text:
    Thomas W. Lamont et al., Individually and as the International Committee of Bankers on Mexico, Plaintiffs, v. Travelers Insurance Company et al., Defendants, and Louis S. Ottenheimer, Appellant. The Government of the United States of Mexico, Appearing Specially, Respondent.

      Argued June 1, 1939;
    decided November 14, 1939.

      Mark Hyman, Daniel W. Blumenthal, Frank B. Bruce and Maurice B. Blumenthal for appellant.

      Jerome S. Hess, Irving I. Goldsmith and Frank Rashap for respondent.
   Lehman, J.

The plaintiffs, constituting the “ International Committee of Bankers on Mexico,” have brought this action, asking that the court permit them to render an account of their procedings, as such committee, and that the court instruct them as to the manner in which they should distribute moneys which they have received from the Government of the Mexican Republic and which they now hold. In their complaint the plaintiffs allege that the moneys have been paid to them pursuant to certain agreements, to which the Government of Mexico was a party, and that, by the terms of such agreements, “ they are constituted trustees of the funds coming into the hands of the Committee pursuant to said agreements and are obligated to distribute such funds ” to holders of obligations, issued or guaranteed by the Republic of Mexico, who have deposited their securities with the committee, pursuant to a deposit agreement. Claiming that the committee holds the moneys, received from the Government of the United States of Mexico, only as agents and that the moneys remain the property of the government, that government has appeared specially for the purpose of “ asserting the sovereign immunity from suit of the United States of Mexico ” and has moved for an order that the court refuse jurisdiction of the action. The motion was granted and an order dismissing the action was entered, and has been affirmed by the Appellate Division.

The pleadings and the affidavits filed upon the motion, show that in June, 1922, the Mexican Government was in default in the payment of interest on over $500,000,000 of bonds, issued at various times and containing varying terms and stipulations. These various issues of bonds may, it is said, be “ generally classified as falling into three classes: a, the Secured Direct Debt; b, the Unsecured Direct Debt; and, c, the Railways Debt.” A committee of foreign bankers, composed of representatives of banking firms or corporations which had distributed these issues of bonds to foreign investors, was formed for the purpose of negotiating, in behalf of the foreign bondholders who might deposit their bonds with the committee under a deposit agreement and plan prepared by the committee, an agreement with the Government of Mexico for the adjustment and liquidation of its public debt. The committee successfully negotiated a satisfactory agreement with the government whereby the government promised to pay to the committee stipulated sums, to be distributed by the committee in accordance with a schedule which was made part of the agreement. In 1925 the committee, purporting to act under authority conferred by the depositing bondholders, agreed to a modification of the earlier agreements. The government has not paid the full amounts stipulated in the original or the modified agreement, but it has paid to the committee large sums of money and the committee now holds a fund of several million dollars which, concededly, it has received from the government for distribution among holders of government obligations deposited with the committee.

Conflicting claims have been made by holders of the three classes of obligations, and the Mexican Government has claimed that it is entitled to the return of the moneys it has paid. The complaint accordingly states: * * .* serious doubts have been raised as to whom and in what manner such funds should be distributed, it being questioned whether (a) all such funds should be distributed pro rata to depositors of bonds of the Secured Direct Debt, or (b) whether all such funds should be applied pro tanto in accordance with the schedule attached to the Deposit Agreement to depositors, or (c) whether the Mexican Government has an interest in all or part of said funds sufficient to require your plaintiffs, as such Committee, to deliver over all or part of such funds to such Government,, or (d) whether distribution should be made in some othér manner. In view of these circumstances, your plaintiffs, as such Committee, and as Trustees as aforesaid, feel it incumbent on them for their protection to apply to this Court for directions as to the persons to whom and the proportions in which they should pay and turn over such funds before making any distribution or partial distribution thereof whatsoever.”

Because over two hundred and seventy-five thousand individual holders of securities have deposited their securities under the deposit agreements and because, according to the complaint, the questions which are the subject of this action are of common and general interest to all depositors of securities falling within the three general classifications of securities under the aforesaid Agreements, namely, the Secured Direct Debt, the Unsecured Direct Debt, and the Railways Debt; that the rights under the aforesaid Agreements of depositors of securities of each of said three general classifications are equal and identical within the respective classification,” the plaintiff has named Travelers Insurance Company of Hartford as a party defendant, as the representative of all the holders of deposited securities, herein-above designated as the Secured Direct Debt; has named New York Life Insurance Company as a party defendant, as the representative of all holders of deposited securities of the Unsecured Direct Debt, and has named Equitable Life Assurance Society of the United States as the representative of all holders of securities of the Railways Debt. Thereafter, by stipulation of the parties and by order of the court, Louis S. Ottenheimer was permitted to intervene as a party defendant in his own behalf and in behalf of all other holders of bonds of the “ Secured Direct Debt.” He appeared and filed an answer in which, as a counterclaim, he asserted, in behalf of the bondholders he represented, that, under the terms of their bonds and under the terms of the agreement and plan of 1922, holders of obligations of the Secured Direct Debt have a right to payment of defaulted interest out of the moneys held by the committee prior and superior to the rights of holders of other classes of obligations. He alone has appealed from the order dismissing both the complaint and the counterclaim which he has pleaded.

The Government of the United States of Mexico is, of course, immune from suit here. The courts of this State cannot adjudicate any controversy to which a foreign sovereign government is a necessary party unless the foreign government, as a suitor, asks our courts to enforce some right claimed by the foreign government or, voluntarily, submits to our courts for adjudication a claim which another makes against it. In this action neither the plaintiffs nor the defendant Ottenheimer seek any relief against the Government of Mexico or redress for a wrong which they claim the Mexican Government has done. Both ask the court only to pass upon conflicting claims to a fund which is here and in which, it is said, the Mexican Government has no property right or interest. They seek an adjudication of the rights only of those who are subject to the jurisdiction of the courts in a fund which is held by the plaintiffs. The problem is, primarily, whether the Mexican Government is a necessary party, because of its claim that it owns the fund and that none of the parties who urge conflicting claims have any legal or equitable interest in the fund, and, incidentally, whether the controversy between the parties to the action involves questions upon which the court cannot pass without invading the sovereign right of immunity of the Mexican Government.

Since the defendant Ottenheimer, alone, has appealed to this court, we are concerned only with the controversy between holders of the bonds of the Secured Direct Debt, who are represented by him, and the other parties to the action. That controversy involves, however, as we have said, conflicting claims to the fund received by the committee and it is plain that, in an action for an accounting, an adjudication of the claims of one party requires the adjudication, also, of the claims of all the other necessary parties to the action who assert an interest in the same fund. It follows that if the order of the court below, rejecting jurisdiction of the action, is reversed, the court must resume jurisdiction of the action and determine the conflicting claims of all the necessary parties, regardless of whether such parties are appellants or respondents here. There may, of course, still be some questions, which the parties seek to raise, upon which the court cannot pass without the consent of the Government of Mexico; but the court must pass upon all questions, where it has jurisdiction, if all necessary parties are before it.

It is said that, at least in part, the action for an accounting is an action in personam; that a judgment in personam is an adjudication binding only upon the parties to the action, and that the Government of Mexico, which is not a party to the action, cannot object to the court taking jurisdiction of an action and granting judgment in personam, binding upon the parties to the action but not upon the foreign State. The principal, if not the sole, object of the accounting action is to obtain a judgment determining the proper disposition of the fund. We decide whether the court has jurisdiction, without the presence of the Government of Mexico, to direct how that fund should be distributed before we consider whether the court might take jurisdiction to grant a judgment in personam upon minor related questions, even though it could not adjudicate the principal controversy.

A foreign government, like the government of a State or of the United States, cannot be called to account in the courts of this State. Redress for repudiation even of a solemn contract or for injury inflicted without any justification by a sovereign State cannot be granted by the courts without the consent of the sovereign State. For such redress a party wronged must invoke the aid of the political branches of the government (United States v. Diekelman, 92 U. S. 520); nor may a court grant redress against an agent of the foreign State for a wrong inflicted within the territory of the foreign State with the sanction or by command of the sovereign. Every sovereign state is bound to respect the independence of every other sovereign state, and the courts of one country will not sit in judgment on the acts of the government of another done within its own territory.” As corollary of that principle, there is immunity of individuals from suits brought in foreign tribunals for acts done within their own States, in the exercise of governmental authority.” ( Underhill v. Hernandez, 168 U. S. 250, 252.) That immunity extends to property here of the foreign sovereign and no action can be maintained to take the property of a sovereign State or to subject it to judicial process. (Stanley v. Schwably, 147 U. S. 508.) Even an agreement by the sovereign that its property shall be applied upon a debt of the sovereign cannot be enforced in our courts against such property, for such an agreement “ amounts to nothing more than an engagement of honour, binding, so far as engagements of honour can bind, the government which issues them, but are not contracts enforceable before the ordinary tribunals of any foreign country, or even by the ordinary tribunals of the country which issued them, without the consent of the government of that country.” (Twycross v. Dreyfus, 36 Law Times Rep. 752 [1877], per Jessel, M. R. Cf. Smith v. Weguelin, 8 Eq. 198 [1869].)

