author: Hiscock, Ch. J.

text:
    In the Matter of the Claim of Vinnie M. Lyle, Appellant, against H. R. Lyle Cider and Vinegar Company et al., Respondents. The State Industrial Board, Appellant.
    (Argued June 2, 1926;
    decided July 9, 1926.)
    Workmen’s compensation — insurance — policy intended to cover employer should so indicate by its terms — award may not be sustained on theory of insurance for employer where policy is limited in its terms to employees and findings are that decedent was injured while engaged as employee — member of copartnership injured while performing labor incident to copartnership business not an employee.
    1. Though under the provisions of the Workmen’s Compensation Law (Cons. Laws, eh. 67, § 54, subd. 6) a policy may be taken out "which will insure employers who perform labor incidental to their occupations, the purpose so to cover employers should be indicated by its terms, and where a policy not only contains no provisions covering the employers, but, by its terms, is unmistakably limited in its application to employees and in addition the findings of the Industrial Board, which made an award in favor of claimant, are to the effect that decedent was injured while engaged as an employee, the award cannot be sustained on the theory of insurance for an employer.
    2. Nor can the award be sustained on the theory that the injuries causing death of claimant’s husband were received while he was engaged as an employee. He was a member of a copartnership carrying on business and was injured while performing labors incidental thereto. Copartners are the principals and employers and it is not within the contemplation of the Workmen’s Compensation Law that one of them may become the employee of himself and his associates and thus at the same time occupy the inconsistent attitudes of employer and employee.

      Lyle v. Lyle Cider & Vinegar Co., 215 App. Div. 736, affirmed.
    Appeal from an order of the Appellate Division of the Supreme Court in the third judicial department, entered December 15, 1925, reversing an award of the State Industrial Board made under the Workmen’s Compensation Law and directing a dismissal of the claim.

      Ernest F. Fox for claimant, appellant.
    The award of the Industrial Board should be affirmed as the decedent was protected under the policy written and is entitled to recover. (Workmen’s Com. Law, § 6, subd. 54.)

      Albert Ottinger, Attorney-General (E. C. Aiken of counsel), for State Industrial Board, appellant.
    An employer who does the work of an employee and is paid wages therefor is entitled to compensation, (Skouitchi v. Chic Cloak & Suit Co., 230 N. Y. 296.)

      William B. Davis and E. C. Sherwood for respondents.
    The decedent was an employer and not an employee. (LeClear v. Smith & LeClear, 207 App. Div. 71; Matter of Skouitchi v. Chic Cloak & Suit Co., 230 N. Y. 296; Matter of Kolpien v. O’Donnell Lumber Co., 230 N. Y. 301; Matter of Hubbs v. Addison Electric, etc., Co., 230 N. Y. 303; Matter of Schweitzer v. Thompson & Norris, 229 N. Y. 97; Cooper v. Industrial Accident Commission of California, 177 Cal. 685; Employers Liability Assurance Corporation, Ltd., v. Industrial Accident Commission, 187 Cal. 615; Millers’ Indemnity Underwriters v. Patten, 238 S. W. Rep. 240.)
   Hiscock, Ch. J.

This appeal represents an effort to secure an award under the Workmen’s Compensation Law (Cons. Laws, ch. 67) in favor of the claimant on the theory that her injúred husband was an employee and also that the policy issued by the carrier covered him as an employer and, therefore, insured against the accident suffered by him while engaged as such employer in the per formance of work being carried on by the copartnership. The latter is the more important claim.

Claimant’s husband, upon whom she was dependent within the provisions of the Compensation Law, was a member of a copartnership engaged in carrying on a business of limited proportions and while he was performing labors incidental to the purposes of the copartnership he was so injured that death resulted. No question is made but that under the provisions of section 54, subdivision 6, of the Workmen’s Compensation Law ■a policy may be taken out which will insure employers who perform labor incidental to their occupations.” This is a remedial and wise provision and, in accordance with well-established principles, we ought to construe it liberally to the end of effectuating if possible the purpose for which it was adopted. The trouble in this case is that all of the facts by which we must be guided oppose rather than support the claim that decedent was insured as an employer. If a policy is intended to cover employers within the permission of the statute that purpose ought to be indicated by its terms. Whatever the intention of the parties may have been, the policy before us not only does not contain any provisions covering the employers but by its terms it is unmistakably limited in its application to employees. In addition to this the findings of the Industrial Board, which made an award in favor of claimant and which are binding upon her now, are to the effect that decedent was injured while engaged as an employee and at work for his employer. Thus we are compelled to decide against the claim on this theory of insurance for an employer and are relegated to the question whether under the circumstances an award can be sustained because of injuries received by the decedent while engaged as an employee. Carrying this question farther it becomes the one whether a copartner can become the employee of himself and his partners as employers and we think that a negative answer must be made to this question. The copartners, of course, are the principals and employers and we do not think that it is within the contemplation of the Workmen’s Compensation Act that one of them may become the employee of himself and his associates and thus at the same time occupy the inconsistent attitudes of employer and employee. The Workmen’s Compensation Law, in our opinion, does not contemplate any such anomalous situation and it is entirely opposed to well and long-established principles of law which to a certain extent furnish the foundation for the Compensation Law, that a partner should have a claim against himself and his copartners for an accident springing out of the work of the copartnership and for the conduct of which he is responsible. This question has been thus directly or indirectly decided in other jurisdictions (Cooper v. Industrial Accident Comm, of Cal., 177 Cal. 685; Employers Liability Assurance Corp., Ltd., v. Industrial Accident Comm., 187 Cal. 615; Ellis v. Ellis & Co., 7 W. C. C. 97); and this view is in accordance with what was said by this court in Matter of Bowne v. Bowne Co. (221 N. Y. 28) and Matter of Skouitchi v. Chic Cloak & Suit Co. (230 N. Y. 296). In the latter case we pointed out that the provision under consideration (Sec. 54, subd. 6) “ was intended to cover the case of an employer who maintained his status as such but who nevertheless did some work of the character usually performed by an employee. * * * He would remain an employer and obviously could not become an employee of himself as an employer. If he received any compensation for injury it would be as employer.” The obvious course to be pursued by persons like the decedent who, although employers, are engaged in performing labor contemplated by the statute and desire insurance, is to secure a policy which by its terms properly insures them as such employers.

The order appealed from should be affirmed, with costs against the State Industrial Board..

Cardozo, McLaughlin, Crane, Andrews and Lehman, JJ., concur; Pound, J., not voting.

Order affirmed, etc.


source: Caselaw Access Project

author: Crane, J. Lehman, J. (dissenting).

license: Public Domain

text:
    The Employees’ Liability Assurance Corporation, Ltd., of London, England, Appellant, v. John L. Hayes Construction Co., Inc., Respondent.
    (Argued May 12, 1926;
    decided July 9, 1926.)
    Insurance — contract — policy of insurance may provide that rate be subsequently fixed and relate back to date of policy — provision in policy of workmen’s compensation insurance for modification of rates in accordance with manual and rating plan established by rating board — provision in rating plan that adjusted rates shall be effective as of effective date of policy — provision in notice to insured of modified rates that they shall apply from date of policy in accordance with contract — insurer may recover increased rates from inception of policy.
    1. The insured and the insurer are free to contract as they please, subject to the approval of the Insurance Department, and may legally agree that the rate of premium shall be subsequently fixed and relate back to the date of the policy.
    2. Where by the terms of a workmen’s compensation policy of insurance, effective on the date of its issue, it is agreed that the rates of premium are subject to modification in “ accordance with the rate manual and rating plans established by the Compensation Inspection Rating Board,” and the rating plan so mentioned provides “ adjusted rates determined by the Board shall be published * * * and the carrier shall make such rates effective for the current policy as of its effective date,” and while the policy was in effect the Compensation Inspection Rating Board experience rated the risk and increased the rates, upon which the insurer forwarded to the insured an indorsement of the policy in accordance with the increased rates, a provision therein that they should apply from the “ date of issue of this policy,” is in accordance with the plan and express contract of the insured and the insurer may recover the increased rate from the inception of the policy.
    Employers’ Liability Assur. Corp. v. Hayes Construction Co., 216 App. Div. 702, modified.
    Appeal from a judgment of the Appellate Division of the Supreme Court in the second judicial department, entered March 1, 1926, modifying and affirming as modified a judgment in favor of plaintiff entered upon a verdict directed by the court.

      Walter L. Glenriey, Lawrence C. Stryker and Bertrand L. Pettigrew for appellant.
    Public policy required that the contract of insurance should provide for a modification of the premium rate during the term of the policy, and the parties did so contract. (Scranton Leasing Co. v. Industrial Commission of Utah, 51 Utah, 368; Employers’ Liability Assur. Co. v. Success Uncle Sam Cone Co., 124 Misc. Rep. 614; German-Alliance Ins. Co. v. Lewis, 233 U. S. 390.) The modified rate was duly approved by the Superintendent of Insurance. (Peabody, Jr., & Co., Inc., v. Travelers Ins. Co., 240 N. Y. 511.) Public policy requires that the modification of the rate should become effective from the effective date of the policy. (Peabody, Jr., & Co., Inc., v. Travelers Ins. Co., 240 N. Y. 511.)

      Clarence C. Fowler for Superintendent of Insurance of State of New York.
    The experience rates determined by the Board should be applied from the effective date of the policy and not from the date the carrier mailed the indorsement. (Young v. Duncan, 218 Mass. 346.)

      I. J. Beaudrias and Raeburn W. Jenkins for respondent.
    The Legislature did not intend to give to the insurance company the right to set aside premium rates approved by the Superintendent of Insurance and promulgate retroactively a different set of premium rates. (Peabody, Jr., & Co, Inc., v. Travelers’ Insurance Co., 240 N. Y. 511.)
   Crane, J.

