Without prejudiae to>thebusinessof ·defendant. In tbe>iC8lle of OentralTruat 00. v. Wabash,Bt. L.1c. P. By. 00., 29 Fed. Repdi46, I considered at some length the power pfa court of equity in'casaof ,a ,contract of this kind,and I, have nothing to add to what Ltbete. said. I think a court has power to enforce a contract between parties of the same nature as those which we know, as a matter of generaLknowledge, railroad companies are constantly making and keeping. A,de,cree will therefore be entered decreeing to complainant the right to us.ethe track of the defendant from the northern limits of the city down as Jat all George alley; the balance of relief claimed by complainant will coste will be divided· . I
f1. ,
EIBTON. ,. " ",I,I,J! ,
(Cfrcuft .' "',:
Coon .,'
,"
61
.,',
"
Si:!:th C1;rcuU, O*J)of 10,18a) . ·
No. sa. . .o1' OOLLATEJtJ.L-Col!lTRAO'l" paYable Was t.o it.l whole by insurance by the guar, pol1oiesOll eertain bul1Wngs for the benefit of t.he oredltor, and .tl,Yof A tbi;rd per80Q.for,thepart first due. Hela,·tbatthe creditor had a rigb.t to hOld the insuranee, mOlley. paid when thE! buildillgs .. burlled as seourity for thepilrt of thed4i'btnot. cov:ered by the guaranty, although not yet. due, and t.hat 't.hegUarallt.or was ,liable for t.he unpaid installments covered hy. his guaranty. v. 183, lLBuE...:REiliiASII:. '
l. BALJlhRE.TB:N'1'ION OP
Where s,.creditor whQse debt is secured by fire insuranCe policies, and in part by apert¥'DBl lIQClepts, from the an amount less than the face of \lie pol!c1ell,t,lie burden of proof lS on the guarantor to show that the creditorgotl88s thali:wudue him, and thereby releaSed the guarantor from his contract,. .. ..' '.' .. .'
:'
,
Where a' contract 'of .sale of furniture provides that the title shall remain in the priCll'ibl paid, and the furniture isinllured for his benefit, and he -pays, tM be ill to all the insurance mOlllilY coming from a loss, and the purchaser nas 110 interest in it. ' t,he premium" a charge to Lhe jury that the Beller has a right to apply so much oft.he insurance money as is necessary to pay tb.e balance due on thefurniturEl, and hold the surplus under the direction of the purchaser, toreduee theliabiUty;,of the ¥uarant.or of IIoDother <lebt due from the purchaser to the seller, is not to the prejudIce of thegUl\ralltor, nor, as to him, a groulld for er, . ,
4. BAllE. . If tlle purchaser
In Enor to the Circuit Court of the United States for the Western District ofMichiglln. At Law., Action inQ¥Umpait on· a contract of guaranty by Robert W. Elston Adolpb . H. Kortlander. Judgment for plaintiff. Deerror. .Affirmed. Stateu:umtby TAJ!'.U, .Oircuit Judge: , Elston, an alien, brought. his action In aBBUmpsit against AdQlpb of Michigan,on a written contract of . ·. .was Qw,uer of an hotel and tract of .land in Kent
KORTLANDER V.ELSTON.
181
county, Mich., which in 1890, contracted to sell to one Edwin Carman for $12,000, to be paid: $200 on the delivery of the contract; $200 or more on the 27th day of each month, up to and including June 27, 1891; and the remainder in monthly payments of $300 on the 27th of each month thereafter, with interest at the rate of 7 per cent. per annum, to be paid semiannually from the date of the contract upon so much of the purchase money as remained unpaid. Carman agreed, among other things, to insure the buildings then erected and to be thereafter erected on said premises in companies to be approved by Elston, for Elston's benefit, in the sum of at least $6,000, so long as any balance should remain unpaid on the contract; and to forthwith deliver the policy or policies therefor to Elston; and, in case Carman failed to insure, Elston was given the right to do so, and to add the cost thereof to the amount due under the contract, with interest at 10 per cent. A deed was to be executed when $8,000 of the purchase money had been paid. Right of re-entry was reserved to Elston in case of default ill any payment by Carman. Carman covenanted that all buildings, erections, and improvements then upon or thereafter to be placed upon the premises should stand as security for the payments of sums agreed to be paid by him, and should not be removed from the premises without the written ·consent of Elston. Kortlander guarantied the payment of $3,000 of the purchase money, as follows: "In consideration of the making by the said Robert W. Elston with the said Edwin Carman, at my request, of the foregoing agreement, andalso·for other good and valuable consideration, the receipt whereof is hereby confessed and acknowledged, I do hereby become security for the punctual payment of the three thousllnd dollars ($3.000) of principal first to be pllid by the terms of the foregoing contract by the said Edwin Carman to the sllid Robert W. Elston, together with the interest thereon, at the time and in the manner expressed in said contract, and hereby guaranty the payment thereof as expressed in said contract, and, in default of payment by the said Edwin Carman, I do hereby promise and agree to and with the said Robert W. Elston to pay him said amollnt, with the interest thereon, without requiring notice or proof of demand being made. .. Dated this 24th day of June. 1890.
