Sun Mutual Insurance v. Davis — 26 N.Y. Super. Ct. 254

Majority

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The Sun Mutual Insurance Company, plaintiff and appellant, vs. Joseph D. Davis et al. defendants and respondents.

Headnote

An agreement having been entered into between G. & Co. and D. & T., for the purchase and shipment by the latter firm, from Cuba to New York, of cargoes of sugar consigned to G. & Co., to be insured by G. & Co. on joint account, and at the joint expense of both firms, an open policy of insurance was effected by G. & Co., for the benefit of themselves, or “ whom it may concern,” upon which goods purchased under such agreement were entered belonging to both firms jointly; Held that D. & T. were liable as joint contractors with G. ■ & Co. to the insurers, for the portion of the premiums remaining unpaid.

(Before Robertson, Ch. J. and Garvin and McCunn, JJ.)

Heard February 15, 1865;

decided May 27, 1865.

This was an appeal from a judgment absolute, in favor of the defendants, upon a demurrer to the complaint. That pleading set forth that two of the defendants, (Davis and Toscano,) were partners under the firm of Davis & Toscano in the island of Cuba, and the other three defendants, (.Grove, Allison, and Kohl,) were partners under the firm of William Grove & Co., in the city of New York ; that such-firms agreed that the first named, should purchase in Cuba and ship to New York and Boston, cargoes of sugar consigned to the latter firm, to be insured by them on joint account, and at the joint expense of both such firms, and by them sold on like joint account; and that such firm of Davis & Toscano, actually, in the year 1863, shipped to the firm of Wm. Grove & Co., seven different adventures of sugar, and on being advised of such shipments, the latter firm in pursuance of such agreement, applied to,the plaintiffs to insure such shipments on joint account of both firms. The complaint then proceeds to state that in consideration of certain premiums therein after stated “ agreed to be paid for the said respective insurances by the parties for whose account the same was effected,” the plaintiffs insured such shipments against certaiti perils, under an open and running policy theretofore issued by them to William Grove & Go., upon which, by its terms, shipments of such

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description were applicable, by which they “ had undertaken to insure for account of all whom it might concern, all such risks as should be reported by the said William Grove & Co., and by the plaintiffs accepted and entered upon said policy and insured thereby.” This was followed by a detailed statement of the amount of goods, vessels, amount of insurance and premiums upon the seven shipments before mentioned, and stating $2668, as the aggregate of such premiums, and that the defendants had paid on account of such premiums $444,24, leaving a balance of $2223.76 still due.

The demurrer only assigned as a ground that the complaint did not "contain facts sufficient to constitute a cause in action.

J. H. Choate, for the appellant.

I. The action was brought to recover a premium due for an insurance made by the. plaintiff upon property belonging to the defendants as partners, and upon their express promise to pay the same. The facts stated in the complaint are sufficient to constitute a cause of action against the defendants, Davis & Toscano, by whom the demurrer is interposed. It states that all the defendants constituted a copartnership which owned the property insured, and that as part of their copartnership agreement and adventure, it was arranged that all the property should be insured in New York for the joint and equal account .and benefit, and at the equal expense and charge of all the defendants ; that in pursuance of this agreement, application was made to the plaintiff for the insurance for the joint and equal account and interest of all, and that in consideration of the insurance all the defendants, through the agency of William Grove & Co., undertook to pay the premium, and that, so far as paid, it has been paid by all the defendants. It also appears that" the insurance, though effected under a policy standing in the name of William Grove & Co., was made expressly “ for whom, it may concern,” and that the interest of Davis & Toscano, as well as that of William Grove & Co., was intended to be covered thereby by the parties who effected the insurance. The repeated adjudications of this court on the construction

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and effect of this clause of the policy, leave no question but that Davis & Toscano were entitled to the benefit of the policy, to sue thereon in their own names. By the inevitable mutuality of such a contract, they are liable to the insurers for the premium. (Crosby v. The New York Mut. Ins. Co., 5 Bosw. 369 . Forgay v. The Atlantic Mut. Ins. Co. MSS. 3 Kent’s Comm. 258. 2 Caines’ Rep. 203 .)

II. The argument on which the learned counsel for the defendants sought to sustain his demurrer was, that inasmuch as the complaint disclosed that the insurances were effected under a policy in the sole name of William Grove & Co. only, the law would presume that they only were liable for the premium. Therefore the plaintiff could have no benefit of the additional allegations inserted to charge the other defendants with an express promise to pay it. In other words, that all such other allegations must be disregarded, as much as if they were stricken from the complaint.

