Hoffman v. Ætna Fire Insurance , 1 Rob. 501 ( 1863 )

By the Court.^*—Robertson, J.

The policy in this case declares the subject insured by it to be merchandise contained in a certain building, either “ Hoffman, Place & Co’s,” or held by them in trust or on commission, even if sold, provided it was not delivered. The defendants also by it agree to make good, not only to the insured (H., P. & Co.), but also to their executors, administrators, and assigns, any loss by fire to the property insured for a year. Another clause in the policy declares it to be null and void, if the property insured is sold or conveyed. This conflicts with the description of the subject of insurance, which permits the property to be sold, if not delivered. If they are to be reconciled- by supposing the description to create an exception to the annulling clause, the difficulty remains of the kind of sale intended. It would be superfluous to provide for a sale to customers, because the assured would have no insurable interest. The annulling clause, which is printed, seems to have been intended for subjects of insurance existing when the policy was executed, and not for a suspended policy like the one before us, which had no vitality, until some merchandise was brought into the building in question, to which it could attach. (Hooper a. Hudson River Fire Ins. Co., 17 N. Y., 424; .Dey a. Poughkeepsie Insur. Co., 23 Barb., 623.) And yet, what is required to he sold, is not the interest of any of the assured, but the property itself. The loss to be paid for is not damage to such interest, but to the “ property” itself; and the parties, whose loss is to be made good, are not merely the assured, but their representatives if they die, or their, assigns if they live. These provisions certainly look to a sale of the goods out and out, particularly in connection with the permission to sell without delivering, and not to a mere change of interest among the parties. The clause itself, which renders the policy null and void, is so wdiolly inappropriate ' as applied to a shifting policy, on a fluctuating stock of goods, that it could be entirely rejected, without great violence, as inoperative.

But whatever the meaning of the term “ sold” may be, the annulling clause must be strictly construed. (Livingston a. Stickles, 7 Hill, 253; S. C., 8 Paige, 398; Jackson a. Harrison, 17 Johns., 66.) Under a similar one, both an executory contract of sale and a mortgage, have been held not to be a sale. (Masters a. Madison Co. Mut. Ins. Co., 11 Barb., 624; Conover a. Mut. Ins. Co., 1 N. Y., 290.) There would be no entire sale, even of the interest of any joint assured, while he retained the slightest interest in the property. And the only purpose of prohibiting a sale by any of the parties would be to compel .each one to retain some interest. It is difficult to perceive what benefit that would bestow on the insurer, unless it were accompanied by a positive obligation, by each of the assured, to be actively employed in taking care of the property. Otherwise it would only increase the number of persons having an interest to commit a fraud. It is supposed by the author of a note in the second volume of Parsons on Maritime Law (p. 46), that the fatal effect of a release by one partner to others of his interest in goods insured in a policy, having such a clause-in it, is owing .to the loss by the underwriter of the character, exertions, and vigilance of every assured to prevent a fraud. But unless there is something in the policy entitling the insurer to the positive efforts of each assured to prevent fraud, I do not see how tjie possibility of a contracting party being so honest and vigilant as to prevent fraud by his co-contractors, aids the underwriters. All policies are framed on the theory of there being temptations to commit fraud, and with a view to guard against it by positive stipulations and conditions. Otherwise the fact of making a contract at all with several persons constituting the assured, assumes that they are all fit to be trusted. The possibility of fraud, arising from the increase of the number of persons to be tempted, is practically greater than the probability of the discovery and prevention of the fraud by the possible conscience and vigilance of the added parties, against their own interest. The substitution of a new party, by assignment, without the consent of the underwriters, but not the withdrawal of one of the original assured, may increase the risk. In every case, where the effect of a clause in a policy prohibiting alienation of the subject of insurance has been discussed, its purpose has been considered to be the same as that prohibiting underletting, or assignment in a lease; which was, that the person who could avail himself of such a provision, may know with whom he is dealing, and not be made to contract with a stranger. This reason can only prevail when a new party intervenes, and never when one of the former contracting parties merely releases his interest to his co-contractors.

