text:
    The Fame Insurance Company’s Appeal.
    ]. The Enterprise Insurance Company and the Fame Insurance Company entered into a contract by which the latter company agreed to re-insure the former on all its term risks in Ohio, Indiana, Illinois, Missouri, Kentucky and Pennsylvania, except Philadelphia, and exonerate it from all losses in one class of cases, exceeding 55000, and in others denominated “ extra hazardous” exceeding 52500, and in the cases of dwelling-houses or their contents, to contribute for the payment of losses, if any, in various proportions and amounts. The losses, if any, were to bo payable pro rata at such times and in such manner as the former company may pay. Losses covered by this agreement occurred by the fire in Chicago on October 8th and 9th 1871. Held, that a court of equity would take jurisdiction of a bill by the assignee of the Enterprise Insurance Company against the Fame Insurance Company to enforce this contract.

      2. That the re-insured can resort to equity as soon as the claim arisés without waiting to pay the original insured, and the words “ may pay” held to be “liable to pay.”
    3. That as the act incorporating the Fame Insurance Company made it subject to the General Insurance Act of April 2d 1856, authorizing companies to “re-insure themselves,” the contract was not ultra vires.

    4. Ijhe sending to the Fame Insurance Company of insurances which they ought not to have had, and the withholding others which they should have had under the contract, did not work a forfeiture.
    January 3d and 4th 1877.
    Before A&neav, C. J., Sharsavood, Mercur, Gordon and Woodavard, JJ. Williams and Paxson, JJ., absent.
    Appeal from Nisi Prius. In Equity. January Term 1873,' No. 13.
    The bill in this case Avas filed November 30th 1872, by the Philadelphia Trust, Safe Deposit and Insurance Company, assignees of the Enterprise Insurance Company of Philadelphia, against the Fame Insurance Company.
    The bill alleges that the Enterprise Insurance Company entered into an agreement with the Fame Insurance Company, on January 17th 1871, and by it the latter company agreed to re-insure the former company on all term risks assumed by it in the states of Ohio, Indiana, Illinois, Missouri, Kentucky and Pennsylvania, outside of Philadelphia, and exonerate the Enterprise Company from all losses exceeding $5000, in one class of cases; in other cases, from all losses exceeding $2500; and contribute in certain eases to the payment of losses in various proportions and amounts. After the date of the agreement, risks were assumed by the Enterprise Insurance Company, and reported to the Fame Insurance Company, which received the premiums therefor; that a fire occurred in Chicago, in October 1871, and property amounting to betAveen $40,000 and $50,000, so insured, was destroyed; that the Enterprise Insurance Company, on October 31st 1871, made a deed of assignment to the Philadelphia Trust, Safe Deposit and Insurance Company, for the benefit of creditors; that the plaintiffs were desirous of producing the books of the Enterprise Insurance Company, and requested defendants to produce .their books, that the account of the sums due under their agreement might be taken; that plaintiffs’ demand for contribution and exoneration was properly cognisable by a court of equity, and prayed that the defendants should exonerate and discharge the plaintiffs as assignees in one class of cases, and in the other properly .and rateably contribute towards the payment of the said losses by risks re-insured, and for an account.
    Defendants demurred to the bill, on the grounds, 1. No cause for relief shoAvn. 2. No discovery Avas alleged to be necessary. 3. No mutual accounts; and 4. No payment of losses alleged, and no right to demand from defendants any money.

      The’ demurrer was overruled by Sharswood, J.: — i
    “ I think there is authority which sustains the jurisdiction of a court of equity in a case of this kind. A contract of re-insurance is a contract of indemnity. The re-insured may go into equity as soon as the claim arises upon him, without waiting to pay the original insured. I do not understand this to be denied by the learned counsel for the defendant. But he maintains that it is not applicable to this ease, because, by the express terms of the contract, ‘ the losses, if any, are to be payable pro rata to the Enterprise Insurance. Company, at such time and in such manner as the latter company may pay.’ This clause must have such an interpretation as will not entirely defeat the contract. It can evidently have no application where, as in this case, the Enterprise Company have made a general assignment for the benefit of their creditors. If the assignee can only recover from the defendants when and' as he pays dividends on the assigned estate to the original insured, it is plain an endless number of suits must be the consequence; and if it had so happened that there was no assigned estate, there could be no recovery at all. I would construe the words, ‘ as the latter company may pay,’ to mean, ‘ as the latter company may be liable to pay.’ It meant that the Fame company should have all the advantages of the Enterprise company as to the times and manner of payment; that they should not be called on to pay on the immediate happening of the loss, but whatever conditions as to the time and manner of payment might be annexed to the original policy should be extended to them.”
    Demurrer overruled.
    The defendants then filed their answer.
    The answer of defendants avers that the contract was beyond the lawful authority of defendants to mak§ it, denied that defendants had agreed to exonerate the Enterprise Insurance Company from all losses over $5000, and in other cases all losses exceeding $2500; that the Enterprise Insurance Company failed to comply with the agreement in reporting and paying the premiums on all risks taken by them which were covered by the agreement; admits the losses by the Chicago fire covered by the agreement; denies'that any sum was due plaintiff, and avers that the demand of plaintiff is not cognisable by a court of equity.
    A replication was filed, and the cause was referred to George M. Dallas, Esq., as examiner and master.
    The testimony is very voluminous;- the master reported the following facts:—
    “ On the 17th of January 1871, the Enterprise Insurance Company and the Fame Insurance Company entered into an agreement as follows:—
    “ ‘ The Enterprise Insurance Company and the Fame Insurance Company, both of Philadelphia, have made the following agreement, viz.: The Fame Insurance Company hereby re-insures the Enterprise Insurance Company on the terms, in the manner, and to the extent hereinafter set forth, against loss or damage which shall or may happen - by fire, on all term risks assumed after the date of this agreement by the Enterprise Insurance Company in the states of Ohio, Indiana, Missouri, Illinois, Kentucky and Pennsylvania (except the city of Philadelphia), on all risks over five thousand dollars (except on property denominated “.extra hazardous” or “ specially hazardous,” and on dwellings and their contents), which the Enterprise Insurance Company may so assume, the Fame Insurance Company hereby re-insures the sum which shall exceed five thousand dollars. Thus, for example, if a risk so assumed by the Enterprise Insurance Company be six thousand dollars, the Fame Insurance Company hereby re-insures one thousand dollars, and if the risk be nine thousand dollars, the Fame Insurance Company hereby re-insures four thousand dollars, and so of other sums on such risks over five thousand dollars. On all risks denominated in the policies of the Enterprise Insurance Company “ extra hazardous” or “ specially hazardous” over twenty-five hundred dollars and not exceeding five thousand dollars, which the latter company may assume, and which shall not have been divided or apportioned in the policies issued by that company therefor in the manner hereinafter referred to, the Fame Insurance Company hereby re-insures the sum which shall exceed twenty-five hundred dollars. Thus, for example, if such a risk so denominated be three thousand dollars, and no division or apportionment be made in the policy issued by the Enterprise Insurance Company therefor, the Fame Insurance Company hereby re-insures five hundred dollars, and if such a risk be five thousand dollars, the Fame Insurance Company hereby re-insures twenty-five hundred dollars, and so of such other risks over twenty-five hundred dollars. In no case, however, is the Fame Insurance Company to be liable under this agreement for a greater sum than twenty-five hundred dollars upon any single risk taken on property so denominated “extra hazardous” or “specially hazardous,” except where the interests insured in any one policy are therein so divided or apportioned as in the judgment of the respective officers of said companies not to subject either of them to a greater loss than twenty-five hundred dollars by any one fire, in which case the Fame Insurance Company shall not be liable under this agreement for a greater sum than five thousand dollars on any one policy on such property. But when the risk so assumed by the ■Enterprise Insurance Company shall exceed five thousand dollars, then each of the said companies shall be liable for an equal amount. Nor shall the Fame Insurance Company be liable under this agreement for a greater sum than five thousand dollars on any single risk taken on any and all other property except on dwelling-houses and their contents. On all risks on dwelling-houses and their contents over five thousand dollars and under ten thousand dollars which the Enterprise Insurance Company may assume, the Fame Insurance Company hereby re-insures the sum which shall exceed five thousand dollars; but when the risk so assumed by the Enterprise Insurance Company shall exceed ten thousand dollars, then each of the said ■ companies shall be liable for an equal amount. Thus, for example, if such a risk on dwelling-houses and their contents, or on a single dwelling and its contents, be for fifteen thousand dollar’s, then each of the said companies shall be liable for seventy-five hundred dollars; but the Fame Insurance Company shall not in any case be liable under this agreement for a greater sum than seventy-five hundred dollars ($7500) on any single risk taken on dwelling-houses and their contents, or on a dwelling-house and its contents. The said re-insurances are to attach simultaneously with the insurances so assumed by the Enterprise Insurance Company, at the same rate of premium, and to be subject to the same risks, valuations, conditions and modes of settlement as are or may be adopted by the said Enterprise Insurance Company. The losses, if any, are to be payable pro rata to the Enterprise Insurance Company at such times and in such manner as'the latter company may pay. Other re-insurances by the said Enterprise Insurance Company of the same risks are hereby permitted, but notice thereof is to be given to the said Fame Insurance Company, upon receiving which notice the said Fame Insurance Company may terminate its re-insurances upon such particular risk or risks, as the Enterprise Insurance Company may have effected other re-insurances upon by giving three days’ written notice to the said Enterprise Insurance Company of its desire to do so. The reports of all risks hereby re-insured by the Fame Insurance Company shall be made to the said company within three secular days after the Enterprise Insurance Company shall have received from its agents notice thereof, and the premium thereon (after deducting thirty per cent, therefrom for expenses and commission) shall be paid by the Enterprise Insurance Company to the Fame Insurance Company on or before the fifteenth day of every month on all risks thus re-insured during the preceding month. The Fame Insurance Company shall have the right at any time to examine, at the office of the Enterprise Insurance Company, the agents’ returns of such risks as are provided for in this contract. Either company shall have the right to terminate this agreement at any time by giving to the other thirty days’ notice thereof in writing.’
    “ The two insurance companies commenced the transaction of business under the foregoing agreement almost immediately upon its execution.
    “ The reports of insurances made on behalf of the Enterprise company, in the localities affected by the contract, were made to that company by its agents, upon forms designated ‘Daily reports.’ A number of these are printed with the evidence, but a single one will serve to illustrate the first step taken by either of the parties to this controversy in dealing with its subject, and for this purpose only the following is, without selection, inserted here. The portion here printed in ordinary type composed the form before use, the portion here printed in italics was written by the agents at Chicago before forwarding, and the words here printed in script were added, in lead pencil, at the Enterprise company’s ofiice in Philadelphia:—

      ‘“Be-Ins. $%500.

