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CASES

IN THE

SUPREME COURT ·

OF

IOWA.

THE ROYAL INSURANCE Co. v. Davies.

(40 Iowa, 469.)

Surety when death of, does not discharge estate.

The obligors in a bond-one of whom was a surety only-bound themselves, their "heirs, executors and administrators." The surety died, and after his death a breach occurred. Held, that his estate was liable.*

ACTION on a bond executed by W. F. Kidder, as principal, and

John L. Davies, as surety, against the defendant, as executor [we assume the original report gives no intimation as to the character of the defendant] of the said Davies. The bond was in substance, that whereas the obligees-the plaintiffs above named-had appointed said Kidder their agent, the said agent should properly discharge his duties and pay over all money, and to this end the obligors jointly and severally bound "ourselves, our heirs, executors and administrators, jointly and severally, by these presents."

The plaintiffs alleged a failure of the agent, Kidder, to pay over certain moneys. The defendant alleged that the said surety, John L. Davies, died on a day named which was prior to the alleged breach, and that his estate became thereby discharged.

The plaintiffs demurred to the answer, and the demurrer being overruled, and judgment rendered for the defendant, plaintiff appealed.

* See Wood v. Fisk. ante, 528.

The Royal Insurance Co. v. Davies.

Brown, Campbell & Gould, for appellant.

Davidson & Lane, for appellee.

MILLER, C. J. The question presented in the record is whether the death of Davies, the surety in the bond, operated in law as a discharge of his estate from liability for the default of the principal, happening after the death of the surety. In other words, whether the death of the surety operated to terminate the obligation assumed by him when he executed the bond on his part. It is not claimed on the part of the defendant that the liability of the surety, or his obligation as such, was terminated by reason of any act, or omission of the plaintiff, but it is claimed that the obligation of the surety ceased and the bond became defunct, as to every act done after the death of the surety, by reason of such death alone. By the terms of the bond the surety, Davies, bound himself, his "heirs, executors and administrators," as surety for his principal, Kidder. This language shows no intention to limit the liability to the life-time of the surety; on the contrary it imports that the liability shall continue after his death, and binds his heirs and personal representatives. This intention is further manifested by the subsequent language of the bond, in defining more particularly the obligation assumed by the obligors therein. It is, that, "if the said W. F. Kidder shall promptly pay to the said company the amounts received from time to time, and shall well and truly perform all, and singular the duties as agent of said company, as directed, according to the provisions of the charter, by-laws, rules and regulations of said company now existing, or which may be adopted by said company, for and during the time he officiated as said agent, then this obligation shall be null and void, otherwise remain in full force and virtue." This language clearly shows that the obligation of the sureties to the bond was to continue for and during the time Kidder, the principal, should officiate as agent of the company. Of course the death of Kidder would terminate the obligation of the sureties, for thereby the agency of Kidder would terminate. The terms of the bond continue the liability of the sureties as long as Kidder should act as agent of the company, and this liability likewise, by the terms of the bond, extends to the heirs and legal representatives of the sureties. They are bound by as clear and unmistakable language as that which binds the sureties personally. Instead of there being any intent manifested to limit the obligation of the sureties. to the terms of their respective lives, it is clearly shown that it was intended the obligation should extend to, and bind the heirs and personal representatives of the sureties, and that the binding force of the

Cowan v. The Iowa State Insurance Company.

bond, and the sureties' liability should continue as long as Kidder should act as the agent of the company.

No case exactly in point has been cited by appellant, and no authority whatever is cited by appellee. We are clear, however, that upon the general principles regulating contracts, and the terms of the bond in this case, the death of the surety, Davies, did not terminate the binding force of the bond upon his heirs and legal representatives for the failure of Kidder, while he was the agent of the plaintiff, to pay over money coming into his hands as such agent. The case of Gordon v. Calvert, 4 Russ. 581, cited by appellant, supports the view we have here taken. The court erred in overruling the plaintiff's demurrer to the answer. Reversed.

COWAN V. THE IOWA STATE INSURANCE COMPANY.

(40 Iowa, 551.)

Fire insurance — alienation - sale by one partner to the firm.

Plaintiff, being the owner of goods which were insured by a policy conditioned to be void in case of alienation, sold the goods to a firm of which he was a member. Held, that this was not such an alienation as would avoid the policy.

ACTION upon a policy of insurance against fire, issued to plaintiff,

covering a stock of dry goods and merchandise. The petition averred the loss of the property and other facts entitling plaintiff to recover.