The facts upon which this action is brought were agreed upon in the form of a written stipulation. The plaintiff seeks to recover premiums of insurance fixed by the Compensation Inspection Rating Board about eight months after the issuance of the policy, according to the Experience Rating Plan approved and adopted by the Superintendent of Insurance. The trial court ruled that the rate stated in the policy could not be increased during the life of the policy. The Appellate Division modified the judgment by allowing an increase, in the rate from the date of the increase. We are of the opinion that the plaintiff, appellant’s position is the correct one, and that increase was made according to the agreement and terms of the policy, to relate back to its inception.

The Compensation Inspection Rating Board has been recognized by law as competent to fix rates for this class of insurance by and with the approval of the State Superintendent. (Peabody, Jr., & Co., Inc., v. Travelers Ins. Co., 240 N. Y. 511.) The Experience Rating Plan is one of the methods by which the Rating Board fixes the premiums for insurance according to the risk. The plan has the approval of the Insurance Department. The method of fixing the rate of the premium and its reasonableness and fairness are not questioned in this case; the only point at issue being the date at which the new or modified rate is to take effect. This, of course, depends upon the contract which the parties have made, the terms of the policy and the statutes which must be read into it. The parties may legally agree to pay a premium to be subsequently fixed which shall relate back to the date of the policy. The insured and the insurer are free to contract as they please, subject to the approval of the Insurance Department.

We, therefore, turn to the policy and the stipulation of facts to determine the contract.

On the 15th day of June, 1921, the plaintiff at the request of the defendant issued to the defendant its universal standard Workmen’s Compensation Policy of Insurance covering a period of one year from June 15, 1921, to June 15,1922. Indorsed on the policy, and made a part of it was the following:

This policy is issued by the Corporation and is accepted by this Employer with the agreement that the rates of premium are subject to modification in accordanee with the rate manual and rating plans established by the Compensation Inspection Rating Board and approved by the Superintendent of Insurance of the State of New York, such modification, if any, to be expressed by indorsement naming the effective date thereof.”

This indorsement was according to standard form. The Compensation Inspection Rating Board functions by virtue of sections 67 and 141 of the Insurance Law (Cons. Laws, ch. 28) and authority derived from the Superintendent of Insurance. It inspects risks and fixes rates for premiums in accordance with the Manual of Compensation and Liability Insurance known as the Rate Manual, the Compensation Industrial Rating Schedule, and the Experience Rating Plan, all of which were duly approved by the Superintendent of Insurance, prior to June 15, 1921.

Subsequent to the issuance of the policy of insurance and while the same was in full force and effect on February • 17, 1922, the Compensation Inspection Rating Board took the necessary action as required by the Experience Rating Plan in regard to the risk covered by the policy, experience rated the risk in accordance with the plan, modifying the rates by increasing them 53.8 per cent and duly notified the plaintiff. The plaintiff thereafter, on February 28, 1922, forwarded to the defendant an indorsement of the policy in accordance with said modified and increased rates.

This indorsement is contained in full in the stipulation of facts, but need not be copied here. In part, it read: “It is hereby understood and agreed that this risk has been experience rated and that from date of issue of this policy the following rates shall apply.” (These are the rates sued for by the plaintiff.)

Did the policy contract that the insured should pay such modified rates from the date of the policy?

The indorsement on the policy when first issued stated that the rates of premium were subject to modification in accordance with the Rate Manual and Rating Plans established by the Board, and approved by the Superintendent of Insurance, and that such modification was to be expressed by indorsement naming the effective date thereof. I have quoted the indorsement above. The Rating Plan thus approved by the Superintendent of Insurance was made part of the policy. It became part of the agreement of the insured. The defendant agreed to pay the rate of premium fixed according to the plan, and to pay it from the date expressed in the indorsement according to the plan.

The Rating Plan is Exhibit 2 in the record, referred to in the stipulated facts as the Experience Rating Plan duly approved by the Superintendent of Insurance. Section 31 thereof provides:

“Adjusted rates determined by the Board shall be published subject to the customary five-day preliminary notice to the insurance carrier, and the carrier shall make such rates effective for the current policy as of its effective date.”

The current policy in question became effective on the date of its issue. The modified rate sued for by the plaintiff was made to take effect “ from the date of the issue of this policy.”

We, therefore, find that the plaintiff has fixed the rate of premiums on the defendant’s risk as directed by the Compensation Inspection Rating Board, in accordance with the Experience Rating Plan referred to and made a part of the policy taking effect at the date of the policy in accordance with the plan and the express contract of the defendant.

The plaintiff is entitled to this rate of premium, and as there is no dispute about the figures, the amounts having been stipulated, judgment must be awarded to the plaintiff for the full amount demanded in the complaint.

The judgments should be modified by awarding to the plaintiff the full amount demanded in the complaint, and as so modified affirmed, with costs to appellant in this court and in the Appellate Division.

Lehman, J. (dissenting).

The defendant’s obligation to pay the adjusted rate concededly depends upon its written agreement. That agreement provides for modification of rates in accordance with the rate manual and rating plans,” etc., but it expressly states that “ such modification, if any, to be expressed by indorsement naming the effective date ” (italics are mine). It seems to me quite clear that the direction contained in section 31 of the Bating Plan that the “ carrier shall make such rates effective for the current policy as of its effective date ” cannot by its own force make the adjusted rates effective for the current policy as of its effective date ” when the carrier and the employer have by contract expressly provided that the “ effective date ” of any modification must be expressed by indorsement naming such date.

The judgments should be affirmed.

Cardozo, Pound and Andrews, JJ., concur with Crane, J.; Lehman, J., dissents in memorandum, in which His cock, Ch. J., and McLaughlin, J., concur.

Judgment accordingly.


author: Crane, J.

text:
    Antoinette Sherri, Respondent, v. National Surety Company of New York, Appellant.
    ■' Insurance •— contract — notice of cancellation — trial — amendment of pleadings so as to continue action, brought on policy of burglary insurance, on binder — obligation of parties to insurance binders are according to terms of ordinary policy — where ordinary policy requires written notice of cancellation oral notification of cancellation of risk secured by binder insufficient — delay of week by broker to examine and return submitted policy not unreasonable as matter of law — waiver of requirement of filing proofs of loss.
    1. Where upon trial of an action to recover upon a contract of burglary insurance, it became a question whether the insurance was in effect by reason of the binder or the policy, the trial justice properly permitted an amendment of the pleadings so as to continue the action upon the binder, where defendant’s counsel did not claim surprise or unpreparedness to meet the issue, his only objection being to the power of the court.
    (Argued June 7, 1926;
    decided July 9, 1926.)
    2. Binding slips are a present insurance in the amount specified. They are a short method of issuing a temporary policy for the convenience of all parties, to continue until the execution of the formal one and the obligations of the parties are according to the terms of the policy in ordinary use by the company.
    3. Where the policy issued by defendant and the one customarily used contained a clause to the effect it might be canceled at any time by either of the parties upon written notice and there was nothing in the binder indicating a contrary intent, written notice was required to cancel the insurance before delivery of a corrected policy.
    4. Where after issuance of the binder defendant delivered to plaintiff’s broker a policy of insurance, but. on the same day, having received an unfavorable report on the plaintiff’s risk, orally notified the broker that it canceled the risk and demanded a return of the policy, which the broker refused to do until it had insured the plaintiff elsewhere, and there is nothing in the findings or the evidence to show that written notice of cancellation was given to plaintiff or her agent, and one week later, plaintiff’s home was burglarized and her property stolen, she may recover on the contract.
    5. When the policy was delivered to the broker, it was supposed to examine it and return it for correction or for a corrected policy within a reasonable time. The binder was only to continue until the corrected policy was issued. The broker, therefore, could not keep the binder alive by failing to do its work; that is, accept the policy as it was or demand a corrected policy, but it cannot be said, as matter of law, that an unreasonable length of time had elapsed between the date ■of delivery of the policy and the date of the burglary, in view of all the facts and circumstances in the ease, and the demand made for the return of the policy. The company at any time could have given written notice of cancellation and that would have been the end of the insurance.
    6. An unquestioned letter, in evidence, written by the defendant, two days after the burglary, denying all liability and refusing to pay the loss, supports a conclusion of law embodying findings of fact that by reason of an immediate denial of liability, the defendant waived the requirement of filing proofs of loss.

      Sherri v. National Surety Co., 215 App. Div. 808, affirmed.

      Appeal, by permission, from a judgment of the Appellate División of the Supreme Court in the first judicial department, entered February 5, 1926, unanimously affirming a judgment in favor of plaintiff entered upon a decision of the court at a Trial Term without a jury.

      Sidney J. Loeb and Leon M. Prince for appellant.
    The trial court should not have permitted plaintiff to radically amend the complaint from an action on a policy of insurance to an action on a binder or agreement to insure. (Underwood v. Greenwich Ins. Co., 54 App. Div. 386; Struzewski v. Farmers Fire Ins. Co., 226 N. Y. 338.) No recovery should have been permitted on the binder because (1) the issuance of the policy superseded and extinguished the binder; and (2) the binder was no longer in effect because the condition on which it was to terminate actually occurred. (Poste v. American Union Life Ins. Co., 32 App. Div. 189; 165 N. Y. 631; Lipmann v. Niagara Fire Ins. Co., 121 N. Y. 454.)

