author: Andrews, Ch. J.

text:
    John Barth, Assignee, Resp’t, v. Erastus P. Backus, Sheriff, et al., App’lts.

      (Court of Appeals,

      Filed November 28, 1893.)

    1. Assignment fob creditors—Foreign assignment—Attachment.
    In view of the compulsory clauses of the Wisconsin statute as to assignments for creditors, that statute is to he regarded as in the nature of a bankrupt law, and ineffectual to transfer title to property of the insolvent as against subsequent attaching creditors.
    2. Same—Foreign creditors.
    A creditor coming here from the common domicil stands upon the same footing as a resident creditor, and his attachment lien will be sustained to the same extent.
    Appeal from judgment of the supreme court, general term, third department, affirming judgment in favor of plaintiff.
    Action brought by plaintiff, as assignee for creditors of the Wilkin Manufacturing Company, a Wisconsin corporation, to recover a debt due to said corporation from the Canton Lumber Company, which had been attached in actions brought against said corporation by certain banks in this state.

      Nelson L. Robinson, for app'lts; Thomas Spratt and Ledyard P. Hale, for resp’t.

      Reversing 51 St. Rep., 111.

   Andrews, Ch. J.

The general rule that the validity of a transfer of personal property is governed by the law of the domicil of the owner, is in most jurisdictions held to apply to a transfer by voluntary assignment by a debtor of all his property for the benefit of creditors, as well as to a specific transfer by way of ordinary sale or contract, and the title of such assignee, valid by the law of the domicil, will prevail against the lien of an attachment issued and levied in another state or country, subsequent to the assignment, in favor of á creditor there, whether a citizen or non-resident, upon a debt or chattel belonging to the assignor embraced in the assignment, provided the recognition of the title under the assignment would not contravene the statutory law of the state, or be repugnant to its .public policy. The decisions are not uniform, but this is the general rule, supported by the preponderating weight of authority, and is the settled law of this state. Ockerman v. Cross, 54 N. Y., 29; Bishop on Insolvents, §§ 241, 265, and cases cited.

But this general rule is subject to a qualification established in the jurisprudence of the American states, that a title to personal property acquired in invitum under foreign insolvent or bankrupt laws, good according to the law of the jurisdiction wher§ the proceedings were taken, will not be recognized in another jurisdiction" where it comes in conflict with the rights of creditors pursuing their remedy there against the property of the debtor, although the proceedings were instituted subsequent to and with notice of the transfer in insolvency or bankruptcy. Holmes v. Remsen, 20 Johns., 229; Kelly v. Crapo, 45 N. Y., 87 ; In re Waite, 99 id., 433; 2 Kent Com., 406, 407. This exception proceeds upon the view that to give effect to such a transfer arising by operation of law, and not based upon the voluntary exercise- by the owner of the jus disponendi, would be to give the foreign law an extraterritorial operation, which the rule of comity ought not to permit to the-prejudice of suitors in another jurisdiction:

The cases in this state since the case of Holmes v. Remsen, supra, in which the chancellor sought to maintain the English doctrine on the subject, have uniformly sustained the rights of domestic attaching creditors against a title under a prior statutory assignment in another state or country, the several states of the Union being treated for this purpose as foreign to each other. Willitts v. Waite, 25 N. Y., 577; Johnson v. Hunt, 23 Wend., 87; Kelly v. Crapo, supra.

The general question in this case involves the point whether the assignment made by the Wilkin Manufacturing Company, under the statutes of Wisconsin, is to be treated as a voluntary assignment, not in conflict with our laws or policy, or whether, in view of the compulsory clauses of the Wisconsin statute, that statute is to be regarded as in the nature of a bankrupt law, .and ineffectual to transfer title to the property of the insolvent in our jurisdiction as against attaching creditors. In considering whether the title of the assignee in Wisconsin is paramount to the claims of creditors here, who, subsequent to the assignment, procured attachments against the debt owing to the Wilkin Manufacturing Company by the Canton Lumber Company, a reference to the Wisconsin statute under which the assignment was made becomes important. The original Wisconsin statute upon the subject of voluntary assignments by failing debtors was similar to the statute in this state upon the same subject. It was a statute prescribing the conditions of such assignments and regulating the administration of the trust for the protection of creditors.

In 1889, radical changes were made in the statutory system of Wisconsin, and the prior statute was amended. The amendments, among other things, provided that the assignor in a voluntary assignment for the benefit of his creditors, made under, or in pursuance of the laws of the state, “ may be discharged from his debts as a part of the proceedings under such assignment, upon compliance with the provisions of this act.” It further declared that every creditor of the insolvent debtor residing within or without the state who should accept a dividend out of the assigned estate,' or in any way, by proving his claim or otherwise, participate in the proceedings under the assignment, shall be “ deemed to have appeared in the matter of such assignment and the application for a discharge, and should be bound by any order or discharge granted by the court,” subject to the right of appeal. Under the statute, a creditor, by accepting a dividend, thereby consented to a discharge of the debtor from the portion of the debt remaining over and above his share of the assets, and unless a creditor comes in under the assignment he is debarred from receiving anything out of the assigned property, unless indeed a surplus should remain after payment of the participating creditors in full, although it seems the debt would remain as a claim against the insolvent.

The power to discharge a contract without payment or satisfaction and without the consent of the parties, is a power which pertains to the sovereign alone. The statute of Wisconsin does not assume to discharge the debts owing by the insolvent assignor absolutely. But, as has been said, it deprives creditors who do not come in under the assignment of all share in the assigned estate, unless in the improbable contingency of a surplus. This coercive feature of the scheme, if contained in a voluntary general assignment for the benefit of creditors, would render the assignment void. Grover v. Wakeman, 11 Wend., 189. The statute of Wisconsin, however, incorporates this feature and the law is recognized by the courts of Wisconsin as an insolvent law. Holton v. Burton, 78 Wis., 321; Hempsted v. Ins. Co., id., 375.

This court had occasion in the case of Boese v. King, 78 N. Y., 471, to consider a similar provision in a statute of Yew Jersey regulating voluntary assignments for the benefit of creditors in that state, and it was assumed that the provision in that act was in the nature of a bankrupt law. Effect cannot be given here to this coercive feature in the Wisconsin law, except by giving extraterritorial effect to the law of that state. The assignor had no power to make such a condition, and if it is legal it is by force of the Wisconsin statute alone.

This feature is one of the distinguishing tests of an insolvent or bankrupt law. The assignment was voluntary in the sense that the Wilkin Manufacturing Company were not coerced into executing it, and the title to the property was vested in the assignee by its own act. But, whether it is to be treated as voluntary in another jurisdiction when the claims of creditors there are in question is the point. The assignment purports to have been made under and in pursuance of the law of Wisconsin. The assignor, by proceeding under that law, presumably designed to avail itself of the provision for a discharge. This could only be accomplished by force of the law. The right of an insolvent or bankrupt to initiate voluntary proceedings in bankruptcy is a common feature in bankrupt laws, but that fact does not make the assignment voluntary, so as to give extra-territorial operation to the proceedings. This point was adverted to in the case of Upton v. Hubbard, 28 Conn., 274, where the court said: “ In our view there is essentially no difference whether, in consequence of an act of bankruptcy, as in England, the bankrupt’s estate is forced from him, or he himself sets the law in motion by a conveyance in bankruptcy in the first instance.” Under the Wisconsin statute the transfer is voluntary, but the law then steps in and regulates the distribution of the assigned estate in accordance with conditions which the sovereign alone can impose. It would, we think, be disregarding the substance to hold that the voluntary feature of the law distinguishes it from the class of bankrupt or insolvent statutes which, by general consent in this country, are held tobe ineffectual to transfer the title of the insolvent to property in another state, as against attaching creditors there.