If, as the Government of Mexico asserts, the object of this action is to enforce an agreement, made by that government, affecting its public debt or to reach moneys held by the plaintiffs as its agents, then, under these well-established principles it is plain that the action cannot be maintained in the courts of this State. The question, however, remains whether the courts must accept the assertion of the foreign State though disputed by the appellant and the other parties to the action. The appellant maintains, as we have said, that the moneys, in the hands of the committee, are held by it as trustee for the bondholders, not as agent of the government; that no party is seeking to compel the foreign government or its agents to perform any agreement of the government; and that no party is seeking redress for breach of any agreement made by the government or to apply property of that government to payment of its public debt. They maintain, on the contrary, that they seek merely to distribute, among the real owners, moneys held in trust for them.

Whether the moneys are the property of the Mexican Government and are held by the plaintiffs as its agents, or whether the moneys are held by the plaintiffs as trustees for the benefit of the depositing bondholders, depends upon the proper construction of the agreement or agreements under which the moneys were paid to the plaintiffs. Argument, certainly not without force, can be made that the moneys do not belong to the Mexican Government; but the courts below have refused to pass upon the proper construction of these agreements on the ground that they cannot pass upon the validity of the claim of a foreign government, when the government refuses to submit that claim to the arbitrament of the courts.

That leaves the parties in an anomalous situation. The Mexican Government cannot obtain the moneys without appeal to our courts and proof that the moneys belong to it; yet, under the decision we are now reviewing, the mere assertion of a claim of ownership by the Mexican Government halts the trial and determination of whether the moneys belong to the parties to the action rather than to the Mexican Government, even though no judgment is asked against the foreign government or against any person who is shown to be agent of the government. Immunity of a government and its property from coercion by the courts includes, it is said, immunity from investigation by the courts of the government’s assertion that it owns property which parties to an action assert belongs to them, and which these parties assert is not in the possession of the foreign government or its agents.

In the recent case of Ezra v. Lamont (265 N. Y. 635) the plaintiff sought to rescind or repudiate the agreements under which the moneys had been paid to the committee by the foreign government. There, if the plaintiff successfully sustained the allegations of the complaint, the conclusion would necessarily follow that the committee may not use the moneys it has received from the Mexican Government for the purpose for which the moneys were paid to it, and upon rescission of the contracts the committee would hold the moneys not for the benefit of the depositing bondholders but for the Mexican Government. No court could by its decree order that the moneys held for that government should be put to any other use. In the case'we are now considering, though the pleadings contain many allegations contained, also, in the pleadings in Ezra v. Lamont (supra), yet the pleadings contain other allegations and present other claims which, if sustained, will establish the right of the bondholders to distribution of the moneys held by the committee. There lies the distinction between the two cases.

The mere assertion by the Government of Mexico that the committee holds the moneys not as trustee for the bondholders but as agents of the government for distribution among the bondholders does not, we think, preclude the court from determining whether, under the contracts, the committee has acted and is acting solely as agent and trustee of the bondholders and not as agent of the government. In the recent case of Compania Espanola de Navegacion Maritima, S. A. v. The Navemar (303 U. S. 68) the Supreme Court of the United States has discussed the question of how far a suggestion by a foreign sovereign that it is the owner of property which is the subject-matter of a suit in the courts here must be accepted as true by the court and requires the court to refuse jurisdiction of the suit. There the court held that such a suggestion, made by a foreign government to the court, constitutes merely the statement of a claim by the foreign government, and is not proof of the allegations contained therein. The right of the foreign government to demand the return of its property or to demand that the court shall recognize that the property is immune from judicial control is, then, an appropriate subject for judicial inquiry upon proof of the matters alleged; ” but the assertion of the claim gives to the foreign government only the right to intervene and prove its allegation that it owns the property. The court, in the absence of such proof, is not required to cease its consideration of the controversy between the parties to the action or to deny effect to the proof, produced by such parties, to sustain the pleaded allegations. If, in this case, the allegations of the pleadings are sustained, that the plaintiffs hold moneys received from the Mexican Government in trust for the depositing bondholders, then the court can direct distribution of the fund without invading the sovereign immunity of the foreign government, without sitting in judgment on the acts of the government done within its own territory, and without interference with any property which belongs to the government or is in its own possession or in the possession of its agents. The foreign government does not become a necessary party to the action, unless the issues raised in the action by the pleadings of the parties in the action cannot be decided without the presence of the foreign government. No issue is raised merely by suggestion of a government which refuses to intervene and to present proof to sustain its allegations; and immunity from suit exists only where the object of the suit is to enforce a claim or right against the foreign government or its property. The mere assertion by a foreign government, without proof, that property which is the subject of controversy between parties here belongs to the government, does not constrain the court to refuse jurisdiction of that property.

It is true, of course, as the court pointed out in Compania Espanola de Navegacion Maritima, S. A. v. The Navemar (supra, p.74), that a foreign government may claim immunity from suit either in the court or through diplomatic channels, and if the claim is recognized and allowed by the executive branch of the government, it is then the duty of the courts to [accept the claim of immunity] upon appropriate suggestion by the Attorney-General of the United States, or other officer acting under his direction.” Here, as the United States Attorney states, he has done no more than to “ present ” the suggestion of immunity, “ at the request of the Secretary of State of the United States, through the Attorney General, following diplomatic representations * * * made to the Secretary of State in behalf of the Government of Mexico,” and the United States Attorney adds significantly: “ In bringing this matter to the attention of the Court I respectfully inform it that the United States does not intervene as an interested party and that I do not appear either for the United States or for the Government of Mexico, but I present this suggestion as a matter of comity between the Government of Mexico and the United States Government for such consideration as the Court may deem necessary and proper.” It seems plain that such a presentation of a suggestion ” does not indicate that the executive branch of our government has recognized and allowed the claim of the Government of Mexico, and the court remains free to give to the claim of immunity such consideration as the Court may deem necessary and proper.”

We do not upon this appeal decide whether the agreements should be construed as constituting the committee the agent of the Government of Mexico for the distribution of the moneys which the committee has received and holds, or whether under the contracts the committee became the trustee of such moneys for the depositing bondholders. That is a matter which must be decided, in the first instance, in the Supreme Court. We hold only that the Supreme Court has jurisdiction to pass upon the issues raised in the pleadings in this action and to render appropriate judgment, unless it shall appear at the trial that the Government of Mexico has, in fact, retained some right or interest in the property which is the subject of the accounting, and is a necessary party to any adjudication.

The orders should be reversed, without costs, and the motion to dismiss denied.

Crane, Ch. J., Hubbs, Loughran, Finch and Bippey, JJ., concur; O’Brien, J., taking no part.

Orders reversed, etc.


source: Caselaw Access Project

author: Lehman, J. Rippey, J.

license: Public Domain

text:
    Freda Abbott, as Administratrix of the Estate of Samuel Abbott, Deceased, Appellant, v. Prudential Insurance Company of America, Respondent.
    Argued May 18, 1939;
    decided November 14, 1939.

      M. Maurice Chacchia for appellant.

      Nicholas J. Weldgen for respondent.
   Lehman, J.

During the period from March 4, 1935, to August 12, 1935, the defendant insurance company issued six industrial life insurance policies for sums aggregating $1,344 upon the life of Samuel Abbott. The insured died on August 24, 1935, twelve days after the last policy was issued. The plaintiff., as administratrix of the goods, chattels and credits of the insured, her husband, has brought this action to recover upon the policies.

Each policy contained a provision that “ this Policy shall not take effect if the Insured die before the date hereof, or if on such date the Insured be not in sound health, but in either event the premiums paid hereon, if any, shall be returned.” It is not disputed that the insured was not in sound health at the time the policies were issued. Since 1931 he had been suffering from chronic myocarditis due to a strain caused by an industrial accident. He was unable to do “ physical ” work and, at times, he was confined to his bed and he had received an award of compensation under the Workmen’s Compensation Law (Cons. Laws, ch. 67). The insured had taken out other industrial policies in the defendant insurance company before he suffered the heart strain. In 1933 he had attempted to obtain additional insurance but the company’s agents informed him that he could not pass a physical examination. Nevertheless the same agents, with knowledge that the insured was suffering from a serious heart injury, delivered the policies in suit. The corporation, acting through its agents, thus issued policies by which the corporation in form assumed an obligation which in fact could never be enforced, as written, because it was made subject to a condition that the insured was, at the time of delivery, in good health, though the insured, to the knowledge of the agents, was then suffering from a serious cardiac impairment.

If the company, acting through duly authorized agents, with knowledge of the invalidity of the policies, chose to deliver them as valid instruments and, misleading the insured, to collect the premiums thereon, the company is estopped from enforcing the condition. Delivery of the policy would in such case have the effect of a waiver of the condition. “ If the insurance company or its general agent is at the time of the issue of the policy notified of facts which, under the terms of the policy, would render it void if not noted on the policy, the company cannot avail itself of such a defense.” (Lewis v. Guardian Fire Assur. Co., 181 N. Y. 392, 395, and cases there cited.) Though the rule was repudiated by the Supreme Court of the United States it remains with proper limitations ” the law of this State. (Satz v. Massachusetts Bonding & Ins. Co., 243 N. Y. 385.) It has been applied to conditions that a policy shall be void if the insured is not in good health when the policy is delivered (McClelland v. Mutual Life Ins. Co., 217 N. Y. 336), and the rule so applied has been recently approved by this court in Bible v. John Hancock Mut. Life Ins. Co. (256 N. Y. 458); Lampke v. Metropolitan Life Ins. Co. (279 N. Y. 157). These cases, however, emphasize that estoppel or waiver arises only when the agent has authority, actual or apparent, to waive conditions in a policy, and the defendant insurance company is charged with the knowledge of the agent. (Cf. Drennan v. Sun Indemnity Co., 271 N. Y. 182.) In this case the company denies that the agents had such authority and claims that the insured had warning and knowledge of the limitations upon the agents’ authority.