    New No. 60.. DAILY REPORT.
    Last No. (of same risk.) - • $5000
    COPY OP POLICY ISSUED AT AGENCY OP
    THE ENTERPRISE INSURANCE COMPANY
    OP PHILADELPHIA,
    AND FORWARDED TO THE OFFICE IMMEDIATELY THEREAFTER.
    & tO M ss.S'S
    Insuring Page Sprague, of Chicago, for Five - Thousand Dollars. On stock in trade, their own, c., consisting chiefly of paints, oils, varnishes, brushes, window-glass, turpentine, alcohol, painters’ and glaziers’ stock, in k-story brick building, Flos. 12 14 Dearborn Street. Warranted by assured that no benzine, benzole, naptha, kerosene or carbon oil shall be kept on premises, permission to keep one can of benzole in vault under sidetvalk in front of premises.

    Additional Insurance, how much ? (If other insurance, the Policies should be concurrent.) Other Ins., ¿-c.

    If policy covers merchandise, of what does the principal part consist ?
    (This is wanted for classification of business. Agents will please be particular.)
    $5000. Term of 12 Mos. at 2-10 off cents per $100. Prem. $90. Date, 7th March 1871. Expiration, 7th Marchfl&TZ.

    Has this company other insurance on the ) premises, or within 100 feet? V If so, how much, and under what policy ? j

      GOODWIN &PASOO,

      8. Agents.
    [Other side important. Please be particular.]’
    “ Upon receipt of these reports, they would be marked for re-insurance ; and, in a book which was kept for that purpose, and which was printed in blank, especially for use under this agreement, an entry upon the margin would be made as a memorandum of the transaction, and a corresponding slip be torn from that margin, and sent, unaccompanied by any other verbal or written communication, to the Fame company’s office. Of these marginal entries and orders, there are also a number printed in connection with the examiner’s report, but again one of each will serve the purpose of illustration, and, with that view solely, a single stub and corresponding slip are here produced — ordinary type indicating the printed portion of the original, and italics the part which is in writing:—
    “ ‘Re-insurance.
    “ ‘Pci. — 3, 14, ’71.
    Amount, $1500.
    Term of One Year.

    Beginning Pebruary 2d 1871.
    On household furniture contained in brick building.

    Situate and known as Nos. 74, 76, 78 Michigan Ave., Chicago. Policy, No. 10.
    Agency, Chicago.

    Date, Pebruary 8th 1871.

      Prem. $11.48.
    14
    “ ‘ Re-insurance in The Fame Insurance Company of Philadelphia against loss or damage by fire, for The Enterprise Insurance Company of Philadelphia, in the sum of Fifteen Hundred, dollars, for the term of One Year, beginning Pebruary 2d 1871. On household furniture contained in brick building, situate and known as Nos. 74, 76 and 78 Michigan Avenue, Chicago, Illinois, the same being part of sum insured by The Enterprise Insurance Company for John S. Ramsey, by their policy, No. 10, Chicago Agency.
    “ ‘ This re-insurance is subject to all the terms and conditions set forth in the agreement executed by the said insurance companies, bearing date the 17th day of January 187.1, with the same effect as if the same were herein inserted.
    “ ‘ Amount Re-insured, $1500, at 85 cents per $100. Prem. $11.48. 10 per cent. off.

      ALEX. W. WISTER, Secretary.
    Oeeice oe the Enterprise Insurance Company,
    Philadelphia, Pebruary 8th 1871.’
    “ The stub and slip cut therefrom each bore the same number, as in the instance just given — the number ‘14.’
    “ The Fame company kept, at their office in Philadelphia, a book which they designated their ‘ General Order-book,’ which also contained a general system of numbers, for purposes of reference. In that book, under the Fame company’s number, and between printed matter already on the page in connection with each of their numbers, the Fame company pasted the slips or orders just referred to, when and as they received them from the Enterprise company; but this course was adopted by the officers of the Fame simply as a matter of convenience, and without the knowledge of the Enterprise company, except that the secretary of the Fame company incidentally called the attention of the secretary of the Enterprise company to the course he had adopted in this particular. The following is a sample of the Enterprise slips as they appeared when pasted in the Fame ‘ General Order-book,’ in connection with the number and printed matter contained in the latter — the slip, as it was received from the Enterprise company, being the portion printed between the lines extending across the page:—
    “ ‘No. 10,574. Philadelphia, February 10th 1871.
    “ ‘ Fame Insurance Company make insurance against loss or damage by fire on the under-mentioned for the term of at noon, viz.:—
    15 ~
    “ ‘ Re-insurance in The Fame Insurance Company of Philadelphia against loss or damage by fire, for The Enterprise Insurance Company of Philadelphia, in the sum of Twenty-five Hundred Dollars, for the term of One Year, beginning February 6th 1871; on stock of printing office, presses run by steam-engine, in rear of basement, in brick building, stone front, known as the ‘Updylce Building,’ situate Nos. 108 and 110 Randolph Street, Chicago, III., the same being part of sum insured by The Enterprise Insurance Company for J. M. W. Jones, by their Policy, No. 19, Chicago Agency.
    “ ‘ This re-insurance 'is subject to all the terms and conditions set forth in the agreement executed by the said insurance companies, bearing date the 17th day of January 1871, with the same effect as if the same were herein inserted.
    “ ‘Amount re-insured, $2500, at 1.40 cents per $100. Prem. $31.50. 10 per cent. off.

      ALEX. W. WISTER, Secretary.’
    “ These papers were treated by both parties as complete, and no more formal policy was ever delivered or expected.
    “ The premiums were paid each month by the Enterprise company, and receipts taken therefor from the Fame company. During the first three months these bills were made out by the Enterprise company, and sent to the Fame; but after that, by arrangement between the secretaries of the respective companies, they were made out by the latter.
    “ The reports of insurances received by the Enterprise company from their agents were never sent to the Fame company, but were, in every instance, retained at the Enterprise office. They were, however, at all times freely open to inspection and examination by the representatives of the Fame company, and its secretary did, in fact, inspect all, or nearly all, of those which related to the risks which were certified to that company for re-insurance.
    “The Fame company received from the Enterprise company a number of the certificates or orders cut from the book of the latter company, and regularly filled up in the form and manner before explained. Among them were fourteen slips based upon risks which had been taken by the Enterprise company in what afterwards became the burnt district of Chicago, and the dates of which, respectively, extended from February 8th 1871, until October 5th 1871, and in which the aggregate amount named for re-insurance was $47,000.
    “ Upon the morning of October 8th 1871, a conflagration commenced in Chicago, which continued during that and the following day, and the several subjects of risk which were referred to in the fourteen orders or certificates last mentioned were thereby destroyed.
    “ On the next day after that fire, viz.: October 10th 1871, the secretai-y of the Enterprise company received a note in these words:—
    “ ‘When the-losses are satisfactorily adjusted in Chicago, we are prepared to bear our portion of the burden.
    “ ‘Would it not be best that your most efficient adjuster should, as the fire ceases, be upon the ground for an early and speedy settlement ?’
    “This communication was signed as ‘secretary,’by that officer of the Fame company, who had- been especially active in conducting, on its behalf, the business under the. agreement; but it was written and sent by him of his own motion, without consultation with or direction from any of the other officers or directors of the corporation.
    “The proofs of loss under the insurances made by the Enterprise company, which formed the subject of these fourteen orders, were produced by plaintiffs and offered in evidence. They are fifteen in number — an apparent discrepancy, which is explained by the fact that one of the orders to the Fame company (although not so expressed) included two risks taken by the Enterprise company for Potter Palmer.
    “ These proofs of loss were all originals, except in the case of John S. Ramsey, referred to in order No. 14, $1500 on household furniture, as to which the original failed to reach the plaintiffs, and there was substituted and produced a copy of proof, with affidavit of Mr. Ramsey, made before a commissioner for Pennsylvania, resident at Chicago, that the copy is a true and correct one of his original proof of loss, which had been duly sworn to, proved, certified and forwarded by mail within the time prescribed by his policy.
    “ Except in the case of Ramsey, just referred to, the adjustment of the losses was faithfully and properly made by one whose business it was to do so, who was. thoroughly acquainted with the subject, and who acted on behalf of the Enterprise company, and not of the insured. A record was made by him of the work when completed, and without any unnecessary loss of time.
    “ There were a number of cases of omissions to send risks to the Fame company, to which, under the agreement, they were entitled, and of risks sent in excess of what, by the agreement, the Fame were required to take. This did not arise, however, from any fraudulent design on the part of the Enterprise company, or its officers or agents, but from mistakes incident to the character and extent of their business, and while the amount involved is large, the number of instances is relatively small.
    “ The master finds that losses, very considerable in amount, have been duly proved against the Enterprise company in eleven cases (additional to the fourteen heretofore separately treated) which were within the terms of the agreement of January 1st 1871; and that dividends thereon have been paid by the plaintiffs under the authority of two reports of an auditor, which have been duly confirmed; but no slip or order, such as hereinbefore described, was sent in any of these eleven cases to the Fame company, nor did they have any notice thereof whatever, or receive any payment or offer of payment of premiums thereon; and no knowledge that the Enterprise had taken such risks ever reached airy of the officers of the Fame company until the pendency of this case before the examiner.” Upon these facts the master concluded as follows:—
    “ The questions arising upon the first and fourth reasons assigned in support of the defendants’ demurrer, viz.: the questions of jurisdiction in equity, and of the liability of the Fame company to pay in advance of payment by the Enterprise, were again raised by the answer, and insisted upon before the master, who, however, is of opinion that they are not open for his consideration, having been decided and passed upon in the opinion of the court (Phila. T. & Safe Deposit Co. v. Fame Ins. Co., Leg. Int., vol. 30, p. 60) on the demurrer. In that opinion his Honor Judge Sharswood sustained the jurisdiction, and held that the ‘ re-insured may go into equity so soon as the claim arises upon him, without waiting to pay the original insured;’ and that this case is within the rule, the words, ‘ as the latter company may pay,’ as they occur in the agreement, being construed to read, ‘ as the latter company may be liable to pay.’
    “ On behalf of the defendants it was contended that the agreement of January 17th 1871 was one which it was beyond the power of the Fame Insurance Company to enter into. The point thus presented is of the first importance, for if it be well taken, the contract is absolutely void; the question being one ‘of statute power and public policy, not of mere equity between the parties :’ Fowler v. Scully, 22 P. F. Smith 456. For the plaintiffs, it was insisted that, even were the agreement in excess of the Fame’s powers, yet, having been acted upon to the extent to which it had been, it would not be void, under a rule asserted and invoked, that executed dealings, though in excess of corporate power, must he supported when required by good faith. To maintain this proposition, the learned counsel referred to Parish v. Wheeler, 22 N. Y. 494; Bissell v. The Railroad Companies, Id. 258; De Groff v. The American, &c., Co., 21 Id. 126. But these cases do not support the doctrine for which they were cited.
    “ The act incorporating the Fame Insurance Company made no special provision for its organization and management, and did not, in itself, contain a specific grant or limitation of power, but provided that the company should be organized and managed according to the provisions of the General Insurance Act of April 2d 1856 (Purd. Dig. 792), and that it should be ‘limited to the risks designated in the first class in the 7th section of said act’ (Purd. Dig. 792, pi. 7). The designation of risks in the class and section referred to is ‘ risks against fire on all kinds of buildings, merchandise and other property,’ * * * ‘and to re-insure themselves.’ Upon this language, the learned counsel for defendants contended:—
    “ 1. That ‘ to take risks against fire’ is to be construed as meaning to take them only in the manner which was customary when the act was passed — by ordinary policies.
    “ 2. That the section presents a case for the application of the maxim expressio ivnius est exclusio alterius: the words ‘ re-insure themselves’ being exclusive of power to re-insure others.