The foregoing views are applicable to every case of an insurance of several persons; but in the present one, the assured were partners, and insured as forming a partnership. They-were, therefore, entitled to exercise all the lights of partners, and were to- be subject to all their responsibilities. One of the consequences of a partnership is, that the interest of any partner may be virtually transferred by operation of law to the others, by his taking more than his share of the partnership profits to his own use; or, by his insolvency, may go to his creditors, or, by his death, to his representatives. The representatives of any who die become joint owners with the survivors. The annulling clause in question could never have been intended to reach such a change of interest; and if not such, why should it be supposed to have been intended for any release by either partner to any of the others ? It should require the most explicit expression of such an intention, before it could be assumed that the assured intended to lose all benefit of the policy after having paid the premium, in case any of them relinquished his interest to his associates. (Wilson a.. Genesee Mut. Ins. Co., 16 Barb., 511.)

The question of the effect of the release by one of the assured1 to his co-assured of his interest in the subject insured, where a policy contains a provision avoiding it in case of a sale of such subject, has not yet been definitively settled in the court of dernier resort, in this State. But the reversal by it of the judgment of the Supreme Court in the two cases of Tillou a, Kingston Mut Ins. Co. (7 Barb., 70; S. C., 5 N. Y., 406) and Wilson a. Genesee Mut. Ins. Co. (16 Barb., 511; S. C., 14 N. Y, 418), where that question had ' been raised, and passed upon in the court below, without disposing of it, is strong evidence of the leaning of that court. There was not even a word of disapprobation of the doctrine of the court below in regard to it. Moreover, in the two cases of Howard a. Albany Insurance Co. (3 Den., 301) and Murdock a. Chenango Insur. Co. (2 N. Y., 210), cited as authority for the contrary, in which the question in fact arose, the respective courts, before whom they were, placed their decision upon the ground merely of the improper joinder, as plaintiff, of the party who had released his interest to the others. Yet, strange to say, these separate cases decided in Illinois, Missouri, and Pennsylvania, respectively, by some misapprehension, have held that such a release made a policy, containing such a clause, void, upon the authority of the two cases last cited. (Dix and Others a. The Mercantile Ins. Co., 22 Ills., 277, 278; Dreher a. Ætna Ins. Co., 18 Miss., 135, 136; Finlay a. Lycoming Mut. Ins. Co., 30 Penn., 311-313.) .

Ho reason derived from authority warrants any departure, therefore, from the doctrine as laid down in Tillou a. Kingston Mut. Ins. Co. and Wilson a. Genesee Mut. Ins. Co., in the Supreme Court, strengthened as they are by the subsequent approbation of that doctrine in the cases of Dey a. Poughkeepsie Mut. Ins. Co. (23 Barb., 623), in the Supreme Court, and Buffalo Steam Engine Works a. Sun Mut. Ins. Co. (17 N. Y., 412), in the Court of Appeals.

The refusal, therefore, of the judge at the trial of this cause, to charge that the release of one partner to one of the plaintiffs avoided the policy as to all, was therefore correct.

The next question that arises is, whether the plaintiffs can recover for the interest in the merchandise assigned to one of them by his copartner; in other words, for the whole of the •damage to the property. This is equally involved in the damage to the merchandise bought by them after his retiring from the firm, and must turn, not upon the question of a sale by him, but of the acquisition by them of his interest and his losing it. As the policy is a contract of indemnity, and the plaintiffs are injured to the extent of the whole damage to the property insured, if they can maintain an action in their own names alone, there would seem to be no reason why they should not recover the whole of their loss. The cases last referred to, which pass upon the effect of a release by a joint owner to his co-owners, in case of a similar clause, put the deprivation of the party who has parted with his interest, of all right to join as plaintiff, upon the ground that he has parted with his interest. This recognizes a fire-policy'as being a contract with the assured named in it, only so long as they have an insurable" interest, and with" such of them as retain such an interest, after the others have parted with theirs. If the assured having an insurable interest are entitled to join in an action, and are entitled to recover at all, I see no reason why they should not recover the damage to the whole property, from whomsoever they derived it. If new merchandise bought by them could be covered by the policy, certainly, although the ’ plaintiffs acquired the title to what they had on hand by two purchases, the latter must be equally protected.

