text:
    Henry W. Hubbell, Appellant, v. The Pacific Mutual Insurance Company, Respondent.
    (Argued June 9, 1885 ;
    decided October 6, 1885.)
    Plaintiff made application to defendant for insurance upon the cargo of a vessel, the premium to be at the rate fixed and on the same terms granted by another insurance company named. The application was accepted by ^defendant. It was the custom on such an application for the insurer to issue a policy in from ten to twenty days, on payment of the premium or delivery of a note of the insured therefor. Within twenty days after the application plaintiff became insolvent and made a general assignment for the benefit of creditors. Thereupon defendant’s brokers notified plaintiff and his assignees that it would not be bound unless the premium was properly secured; they took no steps in that direction, paid no premium, tendered no note, and did not demand a policy, but took part in procuring a new and different insurance upon the cargo, and no claim was made for over seven years under the agreement. In an action upon said agreement, held, that under it the insurer was bound to issue a policy in the usual and ordinary way, and within the usual time, but only upon payment by the insured of the premium or his giving the customary note, and either party, upon the refusal of the other to perform, could treat the refusal as an abandonment, and by joining therein could terminate the contract; that while the insolvency of defendant did not per se terminate the contract, it gave the insured an equitable right to demand and receive a note of some responsible party, or payment of the premium in cash, and the default of plaintiff in not so paying or securing the premium, after notice that it was required, accompanied by the failure of himself or assignees to demand a policy or take note of its absence, and their action in procuring other insurance justified the insurer in inferring an intent on their part to terminate the contract which its concurrence made effective.
    Defendant presented an account to plaintiff, in which was charged an item of premium which referred to the insurance in question or that of the cargo of another vessel which arrived safely, where the agreement was similar and no policy was issued ; it was not proved, however, that it related to the former. Held, in the absence of such proof, it could not be urged as a recognition of that insurance as a subsisting contract and a waiver of plaintiff’s default; and that from the fact there had been a breach of another similar contract it did not follow that there was a mutual abandonment of it as in this case, or because default had been waived in that case that it had also been in this.
    Appeal from, judgment of the General Term of the Supreme Court, in the first judicial department, in favor of defen0ant, entered upon an order made February 3,1882, which overruled plaintiff’s exceptions, denied a motion for new trial and directed judgment on an order dismissing the complaint on trial.
    This action was brought upon an alleged contract of marine insurance.-
    Plaintiff, who was interested in purchases and shipments of hemp in East India markets, having been advised by his agents at Hong Kong that they had chartered the ship Stuart Worthy for a voyage from Manila to New York, with a cargo of hemp, on October 8, 1867, made application in writing through Bell & Hayward, marine insurance brokers, to defendant for insurance on the cargo, of which the following is a copy:

      “ Insurance is wanted by Henry. W. Hubbell for account of whom it may concern, loss, if any, payable to him for $10,000 on cargo, valued £ sterling, as drawn for at $10.50 on board the British ship Stuart Worthy, Showers, master, at and from Manila to New York * * * same rate as Atlantic charges and on same terms.”
    The insurance was made, binding by the signature in initials of the vice-president of the defendant. Plaintiff held at the time an open policy of insurance in the Atlantic Mutual Insurance Company and had arranged with that company for an insurance on the same cargo under that policy.
    On October 11, 1867, Messrs. Bell & Hayward advised the plaintiff by a “ memorandum,” signed by themselves, that they had covered $10,000 with defendant.
    It appeared upon the trial that according to the usual course of dealing, after such an application had been made binding, a policy would be issued “ all along from ten to twenty days” and sent to the insured, accompanied by a premium note, to be signed by the insured, and returned to the company, the insured retaining the policy. Before any policy was issued by defendant, or any premium note was signed, and within less than twenty days from the application, the plaintiff failed in business, became openly and notoriously insolvent and made a general assignment for the benefit of creditors. Immediately after the assignment, Messrs. Bell & Hayward notified plaintiff, by letter, dated October 30, 1867, that the companies in which this and the other risks had been made binding, but for which policies had not been issued, declined' “ to issue policies for same until the premiums a/re made satisfactory,” adding, “ we deem it right to give you the information in this shape, that you may take such steps for the protection of all concerned as may be necessary.” The plaintiff made no reply to this communication, and did nothing touching the insurances referred to therein. On November 2, 1867, Messrs. Bell & Hayward, at the previous request of the assignees, gave them a list of the insurances effected by them in the plaintiff’s name with this statement entered therein—“ the policies for which the companies refuse to deliver until the premiums are satisfactorily guaranteed.” Hpon this list appeared defendant’s insurance. Neither plaintiff nor the assignees made any provision for paying or guaranteeing the premiums, and nothing was done by them under the notice, but new policies were taken out as stated in the opinion. The Stuart Wortley was lost in the China sea September 20, 1867, official information whereof reached New York in November, 1867, and plaintiff’s assignees and the consignees of the cargo collected the other insurance. In August, 1874, plaintiff having procured releases from his • creditors procured a reassignment from his assignees of all the property and assets remaining and, thereafter, made a claim for loss.