    “ In support of the first of these positions, the learned counsel argued that the agreement in question is probably without parallel, and certainly was not preceded by any similar one existing at the date of the passage of the General Insurance Act, or of the Fame company’s act of incorporation; and that, as (Commonwealth v. Erie & N. E. Railroad Co., 3 Casey 351) ‘laws must be executed according to the sense and meaning which they imported at the time of their passage,’ this agreement, being of a species which could not have been known to the legislature when the acts before referred to were passed, cannot be warranted by their provisions. But, in the opinion of the master, this argument is fallacious. The power conferred by the act is to take risks, not to issue policies, and nothing is said in this section as to the form in which risks shall be taken. If the legislature had intended to restrict the power they conferred, so that it should be exercised only in the mode then in use, they would have said so. That they did not so intend, it is reasonable to infer; for otherwise, it would be necessary to examine the policies of any company organized under the General Insurance Act, whenever it might be desired to determine its power to issue them, to ascertain whether they were the same as those or some of those which had been in use in 1856. Did the legislature mean, in passing an insurance act for the general government of that business, to prohibit every change which time and experience might suggest in the manner of conducting it ?

      “ In Commonwealth v. Erie & N. E. Railroad Co., supra, cited by counsel for defendants, the question involVed was a very different one. There power had been conferred upon a corporation to construct a railroad from a certain designated point to another which was described as ‘the borough of Erie.’ That borough was subsequently extended sixty yards; and the court held that the terminus in mind when the act Avas passed, and therefore the one which must be adopted, was that which then existed. But there the line of road and its termini were' the subjects of legislation; here, not the form of policy (the mode of contract), but taking risks (the thing to be contracted about) Avas the matter of legislative contemplation. That the contract now involved was, though not in form a policy, still an agreement to take risks against fire on ‘property,’ Avill appear in considering the next branch of this subject.
    “ The contention under the second branch of the argument for defendant upon this question of ultra vires, Avas that it is apparent, 'from the use of the Avords ‘re-insure themselves,’ in close connection Avith the language that precedes them, that the subject of reinsurance Avas in view, and that the poAver of insurance companies upon that subject Ayas designedly limited to re-insuring themselves, as distinguished from becoming themselves re-insurers; and the case of Bowery Insurance Co. v. New York Insurance Co., 17 Wend. 359, s. c. 1 Fire Ins. Cases 658, having been cited as expressly deciding that the power to re-insure is' ‘ already included in the power to make contracts of insurance,’ it Avas replied, and Avith correctness in fact, that the statute of NeAv York to which the opinion in that case referred, did not mention the subject of reinsurance at all. Again the master is unable to adopt the reasoning or conclusion of defendant’s counsel. The definition of re-insurance, as given by Phillips (Phil, on Ins., par. 374) — and it is described in ’ substantially the same language in the authorities generally — is that it is a contract Avhereby one party, called the re-insurer, in consideration of a premium paid to him, agrees to indemnify the other against the risk insured by the latter, by a policy in favor of a third party. Clearly, re-insurance is the assumption of a risk of destruction of property by fire, AArhereby the re-insurer may assume all or any part of the risk of the original underAA’riter. It is but a modification of the contract of insurance, in which the thing insured is the same as in the original policy; but the'subject of indemnity is the risk assumed by the first insurer. It is very similar to the common case of simple insurance in favor of a mortgagee, who becomes insured against loss of the property mortgaged, which, in such case, is the subject of risk, whilst the subject of indemnity is the mortgage debt. In granting the poAver to take risks generally, and AYithout limitation as to its mode of exercise, the 7th section conferred the privilege of taking them by re-insurance as well as by original contract; and this conclusion is not, in the master’s opinion, affected by the addition of the words ‘ and to re-insure themselves,’ for they are cumulative, and are inserted in extension and not in limitation of the grant. The power to insure, in every lawful mode had, by the previous language, been already given, and by these words the right to he insured was added. By the charter of the State Mutual Insurance Company, Pamph. L. 1853, p. 83 — and ¶ there are probably many others which are like it — that company was empowered ‘to insure all kinds of property against loss or damage by fire,’ * * * ‘and to cause themselves to be insured against any loss, damage or risk in the course of their business.’ The word re-insure was not used, but it cannot be doubted that power to do so was included in that to insure generally, and the privilege of being in turn insured is added. The same purpose was in view when the 7th section of the Act of 1856 was drafted, and it expresses it precisely, although in fewer words.
    “ This agreement, and the business transacted under it, are said to be invalid and unlawful for still another reason, viz.: that they involved a surrender of the corporate privileges and franchises of the Fame company to the Enterprise company, and the delegation of the powers and duties of the officers of the former to those of the latter corporation. That such surrender and delegation are unlawful, was claimed, both upon general principles of law relating to corporations, and under the fourth section of the general insurance act (Purd. Dig. 791, pi. 4), which latter provides that ‘the affairs of said company shall be managed by twelve directors,’ * * * ‘and the directors’ * * * ‘ shall appoint a president and vice-president of the company, and such other officers and agents as they may deem necessary for conducting the business of the corporation ; who shall perform the duties of the respective offices until they shall be reelected, removed from office, or their successors shall be chosen,’ &c.
    “ The franchises of the Fame, and the duty of its officers, were, it was argued, attempted to be transferred by the agreement, because, by it the number, the nature and character, the consideration for, and the amount of each risk assumed by the Fame were to be fixed by the Enterprise company, to whom also was transferred the power to settle with the insured the form and substance of every policy, and finally, to attach the liability of the Fame, without consulting its officers, simultaneously with the assumption of the insurances by the Enterprise company. It will be found that all these objections are dependent upon the right of the Fame company to make and contract for re-insurances; for the matters here objected appear to be necessarily incident to the taking of a risk in that form. In Philadelphia Ins. Co. v. Washington Ins. Co., before cited, the language of the policy of re-insurance was, so far as this question is concerned, the same as in this agreement, viz.: ‘subject to such risks, valuations, conditions and mode of settlement as are or may be assumed or adopted by them;’ yet neither the very able counsel who argued that case, nor the eminent judge who delivered the opinion of the court upon it, suggested any doubt of the power to make the contract.
    “ In the opinion of the master, the agreement between the companies in this case, and the performance of the acts provided for in it, constituted a complete insurance made by and under the management of the officers of the Fame company, who do not appear tb have been negligent in conducting its affairs; but if they had been, that would not have invalidated their acts on behalf of their company. An insurance corporation has undoubted power to employ agents to examine and report the number and nature of risks to be taken by it, and to rely upon the discretion of those agents; and no reason is perceived why, with equal propriety, the same questions might not be determined by reliance upon another company whose interest is the same, or why a re-insuring company may not lawfully agree that its premiums and amounts of insurance shall be ascertainable by reference to those of the company to be re-insured, instead of stating those particulars specifically in each instance.
    “ The whole subject, however, is, as already said, included in the right to re-insure. The liability of the re-insurer must always have reference to that of the first underwriter, by whom, of course, all - the particulars of the original insurance must be settled with him who is primarily insured.
    “ Have the Enterprise company, or its assignees, forfeited their right to relief under the agreement, by the non-compliance of that company therewith, as found and reported by the master ?
    “ The learned counsel of defendants contended that this interrogatory should be answered affirmatively; and, in an argument involving a Very thorough examination of the subject, relied upon the nature of the stipulation for all risks of the classes mentioned in the agreement, within the limitations there prescribed, and no more; which, he insisted, was a ivarrcmty, the breach of which should be followed by the same consequences as a breach of warranty in a policy of insurance. '
    “ He referred to the text writers and reported cases as follows: Phillips on Insurance, ch. 9, sect. 10, pl. 866, 869; Frisbie v. Fayette Ins. Co., 3 Casey 327; Jefferson Ins. Co. v. Cotheal, 7 Wend. 72; s. c. 1 Fire Ins. Cases 361; Dennistoun v. Lillie, 3 Bligh 202; Phillips on Ins., pl. 754; New Castle Fire Ins. Co. v. Macmorran, 1 Fire Ins. Cases 96; Lycoming Ins. Co. v. Mitchell & Boyle, 12 Wright 367; s. c. 1 P. F. Smith 409; Cumberland Val. Ins. Co. v. Douglas, 8 Id. 421; 3 Kent’s Com. 288; 2 Pars. Conts., pp. 429, 431; Jennings v. Chenango Ins. Co., 2 Denio 75. To some only of these authorities need special reference be here made; but they have all been examined. They establish that any statement or averment as to an existing fact, made by the assured, and incorporated in the policy, is a warranty, and that by breach of warranty, the policy is avoided.