It is claimed, however, in behalf of the plaintiff that, assuming that the title of the assignee would be subordinate to the lien of attachments issued here at the suit of resident creditors, this priority cannot be availed of in behalf of Wisconsin creditors who, knowing of the assignment, seek to gain a preference under our attachment laws, and that the banks to whom the claims were assigned after maturity, and who took with notice of the assignment, stand in no better position than the original creditors.

In some of the states which refuse to recognize the validity of the title of a foreign assignee, even in case of voluntary assignment, where it comes in conflict with the claims of domestic creditors, a distinction is made, and it is held that where the domicil of the foreign assignee and the creditor is the same, the latter will be bound by the title of the former good by the law of the common domicil. May v. Wannemacher, 111 Mass., 202; Sanderson v. Bradford, 10 N. H., 260; Moore v. Bonnell, 2 Vroom, 90. The principle of comity in these states is held to apply so as to subject non-residents to the operation of the foreign law, but not go as to prevent domestic creditors from pursuing their remedy in defiance of the foreign assignment. Faulkner v. Hyman, 142 Mass., 53.

The question is not an open one in this state. We have refused to adopt the distinction made in some of the states, and have placed the right of a creditor coming here from the state of the common domicil upon the same footing as that of a citizen or resident creditor, and have sustained the lien of an attachment issued here at the instance of a foreign creditor after proceedings in insolvency had been insituted in the state of the common •domicil of the insolvent and creditor. Hibernia Natl. Bank v. Lacombe, 84 N. Y., 367. There the debtor and attaching creditor were Louisiana corporations. The attachment was issued after the debtor bank had been placed in liquidation under the laws of that state and commissioners had been appointed to take possession of and administer its assets. Daníorth, J., after stating the general rule that the law of Louisiana could have no operation here, referring to the point now under consideration, said; “ The plaintiff, as we have seen, although a foreign creditor, is rightfully in our courts pursuing a remedy given by our statutes. It may enforce that remedy to the same extent, and in the same manner, and with the same priority, as a citizen. Once properly in court and accepted as a suitor, neither the law nor court administering the law will admit any distinction between the citizen of its own state and that of another.”

How far our courts will enforce the title of a foreign assignee in bankruptcy as between the assignee and the bankrupt or his creditors, where all the parties have a common domicil abroad, was much discussed in the case of Abraham v.Plestoro, 3 Wend., 548, and that case, with others, were reviewed in the case of In re Waite, supra. The authority of Hibernia Bank v. Lacombe upon the point now in question was expressly recognized and approved in Warner v. Jaffray, 96 N. Y., 248, and it must be regarded as establishing the law of the state on the subject. In Warner v. Jaffray the court refused to interfere with liens acquired by citizens of this state upon personal property in another state under the laws of that state, belonging to an insolvent resident here, under proceedings commenced after a voluntary assignment for the benefit of creditors, valid by the laws of this state, had been made and delivered. It was in substance held that •creditors of the assignor, citizens of this state, were not, because of such citizenship, precluded from taking proceedings in another state hostile to the assignment, for the purpose of acquiring priority in respect of personal property situated there embraced in the assignment. See, also, Johnson v. Hunt, supra. The courts of this state accord to our citizens the same liberty to proceed in another jurisdiction in hostilitj' to assignments executed here which they accord to citizens of other states coming here and instituting proceedings in hostility to transfers in insolvency, valid by the laws of their domicil. The rule in New York on the question is also the rule in other states. McClure v. Campbell, 71 Wis., 350; Rhawn v. Pearce, 110 Ill., 350; Boston Iron Works v. Boston Locomotive Works, 51 Me., 585 ; Upton v. Hubbard, supra.

It follows, therefore, that the attachments in question created valid liens on the debt attached in priority to the title under the assignment, assuming the claim of the plaintiff that the banks stood in no better position than the Wisconsin creditors.

The point that the provisions in the Wisconsin statute providing for a discharge of insolvent debtors apply to natural persons only, and not to corporations, is opposed to the statutory construction of the word “person,” as defined in the Revised Statutes of that state, and there is nothing in the charter of the-corporation, so far as appears, or in the statutes of Wisconsin, which takes from this corporation the general powers which, in the absence of any statutory or charter restriction, belong to corporations to make an assignment in insolvency. De Ruyter v. St. Peter's Church, 3 N. Y., 238. This judgment is not, we think, in accord with the law of this state, and must, therefore, be reversed. The case was argued at our bar with great ability, and the researches of the several counsel have materially lightened the labors of the court.

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

Judgment reversed, and new trial granted, costs to abide event.

All concur.


source: Caselaw Access Project

author: Per Curiam.

license: Public Domain

text:
    The Hygeia Water Ice Co., App’lt, v. The New York Hygeia Ice Co. (Limited), Resp't.

      (Court of Appeals,

      Filed November 28, 1893.)

    Corporations—Corporate name—-Injunction.
    Defendant’s corporate name was chosen by its incorporators before, but. the company was not incorporated until after that of plaintiff, at which time it had no knowledge of the use of the word “Hygeia” by plaintiff. It had a capital of $300,000, all of which was paid and used in the conduct of its business, while plaintiff has only a capital of $5,000, half of which has been paid in, and it has never actually engaged in business. It also appeared that the word ‘ ‘ Hygeia ” had been previously used by a water company. Held, that plaintiff had no absolute right to the aid of , the equitable powers of the court to restrain the use by defendant of such name, but they may be withheld in the exercise of a sound discretion, and that such discretion was properly exercised in denying such relief.
    Appeal from judgment of the supreme court, general term, first department, affirming judgment dismissing the complaint-on the merits.

      Charles Steele, for app’lt; George E. Mott, for resp’t.

      Affirming 47 St. Rep., 71.

   Per Curiam.

The plaintiff sought to restrain the defendant, from the use of its corporate name, on the ground that such name so nearly resembled that of the plaintiff as to be calculated to deceive persons dealing with them. The plaintiff was incorporated March 1, 1890, pursuant to chapter 40 of the Laws of 1848, and the acts amendatory thereof, under the name of the- “ Hygeia Water Ice Company.” The defendant was incorporated April 1, 1890, pursuant to chapter 611 of the Laws of 1875,. under the name of the “New York Hygeia Ice Company, Limited.” The corporate name of the defendant was selected by the incorporators in Januarjq 1890, but under the act of 1875 it was necessary to procure subscriptions to the capital stock and comply with the provisions of that act before the incorporation was perfected. This occurred on the first of April following, and the capital then fixed at $200,000 was all paid in and subsequently increased to $300,000, all of which was paid. The original capital was used in procuring the necessary plant, machinery and other property necessary to the conduct of the business, which was commenced almost immediately after the incorporation was finally completed. The incorporators then had no knowledge of the use of the word “ Hygeia ” by any other ice company, nor until the commencement of this action, September 25, 1890, when its business was in full operation.

