text:
    Abram Block et al. plaintiffs and respondents, vs. The Columbian Insurance Company, defendant and appellant.
    1. The defendant, by an open policy, insured “H. C. & Co. on account of A. B. & Co. (the plaintiffs) and consigned to H. C. & Co. by regular invoice and bill of lading. In case of loss, to be paid to H. C. & Co. at and from San Francisco, via Isthmus, to N. Y. On specie, gold bars &c. * * * laden, or to be laden, on board of steamers sailing from and after July 1, 1862.” Gold bars, the property of the plaintiffs, of the value of $12,000, shipped at San Francisco after July 1, 1862, were consigned to H. C. & Co. by regular invoice and bill of lading, but in the bill of lading S. & Co. were designated as shippers, and N. Bro’s. as consignees.

      Held that the gold bars so shipped were covered by the policy; the expression in the policy “ consigned to H. C. & Co. by regular invoice and bill of lading” not demanding the insertion of the name of that firm in the bill of lading, as consignees, in order to cover any shipments.
    2. Held, also, that this construction was strengthened by proof of-the existence of a custom among merchants in San Francisco, when shipping gold in less sums than $30,000, to unite them in one shipment exceeding that amount, taking a bill of lading for the whole in the name of one person, to save charges. That the defendant was charged with knowledge of that custom, and the language of the contract was to be construed in reference to it.
    (Before Robertson, Ch. J. and Garvin and McCunn, JJ.)
    Heard February 6, 1865;
    decided May 27, 1865.
    This was an action on. an open policy of insurance, with a special risk under the same notified to the defendant. At the commencement of such policy partly written and partly printed, “ H. Cohn & Co. on- account of. A. Block & Co. and consigned to H. Cohn & Co. hy regular invoice and bill of lading, in case of loss to be paid to H. Cohn & Co.” did “ make insurance and cause to be insured, lost or not lost, at and from San Francisco via Isthmus to New York, on specie, gold bars, &c. * * laden or to be laden on hoard of .the good sirs, sailing from and after July 1st, 1862.” In the margin of such policy it was declared that the defendants were “ not to be liable for more than $25,000 per any one vessel, at one time, unless otherwise agreed upon at the time of indorsement. Eisks applicable hereto to he reported to this company for .indorsement on the policy, as soon as known to the assured.” The action was brought for a shipment of gold within the time mentioned in the policy, which was lost on a voyage therein described, the news of whose shipment and loss was received by telegram in New York on the same day. Such telegram of the shipment was as follows : “Shipped July 21st under bill of lading of Newstadter Bro’s to Newstadter Bro’s, twelve thousand dollars insured under our policy with Columbian Insurance Company—A. Block & Co.” It was shown as soon as received by a clerk of Messrs. Cohn & Co. to the president of the defendants, who directed such clerk to a clerk of the company, in order to indorse such risk upon the policy; but he only made an entry thereof in their books, in the following words and figures: “August 7, 1862. Golden Gate from San Frsncisco to New York. Treasure $12,000. Rate of premium 1|- per cent, premium $180.”
    The gold in question was shipped at San Francisco by the firm of Newstadter Brothers, of that place, in the name of Levi Strauss & Co., in whose name the bill of lading was taken, to be delivered to Newstadter Bro’s of New York. In addition to a regular invoice, á memorandum of such gold, its weight, value and fineness, directed to Newstadter Bro’s in New York and signed by Newstadter Bro’s of San Francisco, was sent by the next steamer to New York and delivered to Cohn & Co. It was headed “ shipped by the plaintiffs to be delivered to H. Cohn & Co. N. Y.,” and at the foot was written : “ Insured for $12,000. Please deliver as directed above.”
    A custom among merchants in San Francisco, when shipping gold in less sums than $30,000, to unite them in one shipment exceeding that amount, taking a bill of lading for the whole in the name of one person, was proved on the trial. The reason for it was established to be the diminution thereby of shipping charges-, which were greater in proportion, where the sum shipped was less than such standard.
    An exception was taken to the evidence admitted on the trial to prove a declaration by the president of the defendants to the clerk of Cohn & Co. when he called his attention to the variation in the telegram of the shipment from the policy in the names of the shippers and consignees, that it made no difference; and a direction by him to such clerk to have the risk indorsed on the policy by the entry clerk of the defendants, and an entry by the latter of such risk in a book kept by him for that purpose.
    A motion to dismiss the complaint was made and refused on the trial; a verdict was rendered in favor of the plaintiffs, by direction of the court, from the judgment on. which the present appeal is taken.

      A. C. Morris, for the appellants, (defendants.)
    I. The policy is what is known to merchants and underwriters as an open policy, and is not confined to any particular voyage or any particular specified risk. It is, by its terms, to cover all shipments from San Francisco to New York of Block & Co.’s gold, between a certain date. All shipments to be reported to the company as soon as the assured, who reside in New York, are advised. Under a policy of this kind, if no restriction is imposed, the company, with reference to premiums, is at the mercy of the assured. If the vessel arrives safe, and no report is made, the company having no means of informing itself of the shipment, would get no premium. In case of disaster, it would be sure to hear of it. It was with reference to this that the defendants inserted in their open policies a clause confining their risks to shipments by regular invoices and bills of lading to persons designated. This enables their open policy clerk to ascertain, upon the arrival of each steamer,, what risks they cover and what premiums they are entitled to, by a mere inspection of the published specie list, which is a transcript from the manifest made up from the bills of lading. The clerk in going over the specie list would never dream that a shipment of $30,000 to News tad ter & Co. covered a shipment to Cohn & Co.
    II. The language of the policy is plain and unambiguous. The words are “ H. Cohn & Co. on account of A. Block & Co., and consigned to H. Cohn & Co., by regular invoice and bill of lading.” Not consigned by the bill of lading to Newstadter Bros, and to Cohn & Co. by an order made secretly on Newstadter Bros., but to Cohn & Co. directly, openly and by the bill of lading itself. Such a secret consignment to Cohn & Co. as was made in this case, was precisely what the clause referred to was intended to protect the company against. Parsons, in speaking of a consignor and consignee in a bill of lading, says : “ The party who ships the goods is called the consignor, and he to whom the goods are to be delivered, by the terms of the bill, is the consignee.” (Parson’s Maritime Law, p. 138.) He is speaking of the consignor and consignee in a regular bill of lading.
    II. Although the testimony shows that the gold belonged to Block & Co., consigned to Cohn & Co., and shipped by a regular invoice and bill of lading, and the interpolation, therefore, of the words “ and shipped,” so as to make the clause read “ on account of Block & Co., consigned to Cohn & Co., and shipped by regular invoice and bill of lading,” would present a case, all the conditions of which have been fulfilled, to render the defendants liable. It cannot be done legally. The interpolation of these words would not only change entirely the sense of what is clear, unambiguous, and has a very obvious and important meaning, as it stands, but would render the clause, so far as concerns the invoice and bill of lading, idle and frivolous. All goods are shipped by regular invoice and bill of lading. It' is not to be supposed that this special written clause was inserted with no other object than to provide for what would be a matter of course without any such provision in the policy. (1 Duer on Ins. 163. Neilson v. Commercial Ins. Co., 3 Duer, 461.)
    IY. The testimony of a witness (Romberg) in regard to a conversation between him and the president of the company, was inadmissible for the purpose of showing any alteration or waiver of any clause, condition or provision in the policy.
    1. The policy specifies fully and clearly the terms, conditions and provisions of the insurance. It is expressed as clearly as language can express it, that the policy shall cover all future indorsements which shall fall within the terms, conditions and provisions of the policy, and none other.
    2. Any agreement between the president of the defendants and the clerk of the plaintiffs for an alteration in the terms "of the insurance, if in tended to affect the policy, should have been in writing. There was no such writing ; on the contrary, a new writing was made' by the direction of the clerk of the plaintiffs, to wit, the indorsement upon the policy, in which not a word is said about changing the terms of the policy so as to cover shipments to Hews tad ter Bros.
    V. Supposing the testimony admissible, it does not show any alteration of the contract, or the waiver of any of its conditions.
    1. There "is ho pretense that the clerk had any authority to do any thing further than to report the loss and have it indorsed upon the policy. He clearly had no authority to enter into a new contract for insurance.
    2. The clerk says he called the attention of the president to the telegram and to the fact that the gold had.been shipped to Hewstadter Bros., and not to Cohn & Co.- direct, and that the president said it made no difference. This was, if any thing, a mere matter of opinion, after the loss had occurred, and the rights of the parties had become fixed. The defendants cannot be affected by a mere matter of opinion of their president! . The opinion of the president, that the company was- liable, could not in itself create such liability. But it does' not appear that the president ever gave such opinion. It does not appear that his attention was called to the policy or its terms. The business of the defendant’s clerk was to indorse the risk, not to discuss the meaning of the policy, and the president may, in the hurry of business, be supposed, when he said “ it made no difference” to have referred to something very different from what the clerk supposed.
    It is erroneous to suppose that the contract of insurance ill such a case is made at the time of the indorsement.- The truth is, that the whole of the contract is in the policy. The assured reports and indorses what he pleases, always subject to the terms and conditions of the policy.

