Giddings v. Seevers , 24 Md. 363 ( 1865 )

Goldsborough, J.,

delivered the opinion of this Court.

The appellant was the owner of certain cotton machinery in the Yalley Factory, at Harper’s Ferry, in Virginia. This machinery he sold to the firm of Stanbrough & Holliday, on a credit, and took their notes for the purchase money, to secure the payment of which they executed a deed of trust on the 31st day of March, 1851, to William T. Daugherty, in which they agreed to insure the said property to the amount of the debts secured by the deed, in some responsible office. All of the debts thus secured were paid except two notes to the appellant, one for $2,000, and the other for $1,124.

In pursuance of the agreement to insure, Stanbrough & Holliday effected an insurance in the Etna Insurance Company for $5,000 ; $1,500 on fixed machinery, and $3,500 on movable machinery, loss payable to James Giddings. This insurance was for one year, from the 12th day of October, 1850, to the 12th day of October, 1851, and renewed to 12th October, 1852, when it expired.

The firm of Stanbrough & Holliday continued until the 15th day of January, 1852, when Mark A. Duke became a member thereof, under the name of Stanbrough, Holliday & Co., and the firm thus constituted effected two policies of insurance, for $1,000 each ; one in the Etna Insurance Company, and the other in the Protection Insurance Company, both policies embracing the movable machinery in the Yalley Factory, and admitted to be the same machinery covered by the first policy, in which it was provided that in the event of loss, the loss was to be payable to the appellant. 'The two policies, for $1,000 each, were taken out on the 20th of January, 1852, for one year, to the 20th of January, 1853.

On the 3d of August, 1852, Mark A. Duke, one of the new firm, made a purchase of cotton, for the use of the factory, from the appellees, and gave to them a note for $282.47, signed in the name of the firm, and on the 1st of November, 1852, executed another note, payable to the appellees, for $1,253.$4. This last note being “a note on which the plaintiffs put their names for a commission paid to them by Stanbrough, Holliday & Co., which last note was paid at maturity by the plaintiffs.”

The policy for $5,000 in the name of Stanbrough & Holliday, was transferred on the 24th of January, 1852, to the name of Stanbrough, Holliday & Co. The property was destroyed by fire on the 19th of November, 1852, after tbe expiration of the policy of $5,000 to Stanbrough & Holliday.

On the 20th of November, 1852, Duke, signing the name of the new firm, gave to the appellees an assignment of each of the $1,000 policies, and afterwards, on the 10th of December, 1852, from some apparent apprehension that the first assignments were not in proper form, he gave them a new assignment of the policies, of which assignments the assignees gave notice to the insurance companies.

On the 2d of December, 1852, Ira Stanbrough and John R. Holliday, describing themselves as the acting partners of the firm, assigned the money due on the $1,000 policies to William T. Daugherty, trustee in the deed of trust, for the benefit of the appellant; aud on the 18th of January, 1853, Daugherty assigned the said money to the appellant.

The $2,000 was subsequently paid by the insurance companies to Messrs. Dobbin and Snyder, the counsel of the appellant and appellees, and by them invested for the benefit of the party who might he entitled to it. That the legal right to this fund might he judicially determined, it “was agreed that a case should be docketed in the Superior Court of Baltimore City to September Term, 1854, anda nar with the common Courts in assumpsit be filed with a plea of non-assumpsit, and all errors in pleading waived, and that the plaintiffs and defendant may give in evidence the assignments executed to them, respectively, by Stanbrough, Holliday & Co., and that this case shall determine which is entitled to the fund in the hands of the counsel. If it he determined for the plaintiffs, to the extent of the judgment if the fund be sufficient, said fund shall be paid to the plaintiffs, and if for the defendant, in like manner to the defendant. ’ ’

At the trial of the cause, after the deed of trust, the poliicies of insurance, assignments, and other instruments of writing, which it was agreed should be admitted in evidence, were submitted to the jury.