Thus, upon a general demurrer, where the only question is, whether the statements in the complaint constitute a cause of action, he would have the court wholly ignore and erase from the complaint all the allegations which are relied upon as stating the cause of action against his clients. But there is no such presumption even upon the policy alone as that which he claims, as will presently appear, and if there were, it would be only to the extent of presuming that none but the parties in whose names the policy is effected are liable by force of the policy itself. No presumption of law ever went to the extent of presuming away an express promise made by other parties, for valuable consideration received by them, to pay the premium. And that is what this complaint expressly alleges—that for the insurance of their property they, Davis & Toscano, as well as William Grove & Co., undertook to pay the premium.

III. There is no fact or principle that can be invoked to take this transaction out of the ordinary rules as to the rights and liabilities of partners. The partnership appearing, and the fact that the contract was made by one partner for the account and benefit of the firm, in relation to the property of

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the firm, his act and contract are the act and contract of the whole firm, and subject all the members to the same joint and several obligation.

It is to be noted, that no premium note appears to have been' given in this case, so that there can be no pretense that the insurers accepted the liability of the party effecting the insurance, and waived any claim upon the other partners, for whose benefit the insurance was effected.

IV. The point here sought to be raised on the part of the defendants has no place on the argument of this demurrer, in the face of the express allegations of the complaint. It can only be raised, if it all, by answer, unless indeed it be claimed that a party who is not named in the policy cannot, by his own express agreement outside of, and in addition to, the policy, make himself liable to pay the insurers for insuring his property. But should the point be insisted upon by answer, it will be found to have been disposed of in the American courts, and by the most authoritative writers on insurance law.

1. Owing to a usage peculiar to the city of London, where all insurances are effected by brokers, “ policy brokers,” or “ insurance brokers,” as they are called, who make all insurances part of their own accounts with the underwriters, and give their own notes, and settle all losses in their own accounts with the underwriters without reference to the real parties insured ; the courts there have, in pursuance of the obvious understanding of the parties deduced from this usage, held that the liability for the premium note is limited to the broker, who is the only party named in the policy and in the premium note. But no court in England ever held, or will hold, that in the case of a departure from the usage, by an express promise of the principal to the insurer to pay the amount of the premium, he is not liable to make his promise good.

2. This peculiar and anomalous rule has been universally denied in the courts of America, where no such usage prevails, and it has here been held, even in the case of policies effected by an agent, that the party for whose benefit the policy was effected, is liable directly to the underwriters for the premium.

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And even where a note has been given by the agent in his own name, the real party insured, in settling for a loss, is subject to a deduction of the unpaid premium. (2 Duer on Ins. 209, &c. 1 Arnould on Ins. Am. ed. 109, 110, 113 c. 1 Phillips on Ins. 274. The Ins. Co. of Pa. v. Smith, 3 Wharton, 520 . The Patapsco Ins. Co. v. Smith, 6 Harris & J. 166. Aldrich et al. v. The Eq. S. Ins. Co., 1 Woodb & M. 278. Hurburt et al. v. The Pac. Ins. Co., 2 Sumner, 471, 480.)

3. But here there can be no question as to brokers or agents, the insurance being by one partner for the benefit of all, and his every act being the act of all.

W. H. Anthon, for the respondents.

This action cannot be sustained against Davis & Toscano, either on the ground that they are beneficially interested in the policy, or on the ground that they are partners with William Grove & Company, the insurers.

Are they liable as beneficially interested ?

I. There was no privity of contract between the insurance company and any party, except William Grove & Co., the policy being in the usual form, insuring them in consideration of premiums paid, loss payable “ to whom it might concern.”

II. The terms of the policy as set forth in the complaint, are plain and unambiguous. William Grove & Co., and they alone, are the parties to whom the plaintiff is to look for the premiums, and no parol evidence can now be adduced to change the nature and effect of that contract.

III. The contract was made with William Grove & Co., and if a credit for the premiums was given, that credit was given to them, and the remedy of the insurer is confined to the party to whom the credit is given.

See 2 Duer on Insurance, 301, and the English cases cited there, which establish the fact that where the insurance is effected in the name of a broker, which is the universal custom in England, he alone, and not the principal, is liable for the premium.

IY. These view's are particularly pertinent to an open run-

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ning policy, like the one mentioned in the complaint, doubtless intended to cover the whole general business of the insured, and in regard to which'it is evident that the company must look for their premium expressly to' the firm with whom the contract is made.

Y. It is therefore submitted that as parties beneficially interested the defendants are not liable.

Are they liable as partners of William Grove & Oo. in this particular adventure ?

I. The policy does not treat the two firms as partners ; it is made with William Grove & Company alone, and it is a plain principle of law “ that where any contract is made by one partner upon his own exclusive credit, he alone is liable therefor, and the partnership, although the money, property, or other contract is for their own proper use and benefit, and is applied thereto, will in no manner be liable therefor. (Story on Partnership, 212.)

II. Notwithstanding a copartnership, either of the copartners may undoubtedly contract on his own account and make himself alone liable for merchandise bought for copartnership account, if the vendor chooses to accept him. (Sylvester v. Smith, 9 Mass. Rep. 121 , opinion of Parker, J.)