      George H. Forster for appellant.
    The preliminary contract was valid and binding. Payment of the premium at the time was not necessary to make the same obligatory. There was a credit given of six months. The issue of the policy was unnecessary. (Train v. H. P. Ins. Co., 62 N. Y. 602; Sandford v. T. F. Ins. Co., 11 Paige, 547; Baptist Church v. B. F. I. Co., 18 Barb. 69; Tayloe v. M. F. I. Co., 9 How. [U. S.] 390; Fish v. Cottenet, 44 N. Y. 538; Perkins v. W. Ins. Co., 4 Cow. 645 ; Lightbody v. N. A. Ins. Co., 25 Wend. 25;
      Ellis v. A. C. F. Ins. Co., 50 N. Y. 402.) The loss having occurred and been known before a policy would be issued, no policy is necessary. (Rockwell v. H. F. Ins. Co., 4 Abb. 179 ; Ellis v. A. C. F. I. Co., 50 N. Y. 405 ; W. Tool Co. v. H. F. I. Co., 7 Hun, 74.) The question was clearly one for the jury, and it was error for the court to take the case from them. (Masten v. Deyo, 2 Wend. 424; Foshay v. Ferguson, 2 Den. 617; Bacon v. Towns, 4 Cush. 218; Besson v. Southard, 10 N. Y. 240 ; Heyne v. Blair, 62 id. 19 ; Kavanagh v. Wilson, 70 id. 177.) If companies place in their policies conditions limiting the time within which proofs must be presented, or suit brought, such conditions are valid and enforced by the courts. (Ripley v. AEtna Ins. Co., 30 N. Y. 136; Roach v. N. Y. & E. Ins. Co., id. 516; Smith v. Haverhill M. F. Ins. Co., 1 Allen, 297; Ames v. N. Y. U. Ins. Co., 14 N. Y. 253; Mayor v. H. Ins. Co., 39 id. 45.) But if no such condition or limitation is in the contract of insurance, courts have no power to impose it. (DeGrove v. Metcalf Ins. Co., 61 N. Y. 606; Gamble v. A. As. Co., 4 Irish [Law Exch.], 204; Riddlesbarger v. H. I. Co., 7 Wall. 386; Emmons v. Hayward, 6 Cush. 501.) It cannot be said, as matter of law, that fifteen months was an unreasonable time for presentation of proofs, considering the facts in the case. (Pattershall v. Franter, 4 Nev. & M. 649; Fielder v. Starkie, 1 H. Bl. 17; Wiberts v. Erie R. Co., 12 N. Y. 245; Edwards v. B. Ins. Co., 3 Gill [Md.], 176; People, ex rel. v. Common Council, 78 N. Y. 57; In re Lord, id. 109.) The English insurance was an independent insurance. on an independent interest. It is not d ouble insurance. ( Warder v. Horton, 4 Binn. [Penn.] 529 ; Hastings v. W. F. Ins. Co. 73 N. Y. 141; Godin v. R. Ex. Ass. Co., 1 Burr. 489.) The complaint was improperly dismissed, either on the ground that the statute of limitations was a bar to the action, as held by the General Term, or on the ground of inexcusable inattention and loches. (First Nat. Bk. v. Morgan, 73 N. Y. 593 ; Tayloe v. Merchants' F. I. Co., 9 How. [U. S.] 390; In re Lord, 78 N. Y. 111.) Conditions which impose a forfeiture are construed strictly against the insurers who impose them, and for whose benefit they are imposed, and liberally in favor of the insured, upon whom they impose burdens more or less onerous, so that the latter will be held to nothing in this behalf, not explicitly required by the terms of this condition. (Catlin v. S. F. Ins. Co., 1 Sumn. 434; Welcome v. People’s Eq. Mut. F. Ins. Co., 2 Gray, 480; Mason v. Harvey, 8 Wel. Hurl. & Gor. [Exch.] 819; S. G. Mut. Ins. Co. v. Evans, 9 Ind. 1; Roper v. Lendow, 1 Ell. & Ell. [Q. B.] 825 ; Com. Ins. Co. v. Jarrett, 41 Penn. 161; Blakeley v. P. Ins. Co., 20 Wis. 205 ; Gilbert v. N. Am. Ins. Co., 23 Wend. 45; Battaile v. M. Ins. Co., 3 Rob. [La.] 384; G. W. Ins. Co. v. Stadden, 26 111. 360.) The theory of inattention or loches is not sustained by authority. (Merritt v. Todd, 23 N. Y. 28 ; Howland v. Edmonds, 24 id. 307 ; Herrick v. Woolverton, 41 id. 581; Wheeler v. Warner, 47 id. 519 ; Sands v. Annesley, 56 Barb. 598 ; Osgood v. Toole, 60 N. Y. 475 ; Hope Ins. Co. v. Perkins, 38 id. 408; H. Mut. I. Ins. Co. v. Taylor, 2 Rob. 278.) There was no release under seal, which alone could discharge defendant without payment or satisfaction. (Brooklyn v. Degrauw, 23 Wend. 342; Hawley v. Foote, 19 id. 516; Olcott v. Rathbone, 5 id. 490 ; Bunge v. Koop, 48 N. Y. 225 ; Ryan v. Ward, id. 204; Gray v. Barton, 55 id. 71; Bliss v. Swartz, 65 id. 444.) Limitations of actions never commence until the cause of action accrues. (Hay v. S. F. Ins. Co., 77 N. Y. 243; Ames v. N. Y. U. Ins. Co., 14 id. 264; Mayor v. H. F. Ins. Co., 39 id. 46 ; Mix v. A. Ins. Co., 9 Hun, 400; Browning v. P. Ins. Co., L. R., 5 P. C. 75 ; Fisher v. Mayor, etc., 67 N. Y. 73.)

