
    JOHN S. RIGGS, Respondent, v. THE COMMERCIAL MUTUAL INSURANCE COMPANY, Appellant.
    
      Marine insurance.—What is an insurable interest in a vessel owned by a corporation other than the interest of the corporation.
    
    The Merchants’ Steamship Company was a corporation organized under the laws of South Carolina, with a capital stock of $45,000, divided into 450 shares of $100 each, and owned the steamship “ Falcon ” at the time of her loss, which occurred November 8, 1879. At the time, and previously to her loss, Joseph L. Tobias was a stockholder in said steamship company and owned thirty-six shares of the capital stock at the time of the issue of said policy by the defendant. Tobias had for several years carried an insurance on the vessel, underwritten by defendant, and had duly paid the premiums, including that which fell due after the loss of the steamship.
    The sole question before the court in this case was, “ Had Tobias an insurable interest in the steamship ‘ Falcon ’ at the time of the issue of the policy in question to him by the defendant ” ?
    
    
      Held, that Tobias had an insurable interest in the “Falcon,” for he had such an interest in the vessel that he would suffer pecuniary loss by its destruction. An insurable interest in property may exist without any estate or interest in the “ corpus ” of the property or thing insured, and it is not necessary to show that the insured was the legal or equitable owner or possessor of the property itself. The owner of shares of capital stock of a corporation that owns a steamship, or other property, has an insurable interest in said steamship or property.
    Before Sedgwick, Oh. J., Truax and Dugro, JJ.
    
      Decided May 6, 1889.
    Appeal from a judgment entered in favor of plaintiff against the defendant.
    