    “ Thus far they all seem to go, and to unite in enforcing the doctrine of warranties in policies of insurance with extreme and especial rigor; because, upon the strictness with which the insured are held to such warranties, very largely depends the protection of insurers against decoit and fraud. But they do not go as far as is necessary to the defence in this • case. In the first place, the agreement, as before stated, is not in itself a policy, and is by no means within the mischief just mentioned ; for it was made between two insurance companies, each, presumably, equally well acquainted with the business about which they were contracting, and neither of them making any representations to the other, as that word is generally applied; and, although it is true, according to the master’s finding, that the Fame company were not informed of the acts of the Enterprise which are now complained of, yet the right, and therefore, perhaps, the duty to inform themselves were theirs, under the agreement ; which provided, not that the Fame company might examine the agent’s reports only as to the risks which were' reported by the Enterprise to the Fame, but as to ‘ such risks as are provided for in this contract.’ It is hardly possible that the officers of the respective companies would have replied in the affirmative if, at the time of the execution of this agreement, they had been asked whether they understood and intended that in case the Enterprise company (with this power of complete examination in the Fame) should fail to give all, or happen to give more risks to the latter than provided by "their contract, the right of the Enterprise to recover for losses upon other risks, which had been actually given and accepted, and the premiums thereon paid, in accordance with the agreement, would be absolutely forfeited, as in the case of false representation*touching premises to be insured,' and amounting to warranty in an ordinary policy. And yet the cardinal point to be reached in the construction of every contract, is the intention of the parties at the time they made it.
    “ Moreover, the stipulation in question does not purport to have been based upon an averment of the Enterprise company, and did not relate to a then existing fact. It was simply a covenant or undertaking to be performed in the future — a promise, not even a representation. In many of the books warranty is applied to matters to arise, as well as to those existing; and even in our own state, and in a recent case (Cumberland Valley Mut. Proct. Co. v. Douglas, 8 P. F. Smith 421), Judge Strong incidentally so used it; but in Lycoming Ins. Co. v. Mitchell & Boyle, 12 Wright 367, the present chief justice has expressly considered this very subject, and has said that ‘ a warranty in a policy is understood to be a contract relating to an existing fact, and not a covenant for future acts.’
    “ On the whole the master is of opinion that this is not a case for tbe enforcement of the doctrine of warranty, as applied to poli-» cies. Under the authority last cited, this stipulation could not be, in strictness, a warranty; and, as already shown, the agreement is not a policy. But a contract which is not a policy may contain a covenant, the non-performance of which will practically work a forfeiture, although that covenant be not technically a warranty; for ‘ it seems to be -well settled that when there is a stipulation amounting to a condition precedent, the failure of one party to perform such condition will excuse the other party from all further performance of stipulations depending upon such prior performance ; but a failure to perform an independent stipulation, not amounting to a condition precedent, though it subject the party failing to damages, does not excuse the party on the other side from the performance of all stipulations on his part:’ Shaw, C. J., in Milldam Foundry Co. v. Hovey, infra. In the master’s opinion, the real question upon this branch of the present case arises under the principle of law just stated; and the solution of that question involves the inquiry whether the covenant, as to the class and limitation of the risks to. be taken by the Fame company, was one upon which the obligations of that company under the agreement depended, or, in other words, whether it was or was not a condition precedent. On behalf of defendants, it was contended that it went to the whole consideration, for the Fame company might well have been willing to make a contract for all, and no more, of certain described risks, but still wholly unwilling to take either'less or more than precisely -what they had in view, and stipulated for, as a safe or profitable number, amount or proportion. This argument is not AYithout Aveight; but if it should prevail, the injustice Avhieh would result to plaintiffs AYOuld be greater than that which it is urged will be done to the defendants by disregarding it; for, if the plaintiffs were not permitted to recover upon the re-insurances which were actually perfected in accordance Avith the agreement, then would they fail to obtain the indemnity for which they had actually and in good faith contracted and paid; Avhilst in requiring the defendants to indemnify the plaintiffs in those cases, the right of the former to full compensation for any loss or injury to them arising from the plaintiff’s failure to perform their covenants, is in no Avise impinged. In Foundry Co. v. Hovey, 21 Pick. 417, the whole subject of dependent covenants and conditions precedent is discussed, and the authorities revieAved, and the conclusion there arrived at is, that to constitute an undertaking a condition precedent, it must appear, either:
    “ 1. That it is in terms such : or,
    “ 2. That the act stipulated for must necessarily precede the act claimed to be dependent upon it: for if it be merely convenient, or even beneficial, that the one should precede the other, and the inconvenience or loss can be compensated in damages, the performance of the one is not a condition to the obligation of the other: or,

      “ 3. That the non-performance upon one side goes to the entire substance of the contract, and to the whole consideration.
    “ In that case, defendant had accepted, and, in part, worked upon, a large quantity of materials furnished by plaintiff, and it was held that he was not excused from completing the work on them, as agreed, by the subsequent failure of plaintiff, after demand, to furnish further material, although the plaintiff thereby broke his covenant and became liable in damages therefor.
    “ That the covenant now under- consideration is not made in express terms a condition precedent, inspection of the agreement determines ; and that no reasonable construction of it (were construction called for) would warrant such an interpretation of the terms employed, has already been shown. Neither can it be said that the act stipulated for must necessarily precede the act claimed to be dependent upon it; for the re-insurances which were actually made under and in accordance with the agreement, were all, in fact, completed before the partial non-compliance of the Enterprise Company with that stipulation was known.
    “ The strength of the defence upon this point, lies in the effort to bring the covenant in question within the third class of conditions precedent as classified in the case reported in 21 Pick. 417 : but it cannot prevail. ‘ The performance upon one side’ does not go ‘ to the entire substance of the contract, and to the whole consideration;’ but on the contrary the substance of the contract is plainly divisible and the consideration is clearly severable in its application to the numerous independent risks contemplated by the agreement.
    “In Weaver v. Sessions, 6 Taunt. 154, it is held that in case of a continuous agreemeht for repeated distinct acts, the failure to perform some of the acts does not discharge the obligation of the other party in relation, to the acts performed; and it was there said, ‘ if we were to hold this plea sufficient, we must decide that a single breach by the lessor would release the covenant of the lessee.’ * * 1A breach by the landlord does not generally discharge the covenant of the tenant, nor must it be construed so, because upon these covenants each party has a complete remedy against the other. ’ * * ‘ I think each of these parties has a complete remedy, and must resort to the remedy by actions on their respective covenants, and that the breach by the plaintiff of his covenant, is no discharge of the present action.’ In Story on Contracts, sect. 670, it is laid down that, even where there be ground for rescission, it should be partial and not in toto, if the contract be apportionable. See also Shields v. Davis, 6 Taunt. 65; Ritchie v. Atkinson, 10 East 295 ; Stavers v. Curling, 3 Bing. N. C. 355; McCulloch v. Cox, 6 Barb. 386 ; Keenan v. Brown, 21 Verm. 88.
    “ It is the consideration to be paid, not the subject or thing to be performed, that, in general, determines the class to which a contract belongs: 2 Parsons on Contracts 29, 30, 31; Lucesco Oil Co. v. Brewer, 16 P. F. Smith 351; 1 Comyn on Contracts, sects. 23, 24; Boone v. Eyre, 1 H. Black. 273.

      “ Obermyer v. Nichols, 6 Binn. 159, is an early and well-considered Pennsylvania case, in which it was held that a covenant which does not go to the whole consideration, and a breach of which may be compensated in damages, is an independent covenant; and, applying that principle to the subject-matter of that case, it was decided that a landlord who had covenanted to make improvements, might recover the rent reserved, without averment or proof that the improvements had been made. To the same effect is Ligget v. Smith, 3 Watts 331.
    “ The agreement of January 1871 was for distinct and separate acts ; the breach of covenant may be compensated in damages, and does not go to the whole consideration, as that test has been illustrated and applied by the courts; the contract has been in part performed, and the defendants, by receipt of premiums, partially benefited; and, finally, the most rational construction of -the whole instrument (as shown at an earlier stage of this inquiry) is, that it was not the intention of the parties to give to this stipulation the effect of a condition precedent. For these reasons, and because the doctrine of warranties in policies of insurance is without application, the defence founded upon the non-compliance of the Enterprise company with the agreement is not sustained. If injury had resulted to the Fame company, damages therefor should be ascertained and allowed in this proceeding, and defendants not be put to a separate action for their recovery; but inasmuch as the failure of the Enterprise company to send to the Fame all the risks that it was entitled to have received, has not been a source of loss, but of gain (as the result has proved) to the latter company, no damages can be awarded.”
    Exceptions Avere filed by defendants, which were dismissed and the report confirmed. A decree Avas made accordingly for plaintiffs, for the sum of $50,207.82, AA’ith interest. Defendants below appealed and assigned for error the dismissing of the exceptions,- confirming master’s report and entering the decree for plaintiffs beloAV.