      William Allen Butler for respondent.
    The rule applicable to all contracts requiring any act to be done by one party as a condition of performance by the other party is, that, if the contract specifies no time, the law implies that that act shall be done within a reasonable time. When the facts are undisputed the question of reasonable time is a question of law. (2 Pars, on Cont. 173, 178; Bennett v. Lycoming Co. Ins. Co.,
      67 N. Y. 274; Aymar v. Beers, 7 Cow. 705; Ballard v. Walker, 3 Johns. Cas. 60, 65 ; Barbee v. Willard, 4 M. L. 356.) The fact that no claim was asserted or notice given as-respects the defendant, coupled with the fact that long before the loss was ascertained the insured was notified that no policy would issue unless the premium was made satisfactory, and that no attempt was made to pay or secure it, establishes such loches on the part of the plaintiff as to prevent any recovery in this action. (Codman v. Rogers, 10 Pick. 111; Price v. Yates, 19 Alb. L. J. 295 ; Laforge v. Jayne, 9 Penn. St. 410.) While the application made October 8, 1867, and its acceptance by the defendant made the risk binding, it was contemplated by both parties, as a part of the transaction, that a policy of insurance should be issued pursuant to the application, and a promissory note for the amount of the premium given by plaintiff to the defendant, simultaneously with the receipt by him of the policy. (1 Phil. on Ins., §§ 15, 16 ; Ex parte Chalmers, L. R., 8 Ch. App. 289 ; Morgan v. Bain, L. R., 10 Eq. Cas. 15.) A purchaser of a chose in action must always abide by the case of the person from whom he buys. (Davies v. Austin, 1 Ves. 247; Bush v. Lathrop, 22 N. Y. 535.)
   Finch, J.

