The opinion of the court was delivered by: MODARELLI
This is an interpleader action commenced under 28 U.S.C.A. § 1335 by two insurance companies who have paid into the registry of the court $ 29,749.35, representing the proceeds of four policies. Motions for summary judgment have been made by Arnold M. Smith, Receiver of Paramount Finishing Co., Inc., the named insured, hereinafter referred to as the bailee or receiver, a processor of goods; and by various interpleaded defendants or their insurance company subrogees on behalf of certain customers of the bailee, hereinafter referred to as bailors-customers. On October 26, 1950 and January 3, 1951, fires occurred at the premises of the bailee, destroying goods entrusted to it by the bailors-customers. The bailee had procured the policies covering the goods. There is only one policy involved in this dispute. It is labeled 'transit policy' although it includes coverage against fire loss while the goods are at certain described locations.
On April 24, 1951, the Receiver, one of the interpleaded defendants, was appointed by the Superior Court of New Jersey, Chancery Division, for the named assured. The Receiver never attempted to collect any of the proceeds of the policies in suit from the date he was appointed until the receivership proceedings were closed and he was finally discharged by the court on November 14, 1952. He asserts his claim to the proceeds for the first time in this suit.
The issue is whether the named insured who was a bailee in possession of the goods at the time they were destroyed by fire or the bailors who were customers of that named insured to whom they had delivered their goods for processing are entitled to the proceeds of the policy.
The bailee relies on the opinions in three cases for the proposition that only the named insured is now entitled to the proceeds of the policy, Crown Fabrics Corp. v. Northern Assurance Co., 124 N.J.L. 27, 10 A.2d 750; London Assurance v. Bigeleisen, 135 N.J.Eq. 564, 39 A.2d 494; Shapiro Bros. Factors Corp. v. Automobile Ins. Co. of Hartford, Conn., D.C., 40 F.Supp. 1. In each of those cases, however, the purpose of the policy was 'an indemnification * * * against indirect loss by way of liability to others to the extent that it is obliged to, and does, pay.' Crown Fabrics, 124 N.J.L. at page 29, 10 A.2d at page 752; 'to indemnify the named insureds * * * against loss and damage on their own merchandise and on merchandise for which they may be legally liable.' Bigeleisen, 135 N.J.Eq. at page 568, 39 A.2d at page 496; 'for which the 'assured' might become liable upon loss or damage.' Shapiro Bros., 40 F.Supp. at page 3. Thus, those decisions were that a bailor could not recover the proceeds of a policy, the purpose of which was to indemnify the named insured bailee for pecuniary losses arising from the legal liability of the bailee to the bailor. Of course, under such a policy of indemnity against legal liability issued to a bailee, the bailors have no right to the proceeds of the policy because the bailors have no legal liability to third parties within the meaning of the policy. But in the case at bar, the policy has no clause indicating that its purpose was so to indemnify the named insured. Moreover, the words 'whether liability is assumed or not' contained in one of the typewritten provisions
is affirmative proof that the parties to the policy did not intend to limit the policy to such indemnification.
Counsel have not discussed the conflict of laws problem in this case. Under the doctrines of Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188, and Klaxon Co. v. Stentor Electric Mfg. Co., Inc., 313 U.S. 487, 61 S. Ct. 1020, 85 L. Ed. 1477, in this action the federal court must apply the substantive law of the State of New Jersey, including its conflict of laws rule. What substantive law would a New Jersey state court apply in this case involving a Massachusetts insurance company licensed to do business in New Jersey, a New Jersey named insured which purchased the policy from a New Jersey agent, the policy having been issued in New Jersey and having riders incorporated therein date-lined New Jersey? In Lloyd v. Massachusetts Accident Co., 125 N.J.Eq. 320, 323, 5 A.2d 312, the court held that the substantive law of New Jersey applied because the contract of insurance was entered into in that state. In Orient Insurance Co. v. Rudolph, 69 N.J.Eq. 570, 61 A. 26, the court held that New York law applied because the insurance contract was a New York contract. Thus, a New Jersey court would apply the substantive law of the place of contract. While those cases do not discuss the meaning of 'place of contract', in this case all of the material contracts involving the contracting parties having been in New Jersey and there being nothing before the court regarding any events occurring outside New Jersey that state is the place of contract.
