Hoffman v. Ætna Fire Insurance

The policy in this case declares the subject insured by it, to be merchandise, contained in a certain building, of either “Hoffman, Place & Co.” 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. & Go.,) 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, provided it was not delivered. If they are to be reconciled by supposing the description to create an exception to the annulling clause, the difficulty still remains of the kind of sale intended. It would be superfluous to provide for a sale to customers, if thereby the assured lost their 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 v. Hud. Riv, Fire Ins. Co. 17 N. Y. Rep. 424 . Dey

Whatever, however, the meaning of the term “sold” may be, the annulling clause must be strictly construed. (Livingston v. Stickles, 7 Hill, 253 . S. C. 8 Paige, 398. Jackson v. Harrison, 17 John. 66 .) Under a similar one, both an executory contract of sale and a mortgage have been held not to be a sale. (Masters v. Madison Co. Mut. Ins. Co., 11 Barb. 624 . Conover v. Mut. Ins. Co., 1 N. Y. Rep. 290 .) There would be no entire sale, even of the interest of any joint assured, while he retained the slightest interest in the property. The only purpose of prohibiting such 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 constantly and 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-

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 rights 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, j 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,

The question of the effect of the release by one of the assured 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 definitely 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 v. Kingston Mutual Insurance Co., ( 7 Barb. 570 ; S. C. 5 N. Y. Rep. 405 ,) and Wilson v. Genesee Mutual Insurance Co., (ubi sup. S. C. 14 N. Y. Rep. 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 v. Albany Insurance, Co., ( 3 Denio, 301 ,) and Murdock v. Chenango Insurance Co., ( 2 N. Y. Rep. 210 ,) cited as authority to 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, three 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 v. The Mercantile Insurance Co., 22 Ill. Rep. 277 , 278. Dreher v. Etna Insurnce Co., 18 Miss. Rep. 135 , 136. Finlay v. Lycoming Mutual Insurance Co., 30 Penn. Rep. 311 -313.)

Ho reason derived from authority warrants any departure, therefore, from the doctrine as laid down in Tillou v. Kingston Mutual Insurance Co., and Wilson v. Genesee Mutual Insur

The refusal 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 of 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 present 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 fact 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 defend

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. No 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 v. Excelsior Fire Insurance Co., ( 1 Bosw. 507 ,) would have excluded the correction of mistakes. (American Insurance Co. v. Griswold, 14 Wend. 399 .) The defendants were not bound by the policy to pay the actual cost, nor were the plaintiffs limited to it 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 cost was meant; if it meant the cost of similar articles in the market, it was properly refused as not. warranted by law, and if it meant actual cost of these identical

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 whose total destruction presented more particularity in specifying them, accompanied as it was by a reference to the destruction of books and papers in his charge. (Norton v. Rensselaer and Saratoga Insurance Co., 7 Cowen, 645. McLaughlin v. Washington Co. Mutual Insurance Co., 23 Wend. 525 . Bumstead v. Dividend Mutual Insurance Co., 12 N. Y. Rep. 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 and 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 v. United Insurance Co., 1 John. 406 . Van Rensselaer v.

The clause in the policy respecting the duty of the assured, in regard to the protection 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 sdch 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 probability of the use of such means in restoring the goods, and its expense in fixing the market value. But the defend-' ants, in the absence of any stipulation, to that effect, had no right to impose on the plaintiffs the burden, risk and delay of relaundrying 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 which they were instructed to proceed to estimate the damage done: to the goods, in case they took a per centage of injury as the-inóde of arriving at it. This statement consists, in a great measure, of facts. Some of the propositions contained in it are unquestionble; no objection was made to it upon the ground that the facts were misstated, and no particular instruction contained in- it as regards the- law of it was singled out as an object of exception.- ■' The exception taken should fail upon that ground. The jury ' was in such, statement substantially directed to take the- market' value of the injured goods, and the value of those entirely destroyed, as the basis of their calculation of damage. The1 market value, as placed upon them in the preliminary proofs 'of loss, was .stated not to be- contested, and the residue of that valúe, after deducting the value of goods uninjured, was required to be part of such basis, and the jury were directed

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 relating 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

The labor of examining in this case, the questions 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, hut 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.

