The tobacco company purchased from an internal revenue officer
of the United States revenue stamps to the amount of $1100.10, to
be put upon its tobacco as manufactured. April 2, 1893, its factory
in New York and all the contents were destroyed by fire. Among the
contents were the stamps so purchased. Of these, stamps to the
value of $1356.63 had not been used, and stamps to the value of
$2743.47 had been put upon packages of tobacco which were still in
the factory, unsold. The property
Page 166 U. S. 469
was insured. In settling with the insurers, the latter paid the
tobacco company the value of the destroyed stamps, and it was
understood that the insurers were entitled to whatever might be
received or recovered from the government under the provisions of
the statute amending the laws relating to internal revenue. Act of
March 1, 1879, c. 125. The company, under the provisions of that
act, applied to the Treasury Department for the return of the
destroyed stamps. The rules of the department required the
applicant for such repayment to make oath that he had not
theretofore presented a claim for the refunding of the amount asked
for, and that its amount or any part thereof had not been received
by him. Instead thereof, the company filed an oath that the amount
had not been claimed of the government, and that no portion of it
had been received from the government. The department having
refused payment, the company thereupon brought this action in the
Court of Claims.
Held:
(1) That the action was properly brought in the name of the
insured for the use of the insurers.
(2) That payment by the insurer to the company did not bar the
right of the latter to recover from the United States.
(3) That, by recovering from the United States, the company
would become the trustee of the insurers, who were its equitable
assignees.
(4) That, upon the facts found by the Court of Claims, the
action could be maintained, as the payment by the insurers
constituted no bar.
(5) That there was a substantial compliance with the Treasury
regulation concerning the oath when the oath was filed on the part
of the company of the fact of the destruction, and that no claim
for refunding had been presented to the government, and no portion
of the claim had been paid by it.
(6) That the company had an insurable interest in the stamps
destroyed.
(7) That it was too late to set up for the first time in this
Court that the government had the election to reimburse the
claimant by giving stamps instead of by payment in cash.
This action was brought in the Court of Claims for the purpose
of recovering the value of certain internal revenue stamps alleged
to have been destroyed by fire before they had been used. The
action is founded upon the provisions of § 3426 of the United
States Revised Statutes, as amended by chapter 125 of the Laws of
1879, 20 Stat. 327, 349, the first paragraph of § 17 of which
reads as follows:
"The Commissioner of Internal Revenue may, upon receipt of
satisfactory evidence of the facts, make allowance for or redeem
such of the stamps issued under the provisions of this title, or of
any internal revenue act, as may have been
Page 166 U. S. 470
spoiled, destroyed, or rendered useless or unfit for the purpose
intended, or for which the owner may have no use, or which, through
mistake, may have been improperly or unnecessarily used, or where
the rates or duties represented thereby have been excessive in
amount, paid in error or in any manner wrongfully collected, and
such allowance or redemption shall be made either by giving other
stamps in lieu of the stamps so allowed for or redeemed or by
refunding the amount or value to the owner thereof, deducting
therefrom, in case of repayment, the percentage, if any, allowed to
the purchaser thereof; but no allowance or redemption shall be made
in any case until the stamps so spoiled or rendered useless shall
have been returned to the Commissioner of Internal Revenue or until
satisfactory proof has been made showing the reason why the same
cannot be so returned,
provided that nothing herein shall
be held as authorizing redemption of or allowance for any of the
stamps allowance for which is prohibited by the provisions of 'An
act relative to the redemption of unused stamps,' approved July
twelfth, 1876."
On the 27th of May, 1895, the American Tobacco Company filed its
petition in the Court of Claims, in its own name, for the use of
certain insurance companies named in the petition, to recover the
value of the stamps destroyed by fire in its factory. The facts as
to the loss and destruction of the stamps were set forth, and
judgment asked for the value thereof. The usual general denial of
all the allegations of the petition was filed by the Attorney
General on behalf of the United States, and the case went to trial,
and after the evidence had been submitted, the court found the
following facts: that the tobacco company was a manufacturer of
tobacco, occupying a building in New York City, which was
established solely as a manufactory, no sales of tobacco being made
at the factory, the shipments therefrom being made in bulk after
the tobacco had been stamped according to law. On the second of
April, 1893, the factory and its entire contents were destroyed by
fire. Among those contents were internal revenue stamps of the
United States of the face value of $4,100.10. These stamps had been
purchased by the company from the
Page 166 U. S. 471
United States collector of internal revenue for use in the
factory. Some of the stamps were unattached to packages of tobacco,
and had never been used, and they were of the face value of
$1,356.63. The balance of the stamps, of the face value of
$2,743.47, had been attached to packages of tobacco which had not
been sold or offered for sale or removed from the factory for sale.
