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made in the collecting bank's own drafts also. But we do not think it material. The direction of the defendant to the Florida bank should be read in the light of the custom, and meant no more than that which the custom sanctioned.
But other considerations lead more directly to the determination of the controversy. The Florida bank was an agent in niaking the collection. When it had made the collection, it held it in trust. If it mingled it with its own funds, the trust attached pro tanto to the funds. National Bank v. Insurance Co., 104 U. S. 54, 26 L. Ed. 693, where the principle vindicated in Knatchbull v. Hallett, 13 Ch. Div. 696, by Sir George Jessel, M. R., is fully confirmed. When it sent its own draft as the remittance, it did not operate as a satisfaction of its obligation, unless the draft should be paid, there being no agreement to receive the draft as payment. This would be so in the case of a common debt. And certainly the reasons for the same rule are not less where an agent transmits to his principal his own note or draft to provide means for the satisfaction of a trust obligation on account of funds received for his principal. The facts show that the draft of the Florida bank was uncollectible, that the payment of it was forbidden by the receiver, the party upon whom the right of the bank had been devolved. The trust relation between the plaintiff and the Florida bank was not discharged by such a remittance, and the collection went into the hands of the receiver subject to the trust. If the remittance of the draft were to be regarded as provisional payment, the result would be that, in case the draft should not be paid, the parties would be remitted to their former position. In such a case there would be no sound reason, as we think, for holding that the debt had lost its privileged character by a proceeding of the party owing it, unless the party to whom the debt is owing expressly assents to the change of relation between himself and his agent. The bank could not rid itself of that relation and become the mere debtor of the plaintiff by its own act. The trust was part of the plaintiff's security. Neither the plaintiff nor the Western German Bank, in his behalf, ever consented that the Florida bank should cast off the trust and become the plaintiff's debtor. It would be a most absurd consequence if a man in the possession, as an agent, of a fund belonging to another, could convert the fund into his own property by sending his check to the owner, and then, upon some change in his own circumstances, direct his bank not to pay it, and so transform himself into a debtor. Of course, if the owner consents to such a change of relationship between himself and his agent, or where the circumstances indicate that a credit in account is expected, which is the same thing, the result is different, because the destination of the fund is altered by agreement. But here there was no such agreement. The check was sent for collection and remittance. Satisfactory proof should be required that the owner assented to such change, in view of the consequences which would ensue. A man might be quite willing to trust another with the collection of his money when he would be very unwilling to loan it to him. It would seriously impair the facilities for collecting commercial paper if it should be exposed to the hazards of conversion by the agent into whose hands the proceeds might come.
By agreement of the plaintiff and defendant, the Florida bank became the plaintiff's agent, and the defendant is not responsible to the plaintiff for the failure of its agent to fulfill the obligations of his trust, and we think the plaintiff's remedies have not been impaired by any fault of the defendant.
If the remittance were by drafts of other parties, it may be that the presence of other considerations would require a different conclusion. But the custom referred to, if it gave the collecting bank the power to thus change the character of its obligations to its principal, would be palpably inconsistent with settled rules of law. But when interpreted in harmony with such rules, probably it would be unobjectionable.
We have stated the relations of the collecting bank, and its obligation, upon the assumption that the relations were with, and its obligation to, the owner of the check. But if upon the form of a general indorsement, without more, the Western German Bank appeared to be the owner, and the relations of the Florida bank were therefore, in technical law, with the former, the result would not be different, for all that has been said of the nature of the Florida bank's obligations would be equally applicable, and all the advantages of the right of the Western German Bank would inure to the plaintiff.
The prime reason which supports the judgment of the Circuit Court is that the injury suffered by the plaintiff consists in the failure of his agent, the Florida bank, to discharge its duty to transmit the trust fund to the Western German Bank, for which failure the latter is not responsible.
The direction to remit in New York exchange did not authorize the remittance of the collecting bank's own draft, which, being valueless, would not effect the purpose of a remittance.
The judgment is affirmed, with costs.
FARWELL et al. v. HOME INS. CO. OF CITY OF NEW YORK,
Complainant employed brokers to obtain $60,000 of insurance on plantation buildings, which it was found necessary to distribute among 20 different insurers. In order to have the policies read exactly alike, riders were printed containing a description of the property, and a provision for concurrent insurance to the extent of $60,000, which were used on all but one of the policies, on wbich a printed rider previously used by complainant's grantor, providing only for $45,000 concurrent insurance, was used by mistake. The policies were similar in form, each containing about 4,000 words. Held, that the complainant was not guilty of negligence in failing to read the policy before loss and discovering the mistake, precluding a reformation.