III. The exception to the rule is the case of dormant partners, because in general it may be claimed that a man cannot be said to agree to look to one person only when he is not aware that there is another interested; but this reason will not apply to the present case, because the form of the policy in favor “ of whom it may concern ” is in fact a recognition and permission of assignees, dormant partners, or any one else who can prove an interest.

IV. The plain meaning, therefore, of this policy is, that the plaintiffs look to William Grove & Company alone for the payment of the premiums, with full knowledge that there are others interested, and are willing that all the world may claim the benefits of the insurance, on proving interest.

In discussing the merits of this demurrer, we are not warranted in looking at the facts in any other light than as the complaint presents them, because the interposition of a demurrer admits the truth of all the allegations contained in the complaint, and the only question to be determined is, whether a judgment entered upon these facts would be good and valid in law ?

The .complaint alleges that the two firms, William Grove & Co. of Hew York, and Davis & Toscano of Cuba, entered into a partnership to buy and ship sugars from Cuba to Hew York ; that it was agreed between all the partners that Grove & Co., the members of the firm in Hew York, were to insure the goods so shipped at the joint and equal expense of both firms, out of the proceeds of the shipments ; that on being advised of the shipments, Wm. Grove & Co. applied to the plaintiffs to insure the goods for the joint and equal account and interest of all the defendants, and that in consideration of the premiums agreed to be paid by the new copartnership, the plaintiffs. did, in an open policy, for whom it may concern, and upon which, by its terms, shipments of the said description were applicable, and which policy had been effected by and in the name of Wm. Grove & Co. some time previous, allow the risks to be entered; that the defendants paid, on account of said premiums, $414.24, and that there remains a balance due and owing, for which they ask judgment.

This is a brief outline of the facts set up in the complaint, and I am clearly of opinion they would warrant the entry of a judgment thereon.

The policy declared on is an open policy, and is in the ordinary form, and contains the usual clause for whom it may concern, and it had been effected by William Grove & Co., before the partnership between them and Davis & Toscano was formed ; yet the company had a right to select their risks thereunder, and as they thought proper to assume these risks in consideration of the premiums agreed to be paid by the defendants, they are clearly entitled to recover. It is true the policy was effected in the name of William Grove & Co., but

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no presumption of law arising on the face of the policy, can presume away an express promise made afterwards by other parties, for a full consideration. Moreover, one-half the sugars entered under the risks, were the goods of Davis & Toscano, and under this form of policy they had a right to enter these shipments as risks, and consequently they had an interest in, and were entitled to the benefits of the policy, and by virtue o.f mutuality of contract, they became liable to the insurers. (3 Kent’s Com. 344, 9th ed. 2 Caines’ Rep. 203 .)

And for all that appears in the complaint, the policy may have been effected by Wm. Grove & Co., in their own name, to cover these very risks ; at any rate, the complaint alleges that all the parties agreed to pay, or be responsible for, the premiums at the time the risks .were entered, and it was for this consideration the risks were assumed by the company.

It may be remarked here, that.the facts set out in the points offered to sustain this demurrer can be conveniently set up in the form of an answer.

The order must be reversed, with costs. The defendants to be permitted to withdraw their demurrer, and answer within twenty days, upon payment of costs.

Whether the open policy mentioned in the complaint was obligatory as a contract on the plaintiffs, or was any thing more than a mere specification of the terms of future policies, of which use could readily be made, as each risk was assumed, by endorsement, so as to render a full policy in each case unnecessary, is immaterial in this case. Possibly it might have some effect as evidence, in the absence of any other, to determine to whom credit was given by the plaintiffs, and that they considered the firm of William Grove & Co. alone, in whose name the policy was made out, their paymasters, so as to throw upon the former the burden of proving that the promise to pay the premium was made by both firms. In this case there is a positive allegation to the latter effect, and unless it is impossible for parties not named in a policy of insurance, particularly when beneficially interested therein,

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to become liable to pay the premium, a good cause of action is shown against all the defendants. Even a presumption arising out of the usage which seems to have gained foothold in the city of London, in reference to the person, whom credit is given in case of insurances by agents or brokers, and which perhaps grew out of frequent insurances on foreign account, could not overcome positive evidence of a promise by the principal; the presumption is the other way, in this country. (2 Duer on Ins. 298. 1 Arn. on Ins. Am. ed. 109, 110, 113, n. 1 Phil, on Ins. 274.) The defense of the absence of any separate promise by the firm in Cuba, must be set up by answer.

The demurrer should have been overruled. The judgment therefore must be reversed with costs.

Cases cited

Crosby v. New York Mutual Insurance 5 Bosw. 369 N.Y. Super. Ct. 1859-11-26 p. 256