It has been held that such a preliminary contract of insurance as was made in this case is not, in and of itself and standing alone, the basis of an action, but amounts to an agreement to insure upon the terms of the usual policy afterward . to be issued, for a breach of which agreement an action lies, and the loss may be recovered, (Ellis v. Albany City Fire Ins. Co., 50 N. Y. 402; De Grove v. Metropolitan Ins. Co., 61 id. 594.) This doctrine implies that essential conditions of the contract remain to be performed, and that the insurance takes effect upon that assumption. These conditions are subsequent in point of time, but on each side precedent to the right of action. The insurer is bound to issue the policy in the usual and ordinary way and within the usual and reasonable time, and within the same time the insured is bound to-pay the premium, or if credit is allowed, to give the customary note. But the insured is not bound to pay if the policy is refused, and the.insurer is not bound to deliver the policy if the premium or the stipulated note is withheld. Either party not in default may compel performance by the other, or treating the refusal as an abandonment, may himself join in the abandonment and so terminate the contract and destroy its existence. (Graves v. White, 87 N. Y. 468; New Eng. Iron Co. v. Gilbert El. R. R. Co., 91 id. 168.) If in such case the breach on one side is such as to indicate an intent to abandon or repudiate the agreement, the other party may assent and so the contract be dissolved.

In the present case neither party performed or offered to perform the mutual conditions within the agreed or customary time, and both parties appear to have abandoned the contract. It was made on the 8th of October, 1867 through Bell & Hayward who acted as brokers and agents for both parties. The custom was that in ten or twenty days the policy would be issued upon payment of the premium or the delivery of a note of the insured. Such note, where credit was to be given, appears to have been not only the customary condition, but essential and material. It both fixed the term of credit beyond dispute, and showed that payment had not, in fact, been made, and in the hands of the insurer could be discounted and used as business paper whenever the exigency of losses or expenses should require. ' Of course the custom permitted this credit only in the case of responsible parties, and when the note tendered was assumed or understood to be good. But within the customary twenty days two things happened. The plaintiff became insolvent so that his premium note, if offered, would have been worthless; and he made a general assignment of all his property for the benefit of creditors. From that date the insurable interest in the cargo of the ship Stuart Woriley passed out of the plaintiff and to his assignees, and they became the owners of his contract of insurance, and of all his rights under it. But they took it own onere; they took it as he held it subject to the payment of the premiaña or the delivery of the premium note. The insolvency of plaintiff did not per se terminate the contract, but it gave to the insurer an equitable right, to demand and receive, instead of the worthless note of plaintiff, the note of the new owners of the contract, or of some responsible parties, or payment of the- premium in cash. Such a notice ’was given by Bell & Hayward in behalf of the insurers to both plaintiff and his assignees. They were explicitly told that the insurers would not be bound unless the premium was properly secured. The plaintiff and his assignees took no steps in that direction. They paid no premium; they tendered no premium note; they demanded no policy. There was also not only a breach of the agreement now sued upon, but affirmative action indicating an intent to abandon the contract, and justifying that conviction on the part of the insurers, for the assignor and assignees took part in procuring a new and different insurance upon the cargo of the vessel. That cargo was hemp, purchased in Manila, through letters of credit issued by English bankers, who were protected by a lien upon the cargo through bills of lading and who procured for their own safety a new insurance. That for the benefit of Brown Brothers & Co. was procured in JSFew York, valuing the pound sterling as. drawn for at $8.50, instead of $10.50, as in the original insurance; and the remaining $2 of such valuation, representing expected profits on the cargo, was covered by an insurance taken in the name either of assignor or assignees. The portion óf the cargo paid for out of the letter of credit issued by the English and American bank was in like manner insured for the benefit of that institution but in foreign companies. It turned out that the Stuart Worthy had been wrecked in the China seas, and her cargo totally lost in the previous September, and before even the date of the contract with defendant. The protest of the captain, detailing the circumstances of the wreck, appears to have arrived in December, and soon thereafter proofs of loss were made and the insurance was collected. That paid for the full cargo, including estimated profits. The default of plaintiff in not paying or securing the premium, accompanied by his failure and that of his assignees to demand a policy or take note of its absence, and their action in procuring a new insurance, and this in the face of a notice that they must give a good note, or the contract would be deemed not binding, fully justified the insurers in inferring an intent to abandon the contract, which their concurrence made effective. And such mutual assent is rendered certain and conclusive by the further fact that with the exception of a single incident hereafter to be noticed nothing transpired between these parties for over seven years; and whatever else may be the effect of that long silence and inaction, it assuredly bears conclusively upon the mutual intent to abandon, and the knowledge and assent of each party of and to such abandonment. So far and upon this state of facts the inference was inevitable and dependent upon no controversy in the proofs.