The tobacco company had purchased and paid for these stamps, which
were totally destroyed, and there were no unsettled claims against
the company on behalf of the United States.
The court also found the following facts:
"IV. On or about the 1st day of November, 1893, the claimant
filed with the Treasury Department, under the rules and regulations
of said department, a claim for the redemption of said stamps so
destroyed, with proof of said loss, which claim was examined and
certified as true and correct by the United States internal revenue
collector for said district, but without recommendation of payment,
for the reason, stated by the collector, 'that the claimant had
been paid by the insurance companies for the value of the stamps,'
and on the 14th day of February, 1894, the department rendered its
decision upon said application, declining to allow the same for the
reason"
"that satisfactory evidence has been furnished to this office
that you have received reimbursement of the value of said stamps by
the recovery of insurance thereon."
"V. Thereafter, on or about the second day of April, 1895, the
claimant, by its attorneys, filed an amended petition for the
redemption of said stamps, and asked for a rehearing, and on April
10, 1895, the Treasury Department rendered a decision declining to
grant a rehearing, and this suit was brought."
"VI. The contents of said factory were insured to the American
Tobacco Company, by the insurance companies for whose use this suit
is brought, in the full sum of $139,500. The total loss by fire, as
adjusted and settled with said claimant, was $78,635.47, which sum
said companies have paid to the American Tobacco Company in
proportions as the face of their several policies bears to the
whole sum insured. The
Page 166 U. S. 472
face value of said United States internal revenue stamps
destroyed as aforesaid, namely, $4,100.10, was a part of the sum so
paid by said insurance companies."
"VII. In the adjustment of the losses and the payment thereof,
it was understood between the claimant and the insurance companies
that the insurance companies were entitled to have and should
receive, in the proportions their several policies bore to the
entire amount insured, the amount of the redemption money for the
destroyed stamps to be recovered upon the application aforesaid, or
in this suit."
"VIII. This suit was brought by the claimant, for the use of
said insurance companies in the proportions aforesaid, to recover
the value of said stamps so destroyed."
"IX. By an existing regulation of the Commissioner of Internal
Revenue, made June 12, 1873, by authority of the Act of June 30,
1864, section 11, afterwards reenacted as Revised Statutes, section
3426, all claims arising under that section were required to be
made upon a certain printed form, called 'Form 38;' and ever since
sometime in 1875, and probably earlier, all claimants under the
said section have been required to make oath, upon Form 38, that
they have 'not heretofore presented any claim for the refunding of
the above-mentioned amount, or any part thereof,' and"
"that the value or reimbursement of the value of said stamps, or
any portion thereof, has not heretofore been received by claimant,
directly or indirectly."
"X. In presenting the claim as stated in finding 4, the
claimant's general manager did not make the oath referred to in
finding 9 in the form required by the Commissioner of Internal
Revenue, but, instead of taking the required oath, he made oath
that the claimant had 'not heretofore presented any claim
to
the government for the refunding of the above-mentioned
amount, or any part thereof,' and"
"that the value or reimbursement of the value of said stamps, or
any portion thereof, has not heretofore been received by claimant,
directly or indirectly,
from the government."
As a conclusion of law, the court found that claimant was
entitled, for the use of the companies, to recover the sum of
Page 166 U. S. 473
$4,100.10. Judgment pursuant to the finding of the court was
entered, from which an appeal was taken to this Court.
MR. JUSTICE PECKHAM, after stating the facts, delivered the
opinion of the court.
Three assignments of errors alleged to have been made by the
court below have been filed on the part of the government, as
follows:
"1. In holding that the use appellees had an equitable claim
against the appellant, which could be enforced by a suit in the
name of the nominal appellee."
"2. In holding that section 3426 of the Revised Statutes, as
amended in 1879, required the Commissioner of Internal Revenue to
refund the tax represented by the face value of destroyed tobacco
tax stamps, or to furnish others in their place, in cases where the
full amount represented by such face value had been recovered by
the tobacco manufacturer from insurance companies, so that he had
been subjected to no loss."