1. 'Old Colony Insurance Company In Consideration of the Premium herein named Does Insure Paramount Finishing Co. * * * (hereinafter referred to as the Assured), for account of whom it concerns; loss, if any, payable to the Assured * * * On goods and/or merchandise, including packages, as per form attached.'(Emphasis supplied.)
2. 'On lawful goods and merchandise, including packages, consisting of textiles their own or held by them in trust, or on commission, or on consignment, or on which they have made advances, or sold but not delivered. The said goods and merchandise shall be valued at invoice plus charges * * *.'
3. The provision quoted in footnote 1 supra.
4. 'Property to be valued at actual cash market value on day of loss * * * including labor performed thereon and all charges and costs which may have accrued.'
Counsel have not cited any New Jersey cases construing such provisions, and the court has found none. Thus, 'What is a federal court to do, then, when the question before it is a matter of state law and there is found no conclusive authority in the state decisions upon the point? Both of the parties urge upon the court the ascertainment of the state law 'from all the available data'. We accept that admonition completely and follow it.' Stentor Electric Mfg. Co. v. Klaxon Co., 3 Cir., 125 F.2d 820, 823, 824, certiorari denied 316 U.S. 685, 62 S. Ct. 1284, 86 L. Ed. 1757. 'The obligation to accept local law extends not merely to definitive decisions, but to considered dicta as well, and if explicit pronouncements are wanting, the federal court should endeavor to discover the law of the state on the point at issue by considering related decisions, analogies, and any reliable data tending convincingly to show what the state rule is.' Moore, Vol. I, 1947 Supplement, 1.15, at pp. 63-64. See also West v. American Telephone & Telegraph Co., 311 U.S. 223, 236, 237, 61 S. Ct. 179, 85 L. Ed. 139. Jackman v. Equitable Life Assur. Soc. of United States, 3 Cir., 145 F.2d 945, 947. This court, lacking any New Jersey statute or case to rely upon as dispositive of this case, must put itself in the place of a New Jersey court and 'from all the available data' apply the law that it believes the state court would apply in this case.
At the outset, 'As always, it is embarrassing to have to pass upon the law of a state whose courts have not decided the question. * * *' Slattery v. Marra Bros., Inc., 2 Cir., 186 F.2d 134, 139, certiorari denied sub nom. Marra Bros., Inc., v. Slattery, 341 U.S. 915, 71 S. Ct. 736, 95 L. Ed. 1351.
The two New Jersy cases relied on by the customers-bailors are Decorative Utilities Corp. v. National Motors Trucking Corp., 123 N.J.Eq., 48, 49, 196 A. 381, and Robert Williams & Co. v. Auto Express Co., 78 N.J.Eq. 165, 169, 78 A. 670. In the Decorative Utilities case (123 N.J.Eq. 48, 196 A. 382), without discussion the court concluded that the policy 'covered the property of (the) customers, not its own property. The money belongs in equity to the bailors whose goods were destroyed.' That opinion is not an exposition of New Jersey's law concerning the problems now confronting this court. In the Williams case (78 N.J.Eq. 165, 78 A. 671), the court noted that the insurance was 'against loss or damage by fire 'on merchandise consisting principally of silk and silk goods in transit between all points to and from * * * and for which they are liable as common carriers." While the discussion in that case is helpful as an indication of what a New Jersey court would do, the result is not a sound precedent to guide this court because the policy in this case does not contain such an indemnity clause.
In the Williams case, the court did discuss the meaning of insurance clauses which are also contained in the policy now before this court. Further, in that case the bailor argued that the named assured, which was a bailee transportation company, never had any beneficial interest in the insurance proceeds but was at most entitled to receive them for the benefit of the owners of the merchandise. The court decided that 'in each and all of the cases (decided in the Supreme Court, New York, Tennessee, Maryland, Pennsylvania, and England) the policy was procured by a bailee, and was for the benefit of a bailor, and in every case was held to be direct insurance on the goods of the bailor, thus giving the bailor an interest in the policy from the time of its issuance. This interest is, however, subject to any interest which the bailor may have under the policies.' Among the policy provisions which persuaded those courts and the New Jersey court to decide that the bailors had an interest in the policies were: (1) 'On merchandise; their own or held by them in trust or in which they have an interest or liability.' (2) 'On cotton in bales, their own or held by them in trust or on commission * * *.' As quoted above, the policy in this case contains similar clauses. See Hagan v. Scottish Ins. Co., 186 U.S. 423, 22 S. Ct. 862, 46 L. Ed. 1229, where the phrase, 'for account ...