But the appellant claims that there would have been such controversy, and the question of abandonment would have gone to the jury if evidence offered by him had not been illegally excluded. He sought to prove that an item in an account rendered in 1872 under date of April, 1868, was for an insurance premium in a case where no policy had been issued and where the agreement was similar to that relating to the cargo of the Stuart Worthy, which evidence was excluded. The ruling was unimportant, since at a later period of the case all the facts relating to this item were admitted, and it was shown in substance that it must have referred to the insurance upon the Stuart Worthy or the Ashburton, which arrived safely, no policy having been issued in either case, and the item charging an unpaid premium as an existing debt. Upon those facts it is argued that the question of.abandonment should have gone to the jury, and the court erred in dismissing the complaint. The item referred to was not shown to have related to the premium on the Stuart Worthy, and cannot, therefore, be urged as a recognition of that insurance as a subsisting contract, and a waiver of the non-payment of the premium or non-delivery of a sufficient note. But yet, it is said, it must then have been a charge for the premium on the Ashburton. We may grant so much; but because in that case there was a breach of the contract, it does not necessarily follow that there was a mutual abandonment, or that the unknown facts of that case would have warranted the inference as they did in this ; and because a default may have been waived in one case there is no necessary inference that it was also waived in another and different one. The insurer was not bound to treat both alike so far as his own action was concerned. However unjust or unreasonable it might be not to do so, no law compelled the insurer, if he waived a default in one .case, to waive it also in another. The company might recognize the contract as to the Ashburton, which arrived safely and on whose cargo there was no loss, and collect the premium, if plaintiff did not object, and its interest lay in that direction ; but it would not at all follow from that, or justify an inference, that the insurer waived a default in the case of the Stuart Wortley, and reinstated that abandoned contract for the purpose of becoming liable for the large loss known to have happened. So that the facts relied on did not change the situation or raise a question for the jury.

The judgment should be affirmed, with costs.

All concur.

Judgment affirmed.


source: Caselaw Access Project

author: Ruger, Ch. J.

license: Public Domain

text:
    George Crawford, Respondent, v. The West Side Bank, Appellant.
    A bank may only pay out the funds of a depositor in the usual course of business and in conformity to his directions ; it is not entitled to charge to him any payments, except those made at the time when, to the person to whom, and for the amount authorized by him, and where a check properly drawn by the customer has been subsequently altered in a material point without his consent, even if done so skillfully as to defy detection on examination, the bank is responsible for an omission. to discover the original terms and conditions thereof.
    The question of negligence cannot arise unless the depositor has, in drawing the check, left blanks unfilled, or by some affirmative act of negligence has facilitated the commission of a fraud by some one into whose hands the check has come.
    (Argued June 5, 1885 ;
    decided October 6, 1885.)

      It seems, however, that this responsibility is confined to the depositor alone; as to other persons through whose hands an altered check passes the bank is only responsible for the genuineness of the drawer’s signature.
    The change in the date of an instrument, whereby the time of payment is accelerated, is a material alteration, and, when made without the consent of the maker, destroys its validity.
    Plaintiff on April 20tli, intending to be absent from his place of business for a few days, drew his check on defendant, dated April 22d, payable to M., his clerk, which he left in charge of M., with directions to draw the money on the 22d, in case he did not return before noon of that day, and deliver the same to his foreman, to be used in paying his employes. M. having altered the date of the check to the 21st, on that day drew the money thereon and absconded. Plaintiff did not return until after the time appointed. In an action to recover an alleged balance on deposit, held, that defendant was not entitled to charge to plaintiff's account the amount of the check ; that the check never became a valid instrument for any purpose, as before it had any inception it was vitiated by a fraudulent alteration, and there being no original legal liability, the transfer of the check conveyed no right whatsoever as against plaintiff.