      YI. It appeared by the testimony of this same clerk, that in October, 1863, after this suit had been pending nine months, he paid the premium upon this risk, receiving back 15 per cent of it under some general agreement. What he meant was, that the general notes to the company which he paid, included the premium upon this risk.

      S. P. Nash, for the respondents, (plaintiffs.)
    I. The bars in question were covered by the policy construed according to its true intent and meaning.
    1. The purpose of the description was merely to identify the property put at risk. All that was really required by it was, that the gold shipped should be accompanied by proper shipping documents, so as to secure the underwriters against fraud—against attempts to cover under the policy, property upon which, unless a loss should occur, the owners did not intend to pay a premium. The transaction in question met all these requirements. There was an invoice identifying the bars by numbers, weight and value, specifying the drafts drawn against the shipment, the ownership of the bars by the plaintiffs, and the shipment of them through Newstadter Bros, (in treasure box No. 10;) and stating that they were considered as insured with the defendants. This invoice accompanied the shipment, and served every purpose of identification, and Newstadter Bros, at the time of the shipment, by their order in favor of H. Oohn & Go. assigned the bill of lading to them to the extent of that order, and to that extent made them consignees under the bill of lading. No question could have arisen if the bill of lading expressed on its face that the property was for account (as to the bars in question) of A. Block & Co. to be delivered to Newstadter Bros, for H. Gohn & Co. ■ So, also, if the bill of lading had been at the time indorsed by Newstadter Bros, to H. Cohn & Co. to the extent of the bars in question. The order, which was to “ deliver as directed,” was, however, equivalent to this. The bars, then, were shipped by the plaintiffs, consigned to H. Cohn & Co. and by regular invoice and bill of lading. The defendants’ counsel claims, however, that the words “consigned to H. Cohn & Co. by regular invoice and bill of lading,” should have had added thereto “in which they shall be named as consignees.” Nothing in the policy requires this. The word “consigned” does not require it. A consignment is merely a transmission of goods for sale, and, to consign, is to transmit, or send goods for sale. (1 Burr ill’s Law Diet. tits, “consign,” “consignee,” “consignment.”') The words consignor and consignee may express the relation of principal and factor, or of vendor and vendee. The bill of lading is not conclusive either way. (Price v. Powell, 3 Comst. 322. Sweet v. Barney, 23 N. Y. Rep. 335. Grove v. Brien, 8 How. U. S. 429.)
    In this case, it clearly appears from the policy that the gold which was to be insured was the gold of the plaintiffs, and that H. Cohn & Co. to whom it was sent, were their agents. As no title was to pass, then, by the mere shipment, the only purpose of the shipping documents, so far as the underwriters were concerned, was that of identification.
    As against the vessel, it is clear that there was nothing in the form of these papers which would have precluded the plaintiffs from holding the Golden Gate as carrier, though Levi Strauss & Co. were named as shippers.
    2. In construing matters of description, if enough appears to bring the thing described within the controlling particulars of the description, slight variations may be disregarded. (Ruan v. Gardner, 1 Wash. C. C. Rep. 145, 150. Burr v. The Broadway Ins. Co., 16 N. Y. Rep. 267. And see Pars, Merc. Law, 437; 1 Phil, on Ins. § 430.)
    II. If, however, a bill of lading in which H. Cohn & Co. were named as consignees be held essential, the paper at folio 94 answers the demand, Newstadter Bros, being bailees of other gold as well as of the plaintiffs’, make with the carrier an engagement for the whole, and thus take a position like that of an expressman chartering a crate or car and giving receipts for parcels to be carried by him. (N. J. Steam Nav. Co. v. Merchants’ Bank, 6 How. U. S. 344. Stoddard v. Long

      Island R. R. Co., 5 Sandf. 180.) The paper given by Newstadter Bros, to the plaintiffs is like such a receipt; and has the essential elements of a bill of lading. It names the shippers : “ Shipped by A. Block. & Co.” the consignees : “ To be delivered to H. Cohn & Co.” and describes the property. (See Dows v. Greene, 24 N. Y. Rep. 638; 32 Barb. 490.) With such a shipping receipt or bill of lading, and a full invoice accompanying the principal bill of lading, the utmost requirements of the policy are certainly fully met.
    III. The acts of the defendants in accepting the risk when reported, entering it on the policy with full knowledge of the alleged defect in the form of the consignment, receiving the premium, and returning a dividend upon it as a premium earned, either gave a practical construction to the policy, if ambiguous, or operated as a waiver of the defect in the form of the shipment, if defective.
    1. Assuming that the policy was so ambiguous as to mean either that the gold should be consigned to H, Cohn & Co. by any invoice or bill of lading which would serve to identify it, and entitle H. Cohn & Co. to receive it from the ship; or that it must be consigned by documents naming H. Cohn & Co. as consignees; the acts of the defendants on accepting the risk pronounced the risk to be within the description, and were properly admissible as evidence of the understanding of the parties at the time.
    If the policy had been made to cover a risk proposed at the time it was written, and H. Cohn & Co. then stated that they had been advised of a shipment to them by the Golden Gate, under Newstadter Bros/ bill of lading, and the defendants took the risk, describing it in the policy as here, what took place at the time of writing, the policy would clearly be evidence of the sense in which its language was used. (Bidwell v. The N. W. Ins. Co., 24 N. Y. Rep. 302. Galen v. Brown, 22 id. 37. Steffens v. Collins, 6 Bosw. 223. Colbourn v. Dawson, 1 J. Scott, 70 E. C. L. 765. Almgren v. Dutilh, 1 Seld. 28.)
    2. But these acts still more clearly operated as a waiver of the defect in the form of the shipment, if it was defective. This point assumes that the contract of insurance was conditional upon a risk being reported to the defendants, which came within the description in the policy. The policy was an executed contract in reference to the gross total insured, $50,000 ; the subject matter, specie, gold, &c.; the route, San Francisco to New York ; the rate of premium, &c. Even if it were necessary that the risk reported for indorsement on the policy should not only agree in all these particulars, but that the defendants might require that the gold should be addressed in form by the bill of lading to H. Cohn & Co. as well as consigned to them in fact, it is quite clear that, being satisfied that it was competent for them to waive this mere formal and unimportant requirement, the acts of the defendants in accepting the risk, with full knowledge that, by bill of lading, the gold was addressed to Newstadter Bros, and not to H. Cohn & Co. were clearly such a waiver. (Liddle v. Market Ins Co., 4 Bosw. 179, affirmed in Court of Appeals. Whittaker v. Farm. Ins. Co., 29 Barb. 312. Holbrook v. Basset, 5 Bosw. 147.)
   By the Court, Robertson, Ch. J.