"3. In entering judgment in favor of the appellee for the sum of
$4,100.10.'"
It is argued upon the part of the government that, as the
insurance companies have paid the tobacco company in full for the
value of the stamps destroyed by fire, they have thereby become the
actual plaintiffs in this suit, and as the connection of the
tobacco company is merely nominal, the case must therefore be
decided as one between the United States and the insurance
companies. Dealing with the companies in that light, it is further
urged that their right to sue is based upon the ground that they
are subrogated to the rights of the tobacco company, and
consequently, if there be no right of subrogation, there is no
right of recovery; there
Page 166 U. S. 474
is no right of subrogation because there was no insurable
interest in the stamps on the part of the tobacco company, and
there was no insurable interest because the tobacco company could
obtain from the government either other stamps in lieu of the
stamps destroyed or the amount or value thereof upon giving
satisfactory evidence of the necessary facts to the Commissioner of
Internal Revenue, and therefore the tobacco company was not liable
to suffer any loss, and, as a consequence, had no insurable
interest in the stamps.
The argument, as we think, is not well founded. The case is not
to be treated or decided as one between the United States and the
insurance companies. On the contrary, the rights of the companies,
as between them and the government, are not the subject matter of
the suit. The insurance companies, as such, have no right of action
against the government. It is the right of the claimant, the
tobacco company, which is to be passed upon, and unless that
company has a legal cause of complaint, no recovery can be had in
this suit. The companies must recover in the name of the tobacco
company, and by reason of its rights.
Hall &
Long v. Railroad Companies, 13 Wall. 367,
80 U. S. 372,
and cases cited.
The suit is properly brought in the name of the insured for the
use of the insurers, but the cause of action rests on the rights of
the owner.
Ibid.; Phoenix Ins. Co. v. Erie & Western
Transportation Co., 117 U. S. 312,
117 U. S. 321,
and cases cited.
Payment to the owner by the insurer does not bar the right
against another party originally liable for the loss, but the
owner, by recovering payment of the underwriters, becomes trustee
for them, and by necessary implication makes an equitable
assignment to them of his right to recover in his name.
Rockingham Mutual Fire Ins. Co. v. Bosher, 39 Me. 253,
255.
The question then arises as to what right, if any, the tobacco
company has under the statute above cited when it appears that the
company has received payment from the insurance companies for the
value of the stamps destroyed. Is that fact a bar to its right to
claim payment under that section in a case where the recovery is
sought for the purpose of reimbursing
Page 166 U. S. 475
the insurance companies for the payment made by them, to the
extent of the value of the stamps?
We think, upon the facts found by the Court of Claims, the
action can be maintained, and the payment by the insurance
companies constitutes no bar.
No question is made in regard to the sufficiency of the proof in
regard to the destruction of the stamps by fire or of the
bona
fides of the tobacco company. The claim was examined and
certified as true and correct by the United States collector of
internal revenue for the district in which the factory was
situated, but he failed to recommend payment of the claim, for the
reason, as stated by him, "that the claimant had been paid by the
insurance companies for the value of the stamps," and the
department itself, when the claim was made, rendered its decision
upon the application, declining to allow the same for the
reason
"that satisfactory evidence has been furnished to this office
that the claimant has received reimbursement of the value of the
stamps by the recovery of insurance thereon."
It is true that the claimant was unable to comply with the
regulations of the department in one particular regarding the oath
to be made by such claimant. It could not truthfully be said that
the claimant had not theretofore received, directly or indirectly,
the value or reimbursement of the value of the stamps. This oath
was required by what is called "Form 38," which was a certain
printed form of oath to be taken by all claimants for reimbursement
for stamps claimed to have been destroyed within the meaning of the
section of the Revised Statutes heretofore quoted.
The claimant, however, through its proper officer, did make oath
that it "had not heretofore presented any claim
to the
government for the refunding of the above-mentioned amount, or
any part thereof," and
"that the value or reimbursement of the value of said stamps, or
any portion thereof, has not heretofore been received by claimant,
directly or indirectly,
from the government."
