Hurlbert v. Pacific Ins. Co.
12 F. Cas. 1009
U.S. Circuit Court for the Dis...
1837
Check Treatment
STORY, Circuit Justice.

The only questions arising upon the statement of facts are, 1st. As to the right of set off of the defendants of the demands, which they hold against the plaintiffs; 2d. As to the right of deduction of the same demands under a particular clause in the policy, which will be presently brought under notice.

In regard to the right of set-off, either at the common law, or under our statute of set-off (Rev. St. c. 96), it appears to me, that upon the circumstances of the present case it is not at all maintainable. However true it may be, that the right of set-off of mutual demands between the parties is founded in natural justice and equity 2 (a proposition, to which T give my full assent), it is very certain, that the common law has not carried this right into full effect; for by that law the right of set-off is limited to eases of mutual connected debts, and does not extend to debts, which are unconnected with each other. The present case is not one of mutual connected debts. In regard to our Revised Statute of set-off, although it has enlarged the doctrines of the common law, there is no clause in it, which reaches, either in its language or its spirit, a case like the present. It is limited, with few exceptions, to mutual debts or demands between the parties to the action; and it contemplates only such mutual debts and demands, as are due in the same right. In the present case, the suit is brought by the plaintiffs, as mere agents for the benefit of the owners of the Flora. They sue in autre droit. The debts or demands sought to be set off, are not the debts or demands due by these owners; but by the plaintiffs in their own right. So that the suit and the set-off are not in the same right. The case of Gordon v. Church. 2 Caines, 299, is also a direct authority against allowing a set off under such circumstances upon general principles.

Then, as to the second question. The clause in the policy is in the following words. “And in case of loss, such loss shall be paid in sixty days after proof and adjustment thereof, the amount of the premium note, if unpaid, and all sums due to the company from the insured, when such loss becomes due, being first deducted; and all sums coming due, being first paid or secured to the satisfaction of the said president and directors, they discounting interest for anticipating payment.” The whole question as to the construction of this clause, turns upon the point, who is “the insured” within its true intent *1012and meaning; for it is clear, that the debts and demands due from that person, and from him alone, are to be recouped from the amount due on the policy. It has been argued, that, by the insured, must be here intended the party, in whose name the insurance is proved to.be made; and who may sue for the loss; and, especially, where he is the party, to whom the amount is to be paid in case of loss, and who, therefore, is exclusively entitled to sue on the policy. In the present case, the policy expressly declares, that in case of loss the amount shall be paid to the plaintiffs; and it Is added, that, upon any other construction, even the premium note itself upon this very policy could not be deducted. As to this last suggestion, it appears to me, that no such consequence would follow, as the argument supposes. It seems to me, that the true interpretation of the clause authorizes the deduction of the premium note at all events, by whomsoever it may have been given. But it authorizes no other deduction, except of debts or demands due from the insured. In the ordinary case of a suit brought by the principal, who has procured the policy to be made by an agent in his own name, the premium note cannot, unless under special circumstances, be set off, if it has been given by the agent, binding himself personally; because the suit is brought for the right of the principal, and the premium note is the agent’s own debt. The case of De Gaminde v. Pigou, 4 Taunt. 240, seems to have proceeded upon this ground. See, also, Cumming v. Forester, 1 Maule & S. 494, 499; Leeds v. Marine Ins. Co., 6 Wheat. [19 U. S.) 565. The clause was, therefore, probably introduced to entitle the underwriters at law to deduct the premium, whether the suit was brought in the name of the principal or of the agent. See Maanss v. Henderson, 1 East, 335.