The plaintiff company, as we have seen, was actually organized a month before the defendant, the provisions of the act of 1848 not requiring compliance with such formalities as the act of 1875, with three stockholders and an authorized capital of $5,000, but half of which was ever paid in. It has never actually engaged in the business of manufacturing ice or any other business, and its sole property consists in its corporate franchise. It is apparent from these facts that there was no fraudulent intent on the part of the defendant to appropriate the plaintiff’s name or any part of it, and that the reasons for the interference of a court of equity are not very strong. In'such cases a party has no absolute right to the aid of the equitable powers of the court, but they may be withheld in the exercise of a sound discretion as the facts and circumstances of the case may require. Calhoun v. Millard, 121 N. Y., 69; 30 St Rep., 759. There were many considerations in the case which equity could not ignore. The fact that the word “ Hygeia ” had been used before the plaintiff was incorporated as part of the name of a water company, the large capital invested by the defendant and the extent of its business and the expense of conducting it, as well as the good faith of all its proceedings, the comparatively insignificant financial and business interests of the plaintiff to be affected, aside from the corporate name, were all circumstances which a court of equity could properly take notice of when asked to interfere by injunction.

The gravamen, of the action is that the defendant has appropriated and is using a corporate name calculated to confuse and deceive the public to the plaintiff’s injury. There is no finding and no satisfactory proof that the defendant, by the use of the name, ever deceived any one, or that any confusion as to identity was ever produced in consequence. The two corporations certainly have different names, though the word “ Hygeia ” occurs in both. But this fact would not warrant us in assuming as matter of law that the name adopted by the defendant has deceived the public or is calculated to deceive them, or that any confusion with reference to the identity of the two corporations exists to the prejudice of the plaintiff in consequence of the defendant’s acts.

Courts of equity must, in such cases, assume that the public "will use reasonable intelligence and discrimination with reference to the names of corporations with which they are dealing or intend to deal, the same as in cases of individuals bearing the same or similar names. It is timely enough in such cases for equity to use its extraordinary powers when it appears that deception or confusion has in fact resulted from the use of a word or a name or when it clearly appears that such result is likely to follow. But we think that the court was not bound to hold in this case that the defendant corporation, by reason of the corporate name which it adopted, has been mistaken for the plaintiff or is likely to be. So that the conditions upon which courts of equity are accustomed to act in such cases were not present in this case, and there being no error in the disposition made of it by the court below, the judgment should be affirmed, with costs.

All concur.


author: Finch, J.

text:
    Smith A. Skinner, Resp’t, v. The Walter A. Wood Mowing & Reaping Machine Co., App’lt.

      (Court of Appeals,

      Filed November 28, 1893.)

    1. Contract—Bar.
    By a contract between the parties to this action it was agreed, on the part of the plaintiff, that defendant should have the exclusive right of using an oiler, plaintiff’s invention, on its mowing and reaping machines, and on the part of defendant, that it would use the oiler upon its said machines and would pay plaintiff the reasonable value of such use. Held, that the contract established substantially the relation of licensor and licensee of a patented invention, and that plaint ff’s cause of action to recover compensation was not entire, so that one judgment would exhaust the whole right of action on the contract.
    3. Patents—Licensee cannot question validity of patent.
    A licensee, while he remains such, cannot question or dispute the validity of the patent, but in order to do so he must fully renounce its protection, and put himself in the clear and unmistakable attitude of an infringer, having no defense except in the claimed invalidity of the patent.
    3. Same—Sufficiency of notice.
    Plaintiff presented a claim for royalties, which was rejected by defendant’s auditing board on the ground that they believed the patent to be invalid, and notice thereof given to plaintiff, but no ground on which such invalidity was asserted was stated. Two years later another claim was rejected by the auditing board on the same ground, and notice given, and again no ground of invalidity was slated. Reid, that the notices were insufficient to show that defendant renounced the protection of the patent and abandoned the position of licensee, and that it remained liable as such.
    4. Same—Power of auditing board of corporation.
    In the absence of proof that the auditing board had power to rescind contracts and settle and determine the future action of the company, it must be held that such power resided only in the board of trustees, and as such board had not acted in the matter, the notices were also insufficient because they did not emanate from the competent authority.
    Appeal from judgment of the supreme court, general term, third department, affirming judgment in favor of plaintiff, entered upon the report of a referee.

      Esek Cowen, for app’lt; James Lansing, for resp’t.
   Finch, J.

We deem it our duty to affirm the judgment upon two of the propositions asserted by the general term, but without any further expression of opinion as to other matters which were brought into the discussion.

We agree that the contract between the parties established substantially the relation of licensor and licensee of a patented invention, and that the plaintiff’s cause of action to recover compensation was not entire, so that the one judgment previously obtained exhausted the whole right of action upon the contract, but was and is in the nature of a demand for royalties, dependent upon the number of machines manufactured to which the invention was applied, and measured by the value of the use to which the latter was thus subjected. The question was fully discussed in the opinion below, and our approval of its reasoning upon the point remains unchanged by the appellant’s criticism on the argument. The terms of the contract itself, its peculiar subject-matter, and the conduct of the parties under it, all indicate that the cause of action was not entire and complete upon the execution of the agreement, but that the latter contemplated compensation measured by future use, and giving rise to causes of action severally founded upon subsequent breaches. While the contract as proved lacks the precision and accuracy of detail which would have excluded the question raised, enough is left to justify the construction thus far maintained.

The further contention of the appellant is rested upon the theory that at a period antecedent to the use of the invention for which a recovery has been had, notice was given to the plaintiff that the defendant company renounced their license and refused to further manufacture under it, but should manufacture in the future in hostility to and defiance of the patent, on the ground that the latter was invalid and a nullity. It is conceded that a licensee may thus change his position ; that while he remains such he cannot question or dispute the yalidity of the patent, but in order to do so must fully renounce its protection, and put himself in the clear and unmistakable attitude of an infringer, having no defense except in the claimed invalidity of the patent. And the inquiry now is, whether any such sufficient notice was given.

The referee has found that about August 1, 1880, the plaintiff demanded payment for the use of his invention up to that date; that the claim was presented to the auditing board of' the company and was rejected by its members, though without any formal vote or resolution; the reason assigned being that the president of the company denied having made any contract with plaintiff, and that they believed the patent to be invalid. They also requested Mr. Parsons, who was the attorney of the company, to notify the plaintiff of their conclusion, and the latter did so, but without stating any grounds upon which the invalidity of the patent was asserted.

The referee further finds that in June of the year 1882 the plaintiff renewed his application for payment, and did so in a writing which was proved and put in evidence. In that document he asserts that there had been a reissue of his patent; that whether valid or not it had up to that time served to protect the company in the use of the invention which they had applied to their machines as a patented article of which they had the exclusive use, and were in the habit of so representing the facts to the public; and that he desired to effect an arrangement for his compensation. This paper was presented by Parsons to the auditing committee, he adding at the foot of it, “ The whole matter seems to depend on his contract with Mr. Wood, if he had one.” The referee further finds that the auditing board again rejected the claim, and a majority of the individual members requested Parsons to so inform the plaintiff, because they believed the patent to be invalid, which the attorney did, though again without specifying the alleged ground of invalidity.

Several facts'about these notices challenge our attention. They are a refusal to pay, and give as a principal reason the asserted invalidity of the patent. But they do not in terms renounce its protection; they do not directly or explicitly abandon the position of licensees; they do not assert an intention to continue the manufacture in hostility to the patent and in defiance of its authority. All that can be said is that something of that sort might fairly be inferred from the refusal to pajq coupled with a claim of invalidity. While that is a possible, it is not a necessary inference, and the licensor was entitled to a distinct and definite and unequivocal notice, such as would leave the company inevitably liable as an infringer if the patent should be sustained. It is quite doubtful whether the defendant intended to take any such position or the plaintiff at all so understood it. Before the notice of 1880 there had been a use of the machine under the patent, and it was for that use that claim was made.