The defendants claim that the expression in the policy “ consigned to H. Cohn & Co. by regular invoice and bill of lading,” demands the insertion of the names of that firm in such bill of lading as consignees, iu order thereby to cover any shipments. They contend that the object of such provision was to protect them against the risk of loss of premiums or shipments, which might arrive safely, by concealing the fact that they had been covered by such open policy ; inasmuch as under it, so construed, the assured could not avail himself of parol proof, to bring a particular shipment in case of loss, within its terms ; and that without the insertion of the words and shipped ” before “ by regular invoice,” or some equivalent ones, no different interpretation can be given to it. The main argument to sustain this position is, that such words must .have been inserted for some further purpose than merely to require invoices and bills of lading to accompany the goods, since they are universally sent; and that such purpose could only he that contended for; that the persons to whom the consignment was made in the hills of lading, was material to the discovery of risks assumed and premiums earned, and the mention of their names in the bill of lading, was the main object to be attained.

But the facility of concealment of risks covered by the policy; and evading liability for premiums therefor, by shipping gold in a third person’s name,- if so great an evil and so vital to insurers, should have been guarded against by an express and unambiguous stipulation, in language intelligible to both parties. Was such the case here ? The language of the clause in question is “ consigned to H. Cohn by regular invoice and bill of lading.” The preposition used is by,” not in,” and the invoice is to consign the gold, as well as the bill of lading. “ Consigned ” is by no means a word of such technical import as to be confined in its scope to the operation of a bill of lading. (Burrill’s Law Dict, in verb.) Cl By,” as much signifies “ by means of,” as “ by the language of.” In is a much more appropriate word to express the latter ; indeed both are generally found coupled together in conveyances, where reference is made therein to the language of the instrument as well as its effect. Goods, to whose possession a person is entitled by an assignment or indorsement of a bill of lading of them, are as much consigned to him thereby, as if he were named in the' bill, (Zachrisson v. Ahman, 2 Sandf. 68,) and no technical force can be given to the word consigned, as applied to an invoice. It follows that such phrase cannot be subjected to so rigorous a construction as to . require Cohn & Co.” to be designated in a bill of lading and invoice of gold as consignees, in order to bring them within the terms of such policy ; so long as it is equally susceptible of a more liberal one, without departing from the meaning of the words employed. The construction now contended for, if adopted for the reason urged therefor, would extend to the exclusion of parol evidence to prove a mistake in a bill of lading, which is admissible in other cases, (Lee v. Salter, Hill & Den. 163,) since otherwise the underwriter would be equally baffled in ascertaining what premiums he had earned.

It is moreover not to be overlooked as insignificant, that the contested phrase precedes, and does not follow, the description of the kind of subject of insurance, and is connected with the name of the shipper, the party insured, and the consignee, and must have been intended to carry out a kindred purpose. The making of a contract of insurance depends frequently on the character of the parties insured, and sometimes on that of those who represent them; the names of the owners and shippers were, therefore, inserted for the purpose of protection ; the name of the consignee was simply for the purpose of identification ; and the requirement of regular invoices and bills of lading was evidently in contrast with irregular lists, ship’s receipts, or other modes of contracting for the transportation of the metal, .and also to determine that it was originally destined for New York.

But even if such phrase composed part of the description of the subject insured, if the main characteristics are observed, slight deviations in unimportant or contradictory particulars, may be overlooked. (Ruan v. Gardner, 1 Wash. C. C. 149, 150. Burr v. Broadway Insurance Co., 16 N. Y. Rep. 267.)

It is by no means clear that the memorandum of the gold forwarded to Cohn & Co., expressing it to be shipped by the plaintiffs, to be delivered to H. Cohn & Co., and signed by the shippers in San Francisco, (Newstadter Bros.,) who received the same jointly with other amounts, and took a more formal bill of lading of the whole, was not equivalent to a new bill of lading, or at least an assignment pro tanto of such bill to Cohn & Co., as in case of an expressman carrying parcels, (Stoddard v. L. I. R. R. Co., 5 Sandf. 180; N. J. St. Nav. Co. v. Merch. Bk., 6 How. U. S. 344;) since in such cases there appears to be a privity of obligation between the common carrier and the party whose goods are carried. It seems also to contain enough of the elements of a bill of lading to constitute one. (Dows v. Greene, 24 N. Y. Rep. 638.) This derives still more force from the fact of the existence of the custom to ship parcels of gold belonging to different persons, when under a certain amount in value, jointly, in the name of one person. The defendants were chargeable with knowledge of such custom, and the language of the contract was to be construed in reference to it. (Astor v. Union Ins. Co., 7 Cowen, 202. Dana v. Fiedler, 12 N. Y. Rep. 40.) The risk' taken was but for $12,000, below the standard, and they were therefore bound to know that the bill of lading might be taken in other names, though for the benefit of the plaintiffs. The latter are not to be presumed to have intended to forego the advantage of such mode of shipping, without clear expression showing it. And the forwarding of such memorandum by the common agent of all the parties who shipped in the name of one person, was the best mode of separating and indicating the interest of each in such common bill of lading.

The effect' of the conversation between the clerk of the consignees, and the president-of the defendants, upon the exhibition by the former to the latter of the telegram of the shipment, depends somewhat upon the question whether the policy attached, • and continued to be attached, without notice of the risk ? It would be a matter of serious doubt, whether the note in the margin of the policy prevented it from attaching until notice of the risk, and the omission to notify would hardly detach it, if it once attached. It seems to follow, therefore, that unless a new and binding agreement was made at the time of the notification, varying the terms of the original agreement, the rights of the parties must be determined by that alone. It is true, it is possible that if the plaintiffs could have done anything at that time to repair any defect in the documents, the defendants might have been estopped from denying that the risk announced, came within the policy, after accepting it, but it was too late for any change in that respect. The admission, however, of the president of the defendants, that a variation of the names of the persons by whom, or to whom, or in whose names, such goods were shipped, is valuable as showing that the danger of losing premiums, by concealing risks, was not considered by him, at least, as the evil intended to be provided against in this case by the contested clause.