Besides this, the policy expressly provides that the defendants shall pay any loss “ to the property insured,” and not merely to the interest of the plaintiffs therein. Any limitation of the recovery of parties insured, to the extent of their interest, is derived from general principles of law alone. That interest in this case was equivalent to the entire ownership of the goods. The policy also provides for any loss to the successor and assigns. of the assured, as well as to the latter themselves. On all of these grounds, therefore, the refusal of the judge on the trial to direct the jury to disregard the interest assigned by the retiring partner, and not to allow for goods bought after he retired, was correct.

I am unable to perceive any connection between the proof of the cost of manufacturing articles similar to those injured by the fire in question, and the. actual cost of those articles as-stated in the inventory. Although the latter is required, by the ninth condition attached to the policy, to be stated' in the preliminary proofs, the same condition provides that the amount of sound value shall be ascertained by appraisers, and that such sound or cash value of the property destroyed or damaged by fire shall be what it may cost at the time of the fire to replace it. Ho evidence was offered of a different actual cost than that stated in the inventory in the preliminary proofs. If it had been, I am not prepared to say that the case of Irving a. Excelsior Fire Ins. Co. (1 Bosw., 507) would have excluded the correction of mistakes. (Am. Ins. Co. a. Griswold, 14 Wend., 399.) The defendants were not bound by the policy to pay the actual cost, nor were the plaintiffs limited to it; although when furnished it afforded some criterion as to the value of the articles at the time of the loss. Indeed the plaintiffs furnished the cash value as well as the cost in their inventory. The request to charge that the plaintiffs could not claim that the merchandise cost any more than they stated it to have cost in their preliminary proofs, was therefore ambiguous in not defining what kind of costs was meant. If it meant the cost of similar articles in the market, it was probably refused because not warranted by law; and if it meant actual cost of these identical articles', there was no aliment for the instruction in the evidence.

The learned judge before whom the cause was tried was correct in qualifying his instruction that the plaintiffs could only recover for the goods set forth in their schedule, with the exception, that those might be recovered for the total destruction of which prevented more particularity in specifying them, accompanied as it was by a reference to the destruction of books and papers in his charge. (Norton a. Rensselaer and Saratoga Ins. Co., 7 Comst., 645 ; McLaughlin a. Wash. County Mut. Ins.. Co., 23 Wend., 525; Bumstead a. Dividend Mut. Ins. Co., 12 N. Y., 81.) The policy itself, in its ninth condition, required only as much particularity as the nature of the case would admit of. The original actual cost of the goods not being the standard of value agreed upon by the parties, it would have been error to have charged, as requested, that the loss of the plaintiffs was to be ascertained by deducting the value of the goods in their damaged state from their original cost; and the-refusal' so to charge was proper. The price for which wholesale dealers and manufacturers sold similar goods was one mode of aiding in arriving at their market value, and instructing the jury to the contrary would have been erroneous; the direction actually given in that respect was proper. So far as ■ any loss in the business of the plaintiffs, or of profits in the course of their business, was embraced in the difference between the cash value of the articles damaged ánd their actual cost, the plaintiffs were entitled to recover, because the measure of their indemnity was present cash value, not original cost; and by whatever name the difference may be called, the plaintiffs are entitled to it. To have instructed the jury, as requested, that they were not, would have been erroneous, and was properly withheld. The plaintiffs, of course, were entitled to interest on the amount of their claim from June, 1862, being thirty days from the day of presenting the claim, at which time, by the terms of the policy, it was payable. (Vandenheuvel a. United Ins. Co., 1 Johns., 406 ; Van Rensselaer a. Jewett, 2 N. Y., 141; Livingston a. Miller, 11 N. Y., 80.)