      William Otis Badger, Jr., and Paul D. Compton for respondent.
    It was proper for the court to permit the amendment of the pleadings. (Lipmann v. Niagara Fire Ins. Co., 121 N. Y. 454; Struzewski v. Farmers Fire Ins. Co., 226 N. Y. 338.) The binder was in full force and effect as covering upon the property insured at the time of the loss. (Lipmann v. Niagara Fire Ins. Co., 121 N. Y. 457; Richards on Insurance, 96.)
   Crane, J.

After an unanimous affirmance by the Appellate Division, we allowed an appeal in this case, but a more thorough examination of the record and briefs convinces me that the case has been properly decided.

The plaintiff sought burglary insurance through her broker, L. T. Hollister & Co., Inc. In accordance with custom, a placer of that company made application on the risk to the National Surety Company, and received a binder insuring the plaintiff until a corrected policy should be issued. The binder contained the following clause: We, the undersigned Insurance Companies, hereby agree to insure property as herein described for amounts subscribed.

“ This binder becomes void upon delivery of corrected policy to the office of L. T. Hollister, Inc.”

The term “ corrected policy ” had this meaning and significance. At the time of the issuance of the binder insuring the property which is given immediately upon the application of the placer, the insurer knows little or nothing of the risk. Any and all investigation as to its nature and soundness has to be made thereafter. Should the risk prove to be hazardous, the company may cancel the insurance. When the policy is thereafter issued it is accompanied by certain declarations annexed thereto which are supposed to be the answers to questions made by the insured. The fact is that the company issuing the policy writes in these answers as it understands the facts to be. After the receipt of the policy by the broker for the insured, if any of these answers are incorrect or inaccurate, the insurer is notified and a corrected policy is issued.

The clause quoted, therefore, was to be binding until such a corrected policy was issued. The binder in this case was issued by the defendant on March 10, 1922. Four days thereafter the policy of insurance with the proposed declarations attached, was executed and sent to the plaintiff’s broker, L. T. Hollister & Co., Inc. On the same day, the 14th of March, 1922, the National Surety Company received an unfavorable report on the plaintiff’s risk, and so notified the broker. Notice was also given that the company canceled the risk and demanded the immediate return of the policy. This notice was not in writing, the information having been imparted by an employee of the defendant who called .upon the brokers to procure the policy. The brokers refused to return the policy until they had insured the plaintiff elsewhere.

Mrs. Antoinette Sherri, the plaintiff, was not informed -or aware of any of these proceedings. She had employed her brokers to insure her property. '

Some time about the 21st of March, 1922, the plaintiff’s home was burglarized and her property stolen. She brought this action on the policy of insurance to recover her loss. At the trial it became a question whether the insurance was in effect by reason of the binder or the policy. The trial justice permitted an amendment of the pleadings and the action was continued as upon the binder. The defendant complains of this amendment, but as its counsel did not claim surprise or unpreparedness to meet the issue, his only objection being the power of the court, we find no error in this ruling. (Struzewski v. Farmers’ Fire Ins. Co., 226 N. Y. 338; Walrath v. Hanover Fire Ins. Co., 216 N. Y. 220, at p. 226.) So far as we are concerned, therefore, the policy is eliminated from this case, except as it may become a part of the insurance contract effectuated by the binder. .¡

These insurance binders, so called, have been before this court in other decisions. In Lipman v. Niagara Fire Ins. Co. (121 N. Y. 454) it was held that these binding slips are a present insurance in the amount specified; that they are a short method of issuing a temporary policy for the convenience of all parties to continue until the execution of the formal one. The obligations, however, of the parties are according to the terms of the policy, in ordinary use by the company.” (See, also, Hicks v. British American Assurance Co., 162 N. Y. 284.) The policy issued by the defendant and the one customarily used contained, this clause: “ This policy may be cancelled at any time by either óf the parties upon written notice to the other party stating when thereafter cancellation shall be effective and the date of cancellation shall then be the end of the Policy Period.”

The binder issued by the defendant insured the plaintiff’s property under the obligations of the usual policy containing this cancellation clause. Unless there was something in the binder indicating a contrary intent, written notice was required to cancel the insurance before the delivery of a corrected policy. In practice parties may, and no doubt do, at times waive such written notice, but this element does not enter into this case.

We find nothing in the binder nor in the findings of fact, unanimously affirmed, which renders this cancellation clause inoperative. The words of the binder state that it becomes void upon the delivery of the corrected policy to the office of L. T. Hollister, Inc. We may say here, in passing, that written notice given to Hollister & Co., the plaintiff’s authorized agents, acting in the matter, would probably have been written notice of cancellation within the terms of the policy. The broker was acting for the plaintiff at the time in the very transaction. The notice given, however, was an oral communication in demanding back the written policy. The demand was refused until other insurance could be placed.

The findings state that customarily a binder is issued pending an investigation as to the hazards of the risk, and if the report as to those hazards is not good, the company declines to issue a policy, and cancels the binder. The trial justice further found that the binder in this case was delivered subject to such a report. Finding of fact No. 12 reads as follows:

That on the 14th day of March, 1922, the defendant company received a 'report as to the moral hazard and risk in regard "to the plaintiff and as a result of said report, on said date notified L. T. Hollister & Co., Inc. that the report was unfavorable and that the company cancelled the risk and demanded the immediate return of the policy of insurance.”

This is not a finding that the cancellation was in writing within the terms of the policy. It is conceded that the.demand for the return of the policy was made orally. The notice of cancellation was given in the same conversation. Examining the evidence, as we have a right to do, to sustain or to make a new finding; not inconsistent with others, in order to affirm a judgment, we ascertain that no written notice of cancellation was given to the plaintiff or to her agent, Hollister & Co. That this finding No. 12 did not refer to a written cancellation is quite evident from the fact that the trial justice based his conclusions of law and judgment for the plaintiff upon the failure to give written notice of cancellation in accordance with the policy. The fourth conclusion of law reads as follows:

That said policy provided the method of cancellation of the contract; that, in the absence of waiver, that was the sole method by which the contract could be can-celled; that there was no waiver; that the contract of insurance was not cancelled prior to the loss.”

One other consideration may be necessary. When the policy was delivered to the broker, it was supposed to examine it and return it for correction or for a corrected policy within a reasonable time. The binder was only to continue until the corrected policy was issued. The broker, therefore, could not keep the binder alive by failing to do its work; that is, accept the policy as it was, or demand a corrected policy. We cannot say, as matter of law, that an unreasonable length of time had elapsed between the 14th day of March and the date of the burglary, in view of all the facts and circumstances in this case, and the demand made for the' return of the policy. The company at any time could, have given written notice of cancellation and that would have been the end of the insurance.

The plaintiff presented no proofs of loss as required by the policy. The findings of fact are not as full and complete as they might be. There is a letter in evidence written by the defendant, dated March 23, 1922 — two days after the burglary — denying all liability and refusing to pay the loss. This is in no way questioned, and supports that conclusion of law made by the judge embodying findings of fact which stated: “That by reason of an immediate denial of liability, the defendant waived the requirement of filing proofs of loss.”

For the reasons here stated, I am of the opinion that the judgment should be affirmed, with costs.

Hiscock, Ch. J., Cardozo, Pound and Andrews, JJ., concur; McLaughlin and Lehman, JJ., dissent. Judgment affirmed, etc.


text:
    The People of the State of New York, Respondent, v. Edward Purtell, Appellant.
    Crimes — assault and robbery and grand larceny — trial — evidence — good judgment must be guide of appellate courts in determining whether error requires reversal — rules of evidence to be impartially applied on trial of defendant as second offender — improper admission of evidence of witness for prosecution impeaching statement of previous hostile or recalcitrant witness — error affecting defendant’s substantial rights.
    1. In reviewing criminal cases good judgment rather than definite rules of law must be the guide of appellate courts in determining when a wrong ruling regarding the admission or rejection of evidence requires a reversal of a judgment of conviction.
    2. The rules of evidence are to be as impartially applied to a defendant indicted as a second offender as if he had never before been accused of crime. Care must be taken in determining whether or not an error in the admission of evidence has affected his substantial rights not to be influenced by these previous offenses. The past life of the defendant may affect his credibility with the jury, but cannot affect the rules of law according to which all men in this State are entitled to trial, no matter who they may be or what they have done.
    3. Where, upon trial of an indictment charging defendant with the crimes of robbery, assault and grand larceny, in having held up a truck and shot and robbed a passenger thereon of a bag containing money, the question became one of identification, and the chauffeur who drove the truck and had been called by the prosecution, having failed and refused to identify the defendant as the guilty party, the district attorney, claiming surprise, was permitted to cross-examine him as to his previous statements, and amongst other questions, asked him, if at the time he told detectives defendant did the shooting he had said anything to defendant, to which the witness answered, “ No,” it was error to permit a detective, called as a witness on behalf of the People, to contradict such statement and testify that the chauffeur, after identifying defendant, said: “ You haven’t got a rod on you now. I would like to take a fall out of you.” The evidence was incompetent and improper. The People’s witness could not thus be impeached and, if the testimony was to corroborate him, it was likewise incompetent. Statements of the chauffeur made in the presence of the defendant were purely hearsay when given by another. The chauffeur himself could be cross-examined by the district attorney regarding such statements as he was a hostile or recalcitrant witness. His answers, however, were final. (Bullard v. Pearsall, 53 N. Y. 230; Becker v. Koch, 104 N. Y. 394; People v. DeMartini, 213 N. Y. 203, 217; People v. Hickey, 235 N. Y. 188, 193, followed.)
    (Argued June 1, 1926;
    decided July 9, 1926.)
    4. An examination of the record shows that the issue was sharply drawn as to defendant’s participation in the crime and the evidence of identification somewhat contradictory. The admission of the evidence of the detective was, therefore, an error affecting the defendant’s substantial rights.