(Ed. Note.-For cases in point, see vol. 28, Cent. Dig. Insurance, 88 265
272.) 2. SAME-EVIDENCE,
In a suit to reform an insurance policy, the evidence was held to require a finding that a rider only authorizing $45,000 concurrent insurance had been attached to the policy, by mistake of both parties, in place of a rider provided, authorizing concurrent insurance to the extent of $60,000.
Appeal from the Circuit Court of the United States for the Eastern District of Louisiana.
S. Wolff, J. D. Rouse, and William Grant, for appellants.
SHELBY, Circuit Judge. The appellants, Charles A. Farwell and two others, citizens of Louisiana, brought this suit in equity against the appellee, the Home Insurance Company of the city of New York, a corporation organized under the laws of New York, to reform a fire insurance policy for $2,500 issued to the complainants by the defendant company. The policy, as issued, allowed concurrent insurance for only $45,000, and became void if insurance was had for a larger sum. The assured obtained insurance, including the $2,500—the amount of the policy in question for $60,000. The policy, as issued, was thereby made void. The bill seeks to have the policy reformed so as to permit, by its terms, concurrent insurance to the amount of $60,000. The case was tried on its merits. The Circuit Court dismissed the bill, and the complainants appealed to this court.
The bill, answer, and evidence show many facts about which there is no controversy, and yet it is necessary to make a condensed statement of them, for they greatly aid, we think, in pointing to a correct and just answer to the one controverted question of fact, to wit, whether or not $45,000, instead of $60,000, was by mutual mistake fixed as the amount of concurrent insurance allowed by the terms of the policy.
The policy sought to be reformed is dated September 27, 1902, and was issued by the defendant company from the office of Peter F. Pescud, insurance agent. It covers the buildings and fixed and movable machinery of all kinds situated on the Ashton Plantation, in the parish of St. Charles, La., and, as issued, contains the words "$ 15,000 total insurance permitted concurrent herewith.” The premium was duly paid by the complainants. The property insured was totally destroved by fire, and proof thereof was duly made.
The Ashton Plantation formerly belonged to Emile Legendre, who sold it to the complainants in September, 1902. While Mr. Legendre owned the property, he obtained insurance upon it to the amount of $15,000, $5,000 of which was issued through Peter F. Pescud, insurance agent. Mr. Legendre obtained the $45,000 insurance from several different companies. In order to have all the policies alike, he had printed a number of forms to be used as riders, which contained a description of the property and a statement of the amount of concurrent insurance permitted. One of these riders or forms was to be attached to each of the policies. For convenience of reference, they will be called hereafter the “old form.” They were furnished the agents of the several insurance companies to whom Mr. Legendre made application for insurance. Such forms were furnished Peter F. Pescud, insurance agent. After the complainants became owners of the property, they employed Brand & Bush, insurance brokers, to obtain insurance for them upon the property for $60,000. Brand & Bush prepared and had printed a large number-perhaps 250—forms or riders,
describing the property, and providing $60,000 as the total insurance permitted. These forms (hereafter designated as the “new form”), in general appearance, were substantially like those which had been printed for Mr. Legendre. They were distributed by Brand & Bush among the agents of the several insurance companies of whom they sought the $60,000 insurance. They obtained insurance for the complainants from 19 different companies for sums ranging from $1,000 to $7,000; the aggregate amount of the 19 policies being $57,500. In each of these 19 policies the new form, allowing concurrent insurance to the amount of $60,000, was used. The $2,500 policy issued by the defendant company, which is in suit here, is required to complete the amount of $60,000. There is no dispute or controversy as to the 19 policies. After the fire which destroyed the property insured, these 19 policies were paid. The defendant company refused to pay the policy in question, claiming it was void, because by its terms only $15,000 of concurrent insurance was allowed, and the complainants, they claim, had made the policy void by obtaining insurance for a greater sum. The only material difference between the policy in question and the other 19 policies is as to the amount of concurrent insurance. The fact is that the agents of the defendant company, in issuing the policy, pasted thereon one of the old forms, instead of one of the new forms. Brand & Bush, who were intrusted with obtaining the $60,000 insurance, did not, of course, intend to obtain the policy which permitted only $15,000 of concurrent insurance. There is no controversy in the case, and no room for controversy, about the fact that, so far as Brand & Bush are concerned-and they were the agents of the complainants—there was a mistake in using the old form instead of the new one. The controverted question is as to whether or not the defendant company had knowledge of the fact that insurance was being obtained to the amount of $60,000, and intended to issue a policy that would permit such insurance, and by mistake used the old form. The evidence which bears directly on that point must be briefly stated.