      Oliver Drake Smith, attorney, and David Willcox, of counsel, for appellant, argued :—
    That no liability under the policy existed or has been proved in favor of the person who procured it. The subject of the insurance was the steamship “ Falcon.” This was the property of the Merchants’ Steamship Company. Tobias was a stockholder in that company. This, of course, conferred upon him no title to, lien upon, or property rights or interests in the property of the company. This is well settled. In Queen v. Arnaud, 9 Ad. and Ell,, N. S., 806, the question related to the registry of a ship owned by a corporation. The court, by Lord Denman, said, “ it appears to me that the British corporation is, as such, the sole owner of the ship. The individual members of the corporation are, no doubt, interested in one sense in the property of the corporation, as they may derive individual benefits from its increase or loss from its decrease ; but in no legal sense are the individual members the owners.” In Van Allen v. Assessors, 3 Wallace, 573, it was held that a tax on the shares of a bank in the hands of individuals was not a tax on the capital or property of the bank, but upon a distinct, independent interest or property held by the shareholder. The court said (Nelson, J.), “ a tax on the shares is not a tax on the capital of the bank. The corporation is the legal owner of all the property of the bank, real and personal ; and within the powers conferred upon it by the charter, and for the purposes for which it was created, can deal with the corporate property as absolutely as a private individual can deal with his own. * * The interest of the shareholder entitles him to participate in the net profits earned by the bank in the employment of its capital during the existence of its charter, in proportion to the number of his shares ; and upon its dissolution or termination to his proportion of the property that may remain of the corporation after the payment of its debts. This is a distinct, independent interest or property held by the shareholder like any other property that may belong to him.” Accordingly, it is held that a stockholder in a corporation has no right to take for his own benefit insurance generally upon the property of the corporation. In Philips v. Knox, etc., Co., 20 Ohio, 174, the property insured was owned by a corporation in which the parties taking the policy were the sole stockholders. The court held that even in that case the stockholders could not insure the property of the company as their own individual property. It said, “ in fact, these plaintiffs had no insurable interest in this property whatever. The fee was in another person, not in a natural person, but an artificial person—a corporation. If they had any insurable interest, it was the stock which they held in the company, and this they did not attempt to insure.” This case is cited as stating the correct rule in Wood on Insurance, 684. And it is in accordance with the view already expressed by the court in this case. “ It is not perceived that he (Riggs) had any interest in the vessel. He was not legal or equitable owner of any part, nor of its earnings, nor of any lien” (51 Superior, 467).
    The case of Seaman v. Enterprise Co., 18 Fed. Rep., 250, and again 21 Fed. Rep., 778, has been relied upon as establishing the broad principle that stockholders in a corporation have an insurable interest in the property of the corporation. That was an oral decision in one of the Western circuits. Upon the argument of this appeal it was cited by the respondent,, but was not regarded by this court as controlling, and probably will not be deemed to have gathered weight by mere lapse of time. In any event it should be observed that the case is not an authority in support of the recovery here. The court, indeed, there said that “ it is not necessary that the party who takes out the policy should have any title to the property insured ; it is sufficient if he has such an interest in it as that, by its destruction, he would suffer pecuniary loss * * the stock of a corporation represents its property, and is evidence of the right of the stockholder to receive the profits and increase of the corporate property. It is a plain proposition, in our judgment, that the destruction of the corporate property may entail pecuniary loss upon the stockholder, and therefore that he has a right to insure his interest as such stockholder.” (18 Fed. Rep., 250.) But it said further, “ some question has been raised as to the measure of damages. It has been insisted on the part of the defendant that the corporation may be insolvent; that there may be many debts which must be paid before a stockholder can receive any dividends ; and that, therefore, his interest may be nothing. We reserve all questions of this character until the trial of the cause, simply saying now that the loss of the policy holder must be shown upon the trial by competent evidence.” The same rules are recognized in the further report of the case found in 21 Fed. Rep., 778. In other words, the case holds that it must be shown that the destruction of the corporate property has injured the stockholder by subjecting him to a loss of something which he would otherwise have received. But in the present case there is no finding or proof that Tobias’ interest as a stockholder was in any way injured by the loss of the steamship ; that by reason thereof he has lost anything which he'would otherwise have received. Por aught that appears, the value of his stock was not affected thereby. These observations cover also the case of Warren v. Davenport Ins. Co., 31 Iowa, 464. There the insurance was expressly upon the plaintiff’s interest as a stockholder in the property of the corporation. And damage to that interest was shown, aside from the damage to the corporation itself. The court stated in that case also that the case was controlled by the rule that no more than the actual loss sustained was recoverable.
    It is manifest, therefore, that no liability by reason of any interest of Tobias is shown, because (1) that was not an insurable interest, and (2) in any event no damage thereto has been proved.
    