Here, as in Bible v. John Hancock Mut. Life Ins. Co. (supra, p. 463) the agent was authorized not only to solicit applications, but to make delivery of the policies, and upon delivery and afterwards to collect the weekly premiums.” It is now firmly established in this State that such an agent has apparent authority to brad the company unless the assured had notice of an actual limitation upon his authority. Whether the assured did have such notice is an issue presented in this case. Not only the policies in suit but policies previously issued to the same assured contained certain General provisions ” including a provision that no agent has power in behalf of the Company to make or modify this or any other contract of insurance, to extend the time for paying a premium, to waive any forfeiture, or to bind the Company by making any promise, or by making or receiving any representation or information.” Before the policies were issued, the assured signed and delivered applications for insurance. These also contained clauses above the signature of the applicant that “ I also understand and agree that no agent has power in behalf of the company to make or modify this application for insurance, or to bind the company * * * by making or receiving any representation or information.” The defendant maintains that this clause in the application and the general provisions in policies previously issued to the applicant gave notice to the applicant that the agent had no authority to waive the condition in the policy that the assured was in good health at the time the policy was delivered. The applications were not attached to the policies and were, therefore, not part of the contract of insurance. The court excluded them when they were offered in evidence, holding that under section 58 of the Insurance Law (Cons. Laws, ch. 28) the contents of an application not attached to a policy may not be considered for any purpose and that the applications are not competent evidence upon any issue. The question here presented is whether the exclusion of these applications presents reversible error.

Both the condition contained in the policy that the policy shall not take effect if the insured is not in sound health on the date of its delivery and the provision that no agent has authority to modify the contract of insurance or waive any of its conditions constitute part of the written contract between the parties. Both, too, might be waived by the insurance company acting through a duly authorized agent. The policy gives notice, it is true, of a limitation upon the authority of any agent to waive conditions, but that notice is received only at the time the policy is delivered. It does not apply by retroaction so as to nullify a waiver or estoppel having its origin in conduct antecedent to the contract.” None the less no waiver or estoppel arises where, before the contract is made, there has been warning, extrinsic to the policy, of a limitation on the apparent authority proper to an agent.” (Italics are new.) (Bible v. John Hancock Mut. Life Ins. Co., supra, pp. 462, 463, citing Drilling v. New York Life Ins. Co., 234 N. Y. 234, 242.)

Every policy of insurance delivered in this State must contain the entire contract between the parties, and nothing may be incorporated therein by reference to any “ application or other writings unless the same are indorsed upon or attached to the policy when issued; and all statements purporting to be made by the insured shall in the absence of fraud be deemed representations and not warranties.” (Insurance Law, § 58.) If the application had been attached, the provision that the applicant agrees that no agent has power to bind the company would have been incorporated in the agreement of the parties, and no claim could then have been made that the applicant did not at that time have notice of limitations upon the agents’ authority. That would be true even if there might otherwise be dispute as to whether the applicant read the application or knew its contents. Controversy is foreclosed if the application is annexed.” (Bible v. John Hancock Mut. Life Ins. Co., supra, p. 464.) Because the application was, in this case, not attached to the policy, its contents are of course not incorporated. therein and form no part of any contract between the parties which is the subject of this action. That is equally true of the policies of insurance previously issued to the same applicant. The applications, like the earlier policies, have no contractual force in this action. They are, like oral statements made during the negotiations, extrinsic to the policy ” and in an action upon the contracts are relevant only where evidence of matters extrinsic to the contracts would be admissible. Provisions in the application which the applicant failed to read or understand, are of no more effect than if they had never been written. If read and understood, and certainly a jury might infer that when the applicant signed the application he saw the provision immediately above his signature, then the applicant had warning of the limitation of the agents’ authority, and a contention that he was misled by the agents’ apparent authority would be without foundation. It is clear that except for the provisions of section 58, the application would be competent and cogent proof that the assured knew that the agents’ authority was limited and was not misled by appearance of greater authority in the agents. It constitutes a signed admission that warning of the limitation was received before any contract was made, and though the admission that warning was received is not conclusive there can be no doubt that in the absence of statute it would have the same force as any other admission, oral or written.

All the members of the court of course recognize that the claim of waiver or estoppel fails if the defendant shows by competent evidence of matters extrinsic to the contract that the assured knew of the agents’ authority prior to the delivery of the policy. What evidence can be produced to show that the assured knew of such limitation other than evidence that he was informed of the limitation either orally or in writing, or evidence that the assured admitted, either orally or in writing, that he had such knowledge? It cannot be disputed that evidence of a conversation prior to the making of the contract through which the assured received notice or admitted knowledge of the limitation would be competent and relevant, but argument is made that evidence that such information was conveyed by means of a printed form of application and that the assured signed such an application is incompetent under section 58 of the Insurance Law, unless the application is attached to the policy.

We have had frequent occasion to state the purpose and effect of the section as we construe it. The latest statement is contained in the opinion of Hubbs, J., in Lampke v. Metropolitan Life Ins. Co. (supra, p. 162): Prior to the enactment of section 58 of the Insurance Law (Cons. Laws, ch. 28), a policy might, by stipulation or reference therein, make a part of itself statements of the assured which were not embodied in the policy and such material statements were warranties the falsity of which avoided the policy. The insured, as a part of his contract, did not have a copy of such statements. He could not, by reading his policy, know what the statements were. He had no opportunity to correct any error in the statements. By the enactment of section 58 the Legislature intended to and did' change the situation by providing that the policy should contain the entire contract and that nothing could be incorporated therein by reference. Section 58 provides: Any waiver of the provisions of this section shall be void.’ After the enactment of section 58 the defense that the insured made false statements inducing the issuance of the policy ceased to constitute a valid defense unless such statements were made a part of the policy as provided in the section. The decisions previously made, holding such defense to be valid, no longer represented the law of the State. By many decisions the law has been definitely settled to the effect that false material statements made to induce a company to issue its policy, whether made orally or in writing, no longer constitute a defense unless such statements are attached to or indorsed upon the policy. Not constituting a defense, no evidence can be received of such material false statements. (Archer v. Equitable Life Assur. Society, 218 N. Y. 18.) Since that decision a defense based upon alleged false statements, not made a part of the policy as required by section 58, no longer has existed in this State. It makes no difference whether such false statements be called representations or warranties.”

Our ruling there that no statements “ whether made orally or in writing ” can be made a part of the contract of insurance or if false constitute a defense to the contract “ unless such statements are attached to or indorsed upon the policy,” is in accord with the language and purpose of the statute. For the protection of the assured the "statute requires that when the assured receives a policy of life insurance he may be able to read, in the policy itself, every provision of the contract the insurance company has made and every material representation which he may have made to induce the company to issue the policy. The parties to a contract of insurance may, subject to statutory restrictions not important here, determine what terms shall be inserted in a contract of life insurance. The statute defines the form which the parties must use to express their intention. If the application or any other writing is attached to the contract, it becomes a part thereof. If the application or other writing is not attached it has no more effect than oral promises or oral representations. That is what the statute says and that is what this court said in the opinion of Hubbs, J., in Lampke v. Metropolitan Life Ins. Co. (supra). In this case, then, the effect of the statute is to preclude the defendant from availing itself of the false representations contained in the signed application as a defense to an action to enforce the contract as written. When, however, the beneficiary of the policy seeks by extrinsic evidence to estop the company from enforcing a condition in the policy as written, the statute does not in terms or by fair implication provide that the company may not show either by oral or written evidence that the assured was not misled by the agent's appearance of authority.

“ The purpose of section 58 of the Insurance Law in requiring the whole contract to be stated in the policies, and not pieced out by documents included by mere reference, was not the relief of the insurer. It was the protection of those insured and of the beneficiaries claiming under them.” (Bible v. John Hancock Mut. Life Ins. Co., supra, p. 464.) The courts to carry out that purpose have given the statute a construction broad enough to ban every device by which the terms of the contract embodied in the policy may be altered or defeated by statements of the insured or agreements made orally or contained in any other writing which the insured may have made or signed without fully understanding their purport or effect. By no stretch of its language can we read into the statute an intent that the insured or his beneficiaries, by claiming ignorance of matters revealed, either orally or in an application or other writing, may impose upon the insurance company by estoppel a liability that the company never intended to assume. That proof of information conveyed orally is admissible is, as we have said, not disputed; but we are told that a distinction should be drawn between proof of knowledge made through production of a signed application and proof of knowledge made through testimony of conversations or through production of earlier contracts.

No language of the statute is pointed out to justify such distinction, and no sound reason for it is apparent. If the insured after reading the application had refused to sign it or had stricken therefrom the clause giving notice of the limitation on the agents’ authority, it could hardly be claimed that the insured had no warning of the limitation. Contention can hardly be made that in such case the unsigned or changed application would not have been admissible in evidence. The signature to the application does not conclude the controversy as to whether the insured read the notice handed to him, but it permits the inference that it was read. That evidence may be at least as reliable and persuasive as testimony of conversations would be- or testimony that the insured read the applications and refused to sign them; or as the evidence actually admitted that similar provision was contained in earlier policies. The statute does not render the application, though not attached to the policy, incompetent evidence where it is relevant upon a controversy as to matter extrinsic to the contract, and exclusion of that evidence constitutes reversible error

The order of the Appellate Division should be affirmed and judgment absolute ordered against appellant on the stipulation, with costs in all courts.