      People v. Purtell, 215 App. Div. 721, reversed.
    Appeal from a judgment of the Appellate Division of the Supreme Court in the second judicial department, entered November 13, 1925, which affirmed a judgment of the Queens County Court rendered upon a verdict convicting defendant of the crimes of robbery in the first degree, assault in the second degree and grand larceny in the first degree, all as a second offense.

      Sydney Rosenthal for appellant.
    The trial judge erred in permitting the district attorney to impeach or discredit the witness Peter Farley after his failure to identify the defendant. (People v. DeMartini, 213 N. Y. 203; People v. Minsky, 227 N. Y. 94; Potter v. Browne, 197 N. Y. 288; People v. De Garmo, 179 N. Y. 130.)

      Richard S. Newcombe, District Attorney (Thomas F. Thornton and Peter M. Daly of counsel), for respondent.

      The district attorney did not impeach the witness Peter Farley, and the trial judge was not in error in permitting the district attorney to cross-examine Farley as a hostile witness. (Iverson v. United Traction Co., 159 App. Div. 27; Bullard v. Pearsall, 53 N. Y. 230; People v. DeMartini, 213 N. Y. 203; Ritchey L. Corp. v. Robertson Cole D. Corp., 199 App. Div. 362.)
   Crane, J.

One of the most difficult problems which . confronts appellate courts in reviewing criminal cases tried before a jury is to determine when a wrong ruling regarding the admission or rejection of evidence requires a reversal of the judgment of conviction. Every error is not fatal. Section 542 of our Code of Criminal Procedure provides that after hearing an appeal the court must give judgment without regard to technical errors or defects or exceptions which do not affect the substantial rights of the parties. Whether an error has such an. effect necessarily depends upon the nature of the case and the narrowness of the issue. Good judgment rather than definite rules of law must in such cases be our guide.

In this case the defendant was indicted as a second offender. Ten years ago, when about nineteen years of age, he pleaded to petit larceny and later to grand larceny. For the first offense he was sent to the New York Reformatory; for the second to State’s prison, where he was confined two years and six months. The rules of evidence, nevertheless, are to be as impartially applied to this defendant on this his third trial as if be had never before been accused of crime. Care must be taken in determining whether or not an error in the admission of evidence has affected his substantial rights not to be influenced by these previous offenses. The past life of the defendant may affect his credibility with the jury, but cannot affect the rules of law according to which all men in this State are entitled to a trial, no matter who they may be or what they have done. Our criminal procedure and our rules of evidence, according to which crimes are to be proved, may be refined until they lose much of their usefulness and cease to accomplish the purpose for which they were created. On the other hand, they must not be hastily brushed aside or misapplied in the zeal to find a guilty party. Experience has proved that a substantial adherence to our fundamental rules of evidence is the safest and wisest way to administer the .criminal law. The necessity for a careful application of our rules of evidence was well stated in Rutherford v. Richardson (1923 A. C. [H. of L.] by Lord Birkenhead) : “ The issues pronounced upon by Courts in criminal, and, indeed, in civil matters, are attended with such decisive consequences that the adoption in matters of evidence of a standard of admissibility which is so cautious as to be meticulous may not only be defended but is, in fact, essential.”

That there was error in the admission of evidence in this case, affecting the substantial rights of this defendant, and entitling him to a new trial, I shall attempt to show.

Since coming out of jail some eight years ago, the defendant has married, has had two children, and with them was living with his mother and his sister in the borough of Manhattan. He was thirty-two years of age, and worked as a dock hand, unloading ships for a man named Stephen Costello. On the night of October 17, 1923, he was stopped on the street by a detective who knew him personally, and told that he was wanted at headquarters. On October 6 a truck of the International Motors Company was held up at Borden and Review avenues in Long Island City and a bag containing a payroll of $1,400 stolen. Peter Farley was the chauffeur of the truck; John Fetzer, riding with him, had the bag of money. Fetzer was shot but not killed. The case against the defendant became one of identification. Was he the man who- shot Fetzer and stole the money?

'The materiality of the error, to which I shall later refer, must, as I have heretofore intimated, depend in a large measure upon the certainty of the identification. Fetzer was in the hospital not far from the jail. After the shooting he did not see the defendant for about seven months. At the trial he testified that as he was riding on the truck, a taxicab drove up, a man jumped out, shot him, grabbed the money bag and got away. He only had a side view of the man’s face. He was asked the following questions:

“ Q. Do you see the man in the Court Room this morning that shot you? A. Yes, sir, sitting right there [indicating the defendant]. * * *
“ Q. Now, how many months is this after the alleged crime took place that you were asked to identify him? A. About seven months.”

When shown a photograph of the defendant, he was not sure that he ivas the man and wanted to see him personally. 'The witness continued:

“ A. While he shot me, I looked right at him. * * *
Q. Well, how did you recognize him? A. By his side face. I didn’t see the full face. When he shot me he was side view.
Q. Now, the only view you ever got of the man you say that shot you was a side face view? A. Yes, sir.”

The witness further swears that the man had on a derby hat. The side face view is further explained as follows: •

“ Q. And that is all you saw of the man’s face, from his eyebrow over to his ear? A. Yes, sir.
Q. And you are able to say, that judging a man from the side of his eyebrow to bis ear, that this is the man that shot you; is that right? A. Yes, sir.”

The chauffeur with Fetzer was Peter Farley, who to the apparent surprise of the district attorney failed and refused to identify the defendant as the guilty party. He was asked:

“ Q. Do you see the man in Court that shot him and took the money? A. By full face I could not identify him.
Q. Do you see the man in Court that did the shooting? A. No.”

The district attorney, claiming surprise, and declaring Farley a hostile witness, was permitted to cross-examine him regarding his previous statements out of court and his testimony in the Magistrate’s Court. The witness frankly stated that he told the detectives that the defendant was the man who did the shooting, but he also details the manner of the identification about which there is little dispute. He picked out three photographs of three different men, all of whom he said looked like the culprit. He says that the man who did the shooting wore a slouch hat; Fetzer had sworn that he wore a derby hat; a discrepancy which may not be vital, but bears upon the certainty or uncertainty of the identification. Farley only had a side view of the culprit’s face and so told the detectives. Consequently, when he was brought into the room where the defendant was, he could not identify him by the full face. He stood looking at him for a minute. The testimony reads as follows:

“ Q. And then you looked him over, straight in the face, in the front of these detectives, and said, ‘ I cannot identify him this way? ’ A. Yes, sir. * * *
Q. Now, after you said that you could not identify the man you said, Let me take a look at the side of his face; ’ isn’t that true? A. Yes, sir.
“ Q. And again this man said to you, 1 Look me over good. I have done nothing.’ Isn’t that true? A. Yes, sir. * * *
Q. And when he turned around to the side face, you said something about that looks like the man; isn’t that true? A. That is right.
Q. And then they arrested him as being the man who committed this crime, isn’t that true? A. Yes, sir. * =>• *
Q. Will you or will you not say whether this man beyond a question of doubt is the man that held up John Fetzer on that day? A. Well, I am not sure.”

The following questions in re-direct were asked by the district attorney. They lead • up to what was a clear violation of the rules of evidence existing for a long time in this State and repeated in many cases.

Q. Now, after you identified this defendant did you say anything to him? A. No, I did not.
Q. Well, after you saw the defendant down there in court and after you had said to Captain Gallagher, 1 That is the man/ did you say anything to the defendant? A. No, sir, I did not.”

Thereupon the district attorney as part of the People’s case called Detective Sadlo who was present at this identification to contradict Farley and to testify what Farley said.

“ Q. You are the man who took Purtell over to the station house the morning Farley identified him? A. No.
“ Q. Were you there at that time? A. I was.
Q. Were you there when Farley was taken into the room where Purtell was? A. I was.
Q. Will you please tell us what took place at that time? A. I was in the room with Purtell when Captain Gallagher called to Farley, who was in an adjoining room, outside the office. Farley came in and faced the defendant, stood about four feet away from him, looked him over, went to step to the right side of him, looked him over, and he pointed at him and he said: That is the man.’ In walking out he then said: ' You haven’t got a rod on you now. I would like to take a fall out of you.’ ”

An exception was taken to the judge’s refusal to strike out this testimony. It was incompetent and improper from every viewpoint. Farley had denied that he said anything to the defendant. This officer is called to contradict him by swearing that he said: “ You haven’t got a rod on you now. I would like to take a fall out of you.” The People’s witness could not thus be impeached. If the testimony were used to corroborate Farley, it was likewise incompetent. (People v. Jung Hing, 212 N. Y. 393, p. 401.) Statements of Farley made in the presence of the defendant were purely hearsay when given by this witness. Farley himself could be cross-examined by the district attorney regarding such statements, as he was a hostile or recalcitrant witness. His answers, however, were final. In Bullard v. Pearsall (53 N. Y. 230) this court said through Bapallo, J., regarding a disappointing witness testifying contrary to expectations: “ The further question has frequently arisen whether the party calling the witness should, upon being taken by surprise by unexpected testimony, be permitted to interrogate the witness in respect to his own previous declarations, inconsistent with his evidence. * * * We are of opinion that such questions may be asked of the witness for- the purpose of probing his recollection, recalling to his mind the statements he has previously made, and drawing out an explanation of his apparent inconsistency. * * * It is only evidence offered for the mere purpose of impeaching the credibility of the witness, which is inadmissible when offered by the party calling him. Inquiries calculated to elicit the facts, or to show to the witness that he is mistaken and to induce him to correct his evidence, should not be excluded simply because they may result unfavorably to his credibility. In case he should deny having made previous statements inconsistent with his testimony, we do not think it would be proper to allow such statements to be proved by other witnesses, * * * As a matter of course, such previous unsworn statements are not evidence, and when the trial is before a jury that instruction should be given.”