      J. E. Buvrill and G. ZabrisMe, attorneys and of counsel, for respondent, argued :—
    I. Any one has an insurable interest in a ship on whom an injury to it will inflict pecuniary loss. The theory on which the general term disposed of this appeal on the first argument (51 Supr., 466), was that, in the absence of evidence showing that plaintiff was legally or equitably owner of a part of the vessel or of its earnings or of some lien in respect of one or the other, the court could find in him no insurable interest. But the authorities to which reference is made below establish the principle that it is not necessary that the assured should be legally or equitably an owner or should have any lien upon, or direct interest in, the subject of the insurance. White v. Hudson River Ins. Co., 7 How. Pr. 341; Cone v. Niagara Fire Ins. Co., 60 N. Y. 619 ; Herkimer v. Rice, 27 Ib. 162; Harvey v. Cherry, 76 Ib., 436 ; Rohrbach v. Germania Fire Ins. Co., 62 Ib. 47 ; Hooper v. Robinson, 98 U. S. 528; National Filtering Co. v. Citizen’s Ins. Co., 106 N. Y., 535, which was decided in October, 1887, 'subsequently to the decision of this court. The nature of insurable interest is the same, whether the risk be against fire or against marine perils. Herkimer v. Rice, 27 N. Y. 162, 173. (1)The leading case in this court is De Forest v. Fulton Fire Insurance Company (1 Hall, 84) decided in 1828. The case was tried before Oakley, J., and the opinion of the court on motion for judgment upon the verdict was delivered by Jones, C. J. The plaintiffs were commission merchants and insured goods partly their property and partly held by them on commission, and the question was, whether the plaintiffs had any insurable interest beyond their advances and commissions in-goods which they did not own.- The court held that they had, and said (page 102): “ It is well settled • that an insurable interest, in mercantile language, does not necessarily import an absolute right of property in the thing insured. A special or qualified interest is equally the subject of insurance, and it has often been determined that each distinct interest in the same subject may be protected by a separate policy on the subject, for the party interested in it.” The court proceeded-to cite cases, and especially reviewed at length the case of Lucena v. Crauford (3 B.& P. 75), where commissioners appointed under an act of parliament for the custody, care, sale and management of such ships and cargoes belonging to subjects of the United Provinces as should be brought into the ports of the United Kingdom, were held to have an insurable interest in Dutch ships and cargoes while on their passage to England, which had been taken by a British cruiser under the instructions of the admiralty. The De Forest case was approved, and the subject of insurable interest was re-examined at length on principle and on authority in Herkimer v. Rice (27 N. Y. 163), where the court (Denio, C. J., Op., 172) held that the administrator of an insolvent estate has an insurable interest in buildings descended to the heirs, on the ground that the right of creditors to resort to a sale of real estate of decedent for the payment of debts, gives them such an interest therein as to support an insurance, though they have no estate in the real property and no lien on it, but have important rights connected with it, and a pecuniary interest in its preservation ; and that the administrator insures for the benefit of such creditors so far as required to pay the debts of the estate, and that the law does not require that the assured should have an estate or property in the subject of the insurance ; it is sufficient that he have a direct pecuniary interest in its preservation. The case of Lucena v. Cranford, supra, was elaborately .reviewed, and followed ; and the court said (page 177): “ No property in the thing is required ; it is enough if the assured is so situated as to be liable to loss if it be destroyed by the perils insured against.” Because.the creditors have such insurable interest, the court concluded that the administrator had also, since he is charged with the duty of procuring the application of the real estate to the payment of debts, when necessary. (2) Herkimer v. Rice was reviewed and approved in Rohrbach v. Germania Fire Ins., Co. 62 N. Y. 47, where the subject of “ Insurable interest ” was fully and at length considered (Folger, J., writing the opinion). It was stated in the opinion : “ But the result of a comparison of the text writers above cited is, that there need not be a legal or equitable title to the property insured. If there be a right in or against the property which some court will enforce upon the property, a right so closely connected with it, and so much dependent for value upon the continued existence of it alone, as that a loss of the property will' cause pecuniary damage to the holder of the right against it, he has an insurable interest.” * * * The question is one of damages rather than title or possession ; and it will be enough in general to show such a relation between the insured and the property, that injury to it will, in natural consequence, be loss to him; and it is not necessary to show that the insured is the legal or equitable owner.” Numerous authorities are cited to support the principle enunciated ; among others, the court refers to Springfield Co. v. Allen, 43 N. Y., 389, 395-396, and quotes the remarks of Allen, J., made in that case : “ An insurable interest may exist without any estate or interest in the corpus of the thing insured.” It was enough that there be a pecuniary interest in the preservation and protection of the property, and that the insured might sustain a loss by its destruction. Nor was it necessary that the nature of the interest should be disclosed. (3) In Hooper v. Robinson, 98 U. S. 538, Justice Swayne, delivering the opinion of the court, says : A right of property in a thing is not always indispensable to an insurable interest. Injury from its loss or benefit from its preservation to accrue to the assured may be sufficient, and a contingent interest thus arising may be made the subject of a policy,” citing Lucena v. Crauford, supra, and other cases. (4) It has been repeatedly decided, and no one at this day will question the right of an underwriter to reinsure so as to protect himself against the risk he has incurred by having insured, and yet he has no estate in or lien on the property insured, but he has “ such an interest in the property insured connected with its safety as will occasion loss if it be destroyed.” N. Y. Bowery Ins. Co. v. N. Y. Fire Ins. Co., 17 Wend. 363. Mutual Ins. Co. v. Home, 2 N. Y. 235. The last case originated in this court, and its judgment was affirmed on the principle that “ the interest acquired in consequence of the previous insurance was an insurable interest, * * * and the interest of the insured in the preservation of the property was the interest insured.” (5) The principles above stated have recently been again examined by the Court of Appeals, and applied to a case in which the interest of the assured was at least as remote as in the present case. National Filtering Oil Co. v. Citizens’ Ins. Co., 106 N. Y. 535.