It is shown without conflict that Mr. Robert Gottschalk was in charge of Pescud's office, and had full authority to represent the defendant company. Mr. W. A. Brand, of the firm of Brand & Bush, testified that he did not authorize the use of the old form in the issuance of the policy, and that, at the time the policy was written, Mr. Gottschalk was familiar with the amount of insurance which was to be had on the property. This witness was asked, “What did you tell him [Gottschalk] was the gross amount of insurance you were trying to place?" And he replied: "$60,000. Q. Did you tell him that before or after the policy was issued? A. Before." This witness says that he is quite certain that he furnished Mr. Gottschalk with the $60,000 forms which he had printed. Duncan J. Arnoult, who was connected with the firm of Brand & Bush, testified that he showed Mr. Gottschalk one of the new forms. Arnoult testifies that, representing Brand & Bush, the complainant's agents, he went to Pescud's office, and saw and talked to Mr. Gottschalk; applying to him for part of the $60,000 insurance. On this visit, and in connection with the application, he showed him the new form. Both Brand and Arnoult testify positively to conversations in which they informed Gottschalk of the purpose to insure the property for $60,000, and this occurred before the issuance of the policy. The fact that these conversations occurred in relation to the insurance, Gottschalk does not deny, except to the extent of saying that the amount of insurance sought—$60,000—was not mentioned. Is it reasonable that, in obtaining 20 policies as a part of one plan to insure the property for $60,000 Brand & Bush would have made the amount known in 19 instances, and failed in the twentieth, when the same opportunities were had for conveying the information ?
The following excerpt from Brand's deposition points to the way in which the mistake probably occurred:
"Q. And you are quite sure you sent a copy over to Mr. Pescud? A. I am. [Witness is speaking of the $60,000 form.] When I went there after it was discovered that this was the wrong form, I asked Mr. Gottschalk how he came to make such a mistake; and he turned to a young man and asked him where he got the form, and he said he used some of those he had in the office, which had been left there for Emile Legendre's sugar house. Q. The conversation you had respecting what you term a mistake in the policy occurred between you and Mr. Gottschalk after the fire? A. Yes, sir. Q. Did Mr. Gottschalk say that that was a mistake then? A. Well, he turned to the boy and asked where he had gotten the form. Seems he knew it was a mistake, because I tried to get more from him on the $60,000 form, but he declined to take it. We did a large business together, and I always offered it to him when I could."
On this point Gottschalk testified:
"Q. When your attention was called by him (Brand) to the fact of the printed form attached to the policy, which specified the amount of the riskthe total risk-upon that property was $45,000, didn't you turn to a young man in your office, and ask him where he got it? A. I might have. Q. Did he not say, 'I took one of the forms of the Legendre policy found in the office'? A. I don't recollect that at all. Q. What was that young man's name? A. Bulber. Q. Is he in your employ now? A. Yes, sir. Q. What is his first name? A. Eugene.”
Eugene Bulber was not examined as a witness, and the record does not show why he was not made a witness.
The record shows that there was some correspondence between Mr. Gottschalk and the defendant company in reference to the insurance in question. This correspondence was asked for by the complainants on the taking of the proof, but it does not appear in the record. It is not improbable that it would show whether the insurance was to be on a basis of $45,000 or $60,000. Mr. Farwell, one of the complainants, testifies that, when Pescud sent to collect his bill for the premium on the policy, he referred him to Brand & Bush, saying that he (Farwell) would settle with them. Gottschalk confirms this, saying that Brand came to the office "some time between the date of the policy and the issuance of the policy—the issuance having been delayed on account of correspondence—and asked me, inasmuch as he had the balance of the insurance, if he would permit this transaction to go through his office; and I felt he referred particularly to the commission on the premium, and I instructed our bookkeeper to let that policy go to Mr. Brand's account, and it was charged to his account.” This is significant as showing that Gottschalk admits in every instance his coming in contact