The refusal to pay, so far as it rested upon an asserted invalidity of the patent, could only mean that the company deemed that a defense although they were and remained licensees. They could not mean anything else, for there is no pretense that prior to that date any notice at all had been given. If at that time the defendant claimed, as it did, that the invalidity of the patent could justify a refusal to pay while the company was licensee, how could plaintiff be expected to infer that the licensee intended to cease to be such or manufacture on any different basis ? That the plaintiff did not and was not bound to so infer is evident from what followed. About two years later he again presented a claim for compensation. That the company for that period were chargeable only as infringers and oütside of the license does not seem to have entered his mind. On the contrary, he distinctly asserts that up to that very moment the licensees had been manufacturing as such, and so holding themselves out to the public, and he renews his claim on that basis. And now observe the action of the auditing board and their attorney. ' If they believed that two years earlier they had renounced their position as licensees, we should expect them to say so and tell the plaintiff if he had faith in his patent to proceed against them as infringers for two years at least. They say nothing of the kind. They merely repeat their refusal and assertion of the invalidity of the patent, without one word indicating any intended or accomplished change of position. Their own attorney appends to plaintiff’s claim a written memorandum that it depends upon the question whether there was in fact a contract with Wood, and so recognizes that if there was there had been no infringement. And it is further to be noted that in a previous suit for royalties accruing after as well as before these notices were given, they were not pleaded as a defense against a recovery after their date founded upon an invalidity of the patent

There is a further difficulty. We may perhaps assume that the defendant’s auditing board were vested with authority to pay or reject claims against the company, but we can assume nothing more than that. Ho proof is given of any authority conferred upon them beyond the usual functions involved in their official designation. It is not proved that they had any authority to rescind a contract or settle and determine the future action of the company. In the absence of such authority it must be held to reside in the board of trustees, which never acted upon the matter, either formally or informally.

A licensor is entitled to assume that his licensee remains such until the latter, by a clear, definite and unequivocal notice emanating from lawful and competent authority, throws off the protection of the license and stands admittedly an infringer if the patent is valid. The licensor is not to be left in a doubtful or uncertain position. He must not be exposed to the double danger of being defeated in a suit for infringement by a plea of license never effectually^ or authoritatively renounced; or if he sues for royalties, of being beaten because there was merely an infringement, if anything.

We think the alleged notices were insufficient, and so the defendant remained liable as licensee.

The judgment should be affirmed, with costs.

All concur, except Peckham, J., not sitting.

      Affirming 47 St. Rep., 506.


author: Gray, J.

text:
    Anna V. Conway, Adm’rx, Resp’t, v. The Phœnix Mutual Life Insurance Co., App’lt.

      (Court of Appeals,

      Filed November 28, 1893.)

    1. Insurance (life)—Premiums—Custom.
    A policy of life insurance provided that when three or more premiums were paid the company would be liable upon any default thereafter, for a sum of paid up insurance at death equal to as many twentieths of its amount as there should have been paid full year premiums; that no agent or person could alter, modify or waive any of its terms or conditions. After four years premiums had been paid the insured gave a note for the fifth at six months to the general agents, but upon maturity the agents refused to renew it and he did not pay the same, and died a "few days afterward. It was shown, in an action on the policy, that the company had accepted •payment of premiums after they became due, the agent’s authority to do so being limited to cases where the insured was in good health, but there was no evidence that it knew that its agents had taken notes for premiums. Held, that while this custom inured to the benefit of the contract so far as to justify a finding tliac the extension of time granted was not without the implied authority of the agents, the insured was bound by the limitations,
    ■ and when he failed to pay the note after a refusal by the agents of a renewal, ho did so at his own risk, and that the company was liable for only four-twentieths of the amount of the policy.
    2. Same—Notice.
    The notice required by statute to be given as a condition of a right to declare a policy lapsed by reason of non-payment of a premium need not be given where such notice was duly given before the premium became due.
    (O’Bbien and Maynabd, JJ., dissent.)
    Appeal from judgment of the supreme court, general term, third department, affirming judgment in favor of plaintiff, entered upon verdict directed by the court.
    The policy of insurance in this case was issued to the plaintiff’s intestate, and was payable to his legal representatives upon his death, or in twenty years to him if then living. When three or more full years’ premiums should have been paid upon it, then, upon any default thereafter occurring in the payment of any premium, the company became liable for a sum of paid-up insurance at death, or the due date of the policy; equal to as many twentieths of the amount of the policy as there should have been paid full years’ premiums thereon. The policy contained provisions “ that no agent or. other person can alter, modify or waive any of the terms or conditions of this policy,” and “ that if any subsequent premium hereon be not paid when due, and a separate receipt'signed by the president or secretary of this company in each case given therefor, then this policy shall cease.” A clause equally restrictive upon an agent’s power to waive or postpone payment of premiums, or to accept them after due date, was contained in each renewal receipt.
    Four full years’ premiums had been paid by the deceased upon his policy; but on October 24, 1891, when the fifth year’s premium was due, he failed to pay it. For its amount he gave to the general agents of the company his promissory note, payable six months after date, which they took, withholding, however, a renewal receipt. A few days prior to its maturity he wrote to these agents, expressing his inability to meet it, and requesting its renewal for a period of time. To this they at once replied, saying: “Your renewal has remained unpaid since October last, pending the maturity of your note, and we do not feel at liberty to accept a note extending the time any further. We will, if you so request, recall your note from the bank * * * and hold your renewal at this office as long as it may be possible to do so. You will understand that we are likely any day to be required to return it to the home office for cancellation. * * * ” The note was recalled. It was not paid at maturity, and on May 8th, some days after its due date, the assured died, without a payment of the premium having been made. The company conceded its liability to the plaintiff for 4-20ths of the sum insured, to wit: $1,000, and moved for such a direction to the jury, but the court granted the plaintiff’s motion for the direction of a verdict for the full amount of the policy, and the judgment thereupon entered has been affirmed at the general term.

      Matthew Hale, for app’lt; George B. Wellington, for resp’t.
   Gray, J.

The evidence in this case was given by one witness, called for the plaintiff, who was the cashier and accountant in the office of the general agents, through whom this policy was issued, and the facts are not in dispute. It was thought by the learned trial j udge, and it is the basis of the respondent’s contention here, that the facts proved warranted an inference either that the powers of general agents were such as to authorize them to extend the time for the payment of the premium; or that there had been such knowledge and acquiescence on the part of their principal, the company, with respect to a general custom to extend the time for the payment of premiums, and frequently to accept notes for the •amounts, and with respect to the particular extension of time in question, as to amount to a ratification of the acts of these agents in such respects. It is difficult to understand how the powers of agents could have been more restricted than they were by the provisions of this policy, or what other language could have been resorted to by the company in the endeavor to guard itself against unauthorized acts of all agents. The fact that these were general agents does not take the case out of the comprehensive language in the instrument, which denies to any agent or other person authority to alter, modify or waive any terms or conditions. Of this restriction upon the powers of all agents the assured is deemed to have had knowledge when he accepted his policy.