"In presence of CHARLES CHANDLER."
"A; H. KORTLANDER.
[L. 8.)
Carman already had possession of the premises under a from Elston, and now continued it under the contract. He had, in May, 1890, bought the botel furniture from Elston for $1,500,-$388 in cash, and the rest to be paid in monthly installments, the last. payable in May, 1891. The oontract of purchase provided that the title. to the chattels should remain in Elston until the purchase money was fully paid, but that Carman might use them, subject to Elston's right to repossess him.self in case of default on any payment. Carman paid $588 in cash on the furniture contract. At the date of the contracts, Elston had three ,policies of fire insurance on the hotel and furniture,-one the Citi_zeDS' Fire Insurance Company for$1,300 011 buildings and $700 on the
182
FEDERAL REPORTER,
vol. 52.
$1,400 on the furniture;lhe second 'in buildings arid $600 the furniture,and the third in'the Royal Insurance Company for $1,300 on the bUildingR and $700 on the' furniture. When Elston delivered the property t(lCarman, he took the policies to the office of the agent of the companies. He did not find the agent, but left the policies, with notice that he had sold the place on contract. The policies were retarned to Elston, and by him put away without examination. 'rhe agent had indorsed llpon the Citizens' and the Underwriters' policies a memorandum that the land and buildings insured had been sold on contract to Edwin Carman, to whom the loss, if any, was payable, as his interest might appear. Upon the Royal policy there was no indorsement. On the 14th of August, 1890, all the buildings and a large part of the furniture were destroyed by fire. On August 16th, Carman assigned his interest in the two policies indorsed to him to Elston, at the request of Elston's attorney, Fitzgerald, with whom Elston had left the policies during his absence from home. Suit was begun on all three policies, a:nd, pending suit, the claim was settled for $4,050 without reference to any division of the fund between the buildings and the personal property. This am01lnt Elston kept, and on August 17, 1891, brought suit against Kortlander on the guaranty. The amount of money due on the land contraot by its terms, up to andirlCluding July 27, 1891, was $3,000 and interest. Of this, Carmall had paid $400, as Elston admitted, and he claimed to have paid $200 more. This made one issue of fact at the trial. Another controversy was as to the mallner in which the insurance money should be applied. Kortlander claimed that Elston shouldcl'editit on the first amounts due under the contract, thus paying everything which he had and he introduced himself a!1d Carmanas to prove that, in consideration of Carman's assigning the policies, Elston agreed to apply the money so as to release Kortlander. Elston denied having made any such agreement, and this presented another issue of fact on the evidence. Finally, Kortlander claimed to be credited with the amount received by Elston as insurance on the personal property, on the that Carman, having paid the premium wheq ,he bought the furniture; was entitled to apply the insurance as he wished, and had applied it to the land contract and the first payments thereunder. Eiston denied that Carman had paid the premium on the PElrsonal property insurance, and this made third issue of fact for the jury. '.' Under the instructions of the court, the jury returned a verdict for Elston of $2,441.60. Upon this was entered the judgment which this writ ofel'rorwas brought to reverse. Defendant's counsel requested 'several cha.rges, wh.ich·were refused, and excepted to a number of passages in the charge llsgiven. The assignments of error, based on these rulirigsofthecircuit cOurt, are referred to in the opinion. James E. McBride,lty7rmnD. N01'1"iA,atid Mark Norris, for plaintiff in error. ' Fitzgerald &Barry,f9r defendant iIi error. . Before BROWN, OitcuitJustice,'and JACKSON arid TAFT, Circuit Judges.