Defendant, in the second count of its answer, set out that it was a mutual insurance company, organized under the laws of the State of Iowa, and the following was one of the provisions of its articles of incorporation, printed on the back of the policy, and referred to therein:

"When any property insured in this company shall be alienated by sale or otherwise, the policy thereon shall be void; but in such cases the insured may assign and deliver to the purchaser or purchasers such policy of insurance, and such assignee or assignees shall have all the benefit of such policy, and may bring and maintain a suit thereon in his or her or their own names; Provided, that before any loss happens he, she, or they, shall obtain the consent, in writing, of the said company to such assignment, and have the same indorsed or annexed to the same policy."

Cowan v. The Iowa State Insurance Company.

It was also shown that the following condition was printed upon the back of the policy, and expressly made a part thereof.

"Policies of insurance subscribed by this company shall not be assigned without the consent of the company, expressed by indorsement made thereon. In case of assignment without such consent, whether of the whole policy or of any interest in it, the liability of the company, in virtue of such policy, shall thenceforth cease, and in case of any transfer or change of title in the property insured by this company, such insurance shall be void and cease, unless assigned with the consent of the company."

It is then alleged that plaintiff violated these conditions by the sale, alienation and transfer of all the insured property to "the firm of Cowan & Haskins, a copartnership composed of plaintiff, Samuel Cowan, and Omar Haskins," and that the goods insured were, at the time of the loss, the property of that firm.

A demurrer to this count of the petition, on the ground that it does not show an alienation or transfer of all the property, but shows that the plaintiff still retained an insurable interest therein, which was covered by the policy, was sustained.

From the judgment of the court upon the demurrer, the defendant appeals.

Craig & Collier, for appellant.

Work & Lea, D. C. Beamen and J. C. Knapp, for appellee.

BECK, J. Nothing less than a transfer of the property insured, whereby plaintiff would part with all his interest therein, would operate to defeat the policy under the condition against alienation, pleaded by defendant. As long as plaintiff retained an insurable interest in the property, the policy attached thereto and protected plaintiff to the extent of his interest. May on Insurance, p. 463, § 381; p. 303, § 278; Hitchcock v. N. W. Ins. Co., 26 N. Y. 68; West Branch Ins. Co. v. Helfenstein, 40 Penn. St. 289: Shearman v. Niagara Fire Ins. Co., 2 Sweeny, 470; Fernandez v. Great Western Ins. Co., 3 Robertson, 457; Hoffman v. Place, 32 N. Y. 405.

The rule is based upon sound reason and the true construction of the clause in question, which neither in its language nor spirit is intended to deprive the insured of the right to dispose of a part of the property by sale or otherwise. This would operate as a restraint upon trade and the free sale and transfer of property to which business men, who most enter

Cowan v. The Iowa State Insurance Company.

into these contracts of insurance, would never submit.

It is not de

manded for the protection of the underwriters, and we have never heard of a construction giving such an effect to a condition against alienation. The condition of the policy before us declares that the instrument shall be void upon the alienation of the property insured, not upon the alienation of a part of it.

In our judgment, the same reasons will support the view that the transfer of an interest in the property to a partner, which is shown by the answer, will also fail under the condition in question, to defeat plaintiff's right to recover. As long as the insured owns the property, or a part of it, or an interest in it that is insurable, the policy during its life covers such part or interest. As the condition cannot be construed into a contract against a sale of a part of the property, neither can it be regarded as an undertaking on the part of the assured not to dispose of an interest in it. These views are based upon the consideration that no increase of risk is wrought by the sale or transfer of a part of, or an interest in, the property insured.

It is well settled that a partner has an insurable interest in the property of the firm.

The transfer pleaded was by the plaintiff to a firm of which he was one of the partners. So far as plaintiff is concerned, whatever interest he retained in the goods never passed out of him. As the transfer is stated in the answer, plaintiff passed the title of the property from himself to another and himself It is true that, to a certain extent, a copartnership is considered a person separate from the partners who may have transactions, and make contracts with it as such. But it is not true that a partner, by the sale of the property to the firm, actually parts with the interest which, as a partner, he actually holds in the firm property. The answer, therefore, fails to show such an alienation as will defeat the policy and bar all right of recovery by plaintiff.

Cases are cited by defendant's counsel, holding that the sale by one partner to another of his interest in partnership property, upon withdrawing from the firm, or upon its dissolution, avoids the policy issued to the firm, under the condition against alienation. Finley v. Lycoming Co. Mut. Ins. Co., 30 Penn. St. 312; Keeler v. Niagara Fire Ins. Co., 16 Wis. 523; Doher & Bumb v. Etna Ins. Co., 15 Mo. 134; Hartford Fire Ins. Co. v. Ross et al., 23 Ind. 180; Dix et al. v. Mercantile Ins. Co., 22 Ill. 272; Western Mass. Ins. Co. v. Riker, 10 Mich. 279; Fallon v. Mut. Ins. Co., 1 Selv. 405.

In some of these cases doctrines are found inconsistent with the conclusion we have reached, but we do not think the decisions themselves VOL. XX.-74

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