There is no reason for relaxing the rules of law with respect to the construction and enforcement of a contract of insurance any more than there would be in the case of any other kind of contract which parties have deliberately and formally executed for the purpose of defining their respective engagements and of securing the due and exact performance thereof. Whatever the disposition to strictly enforce the performance of an insurer’s obligation, it must, nevertheless, be controlled by what is a just and fair construction of the contract of insurance. Exceptional cases, in which recoveries have been permitted in the face of the contract, have been where it could be shown that there had been such a usage, or a course of business, or such consent, expressed or implied, as to justify the inference that the insurer had extended the agent’s authority and thus modified the restrictions contained in the policy. The insured is bound to know the measure of an agent’s authority from the terms in which power has been given him, or from the instructions under which he assumes to act. His right to believe that the limitations upon the agent’s authority to bind his principal have been removed is confined to such inferences as might reasonably be drawn from methods of doing business which have, either by their public and continuous nature, or by some particular course of dealing or conduct in his case, acquired the virtue of a usage or the force of a consent. In the present case it appears to have been the custom in the office of these- agents to accept payment of premiums after the date when they fell due. In many instances they had taken notes for their amount, but there is not the slightest evidence in this case that the company ever knew of a note being taken by their agents. There is evidence that the company knew of delays being granted to premium debtors. The practice -of the agents was to enter in their report, and to remit to the company, only cash, and a premium paid in the month when due, or whenever subsequently paid, went into the report of the following month. By the form of these reports, the company might know, from the non-appearance of the item of payment of a premium, that it had not been made when due and, from its appearance in some subsequent report, that the delay in payment had been granted or condoned. With respect to the general course of business, undoubtedly, a custom had grown up in the office of these agents to accept payment of premiums after their due date.While it had the sanction of their principal, the company, it was proved that the authority in such respects was expressly limited to cases where the individual was in good health. The evidence is that the agents were not to receive a payment where the party was,out of health and the renewal past due, and had never done so. While there is no evidence to show that the deceased knew of such a custom, and as to him there had been no extraordinary course of dealings whatever previous to October, 1891, to affect in any respect his contractual relations to the company, I think this custom, which had in fact existed, so far inured to the benefit of his contract as to justify the court in holding that the extension of time granted to him was not without the implied power of the agents. But in dealing with agents, whose powers were limited, the insured was bound by the limitations, and if he has the right to rely upon some enlargement of those powers, through the existence of some usage, that fact is relied upon to enforce the company’s agreement, the limitations will merely be lifted to the extent that the evidence shows what the usage has been.

It was, therefore, fairly inferable that the agents of the defendant were at liberty, not to make any new agreement as to the time for the payment by the insured of his premium, but to accept payment of it, and thus waive the right to declare a forfeiture ; provided that at the time the conditions had not been changed by an alteration in the health of the insured. While the contract of insurance was in force, and up to the time when the insured had the right to renew it by payment of the premium in advance, the risk in the matter was on the company; but upon failure to pay after notice upon the due date of the premium, the risk was on the insured, that pending the delay permitted by the agents he might change in health, if not die, and his insurance be lost. If we might assume that, by the agents’ acceptance of the note for six months, the company was bound, and that it was estopped from insisting upon a forfeiture—a proposition which I wholly doubt in view of the lack of evidence to show that the company permitted or knew of such a practice— the assumption could not aid the plaintiff. The insured had been refused any renewal of his note by the agents, and when he thereafter failed to pay it and to take up the renewal receipt, which would continue the contract of insurance for another year, he acted upon his own risk, and it cannot possibly be said that he acted upon any contract of the company, or upon any course of dealing which would have the force of an implied agreement. When it became obligatory upon him, in order to be entitled to a renewal of the insurance agreement, to pay his premium, he knew that no agent had authority to make any new or other agreement affecting the terms of the existing policy. If he failed to make payment and elected to rely upon some custom which might operate to save the policy from forfeiture, what was the situation ? Only this, that as there had become engrafted upon the authority of the agents, by force of the company’s sanction, a power to accept payment of past-due premiums in those cases where the physical conditions of the assured were unchanged, they might subsequently be willing and able to deliver to him a renewal receipt upon his payment of the past-due premium. Assuming his knowledge of the existence of such a custom in the office, it was not a fact which so far changed the situation .as to have entitled him to rest upon it with the same security as upon a new agreement with respect to the time of payment validly made and enforcible against the company. He simply threw himself upon the chances of life and of the exercise by the agents of a conditional authority to act.

No further notice was required from the company to the deceased. The notice provided to be given by the statute as a condition of its right to declare a policy lapsed for non-payment of an annual premium was not necessary, inasmuch as it had duly given the notice before the premium became due which the statute has provided for. The statute does not apply to this case. Chap. 341, Laws 1876, and chap. 321, Laws 1877.

For the reasons given, the trial judge erred in directing a verdict for the full amount claimed to be due under the policy. Upon the evidence, the company was only liable for four-twentieths of its amount, or the sum of $1,000, and interest accrued thereon.

The judgment should be reversed and a new trial ordered, with costs to abide the event; or if the plaintiff shall stipulate that the judgment shall be reduced to the sum of $1,040, the amount conceded to be due by the defendant company, and the costs of the adtion to and including the trial of the issues at circuit, the judgment may be affirmed as so modified. In such event, costs are awarded to the appellant at general term and in this court, and are to be deducted from the judgment.

All concur, except O’Brien and Maynard, JJ., dissenting.


author: Andrews, Ch. J. O’Brien, J. (dissenting)

text:
    William W. Mack et al., App’lts, v. Edward P. Snell, Resp’t.

      (Court of Appeals,

      Filed November 28, 1893.)

    1. Bailment—Contract for manufacture of articles from materials-FURNISHED—-OMISSION TO OBJECT ON ACCOUNT OF DEFECTS.
    The rule requiring the vendee in an executory contract for the sale of goods to be subsequently delivered to make inspection Within a reasonable time, and precluding him, if he does not, from afterward setting up the existence of defects, has no application to c-' ntracts for the manufacture of articles from materials furnished to the manufacturer by the other party. The title to the things manufactured is in the owner of the materials, whether they conform to the contract or not. His retention of the articles manufactured is the exercise of an absolute right, and he is neither bound to inspect the articles nor to notify the other party of his objections in advance of the presentation of the claim for the work and labor performed.
    2. Same.
    Defendant employed plaintiffs to manufacture certain shears according to a sample furnished, and also furnished them with handles. A portion of the work was finished and delivered. They were not made according to the sample, but the defects could only be discovered by taking them apart, and they were not discovered until the remainder were completed, when defendant refused to receive the balance or to pay for those delivered. In an action for the work performed, Held, that plaintiffs were not entitled to recover; that the contract was one of bailment and not of purchase and sale; that the title to the completed shears was at all times in defendant, and the materials added by plaintiffs became, by accession, the property of defendant, and that the fact that he retained the shears delivered and did not offer to return them after he discovered that they .were defective was no answer to the defense that plaintiffs had not performed their contract.
    3. Same—Counterclaim.
    In such case the owner of the materials may counterclaim for the damages sustained by reason of non-performance, to be measured by the difference between the price agreed to be paid for the work and the market value of the articles if made according to the contract.
    (O’Brien and Maynard, JJ., dissent.)
    .Appeal from judgment of the supreme court, general term, r fifth department, affirming judgment in favor of defendant.

      Henry M. Hill, for app’lts; Heman W. Morris, for resp’t.

      Affirming 46 St. Rep., 963.

   Andrews, Ch. J.