The clause in the policy respecting the duty of the assured in regard to the protectio'n of the property insured was properly interpreted by the learned judge in his charge. They were not bound to use any means or incur any expense to restore the merchandise injured to its previous condition ; they were only bound to take the necessary steps to prevent deterioration, and place it in a condition to be examined. If the attempted use of such means should result in a deterioration of the article, the defendants would not be liable for that injury. The jury had a right to take into consideration the feasibility of the use of such means in restoring the goods, and its expense, in fixing the market value. But the defendants, in the absence of any stipulation . to that effect, had no right to impose on the plaintiffs the burden, risk, and delay of relaundryiug the damaged articles for their benefit. The exception to the charge in that respect was not well taken, besides being to a whole paragraph, some parts of which at least were correct beyond all question.

An exception was taken on the trial to a part of the charge to the jury, consisting of a statement of figures, upon the basis of which they were instructed to proceed to estimate the damage done to the goods in case-they took -a percentage of injury as the mode of arriving at it. This statement consists in a great measure of facts. Some of .the propositions contained in it are unquestionable. Ro objection was made to it upon the ground that the facts were misstated ; and no particular instruction contained in it as regards the law was singled out as an object of exception. The exception taken,should fail upon that ground. The jury were in such statement substantially directed to take the market valué of the injured'goods and the value of those entirely destroyed as the basis of their calculation of damage. The market value, as placed upon them in the preliminary proofs of loss, was stated not to be contested; and the residue of that value, after deducting the value of goods uninjured, was required to be part of such basis ; and the jury were directed to take a certain other sum as the value of goods entirely destroyed, for the other part of such basis. That sutn was stated to be arrived at by taking the value on an inventory made at the time of the retiring of one of the partners, and adding to it purchases to the time of the fire, deducting from such sum the amount of subsequent sales and goods subsequently discovered, which the learned judge stated would, leave such value as that of the destroyed goods. Of course, he did not add that from such difference was to be deducted -the value of the remaining goods, it being plain that such was his meaning. It is true the calculation would make' a larger amount destroyed than was stated by the learned judge,•■but that is no cause of exception by the defendants. There was, it is true, evidence adduced of other injured goods belonging to the plaintiffs in the building in question, besides those contained in their first schedule of loss, whose value was given at cost prices; but there was no request to the judge to instruct the jury that they were to be taken into consideration in estimating the goods totally destroyed. It does not clearly appear what kind of estimate was put on the stock on hand when one partner retired -and assigned to the others. The jury certainly had a right to determine from the value of the goods at that time,, subsequent sales and purchases, and the value of the goods on hand after the fire, if. uninjured, if such values were estimated by the same standard, whether the difference was caused by an. actual destruction of property by the fire or any other cause; and if by an actual destruction, the extent of it. If there was no dispute about such values, and no evidence to account for the existence of such difference, it was a mere matter of calculation. If the learned judge assumed as the foundation of his instruction that there was no such dispute erroneously, that error should have been corrected, not by an exception, but by calling his attention to it to have the correction made. And if he overlooked the supplementary statement in the preliminary proofs as an element in determining the actual destruction of property and its value, his attention should have been called to. such omission. The value of the property uninjured, in making such calculation, was immaterial, as it ought not to be deducted at all from the sound value of the remaining goods in ascertaining the complete destruction of property, since it still remained in existence. The value of the destroyed property does not seem to have been questioned at all throughout the trial, and was sustained by evidence ; and if any error was made in that respect, it is not to be questioned for the first time now on exceptions. Moreover, there was no direction given to the jury to allow that amount of damage, but merely that they were to take it as part of the basis of their calculation in finding a percentage of damage, along with the value of the goods remaining in existence, which they had a right to do. The loss, with interest, appears from the verdict of the jury to have been estimated by them at about $8,150, or, with the interest for eight months deducted, about $7,800. The estimated cash or present market value of-all the injured goods, if sound, was nearly $17,700; deducting $1,300 as the value of the destroyed goods, from the estimate of damage by the jury, leaves $6,500 as their estimate of damage to the injured articles, being less than 40 per cent., and less than the average between 10 and 75 per cent., the extreme rates furnished in the testimony given on the trial. Including the entirely destroyed property, the estimated rate of damage would be about 46 per cent. Unless the jury were bound to take the cost of the articles instead of their cash or market value as the basis of computation, no great injury was done to the plaintiffs by the direction, to assume the value of property destroyed as that testified to and apparently undisputed on the trial.