The judgment should, therefore, be affirmed with costs.


source: Caselaw Access Project

author: By the Court, Monell, J.

license: Public Domain

text:
    Hester Mart Howard, plaintiff and appellant, vs. Terence Farley et al. defendants and respondents.
    1. The general rule that where, by a written contract, money is to be paid at a fixed day, and the contract is broken, interest should be allowed, ought to be applied to interest payable semi-annually, according to the condition of a bond; especially where payment has been demanded.
    2. If there is no evidence of a demand, before suit, in such a case, 'then interest can only be recovered from the commencement of the action.
    (Before Momcrief, Monell and McCunn, JJ.)
    Heard April 5, 1865;
    decided June 17, 1865.)
    The action was upon a bond conditioned to pay $3800, on the 21st of May, 1865, with interest payable semi-annually, on the 21st days of November and May, in each year. The plaintiff alleged the non-payment of the interest which became due and payable on the 21st day of May, 1863, and demanded judgment therefor, with interest thereon from said 21st of May, 1863. .
    The action was tried by a justice of this court, without a jury. The plaintiff requested the justice to find and decide that the plaintiff was entitled to judgment for the amount claimed, with interest thereon from the 21st of May, 1863. The justice refused so to decide, and the plaintiff excepted. The plaintiff further requested the justice to decide, that the plaintiff was entitled to judgment for the amount claimed, with interest thereon from the commencement of the suit. The justice refused so to decide, and the planitiff excepted. The justice decided that the plaintiff was entitled to, and directed judgment for the plaintiff for, the amount claimed, without interest. To this decision the plaintiff also excepted, and appealed from the judgment.
    . G. Tillotson, for the appellant.
    I. The plaintiff is entitled to recover interest from May 21, 1863, upon the installments of interest which became due at that time. It is a general principle that interest is recoverable on every sum of money from the time it becomes due ; because from that time the party owing is in default for pot paying, and the party to whom it is owed is injured by not receiving it. The allowance of interest by the court, as an' incident of the debt, is always founded on the agreement of the parties. This agreement may be expressed in writing, or by words, or it may be implied. Where the principal is to be paid at a specific time, the law has always implied an agreement to make good the loss arising from .a default, by the payment of interest. (2 Bur. 1866. 3 Cowen, 436. 5 id. 610.) The above rule would apply equally to an installment of interest falling due, as to an installment of principal, because the debtor is as much in default, and the creditor as much injured, in the one case as in the other. There is another reason why interest is allowable; because, from the time of default, the law presumes the debtor to have employed the money to his own profit, and this applies equally to principal and interest. In New Hampshire and Massachusetts the principle contended for by the plaintiff has been directly decided. In Pierce v. Rowe, (1 N. H. Rep. 179,) the action was upon a note payable with “ interest annually,” and interest on the annual interest was allowed. Woodbury, J. said : “ We have already perceived that by an express agreement of the parties, ‘ interest’ on the sum named in the note in this action became due 'annually,’ or at the end of each year. In this respect it resembled an installment of principal thus becoming due; and the decisions are numerous, that after the end of each year, an action could be sustained for the annual interest, as well as for an installment of principal. The debtor, therefore, was from that time culpable for not paying it, and must be presumed to have employed it, as well as the principal, to his own profit. Consequently, it is our duty to direct interest to be cast on the annual interest from the time the latter became due until judgment.” In both North and South Carolina it has been held that interest is recoverable upon the annual installments of interest upon a money bond. (Kennon v. Dickens, Cam. & Nor. Rep. 357. Gibbs v. Chisholm, 2 Nott & McCord, 38.) In Greenleaf v. Kellogg, (2 Mass. Rep. 568,) the suit was on a promissory note for $10,000, payable in eight years from date, “ with lawful interest therefor until the same should be paid ; the said interest to be paid yearly and at the end of each year, during said term.” After three years (no interest having been paid) the plaintiff brought suit for the interest, and the court gave judgment for the interest in arrear, and for the interest of each year’s interest from the day it was payable to the time of rendering the judgment.
    The Supreme Court of this district, at the general term in Nov. 1863, decided that interest is recoverable upon coupons for interest, by way of damages for non-payment. (Conn. Mu. Life Ins. Co. v. Cleveland R. R. Co., 41 Barb. 17, 22.)
    II. At all events, the plaintiff is entitled to recover interest from the commencement of the action. In Hastings v. Wiswall, (8 Mass. Rep. 455,) the action was on a promissory note, payable in five years from date, with interest annually. The plaintiff claimed that the interest due by the terms of the note, at the end of each year, should be added to the principal, and interest be cast on the aggregate of these two sums, and so from year to year, to the time of the judgment. The court denied the motion, observing that the plaintiff might have brought his action for the interest at the expiration of each year, and that by neglecting this he might be considered as waiving his claim to compound interest. In Doe v. Warren, (7 Greenl. 48,) the action was assumpsit on two promissory notes, papable in six and ■ seven years, with interest annually. No interest had been paid. The question was, whether the interest should be cast on the accruing interest of each year from the time it became due. Held that simple interest only could be recovered. But the court say, in addition: “ But although the law does not allow compound interest, it has not been inattentive to the rights of creditors. It does not permit the debtor to detain the interest he has promised to pay annually, but furnished a remedy, if not paid to the creditor at the end of each year, to recover it, if he chooses to exact it. The debtor then is sufficiently in his power, and if he is disposed to indulge him, he must be contented to receive simple interest.” (See also Ferry v. Ferry, 2 Cush. 92, per C. J. Shaw; State of Conn. v. Jackson, 1 John. Ch. 17.) These cases show the distinction between the claim for compound interest and the principle for which the plaintiff contends, and indicate clearly that the restriction imposed by the courts upon the recovery of interest upon arrears of interest is limited to those cases where the accumulation had been permitted by the creditor, and does not extend to those cases where he has taken steps to enforce his rights. And they show, further, that interest in such cases must begin to run from the commencement of the action, for otherwise the law would have no uniform operation; in one case judgment might be recovered immediately, in others, owing to the opposition of the creditor, or perhaps the error of a judge, it might be delayed for years, and the creditor would thus lose the benefit of the principle.
    III. The demand spoken of in the cases above cited, means the commencement of a suit. A mere request to pay, without a suit, would not be sufficient; because the law rewards only the vigilant creditor.

      M. L. Townsend, for the respondents.
    I. The rule is well settled in this state, by the decisions of the court of chancery, that interest upon interest, or compound interest, is not recoverable, except where there is a written agreement to pay it, made after the interest upon which it operates has fallen due. (State of Conn. v. Jackson, 1 John. Ch. 13. Van Benschooten v. Lawson, 6 id. 313. Mowry v.
      Bishop, 5 Paige, 98. Quackenbush v. Leonard, 9 id. 334. Toll v. Hiller, 11 id. 228.)
    II. The same rule is recognized by the courts of law. (Kellogg v. Hickok, 1 Wend. R. 521. Jackson v. Campbell, 5 id. 562. Boyer v. Pack, 2 Denio, 107. Van Rensselaer v. Jones, 2 Barb. 666, &c. Forman v. Forman, 17 How. Pr. 255. Henderson v. Hamilton, 1 Hall’s N. Y. Sup’r Ct. 314.)
    III. There is no equity in the plaintiff’s demanding interest from the commencement of the suit. By the rule established by the above cases, the defendants tendered and offered to pay before the suit was commenced, all that they were bound to pay by the established rule of law and of equity. They could do no more, and it was the plaintiff’s own fault in not accepting the money tendered. This action would have been entirely unnecessary if the plaintiff had accepted the tender, which was all the law required the defendants to offer. Had the tender been followed by bringing the money into court with the answer, the plaintiff would not have been entitled even to the costs of commencing the action. Surely it would not be equity to compel the defendants to pay interest (by way of damages') from the commencement of this suit, when they did all that the law required of them before the suit was commenced. The demand of the summons (viz. interest from May 21st, 1863,) was improper, being for more than the law allowed.
   By the Court, Monell, J.

In the action of debt on bond, as it existed before the adoption of the Code of Procedure, the judgment was for the penalty, but execution issued to collect only the amount actually due. Since the Code, however, as I had occasion recently to decide, (Howard v. Farley, 18 Abb. Pr. 367,) the action must be for the recovery of the sum due, and not for the penalty.

In the case before us, the plaintiff sought to recover one year’s interest upon a bond, the principal sum secured not being due until two years thereafter, and the only question is whether the plaintiff is entitled to recover interest upon the sum demanded in her complaint; and if so, whether from the time it became due, or from the commencement of the suit.

