 So. 822; Automatic Sprinkler Corp. of America v. Robinson-Slagle Lbr. Co. (La.), 147 So. 542; Graysonia N. A.R. Co. v. Newberger Cotton Co., 170 Ark. 1056, 282 S.W. 982; Clark Cotton Co. v. Jones, 121 S.E. 519; Southard v. Minn., etc., Ry. Co., 60 Minn. 382, 62 N.W. 442; Sorenson et al. v. Boston Ins. Co. (4 C.C.A.), 20 F.2d 640; Frederick Leyland Co., Ltd., v. Hornblower (1 C.C.A.), 256 Fed. 289; The Turret Crown, 282 Fed. 763; Inman v. S.C. Ry. Co., 129 U.S. 128, 9 Sup. Ct. 249, 32 L.Ed. 612; Couch on Insurance, sec. 2004.
The Supreme Court, in the case of Y. M.V.R.R. Co. v. Levy Sons, 141 Miss. 199, 160 So. 525, in passing on the question of the burden of proof as to whether to give effect to the provision of the bill of lading providing that the carrier should have the benefit of any insurance if such did not avoid the contract of insurance, would avoid the insurance policy, held that the burden was on the carrier since by its plea it set up such provision as a defense. The court thereby recognizes that the bill of lading cannot alter the insurance contract. The court recognizes that the insurance contract may provide against coverage where such a provision in a bill of lading exists. This is exactly what was done in the present case.
Fred H. Montgomery, of Clarksdale, for appellee.
Under the provisions of Sections 6072 and 6091 of the Code, considered in connection with the terms of the bill of lading, defendant had the right to pay plaintiff a sum equal to the amount of the premium charged for the policy of insurance, and thereby became the insured pursuant to the provisions of the bill of lading under which the shipment moved.
Y. M.V.R.R. Co. v. Blum, 124 Miss. 318, 86 So. 805.
It is true there are cases decided in other jurisdictions which are opposed to the holding in the Blum case; but this fact does not affect the holding here. No question involving interstate commerce is present. The shipment was consigned from Deeson to Greenville — wholly within the State of Mississippi. The movement is controlled wholly by regulation of local authorities. Decisions based on regulation of foreign jurisdictions are inapplicable.
It is undeniable on the record that the shipper was protected from fire insurance against loss due by fire while in transit. The policy so provides; notwithstanding it has already received a loan, as it is termed, covering the amount of the loss resulting from the fire. Why call a payment a loan?
But the railroad company, by virtue of Sec. 2, paragraph (c) of the bill of lading had previously acquired a vested right to pay the amount of the premuim incurred to effect fire insurance on the shipment of cotton and receive the proceeds of the fire policy. No legerdemain can deprive defendant of this right. Its right to effect insurance arose the moment the cotton was delivered for shipment by virtue of a written contract. The amount of money due plaintiff by the insurance company has been paid to plaintiff. It is true the payment by the insurance company to the Cotton Association is called a "loan" to the beneficiary, but a specious name label placed on the sum of money payable under plaintiff's insurance policy does not change the true character of the payment.
The right of the railroad company to enforce Sec. 2, paragraph (c) accrued when the cotton was delivered for shipment under the bill of lading; and no equivocal contract entered into subsequently can deprive the railroad of a valid contract right. The effort is a plain subterfuge and ought not be recognized.
Argued orally by Charles A. Sisson and Tom Watkins, for appellant, and by Fred H. Montgomery, for appellee.
This is an action in which the appellant seeks to recover from the appellee the value of twenty-two bales of cotton owned by the appellant, and destroyed by fire when in the possession of appellee under a bill of lading for its transportation from Deeson, Mississippi, to the appellant, at Greenville, Mississippi.
When the appellant closed its evidence, the court, at the request of the appellee, directed the jury to return a verdict for the appellee, and there was a verdict and judgment accordingly.
Prior to the delivery of the cotton to the appellee, the North British Mercantile Insurance Company, Ltd., had issued to the appellant a fire insurance policy covering all cotton owned by it (according to an agreement of counsel made in lieu of the introduction of the policy in evidence) "in various locations and in varying amounts in the different locations."