John R. Holliday, one of the firm, was produced as a witness for the defendant, and testified that it was understood and agreed between all the members of the new firm, before, at, and after the formation of the co-partnership, that the new firm was to come under all the liabilities of the old firm to James Giddings, in relation to the mortgaged machinery, as the same were embodied in the deed of trust to Mr. Giddings, and that the covenant for insurance was expressly recognized as being among said liabilities, and that the new firm did afterwards pay a part of the debt to Giddings, the said Stanbrough, Holliday and Duke uniting in the signature of their separate names for the balance of the note then settled. The witness further testified that he saw Duke several times at Harper’s Ferry, and fully explained to him the liabilities in regard to the insurance, as well for the benefit of Mr. Giddings, as also other insurance for the benefit of the landlord or owner of the mill.

'After all the evidence had been submitted to the jury, and before they retired, the plaintiffs offered three prayers and the defendant two prayers. Those of the plaintiffs were granted by the Court, and the defendant’s rejected.

The jury, under the instructions of the Court, found a verdict for the plaintiffs for $2,132,81, upon which judgment was entered, with interest from the 3d day of August, 1859. The defendant excepted to the ruling of the Court, and appealed. After the transmission of the record in this case, the following agreement was filed in this Court on the 20th of October, 1865 :

“This suit having been originally instituted to try the respective rights of James Giddings, on the one hand, and A. E. and W. K. Seevers, on the other, to a fund in the hands of George W. Dobbin and J. T. Snyder, (and invested by them in City of Baltimore 6 per cent, stock,) it is agreed that if the Court of Appeals shall affirm the judgment of the Superior Court on this appeal, such judgment shall affect only said fund, except as to costs of suit; and if the said Court of Appeals shall reverse said judgment of the Superior Court, then they shall enter judgment for the said James Giddings for the amount of his debt and interest, as shown by the record; said judgment to affect only the said funds in hand, as above mentioned, except as to costs, for which, in any event, the losing party is to be personally liable.”.

In view of the above agreement, we have carefully considered this case, and are of opinion that the ruling of the Superior Court in granting the plaintiffs’ prayers, and rejecting those of the defendant, was erroneous, and the judgment must be reversed. The agreement contained in the deed of trust to insure for the benefit of the appellant, secured to him the proceeds of any insurance when effected; and when Duke became a member of the firm, with full knowledge of the agreement and obligation to insure for the appellant’s benefit, any insurance effected by the new firm was equally affected by the appellant’s lien, and Duke could not divert it from this purpose. The appellees must be regarded as general creditors, and' not as purchasers of the two policies for a valuable consideration.

(Decided December 18th, 1865.)

The ajipellant did not trust to the personal credit of the firm alone, but relied also on the insurance for the satisfaction of his claim. The agreement to- insure was expressly for his benefit, and not for the benefit of general creditors. The appellees, as general creditors, trusted to the personal credit of the firm alone, and if the assignment of the insurance to the appellees be sanctioned, they derive advantage from a fund which they did not look to, and to that extent take from the appellant that on which he specially relied. See Thomas’ Admr. vs. Von Kapff’s Excrs., 10 G. & J., 372.

In the case of Jones vs. Hardesty and others, 6 G. & J., 420, this Court said: “ He who takes an assignment of a chose in action, not negotiable, takes it subject to all the legal and equitable defences of the obligor or debtor, to which it was subject in the hands of the assignor. If he accepts the assignment in ignorance of their existence, without using the appropriate means of acquiring a knowledge of them, the consequences are the merited result of his negligence.” In this case, the deed of trust containing the agreement to insure, was on record and open to public inspection.

The judgment of the Superior Court is reversed, with costs, and judgment rendered for the appellant for $3,124, with interest from the 3d day of May, 1850. This judgment to affect only the fund in the hands of George W. Dobbin and J. T. Snyder, according to the last agreement filed in this cause.

Judgment reversed with costs.