These principles were reiterated in People v. De Martini (213 N. Y. 203, p. 217); People v. Hickey (235 N. Y. 188, p. 193); Becker v. Koch (104 N. Y. 394).

The United States Supreme Court, in Hickory v. United States (151 U. S. 303, at p. 309) said: “ When a party is taken by surprise by the evidence of his witness, the latter may be interrogated as to inconsistent statements previously made by him for the purpose of refreshing his recofiection and inducing him to correct his testimony; and the party so surprised may also show the facts to be otherwise than as stated, although this incidentally tends to discredit the witness. As to witnesses of the other party, inconsistent statements, after proper foundation laid by cross-examination, may be shown; C. M. & St. Paul Railway Company v. Artery, 137 U. S. 507; but proof of the contradictory statements of one’s own witness, voluntarily called and not a party, inasmuch as it would not amount to substantive evidence and could have no effect but to impair the credit of the witness, was generally not admissible at common law. Best Ev. sect. 645; Whart. Ev. sect. 549; Melhuish v. Collier, 15 Q. B. 878.”

With this error in the admission of Sadlo’s testimony we are next to consider whether it affected a substantial right of the defendant. As I have said, the whole case turned upon the question of identification. Farley’s testimony was unsatisfactory and contradictory. On the trial he refused to identify the defendant; he admitted having identified him with more or less certainty on previous occasions. To show how sure he was of the identification at the station house Sadlo is permitted to add that Farley said to the defendant: “ You haven’t got a rod on you now. I would like to take a fall out of you.” Sadlo was the only one who testified to these words. They must have had considerable effect with the jury as revealing to them the state of Farley’s mind on seeing the defendant in the station house. They helped to clinch the identification. That the district attorney thought them important is indicated by the use he made of these words in his summing up.

The defendant took the stand to testify in his own behalf. He admits all that Farley testified to upon the stand. He says that Farley at the identification in the station house said that he thought that he, the defendant, looked like the man. He denies that Farley used the words Sadlo attributed to him. Farléy denies that he spoke to the defendant. Yet Sadlo, called by the People, proves as part of the People’s case that Farley used these words' indicating a positive identification, and some ill-feeling. As before stated, these words were improperly allowed to contradict Farley’s testimony; they were not competent evidence of identification, being merely hearsay, and they could not be used in corroboration of Farley. That they must have had weight with the jury seems self-evident.

As I have stated, the defendant took the stand in his own behalf. He admitted his previous convictions; he admitted the truth of Farley’s testimony; he denied his guilt; he testified that he was home at the time of the holdup. His sister and mother corroborated him, and his employer testified that he came to work that afternoon shortly after the time when the crime had been committed in Long Island City.

I am of the opinion that the issue being sharply drawn as to the defendant’s participation in the crime, and the evidence of identification being somewhat contradictory, the admission of Sadlo’s testimony was an error affecting the defendant’s substantial rights. He is entitled to be tried according to the rules of evidence established by this court, as above stated, and from which we see no occasion to depart.

The judgment should be reversed, and a new trial granted.

His cock, Ch. J., Andrews and Lehman, JJ., concur; Cardozo, J., concurs in result; McLaughlin, J., dissents; Pound, J., absent.

Judgment reversed, etc.


text:
    DeForest Radio Telephone and Telegraph Company, Respondent, v. Triangle Radio Supply Co., Inc., Appellant. DeForest Radio Telephone and Telegraph Company, Respondent, v. Radio Stores Corporation, Appellant.
    Contract — sale — where one party to a contract repudiates it the other party is excused from further performance — action to recover money due for goods delivered — counterclaim for damages arising from plaintiff’s prior repudiation of contract improperly dismissed — defendant not obliged to make payment coming due after breach of contract on part of plaintiff.
    1. Where one party to a contract repudiates it and refuses to perform, the other party by reason of such repudiation is excused from further performance, or the ceremony of a futile tender. He must be ready, willing and able to perform, and this is all the law requires. He is not obliged to go further and perform in the face of a flat refusal and rejection by the other party. Especially is this so in a ease where the vendee knows that the vendor is unable to perform, and the latter has so stated.
    2. In an action to recover for goods delivered under a contract, whereby plaintiff agreed to furnish its manufactured products to defendant and the latter agreed to sell the same and pay therefor in accordance with terms set forth, where it appears that after delivery of the goods in question but before payment was due, plaintiff, being unable, owing to an injunction, to continue furnishing its products, notified defendant of the fact and that it considered the contract at an end, whereupon defendant notified plaintiff that it refused to consider the contract terminated and stood upon its rights, it is error to dismiss a counterclaim, by the defendant for its damages, on the theory that defendant, while insisting upon the continuing validity of the contract, was bound to perform on its part by paying the amount due and by failing to pay this money also broke the contract and, therefore, could not recover for plaintiff’s breach. An argument that payment should have been made in face of the continuing breach, even though the plaintiff would be under the duty in law and good morals to pay it back to the defendant as damages finds no support in law or reason. When the plaintiff repudiated its contract and thereafter refused and was unable to perform, the defendant was not obliged to pay the amount coming due thereafter, and it being conceded that it was ever ready, willing and able to make the payment upon retraction by the plaintiff, there was no breach of contract on its part.
    (Argued May 25, 1926;
    decided July 9, 1926.)

      DeForest Radio Telephone & Telegraph Co. v. Triangle Radio Supply Co., 215 App. Div. 703, reversed.

      DeForest Radio Telephone & Telegraph Co. v. Radio Stores Corporation, 215 App. Div. 703, reversed.
    Appeal in each of the above-entitled actions, by permission, from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered November 17, 1925, unanimously affirming a judgment in favor of plaintiff entered upon a verdict directed by the court.

      Herbert R. Limburg, David Podell and Louis B. Davidson for appellant.
    Triangle was entitled to offset the amount due against the greater amount of damages to which it was entitled by reason of DeForest’s breach. (Sperry & Hutchinson Co. v. O’ Neill-Adams Co., 185 Fed. Rep. 231; Frankfurt-Barnett Co. v. Prym Co., 237 Fed. Rep. 21; Burgie v. Hicks, 203 Fed. Rep. 340; Robertson v. Davenport, 27 Ala. 574; Wiegel v. Road, Improvement Dist., 142 Ark. 434; Central Lumber Co. v. Arkansas Valley Lumber Co., 86 Kan. 131; Wellington Piano Case Co. v. Garfield & Proctor Coal Co., 236 Mass. 544; Hjorth v. Lea Mach. Co., 142 Minn. 387; Balcom v. Kohno, 215 Pac. Rep. 17; Bradley v. King, 44 Ill. 339.) DeForest having unequivocally repudiated the contract and never having retracted such repudiation, Triangle could recover the damages caused to it without further performance on its part. It was required only to be ready, able and willing to perform; and this is so whether or not the contract had been “ kept alive.” (Williston on Contracts, § 1337; Williston on Sales [2d ed.], 584; Lagerloef Trading Co., Inc., v. American Paper Products Co., 291 Fed. Rep. 947; Elterman v. Hyman, 192 N. Y. 113; Hochester v. De La Tour, 2 El. & Bl. 678; O’ Neill v. Supreme Council, 70 N. J. L. 410; Holt v. United Security Life Ins. Co., 74 N. J. L. 795; 76 N. J. L. 585; Frost v. Knight, L. R. 7 Exch. 111; Johnstone v. Milling, 16 Q. B. Div. 460; Clark v. Marsiglia, 1 Denio, 317; Delaware Trust Co. v. Calm, 195 N. Y. 231; Rosenthal v. National Folding Box & Paper Co., 226 N. Y. 313.)

      Samuel Seabury, George Trosk and Hyman Dominitz for respondent.
    The defendant expressly and unequivocally elected in writing to keep the contract alive, and thereby remained obligated to perform it. While the contract was thus in full force and effect, it defaulted in the payment of large sums due for goods sold and delivered to it by plaintiff. Under the contract the plaintiff had the right to and did cancel the contracts because of these defaults. (Rosenthal Paper Co. v. Nat. Folding Box & Paper Co., 226 N. Y. 313; Hadfield v. Colter, 188 App. Div. 563; Heller & Bros. v. Continental Mills, 196 App. Div. 7; 233 N. Y. 641; Rubber Trading Co. v. Manhattan Rubber Mfg. Co., 221 N. Y. 120; Henderson v. Wilson, 235 N. Y. 489.)
   Crane, J.

The plaintiff (hereinafter called DeForest ”), a Delaware corporation having its principal place of business in New Jersey, was engaged in the manufacture of radios, radio apparatus and accessories. The defendant (hereinafter called “ Triangle ”) was a New York corporation engaged in the wholesale business of selling radio products to dealers. On September 7, 1922, the parties entered into a written contract in which the plaintiff is referred to as “ DeForest ” and the defendant as the Distributor.” The main purpose of the contract was to furnish radios to the defendant upon the terms and under the conditions stated, in order that the defendant might place them upon the New York market and build up a demand for the plaintiff’s manufacture among the trade. It was more than a mere sales agreement as it contemplated mutual benefits through the manner and method in which the defendant should handle the product. Increase in demand was anticipated.

Thus the contract starts out by stating that DeForest, desiring to maintain the highest standards in the conduct of sales and the highest efficiency in the service to be rendered the public, in consideration of the agreement of the distributor to actively and aggressively conduct the sale of DeForest products in a dignified manner and render efficient service to the dealer, designates the defendant its distributor in Manhattan and Brooklyn. The fourth paragraph of the agreement reads as follows:

“ Fourth. Until further notice DeForest hereby agrees to allow the Distributor 50% off list prices. The terms of payment shall be Net 30 days from date of invoice, or 2% discount if the entire account is paid on the tenth of the month following date of shipment. DeForest shall have the right to cancel any orders accepted from the Distributor, and refuse or delay the shipments thereof, if the Distributor shall fail to meet payments promptly, or if the Distributor’s financial condition shall be such as in the opinion of DeForest will not warrant further shipments being made to the Distributor.”