    II. The precise question involved in this appeal has been decided by the United States Circuit Court, Eastern District of Missouri, 18 Fed. Rep. 250, where the court says :—“ It only remains, then, to determine whether a stockholder in a corporation may have such an interest as I have indicated. We are very clearly of the opinion that he may. It is true that the title to the property is in the corporation ; that the beneficial interest is in the stockholders of the corporation. The stock of a corporation represents its property, and is evidence of the right of the stockholder to receive the profits and increase of the corporate property. It is a very plain proposition, in onr judgment, that the destruction of the corporate property may entail pecuniary loss upon the stockholder, and, therefore, that he has a right to insure his interest as such stockholder. In this case the property was a steamboat, and the insured was the holder of a portion of the stock, which entitled him to three - sixteenths of the corporate property.” In this decision the court sustained the principle established in Cone v. Niagara Ins. Co., 60 N. Y. 619 ; Herkimer v. Rice, 27 Ib. 162, and National Filtering Oil Co. v. Citizen’s Ins. Co., 106 Ib. 535—that it is not necessary that the party who takes out the policy should have any title to the property insured : it is sufficient if he has such an interest in it as would subject him to pecuniary damage or loss in the event of its destruction—and held that a stockholder would suffer pecuniary loss by the destruction of the corporate property, and consequently had an insurable interest in it.
    III, The interest of a shareholder in the corporate property is such that he will be liable to pecuniary loss through its destruction. Warren v. Davenport Fire Ins. Co., 31 Iowa, 464 ; Seaman v. Enterprise Ins. Co., 18 Fed. Rep., 250 ; May, Ins., § 95 ; Greenhood Public Pol., 255. That a shareholder is “ interested in the preservation of the corporate property,” or that he will “ sustain pecuniary loss by its destruction,” cannot be denied. He has as great, if not a greater, interest in the preservation of it as a creditor of the corporation. If this steamboat constituted all the corporate property and was destroyed by fire or by the sea, and there was no insurance, would not the shareholder lose everything ? If the vessel was partially damaged (in the absence of insurance) would he not be proportionately injured by reason of the depreciation of his interest in the vessel ? The shareholder is not only interested in the preservation of the property and its escape from ' destruction, but he is interested that the property should be preserved from injury, and kept in a condition in which it might be productive of income or profit in which the shareholder would share ; if it was a building owned by the corporation, that it might produce rent; and in case of a vessel that it might earn freight, in which rent and freight he could share. So again the loss would not only occasion damage to the corporation to the extent in value of the property destroyed, but might so cripple the corporation that it would be unable to continue its business or pay its debts, and thereby not only injure the shareholder, but subject him to liability for the debts of the company. The loss of a steamer in which capital of this corporation was invested evidently diminishes the earning power of the company, and reduces its power to pay dividends, and in that way produces a direct pecuniary loss to the shareholders. In order to replace the steamer and restore the earning power of the stock, the corporation must either use its surplus assets, or borrow money ; and in either case the loss falls on the shareholders, who thus come clearly within the principles which have already been stated, and which require no other interest in the property than one which will be subject to pecuniary loss if the property be destroyed.
    IV. The relation of the stockholder to the corporation and its property is that of a cestui que trust towards the trustee and the trust estate. Anderton v. Wolf, 41 Hun, 571, 574 ; 1 Morawetz Corp. (2d Ed.), § 237. The cestui que trust has an insurable interest in the trust property, and it follows that the stockholder has an insurable interest in the corporate property. White v. Hudson. River Ins. Co., 7 How. 
      341 ; Hume v. Ins. Co., 23 So. Car., 190. There is no difference in principle between the case of the stockholder and the case of a creditor. They are both, in their relation to the corporate property, cestui que trust, and if the one has an insurable interest, as cases cited' above show that he has, no reason is perceived why the other has not.
    V. Philips v. Beckel, 20 Ohio, 174, is the only case heretofore cited by the defendant’s counsel, or, after much examination of the authorities, discovered by plaintiff’s counsel, in which it is said that a stockholder has no insurable interest ; but that case proceeded upon the ground of misrepresentation as to the nature of the interest of the assured, who stated in their application that they owned the property in fee unincumbered, whereas it belonged to a corporation whose stock they held, and was subject to a mortgage ; and that misrepresentation was the more material because the Insurance Company in that case was entitled by its charter to a lien upon property insured by it. The dictum at the close of the opinion that the plaintiff had no insurable interest in the property whatever, was based entirely upon the reason that “the fee was in another person,” which, as the cases cited above clearly show, is not sufficient in this state to defeat an insurance where the assured is in such a position as to suffer pecuniary loss by the destruction of the property. The well reasoned case of Warren v. Davenport Fire Ins. Co., 31 Iowa, 464, follows the principles stated in the preceding points, and shows that they lead to the conclusion that a stockholder’s interest in the corporate property is insurable.
   By the Court.—Dugro, J.