Rippey, J.

(dissenting). This action was brought by the plaintiff as administratrix of the goods, chattels and credits of her deceased husband, Samuel Abbott, to recover upon six weekly premium industrial life insurance policies issued by defendant upon the life of deceased on the following dates: Four policies, March 4, 1935; one policy, July 1, 1935, and one policy, August 12, 1935. Samuel Abbott died on August 24, 1935, twelve days after the issuance of the last of these policies, death concededly resulting from a chronic heart disease from which he had suffered since 1931 in which year he received a heart strain in an industrial accident. Plaintiff recovered before a jury at Trial Term. Upon appeal, the Appellate Division reversed the judgment appealed from by a divided vote and granted a new trial on a question of law only. This “ implies that the Appellate Division has examined the facts and is satisfied therewith ” (Grulich v. Paine, 231 N. Y. 311, 315). There was substantial and ample evidence to sustain the verdict. Plaintiff then gave a stipulation for judgment absolute and appealed to this court.

Transactions between the deceased and the agents of defendant occurring antecedent to the delivery of the policies are of importance and reference must be made to them in some detail. Defendant’s agent, Dillon, and its assistant superintendent in charge of its local office, Quinan, knew plaintiff and her husband by reason of previous dealings with them with regard to insurance. Both of them knew of Samuel Abbott’s accident in 1931 and of his resulting sickness which both knew had confined him to his bed for a considerable period of time and to his house under his physician’s care all of the time up to and including the date of the issuance of the policies. Dillon knew of and had spoken to plaintiff and her husband concerning the latter’s claim for workmen’s compensation for permanent injury. In 1933 Dillon advised plaintiff’s husband that he would be unable to procure more insurance because he would be unable to pass a medical examination and by the advice of both Dillon and Quinan he was persuaded not to apply for payment of the cash surrender value of certain policies then in effect upon his life. In February, 1935, without invitation by plaintiff or assured, Dillon and another agent called at their home and informed them that the defendant insurance company was issuing a new form of insurance contract referred to as an “ anniversary policy ” for which the assured was eligible due to the fact that no medical examination was necessary, and that inasmuch as the assured then had a $500 policy with the defendant, he could procure enough of this new insurance to bring his total coverage to $1,500. Plaintiff and her husband inquired of them how it was then possible to procure insurance upon the life of the husband when he was uninsurable in 1933. Dillon replied that this was a new type of policy. Upon application signed by the assured at this conference, insurance in the total amount of $954, divided into four policies, was issued by the defendant on March 4,1935. The policies were delivered to the insured by Dillon, who collected the premiums on these policies thereafter. On an occasion in June, 1935, Dillon called at plaintiff’s home and advised her to take the cash surrender value of various older policies then in effect (issued prior to her husband’s accident) on the life of her husband, explaining to her that she could then procure more of the anniversary insurance to take its place. She thereupon applied for and secured the cash surrender value of some of her husband’s insurance and on July 1, 1935, procured from defendant another weekly premium industrial policy in the amount of $195 upon the life of her husband and on August 12, 1935, another identical policy.

The written applications for the foregoing policies were signed by the deceased and were forwarded to the home office of the company where the policies were issued. The applications were not attached to nor endorsed upon the policies. The questions in the applications were in such form as to indicate that the defendant expected that they should be answered by somebody other than the insured. Question 17-a read: “ What is the present condition of health of the life proposed? ” and question 19 read: Has life proposed ever suffered from consumption, asthma, spitting of blood * * * or accident of any kind? ” These furnish a fair sample of the form and indicate the person from whom the information was sought and reasonably it might be inferred that the agent and not the applicant was expected to answer those questions. There was evidence in this case from which the jury were warranted in finding that the applications were not filled out by Dillon or by the insured or by any one in his behalf at the time Dillon procured the signature of deceased and that they were filled out later in Dillon’s office. In view of the facts that have been recited above, it is a reasonable inference that the insured would not have signed the applications nor applied for the policies had he known that representations that he was in good health were contained therein.

All premiums required on the various policies were paid to Dillon at the times when they were required to be paid. Proofs of loss were produced and received in evidence and it was conceded that they were timely made and in due form.

! Defendant called no witnesses. Dillon, the agent, was in court throughout the trial. It offered certain documentary evidence of which the only pertinent part on this appeal is a clause contained in each of the written applications made for each policy in suit, which read as follows: “ I also understand and agree that no agent has power on behalf of the Company to make or modify this application for insurance, or to bind the Company by making any promise, or by making or receiving any representation or informotion.” Counsel stated that his purpose in offering that evidence was to show the limitation of authority of the agent and that the insured had notice of the limitation of his authority. Upon objection by plaintiff, the evidence was excluded under the provisions of section 58 of the Insurance Law. The correctness of that ruling was the only question considered as a basis for reversal in the Appellate Division and the only question to be considered as a basis for decision in this court.

The policies themselves contained a clause that this policy shall not take effect if the Insured die before the date hereof, or if on such date the Insured be not in sound health, but in either event the premiums paid hereon, if any, shall be returned ” and another clause that “ no condition, provision or privilege of this Policy can be waived or modified in any case except by an endorsement hereon signed by the President,” etc., and that no agent has power in behalf of the Company to make or modify this or any other contract of insurance, to extend the time for paying a premium, to waive any forfeiture, or to bind the Company by making any promise, or by making or receiving any representation or information.” Plaintiff conceded that her husband was not in sound health at the respective dates on which the policies were issued and delivered or at the times the several applications were signed, but she sought to avoid those conditions of the policies on the ground that the defendant knew of the condition of health of the insured but in spite of its knowledge of the ill health issued the policies and was thereby estopped to assert such ill health as a defense.

It is now settled that the provisions contained in the policies limiting the authority of the agent do not constitute a good defense to the claim of waiver and estoppel where the alleged waiver occurred before the issuance of the policies (Bible v. John Hancock Mut. Life Ins. Co., 256 N. Y. 458, 463; Lampke v. Metropolitan Life Ins. Co., 279 N. Y. 157, 165). To avoid such a waiver and estoppel, the defendant may show by competent evidence extrinsic of the policy that the insured knew of the limitation of the agent’s authority prior to the issuance and delivery of the policy. Whether the insured had any such knowledge is a question of fact (see Lampke case, p. 165) and was submitted to the jury in the case at bar as a question of fact and is not a question of law for this court. The admission of the insured that he had such notice may be shown, by the clauses in the application where the application is endorsed upon or attached to the policy, but not otherwise (Insurance Law, § 58; Bible case and Lampke case, supra). As to the force of the statute to exclude evidence of notice to the insured derived from the unattached application, Chief Judge Cardozo says in the Bible case: To-day, the restriction upon the authority of the agent and the manner of its exercise is commonly stated in the application signed by the insured. Controversy is foreclosed if the application is annexed. Here it was not annexed, and notice of the limitation, if imparted, must be proved in some other way. In these circumstances, whatever would have been effective before the adoption of the statute to charge the defendant with an estoppel through notice to its agent, must be equally effective now. The purpose of section 58 of the Insurance Law in requiring the whole contract to be stated in the policies, and not pieced out by documents included by mere reference, was not the relief of the insurer. It was the protection of those insured and of the beneficiaries claiming under them. The Legislature had no design to make their situation harder ” (p. 464). No offer was made to prove by any other evidence notice of the restriction upon the authority of the agent to bind the company.

It is asserted here that a distinction exists as between offering the application to show misrepresentations by the insured as to his health and to show notice to the insured extrinsic of the policy previous to its issuance of the limitation upon the agent's authority. The clause in the applications was offered solely to prove the latter. On the basis of that distinction and for that purpose the Appellate Division has held that the provisions of section 58 of the Insurance Law have no application and that the evidence was admissible. It is suggested by the lower court that Chief Judge Cardozo had that in mind when he cited the case of Drilling v. New York Life Ins. Co. (234 N. Y. 234), but it might have been observed, by reference to the record in the Drilling case, that the application was attached to and made a part of the policy at the time of its delivery. Reading the entire statement of Judge Gaedozo in the Bible case (p. 462), it is evident that the offer of the evidence from the application in the form in which it was offered could not supply the element of proof or warning “ extrinsic to the policy, of a limitation on the apparent authority proper to an agent.” If the ruling of the Appellate Division is correct it means that the statement of the insured that he knew of the limitation of the agent’s authority might be incorporated into the contract between the parties by reference to the unattached application, the specific thing that section 58 prohibits. The section means what it plainly says, as this court has construed it in the Bible case, that the contract is complete on delivery of the policy, which must contain the whole contract between the parties, and that nothing in the application can be deemed a part thereof unless the application is endorsed upon or attached to the policy at the time of its delivery to the assured. Proof of notice to the assured of such limitations may, of course, be shown by evidence extrinsic to the policy, but when an attempt is made to show it by statements made in the application the evidence must be excluded unless the application itself is part of the contract between the parties.