It is an elementary principle that a policy of insurance is a personal contract, whereby the insurer engages to indemnify the assured for such loss as Tie may sustain by reason of the perils insured against, and that such contract is not assignable, before loss, without the consent of the obligor. (1 Arn. on Ins. §§ 1, 8, 9, 13. Skinner v. Somes, 14 Mass. R. 107 . Jessel v. Williamsburgh Ins. Co. 3 Hill, 88 . Wood v. Rutland & Add. Mutual Fire Ins. Co., 31 Verm. R. 552.) Besides, there is no pretense in this case that any assignment or transfer was ever attempted to he made by Silvernail of his interest in the policy to his partners,

But, in the case before us, the insurance, it appears to me, was intended to be made with all the copartners, jointly, and covered their joint interest as such, in the property of the firm ; and nothing was designed to be included in the contract except such of the property described therein, as should continue to belong to them all, as copartners, at the time a loss should occur. The insurers took just this risk, and no other, and the assured accepted the policy with that understanding; and each and all of them must be held to have assumed with such acceptances, the legal obligation always incumbent upon parties procuring an insurance upon their property, that each of them would exercise reasonable and proper watchful care and prudence, for the protection of the property insured and intended to remain in their hands. In the event which has occurred in this case, therefore, I think the defendants may well say, in answer to the plaintiffs’ claim, “ confiding in the habits, good sense and prudence of Silvernail, and believing that the safety of the goods would be cared for by him, we executed the pol- ■ icy, when, without that, we would not have taken the risk; and we had; therefore, a legal right to expect a continuance of such care and prudence on his part. Our contract was made with him and his two partners, jointly, and not with either two of them without the other ; and we agreed to indemnify them for such of the goods, described in the policy only, as should belong to the firm of Hoffman, Place & Co. at the time a loss should occur.”

The authorities upon this point are not only numerous, but, in this state, somewhat conflicting. The first in time of those that

Murdock & Garrett v. The Chenango Mutual Ins. Co., (2 Comst. 210,) was an action upon a policy issued to the plaintiffs as owners of a mill. After the insurance, but before the loss, Garrett conveyed his interest in the premises to Murdock. Upon the trial, the defendants moved for a nonsuit upon the ground, among others, that the joinder of Garrett in the action was fatal to' a recovery; which motion was denied, and the plaintiffs had judgment. Upon appeal to the court of last resort, the judgment was reversed, and a new trial ordered.

These cases in our highest appellate court authoritatively overrule the evidently hasty decision of the Supreme Court, first district, in Wilson v. Genesee Mutual Ins. Co., ( 16 Barb. 512 ,) and they have been followed by the Supreme Court of Vermont in Wood v. The Rutland and Addison Mutual Fire Ins. Co., ( 31 Verm. Rep. 552 ,) a case, which, so far as the naked question now under consideration is concerned, seems to be precisely like this. There a policy upon merchandise in trade was issued to Wood & Co., a firm composed of Wood & Johnson. Afterwards, Johnson having died, Wood purchased the interest - belonging to his estate, and continued the business of buying and selling merchandise, on his own account, up to the time of the loss. The court, in an action brought by Wood upon the policy, held that if the plaintiff had continued in the cafe and possession of the goods as surviving partner only, an action

Upon these authorities, and for the reasons I have suggested, I have no hesitation in holding, that, independent of the clause in the policy prohibiting the sale of the insured property, and, solely upon the principle that the risk only extends to such of th" property as continues to belong to all of the assured at "the-time of the loss, and that such assured and they alone can sustain an action upon the policy, the plaintiffs in this case can not recover, and that the refusal to charge as requested in this regard, was erroneous.

If such must be the result, in cases where no provision is contained in the policy, in terms, restricting the power of sale by the assured, a fortiori, it seems to me, we must arrive at the same conclusion where such prohibition is inserted and directly expressed in the contract itself, with the assent of the parties insured, as in this instance ;■ and so, we find, it has been decided in sundry cases in the highést courts of our sister states.

In Dix v. Mercantile Ins. Co., ( 22 Ill. Rep. 272 ,) an insurance was effected, by a firm, composed of three partners, upon its stock of merchandise. The policy. contained a condition that the instrument should be void in case of a transfer or change of title of the property insured, or of an "assignment of the policy. One of the partners sold his interest in the goods

Finlay & Stanley v. The Lycoming Co. Mutual Ins. Co., ( 30 Penn. Rep. 311 ,) was an action upon a policy issued to a firm of two partners containing a similar provision, and where one of the partners had sold his interest in the insured property to the other, before the loss. The Supreme Court of Pennsylvania held that the plaintiff could not recover. Justice Thompson, in pronouncing the decision) after stating that it was a fundamental condition of the contract that alienation of the property should render the policy void, added: £{ It can not be doubted that a sale by one partner to another is within the prohibition.” * * ££ By the transaction, the one parted with all his interest, and the other acquired double what he previously possessed,”