      C. S. Pancoast and George W. Biddle, for appellants.
    — The plaintiff beloAV was not entitled to relief in equity. The original insured cannot come into equity for payment, and the position of the re-insured is the same. In all cases the defendant below Ayas to pay plaintiff below a certain amount of money, and there is no liability to the original insured: Hastie v. De Peyster, 3 Caines 190; N. Y. State Ins. Co. v. Protection Ins. Co., 1 Story C. C. R. 458. The obligation Ayas to pay, not to contribute: Dering v. Earl of Winchelsea, 1 Cox 321; Stirling v. Forrester, 3 Bligh 590. There is no jurisdiction on the ground of account or discovery: Story’s Eq. Pl., sect. 313; Story’s Eq. Jur., sect. 74; Phillips v. Phillips, 9 Hare 473; Moxon v. Bright, Law Rep. 4 Ch. Ap. 292; Porter v. Spencer, 2 Johns. Ch. R. 169; Peare v. Corporation of Nashville, 10 Yerger 179; Fells v. Hills, 2 H. L. Cas. 28; Dinwiddie v. Bailey, 6 Vesey 136, and O’Connor v. Spaight, 1 Sch. & Lef. 309. Defendant below was not liable under the agreement on the happening of the loss: Mutual Ins. Co. v. Hone, 2 Comstock 235 ; New York State Ins. Co. v. Protection Co., 1 Story’s C. C. R. 418. ■ The contract was to pay at “such times and in such manner as the latter company (Enterprise) may pay.” To interpolate the words “liable to pay” is to make a new contract. The contract was not one of insurance or re-insurance: N. Y. Bowery Ins. Co. v. N. Y. Ins. Co., 17 Wend. 359; 3 Kent Com. 279; 2 Parsons on Contracts 460. If a doubt as to corporate powers, the power does not exist: Pearce v. Railroad Co., 21 How. 444; Wood et al. v. Bedford & Bridgeport Railroad Co., Leg. Int. 1871, p. 53; In re Leeds Banking Co., Howard’s Case, 1 Law Rep. Ch. Ap. Cas. 560; Stewart & Foltz’s Appeal, 6 P. F. Smith 413; Manderson v. Commercial Bank, 4 Casey 379; Gillis v. Bailey, 1 Foster 149; Bank Com’s v. Bank of Buffalo, 6 Paige Ch. R. 497; Percy v. Millandon, 3 La. 568; Ex parte Henry Winsor, 3 Story 416; McCullough v. Moss, 5 Denio 567; Cammeyer v. United Luth. Churches, 2 Sand. Ch. R. 209 (188); Perrine v. Chesapeake & Delaware Canal Co., 9 How. 184; Wittenton Mills v. Upton, 10 Gray 582; Whichcote v. Lawrence, 3 Vesey 750. The contract is ultra vires, because it provides for the company being bound by contracts made by another company: Fowler v. Scully, 22 P. F. Smith 461; Pittsburgh & Steubenville Railroad Co. v. Allegheny Co., 29 Id. 215; Pittsburgh & Connellsville Railroad Co. v. Clark, 5 Casey 146; Hazlett v. Ins. Co., 1 Weekly Notes 24. The Enterprise company withheld reports, and by this breach it was avoided and the testimony of the president of the Fame relating to the alteration of the agreement by which the word “all” was introduced should not have been excluded: Manning v. Purcell, 7 De G., McN. & G. 55; May v. Chaffee, 4 Chicago Leg. News 9; McFerren v. Mont Alto Iron Co., 26 P. F. Smith 182; Frisbie v. Fayette Ins. Co., 3 Casey 327; 3 Kent Com. 373 *283; Dennistoun v. Lillie, 3 Bligh. 202; New Castle Fire Ins. Co. v. Macmorran, 3 Dow. P. Cas. 255; s. c. 1 Fire Ins. Cases 96; Lycoming Ins. Co. v. Mitchell, 12 Wright 367; Jennings v. Chenango Ins. Co., 2 Denio 75.

      R. L. Ashhurst and William A. Porter, for appellee.
    — As to jurisdiction exoneration has always stood with subrogation and contribution: Adams Eq. 267; Viele v. Hoag, 24 Verm. 46; Wayland v. Tucker, 4 Grattan 268 ; Couch v. Terry, 12 Ala. 225; Hickman v. McCurdy, 7 J. J. Marshall 559. Equity will decree specific performance of a contract to indemnify: Story’s Eq., § 850; Ranelaugh v. Hayes, 1 Vernon 189; Champion v. Brown, 6 Johns. Ch. 406; Newby v. Reed, 1 W. Blacks. 416; Antrobus v. Davidson, 3 Meriv. 578 ; McCormick v. Irwin, 11 Casey 111. Equity has full jurisdiction to enforce specific performance of an ordinary contract of insurance by reason of irregularity in the policy : Union Mut. Ins. Co. v. Commercial Mut. Ins. Co., 2 Curtis 524; Suydar v. Ins. Co., 18 Ohio 459; Perkins v. Washington Ins. Co., 4 Cowen 645. The bill is for an account and discovery, and equity has jurisdiction. The Fame company was bound to pay when the losses occurred and the Enterprise company became “liable to pay.” The assignment of the Enterprise Ins. Co. for the benefit of creditors was equivalent to legal payment by that company jn the sense contemplated by the agreement: Miller’s Appeal, 11 Casey 481; Graeff’s Appeal, 2 Weekly Notes 104. If the first insured compromise with the assured he can recover the whole amount from the re-insurer: Flanders on Insurance 42; Mut. Ins. Co. v. Hone, 2 Comstk. 235; Herckenrath v. Ins. Co., 3 Barb. Ch. 63 ; Carrington v. Ins. Co., 1 Bosw. 152; Eagle Ins. Co. v. Lafayette Ins. Co., 9 Ind. 445; Ins. Co. v. Cashow, 41 Md. 59 ; Blackstone v. Insurance Co., 56 N. Y. 107 ; Mackenzie v. Whitworth, Law Rep. 10 Exch. 36; Cummings v. Cheshire, Ins. Co., Legal Gazette 1876, p. 22. A bill will lie as soon as the liability to pay becomes absolute; Carman v. Noble, 9 Barr 371; Stroh v. Kimmel, 8 Watts 157 ; Bamford v. Keefer, 18 P. F. Smith 391. The contract was not ultra vires, but was within the power of the Fame company to make under the power to re-insure: Philad. Ins. Co. v. Washington Ins. Co., 11 Harris 253; Phila. Ins. Co. v. Ins. Co., 11 Harris 65; Bowery Ins. Co. v. N. Y. Ins. Co., 17 Wend. 359. Prima facie all contracts are valid; he who assails must show there is no authority for .making them: Scottish N. E. Railway Co. v. Stewart, 3 Macq. 382-414; Eastern Railway Co. v. Hawkes, 5 H. L. Cases 331; Pearse v. Morrice, 2 Ad. & E. 94 ; Rex v. Loxdale, 1 Burr. 447 ; Forrest v. Manchester S. & L. Railway Co., 30 Beavan 40 ; Brown v. Winnisimmet Co., 11 Allen 326 ; Simpson v. Westminster Palace Hotel Co., Limited, 2 DeG., F. & J. 141, affirmed 8 H. L. Cases 712; First Nat. Bank v. Graham, 32 Leg. Int. 440 ; Lyndeborough Glass Co. v. Massachusetts Glass Co., 111 Mass. 315; Midland Railway Co. v. Great Western Railway Company, Law Rep. 8 Ch. App. 841; Hartford & New Haven Railroad Co. v. New York & New Haven Railroad Co., 3 Rob. 411; Stewart v. Erie & Western Transp. Co., 17 Minn. 372; Sussex Railroad Co. v. Morris & Essex Railroad Co., 4 C. E. Green 13; Columbus, P. & I. Railroad Co. v. Indianapolis & Bell. Railroad Co., 5 McLean 450; Hare v. London Co., 2 J. & H. 80; Delaware & Hudson Canal Co. v. Penna. Coal Co., 9 Harris 144, s. c. 7 Wright 295. A contract executed and benefits received thereunder cannot be successfully assailed as ultra vires : Bradley v. Ballard, 55 Ill. 417 ; California Gas Co. v. San Francisco, 9 Cal. 453 ; Allen v. First National Bank, 23 Ohio St. 97 ; Ossipee v. Canney, 2 Am. L. T. Reps. N. S. 514. The agreement to give all the insurances of a certain character was not a warranty. The contract was for certain re-insurances and any omissions could be' compensated in damages: Boone v. Eyre, 1 H. Blackstone 273, note; Ritchie v. Atkinson, 10 East 306; Davidson v. Gwynne, 12 Id. 381; Weaver v. Sessions, 6 Taunt. 155; MacAndrew v. Chapple, Law Rep. 1 C. P. 643 ; Freeman v. Taylor, 8 Bing. 124; Lucesco Oil Co. v. Brewer, 16 P. F. Smith 351; Morgan v. McKee, 27 Id. 229 ; Foundry Co. v. Hovey, 21 Pick. 417.
   The Judgment of the Supreme Court was entered January 15th

Per Curiam.

— It is unnecessary to enlarge upon the prominent questions argued in this case, as we are of opinion there is not a sufficient ground of reversal. That some of the questions are close and difficult, must be conceded. They have, however, been well investigated and ably treated by the learned master; and we are not able to see our way clear to reverse his conclusions. Substantial equity has been done, and the interests of justice require the decree to stand.