The Distributor on its part agrees to stock and sell the DeForest products exclusively within the appointed territory, and purchase a complete fine of DeForest apparatus at a minimum of $24,000 each and every year during the term of the contract, and not less than $2,000 a month. Sixty days’ advance notice of the Distributor’s requirements is to be given, and even then, DeForest has the right to make shipments in advance of the Distributor’s requirements.

DeForest on its part agrees to give prompt and efficient service to the end that the defendant’s dealers may be faithfully served. The contract is to run for two years with a three-year renewal option. Cancellation of the contract is allowed in these words: “ It being, however, understood and agreed, that this contract may be annulled and cancelled at the option of DeForest on ninety (90) days’ notice at any time during the term hereof, should the Distributor violate any of the terms.”

The contract is to be interpreted and enforced in accordance with the laws of the State of New Jersey.

Upon the establishment of these relations, Triangle undertook to build up a trade in the Brooklyn and Manhattan territory for the DeForest radio products. The purchases far exceeded the contract requirements. In a little more than eight months they aggregated more than $50,000 as against the contract requirement of only $2,000 per month. DeForest was behind in its deliveries.

In May of 1923, while the defendant was in the full performance of all its obligations, the plaintiff deliberately breached and repudiated the contract. That it was forced to do so is beside the point. Injunction proceedings instituted by third parties prevented the plaintiff, so it was claimed, from further performance. As the disposition of this case by the courts below has turned upon the correspondence which thereupon and thereafter ensued, it is necessary, in order to state our position, to refer to portions of the letters.

On May 25, 1923, the plaintiff wrote the defendant:

We desire to notify you that on May 21, 1923, the Chancery Court of the State of New Jersey granted an injunction to the Radio Corporation of America, enjoining this Company from selling certain apparatus, involving our sets and tubes, except upon written agreement by the purchaser that neither said apparatus as a whole nor any part thereof shall be used in the commercial transmission or reception of messages for pay. * * *
We very much regret to have to advise you that under said injunction we will be prohibited from making any further sales of merchandise to you under our contract with you, and that therefore said contract is of no further effect. * * *
“ We wish to take this occasion to thank you for the splendid co-operation you have given us in the past and to just add that we trust we will be able to shortly perfect a plan under which we can establish new business relations with you which will continue as profitable to us both as those in the past.
One of our salesmen will call on you as soon as possible to explain in detail this situation and our new system for the marketing of our merchandise, but in as much as it may take from fifteen to twenty days before he could get around to your territory, we believe it would be to your interest if you could send a representative here for the purpose of taking up this matter without delay.”

At the time of the receipt of this letter the defendant had paid the plaintiff all amounts due to date. On June 8 the defendant replied:

“ We entered,” it said, into that contract in absolute good faith, upon your representation that you had the exclusive rights to manufacture and deliver the sets and tubes in question under the terms outlined in our contract. We never suspected that you had bargained away your rights to make such a contract with us and that there were superior rights in another. * * *
After exerting ever;*" effort and energy to build up a business consisting of your products, upon the strength of your contract and in reliance upon your promise, you will pardon us for not being able to agree with you in your position that the contract is at an end.”

The plaintiff’s letter was more than a mere notice of repudiation or refusal to deliver. It was so worded as to intimate, if not to plainly state, that DeForest considered the contract at an end through unavoidable causes, and that with the acquiescence of the defendant, it would be so considered by both parties. The reply of the defendant was such an one as might be expected from a successful business concern. It notified the plaintiff that the defendant would not acquiesce in any such position and would hold the plaintiff to its obligations. It would not consent to end the contract; the plaintiff could either perform or pay damage.

On or about June 10 a payment became due to the repudiating vendor for goods previously delivered. The defendant refused to pay this amount, notifying the plaintiff that it would hold it as part of the damages which it had suffered and would suffer through the plaintiff’s breach. Herman A. Linde, for the defendant, testified.

Mr. Gilbert [President of DeForest] asked me whether I would be good enough to mail our check for May purchases that night, so that he would receive it the following day as was customary for our concern to do; and I told him that I did not intend to mail the check, that "I intended, under advice of counsel, to hold that remittance, to hold that money for damages; that they refused to fulfill what we considered a good and valid contract, and that there wasn’t any question but what we were very seriously damaged by their not fulfilling it, and we intended to hold that check as part of our damages.”

The plaintiff attempted to make a new and an entirely different contract with the defendant, and negotiations were conducted along that fine. The attempt, however, failed, the defendant writing the plaintiff under letter of June 15 to the following effect:

At the time you placed in our hands forms D. A. and R. A. 1 of your proposed new contract, we had intended in good faith to co-operate with you in working out some solution whereby a new arrangement might be entered into which would safeguard the rights granted to us in our contract dated September 7th, 1922, and which would at the same time protect you from the consequences of the injunction recently granted against you in the Courts of New Jersey.
“ Inasmuch as you have assumed the attitude that you will not change a single word in your proposed new agreement which seeks to completely alter our contract relations, there is no alternative but to decline your proposed new arrangement.
“ * * * It is difficult to avoid the conclusion that the sole purpose of the new contract is not in good faith to avoid the consequences of an injunction but simply to fling off the obligations of a contract which seems to appeal to you no longer and which we consider to be still equally binding on all concerned.”

This correspondence shows that the defendant at all times considered the contract of September 7, 1922, as a good and valid contract; that it refused to consider it as ended, by reason of the injunction proceedings, and that it intended to hold the plaintiff in damages for its breach.

On June 22, 1923, the defendant wrote another letter to the plaintiff stating that pursuant to the terms of the agreement it gave ninety days’ notice of a renewal of the contract for a further term of three years, commencing September 7, 1924. This letter was not inconsistent with the position which the defendant had taken ever since the plaintiff’s letter of May 25, 1923. The defendant insisted at all times upon its full rights under the agreement and its damages resulting from the breach. At most, this renewal letter was a further claim, if necessary, for all privileges and advantages under the contract as thus extended. The damage resulting from the breach of this contract, having three to four years to run, might be much more than for the balance of the two-year period. If the renewal privilege was worth anything, the defendant insisted upon it.

This action was brought for the purchase price of the goods delivered under the contract and ordered prior to May 25, 1923. The amount did not become due, as before stated, until June 10, 1923, some days after the anticipatory breach. The defendant answered, setting up as a counterclaim its damages sustained by the plaintiff’s breach of the contract, as above set forth. As the plaintiff’s bill was admitted, the sole question arising at the trial was the validity of the counterclaim. The trial judge took the view that as the defendant had not acquiesced in the abandonment or termination of the contract, but had insisted upon its continuing validity, it was bound to perform its part of the obligation by paying the amount due on June 10, 1923. Adopting the rule of law that a contract is kept alive for the benefit of both parties, the defendant by failing to pay this money, also broke the contract, and, therefore, could not recover. The later breach was considered to have eliminated the first and more damaging breach of the plaintiff, and the counterclaim was dismissed. Such was the view, taken by the courts below.

After the defendant’s last letter, referred to as the renewal letter, the plaintiff the next day, on June 23, sent a letter in which it said: “We hereby elect to cancel and annul said contract.” No such right of cancellation was contained in the agreement of September 7, 1922. By referring to the cancellation clause, which I have quoted above, it will be noted that DeForest had the right for non-performance of any of the detendant’s obligation to give 90 days’ notice of cancellation. This cancellation was snapped off at once, giving the impression that the plaintiff’s idea of the law and of certain legal phrases was that if the defendant insisted upon keeping the contract alive, it was kept alive for the benefit of the other party to caucel, not to perform. The plaintiff could not perform; it is conceded that the injunction was continued in force and effect during all the times here mentioned. Yet/’ says the plaintiff, the defendant having kept the contract alive, I could cancel it, though I could not execute it.” Such a claim exposes its own weakness, and makes of the law of sales and contracts a mere play for position, rewarding the clever move.

As the case comes before us, with all reasonable inferences to be taken in favor of the appellant, we may summarize the facts as follows: In acknowledging its inability to perform, and stating its refusal to continue further delivery of goods, the plaintiff asked the defendant to consent to the termination of the contract or to make a new contract. The defendant refused to consider the contract terminated, insisted upon its rights, upon performance, or wanted damages. A payment thereafter becoming due for part of the goods purchased, the defendant notified the plaintiff that it would hold the amount as part of its damages resulting from the breach. When sued by the plaintiff for the amount due, the defendant counterclaimed for its damages. What is there here in this brief and concise statement of facts which denies the defendant relief for a conceded loss? What did it do which any reasonable and prudent business man would not have done?

In the first place, the defendant made an election; it elected to consider the contract as valid and binding; it refused to terminate it, and give up its rights thereunder. This is the only election it was called upon to make. Thereafter the contract, so far as the parties were concerned, was an existing contract, as binding after May 25, 1923, as before that date. The plaintiff could at any time have reconsidered and revoked its cancellation, or repudiation and could have entered once more upon the performance of the contract. The defendant’s letters held out this offer to it, which if accepted, would have bound the defendant also to continue performance. After the plaintiff’s letter, which is referred to as the anticipatory breach, the defendant could at any time have sued for its damages. Its delay in so doing afforded the plaintiff an opportunity to repent and to resume the contract. It refused and failed to do so. To the defendant's demand for damages it has but one defense, and that is the non-payment of a sum of money coming due after the breach. Payment, it says, should have been made in face of the continuing breach, even though the plaintiff would be under the duty in law and good morals to pay it back to the defendant as damages. This defense finds no support in law or in reason.