Several exceptions were taken in the course of the trial to the admission of testimony, and its exclusion. Most of such exceptions involved the same principles as those previously - discussed; and the far larger part related to evidence of an advance of the goods in value after they were purchased by the plaintiffs up to the time -of the fire. One was to an instruction by the learned judge in his charge, that the plaintiffs were, entitled to recover for damage to the subject of insurance by water used to extinguish the fire, which, of course, was untenable. One of the witnesses was asked to state what was the , whole cost value of the stock found after the fire, and was informed he could refresh his recollection by reference to a book, which was objected to. Whether this objection was'made to his stating the cost value, or looking at the book, does not appear, nor whether he looked at the book at all. The question as to the statement was, undoubtedly proper, as the witness had shown a knowledge of the subject, and was properly admitted : the objection was therefore properly overruled. On another occasion an inventory of goods, of which the cost prices were taken from the plaintiffs’ bills and books of account was stock received under objection and exception. This had been admitted by the defendants to contain a correct statement of „ ¡the stock of the plaintiffs, and the calculations of amounts in it were proved to be correct. ISTo objection was taken to it specifically, that it was a mode of leading the witness, or that it was mere,, secondary evidence, the original bills and books not.be- ' ing abco,tinted for. If the objection had stated those grounds, the defect might have been cured on the trial, and the objec/(tion^táken was properly therefore overruled. A schedule ' marked “ defendant’s answer,” of whose nature and contents there was no evidence, was also properly excluded. Another witness (Cleveland) testified to an appraisal of loss made in an inventory after examining the goods, and the total amount thereof was given by himit consisted of nearly seven hundred items, and he was asked by the party calling him to read from it the names of every article, and the percentage of damage upon it “ seriatim,” which was prevented by the court. As the only result of such a course would have been an unnecessary waste of time, had the threat been carried out, it was properly cut short; whether it could have been taken on a cross-examination under some possible condition of things, is ■ a different question. In like manner, an inventory testified to by another witness (Hyatt) as made by him, was properly excluded ; as he was able to, and did testify, to the estimate made by him, of the loss, without it. Some questions were properly excluded as leading, and others as irrelevant, not necessary to be passed upon separately.

The labor of examining in this case the questions now presented, by judges unfamiliar with the evidence on the trial, has been much- increased by the unnecessary voluminousness of the case, caused by inserting questions withdrawn, answers excluded without objection, exceptions by the plaintiffs’ counsel, a great deal of testimony not necessary to raise the questions on the exceptions, contrary to general rule 36 ; and the whole testimony in the form of question and answer, notwithstanding all the questions were not objected to. The labor of reducing the case to its proper proportions is thus thrown on the whole court at the hearing, when it should have been done on the settlement of the case. It would seem that the present case never had been submitted for settlement. The 36th rule just referred to seems to imply that this should be done in all cases. The growing evil of improperly'prepared cases may call upon the court to refuse to hear causes where they are offered, and treat them as if no case had been made. The same inattention has been noticed before in other cases, but without apparently any good effect.

The exceptions having been rightly disposed of on the trial, and there appearing no error in the charge of the court, or refusal to charge as requested, the judgment appealed from must be affirmed, with costs.

* Present, Robertson, White, and Barbour, JJ.