The referee found, and both parties concede, that the contract between the parties was one of bailment and not of purchase and sale. The consequence follows that the title to the completed shears was at all times in the defendant. The materials added by the plaintiffs in performing their contract became by accession, when joined with the material furnished by the defendant, the property of the latter, he having furnished the principal part, the part furnished by the plaintiffs being accessorial merely. Pierce v. Shenck, 3 Hill, 28; Foster v. Pettibone, 7 N. Y., 435; Merritt v. Johnson, 7 Johns., 473. When, therefore, the plaintiffs delivered to the defendant in January, 1884, 146 pairs of completed shears, it was a delivery to the defendant of his own property, and the title to the undelivered shears, completed in March, 1884, was also in the defendant, notwithstanding his refusal tq receive them. The plaintiffs agreed to manufacture the shears, using the handles furnished by the defendant, for the sum of seventy-four cents per pair, to be made in all respects like the sample. The referee found that the shears manufactured were not like the sample, but were defective by reason of not conforming thereto, whereby they were useless and of no value, and that the defects were not discoverable by inspection of the shears in their completed state, but that by unscrewing the nut which holds the parts of the shears together, and separating them, the- defects could be seen.

It is also found that the defendant did not discover the defects in the shears until all the shears had been manufactured and were ready for delivery. Upon these findings, which are supported by evidence, no action lies in favor of the plaintiffs to recover for work, labor or materials. They wholly failed to perform their contract in its true scope and meaning. It is jfiain that under the general rule no compensation can be demanded by the plaintiffs. The consideration upon which the defendant’s promise rested has never been furnished. Tire defendant, it is true, has title to the shears, but this is because he owned the materials out of which they were made; the articles he contracted for have never been furnished. In place of these were furnished articles useless and valueless because of defects in construction not existing in the sample shears.

The claim is made, however, that the plaintiffs are entitled to recover on the contract, not on the ground of performance, but by reason of the omission of the defendant to reject and return the shears delivered in January, 1884, or to notify the plaintiffs that they did not conform to the contract. The silence of the defendant; it is claimed, operated in law as an acceptance of the shears delivered, and precludes him from claiming that those subsequently manufactured of the same kind were defective. The plaintiffs seek to apply the principle governing executory contracts for the manufacture and sale of chattels of a kind directed,- subsequently delivered by the vendor in performance of the contract. In such cases the law imposes upon the vendee the obligation to make examination for the purpose of ascertaining whether the articles delivered conform to the contract, and if he fails to make inspection within a reasonable time, he will, in the absence of fraud or express warranty, be concluded from afterwards setting tip the existence of defects which an inspection would have disclosed. This rule has, we think, no application to a case like this. In the case of vendor and vendee under an executory contract, on delivery of the goods the title passes conditionally only to the vendee. It is necessary to the proper protection of the vendor that the vendee, if he rejects the goods and thereby throws them back upon the vendor, should act with reasonable promptness. It would be unjust to permit him to retain the goods after opportunity for inspection, giving no sign, and subsequently claim that they were not according to the contract. He is bound to express dissent, and thus enable the vendor to protect his interests.

The reason upon which the doctrine governing executory contracts for the sale of chattels subsequently delivered rests is inapplicable, to contracts for the manufacture of articles from materials furnished to the manufacturer by the other party to the contract. The title to the things manufactured is in the owner of the materials, whether they conform to the contract or not. The claim of the other party is for work and labor. The employer may await the presentation of the claim of the other party before acting. His retention of the articles manufactured is the exercise of an absolute right, and he is neither bound to inspect the articles nor to notify the other party of his objections. The omission to object may, in many cases, be material evidence on the question of performance, and in case of continuous deliveries of articles manufactured from time to time the duty to speak after knowing the defects might arise.

But in the present case the findings exclude the inference of bad faith on the part of the defendant, or that, knowing that the shears delivered were defective, lie kept silent and permitted the plaintiffs to manufacture the others. The fact that the defendant retained the shears delivered and did not offer to return them after he discovered that they were defective is no answer to the defense that the plaintiffs had not performed their contract. The defendant’s possession followed the title, and the plaintiffs in no event-were entitled to have the shears delivered returned to them.

The owner of real property who has employed another to erect a house on his land does not, by taking possession of the house and occupying it, preclude himself fr.om denying that the builder has performed his contract. Smith v. Brady, 17 N. Y., 173. In like manner the owner of materials whoemploys another to manufacture them into garments' or chattels of any description does not lose his property in the materials, nor is he precluded by receiving the manufactured articles from asserting his title thereto, and at the same time resisting a recovery for the value of the work on the ground that the workman had not performed his contract

In respect to the judgment for the defendant on his counterclaim, we perceive no legal error. It represents the value of the contract to the defendant in case the plaintiffs had performed, measured by the difference between the price agreed to be paid by the defendant for the shears and their market value if made according to the contract The claim that as the title to the shears manufactured was in the defendant, the value of the materials should have been deducted, is not presented by any findii g or exception, and it cannot be affirmed upon this record that tl e matei'ials, in the condition in which they then were, were of any value to the defendant. The exception to the finding of the referee that there was an express warranty that the shears should conform to the sample, which warranty would survive an acceptance of the shears, need not be considered. The facts found show that the plaintiffs did not perform their contract and were not entitled to recover thereon. The result reached would not be affected by an error, if any, in characterizing the plaintiffs’ contract to make the shears according to the sample as an express warranty which would survive an acceptance of the shears.

We find no error in the record and the judgment should "be affirmed.

O’Brien, J. (dissenting)

The plaintiffs sued to recover the stipulated price for the manufacture of 1,000 pairs of pruning shears under an agreement made with the defendant. Ey the judgment they not only were defeated in the attempt to recover the price, but the defendant was awarded a considerable sum as damages upon a counterclaim, based upon the allegation that the plaintiffs did not manufacture the articles as stipulated; and it was also adjudged that the shears belonged to the defendant, so that the plaintiffs have lost their labor and materials, have been condemned to pay a judgment to the defendant for damages, and the latter has the title to the manufactured articles. At first view this seems to be a harsh result which at once invites an examination of the principles and the reasoning upon which it proceeds. The facts have been very fully found by the learned referee upon evidence quite conflicting on some material points, but, we think, they are not open to question here.

From these findings it appears that, in the month of November, 1883, the plaintiffs agreed to manufacture for the defendant 1,000 pairs of pruning shear's for use chiefly in vineyards, and of the kind, pattern and quality of a sample pair which the defendant furnished for the purpose, except in some particulars not important to notice, to be completed on or before January 1, 1884. The defendant agreed to furnish the rough castings for the handles, the small castings around which the springs are coiled, and have them japanned, and the plaintiff was to perform all the labor and furnish the rest of the material, for which the defendant was to pay them the sum of seventy-five cents per pair. The defendant had contracted to sell the goods when made to a nurseryman, and this was known to the plaintiffs. The plaintiffs claim that they manufactured the goods according to the contract, and offered to deliver them, but the defendant has failed to pay the price. It is found that the defendant furnished the material according to his agreement, except that it was not furnished in time to enable the plaintiffs to complete the work at the time stipulated.