      Hall v. Fuller (5 B. & C. 750), Susquehanna Bank v. Loomis (85 N. Y. 207), Redington v. Woods (45 Cal. 400), distinguished.
    Appeal from order of the General Term of the Superior Court of the city of Bew York, made February 21, 1883, which reversed a judgment in favor of defendant, entered upon a decision of the court on trial without a jury. (Reported below, .17 J. & S. 68.)
    This action was brought to recover an alleged balance on deposit by plaintiff with defendant.
    The material facts are stated in the opinion.

      John C. Shaw for appellant.
    The check was not avoided or vitiated by the alteration so as to affect its validity or impair its effect as originally drawn. The bank is entitled to charge it against the account of the maker for the correct amount, and at the true time he made it payable. (Susquehanna Bk. v. Loomis, 85 N. Y. 207, 210; Nat. Bk. of Com. v. Nat. Banking As'n, 55 id. 211; Hall v. Fuller, 5 B. & C. 750; S. C., 8 D. & R. 464 ; Redington v. Wood, 45 Cal. 406; Morse on Banking [2d ed.], 344; Marine Bk. v. City Bk., 59 N. Y. 67, 76-7; White v. Continental Bk., 64 id. 316 ; Pars, on Mer. Law [1st ed.], 92; 2 Dan. on Neg. Inst. [3d ed.], § 1658; 2 Pars, on Bills, 80, 582; Myers v. Henecke, 55 N. Y. 412; Booth v. Powers, 56 id. 22; 2 Pars, on Notes and Bills, 572 ; 2 Dan. on Neg. Inst., § 1373; 2 Pars, on Notes and Bills, 517, 574, 581; 6 Wait’s Act. and Def. 485.) The alteration of the date of a check is not a material alteration. (2 Pars, on Notes and Bills, 582; Atkinson v. Handor, 2 Ad. & El. 628; Morse on Banking [3d ed.J, 345, 372.) The plaintiff’s acts amounted to a direct ratification of Morgan’s alteration, and he cannot now abandon it as a mistake of law. (2 Pars, on Notes and Bills, 575 ; Rooth v. Powers, 56 N. Y. 22.) The payment of the money on the $700 check to E. J. Morgan was in law a payment to defendant. (Johnson v. Donnell, 90 N. Y. 1.) The bank had a right to presume the body of the check was correct, being only bound to know its depositor’s signature. ( White v. Continental Bk., 64 N. Y. 316.) The defendant had a right to introduce the check in evidence in the form in which it received it. ( White v. Continental Bk., 64 N. Y. 316; 2 Pars, on Notes and Bills, 582.) The defendant was wholly free from negligence in paying the checks. (Whart. on Law of Neg., § 1; Edw. on Bills and Notes, 303, 310 ; Turnbull v. Bowyer, 40 N. Y. 456.)