The decree at Nisi Prius is affirmed and the appeal is dismissed, with costs to be paid by the appellants.


source: Caselaw Access Project

author: Per Curiam.

license: Public Domain

text:
    Wickersham versus Lee et al.,

    No. 1.
    1. The question of the fraudulent concealment of the receipt of money, on a claim placed in the hands of an agency for collection, was properly submitted to the jury upon the facts in this case.
    2. When an agency is entrusted with the collection of a claim at a distant point, where its agents are undisclosed, while it is the duty of the creditor to make inquiry about his claim, it is likewise the duty of the agency to give him full and proper information in regard thereto, and. should he be misled by the information thus given, within the time for the running of the Statute of Limitations, the statute will only begin to run against the creditor from the timo he received knowledge of the receipt of the money by the agency.
    January 31st 1877.
    Before Agnew, C. J., Sharswood, Mercur, Gordon, Paxson and Woodward, JJ. Williams, J., absent.
    Error to the Court of Common Pleas, No. 2, of Philadelphia county: Of July Term 1875, No. 30.
    Assumpsit by George and William Lee, executors of Wetherill Lee, deceased, the survivor of the partners of the firm of Barcroft & Co., against O. Wilson Davis and Morris S. Wickersliam, late trading as Davis & Wickersham, to recover the amount of a claim against L. L. Wrothdr & Co., which the defendants had collected as the agents of plaintijfs.
    The summons issued on the 30th of April 1870, and Wickersham •was alone served, who pleaded the general issue, a denial of the partnership between Davis and himself and the Statute of Limitations. Plaintiffs joined issue on each plea except that, of the Statute of Limitations, and as to it replied that the defendant collected a certain sum for plaintiffs and not only did not pay over the same, but fraudulently concealed all knowledge of the collection from the said Barcroft & Co., and refused to give them any information in regard to the same, so that the latter remained in ignorance thereof until the 22d of April 1870, when by accident they discovered that the collection had been made. The defendant rejoined and denied these allegations.
    At the trial, before Mitchell, J., it appeared that in 1860, 0. Wilson Davis and D. B. Birney were engaged at Philadelphia, under the firm name of Davis & Birney, in the collection of overdue claims, and, also, through their correspondents, in different parts of the United States.
    On August 31st 1860, Barcroft & Co., of Philadelphia, placed in the hands of Davis & Birney, for collection, an accepted draft of L. L. Wrother & Co., of Murray, Kentucky, dated April 6th 1859, payable three months after date, for $705, and on the same day this draft was forwarded by Davis & Birney to Messrs. Bigger, Thompson & Stubblefield, their correspondents at Murray, Kentucky, for collection.
    In March 1862, Morris S. Wickersham purchased all the right, title and interest of D. B. Birney in the firm of Davis & Birney, and a new copartnership was formed under the name of Davis & Wickersham, of which firm O. Wilson Davis and the said Morris S. Wickersham were the members.
    Under the agreement between Wickersham and Birney for the purchase of the latter’s interest in the firm, and, also, by the terms of the articles of copartnership between O. Wilson Davis and the said Wickersham, all the unsettled and uncollected claims in the custody of Davis & Birney passed into the hands of Davis & Wickersham, including in said claims the accepted draft of L. L. Wrother & Co., belonging to Barcroft & Co., of which draft there had been collected and paid over to Barcroft &■ Co. the sum of $152.27, leaving a balance uncollected of $555.73.
    This balance, it is alleged, was subsequently collected by W. J. Stubblefield, of Bigger, Thompson & Stubblefield, and remitted to Davis & Wickersham, on the 14th of April 1863.
    The remittance was in two checks, one for $398 and the other for $250 (total $648), and embraced collections on account of three claims, viz., Barcroft & Co. v. Wrother; Moss Bro. & Co. v. Wrother; and Cowell, Fareira & Co. v. Wrother; but the letter enclosing these checks failed to state in what proportions it was to be applied to the three claims referred to.
    The receipt of the checks was noted in the regular cash-book of Davis & Wickersham, and, also, in the petty cash-book kept by M. S. Wickersham, defendant below. A letter was addressed to W. J. Stubblefield, the attorney at Murray, Kentucky, asking for a statement showing how the amount was to be distributed, and the letter containing the check placed upon a file set apart for papers requiring explanation, until the statement from Stubblefield should be received.
    No such statement was ever received by Davis & Wickersham, the proportion of the remittance due Barcroft & Co. was not ascertained or paid to them, and no notice was given to them of the receipt of the checks.
    On April 20th 1863, Davis & Wickersham sold and transferred to William W. Ledyard and William M. Barlow their business, so far as it included the collection throughout the country of claims past maturity.
    Under the agreement of sale, Davis & Wickersham retained the ownership of all their books; dockets and papers, but gave to Led-yard & Barlow the use and possession of them for a period of five years, to enable them to properly continue and carry on the business.
    Notice of the purchase by Ledyard & Barlow from Davis & Wickersham, and of the transfer from the latter to the former of the collection business and the unsettled claims which had been in the hands of the latter, was given to Barcroft & Co. about May 1st 1863. Shortly thereafter Mr. Wickersham went to Europe.
    Barcroft & Co. subsequently, from time to time, applied to Led-yard & Barlow for a statement of the condition of their claims, including that against L. L. Wrother & Co., and received from them replies in writing. Two only of these ■written replies were offered in evidence, one dated November 30th 1864, which gives the answer to the inquiry as to claim against L. L. Wrother & Co. “ regarded as good,” and the other dated March 1869, “ not much hopes.”
    In March 1870, Barcroft & Co. wrote to W. J. Stubblefield, who, they had been informed by Ledyard & Barlow, had charge of the collection of this claim, asking him to account to them only for the claim, and received from him the reply that he had paid and overpaid their attorneys the L. L. Wrother & Co. claim. Upon this information, which, it is alleged, was the first notice they had received of the collection of the money, Barcroft & Co. instituted this suit against defendant in April 1870.
    The following points were submitted by the defendant:—
    1. That there is no evidence of fraud on the part of the defendant Wiekersham to take the case out of the Statute of Limitations, and therefore the verdict must be for the defendant. 2. That Dr. Wiekersham’s omission to give- notice of the receipt of the money from April 14th 1863 to May 1st 1863, during which interval he continued in the firm of Davis & Wiekersham, is not such evidence ’ of fraud on his part as to take the case out of the Statute of Limitations, and the verdict must be for the defendant. 3. That if it were the duty of Ledyard & Barlow to notify Barcroft & Co., their omission to do so is no evidence of fraud on the part of Davis & Wiekersham so as to take the case out of the Statute of Limitations ; and the verdict, even in that view, must be for the defendant.
    To which the court answered:—
    “ All these points are refused, because they include a binding direction to find for the defendant. I leave the question of fraud to the jury as a question of fact, under the instructions already given.”
    The court charged the jury: “ Under ordinary circumstances, the lapse of six years is a bar to a claim, but [if there was a fraudulent concealment, then the law will not allow any person committing that fraud to take advantage of it; and if that fraud has been proved to you in this case, then the lapse of time is not a good defence.]
    “ [Now, the only question which you have, to consider in this case is, whether or not the failure of Davis & Wiekersham to pay over that money to Barcroft when it was collected in 1863, was a fraudulent concealment of the collection with an intent to appropriate the money, or whether it was one of those accidents which are perhaps incident to all human business, and for which they were not responsible after six years.]
    “ Now, it was undoubtedly the duty of the defendant to pay over that money promptly, as soon as they ascertained the amount payable to Barcroft & Co. The plaintiff argues to you, from the neglect of that duty, which is conceded, that there was an intent to conceal the fact of the collection. On the other hand, it is argued to you by the defendant that, as no information was given by Stubblefield in that first letter as to the proportion of this money to go to each of these claimants, therefore no entry was made in the docket upon this claim, because it could not be divided, because they could not say how much of this money was due to .that particular claim, and they omitted to enter it in the docket on that account; but they entered it in the cash-book and petty cashbook, and that the subsequent failure to enter it in the docket and the ledger was one of those accidents of business which was unavoidable when the change in the partnership took place, sixteen days afterwards.
    “ [Now, that is the whole question you have to consider. If you find that this was a fraud, that there was an intention to conceal the collection of this money, then you will find a verdict for the plaintiff for the sum which ought to have been paid over, with interest to the present time.}
    “ If you find it was a mere accidental omission, not with an intention to conceal, then the lapse of time is a good defence, and you should find a verdict for the defendant.”
    The verdict was for the plaintiffs for $981.95. Judgment was entered on this verdict, and the defendant took this writ, assigning for error the refusal of defendant’s points and the foregoing poitions of the charge in brackets.

      James P. Gowen, George M. Pallas and P. P. Patterson, for plaintiff in error.
    — The Statute of Limitations applies to a collection of money by an attorney for his client, and it commences to run as soon as the right of action accrues, viz., when the money is received, or within a reasonable time thereafter, or at the utmost, when the relation of attorney and client is dissolved, as in this case did occur about seven years prior to suit brought, and only a few days after the collection was made: Glenn v. Cuttle, 2 Grant’s Cases 273; Campbell’s Administrator v. Boggs, 12 Wright 524; Rhines’s Administrator v. Evans, 16 P. E. Smith 192 ; Barton v. Dickens, 12 Wright 518.
    The only qualification to this general rule is, that where the attorney fraudulently conceals the collection by giving false or evasive answers to his client, the statute begins to run at the time when the fraud is discovered; but the onus probandi to take the case out of the statute is on the plaintiff.
    The evidence was not sufficient to submit to the jury on the question of fraud: Baisch v. Oakeley, 18 P. F. Smith 92; Howard Ex. Co. v. Wile, 14 Id. 201; Corn Exchange Bank v. Bank of Republic, 28 Id. 233; 1 Greenleaf on Evidence, sect. 80.