It is well settled, both in equity and at law, that compound interest is not recoverable, without a special agreement to that effect. The parties, however, may agree that interest due may thereupon become principal, and bear interest. ( Van Benschooten v. Lawson, 6 John. Ch. 313.) At common law, interest was not recoverable in any case, either as an incident to the debt or otherwise. The rule has been greatly relaxed by statutes and adjudications, so that interest may now be recovered in all cases where the contract by its terms bears interest as an incident to the debt, or when it is allowed by way of damages.

On a contract to pay a given sum of money at a certain future day, with interest payable half yearly, an action may be maintained to recover an installment of interest, although the principal is not due. (Howard v. Farley, supra. Herries v. Jamieson, 5 T. R. 553.)

In the case before us, the interest was payable on the bond on the 21st days of November and May. The time of payment was fixed by the contract, and it became the right of the plaintiff, on each of those days, to demand its payment, If paid, it would have become principal in his hands, capable of earning interest, and if not paid, it would be difficult, I think, to find a reason for withholding interest from the time of the demand. In all the cases in equity or at law, the question has arisen under a different state of facts. In those cases the interest when due was not demanded, and in suits to recover the principal debt, interest was not allowed to be compounded. Hence, if the holder of a note or bond allowed the time to run by, without demanding interest, he could not afterwards, in an action on the note or bond, recover compound interest. (Connecticut v. Jackson, 1 John. Ch. 13. Van Benschooten v. Lawson, supra. In Lord Clancarty v. Latouche, 1 Ball & Beatty, 430,) Lord Oh. Manners says : “ It would be fair for the mortgagee to call for interest due at the end of the year, and if not paid, to insist on its becoming principal.”

Courts of law, as well as of equity, have discountenanced and disapproved of provisions in contracts that interest shall become principal, and have invariably treated such contracts as usurious and void. But I have not been able to find any case which holds that the parties may not agree, after the interest becomes due, that it shall bear interest. The chancellor, in Toll v. Hiller, (11 Paige, 231,) held that such an agreement could be made, and was valid.

In principle there is no difference, between the express and the implied agreement. Where a man agrees to pay the interest of a debt on a given fixed day, he ought to be held to the performance of his engagement; and in default should be liable in damages, for interest is always given as damages for the breach of the contract.

Lord Mansfield, in an early case, (Robinson v. Bland, 2 Burr. 1077,) said ; “ Where money is made payable by an agreement between parties, and a time given for the payment of it, this is a contract to pay the money at a given time, and to pay interest for it from the given day, in case of failure of payment at that day; so that the action is, in effect, to obtain a specific performance of the contract. For pecuniary damages, upon a contract for the payment of money, are, from the nature of the thing, a specific performance, and the relief is defective so far as all the money is not paid.” This language of an eminent jurist, although applied to the debt, equally applies to the interest, when the interest is payable at a fixed period. A specific performance of the contract to pay interest on a given day, would require the party to perform as of the day of failure, or to pay damages. Such damages would necessarily be the interest upon the interest defaulted.

In Pierce v. Rowe, (1 N. H. Rep. 179,) interest was allowed in an action to recover an installment of interest upon a note. The court say, that from the time the interest became due, the debtor was culpable for not paying it, and must be presumed to have employed it, as well as the principal to his own use.

In Greenleaf v. Kellogg, (2 Mass. R. 568,) a similar decision was made, and interest allowed. (See also Hastings v. Wiswall, 8 Mass. R. 455.)

In Connecticut Mutual Life Insurance Co. v. Cleveland &c. R. R. Co., (41 Barb. 9,) the action was to recover interest on coupons annexed to the bonds of the defendants. These coupons contained each a promise to pay, on a day certain, $35 interest due on that day ; and the court allowed interest to be recovered upon the coupons from the day of the default. Although some stress is laid, in the opinion of the court, upon the fact that the coupons could be cut off, and were negotiable by delivery, yet the decision really rested upon the principle that interest should be allowed by way of damages for the delay of payment. So that the analogy between that case and the one I am considering is striking.

I think the general rule ought to be applied to this case, that when by a written contract, money is to be paid at a fixed day, and the contract is broken, interest should be allowed. Especially so, where the creditor demands his due, and the debtor refuses or neglects to pay. In such a case there can be no application of the rule, as stated in Mowry v. Bishop, (5 Paige, 98,) that it was a rule of public policy to prevent an accumulation of compound interest in favor of negligent creditors, who do not call for the payment of their interest when due.”

If the interest is demanded when due, it becomes principal from that time, and interest upon it should be recoverable. If these views are correct, the refusal of the learned justice to allow some interest was erroneous.

There is no evidence of a demand before suit. Therefore, the recovery of interest can only be from the commencement of the action.

Unless the defendants consent in writing to allow the judgment to be amended, so as to include the interest from the commencement of the suit, the judgment must be reversed, and a new trial ordered, with costs to the appellant to abide the event. If the defendants consent to the amendment, then the judgment as amended will be affirmed, but without costs of the appeal to either party.


author: Monell, J. Moncrief, J. (dissenting.)

text:
    Anson E. Hovey, plaintiff and appellant, vs. John Ten Broeck et al. defendants and respondents.
    1. An overseer and book keeper is a “ servant!' within the meaning of the statute authorizing the formation of companies for mining, mechanical and chemical purposes. (2 M. S. 6th ed. p. 658, § 18.)
    2. A stockholder in a mining company is liable for the wages of a “ servant" of the company, which became due within one year previous to the recovery of judgment against the company therefor; and this, even though his engagement was for a longer term than one year.
    (Before Moncrief, Monell and McCunn, JJ.)
    Heard April 13, 1865;
    decided June 24, 1865.
    This was an action to recover from the defendants, as stockholders of the High Shoal Mining and Manufacturing Company, a company created under the act of 1848, respecting corporations for mining, mechanical and chemical purposes, (2 R. S. 5th ed. p. 658,) the sum of $1611 for the services of himself and wife, as servants of said company, performed for them before November 1, 1860. By the 18 th section of that act, stockholders are liable for all debts due and owing to their “ laborers, servants and apprentices for services performed for such corporationand by the provisions of section 24, the stockholders are only liable for debts contracted “ by the company which are to be paid within one year from the time the debt is contracted, and on which a suit is brought against the company within one year after the debt becomes due.” The complaint alleges judgment in an action brought against the company within one year after said debt became due, the issuing of an execution, and its return wholly unsatisfied. The answer, among other things, alleged * * “ Fifth * * that any agreement under which the plaintiff claims to recover in this action was made and entered into on the first day of January, 1856, and that the debt contracted thereby was not to be paid within one year from the time it was so contracted ; and they further say that they are informed, and believe, that said agreement became complete and ended on the first day of January, in the year 1859, and that no services were performed subsequent to such date.” The issues came -on to be tried before Chief Justice Robeetson, and a jury. The only evidence introduced by the plaintiff was the record in a suit brought by him against the company, in which judgment was obtained by default; and his own testimony given on the trial of this action, when the plaintiff rested. The defendants’ counsel moved for the dismissal of the complaint; the court granted the motion ; to which the plaintiff’s counsel excepted. From the judgment entered upon the order and direction to dismiss the complaint, the plaintiff appealed.