The purpose of the Legislature is apparent and the salutary effect of the statutory provision is particularly pertinent in the case at bar, where the agent, who is alleged to have received all the information and to have known of the ill health of the assured, not only at the time the applications were signed but at the time the policies were issued and delivered by him, was in court during the trial and was not called upon to testify. To hold otherwise would permit the insurance company to take advantage of the information which it had, to accept the premiums from the assured and retain them and then, upon the death of the assured, by the simple expedient of offering a written application not a part of the contract of insurance, avoid payment under the policies and thereby perpetrate a fraud upon the estate of the assured (see Lampke case, p. 165).

There can be no question in this case in regard to the authority of the agent. He was not merely a soliciting agent but, as Judge Cardozo says in the Bible case, he was that, but much besides. He was authorized not only to solicit applications, but to make delivery of the policies, and upon delivery and afterwards to collect the weekly premiums ” (p. 463). Here, he was placed by the company in such a position as to enable him to perpetrate the fraud. As Judge Hubbs says in the Lampke case, Repeatedly we have held that the knowledge of an agent with the authority of the agent here involved constitutes knowledge on the part of the company ” (p. 165). Here, at the times the applications were signed, the assured was advised and was lulled into the belief that the agent had authority to bind the company through contracts of insurance which did not require him to be in good health at the respective dates of the policies. He was given no notice by the defendant to the contrary. The protection placed around such transactions by section 58 of the Insurance Law should not be relaxed.

The order of the Appellate Division should be reversed and the judgment of the Trial Term affirmed, with costs to the plaintiff in this court and in the Appellate Division.

Crane, Ch. J., O’Brien and Loughran, JJ., concur with Lehman, J.; Rippey, J., dissents in opinion in which Hubbs and Finch, JJ., concur.

Ordered accordingly.


author: Loughran, J.

text:
    Dores H. Fontheim, as Administratrix of the Estate of Alphonse Fontheim, Deceased, Appellant, v. Third Avenue Railway Company, Respondent.
    Submitted September 25, 1939;
    decided November 15, 1939.

      J. Preston Mottur for motion.

      Addison B. Scoville and Alfred T. Damson opposed.
   Loughran, J.

Plaintiff, as administratrix, brought this action under section 130 of the Decedent Estate Law (Cons. Laws, ch. 13), to recover damages for the death of her intestate. On her motion, Special Term struck from the defendant’s answer a defense consisting of new matter as being insufficient in law on the face thereof. The Appellate Division reversed and denied the motion. Plaintiff has appealed to this court from the order of the Appellate Division by its permission and now asks our leave to prosecute the appeal as a poor person.

Section 199 of the Civil Practice Act defines A poor person ” as “a person who is not worth three hundred dollars in cash or available property besides the wearing apparel and furniture necessary for himself and his family, and the subject matter of the action or special proceeding.” Section 196 provides: “A poor person whether an adult or infant not being of ability to sue who alleges that he has a cause of action against another person or the right to bring a special proceeding may, by order of the court, prosecute as a poor person and have an attorney assigned to conduct his action or proceeding. The attorney so assigned must act without compensation except that if a recovery is had the court may allow such attorney a reasonable sum for his services and taxable disbursements.” Section 198 provides: “ A defendant in an action or special proceeding involving his right, title or interest in or to real or personal property may petition the court in which the same is pending for leave to defend as a poor person and to have an attorney assigned to conduct his defense.” Section 198-a provides: “ Leave to prosecute or defend as a poor person may be granted at any stage of an action or special proceeding including any appeal therein, notwithstanding no leave was applied for or granted to prosecute or defend, as the case may be, prior to or at the commencement of such action or special proceeding.” (See Siegelbaum v. Dowling, 279 N. Y. 22.)

The policy of this legislation has been the subject of some contrariety of opinion. Cowen, J., thought that the. privilege to litigate entirely at the expense of others was a great exemption from the common lot of men. He agreed with Lord Bacon that the effect of the favor was that thereby the pauper became “ rather able to vex than unable to sue ” (Moore v. Cooley, 2 Hill, 412, 413.) On the other hand, the Commissioners to Revise the Statutes characterized the authorization of prosecutions by poor parties as a humane provision of the law.” (Throop’s Code Civ. Proc. [1882] p. 198.) Of course, it is not for us to settle this difference of social viewpoint. The question for us is one of statutory construction. . ........ ■

The foregoing provisions of section 196 do not in terms embrace an executor or administrator. This omission, we think, is conclusive against the plaintiff’s application Cases plainly outside the letter of a statute are not by construction to be brought within it merely because they are within its reason and spirit. Legislation is often tentative, beginning with the most obvious case, and not going beyond it, or to the full length of the principle upon which its act must be justified.” (Holmes, J., in Beard v. City of Boston, 151 Mass. 96, 97.) So, for example, the first of our statutes authorizing prosecutions by poor persons did not license a defendant to petition for leave to defend as a poor party, though it must have been plain that the principle of the legislation extended to the case of a poor man whose property rights were challenged. (Throop’s Code Civ. Proc., supra.)

What this plaintiff asks can be done only by enunciating a general rule for similar and related cases where a fiduciary represents poor beneficiaries. (Cf. Matter of Cannice, 52 Misc. Rep. 6, annotated in 38 Civ. Proc. Rep. 235 et seq.; Daus v. Nussberger, 25 App. Div. 185; Decedent Estate Law, §§ 120, 130-133). We think this legislation is too inelastic to be stretched so far, however deserving the plaintiff’s application may be. In our judgment, it is wiser to stand by the law as the Legislature wrote it. (Cf. Beard v. City of Boston, supra.)

The motion should be denied, without costs.

Crane, Ch. J., Hubbs, Finch and Rippey, JJ., concur; Lehman, J., dissents; O’Brien, J., taking no part.

Motion denied.


author: Per Curiam.

text:
    Edward K. Ream, Appellant and Respondent, v. Robert C. Ream et al., Individually and as Trustees under a Declaration of Trust Made by Caroline P. Ream, et al., Respondents, and Bethel V. Ream, Respondent and Appellant, Impleaded with Another.
    Argued November 13, 1939;
    decided November 15, 1939.

      Bethel V. Ream, in person, and Carl Sherman for motion.

      Harold Rosenblum, Milton Rosenblum and Clarence Blair Mitchell opposed.
   Per Curiam.

The defendant Bethel Veech Ream, having given notice to the court that he has attained the age of twenty-one years, is entitled to appear upon the appeal by attorneys of his own selection. Sherman & Goldring, having filed a notice of appearance for the defendant, may appear in his behalf upon the argument of the appeal and will then be free to state the position which the defendant desires to take upon the appeal.

The motion to dismiss the appeal should be granted to the extent indicated in this opinion; otherwise denied.


author: Hubbs, J.

text:
    Morris Goldstein et al., as Administrators of the Estate of Jack Goldstein, Deceased, Respondents, v. State of New York, Appellant.
    (Claim No. 24726.)

      Argued September 29, 1939; reargued October 16, 1939;
    decided November 21, 1939.

      John J. Bennett, Jr., Attorney-General (Henry Epstein, Joseph L. Delaney, Leon M. Layden and Jack Goodman of counsel), for appellant.

      Julius Applébaum and Samuel S. Leibowitz for respondents.
   Hubbs, J.

Claimants filed a claim against the State for damages growing out of the death of their son as the result of the negligence of a fellow private of the State militia and an officer thereof. The claim is based on section 130 of the Decedent Estate Law (Cons. Laws, ch. 13).

At the commencement of the trial on the claim before the Court of Claims the State moved to dismiss the claim on the ground that “ there were only two remedies open to claimants and which were exclusive: (a) under the Military Law of the State; (b) under the Workmen’s Compensation Law.” The motion was renewed at the close of the evidence and subsequently granted. The judgment dismissing the claim was reversed by the Appellate Division, upon the law, and the claim was remitted to the Court of Claims for a new trial (256 App. Div. 141). At the new trial the record of the first trial was used and by stipulation it is made a part of the record on appeal before this court. Following the decision of the Appellate Division the Court of Claims awarded to the claimants $15,493.50, with interest. The State appealed to the Appellate Division, which unanimously affirmed the judgment and granted permission to appeal to this court. The only points urged in this court by the State are the two grounds quoted above in the motion made by the State for a dismissal of the claim.

It is urged by the State that the deceased, a private of the State militia, who was engaged in active service at the time of the injury which caused his death, and suffered such injury as a result of the negligence of a fellow private and of a militia officer, was an employee of the State and that, therefore, the Workmen’s Compensation Law (Cons. Laws, ch. 67) afforded the exclusive remedy. It is conceded that if deceased was an employee of the State covered by that law there can be no recovery in this proceeding.

Section 2 of the Workmen’s Compensation Law, in part, defines an employer as follows: 3. ‘ Employer,’ except when otherwise expressly stated, means a person * * * employing workmen in hazardous employments including the state * * *.”

An employee is defined by section 2, subdivision 4, as follows: 4. ‘ Employee ’ means a person engaged in one of the occupations enumerated in section three or who is in the service of an employer whose principal business is that of carrying on or conducting a hazardous employment upon the premises or at the plant * *

Section 2, subdivision 5, defines employment as follows: 5. ‘ Employment ’ includes employment only in a trade, business or occupation carried on by the employer for pecuniary gain * *

Section 3 reads: “1. Hazardous employments. Compensation shall be payable for injuries or death incurred by employees in the following employments: * * *.”