      Ludovic C. Cleemann and George Sergeant,, for defendants in error.
    — There was sufficient evidence of a fraudulent concealment of the collection of the money to go to the jury so as to stop the running of the statute: Garrett v. Jackson, 8 Harris 336 ; Dingee v. Jackson, 11 Id. 177; Huntzinger v. Harper, 8 Wright 204; Campbell’s Administrator v. Boggs, 12 Id. 524; Rhines’s Administrators v. Evans, 16 P. F. Smith 192.
    An examination of the cases cited by the plaintiff in error shows that the Statute of Limitations was passed to promote diligence on the part of the creditor, and that any act of the debtor causing delay on the part of the creditor, or misleading him, will stop the running of the statute.
   The judgment of the Supreme Court was entered February 12th 1877,

Per Curiam.

— The ease of the plaintiff was, that his firm had placed their claim against a distant debtor in the hands of a collection agency, which forwarded it to an attorney in a distant state for collection. He collected and transmitted the money to this agency. The partner who received it gave no notice to the creditors of the receipt of the money, did not note its collection upon the docket, where the receipt should appear, sold out the business to another firm, which took their place and their books without notice of the receipt, and was therefore unable to give the desired information to the creditors, who called frequently to ascertain the state of the claim, and were informed first, that it was good, and finally, that it was hopeless. Now, without explanation, this statement of the plaintiff’s ease would leave a very strong impression upon the mind that the money was purposely kept, and its receipt concealed from the creditors. Clearly these circumstances were to be submitted to the jury as evidence of an intentional concealment of the receipt of the money. But when the explanation came, fortunately for the reputation of the gentleman who received the money, a different case was presented. Then it appeared that in consequence of the meagre contents of the letter transmitting the money, this gentleman had to suspend his entries, and write for further information, which was not returned by the distant correspondent, and within three weeks this gentleman went abroad. Hence it was not error to submit the question of wilful, in other words, fraudulent, concealment of the money, to the jury. They have found the fact in favor of the plaintiff and this is sufficient for the case. But, independently of actual fraud, we hold that in such a case as this, where a collection agency is entrusted with a discretion, as to the collection, by law or otherwise, of a distant claim, having its own undisclosed agents, there is a duty to give full and proper information to the creditor who has no other means of knowledge, and therefore if the creditor calls from time to time within the time of the running of the Statute of Limitations, and receives from his agents’ information by which he is misled, the Statute of Limitations does not bar his action before knowledge of the receipt of the money by them. So long as they give him to understand that his claim is uncollected he is put off his guard. The duty of inquiry lies on him, but having made inquiry of his agents and being misinformed by them, they cannot set up the statute, when they have misled him, and thereby induced him to delay his action.

We see no error in this record.

Judgment affirmed..


author: Mr. Justice Paxson

text:
    Wickersham versus Lee et al.,

    No. 2.
    1. An action of debt founded on a contract arising from an implication of law is within the Statute of Limitations, and is barred if not brought within six years.
    2. A plaintiff cannot avoid the bar of the statute by merely changing the form of action, as it is the cause of the action rather than the form which determines the applicability of the statute.
    3. Richards v. Biekley, 13 S. & R. 399, considered and distinguished.
    February 1st 1877.
    Before Agnew, 0. J., Sharswood, Mercur, Gordon, Paxson and Woodward, JJ. Williams, J., absent.
    Error to the Court of Common Pleas, No. 1, of Philadelphia county: Of January Term 1877, No. 60.
    Debt brought by George and William Lee, executors of Wetherill Lee, deceased, the survivor of the partners of the firm of Barcroft & Co., against 0. Wilson Davis and Morris S. Wickersham, late trading as Davis & Wickersham.
    The summons in the case issued on the 14th of November 1874, service of which was had upon Wickersham only. The declaration set forth, that the defendants, being engaged in the business of collecting overdue claims, by law and. otherwise, the said 0. Wilson Davis being an attorney-at-law, the plaintiffs, on March 17th 1862, employed the -defendants to collect for them a claim against McFalls & Collins, of Mayfield, Kentucky, belonging to the said plaintiffs, amounting to $1545.84, of which amount the said defendants heretofore, to wit, on the 11th day of M-arch 1863, collected and received the sum of $447.86, whereby the said defendants became indebted to the said plaintiffs in that sum.
    The defendant, Wickersham, pleaded the general issue, the Statute of Limitations, and put in a plea denying the partnership between Davis and himself.
    The plaintiff's demurred to the plea of the Statute of Limitations, upon the ground, “ that the action of the said plaintiffs, as in the , said declaration set forth, is not grounded upon any lending or contract without specialty, nor is it for arrearages of rent, but accrued to the said plaintiffs by implication of law.”
    The court entered judgment for the plaintiffs on the demurrer, which was the error assigned.

      James E. Gowen, George M. Pallas and P. M. Patterson, for plaintiff in error.
    — The Statute of Limitations applies to an action against an attorney or agent for money collected by him: Glenn v. Cuttle, 2 Grant’s Cases 278; Campbell’s Administrator v. Boggs, 12 Wright 524; Rhines’s Administrators v. Evans, 16 P. F. Smith 192.

    This rule was recognised and enforced in an action of assumpsit in the court below between the parties to the present suit and for the same cause of action, and a nonsuit was entered accordingly.

      In the present action there has been a mere change of form from assumpsit to debt, and by this change alone the demurrer has been supposed to be sustained.
    It is submitted that the plea of the statute, however, is not regulated by the -form of the action, but is governed solely by the nature of the cause of action: DeHaven v. Bartholomew, 7 P. F. Smith 126 ; Thompson v. McGaw, 2 Watts 161; Dillebaugh’s Estate, 4 Id. 177; Doebler v. Snavely, 5 Id. 225; Patterson v. Nichol, 6 Watts 379.
    The cases cited for plaintiffs below, in support of the demurrer, all rest upon the substance and not the form of the action. As this case, however, involves the construction of a Pennsylvania statute only, it will be sufficient to refer to the Pennsylvania cases cited that were relied upon. They were Richards v. Bickley, 13 S. & R. 400; Rank v. Hill, 2 W. & S. 57; Williams v. Freeman, 7 W. & S. 361, and Passenger Railway Co. v. Moore, 14 P. F. Smith 79. In each of them it happened that the action was in form an action of debt, but the substance of the suit in each made the statute inapplicable.
    The language of the statute is, “all actions of debt grounded upon any lending or contract without specialty” shall be commenced within six years next after such cause of action; not upon any express contract, but upon any contract, express or implied, and in Glenn v. Cuttle, supra, and Campbell’s Administrator v. Boggs, supra, where the statute was applied, the court said there is a breach of the “implied contract” where the attorney neglects to pay over the money collected to his principal.

      Ludovie O. Cleemann and George Sergeant, for defendants in error.
    — The Statute of Limitations applies only to the remedy: 2 Pars. on Cont. 379; Ang. on Lim., sect. 7; Glenn v. Cuttle, 2 Grant’s Cases 274. If a party loses one remedy he may have another; he may have a choice of remedies: Ang. on Lim., sects. 7, 72; 1 Chit. Pl. 207, 210. Ry a judicious choice of the remedies the defendant may be precluded from availing himself of a defence which he might otherwise establish, as in case for fraud instead of assumpsit, where assumpsit may be barred by the Statute of Limitations: 1 Chit. Pl. 210; Richards v. Bickley, 13 S. & R. 401. *

    The present case being an action of debt, founded not on a contract in fact, but on one that arises from an implication of law, it is not, in terms, within the Statute of Limitations.
    Our statute follows the English statute, as does that of the state of New York. Yet in England, New York and Pennsylvania, the construction of the words “ all actions of debt grounded upon any lending or contract without specialty,” has always been to include only actions of debt founded on a contract expressed or implied in fact, and not one arising from an implication of law; for had all contracts been intended, the words without specialty would not have been used: Hodsden v. Harridge, 2 Saund. 64; Pease v. Howard, 14 Johns. 479; DeHaven v. Bartholomew, 7 P. F. Smith 126; Richards v. Bickley, 13 S. & R. 395; Rank v. Hill, 2 W. & S. 57; Williams v. Freeman, 7 Id. 361.
    The authorities cited by the plaintiff in error show that actions in such form as would ordinarily be barred by the statute are not so barred if the nature of the cause of the action is such as that it is not included in the statute. All the cases cited on this point that are actions at law are either assumpsit or case, and the statute is held to be no bar. In other words the form of the action is never allowed to impose the restraint of the statute on a cause of action otherwise not within the statute, though the form of the action is allowed in many cases to take from the restraint of the statute causes of action within it under another form of action.
   Mr. Justice Paxson

delivered the opinion of the court, March 28th 1877.

The defendants below pleaded actio non accrevit infra sex annos. To this plea the plaintiffs demurred, and thus raised an issue of law. The issues of fact were decided adversely to the defendants by the jury. The court below sustained- the demurrer and entered judgment upon the verdict. The single question here is, whether the plaintiffs were entitled to judgment upon the demurrer.