While the regulation prescribed by the Commissioner of Internal
Revenue would be regarded as proper and appropriate for the purpose
of satisfying him of the fact of the
Page 166 U. S. 476
destruction of the stamps, yet we think there was a substantial
compliance with that regulation on the part of the tobacco company
in this case when it made oath, through its proper officer, to the
fact of such destruction, and that it had not presented any claim
for the refunding of the amount or any part thereof to the
government, nor had the value of said stamps or any portion thereof
been theretofore received by the claimant, either directly or
indirectly, from the government.
The real object of the regulation, it must be assumed, was to
prevent fraud upon or improper claims against the government and to
protect it from itself twice paying for the loss. If the object of
the regulation were to discover whether the stamps had been insured
and whether payment therefor had been made by the insurance
company, and, if so, to base a refusal to reimburse upon that fact,
we think that portion of the regulation was unreasonable, and
compliance with the form as provided was unnecessary.
The purpose of the statute was to have the government reimburse
the person who had bought and paid for internal revenue stamps
which had been destroyed, under the circumstances mentioned in the
statute, before they had been used. To make such reimbursement
would be no loss to the government, while to retain the amount paid
would be highly inequitable. The government recognized this fact by
the passage of the statute in question. The company did not
purchase the stamps in payment of any tax then due from it to the
government. They were purchased as a matter of convenience, and to
be thereafter affixed to packages of tobacco which were to be sold
in the future. The tax was laid upon sales of tobacco, and the
stamps were resorted to as a convenient means of collecting the tax
on such sales. Of course, if no sales of packages of tobacco took
place upon which the stamps might be affixed, no tax had become due
to the government, and therefore if, after the purchase of the
stamps, they were destroyed by fire, the purpose of their purchase
was frustrated and the government was not entitled, upon any
equitable ground, to retain the money paid for the stamps.
Page 166 U. S. 477
In
Jones v. Van Benthuysen, 103 U. S.
87,
103 U. S. 88,
Mr. Justice Miller said, speaking for the Court:
"Undoubtedly this statute, 15 Stat. 125, 152, only intended to
impose a tax upon the sales of tobacco, and, if the dealer was also
the owner of stamps to be used in paying the duties on tobacco, he
could sell them separately, in any quantity, without being liable
to a tax for such sales. When unattached to the tobacco, they do
not enter into its value, and they can be bought and sold at their
face value, as an independent commodity, to be used when and
wherever the purchasers choose to do so. For such sales, no tax is
imposed upon the seller or the buyer."
"On the other hand, we are of opinion that when they are once
attached to the tobacco and cancelled, and can never be lawfully
used again, they cease to have any separate and independent value,
and that which they had previously has become merged into that of
the tobacco. All subsequent sales are made upon the basis of the
increased value the tobacco has acquired by the payment of the
stamp duty, and can never be estimated apart from this."
"It would seem to follow from this that if the stamps for which
the plaintiff was charged by the collector were not affixed to the
tobacco at the time he made the sale, no tax should be charged to
him for that value. On the other hand, if the stamps were affixed
at the time of the sale, they then entered into the value of the
tobacco purchased, and the broker who made the sale should be taxed
on the price of the tobacco as it was sold."
Where the stamps have been destroyed under the circumstances
detailed in this case, and those who paid for them apply to the
government to be reimbursed for their value, what materiality is
there in the fact that the applicant has been paid the value of
such stamps by an insurance company under and by virtue of a
separate contract made with that company on the part of the
claimant upon good consideration? That circumstance does not alter
the fact that the government has been paid for the stamps which
were to be used for a certain purpose, the payment of taxes
thereafter to become due the
Page 166 U. S. 478
government -- and that, by reason of the destruction of the
stamps by fire, they cannot be used for the purpose for which they
were intended. Whatever sales of tobacco might be thereafter
effected by the tobacco company would have to be evidenced by the
attaching of other stamps upon the packages sold. Unless,
therefore, the government repaid the value of these stamps so
destroyed or provided other stamps in lieu thereof without any
further payment, the government would be in the position of one who
retained money to which it had no equitable right. It would be no
answer to that fact to show that some other person had reimbursed
the claimant the amount it had paid for the stamps. That would not
alter the position of the government. We cannot think that the
payment to the claimant by the insurance companies absolved the
government in the slightest degree from the duty under that statute
of paying back the money which it had received, and for which it
had delivered stamps that had been destroyed by fire before the
contemplated use of them had been made. Whether or not the
insurance companies could have made a successful defense (to the
extent of the value of the stamps in question) to an action on
their policies by the assured because of an alleged lack of
insurable interest in the stamps by the assured is beside the
question. They were not bound to make such defense. Having received
the premiums, they had the right to fulfill their contract, and the
tobacco company, after such payment, might still ask the government
to pay to it the value of the stamps in order that it might
thereafter repay the insurance companies. The government loses
nothing by payment in such case. It simply repays money which it
has no equitable right to retain. The technical question of
insurable interest does not arise in this case, which involves
simply the construction of the statute cited and the right of the
claimant to recover. As was said in
Mason v. Sainsbury, 3
Dougl. 60, 64, by Mansfield, Lord Chief Justice, in reference to a
defense of payment by the insurance companies:
"The case is clear. The act puts the Hundred, for civil
purposes, in the place of the trespassers, and upon principles of
policy, as in the case of other remedies against the Hundred, I am
satisfied
Page 166 U. S. 479
that it is to be considered as if the insurers had not paid a
farthing."