Then follow groups' of different employees covered by the statute. Group 16 reads as follows: Group 16. Any employment by the state, notwithstanding the definitions of the terms ‘ employment/ ‘ employer ’ or ‘ employee ’ in subdivisions three, four and five of section two of this chapter.”

It is contended that by this group the Legislature intended to bring within the provisions of the Workmen’s Compensation Law certain employees of the State who might not be covered in the other groups of employees specified in section 3.

The deceased, while in active service in the militia, received $1.25 per day pay. It is, therefore, urged by the State that as he received pay from the State and was engaged in the service of the State he was an employee of the State within the meaning of group 16 of section 3 of the Workmen’s Compensation Law. We cannot accept that conclusion.

The underlying purpose of the Workmen’s Compensation Law was an attempt to spread the loss caused by injuries to or death of employees engaged in hazardous occupations so that the entire loss should not fall upon unfortunate employees suffering injuries or, in case of death, upon their dependents. (Phœnix Indemnity Co. v. Staten Island R. T. Ry. Co., 251 N. Y. 127, 132.) Gradually, by amendments, the statute has been extended to include many who were not covered by the original statute.

In determining whether particular persons or classes are covered it is necessary to consider the statute as a whole and the purpose embodied in its enactment. When so considered it seems to us to be apparent that it was never intended to cover militiamen while engaged in active service. There are many reasons which lead to that conclusion.

Working men and women, employees of others, under our system of government are free men and women. They have the same standing, rights and privileges possessed by other members of our body politic. They may work or not according to their own free will. If engaged in work they may quit working at any time if they desire without liability therefor unless prevented by the terms of some express contract. They may organize labor unions for the purpose of improving their working conditions. They may engage in strikes against their employers to compel their employers to grant them certain rights or privileges which they deem themselves entitled to. They may even engage in peaceful picketing of their employers’ places of business to induce their employers to grant them the rights which they claim.

Upon the other hand, when a man becomes a member of the State militia he must, when in active service, surrender for the benefit of the State certain of the privileges enjoyed by working men who are employees. Under the Military Law (Cons. Laws, ch. 36) a member of the militia may be tried for various military offenses, for acts which are not illegal under any other law. He may be tried and punished by a military tribunal and if found guilty may be punished by fines and in certain cases by imprisonment. He is at all times subject to the commands of his superior officers. He cannot quit while in active service without consent of his superiors. Members of the State militia do not become members for the purpose of receiving the small per diem allowances awarded them by the State while they are in active service. “ The militia of the state shall consist of all able-bodied male citizens * * * between the ages of eighteen and forty-five, who are residents of the state * * *” (subject to certain exemptions). (Military Law, § 1.) The Governor has power, in case of necessity, to order into active service of the State any part of the militia that he may deem proper. (Id. § 8.) Thus every man who is a resident of the State between the ages of eighteen and forty-five years, subject to certain exceptions, may in case of necessity be required, upon the call of the Governor, to enter the active service of the State as a part of the militia. It seems clear that one who joins the State militia and is engaged in active service therein is in no sense an employee of the State. He is simply performing a duty which he owes to the sovereign State as a resident and citizen. It makes no difference whether he does that voluntarily in time of peace or in response to the call of the Governor in time of trouble. It should also be noted that the Military Law makes provision for compensating those injured in active service and for their dependents in case of death. (Military Law, §§ 220-224.) Those- provisions were in force long before the enactment of the Workmen’s Compensation Law and have never been repealed. We are persuaded that the Workmen’s Compensation Law does not cover militiamen while engaged in active service. They are not employees of the State within the meaning of the law. (Hays v. Illinois Terminal Transp. Co., 363 Ill. 397.)

The question still remains whether the State has waived its immunity from liability to members of the militia and obligated itself to respond in damages for injuries negligently inflicted in active service by one member of the militia upon another and has granted to the Court of Claims authority to determine such liability and award a judgment for money damages therefor.

The statement that the State may be made liable in damages to a soldier or his dependents, because of injuries inflicted upon him through the negligence of a brother soldier or officer, except as provided in the Military Law, is rather startling. We think that the general understanding has always been that for injuries suffered by a soldier in active service the government makes provision by way of a pension. That this State has done in the Military Law (§§220-224), wherein it is provided when an allowance may be made, for what it may be made, the procedure to be followed and the amount that may be allowed. In fact, a complete system is set up for handling such claims. To justify a decision that another concurrent remedy has been created whereby the State may be made liable in unlimited amounts requires a statute to that effect, the meaning and intent of which is unmistakable. Statutes in derogation of the sovereignty of a State must be strictly construed and a waiver of immunity from liability must be clearly expressed.” (Smith v. State, 227 N. Y. 405, 410.) The learned counsel for respondents earnestly urges that former sections 12 (L. 1920, ch. 922, as amd. L. 1936, ch. 775) and 12-a (L. 1929, ch. 467, as amd. L. 1936, ch. 775) of the Court of Claims Act in effect at the date of the death of claimants’ intestate constitute such a statute.

§ 12. Jurisdiction of court. The court of claims possesses all of the powers and jurisdiction of the former board of claims. It also has jurisdiction to hear and determine a private claim against the state, including a claim of an executor or administrator of a decedent who left him or her surviving a husband, wife or next of kin, for damages for a wrongful act, neglect or default, on the part of the state ly which the decedent’s death was caused, and the state hereby consents, in all such claims to have its liability determined. * * *. But the court has no jurisdiction of a claim submitted by law to any other tribunal or officer for audit or determination except where the claim is founded upon express contract and such claim, or some part thereof, has been rejected by such tribunal or officer.”

Former section 12-a. Waiver of immunity from liability for torts of state officers and employees. The state hereby waives its immunity from liability for the torts of its officers . and employees and consents to have its liability for such torts determined in accordance with the same rules of law as apply to an action in the supreme court against an individual or a corporation, and the state hereby assumes liability for such acts, and jurisdiction is hereby conferred upon the court of claims to hear and determine all claims against the state to recover damages for injuries to property or for personal injury caused by the misfeasance or negligence of the officers or employees of the state while acting as such officer or employee. Such claim must be submitted pursuant to the procedural provisions of the court of claims act. Nothing herein contained shall be construed so as to affect, alter or repeal any provision of the workmen’s compensation law.”

The Court of Claims has found that the decedent met his death because of the negligence of a fellow private who was driving the truck in which he was riding, that the corporal who was riding beside the driver was negligent, and there is a general finding that the officers were negligent in failing to furnish a relief driver.

If private members of the State militia are not employees of the State, then for the same reason the officers referred to were not. The word officers ” as used in section 12-a is included in the term employee. Neither was acting in any employment of the State. They were citizens performing a public duty under the Military Law. By section 12-a “ the state * * * waives its immunity from liability for torts of its officers and employees.” The officers and privates in the militia referred to in the findings aré ¡not officers and employees ” within the meaning, intent and purpose of the section. Therefore, the State has not waived its immunity from liability for their torts. Any other construction would be contrary to the history of military organization and control.

No case can be found in this State in which an award has been made under similar circumstances. On the other hand, it has been the practice in cases where the Legislature believed a moral obligation existed to pay damages to a soldier or his dependents for injuries received in active service, to pass an enabling act authorizing the Court of Claims to make an award.

True it is that if the word officers ” is given its broad meaning it would include every officer engaged in performing a duty placed upon him by law, including the Governor, judges, members of the Legislature and all others occupying an official position in the State. Such an interpretation of the statute would lead to an absurd conclusion. The history of the development of our form of government demonstrates that officials in performing certain functions of government cannot by their official acts create a liability against the State by their negligent performance. The language used in former section 12-a must be given a reasonable construction, consistent with our conception of governmental functions and public policy.

It is urged that as the State, by former section 12-a, consents to have its liability for such torts determined in accordance with the same rules of law as apply to an action in the Supreme court against an individual or a corporation,” it, therefore, follows that the State waives its immunity from liability in all cases for the tortious acts of its officers and makes itself hable if an individual or a corporation would be hable on the same facts. The argument overlooks the fact that under all military law the army constitutes a class separate and apart from the civil officers of the State. In this State it is governed by the Mihtary Law embodied in the statute which provides in detail for the adjustment of claims hke the one here in question. “ Members of the militia ordered into the active service of the state by any proper authority, shah not be hable civilly or criminally, for any act or acts done by them_in the performance, of their duty.” (§ 15.)

It is true that under the findings an individual or corporation might be held hable for neghgence. But it is not true that whenever an individual is hable for a certain act the State is hable for the same act.” (Barrett v. State, 220 N. Y. 423, 430. Cf. McAuliffe v. State, 107 Misc. Rep. 553.)

The Court of Claims should have dismissed the claim upon the motion of the State. The conclusion which we have reached makes it unnecessary to pass upon the other questions suggested.

The judgment of the Appellate Division and that of "the Court of Claims should be reversed and the claim dismissed, with costs in all courts.

Crane, Ch. J., Loughran, Finch and Rippey, JJ., concur; Lehman, J., dissents solely on the ground that upon this record the motion to dismiss presented a question of law which the court had jurisdiction to decide and the error in deciding that question has not been brought up for review either in the Appellate Division or in this court; O’Brien, J., taking no part.