on
a
'l1', ELS1;ON. '
CircmitJudge, (afterstatingthefact8.) ' The plaintiff.inerror has made 13 assignments of error. It will not be necessary to oonsider them in detail. Inth!3 first place, it was contended on behalf of Kortlander that, as surety, he was entitled, under the terms of the original land contract and his written guaranty, to have one fourth of the proceeds of theinsurance policies from the, destruction of the buildings applied to the guaranteed the amount due.on his guaranty. It was said that he payment of $3,000 out oithe $12,000 to be paid Jor the land, and as surety he bad aright in equity to be protected by a pro rata, distribution of the collateral over the whole debt. 'l'he court below refused a charge embodying this view of Kortlander's right to the insurance ,money, and told the jury that, unless there was a subsequent agreement changing the rights, of the partie:s, Elston had the right to hold the insurance money realized on the buildings as security for the payment of the whole for this debt, exactly as hemigbt have taken possession of the purpose, and that Kortlander had no right in law or equity to demand that the money be,applied to the amount due under t4;6 guaranty. In this we think the court was entirely right. The primary equity growing out of the relatioll"of creditor, debtor l and surety is that the creditor be paid what is due him; and he does not lose this equity as against the by misconduct to the latter's prejudice. When the creditor in the original contract has received collateral covering the ,entire debt, and a personal guaranty on part of it, the legal and the natural presumption, in the absence of circumstances show,ing the contrary, is that be has taken the personal guaranty as additional or cumulative protection for his debt. In order that his debt may be paid, therefore, to exhaust all his securities, and in doing so he may he has the apply the collaterals to that part of the debt not covered by the personal guaranty, and hold the guarantor to the full measure of his contract. The equit:ywhich a surety or a guarantor has in the collateraUs merely the right, accruing only after the principal debt is fully paid, to \i>esubrogatedto the right of thf:l creditor respect of the collateral Recurity. This, the surety may take .from the paid creditor as 'security against loss by reason of his suretyship. Kortlander, therefore, could have no right to the insurance money for the buildings until Elston had been paid all the purchase price which the buildings and the insurance on them were intended to secure. Elston did not regard the land and buildings as sufficient security for the payment of so many small installments over so long a period, and he therefore demanded as additional protection Kortlander's personal guaranty of the payment of the It would seem absurd to require Elston to suffer Ipss by .the collateral with Kortlander for the purpose of reducing the latter's liability on a gparanty, the only object of which could have been to supplement the collateral and increase Elston's security.. The case of English v., Carney, 25 Mich.183,<litedfor plaintiff inerror, is not in conflict with this view; There a mortgage wl!-!Jgiven to . two nQtes of even date. The Pltyeealld mortgagee soJd the, mort· ·::rAFT,
184
FEDERAL REPORTER.; vol. 52.
to a third party, indorsing one note in blank, and the gage other without recOUrse. It was held on foreclosure that the proceeds of sale must be appl,ied pro rata to both notes. The pro rata application of the securityto the notes was fixed by the original contract when the mortgage was given, and a subsequent indorser, of course, made his indorsement on the basis of the amount of the security applicable to each note thereunder. In the case· at bar, the guaranty and the collateral security were' given concurrently, each withreference to the other, and no one can doubt the intention of the parties to the original contract, that the creditor should use ilbd exhaust both, if necessary, to pay his whole debt. The authorities in support of our view are numerous. In Hanson v. Mart.-ley, 72 Iowa, 48, 33N. W. Rep. 357. a chattel mortgagesecured four notes. There was a surety upon the two notes first due. It was held that the proceeds ofihe mortgage might be applied by the creditor on the notes on which there was no surety. In Nicholsv. Knowles, 3 McCrary, 477, 17 Fed. Rep. 4'94, Judge McCRAR"Ydecided that where a creditor held aeveral notes secured by mortgage,one of which was also secured by the indorsement of a third party, itniight be inferred, in the absence of evidence, that the parties intended to apply the proceeds of the sale of the mortgaged property first to the notes !fot otherwise secured, so as to give the· creditor the full benefit of all his security. To the . same effect are Mathews v. Switzler, 46 Mo. 301; Wood v, Callaghan, 61 Mich. 402, 28 N. W. Rep. 162, (where Englishv. Carney, supra, is distinguished;) Gaston v. Bar'l1ey, llOhio St. 506; Bank v.Benedict, 15 Conn. 437; Fie7:d v. Holland, 6Cranch, 8; Transportation, etc., Co. v. Kilde:dWU8e, 87 N. Y. 430; Bank Wood,n N. Y. 405; Gordon v. Bank, ll5Mass. 591. It is true that when the action below was brought the installments of rent not covered by the guaranty were not due, and that, except by agreement, Elston could not then apply the insurance money to those subsequent installments. His right was to hold the money as security until the installments came due, and then, if they Were unpaid, to use the insurance money to pay them. But the question of the subsequent application of the insurance money is not material in this discussion, in view of the conclusion just reached, that the insurabce money could not be applied to reduce liability on his guttranty I until after the rest of the purchase money was paid. As the entire purchase money was not due untillonga(ter that part covered by the guaranty, and not until long after:the suit.wRs brought, the insurance money could not, for the purposes of thiEf suit, affect Kortlander's liability at all. The second claim made on behalf of the plaintiff in error was that Elston, in adjusting the loss on the buildings with the insurance companies at less than the {ull amount of the policies,' had released collateral without consent of Kortlander; and so had released the latter from his contract of suretyship. A policy of insurance is not like a promissory note, in which an 'eiact amount is unconditionally payable. The face of the policy represents only that amount beyond which, as a limit, the claim of the insured cannot go. The amount due is the actual loss.