This was a case against the Hundred upon a statute making it
liable for damages to property caused by a mob. Although the
insurance company had paid the damages, the action in the name of
the owner of the property was sustained exactly the same as if
there had been no payment by the insurers. The liability of the
Hundred under the statute was not thereby in the least affected.
This case, under the statute cited, is still stronger because the
government suffers no actual loss by the repayment, while it would
secure an unjust and inequitable profit by its refusal to pay.
We are also of opinion that the tobacco company had an insurable
interest in the stamps. It owned them absolutely, having purchased
and paid for them. The right of reimbursement under the conditions
named in the statute did not affect that insurable in, nor prevent
the possibility of loss or prejudice arising from, the destruction
of the stamps. Because an owner of property may be able to
reimburse himself, in case of its destruction, from other sources
is no reason for denying to such owner an insurable interest in the
property. An owner has an insurable interest in his property, to
the extent of the value of the building on it, notwithstanding the
existence of a mortgage on the property sufficient to absorb it.
Per Bradley, J., in
Insurance Co. v. Stinson, 103 U. S.
25,
103 U. S. 29;
May on Insurance, §§ 81, 82. The amount of interest or
its character is not material in determining the question whether a
party who attempts to recover under a policy has an insurable
interest.
Ibid.
Upon all the facts, we think the objections above alluded to are
untenable.
Another objection raised by the government is that, under the
section of the statute cited the Commissioner of Internal Revenue
had the choice, in making an allowance or redemption, either to
give other stamps in lieu of the stamps so allowed for or redeemed
or to refund in money the amount or value to the owner of the
stamps, and that, as he had such election when he was applied to by
the owner, an action thereafter commenced to recover the face value
of the stamps in
Page 166 U. S. 480
money deprived him of that election, and hence could not be
maintained.
The statute does give to the Commissioner of Internal Revenue
the choice as to how reimbursement for the loss of stamps should be
made -- whether by delivering other stamps or by payment of the
face value thereof in money. When the claim in this case was filed
with the Treasury Department, the Commissioner had then the choice,
upon being satisfied of the necessary facts, to reimburse the
claimant in either way he thought proper -- either in stamps or in
money. That was the time when his election could properly have been
made. Instead thereof, he refused absolutely to do either, and gave
as his reason that the claimant had already been paid for the
stamps by the recovery of the insurance thereon. If that were a
sufficient reason in law, the Commissioner was justified in his
refusal. As it was not a sufficient reason, the Commissioner was
not justified, however sincerely he believed that he was. The
claimant was therefore, by reason of this refusal, compelled to
resort to the courts in order to obtain his legal rights under the
statute. Having filed its claim in the Court of Claims, and asked
for judgment for the money value of the stamps, and a trial upon
the merits as to the liability of the government to respond at all
having been had in the court below, and, so far as appears from the
record, no question of this kind having been therein made, it is
too late, upon argument in this Court, for the government for the
first time to question the form of the remedy -- whether it should
be a demand for money only or one which left the election still
with the Commissioner to reimburse claimant by giving stamps
instead of payment in cash. The objection does not go to the merits
of the claim, but is one of procedure only. Hence, even if it would
have been valid if taken in time, it may be and was waived by the
failure of the government, so far as the record shows, to take the
objection until the argument of the case in this Court.
We find no error in the record authorizing a reversal of the
judgment of the Court of Claims, and it is therefore
Affirmed.