The defendants were collection agents. The declaration was in debt for not paying over certain moneys collected by them. It was contended by the plaintiffs that inasmuch as the action was not founded upon a contract in fact, but upon one that arises from an implication of law, it was not within the terms of the Statute of Limitations. The language of said statute is, “ all actions of debt grounded upon any lending or contract without specialty.” Richards v. Bickley, 13 S. & R. 399, was cited as sustaining the proposition that the statute does not apply in an action of debt against an attorney for not paying over money collected by him. No such point was decided in that case. It was an action of debt upon a foreign judgment, in which it was alleged that the foundation of the judgment was a specialty. The court held that in such case the statute was not a good plea. It is true, Mr. Justice Duncan, in delivering the opinion of the court, classes debt against an attorney for money received by him among the instances in which the statute does not apply, and refers to Comyn’s Digest, vol. 7, p. 415, as authority. I have examined the first American (from the fifth English) edition of Comyn, and find that it makes no reference to debt against an attorney. It does enumerate several instances in which the statute does not apply to an action of debt: as debt upon1 an award, debt for a legacy, debt against a sheriff for money collected upon a fieri facias, &c. It may be that where an attorney receives the money of his client by virtue of his official position and not by reason of any contract between them he would not be entitled to set up the bar of the statute to an action of debt brought to recover it. It is unnecessary to discuss this proposition, for we have no such question before us. The defendants below were mere collection agents. True, one of them was an attorney, and is so described in the declaration. But it is mere matter of description. . There is no averment that he received any of the plaintiffs’ money by virtue of his office of attorney. Further, he was not served, did not appear, and there was no trial as to him. The other defendant (Wickersham) was not an attorney, nor declared against as such. It is plain that as to him there was a contract relation. The declaration avers that “the said plaintiffs, heretofore, to wit, on the 17th day of'March 1862, * * * employed the said defendants to collect for them, the said plaintiffs, a claim,” &c. Here was an express contract to collect the money, and an implied contract in fact to pay it over when received. There is a manifest distinction between such a case and that of a public officer who merely owes a duty. A sheriff who receives money upon an execution is under no contract express or implied with the plaintiff in the writ. He collects it by virtue of his office, in obedience to the mandate of the execution, and when received it is his official duty to pay it over to whomsoever may be legally entitled to receive it. If the action at bar had been assumpsit it is clear the statute would apply. • This is settled by authority : Campbell’s Adm’r v. Boggs, 12 Wright 524; Rhines’s Adm’rs v. Evans, 16 P. F. Smith 192. Can the plaintiffs avoid the bar of the statute by merely changing the form of action ? We think not. It is the cause of action rather than the form of action which determines the applicability of the statute: DeHaven v. Bartholomew, 7 P. F. Smith 126 ; Thompson v. McGraw, 2 Watts 161; Doebler v. Snavely, 5 Id. 225; Dillebaugh’s Estate, 4 Id. 177; Patterson v. Nichol, 6 Id. 379; Rank v. Hill, 2 W. & S. 56. We are of opinion that the defendants were entitled to the benefit of the statute, and that it was error to enter judgment against them upon the demurrer.

The judgment is reversed, and judgment is now entered here in favor of the defendants upon the demurrer.


author: Mr. Justice Mercur

text:
    Krumbhaar versus Birch.
    1. A purchaser of personal property who seeks to defend an action for the purchase-money on the ground of a defect in the vendor’s title, must show an eviction or an involuntary loss of possession.
    2. A purchaser of personal property who takes and retains possession thereof and consumes it, cannot defend an action for the price on the ground that he had .afterwards boon obliged to pay for the property again to a third person who had a paramount title.
    3. When the vendor of personal property knowingly makes a false representation as to his title to the goods, this can be set up by the vendee as a defence in an action for the unpaid purchase-money.
    4. K. bought from B. his interest in certain chattels and in certain letters patent for an invention; in an action to recover the unpaid purchase-money, K. offered to show that at the time of the sale, B. had ceased to own the property, and that after the sale and delivery to him he had paid the real owner for it: Held, that this offer was properly refused and that the defendant was bound to prove an eviction.
    5. K. further offered to show in connection with these facts that he did not go into possession until his purchase from the rightful owner: Held, that this offer was properly refused.
    6. K. offered to show that at the time of the sale, B. falsely represented himself to be the owner of the letters patent: Held, that proof of the facts offered would be a defence and that this offer should have been sustained.
    February 1st 1877.
    Before Agnew, C. J., Sharswood, Mercur, Gordon, Paxson and Woodward, JJ. Williams, J., absent.
    Error to the Court of Common Pleas, No. 3, of Philadelphia county: Of January Term 1877, No. 62.
    Covenant by R. DeWitt Birch against L. Ramsey Krumbhaar, on an agreement elated August 3d 1871, by which the former sold to- the latter all his right, title and interest in certain chattels, machinery, &c., and in certain letters patent for the manufacture of copperas, “ so far as the same relates to Philadelphia and adjoining counties, and the city of Camden.” The purchase-money ivas $4680, payable in weekly instalments of $30. Weekly payments were made to the amount of $2970, up to September 13th 1873. This action was brought to recover the remaining payments alleged to be due. The pleas Avere non est factum, and covenants performed, absque hoc, &c.
    At the trial before Finletter, J., the defendant offered, (1) To prove that before the sale to him the plaintiff had assigned his interest in the personal property, and a portion of his interest in the letters patent, to one Weston, and that the title to the personal property and his interest in the patent continued in Weston till after August 3d 1871; that after the sale and delivery by the plaintiff to the defendant, the latter bought the personal property from Weston, and paid him for it; and that, as to the letters patent, a partial interest had previously been assigned by the plaintiff to Weston, who at the time of the sale to the defendant owned the right to use it in Philadelphia for six years, and that the letters patent were a nullity, and conferred no right upon the defendant. Further, in connection with the above facts, that the defendant did not go into possession of the property till after the purchase by him from Weston, on September 12th 1871.
    After these offers had been refused, seriatim, the defendant offered, (2) To show that the plaintiff, at the time of the sale, represented himself to be the owner of one-half interest in the letters patent, whereas he had sold his entire interest therein for Philadelphia county before that time. This offer was also refused.
    There was a verdict for the plaintiff, and after judgment thereon, the defendant brought this writ of error. The first three assignments of error were to the rejection of the first offers above, and the fourth assignment to the rejection of the second offer.

      John M. Thomas and R. C. McMurtrie, for' the plaintiff in error.
    — In the case of an implied warranty in the sale of chattels, an eviction takes place when a party in possession is obliged to hold under another to avoid an action on a title paramount. See Hare and Wallace’s note to Allen v. Hopkins, 13 M. & W. 94; where, also, a doubt is thrown upon the case of Vibbard v. Johnston, 19 Johns. 77. This latter case has also been greatly qualified, if not overruled, in Sweatman v. Prince, 62 Barb. 267.
    In an action to recover purchase-money it certainly is not necessary for the defendant to show an eviction; such is the rule in actions to recover the purchase-money of real estate : Hart v. Porter, 5 S. & R. 201; Shaw v. Anderson, 7 S. & R. 43.

      R. 6r. Platt and Samuel Pielcson, for the defendant in error.—
    The defendant was bound to show either an eviction or an offer to return the chattels to the plaintiff: Chandelor v. Lopus, 1 Sm. Lead. Cas. 290, American note; Vibbard v. Johnston, supra; Cox v. Hall, 24 Wend. 102.
    It makes no difference that this was an action for unpaid purchase-money: Wilson v. Cochrane, 10 Wright 229.
   Mr. Justice Mercur

delivered the opinion of the court, February 7th 1877.

This action was to recover for property sold by Birch to the plaintiff in error. By writing under seal the former sold “all his right, title and interest in and to” certain goods, chattels and fixtures, and also “in and to the letters patent,” * * * “for an improvement in the manufacture of copperas,” * * * “ so far as the same relates to the city of Philadelphia and adjoining counties, and city of Camden, in the state of New Jersey.”

All the assignments of error are to the rejection of evidence offered by way of defence. We do not discover any merit in the first three assignments. Birch sold his interest only. He professed to sell no more. The writing contains no assertion indicating the extent of his interest. It makes no averment that he had not previously disposed of the property. He sold his present interest only — whatever that might be. These offers contain no averment of misrepresentation.

Where defence is made to the payment of the purchase-money for breach of warranty of title, there should be proof of eviction or of an involuntary loss of the possession. The warranty of title is a part of the consideration. While the vendee holds the covenant, and retains the possession, he cannot withhold the purchase-money. The right to detain purchase-money is in the nature of an action on the covenant. A' vendee who seeks to detain by virtue of a covenant of warranty of title, in the absence of fraud, is as much bound to prove an eviction as if he was a plaintiff in an action of covenant: Christy v. Reynolds, 16 S. & R. 258; Lighty v. Shorb, 3 Penna. R. 450 ; Dobbins v. Brown, 2 Jones 79 ; Murphy v. Richardson, 4 Casey 292; Wilson v. Cochrane, 10 Wright 229.

The purchaser of personal property, who takes and retains possession thereof, and uses and consumes the same, cannot afterwards prevent a recovery of the price he agreed to pay, by showing he had bought the title of a third person.

Here the plaintiff in error purchased of Birch on the 3d of August 1871. He offered to show, without any notice to the vendor, and before he took possession, that he bought an outstanding title on the 12th of September 1871. It appears that he made a payment to Birch on the 9th of October 1871, and continued to pay the Aveekly instalments until the 13th of September 1873. After so many payments and so long a time, it was rather late to set up an implied breach of the contract: Leaming et al. v. Wise et al., 23 P. F. Smith 173. There was -no offer to prove any fact which Avould make the patent a nullity.

The fourth assignment presents a different case. Conceding that the vendor sold his interest only, the offer Avas to prove that he, at the time of the sale, represented himself to be the owner of one-half of the patent right, which he then sold; whereas, in fact, he had previously sold the entire interest therein for the county of Philadelphia. It was in substance to prove that the vendor made a representation, which he knew to be untrue, of a material fact, and thereby deceived and defrauded the vendee.

It needs no citation of authorities to prove that the wilful misrepresentation or concealment of a material fact by the vendor constitutes a fraud. If the facts alleged were established, the vendee might sustain an action to recover damages for the fraud; or he may use it by way of defence in an action brought against him for the purchase-money. Under proper pleas (and no objection was made in the court beloAV nor here in regard to them), the vendee may set up any facts in defence which, show that in equity and good conscience he ought not to be required to perform his covenant : Evans v. Dravo, 12 Harris 62. The assignment is therefore sustained.

Judgment reversed, and a venire facias de novo awarded.