KORTL.A.NDER '.ELSTON.
185
The burden of showing facts requiring his release 19 on the surety. There was no evidence tending to show that the amount recovered was not fully equal to the actual loss on the buildings. The presumption is therefore that Elston recovered all that he was entitled to under the policies, and did not release anything. The charge was rightfully refused. The chief contention of counsel for the defendant below was that by a subsequent agreement Elston had stipulated with Carman, the debtor, and Kortlander to apply the insurance money on the contract so as to relieve Kortlander. Whether such an agreement was made, was fairly submitted to the jury as a q\lestion of fact, and the jury found against the defendant. The consideration suggested for making the subsequent agreement on Elston's part was that Carman had assigned the two insurance policies. indorsed to him, back to Elston. If it were material, we should find difficulty in supporting the agreement on such a consideration. The indorsement on the policies to Carman was a palpable mistake of the insurance agent, without the knowledge of either Carman or Elston, was in direct violation of the provision as to the insurance in the original contract, and gave Carman no greater right than if the indorsement had never been made. It was his duty to reassign the policies to comply with his original contract, and his doing so could not constitute avaluable consideration moving to Elston. The error alleged on this branch of the case was the refusal of the court to give the following charge: "If you' find from the evidence that plaintiff agreed with Mr. Carman to apply the money received on insurance as payment on contract for the sale of the premises in question, then he is obliged to apply it 1'8 any otber casb payment on the amounts due and unpaid." The court had already instructed the jury that, if the parties had agreed to apply the money on the part of the contract covered by the guaranty, plaintiff could not recover, and that the same result would follow frem an agreement that the application should be upon the payments due and as they fell due. Considering all the evidence in the record, it seems to us that the charges which the court gave covered substantially all that was contained in the charge requested and refused. It does not appe,ar, when the evidence is all taken together, that it raised any issue upon the point whether the parties agreed in so many words to apply the insurance money generally on the contract, as distinguished from agreeing to apply it on the payments due. The evidence of Carman and Kortlander was to the effect that Elston agreed to apply the insurance money on the amount then due under the contract, and that he distinctly agreed to release Kortlander. Elston denied this. The sharp issue thus presented was fairly submitted to the jury in the charges given. Another objection to the charge of the court, and the last one we shall notice, was to the instruction relating to the application of the money realized from the insurance on the furniture. This insurance was in the name of Elston, and was, of course, payable to him. The title to the furniture under the contract was in him at the time of the fire. The
no provisiol1l as to insl1rance. Elston testipersonal fied thatCarmlinrefused' ,to pay the: insunmce ,premiqmon property-, anuthat he paid it. Carman sworn that, he paiq the premium on' polichis :covering both the aQq the furniture. the: evWenceon the subject. ,The court,o.hllrged the jury that, if Elston: paid the premium, he was ,entitled to aU,tbe money c(>Inifigfrom the lass of the furniture,: tbiat peither CarQ'lan nor Kortlnnd'er had any interest in it. ,In this ,the,.¢Qurt was clearly right. The instltanee and tae property were both in his, name, and, if, be paid tbepreJIiutn, tbematter was one with,wbich Carman had nothing to do, and from which neither he nor Kortlander could derive any benefit. Kf/ng8bu,'Yv. WesifaU, 61 N. Y.; 85.6. ,The court further chlj,rged the jUl'ythat,i'1!:Ca·rmanpaid the premium, then Elston might apply so of it as' was necessaTy to ,pay the balanc!' (If purchase mouey on the furnitUre dnehim from Carman, and would bold the surplus forapplication', as' direected by Carman, to reduce KortlaQder's liability. We ate qUite cltlar 'thatKortlanuer has no ground. of complaint in this charge.' -Tha proceeded on the ,theory that. with the property nnct the insurIl.rteeiJi Elstori1 sIiame, the fact that Carman had paid the premiumimplied a contract on Elston's ,part to distribute the insurance, ill case of 'los8,between himself and Carman, as their respective interests might appear. Whethert'from these.facts alone,. such an implication would arise, we need not definitely.determine.:. The tr.ansaction can tainly not be viewed in any more favorable light for·the plaintiff in error. in the absence. ofa special contract.. A strong argument might be made in support-of the view that the insurance all belonged to Elston, and the fact of Carman's paying the insurance' only gave him a right to be re.. imbursed the'limountofthe premium. As it is, we simply hold that the error,if any, was not to the prejudice of the plaintiff in error. mooted points in the rec" The foregbingdiscuBsionhas covered all ordworthYof eonsideration, and the result is that the judgment of thecircuit court must be affirmed.