The stipulation between the parties reads, “***** it was considered by both parties that if the decision of this (the superior) court in the steamship company’s case, holding that the vessel was a total loss, should be affirmed by the court of appeals, the plaintiff herein would then be entitled to recover, if J. L. Tobias had an insurable interest in the vessel, and it was thereupon agreed that * * * * * the question of J. L. Tobias’ insurable interest in this case, should be reargued at the general term, and that the decision of the general term on such re-argument should be final, so far as the plaintiff was concerned. * * * * *

“ Whereupon it is agreed that this cause be re-argued at general term on the question of J. L. •Tobias’ insurable interest, &c.”

The only question, therefore, before this court is : Did Tobias have an insurable interest ? If he did, the decision of the general term on this question by a fair interpretation of the stipulation is to be final in regard, to the appeal.

The defendant in the statement on his brief says, Upon March 15, 1879-, the appellant, The Commercial Mutual Insurance Company, issued to one Joseph L. Tobias a policy of insurance upon the steamer “ Falcon ” for the sum of $1,000.

Tobias was, at the time of effecting this insurance, a stockholder in the Merchants’ Steamship Company, which then owned the steamers “ Sea Gull ” and “ Falcon.”

Accepting this as a correct statement of the facts, I think Tobias had an insurable interest in the vessel; for he had such an interest in it as that by its destruction he would suffer pecuniary loss. Seaman v. Enterprise Co., 18 Fed. Rep. 250 ; 21 Ib. 778. An insurable interest may exist without any estate or interest in the corpus of the thing insured. Springfield Fire and Marine Insurance Co. v. Allen, 43 N. Y. 389, 395-6.

The question is one of damages rather than title or possession, and it will be enough if such a relation exists between the assured and the property that injury to it will, in natural consequence, be loss to him. And it is not necessary to show that the insured is the legal or equitable owner. Rohrbach v. Germania Fire Ins. Co., 62 N. Y. 47.

That the policy runs to the plaintiff, and by its terms insures his interest in the vessel (he being neither legally nor equitably the owner of the vessel), does not prejudice the plaintiff’s claim.

There is no doubt what property the plaintiff and defendant meant to insure, or that it was that which was destroyed. Rohrbach v. Germania Fire Ins. Co., supra, p. 60.

With this opinion I think the judgment appealed from should be affirmed.

Sedgwick, Ch. J., and Truax, J. concurred.  