One of the provisions of this policy is: "Warranted by the assured free from any liability for cotton in the possession of any carrier or other bailee who may be liable for any loss or damage thereto; and free from any liability for cotton shipped under a bill of lading containing a stipulation that the carrier may have the benefit of any insurance thereon; and that any insurance granted hereunder shall be null and void to the extent of any insurance which the assured or any carrier or other bailee has, at the time of the disaster, and which would attach if this policy had not been issued."
Attached to this policy was the following letter:
"Cotton Fire Marine Underwriters "Columbia, S.C.
"1, August, 1938
"Staple Cotton Cooperative Association "Greenwood, Miss.
"Dear Sirs:
"In consideration of your acceptance of Policy No. 1405 of the North British Mercantile Insurance Company, Ltd., containing the following stipulation and warranty:
"(This warranty has been hereinbefore set forth.)
"We agree (provided always, the loss shall constitute in other respects a claim under this policy) that in event of loss on goods described in said stipulation, from which the bailee or carrier (or insurers of the bailee or carrier) denies liability, we will advance to you the amount thereof as a loan without interest, the repayment thereof to be conditional upon, and only to the extent of, any recovery from the carrier (or insurers of the bailee or carrier) received by you and we further agree that we will pay and assume all cost and expenses of any suit brought in the name of yourself or the owners of said goods, or otherwise to enforce the liability of the carrier or bailee (or insurers of the bailee or carriers).
"Yours truly, "North British Mercantile Ins. Co., Ltd.
"By ______________________."
After the burning of the cotton, the insurance company complied with its agreement to advance to the appellant the amount of its loss on the cotton as a loan without interest, the repayment thereof to be conditional upon, and only to the extent of, any recovery by the appellant from the appellee.
The bill of lading issued by the appellee provides that "Any carrier or party liable on account of loss or damage to any of said property shall have the full benefit of any insurance that may have been effected upon or on account of said property, so far as this shall not avoid the policies or contracts of insurance: Provided, That the carrier reimburse the claimant for the premium paid thereon." The appellee claims, and the court below held, (1) that it is entitled to the benefit of any insurance on the cotton carried by the appellant; and (2) that the money paid the appellant by the North British Mercantile Insurance Company, Ltd., under the policy by it to the appellant inured to the appellee's benefit. Under this provision of the bill of lading the appellee would have been entitled to the benefit of any insurance carried by the appellant on the cotton "in the absence . . . of any contract to the contrary with the insurer." Yazoo M.V.R. Co. v. Blum, 124 Miss. 318, 86 So. 805, 806. This insurance policy, however, provides that it shall be "free from any liability for cotton in the possession of any carrier or other bailee who may be liable for any loss or damage thereto; and free from any liability for cotton shipped under a bill of lading containing a stipulation that the carrier may have the benefit of any insurance thereon."
The agreement of the insurance company attached to the policy to advance the appellant the amount of any loss it might sustain by the destruction of cotton in the hands of a bailee or carrier "as a loan without interest, the repayment thereof to be conditional upon, and only to the extent of, any recovery from the carrier," violated no right of the appellee, and the making of the loan by the insurance company does not relieve the appellee from liability to the owner of the cotton for the destruction thereof. When a loan is made under such an agreement, a recovery against the bailee or carrier inures to the benefit of the insurer. Edgar F. Luckenbach et al. v. W.J. McCahan Sugar Ref. Co. et al., 248 U.S. 139, 39 S.Ct. 53, 63 L.Ed. 170, 1 A.L.R. 1522, and cases cited in the annotation thereof at page 1528. The appellee's request for a directed verdict should have been refused.
One of the appellant's contentions is that the appellee is estopped from making the defense to this action hereinbefore dealt with. It will not be necessary for us to discuss that question, for it seems reasonably clear from the record that when the case is tried again in the court below, nothing will appear that will entitle the appellee to the benefit of this advancement made by the insurance company to the appellant.
Reversed and remanded.