Where one party to a contract repudiates it and refuses to perform, the other party by reason of such repudiation is excused from further performance, or the ceremony of a futile tender. He must be ready, willing and able to perform, and this is all the law requires. He is not obliged to go further and perform in the face of a flat refusal and rejection by the other party. Especially is this so in a case like this where the vendee knows that the vendor is unable to perform, and the latter has so stated. (Blumenthal & Co. v. Gallert & Co., 240 N. Y. 217; Lagerloef Trading Co., Inc., v. American Paper Products Co., Circuit Court of Appeals, 291 Fed. Rep. 947; 263 U. S. 706; Henderson Tire & Rubber Co. v. Wilson & Son, 235 N. Y. 489; Strasbourger v. Leerburger, 233 N. Y. 55; Goodyear Tire & Rubber Co. v. Vulcanized P. Co., 228 N. Y. 118, 125, 126; Stokes v. Mackay, 147 N. Y. 223; O’Neill v. Supreme Council, 70 N. J. L. 410; Holt v. United Security Life Ins. Co., 74 N. J. L. 795; 76 N. J. L. 585; Williston on Contracts, vol. III, sect. 1303, 1337; 10 Cornell Law Quarterly, p. 135; British & Beningtons, Lim., v. N. W. Cachar Tea Co., 1923 A. C. H. L. 49.)

When, therefore, the plaintiff repudiated its contract on May 25, 1923, and thereafter refused and was unable to perform, the defendant was not obliged to pay the amount coming due June 10 thereafter. It is conceded that it was ever ready, willing and able to make the payment upon retraction by the plaintiff. There was no breach of contract by the defendant, and it was error to dismiss the counterclaim.

This view of the case renders it unnecessary for us to consider whether there were breaches of the contract by the plaintiff prior to May 25, 1923. It is likewise unnecessary for us to determine at this time whether the courts of this State will take judicial notice of the adoption of the Uniform Sales Act in other States and by the State of New Jersey. This contract was to be interpreted according to the laws of New Jersey and the courts below, in the absence of proof upon the subject have proceeded according to the common law. We need, not do otherwise. Under the New York Personal Property Law; Cons. Laws, ch. 41 (Sect. 126, subd. 2), sometimes referred to as the Sales Act, non-payment of an installment due cannot always be considered such a material breach as to justify the other party in refusing to proceed. Neither need we analyse this contract of September 7, 1922, to determine whether payment on June 10 was a material and an essential part of the agreement.

By stipulation of counsel the case against the Radio Stores Corporation was tried with this case against the Triangle Radio Supply Co., Inc, The evidence in the one case was to be applicable to the other, although separate verdicts were to be rendered. What I have said, therefore, applies to this other case. The judgment in each case should, therefore, be reversed and a new trial granted, with costs to abide the event.

Cardozo, Pound, Andrews and Lehman, JJ., concur; His cock, Ch. J., and McLaughlin, J., dissent.

Judgment accordingly.


text:
    Elton Clark et al., as Trustees under a Declaration of Trust under the Name of Boston Mexican Petroleum Trustees, Appellants, v. John H. Kirby et al., Respondents.
    Contract — sale — rescission —■ practice — election of remedies — procedure merely methodical means to restore rights — wrong move or mistake should not furnish protection for wrongful act — commencement of action for rescission an election of remedies and bar to later action for fraud but later action for fraud does not bar first action for rescission — issues of fact raised by reply require trial on merits — waiver or abandonment of rescission question of intent — within power of court of equity to relieve plaintiffs from mistake or error in procedure — erroneous dismissal of complaint.
    1. All procedure is merely a methodical means whereby the court reaches out to restore rights and remedy wrongs; it must never become more important than the purpose which it seeks to accomplish. Unless some necessary requirement has been omitted, a wrong move or a mistake in the method of seeking relief from the courts ought not to furnish protection for a wrongful act.
    2. The commencement, in this State, of an action to rescind a contract of sale on the ground of fraud constitutes an election of remedies which would ordinarily be a good defense to a subsequent action to recover damages for the same fraud assuming an affirmance of the purchase, but such a later action for fraud cannot be deemed an election which bars the first action for rescission.
    3. Where one of the defendants to the action for rescission set up as a defense a later action brought by plaintiff in another State against one of the defendants here and a third party to recover for the same fraud, and plaintiff being directed to reply, did so, denying waiver and abandonment or any intention to recede from rescission and alleging that the foreign action was in no way inconsistent with the action here and that the only action authorized to be taken was against the third party who was not a party here, issues of fact were raised as to waiver and abandonment which required a trial on the merits.
    4. Although plaintiffs, after commencing their action of rescission, could waive or abandon their action or the rescission which they had made, such waiver or abandonment.were questions of intent, and, under their reply, questions of fact. Further, an examination of the complaint in the foreign action shows that plaintiffs were seeking to recover the purchase price, also the actual money spent by them to develop the properties. Damages arising from the difference in the value and the amount paid was not the relief sought. Therefore, there was nothing on the face of the pleadings which justified the trial court in deciding that the plaintiffs, as matter of law, had waived and abandoned rescission.
    (Argued June 3, 1926;
    decided July 9, 1926.)
    5. Even if the foreign action had been brought for fraud against all the defendants and for damages, it was still within the power of a court of equity to relieve the plaintiffs from a mistake or error in procedure, especially after a discontinuance of the foreign action and where there had never been any act of ownership over the res since discovery of the fraud.
    6. A dismissal of the complaint, on the pleadings, was, therefore, error.

      Clark v. Kirby, 216 App. Div. 792, reversed.
    Appeal from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered April 20, 1926, affirming a judgment in favor of defendants entered upon a dismissal of the complaint by the court on trial at Special Term.

      Edward F. McClennen for appellants.
    A case should not be dismissed on the pleadings for an affirmative defense alleged in an answer not supported by proof and denied by the plaintiff. (Union Trust Co. v. Barber, 177 N. Y. Supp. 590; Baird v. Grace Church, 197 App. Div. 272; Globe Elevator Co. v. American Molasses Co., 207 App. Div. 9; Nanes v. Peck & Mack Co., 181 App. Div. 760; Townsend v. Felthousen, 156 N. Y. 618; Fairchild v. McMahon, 139 N. Y. 290; Goldenbergh v. Hoffman, 69 N. Y. 322; Smith v. Countryman, 30 N. Y. 655; Van Epps v. Harrison, 5 Hill, 63; Sandford v. Handy, 23 Wend. 260; Churchill v. St. George Development Co., 174 App. Div. 1; Griffing v. Diller, 66 Hun, 633; Schumacher v. Mather, 133 N. Y. 590; Pryor v. Foster, 130 N. Y. 171.) A suit for rescission consistently persisted in is not defeated by an action subsequently brought for deceit not based on a retention of the property or the benefits of the contract. (Schenck v. State Line Telephone Co., 228 N. Y. 308; Mack v. Latta, 178 N. Y. 525; Merry Realty Co. v. Shamokin & Hollis R. E. Co., 230 N. Y. 316; Turner Lumber Co. v. Lacey, 199 App. Div. 534; American Woolen Co. v. Samuelsohn, 226 N. Y. 61; Whalen v. Stuart, 194 N. Y. 495; Kersch v. Machover, 194 N. Y. Supp. 239; Terry v. Munger, 121 N. Y. 161; Conrow v. Little, 115 N. Y. 387; Powers v. Benedict, 88 N. Y. 605; Moller v. Tuska, 87 N. Y. 166; Rodermund v. Clark, 46 N. Y. 354.)

      E. G. Budington for John H. Kirby et al., respondents.
    A suit for the rescission of a contract and an action for fraud and deceit inducing the making of it are inconsistent. The former treats the agreement as a nullity, whereas the latter recognizes and affirms it as valid. (Merry Realty Co. v. Shamokin Realty Co., 230 N. Y. 316; Conrow v. Little, 115 N. Y. 387.) One seeking to rescind a contract for misrepresentations must, upon discovery of the facts, announce his determination to rescind and adhere to it; and if, after seeking to rescind, he does anything by way of recognition of the contract his right of rescission is lost. (Grimes v. Sanders, 93 U. S. 55; Shapiro v. Goldberg, 192 U. S. 232; Clark v. Kirby, 204 App. Div. 447; Genet v. Del. & H. Co., 28 App. Div. 328; Cobb v. Hatfield, 46 N. Y. 533; Terry v. Munger, 121 N. Y. 161; Mc Naught v. Equitable Life Ins. Co., 136 App. Div. 774; Sanger v. Wood, 3 Johns. Ch. 416; Stuart v. Hayden, 169 U. S. 1; U. S. v. Oregon Lumber Co., 260 U. S. 290.)

      James G. Purdy for O. L. Van Laningham, respondent.
   Crane, J.

On points of practice and procedure the plaintiffs have been barred from trying this case on the merits. The action is one for the rescission of a contract of sale on the ground of fraud. Although the plaintiffs have always insisted upon rescission, both before and after the bringing of this action; have ever stood ready to return the property received; have not used the property since the discovery of the misrepresentations involved in the transaction, our courts thus far have dismissed the plaintiffs’ complaint because they later ventured to bring an action in Missouri against one of the defendants and a third party to get back their purchase price and the expenses they had incurred as damages, and which action was discontinued before the trial in this case. Such a result leads to the immediate impression that something must be wrong in the application of our rules of law. The zealous endeavor to bring the defendants into court for their alleged wrongdoing has thus far moved the courts to deny a hearing on the merits.