Judgments reversed, etc.


author: Crane, Ch. J.

text:
    Daniel McCarthy et al., Respondents, v. Thomas Pieret, Defendant, and Michael Jackman, as Administrator of the Estate of Catharine McC. Jackman, Deceased, Appellant.
    Argued October 5, 1939;
    decided November 21, 1939.

      David Friedman, Milton Friedman and Martin J. Fay for appellant.

      Edmund C. Reardon and Nelson A. Ball, Jr., for respondents.
   Crane, Ch. J.

On or about the 7th day of March, 1932, the defendant Thomas Pieret executed a bond and mortgage in the sum of $3,000 to Catherine McCarthy Jackman. Subsequently, and on the 18th day of December, 1934, Catherine McCarthy Jackman entered into an extension agreement of the aforesaid bond and mortgage wherein and whereby the due date of payment of the bond and mortgage was extended to March 7, 1940. The extension agreement contained the following unusual provision: “ And in the event of the death of the party of the first part prior to the 7th day of March, 1940, the interest is to be paid one-half to Daniel McCarthy, brother of the party of the first part and one-half to the heirs of Ellen Buckley, deceased sister of the party of the first part and .'the principal paid the same at time of maturity.”

Catherine McCarthy Jackman, the mortgagee, died on March 16, 1935, one week before the recording of the extension agreement. Thereafter, an installment of interest in the amount of the sum of $75 became due on the aforesaid bond and mortgage. This installment of interest was claimed by the plaintiffs, a brother, nieces and nephews of the deceased. They claimed the installment by virtue of the extension agreement. A similar claim was made by Michael Jackman, husband and administrator of Catherine McCarthy Jackman. The mortgagor Pieret, refused to pay either the plaintiffs or the administrator on the ground that he was in doubt as to who was lawfully entitled to the installment of interest, which resulted in the bringing of this suit, Michael Jackman, the administrator, being impleaded.

The judgments below have held this extension agreement to be a valid disposition in the nature of a gift, and not an attempted testamentary disposition in violation of section 21 of the Decedent Estate Law (Cons. Laws, ch. 13). It is not always easy to determine whether a transaction is a gift or is testamentary in character. It depends upon the intention of the donor.

A concise statement of the rule, easy of expression but difficult in application, is to be found in 28 C. J. (p. 624, § 11 [e]): “ Where a gift is made effective in the lifetime of the decedent and he has divested himself of all power to recall it, such transaction is a gift inter vivas, and not testamentary in its nature. If the gift does not take effect as an executed and completed transfer to the donee, either legally or equitably, during the life of the donor, it is a testamentary disposition, good only when made by a valid will. * * * The test is whether the maker intended the instrument to have no effect until after the maker’s death, or whether he intended it to transfer some present interest.”

If this question of intention of the testator is the deciding factor we must, I think, draw the inference that the mortgagee never intended to transfer a vested interest in the mortgage to the brother and the heirs of her sister. Neither did she divest herself of all control or interest in the mortgage. After March 7, 1940, the principal and interest were to be paid to her if she were alive, likewise the interest and principal were to be paid to her any time during her lifetime up to March 7, 1940. She could have satisfied the mortgage and taken the principal at any time during her life. Had the mortgagor desired to pay the mortgage he could have paid it to the mortgagee. Surely if this had been done these collateral relatives would have had no interest by reason of the extension. Their rights, at best, only arose on the death of the mortgagee prior to March 7, 1940. Suppose there had been default in the payment of taxes and interest and foreclosure was necessary. Could the mortgagee have foreclosed or would it have been necessary to join these collateral relatives? To put the question is to answer it. These collaterals had no present interest. Nothing was transferred to them. The mortgagee never intended to divest herself of all rights and control in and over this mortgage until her death. At death, and only that within a certain time, were these collaterals to receive anything. This to my mind is an attempt to provide for the passing of property at death, in the nature of a will, and contrary to the provisions of section 21 of the Decedent Estate Law,

Seaver v. Ransom (224 N. Y. 233) is no authority for sustaining the claim of the respondents here. Contracts made for the benefit of third parties are well recognized today, but they are executed contracts, where the promisee is unable to revoke or control the promisor in the fulfillment of the promise. The decision has nothing to do with attempts to make testamentary dispositions, and assumes that all three parties are alive.

I do not say that the passing of property at death may not be provided for by contract or by deed, but the donor in such cases divests himself of all interest and vests it in the beneficiary. His intention is to establish present rights and not postpone them until death. He retains no further control over the transaction but, for a consideration or else because of relationship, establishes a present enforceable interest, postponed in enjoyment perhaps until death. This view finds support in the case of Townsend v. Rackham (143 N. Y. 516, 519), where the absurdities of holding otherwise clearly appear. A woman seventy-three years of age conveyed a farm to her two grandchildren, taking back a mortgage from them, a condition in which stated:

“ ‘ This grant is intended as a security for the payment of the following sums of money, to wit: $75.00 on the first day of January and $75.00 on the first day of July in each and every year thereafter during the natural life of the party of the second part, to be paid to the party of the second part at the homes of the said parties of the first part, in the town of Carlton.
“ ‘ And the further sum of $1,500 to be paid as follows: $1,000 to Maria Leach or her heirs five years from the death of the said party of the second part, and $500 to be paid to Esther C. Lutts five years from the death of the said party of the second part (the several sums herein mentioned are for the purchase money of said premises). And as further consideration to these presents it is agreed between the parties that in addition to the sums above mentioned and agreed to be paid the said parties of the first part agree to and with the party of the second part to provide her, the said Catharine Farnham, at their home or homes, at all times when she may choose during her natural life, and provide for her board and all necessary clothing, and all things necessary and proper for her comfort and support during her natural life.
“ ‘ And this conveyance shall be void if such payments be made as herein specified and in case default shall be made in the payment of the above sums hereby intended to be secured or any part thereof, or in case default be made in providing for and taking care of the party of the second part as above provided, it shall be lawful for the party of the second part, her executors, administrators or assigns, at any time thereafter, to sell the premises hereby granted, or any part thereof, in manner provided by law, and out of the money? arising from such sale to retain the amount then due, together with costs and charges of making such sale. Or in case default during the lifetime of the said Catharine Farnham shall be made in any of the above conditions the party of the second part may re-enter and take possession of the above-described premises and declare this obligation void.’

Maria Leach, named in the above mortgage, was the sister, while Esther C. Lutts was one of the grandchildren of the mortgagee, whose name was Catharine' Farnham. On the 12th of October, 1857, this mortgage was satisfied by the mortgagee and a satisfaction piece was duly recorded. On the next day the mortgagor executed and delivered to the same mortgagee another mortgage on the same premises with the same condition as in the first mortgage. Subsequent mortgages and deeds were given without ever consulting or considering Maria Leach or Esther C. Lutts. After the death of Catharine Farnham, the original purchase money mortgagee, Maria Leach and Esther C. Lutts commenced foreclosure proceedings of the mortgages which had been satisfied on the claim that the provision as to them in the condition above quoted gave them an interest in the mortgage and property.

The referee found that the mortgages had all been satisfied in their order and the satisfaction pieces duly recorded, and that each subsequent mortgage was intended as a substitution for the preceding one which was satisfied by Catharine Farnham. He also found that she took the¿ various mortgages upon the understanding and belief that the whole arrangement was testamentary in its character, and in the nature of a will. This court sustained the findings on the ground that there was an overwhelming presumption that the provisions for the payments to these ladies named after the death of the mortgagee were in their nature testamentary amounting to nothing more than a legacy or gratuity given by or coming from the mortgagee. The court was unanimous in this decision.

I can see little, if any, difference between this Townsend case and the one here for decision. The facts in each indicate a mere intention on the part of the mortgagee to make a testamentary disposition of the property and not an intention to convey an immediate interest. As in the Townsend case the plaintiffs knew nothing of the provisions of this extension agreement. This is not vital, but is a circumstance. (See, also, on this point Priester v. Hohloch, 70 App. Div. 256; Butler v. Sherwood, 196 App. Div. 603; 1 Heaton on Surrogates’ Courts [4th ed.], p. 203.)

For the reasons here stated the judgments should be reversed and the complaint dismissed, with costs in all courts.

Htjbbs, Finch and Bippey, JJ., concur; Lehman and Loughran, JJ., dissent; O’Brien, J., taking no part.

Judgments reversed, etc.


author: Loughran, J. Rippey, J.

text:
    The People of the State of New York, Appellant, v. Frank Creeden, Respondent.

      Submitted September 29, 1939;
    decided November 21, 1939.

      Henry Hirschberg, District Attorney, for appellant.

      John J. Bennett, Jr., Attorney-General (Henry Epstein, Joseph A. McLaughlin and Maurice H. Matzkin of counsel), for Industrial Commissioner of the State of New York, amicus curiae.

      J. Allan Ballman for respondent.
   Loughran, J.

The defendant was convicted by a Police

Court of the offense of operating a motor truck on public highways contrary to section 167 of the Labor Law (Cons. Laws, ch. 31), as amended by chapter 902 of the Laws of 1936. On his appeal to the County Court of Orange county, it was held that the statute was an unconstitutional enactment and on that ground the judgment was reversed and the information dismissed. By permission of the Chief Judge, the People bring the case here for review.