In the month of January, 1884, the plaintiffs delivered to the defendant one hundred and forty-six pairs of the shears which the defendant retained, and the balance was completed and ready for delivery in March following, and the defendant was notified of that fact. That as to the one hundred and forty-six pairs delivered and retained and the balance offered to the defendant, he never made any objection that they were in any respect defective or not in conformity with the contract, until this action was commenced, April 10, 1888, and never offered to return those delivered. It is found that the shears manufactured did not correspond with the sample in two particulars: (1) That the hole through the knife blade handle was made round, while in the sample it was square. (2) That the shoulder of the bolt holding the handles together should have,projected through the jawhandle. That in consequence of this deviation from the sample and the agreement, they failed to work and were worthless. That these defects could not he discovered by inspection, but could by unscrewing the nut holding the shears together, and thus taking them apart, and had they corresponded with the sample they would have been worth one dollar per pair in March, 1884. There is a further finding that the defendant did not discover the defects referred to until the shears were ready for delivery, and that he refused to receive the balance of the lot offered in March, 1884. On these facts the learned referee held, as matter of law, that the contract was one of bailment, and the title to the material furnished by defendant remained in him, and that he acquired title to the completed articles by accession; that there was an express warranty on the part of the plaintiffs that the manufactured article should be the same and as good as the sample; that the defendant was under no obligation to return or offer to return the shears delivered; that defendant’s right to damages survived an acceptance; that plaintiffs were not entitled to recover anything for the shears, but that defendant was entitled to recover damages by way of counterclaim, to be measured by the difference between the contract price and the market value, had the article corresponded with the sample and the contract. It appears from the defendant’s answer that the nurseryman, to whom he had contracted to sell the whole lot of shears, refused to take them because they were not ready' for delivery in time, and that the defendant was not able to procure the material till it was too late to have them manufactured at the time specified.

This was not the plaintiffs’ fault, and there is no finding that there was any breach of the contract in regard to the time of performance. It is fairly inferable from the whole record that the defendant lost the benefit of his contract for the sale of the goods, not on account of any defect in the manufacture, but for the reason that they were not ready in time. It should he observed also that the plaintiffs from time to time presented their bill to the defendant and no objection was made to it, though it was not paid. It is quite likely that a recovery could have been had upon account stated had the plaintiffs adopted that form of action. Knickerbocker v. Gould, 115 N. Y., 533; 26 St. Rep., 651; Quincey v. White, 63 N. Y., 370.

How far the same facts will preclude the defendant now from asserting a breach of the contract as a ground for refusing payment, or of an affirmative claim for damages, is a question naturally suggested. Where materials are furnished by one, and labor is to be performed upon it by another, and the identical article produced is to be returned to the employer, who pays a compensation for the labor, the contract is one of bailment, though the manufacturer or workman 'may have furnished some accessorial material or ornaments. This is the locatio opesis faciendi of the civil law. Story on Bailments, §§ 422, 423 ; 2 Kent’s Com. (13th ed.), 588 ; Foster v. Pettibone, 7 N. Y., 433 ; Mallory v. Willis, 4 id., 76; Pierce v. Schenck, 3 Hill, 28.

The title to the completed article generally rests by accession in the party who has furnished the principal material in such cases. Merritt v. Johnson, 7 Johns., 473; Pulcifer v. Page, 32 Me., 404; Wetherbee v. Green, 22 Mich., 311; Beers v. St. John, 16 Conn., 322.

It does not distinctly appear in this case whether the material furnished by the plaintiffs, or that furnished by the defendant, was the more valuable, but the referee held in effect that the defendant furnished the principal material, and as no question is made by either counsel on this point, we will assume that his conclusions as to the nature and character of the contract and as to the ownership of the completed article are correct. The finding of the referee that 146 pairs of the shears were delivered in January, 1884, and retained by the defendant, without any objection being made to the quality of the work, or any offer to return, followed by a completion of the balance in the same way and an offer to deliver in the following March, without any question having been raised for more than four years by the defendant in respect to the character or quality of the work performed, seems to me to be quite important. The findings are to the effect that the defendant never claimed that the shears did not substantially conform to the contract until more than four years after a part were delivered and the balance offered.

There can be no doubt as to the fact that the defendant could have discovered the alleged defects when 146 pairs were delivered, or within a reasonable time thereafter, and if it was then considered important that the hole through the blade handle should be square instead of round, or that the bolt should project through the jawhandle, the defendant could have so notified the plaintiffs and the balance of the lot could have been changed accordingly, for they were not then manufactured. In an executory contract for the sale of goods, in the absence of fraud or warranty, the right of the vendee to claim damages, either as a defense to an action for the purchase price, or by way of counterclaim, does not survive a delivery of the goods by the seller and an acceptance by the purchaser. Reed v. Randall, 29 N. Y., 358. The retention of the property by the purchaser, without objection, is an admission on his part that the contract has been performed. Of course, he is not bound to receive or pay for an article he has not purchased, but. he is bound to ascertain, when it is delivered to him, whether or not it is what he wants, or whether it conforms to the contract, and if it does not he must either return it to the vendor or give him notice.to take it back, or he will be presumed to have acquiesced in its quality. He cannot accept the delivery of property under the contract, retain it after examination, or full •opportunity for examination, as to its quality, and afterwards be heard to urge, as a defense to the purchase price, or in support of a claim for damage, that the quality was inferior to that specified in the contract. Where there is an express warranty, that survives the acceptance and the purchaser may subsequently sue on it if the price of the goods has been paid, or defend in suit for the price. Zabriskie v. C. V. R. R. Co., 131 N. Y., 72; 42 St. Rep., 629; Fairbank C. Co. v. Metzger, 118 N. Y., 260; 28 St. Rep., 775; Brigg v. Hilton. 99 N. Y., 517; Norton v. Dreyfuss, 106 id., 90; 8 St. Rep., 570.

But this principle applies to contracts of sale, and cannot well be applied to agreements to perform special services or contracts of bailment such as the one now under consideration has been held to be. An acceptance of property under any form of contract, or conduct equivalent to an acceptance, must be- given some effect. In contracts of sale, even with warranty, it usually has the effect of vesting the title in the vendee, but in a contract like this, where the title was in the defendant before, it can have no effect whatever, unless it be to preclude him from raising any question with respect to the quality of the article. The facts found import an acceptance by the defendant, at least of the 146 pairs, as there was delivery, retention of the goods without objection, and no offer to return. Silence and acquiescence on the part of the defendant as to the quality and character of the work naturally led to the manufacture of the balance in the same way, and the question is, under these circumstances, whether the defendant, after the lapse of four years, should be permitted to make the objection that the-contract was not substantially performed. The learned referee-held that as there was a warrant}^ that survived acceptance, as in case of sale, the defendant was under no obligation to ascertain whether the contract was performed or not, and that, even when he ascertained that the work was defective, he was under no obligation to make his objection known to the plaintiffs. This proposition, as it seems to me, embodies a radical error which pervades the whole case.

It is undoubtedly true that a workman who undertakes to make-an article from material furnished by another, according to a sample furnished, and to deliver it to him, must show performance-in order to recover the stipulated price and is liable for damages-for a breach of his contract. But it does not follow that this liability survives a delivery and acceptance as in cases of sales of goods with warranty. When the owner, without fraud or mistake, expressly or by silence and acquiescence, accepts the article, that liability is at an end and the workman is entitled to his pay. If a builder contracts to erect a house according to certain plans or after the model of another house, and the owner accepts the work when done and enters into possession of the house without any objection as to the work or any notice to the builder that the-contract has not been performed, with respect to its completion, or the character or quality of the work or material, this would be held to be an admission on his part that the contract was performed and, in an action for the price by the builder years after-wards, the owner would be concluded by his acts from asserting that the builder had no claim for damages on account of defective work or material. So if cloth be delivered to a tailor to make a coat, and it is delivered to the owner when made, who accepts it, or retains and uses it for a long time, without any objection or claim of defective workmanship, he cannot be heard to claim, when sued for the price of'the work, that it was not done according to agreement, and it would not strengthen such a claim to call the workman’s agreement to make the coat according to a certain style or pattern a warranty that survived acceptance. In such cases acceptance or omission to object, within a reasonable time after delivery, or opportunity for examination, operates to extinguish all claims for breach of the contract. Sprague v. Blake, 20 Wend., 61; Coplay Iron Co. v. Pope, 108 N. Y., 232; 13 St. Rep., 480; Brown v. Foster, 108 N. Y., 387; 13 St. Rep., 805; Studer v. Bleistein, 115 N. Y., 316; 26 St. Rep., 400; Pierson v. Crooks, 115 N. Y., 539; 26 St. Rep., 492; Mason v. Smith, 130 N. Y., 474 ; 42 St. Rep., 365; Norton v. Dreyfuss, 106 N. Y., 90; 8 St. Rep., 570.