      John Slosson, for the appellant.
    I. The character and nature of the plaintiff’s services is proved aliunde from the judgment record against the company, and it is proved that the claim against the company was for the same services as those now sued for. The judgment not being attacked for collusion or fraud, is conclusive evidence of the debt, as against the stockholders. (Belmont v. Coleman, 21 N. Y. Rep. 96, and cases there cited, affirming 1 Bos. 188.)
    The. action against the company was brought within one year after the debt became due, under section 24 (marg. 47) of the general manufacturing act. (2 R. S. 5th ed. p. 663.) The debt was due, as alleged, in November, 1860, and the suit was commenced in January, 1861.
    II. The nonsuit was granted on the ground that the plaintiff did not come within the class of persons enumerated in section 18 (marg. 41,) of the general manufacturing act, (2 R. S. 5th ed. p. 662,) “ laborers, servants and apprentices.” In this the judge clearly erred. The character of the services shows that the plaintiff was both a “ laborer” and “ servant." The cases of Aikin v. Wasson, (24 N. Y. 482,) and Ericsson v. Brown, (38 Barb. 390,) are not analogous. In the first, the plaintiff was a contractor for the construction of a railroad; in the second, he was a consulting engineer, and the act under which the suit was brought applied only to ££ laborers and operatives.”

      T. C. Buckley, for the respondents.
    I. The plaintiff was not a “ laborer, servant or apprentice,” within the meaning of the 18 th section of the act.
    1. He had nothing to do with the mining operations of the company, but was a mere book keeper, farmer, and collector of crops and rents. (Aikin v. Wasson, 24 N. Y. Rep. 482.)
    2. The record in the plaintiff’s suit against the stockholders, is no evidence against these stockholders, as it was not recovered after a trial on the merits. (Strong v. Wheaton, 38 Barb, 616. Belmont v. Coleman, 1 Bosw. 196, 200, 201; Affirmed in Court of Appeals, 21 N. Y. Rep. 96.)
    3. At all events, it is no evidence of the particular description of debt for which the stockholders, in the present case, are sought to be held responsible, and so the judge ruled. (Conant v. Van Schaick, 24 Barb. 87.)
    II. The ruling of the court at the trial, dismissing the complaint, was correct, for the following additional reasons :
    1. The debt due the'plaintiff, as stated in the bill of particulars, was not one which was contracted to be paid in one year.
    2. Nor was there a suit commenced within one year after it became due. Suit was not commenced till January 31,1861, and no operations were carried on by the company after the 1st of January, 1859, when they were sold out under foreclosure. Under no circumstances can these defendants be liable for the services rendered after the company was sold out, in pursuance of the arrangement made with Mr. Darling, or the president of the company, or Mr. Alcott, one of the trustees, made at the time of the foreclosure.
    3. No employment of the plaintiff by the corporation, or any authorized agent, at any time, was shown ; nor was notice of his employment brought home to the defendants. (Laws of 1848, §§ 5, 87. McCullough v. Moss, 5 Denio, 575-578.)
    4. The services were not rendered in this state ; nor were they within the legitimate business of the company. (Whitford v. Panama R. R. Co., 23 N. Y. Rep. 470, 475. Angell & Ames on Corp. § 104.)
   Monell, J.

The plaintiff claimed to recover for the services of himself and wife, from January, 1856, to November, 1860, at the rate of $500 per annum. He proved the recovery of a judgment against the corporation of which the defendants were stockholders, for the amount of his claim, and the return of an execution unsatisfied.

The complaint in the action against the company alleged the rendering of services by the plaintiff and wife for the company between the 1st of January, 1856, and the 1st of November, I860,, and claimed a balance due of $1611.35, for which sum the plaintiff recovered judgment.

In actions against stockholders of corporations formed for mining, mechanical and chemical purposes, it is incumbent upon the plaintiff to show the recovery of a judgment against the corporation ; the return of an execution thereon unsatisfied ; that the debt is due to a laborer or servant, and was contracted by the corporation to be paid within one year.

The judgment against the corporation is open to attack by the stockholders only for fraud or collusion. (Moss v. McCullough, 7 Barb. 279 Moss v. Averell, 10 N. Y. Rep. 449. Belmont v. Coleman, 21 id. 96.) It is conclusive as to the contract with the corporation, the services rendered, and their value.

The only questions, therefore, to be examined in this case are, First. Whether the services were of .a character intended to be protected by the 18th section of the act authorizing the formation of mining companies, {Laws of 1848, p. 54,) and Second, Whether the debt was contracted by the company to be paid within a year; and Third. Whether this suit was commenced within a year after the debt became due.

In respect to the character of the services rendered, the plaintiff testified that the company’s property consisted of large plantations of sixteen or seventeen thousand acres of land, on which were gold mines, iron mines, saw mills, grist mills, &c. and a large portion of farming lands. That he worked in the field.with the men, seeing that they did their duty, and assisted in doing it, and that he also did a variety of other things ; that he sometimes worked in the saw mills, sometimes in the grist mills, sometimes gathering wood with the men, and taking it into the saw mill; that he went to the field and gave out the rations to the negroes, kept the accounts in the absence of others, .collected the farm rents and did more or less traveling for the company. He further testified, that his wife took care of the house belonging to the company, where they lived, and that the agent of the company stayed there a portion of the time, and the captain of the men over Sundays, at which time they were fed and given a place to sleep. He further testified, that the president of the company told him that he would probably have occasion to keep the books, and that his wife’s services would be to attend to the household concerns.

It is evident, I think, that the plaintiff was employed by the company to perform a variety of services. He seems to have been a man of all work. He was an overseer and yet worked with the men. He worked in the different mills on the premises, and apparently had a complete supervision of the property, men and business of the company, and also kept their books. Many of the services he performed as a common laborer, and others as the servant of the company. The word “laborer” in the statute must probably be restricted to mean manual work, but “ servant” cannot be confined to a mere menial service. “Laborer” is more distinctive than “ servant,” and embraces a smaller class ; the former comprehending such only as perform labor with their hands, while the latter includes also such as do menial services. From the nature of the services performed by the plaintiff and his wife, I cannot entertain a doubt that they were of a character intended to be protected by the act. He was both a laborer and a servant; much that he did was manual and some of it menial.

The cases of Aiken v. Wasson, (24 N. Y. Rep. 482.) and Ericsson v. Brown, (38 Barb. 390,) must be regarded as standing by themselves, and as establishing no general principle. In the first case the plaintiff was a contractor with a railroad company, and sued to recover for the work of his men. And it was held he was neither a laborer nor servant. Judge Selden says it is difficult to determine precisely where the line should be drawn between the different classes of persons who may perform services for a company. That case, then, merely settles that a person who makes a contract with a railroad company to construct a portion of its road, is not a servant of the company. In the second case the suit was for the services of a consulting engineer, and it was held he was not a servant. The court draws a distinction, in its interpretation of the statute, between one who performs manual labor and a professional man whose labors are mostly mental. Yet, in both these cases, enough can be found in the reasonings of the court to bring the present plaintiff within the intent of the statute. In the case of Oonant v. Van Schaich, (24 Bari. 87,) the plaintiff recovered for services as civil engineer, and it is there said that there is no middle ground between restricting the recovery to day laborers and applying it to all persons employed in the service of the company, who have not a distinctive appellation as officer or agent.

I think the plaintiff is clearly entitled to the benefit of the statute.

The next question is, was the debt contracted by the company to be paid in one year ?

The plaintiff testified that there was no limit to his engagement ; it was to go on ad infinitum, and he was to be paid $500 a year for the services of himself and wife. The employment was for an indefinite period, and could have been terminated by either party at pleasure. The judgment recovered against the company was evidence of the services rendered, and of the sufficiency of the contract to sustain a recovery. No time was fixed for. the payment of the salary, and the most the defendants could claim was, that it became due with the expiration of the year.