The facts are these: The plaintiffs are trustees doing business under the name Boston Mexican Petroleum Trustees, under a declaration of trust, dated May 20, 1919, a copy of which is on file in the office of the Commissioner of Corporations of the Commonwealth of Massachusetts. On November 19, 1920, the defendants for a consideration price of $116,250 assigned to the plaintiffs a lease of petroleum subsoil rights in lands in Kansas, which the defendant Kirby then held as trustee, ostensibly for himself and the defendants McElhiney, Van Laningham and Souders. In December, 1920, the plaintiffs first learned of the falsity of the representations which induced them to make the purchase, and they thereupon rescinded the assignment and gave notice thereof to the defendants, offering to reassign the lease and give up the possession and all further interest in the property. They demanded their money back, and brought this action to get it. In the complaint they set forth a sufficient cause of action, for rescission in equity, stating all the necessary elements of the fraud, and asking for the repayment of the consideration with interest, and that they be directed to reassign the lease. The action being in equity, all of these defendants were necessary parties. The defendant Souders was not served with process until April 10, 1922.

On or about February 27, 1922, these plaintiffs commenced an action in Missouri against one of the defendants here, O. L. Van Laningham, and one W. D. Corbin, who is not a party to this action, to recover as damages for their misrepresentations in the sale of the lease mentioned the consideration paid therefor, together with interest and the amount expended by the plaintiffs in seeking to develop the oil fields in reliance upon the false statements. It will be noticed that this Missouri action was commenced after all the defendants had been served in the New York action, with the exception of Souders. As above stated, Souders was not served until April 10, 1922.

When Souders, therefore, served his answer in this action in our Supreme Court, he alleged among other defenses this suit in Missouri against Corbin and Van Laningham, claiming it as an election of the plaintiffs to recover damages for fraud, and thus an affirmance of the lease-purchase inconsistent with their attempted rescission. By an order of the Supreme Court, affirmed in the Appellate Division (204 App. Div. 447), the plaintiffs were obliged to serve a reply to this affirmative defense. They alleged that the action in Missouri was not to recover the damages sustained by the fraud, in affirmation of the sale; that the action was in no way inconsistent with their claim for rescission; that their agents in Missouri had no authority to commence or proceed with any action inconsistent with the theory of rescission; and that the only action authorized to be taken was against Corbin, who is not a party here. The matters are set forth in full in the reply. It was further alleged that, according to the law of Missouri, an action for rescission and for damages may be maintained at the same time; they are not considered inconsistent, only one recovery being allowed. The reply further stated that the Missouri action was discontinued in April, 1923, without and before trial, and nothing of value has been or is to be received thereunder.”

A copy of the Missouri complaint annexed to the answer of the defendant Souders demanded from Corbin and Van Laningham the repayment of $116,928, which was the purchase price of the lease-assignment, plus interest, together with $150,000 paid out by the plaintiffs in seeking to develop the properties before the discovery of the fraud. There was no allegation which indicated that the plaintiffs were to keep the properties and recover as damages the difference between what they were worth and the purchase price. ■ ■ — - v yj ¡ h i

When the defendants, other than Souders, answered in this case, they set up as affirmative defenses this Missouri action, but demanded no reply. Their affirmative defenses, therefore, under our practice were deemed to be denied. .. -■ »r¡ ;»3 • : 'Chu

The case came to trial, and a motion was made by the defendants to dismiss the complaint on the pleadings. Souders, who had obtained a reply to his affirmative defense, submitted a written statement withdrawing from the trial, taking no part therein, and leaving the matter with the court. The other defendants, whose affirmative defenses were deemed denied, considered that they had a right to rely upon the plaintiffs’ reply to Souders’ defense, and that on that reply it appeared that the Missouri suit was an absolute bar to the continuance of this action.

Cónsidering the decision of the Appellate Division,, above referred to (204 App. Div. 447), as a ruling upon these pleadings and upon the points raised, the trial court dismissed the complaint and the judgment entered thereon has been affirmed by the Appellate Division by a divided court.

Assuming that the defendants could base their motions for dismissal upon the plaintiffs’ reply under the order of the court to Souders’ answer, we do not understand how the decision of the Appellate Division could have had any application to the issues raised by the reply served according to its order. That court simply decided that on the allegations of a waiver and abandonment set forth in Souders’ defense, the plaintiffs should reply. The plaintiffs did reply, denying waiver and abandonment, or any intention to recede from rescission, and further alleging the facts above stated. Here was an issue of fact to be tried. The opinion of the Appellate Division applied to facts alleged by Souders; it could not apply to an issue of fact thereafter created. The trial judge in this case had an entirely different situation presented to him than did the Appellate Division on the motion for a reply. It was natural to assume that Souders’ statements might be true; it was to be expected that, if denied, their truth would be determined by a trial.

In Van Laningham’s answer, filed to the Missouri action, he set up the New York action which had been previously brought against him and his associates as a bar, on the ground that the plaintiffs had made their election to rescind the contract of purchase and had brought an action for rescission. If the Missouri action were the ordinary action to recover damages for fraud and deceit assuming an affirmance of the purchase, such a defense would ordinarily be good, under the law of the State of New York. (Merry Realty Co. v. Shamokin & Hollis R. E. Co., 230 N. Y. 316.) The plaintiffs, upon discovering the fraud of the defendants, could, according to our law, rescind the purchase and sue to get their money back; or they could sue to recover damages for fraud, in which instance they would keep their purchase and recover their loss. They could not do both, and, generally speaking, having elected to pursue one remedy, they could not thereafter resort to the other. Having made an election, it would be final. (Moller v. Tuska, 87 N. Y. 166.) The election, however, would apply to the first method pursued. Therefore, Van Laningham, if his allegations were correct, was right in considering the action for rescission in New York as an election of the plaintiffs which would bar the Missouri action, were it one for the ordinary money damage. It is difficult to see on what theory the defendants claim that such a later action for fraud is an election which bars the first action for rescission. If the plaintiffs elected to rescind the purchase and the rescission stood, it might bar the later action for fraud, but the later action could not be considered an election which would bar the former.

Of course the plaintiffs, after their action for rescission, could waive or abandon their action or the rescission which they had made. Waiver and abandonment, however, are always questions of intent unless they merge into an estoppel, which may sometimes operate contrary to intent. Whether or not the plaintiffs had waived their rescission by their action in Missouri was at least a question of fact under their reply. The facts alleged by them show that they never abandoned the course which they had first taken. They continually insisted upon rescission. An examination of the complaint in the Missouri action, as above stated, shows that they were seeking to recover the purchase price, also the actual money spent by them to develop the properties. Damages arising from the difference between value and the amount paid was not the relief sought. In the ordinary action for fraud and deceit, the plaintiff keeps the purchase and sues for the difference between the value of the property as it is and the amount paid. (Reno v. Bull, 226 N. Y. 546.) Such was not the plaintiffs’ Missouri action. It merely sought the purchase price and the money spent in reliance on the representations, an attitude perfectly consistent with their claim of rescission, Therefore, there was nothing on the face of the pleadings which justified the trial court in deciding that the plaintiffs, as matter of law, had waived and abandoned rescission.

' The courts have heretofore called attention to the confusion which sometimes arises between the election of remedies and acts which deal with the subject-matter of the controversy. If these plaintiffs had continued to exercise ownership over the oil fields, or to develop them, or do anything else indicative of ownership, we would then have a different situation altogether. Such acts would be an actual.confirmation or assent to the bargain, and inconsistent with the claim that the transaction had been rescinded, or that the plaintiffs were holding the property merely as trustees for the defendants. No such claim is made in this case. The whole matter has turned upon procedure and the doctrine of election.

The election of remedies is largely a rule of policy to prevent vexatious litigation, and like the Statute of Limitations is somewhat arbitrary. In this State we say that where a party, knowing all the facts, elects to sue in rescission instead of for damages, he must pursue the course he has taken. Even then, if the remedy chosen be insufficient or inadequate or useless, the rule has not barred the plaintiff from taking other timely methods to obtain his rights. (Schenck v. State Line Telephone Co., 238 N. Y. 308; U. S. v. Oregon Lumber Co., 260 U. S. 290; Mack v. Latta, 178 N. Y. 525.) All procedure is merely a methodical means whereby the court reaches out to restore rights and remedy wrongs; it must never become more important than the purpose which it seeks to accomplish. Unless some necessary requirement has been omitted, a wrong move or a mistake in the method of seeking relief from the courts ought not to furnish protection for a wrongful act. We can find nothing in these pleadings which justifies the action taken below. There should have been a hearing on the merits. The action in Missouri, even if a slip or mistake, having been withdrawn, cannot be seized by the defendants as a substitute for good faith and honest dealing.

Briefly stated, the judgments of dismissal taken below cannot stand for these reasons: (1) The New York action was an action for rescission. This constituted the election of remedies, not the later action brought in Missouri. (2) The reply served to the affirmative defenses set up in the answer raised issues of fact as to waiver and an abandonment which required a trial on the merits. (3) The Missouri action was not as matter of law a waiver or an abandonment of rescission; neither was it inconsistent with the claim of rescission. (4) Even if .the action had been brought for fraud against all the defendants and for damages, it was still within the power of a court of equity to relieve the plaintiffs from a mistake or error in procedure, especially after a discontinuance of the Missouri action, and where there had never been any act of ownership over the res, since discovery of the fraud.

The judgments of the courts below should be reversed and a new trial granted, with costs to abide the event.

Cardozo, Pound, McLaughlin, Andrews and Lehman, JJ., concur; Hiscock, Ch. J., not voting.

Judgments reversed, etc.