DTERSTA.TE COMyERCB .COMMISSION c/.
.. P. RT.oo.
187
INTERSTATE COMMERCE COMMISSION 11. TEXAS
& P. Ry. Co.
(Circuit Court, B. D. New York. October 4, 1892.) L
In proceedings under section 16 of the interstate commerce act (24 St. at Large. ..p. 384) against a carrier to an order of the commissioners, it is. not neces. sary that another carrier,making the forbidden rate jointly with defendant, be made a party to the suit. Freight rates from London and Liverpool to San Francisco are fixed by the competition of the water and rail route via the Isthmus of Panama and the water route around Cape Horn. A carrier by rail from .New Orleans to San. Francisco a much lower rate on goods shipped from London and Liverpool to San Francisco on through bUls of lading than from New York, Chicago, and other points to Sali Fran. cisco, On some cases. less than half the latter rate.) The rate complained of was Slightly remunerative to the carrier, and it would .lose the traftlc unless it carried at such low rate. BeZa, that under sections 2 and 3 of the interstate commerce act (24Bt. at Large, pp. 379, 380) the giving of such low rate is an unjust disoriminati6n, and a charging of one person more than another for a like service under substantially similar circumlltances and conditions. and an order·of the commissioners prohibiting it will be enforced.
bTERSTATE CoMMERCE COMMISSION-ENPORCEMENT OJ' ORDBB-PA.RTIEB.
.. SAME-UNJUST DISCRIMINA.TION-COMPETITIVE TRAFPIC.
Application by the Interstate Commerce Commission to enforce an order against the Texas & Pacific Railway Company. Petition granted. Edward Mitchell, (Simon Sterne and John D. KerniJIn, of counsel,) for complainant. Wi'l18low S. Pierce, (John F. Dillon, of counsel,) for defendant. WALLACE, Circuit Judge. This is an application to enforce an order of the interstate commerce commission, made January 29, 1891, in a proceeding instituted by the New York Board of Trade & Transporta. tion. The petition in that proceeding complained of unjust discrimina· tion made by various railway carriers. The defendant was duly notified of the complaint, and appeared in the proceeding, and submitted its rights. It was shown to the commission, as appears by the findings of fact in their report, that the defendant, in conjunction with the Southern Pacific Company, made joint rates from New Orleans to San Francisco covering carriage of traffic by the rails of the defendant from New Orleans to El Paso, and thence by the rails of the Southern Pacific Company to San Francisco, and also made joint rates with vessel owners in London and Liverpool covering carriage of traffic from those places to San Francisco via New Orleans. It was also shown that the ordinary tariff rates charged by the two companies upon traffic delivered to the defendant at New Orleans, and shipped at New York, Chicago, and other places in this country, for carriage from New Orleans to San Francisco, were somewhat more than double the rates charged for carriage of similar traffic sent from Liverpool or London by through bill of lading to San Francisco via New Orleans. To illustrate, it was shown that the rates made by the two companies, in conjunction with Liverpool vessel owners, by through bill of lading from Liverpool to San Francisco via the rails of the delEmdant from New Orleans to EI Paso, were, per 100 pounds, on books, on carpets, and on cutlery, f1.07,