It appears to me, that the insured, in the sense of the clause, must mean, not the party, who procures the insurance; but the party, for whose benefit the insurance is made. He, and he only can properly be said to be the insured; for he is ultimately to pay the premium and to have the benefit, if a loss occurs. I do not say, that this, the primary . meaning of the words, may not be displaced by showing, that'the parties to the contract have used them in a different sense, as the designation of the person, in whose name the policy is made. But the language ought to be very clear in its import, which should lead to such a result. The present policy does not seem to me in any manner to justify it. It is true, that by the terms of the policy the loss is payable to the plaintiffs. But on whose account? Plainly on account of the owners of the Flora, for whose benefit it was made. There is not the slightest evidence in the case, that the plaintiffs have become the owners of the policy; or that they acted under a del credere commission; or even that they have a lien upon the same for any balance of accounts. The probability is, that the money was made payable to them, solely to secure their ordinary commission for the negotiation. The object of making the loss payable to the plaintiffs, is not to change the character of the insurance itself, and to make it an insurance for the agent, and not for the principal; for then the party, having no interest in the property insured, and not the-party sustaining the loss, would be entitled to the benefit of the insurance. But the object is, to entitle the agent to sue in his own name for the loss, and to receive it without that right being interfered with by the principal. The principal is still, however, the insured; and the money, when received, is to be accounted for to him. This was the interpretation put upon a similar clause in the case of Jefferson Ins. Co. v. Cotheal, 7 Wend. 72, 82. There is great weight also in the argument ab inconvenienti, that otherwise the debts of the agent, though unknown to the principal, might intercept, in the shape of a set-off, the whole indemnity of the principal. Whether, upon a policy thus framed,, the principal, with the consent of the agent, might sue at the common law for the loss, as he clearly could, if this clause about the payment were omitted (without any distinction as to the agent’s having a del credere commission, or not), it is unnecessary to decide. In a court of equity, there would not be the-slightest difficulty; for, if the lien of the agent were discharged, the principal might sue for the loss in his own name, which shows, that he is to be treated as substantially the insured.

Very little light can be thrown on this subject by any references to the English decisions on set-off. Almost all the cases have-turned upon the proper construction of their statutes of set-off in cases of mutual debts and mutual credits, either generally, or in cases of bankruptcy.3 In Grove v. Dubois, 1 Term R. 112, and Bize v. Dickason, Id. 285, the broker acted under a del credere commission, and having paid the losses to his principal, he was allowed to set off these losses against a claim for premiums by the-assignees of a bankrupt. Under such circumstances, it may be fair, as between himself and the underwriters, the policy being made in his name, and the amount being paid, to treat him as the owner of the policy. Moody v. Webstef, 3 Pick. 424; Koster v. Eason, 2 Maule & S. 112; and Parker v. Beasley, Id. 423, recognize the like right of set off where the brokers are under a del credere commission, or have a lien by reason of acceptances. See, also, Davies v. Wilkinson, 4 Bing. 573. But where there is neither a del credere commission nor a lien, the right of' set-off is held not to exist. Parker v. Smith, 16 East, 382, 386. It would, however, be a great mistake to consider Grove v. Dubois, 1 *1013Term R. 112, from which all the other cases have sprung, an authority to the extent of considering, that where the broker acts under a.del credere commission, he is to be considered as the primary debtor to his principal, and therefore, to all intents, the insured. In Baker v. Langhorn, 6 Taunt. 519, and Peele v. Northcote, 7 Taunt. 478, Lord Chief Justice Gibbs repudiated such a notion. See, also, Gall v. Comber, Id. 558. Without going farther into an examination of the English cases on this particular point, resting, as they mainly do, upon the case of Grove v. Dubois, 1 Term R. 112, a case in itself not very satisfactory in its principles, it is sufficient to say. that they furnish no general reasoning applicable to the case before the court Upon the whole, iny opinion is, that there is no right in the defendants to set off or deduct from the amount recoverable on this policy any sums whatsoever due by the plaintiffs to them, except the premium on the policy. Judgment accordingly.

See Green v. Farmer, 4 Burrows. 2220, 2221; Briggs v. Richmond. 10 Pick. 391; 2 Story. Eq. Jur. c. 37, §§ 1432-1444.

The different statutes will be found in Bab. Set-Off, and Mont. Set-Off.