The offense was charged as having been committed on May 10, 1937. At that time, section 167 read in part as follows: When any driver of a motor truck or motor bus shall have been on duty continuously for ten hours or at separate intervals for ten (10) hours in the aggregate or less in any fourteen consecutive horns including time for meals, even though part of such time shall have been outside of the state of New York he shall not continue or again go on duty without having had at least eight consecutive hours off duty. * * * The provisions of this section shall not apply in case of accident or act of God nor when there is delay which was caused by the elements or a cause not known to the driver or owner or his or its officers in charge of such operations at the time that such driver left the place where he last went on duty prior to such delays. Every driver of a motor truck shall keep and carry on the vehicle records showing the day and hour when and the place where he went on and was released from duty, whether in this state or outside of this state. The industrial commissioner shall prescribe the form of such records * * *. Such records shall be exhibited to any state policeman or peace officer who shall demand to see the same. Failure to produce such records upon demand shall be presumptive evidence of a violation of this section relating to keeping of such records. In any prosecution for the violation of any of the provisions of this section such records shall be prima facie evidence of the truth of the contents thereof. * * * Any person violating the provisions of this section or faffing to keep or falsifying any records to be kept in compliance therewith * * * shall be guilty of a misdemeanor, and punishable by a-fine not exceeding fifty dollars, or by imprisonment not exceeding six months, or both. It shall be the duty of the state police and of all peace officers, and they are hereby authorized and empowered to assist in the enforcement of the provisions of this section.”

The record of the People’s case is short enough to be quoted in full:

Clyde K. Miller, being duly sworn, testified as follows:
On May 10,1937, one Frank Creeden, of New Hampton, New York, operating a Mack truck, registration 237341, was stopped at Denton Hill by me. I requested to see the time card carried by the defendant. He presented me with this time card which I would like to offer in evidence. (Time card is received and marked in evidence as People’s Exhibit No. 1, of this date.)
Mr. Ballman: I object to it on the ground that the time card is in violation of Article 1, Section 6, of the New York State Constitution in that the time sheet contains self-incriminatory matter which compels the defendant in a criminal case to be a witness against himself.
“ The Court: Motion denied.
Mr. Ballman: Exception.
Trooper Miller: According to the time card presented the defendant had been on duty driving a truck over a period of time longer than the ten hours allowed by law under Section 167 of the Labor Law. He had operated a truck a total of eleven hours actual driving. Another hour’s time not driving, one-half hour loading truck, one-half hour for lunch. In other words, when I arrested this man he had been on duty twelve for which eleven hours was actual driving time, one hour in excess to the time allowed.
“ Cross Examination by Mr. Ballman:
Q. Trooper Miller, outside of the statements contained in the time card, which you have offered in evidence, do you know of your own knowledge the number of hours that the defendant Creeden was operating this truck? A. No.
“ Q. That’s all.
“ The People rest.’’

The probative sufficiency of this evidence is not challenged by the defendant; but he now presses the objection that his constitutional immunity from compulsory self-incriminatian was infringed by the evidentiary use against him of the daily time record which he had surrendered to the arresting officer.

The only significant facts recorded by that writing were that on the day in question the defendant began duty at 2:30 a. M., and that during that day he had twice been released from duty — “ from 6:30 A. M., to 7 A, M., while loading truck ” and later when he had a half hour for lunch.” Thus the document in itself disclosed nothing incriminatory. The alleged criminal act was the defendant’s voluntary continued driving of the truck after the entries had been made for the statutory purpose. Since the witness who assumed to testify to such driving was the arresting officer, we are unable to see how the defendant was compelled to incriminate himself. (See People v. Rosenheimer, 209 N. Y. 115, 122; 4 Wigmore on Evidence [2d ed.], § 2259-c. Cf. People ex rel. Ferguson v. Reardon, 197 N. Y. 236, as explained in People v. Defore, 242 N. Y. 13, 27.)

The same considerations sufficiently dispose of the defendant’s contention that his delivery of the daily time record to the arresting officer was an extrajudicial confession which did not warrant his conviction without additional proof that the crime charged had been committed. By his surrender of the document, the defendant did not admit his guilt of any offense; and admissions of anything less than guilt itself are not Confessions ” in the true sense of that term in the criminal law. (See People v. Reilly, 224 N. Y. 90, 96; 2 Bishop’s New Criminal Procedure [2d ed.], § 1217.)

The only other point urged by the defendant is that the statute made exceptions which amounted to a denial of the equal protection of the laws. Those exceptions were enacted as follows: “ The provisions of this section [167] shall not apply to the operation of a motor truck or motor bus while being operated exclusively in a city and /or incorporated village nor to the operation of a motor truck or motor bus in and between cities and /or incorporated villages lying adjacent to the place where the driver thereof has gone on duty when such vehicle is not operated on a fixed schedule nor to the operation of a motor truck owned by a farmer and operated by himself or an employee when used in the hauling of farm, dairy or horticultural products and farm supplies for himself or his farm neighbors to market, creamery or place of storage, nor to the operation of wrecking and towing cars.”

The obvious purpose of this law was to safeguard travellers upon the highways. The legislature in making its classification was entitled to consider frequency and character of use and to adapt its regulations to the classes of operations, which by reason of their habitual and constant use of the highways brought about the conditions making regulation imperative * * (Continental Baking Co. v. Woodring, 286 U. S. 352, 373.) For aught we know, the dangers that result from fatigue induced by protracted driving may not prevail to a momentous degree in the localized or sporadic situations which the Legislature here chose to remove from the operation of the statute. It was for the defendant to demonstrate that some permitted exception was a preference so arbitrary as to offend the rule of equal protection. This he has not done. (See Welch Co. v. New Hampshire, 306 U. S. 79.)

The order of the County Court should be reversed and the judgment of the Court of Special Sessions affirmed.

Rippey, J.

(dissenting). The oral evidence in this case, taken upon the trial, is quoted in full in the opinion of Judge Loughran for reversal. Conviction for the commission of crime under the laws of this State still requires evidence to support it. Here, defendant should not be convicted under the statute (Labor Law, art. 6, § 167) unless the evidence established beyond reasonable doubt that defendant shall have been on duty continuously for ten hours or at separate intervals for ten (10) hours in the aggregate or less in any fourteen consecutive hours including time for meals and that he continued on duty thereafter without a layoff of at least eight consecutive hours. There is no evidence of the time of day when the arrest was made. Giving full effect to everything stated in the time card, defendant went on duty at 2:30 A. M., May 10, 1937, was released from duty from 6:30 A. M. to 7 A. M. and for one-half hour for lunch and entered New York State at 1 p. m. The officer testified that he had no knowledge or information of the number of hours that defendant was operating the truck except that furnished by the time card. If taken for all that it is worth, the evidence thus establishes that defendant continued work after a total elapsed time on duty of ten and one-half hours during which he was off duty or released from duty one hour. On this feature of the statute, there was no evidence of its violation.

Notwithstanding the fact that for failure of proof the conviction here cannot be sustained, the point is to be avoided apparently by this court on the ground that appellant’s attorney did not mention it in his brief. That ground was specifically urged at the close of the trial for discharge of the defendant and dismissal of the information. The rule is invariable that the court will not consider the constitutional question if the case may be decided upon other grounds (Burton v. United States, 196 U. S. 283, 295.) The case may be decided on other grounds here, but as the majority of the court are to decide otherwise, we pass to the constitutional questipn.

It is asserted here and has been asserted from the time of the defendant’s arrest that the admission of the time card was in violation of the defendant’s constitutional rights and in that connection it is urged that the defendant was compelled to be a witness against himself in violation of article 1, section 6, of the New York State Constitution. The statute required the defendant to keep and carry on the vehicle records showing the day and hour when and the place where he went on and was released from duty and failure to keep such records or to keep such records correctly is made a crime. The statute provides that such records shall be exhibited to any State policeman or peace officer who shall demand to see them and that failure to produce the records upon demand shall be presumptive evidence of a violation relating to the keeping of such records. The statute also provides that in any prosecution for violation of any of the provisions of the section, such records shall be prima facie evidence of the truth of the contents thereof. Here, the officer demanded the production of the records which were kept by the defendant and he was compelled, on penalty of being prosecuted for a criminal offense, to produce them and upon production they constitute the only evidence upon which conviction has been had. There can be no doubt that the defendant was thereby compelled to be a witness against himself in clear violation of the constitutional provision, under which he might seek protection (People ex rel. Ferguson v. Reardon, 197 N. Y. 236). The decision in the Ferguson case has in no manner been weakened or modified by the decision in People v. Defore (242 N. Y. 13), It was cited with approval in Bean v. Flint (204 N. Y. 153, 167) and People ex rel. Woronoff v. Mallon (222 N. Y. 456, 466) and also in Internal Revenue Agent v. Sullivan (287 Fed. Rep. 138, 141) and is controlling on the question here involved.

An effort is made to avoid this conclusion on the ground that the crime charged is the continuance on duty after the expiration of the continuous ten hours of duty, but such a distinction is purely fictitious and untenable. There are two elements necessary to be established to convict the defendant of the crime charged. First, he must have been on continuous duty for a period of ten consecutive hours or for fourteen hours, taking into consideration the time off for lunch, etc., and, second, he must have remained on duty at the expiration of that time. The first element of the case, according to the provisions of the statute, is to be established by the record of the defendant, which he was compelled to produce.

The order appealed from should be affirmed.

Crane, Ch. J., Lehman, Hubbs and Finch, JJ., concur with Lotjghran, J.; Rippey, J., dissents in opinion; O’Brien, J., taking no part.

Ordered accordingly.