Although it is usual to advance or pay salaries monthly or quarterly, yet upon a contract to serve for a year, at a stipulated rate of compensation for the whole period, no right of action would accrue until tlie expiration of the year.

There was nothing in the evidence to show that the liability of the company could not have been enforced within the year. The 24th section of the act, which exempts stockholders from liability for debts which are not to he paid within a year, must be construed to mean such debts, the payment of which is, in express terms, extended beyond a year, and the collection'of which cannot he enforced before the expiration of that period.

The debt in this case was due at the end of the year, and the judgment (which in that particular cannot be disturbed here) shows a recovery for services to the first of November, 1860.

The plaintiff, in his action against the company, recovered his salary from the 1st of January, 1856. But in this action he can recover only for so much as became due within a year prior to the commencement of that action.

If the views I have here expressed are correct, then the plaintiff is entitled to recover the proportion of salary from January 1,1860, to November 1,1860. But for the salary due December 81,1859, the defendants are not liable, a suit against the company not having been commenced within a year-thereafter.

I think the complaint was improperly dismissed. The judgment should be reversed and a new trial ordered, with costs of the appeal to the appellant, to abide the event.

HoCuítn, J. concurred.

Moncrief, J. (dissenting.)

The agreement under which the services were rendered was made in December, 1855, and in duration has no limit; it was to go on ad infinitum for all that I know,” is the testimony of the plaintiff. The claim made by him in his bill of particulars is for services rendered $ $ from the 1st day of January, 1856, to the 1st day of November, 1860, * * at §500 per annum, as per agreement.

The ordinary and natural interpretation of such an arrangement could only extend to the last day of December, 1856: If, thereafter, the plaintiff continued to perform the same services for the company, and the law would imply the renewal of contracts for other years, they would severally expire on the 31st day of December, 1857 and 1858. What services, if any, were rendered by the plaintiff, or any other person, for the company, after this latter period, does not appear by the testimony. It does appear that the property of the company was sold under a foreclosure, about the 1st of January, 1858, or 1859 ; that the plaintiff became the purchaser, and accepted a deed of the whole property, and held such deed until the summer or fall of 1860, and left the property in October of the same year. The points of the learned counsel for the appellant assert (1.) “the action against the company was brought within one year after the debt became due. * * The debt was due * * in November, 1860, and suit was commenced in January, 1861.” In reference to the time when the action was commenced, it is proper to remark that I have not been able to find sufficient evidence ; the citation of the appellant, or of the respondent, does not verify either assertion as to the fact, the former possibly referring to a summons entitled (by a typographical error) in this court, dated November 9, 1860, and the latter "relying upon the date of the amended complaint. Section 24 (marg. 47) of the General Manufacturing Act, (2 R. S. 5th ed. p. 663,) enacts that “No stockholder shall be personally liable for the payment of any debt contracted by any company formed under this act, which is not to be paid within one year from the time the debt is contracted, nor unless a suit for the collection of such debt shall be brought against such company within one year after the debt became due. * * Assuming, therefore, that the arrangement was a continuing agreement for one year after January 1, 1856, it would cease when services under it were no longer performed, after the 31st day of December, 1858. Whatever debt the company could be said, therefore, to have contracted with the plaintiff became due on that day, or on the 1st day of January, 1859.

The judgment against the company is not evidence of the debt claimed against these defendants ; its office seems to be to exhaust all means belonging to the corporation as a condition precedent to an attack upon the stockholders.

In Belmont v. Coleman, (1 Bosw. 188,) an indebtedness was established aliunde from the judgment against the company ; the bill of exchange, drawn and accepted by its officers, raised a presumption that it was not only given for a sufficient consideration, but for legitimate purposes.”

Slee v. Bloom, (19 John. 456,) is authority only for the proposition that “ a judgment against the company, as well as an account stated between the creditor and its officers, was evidence of the debt.” It was expressly held in 20 John. 669; 684, 5, (S. C.) “ that if the judgment was founded on error,” it was competent to impeach it. Judge Hoffman, with whom, in Belmont v. Coleman, was Bosworth, late chief justice, who simply concurred in affirming the judgment, says (p. 200) the stockholders may question it (the judgment against the company) in any way showing illegality or error, when sued individually.” Upon the review of that case, in the Court of Appeals, (21 N. Y. Rep. 96,) it should be observed that the learned judge who wrote the opinion lays down the rule that the “ creditor of a company seeking to enforce his personal liability upon a stockholder is required to prove the existence of the debt, and that judgment has been obtained, and execution issued, and returned as the statute requires.” (P. 101.) The affirmance by all the judges was placed upon the grounds that there was.no error in the admission of evidence, or in the refusal of a nonsuit, and one half of the court expressly refused to commit themselves to the doctrine that a judgment against the corporation is even prima facie evidence against a stockholder.

As there is no evidence as to the performance of any services by the plaintiff for the company within one year next before the commencement of his action against it, he failed to establish a debt against it for which the defendants could be held to respond, and his complaint was properly dismissed.

In my opinion the judgment should be affirmed.


author: By the Court, Moncrief, J.

text:
    The Washington Marine Insurance Company, plaintiffs, vs. Leon Herckenrath et al. defendants.
    1. Where a policy of insurance provides for payment, by the insurers, “in case of loss, in thirty days after proof of loss,” &c. service of proof of loss, and the expiration of thirty days thereafter, are conditions precedent to a right of action upon the policy.
    2. And if, in an action by the insurers, upon a premium note, the defendants, admitting the allegations of the complaint, set up as a counter-claim a loss occurring under a policy issued by the plaintiffs, but give no evidence tending to show that any proof of loss was ever served, the counter-claim should be disallowed.
    (Before Moncrief, Barbour and Garvin, JJ.)
    Heard June 5, 1865;
    decided June 24, 1865.
    This action was brought upon a premium note made by the defendants for the sum of $150, which had been written against to the amount of the claim made by the plaintiffs, $122.75. The answer admitted “ the several allegations of the plaintiffs’ complaint,” but also set up a counter-claim that the plaintiffs on the 23d June, 1863, under an open policy for $10,000, had accepted a risk of a shipment by bark “ Texana ” to the amount of $325 ; and that said bark, with her cargo, had been captured and destroyed. To this counter-claim there was a reply, &c. The case came on for trial before one of the justices of this court and a jury, and resulted in a direction by the learned judge that the jury should find a verdict for the plaintiffs for their claim and interest, and that the exceptions taken by the defendants should be heard in the first instance at the general term, &c. &e.

      E. A. Doolittle, for the plaintiffs.

      J. Buchanan Henry, for the defendants.
   By the Court, Moncrief, J.

The plaintiffs were entitled to a verdict, unless the defendants established a counter-claim ; the allegations in the complaint were expressly admitted. The defendants had averred the acceptance of a risk by the plaintiffs, the happening of a loss, and that the defendants duly fulfilled all the conditions of said policy of insurance on their part; and more than thirty days before the commencement of this action they gave to the plaintiffs due notice and proof of the loss aforesaid,” &c. &c. The policy provided for payment, “• in case of loss, in thirty days after proof of loss,” &c„ The defendants having failed to establish the giving proof of loss to the plaintiffs, before the commencement of this action, the counter-claim was premature, and could not be entertained. (Kimball v. The Hamilton Fire Ins. Co., 8 Bosw. 495.) Assuming, therefore, that the defendants had given evidence proper to be submitted to the jury upon the question whether or not the plaintiffs had accepted the risk specified as a counter-claim, as to which however there is great doubt, a condition precedent to a right of action was the service of proof of loss upon the .plaintiffs and the expiration of thirty days thereafter. The defendants gave no evidence tending to show that proof was given at any time, and their counter-claim was properly dismissed by the direction to the jury to find a verdict for the plaintiffs.