That element of a contract known to the law as a warranty is peculiar to contracts for the sale of property and policies of insurance. In its application to the sale of goods it is but the agreement of the seller that they will correspond to the terms of the contract with respect to quality or quantity, and this undertaking is so far collateral that it survives an acceptance of the goods by the purchaser. Such a warranty, when it exists, is connected with and belongs to a contract of sale as one of its elements, but, in the sense in which it is understood in the law of sales, can have no application to a bailment, where one party agrees to perform labor upon the materials of another and to make for the employer an article to correspond with a sample. Eighmie v. Taylor, 98 N. Y., 288; Benjamin on Sales, §§ 610, 673; Sedg. on Dam., § 759 ; 2 Schouler on Per. Prop., § 328 ; Hilliard on Sales, 322, et seq.

The cases cit by the learned referee and the counsel for the defendant are all, with perhaps one exception, where the question as to the warranty arose, upon contracts for the sale of property. It is conceded that in such cases a warranty survives acceptance. The case of Harris v. Rathbun, 2 Keyes, 312, was one of bailment, and the dissenting opinion of Judge Wright states that the warranty could not survive the acceptance by the owner of the lumber which had been sawed from his logs. In the other opinions this point is not noticed, but it distinctly appears that when the owner took the lumber from the mill he objected to the way in which the sawing was done, and notified the sawyer that it was not according to the contract.

In Smith v. Brady, 17 N. Y., 173, it was held that a builder who had agreed to erect a house could not recover without showing that the work was done according to the contract, though the owner had entered into the possession and enjoyment of the house without objection. But in that case it appeared that the evidence of performance was, by the.stipulation of the parties, to be the certificate of an architect, which was not furnished. Moreover the vigorous application of a correct principle in that case has been much relaxed by subsequent cases in this court. Woodward v. Fuller, 80 N. Y., 315 ; Nolan v. Whitney, 88 id., 648; Phillip v. Gallant, 62 id., 256 ; Sinclair v. Tallmadge, 35 Barb., 602.

It appears that about seventy pairs of the shears were sold and delivered during the summer of 1884, by a third party to a nurseryman, with the consent and at the request of the defendant, who had the benefit of the sale. This dealing with the property is utterly inconsistent with the position of the defendant now, that the contract was not performed. The findings, however, are too indistinct on this point to make it the basis of a decision upon this appeal. I prefer to let the decision rest upon the ground that the referee erred in applying to this case the doctrine that a warranty, or agreement on the part of the plaintiffs, that the manufactured article would be like the sample, survives acceptance.

I think the judgment should be reversed, and a new trial granted, costs to abide the event.

Judgment affirmed, with costs.

Earl, Finch, Peckham and Gray, JJ., concur; O’Brien J reads for reversal and Maynard, J., concurs.


text:
    Alexander P. W. Kinnan, Ex’r, Resp’t, v. The Fortysecond St., Manhattanville & St. Nicholas Avenue Railroad Co., App’lt.

      (Court of Appeals,

      Filed November 28, 1893.)

    Corporations—Lost stock certificates—Jurisdiction.
    The remedy provided by chap. 151, Laws 1873, in case of a lost certificate of stock, is not one at law, but is wholly and clearly an equitable one; the statute must be regarded as giving a cumulative, additional and summary remedy of a purely equitable character, and does not deprive the court of its ancient and admitted jurisdiction to award specific relief in cases of this character.'
    Appeal from judgment of the New York superior court, general term, affirming judgment directed at an equity term of that court in favor of plaintiff.
    Action to compel defendant to make and issue to plaintiff two certificates for fifty shares each of its capital stock in place of certificates alleged to have been lost.

      William C. Trull, for app’lt; Emanuel J. Myers, for resp’t.

      Affirming 49 St. Rep., 608.

   Finch, J.

There is sufficient evidence in this record to sustain the judgment for equitable relief which has been rendered. Although the facts are not full and precise, and not so developed in detail as to escape some natural criticism, yet they were established to the satisfaction of the trial judge, whose findings have been approved by the general term, and must be conclusive here unless there is no evidence to support them. That is claimed to be the case as it respects the authenticity and genuineness of the stock certificates which have been lost and are sought to be replaced. It is true that nobody testified to their signature by the officers of the company, but that was because no witness was asked that question, and no point was made directing attention to that specific inquiry, and the papers themselves were lost and could not be produced. But the witnesses described them as the certificates of the company, and one of those witnesses was Conover himself, to whom they were originally'issued, and. who sold them to the testator, and who, having been at one time president of the corporation, must have certainly known that the certificates were what he described them to be. Beyond that, when the case for the plaintiff was closed, the defendant’s counsel called no witnesses, but rested the entire defense upon a motion for a nonsuit. Five grounds were assigned, and not only was there an omission to suggest any such defect in the proof as is now argued, but each of those grounds went upon and involved an assumption and tacit admission that the certificates were the authentic obligations of the company. If their validity had been challenged, the court might have permitted further proof and the plaintiff been able to furnish it. It is too late now to raise the question.

Passing by some minor objections to the recovery, which do not seem to us important enough to require discussion, we reach the one upon which the appellant seems principally to rely. It is that the court was not at liberty to grant the equitable relief sought, because there was an adequate remedy at law. That defense was specially pleaded, and its validity was rested upon an act of the legislature giving a summary remedy in cases like the present. That act, Laws of 1878, chap. 151, provides in substance that one who has lost his stock certificate, and finds the company unwilling to replace it, may apply at a special term of the supreme court for an order to show cause why a new certificate should not be given, and on the hearing the court may proceed summarily to hear and determine the facts, and may make an order requiring the company to issue a new certificate upon receiving from the petitioner a specified bond of indemnity, and this proceeding is called by the appellant a remedy at law. I deem it to be nothing of the kind. It gives a relief which a court of law as such never did give and was not competent to give. It is exactly the relief which in such a case a court of equity would regularly and habitually award, and not at all such as a court of law could give. Under our present system the distinctive difference between legal and equitable remedies lies in the character and scope of the relief which may be obtained, Reubens v. Joel, 13 N. Y., 492, and a remedy which, instead of awarding damages or a sum of money, decrees the giving of an indemnity bond and the issue of a new certificate of stock is wholly and clearly an equitable remedy. The supreme court has equity jurisdiction. Its special term may give equitable relief, and when a statute sends a petitioner there for an award which equity alone could give, it amounts to the creation of a- new and summary equitable remedy, and cannot be deemed or denominated a remedy at law. The statute, therefore, cannot support the defense pleaded. There are no words in the law purporting to restrain the ancient and admitted jurisdiction of equity to award specific relief in cases of this character, and I think the statute must be regarded as giving a cumulative, additional and summary remedy of a purely equita? ble character, and to be administered by an equity court.

We find no error in the judgment, and it should be affirmed, with costs.

All concur.