Whether or' not the questions which were allowed under objection and exception by the defendants were proper and relavant as tending to show that no valid and subsisting insurance upon the subject matter of the counter-claim was effected by the defendants with the plaintiffs, need not be considered. Even if the questions were objectionable, the defendants suffered no injury by their being allowed. None of the exceptions being well taken, they should be overruled, and judgment upon the verdict directed to be entered for the plaintiffs.


text:
    George W. Staples, plaintiff, vs. Catharine Anderson, defendant.
    1. It is a subject of defense and recoupment, in an action for rent, that premises demised for the purpose of keeping a respectable boarding house therein had beén previously occupied, to the knowledge of the lessor, without disclosing it, as a house-Of ill-fatn'e, and continued, after such demise, in consequence thereof, tobe subject to nightly visits at all hours, from disreputable persons of both sexes, to the .annoyance and disturbance of the tenant, and bringing, reproach and disgrace upon herself and her family, thus defeating the purposes and uses for which she rént'ed tbe bouse, and forcing her to abandon her business therein.
    2. Where, in such an action, the defendant set up as a defense, the bad character of the house, arising from its former mode of occupation, which obliged her to abandon it; and the evidence tended to show that the plaintiff, although knowing that his house had a bad repute, did not disclose the fact to the defendant, but represented that the premises were “ a go'od place” to let out furnished rooms to gentlemenHeM, that the' question of fact as to the character of the house, at the time of the letting, being known to the plaintiff, and his false representations or fraudulent concealment thereof from the defendant, should have been submitted to the jury, instead of directing them to' find a verdict for the plaintiff.
    (Before Moncrief, Monell and McCunn, JJ.)
    Heard April 11, 1865;
    decided June 24, 1865.
    This action was brought to recover rent of premises No. 10, West 13th street,, from the first of November, 1863, to the first of February, 1864.
    The defendant entered into possession thereof about the 15th of May, 1863, and abandoned them about the 21st of September, 1863. The amount of the claim and interest was conceded to be $242.32. The' defendant set up in her answer,

      First. That the house mentioned in-the complaint is located in a respectable neighborhood, and in a respectable part of the city of New York, and was vacant when hired by the defendant.

      Second. That the defendant rented said house for the use of herself and family, intending to let out the portions of said house not required for her own use in furnished rooms, and for no other uses, and she informed the plaintiff herein, before the said hiring took place, of the uses and purposes for which she intended said house.

      Third. That said house was a house of ill-fame, and had been used as such, with the knowledge and consent of the plaintiff herein, for one year or more preceding the first day of May, 1863, and was frequentéd at late and unusual hours of the night by disreputable and disorderly persons of both sexes, for unlawful and immoral purposes, and was used by the persons so occupying and frequenting it as a common brothel, all of which was known to the plaintiff prior to said hiring by the defendant, but of all which the defendant was ignorant, and had no means of ascertaining until after said hiring and occupation of said premises.

      Fourth. That immediately after said occupation, and until about the time when the defendant removed from said house, which was about the middle of September, 1863, she was subjected to nightly visits from that class of persons formerly frequenting said house for said immoral and unlawful purposes as above mentioned, and the ill-fame of the house and its former inmates and frequenters attached itself to this defendant and her family, by reason of her and their occupation of said house ; and by reason of the premises her name was slandered and held in reproach and disgrace by her neighbors and the public ; and the purposes and uses for which she intended said house were entirely defeated thereby, and she was forced to abandon said house and her business, to her great damage, to wit, in the sum of five thousand dollars.
    Wherefore, the defendant prayed that the complaint herein might be dismissed, with costs, and that the lease mentioned in the complaint might be delivered up to be canceled, and that she might have judgment against the plaintiff for her damages as aforesaid, in the sum of five thousand dollars.
    The issues were tried before a justice of this court, and a jury. Upon the trial, the defendant was permitted to amend her answer, so as to make the facts proven available as a defense, as well as a counter-claim. The counsel for the defendant requested the court to charge the jury, that if the jury find that the plaintiff deceived the defendant by concealing from her the character of the house, and that the defendant did not affirm the contract of letting, then they must find for the defendant. The learned judge refused so to charge, and the defendant excepted. The court charged the jury to find a verdict for the plaintiff for the amount of his claim, to which the defendant’s counsel excepted. The exceptions were directed to be heard, in the first place, at a general term of this court, and a motion was now made thereon for a new trial.

      F. R. Sherman, for the plaintiff.

      E. J. Hamilton, for the defendant.
   By the Court, Moncrief, J.

The plaintiff, upon the argument of the exceptions of the defendant’s counsel, urged that the matters stated in the answer are not the proper subject of defense as counter-claim. The plaintiff did not demur to the allegations set up by the way of counter-claim, nor object to the amendment of the answer upon the trial, making the facts proved available as a defense.” We must assume that the motion for judgment upon the pleadings was correctly decided and properly denied, and that there was no error of law committed, as against the plaintiff; the verdict being in his favor, he is bound to sustain the rulings and direction of the judge, and the verdict rendered against the defendant.

The matter set up in the answer may be the subject of defense or counter-claim. .(Westlake v. DeGraw, 25 Wend. 669, 672.) It was held in Smith v. Marrable, (11 M. & W. 5,) where a tenant was sued for rent under the lease of a furnished house alleged to be so infested with bugs as to be unfit for the occupation of a respectable family, that it was proper to let the jury say whether, under all the circumstances of the case, the alleged grievance amounted to a nuisance, or was merely made a pretext for leaving the house.

The evidence in the present case tended to show that the plaintiff represented that the premises were “a good place” for the defendant to let out rooms furnished to gentlemen. The defendant had stated to him her object in wishing to hire the house, and that she had plenty of good'*friends who would help her, and that was the only means she had of doing any thing for herself, after her husband’s death. There was also some evidence tending to show that the plaintiff knew that his house was not fitted for the purpose for which he was advised the defendant desired to use it; that the suggestion that it was “a good place” to let out furnished rooms to gentlemen was untrue ; and that the house was in such repute as to be an improper residence for respectable people. In Cornfoot v. Fowke. (6 Mees. & W. 359,) it is said: “It.must also be admitted that if the plaintiff knew of the nuisance (a brothel next door) but purposely employed an agent, suspecting that a question would be asked from him, and at the same time believing and suspecting that it would, by reason of such ignorance be answered in the negative, the plaintiff would undoubtedly be guilty of a fraud and the contract would be avoided ; for then the representation of the agent, which he intended to be made, would be the same as his own; and his own representation, coupled with his knowledge of its falsehood, would doubtless be a fraud. But whether the facts in the case would warrant an inference that such a fraud was committed, it is unnecessary to inquire, as if they would, this question should have been “submitted to the jury.” The agent in that case had been asked if there was any objection to the house, and he answered there was not. The defendant in this action testified that she never would have taken the house if she had known its character; that no respectable gentlemen would come into the house ; that she did not know any thing of the character of the house, or of its former inmates, before she took it; the plaintiff knew that his house had some bad repute, and he did not disclose the fact in his conversation with the defendant prior to her taking possession. The question of fact as to the character of the house at the time of the letting being known to the plaintiff, and his false representation or fraudulent concealment thereof from the defendant, we think should have been submitted to the jury. The direction to find a verdict against the defendant was therefore erroneous, and the exception to such direction must be held to have been well taken. A new trial is ordered, with costs of the argument of the exceptions to the defendant to abide the event of the action.