      D. M. Porter for respondent.
    The alteration of the date of the check from the 22d to the 21st by E. J. Morgan was a material alteration. (Eastman v. Shaw, 65 N. Y. 522 ; Cowing v. Altman, 71 id. 435 ; Marvin v. McCullum, 20 Johns. 288; Hall v. Wilson, 16 Barb. 548 ; Vanee v. Lowther, L. R., 1 Ex. Div. 176; Sloman v. Cox, 1 Cromp., M. & R. 471; S. C., 5 Tyrw. 174; Inglish v. Breneman, 5 Ark. 377 ; 4 Am. Dec. 96; Prevost v. Gratz, 1 Pet. C. C. 364; MoGrath v. Clark, 56 N. Y. 34; Mohawk Bk. v. Broderick, 10 Wend. 304; 13 id. 133, 134; Salter v. Burt, 20 id. 205; Godin v. Bk. of Commonwealth, 6 Duer, 76; Parsons v. North, 13 East, 516; Brewster v. Mg Cardle, 8 Wend. 479; Miller v. Gilleland, 9 Penn. St. 119; Kennedy v. Lancaster Co. Bk., 18 id. 347; Bank v. Penick, 5 T. B. Monr. [Ky.] 25; U. S. Bk. v. Russell, 3 Yeates [Penn.], 391; Henderson v. Wilson, 6 How. [Miss.] 65; Hervey v. Harvey, 15 Me. 357; Hocker v. Jamison, 2 W. & S. [Penn.] 438; Humphrey v. Guillow, 13 N. H. 385; Chitty on Bills [12th Am. ed. from. London, 9th ed.], 208, 209 [182*] ; Shepherd’s Touchstone, 68 ; Master v. Miller, 1 Smith’s Lead. Cas. pt. 2 [7th Am. ed.], 1254; S. C., 4 Term R. 320; 5 id. 367; 2 H. Black. 141; Outhwaite v. Luntley, 4 Camp. 179; Hall v. Fuller, 5 B. & C. 750; Adair v. Sanderson, 14 Reporter, 114; Dan. on Neg. Inst., 1373, 1374, 1417, 1418; Suffell v. Governor and Company of Bank of England, 4 L. T. Rep. [N. S.] 146; S. C., 26 Alb. L. J. 406; Bruce v. Westcott, 3. Barb. 374; Goodman v. Eastman, 4 N. H. 455; Sentance v. Poole, 3 C. & P. 1; Smith v. Mercer, 6 Taunt. 76.) The plaintiff was not negligent. (Baxendale v. Bennett, note to Knoxville Bk. v. Clarke, 33 Am. Rep. 137; Bk. of Ireland v. Evans Charities, 5 H. of L. Cas. [Clark] 389; Lehman v. C. R. R. & B. Co., U. S. Cir. Ct., M. D. Alabama; 4 Wood’s U. S. C. C. 560; S. C., 12 Fed. Rep. 595.)
   Ruger, Ch. J.

The relation existing between a bank and its depositor is, in a strict sense, that of debtor and creditor; but in discharging its obligation as a debtor, the bank must do so subject to the rules obtaining between principal and agent.

In disbursing the customer’s funds, it can pay them only in the usual course of business, and in conformity to his directions. In debiting his account it is not entitled to charge any payments except those made at the time when, to the person whom, and for the amount authorized by him. ( Wheeler v. Guild, 20 Pick. 545 ; Dan. on Neg. Inst., § 1818.) It receives the depositor’s funds upon the implied condition of disbursing them according to his order, and upon an accounting is liable for all such sums deposited, as it has paid away without receiving valid direction therefor. The bank is from necessity responsible for any omission to discover the original terms and conditions of a check, once properly drawn apon it, because at the time of payment, it is the only party interested in protecting its integrity, who has the opportunity of inspection, and it therefore owes ’ the duty to its depositors of guarding the fund intrusted to it,' from spoliation. This liability arises, although an alteration of a material part of his order has been effected, even though it be done so skillfully as to defy detection by examination. (Dan. on hi cg. Inst., § 1660.) This follows from the fact" that after it is put in circulation, it passes beyond the reach of its maker, who has no opportunity until after it has. fulfilled its office, of inspecting it, and protecting himself from the loss, occasioned by a fraudulent alteration. This opportunity the banker has and he is responsible for any want of vigilance, in detecting the alteration of an order after it has once been correctly drawn, with its blank places properly filled up, and is put in circulation by the maker.

The liability of the banker, however, for a loss occasioned by neglect to exercise such vigilance, is confined to the maker alone. So far as other parties, through whose hands an altered check passes, are concerned, they have the same opportunity for detecting fraudulent alterations in the body of the check that the" banker has, and as to them, after payment, he is responsible only for the genuineness of the maker’s signature. (Bank of Commerce v. Union Bank, 3 N. Y. 230.) The principle stated in White v. Continental Bank (64 N. Y. 316), Marine National Bank v. National City Bank (59 id. 67), and kindred cases, that the drawees of a check or bill are held to a knowledge of the signature only of their correspondents, the drawers, and not for a want of knowledge of the genuineness of the body of the instrument, applies only as between them and such other parties as have equal opportunity of inspection, and equal means for determining the existence of an alteration. , Such parties take the paper relying solely upon the reputed responsibility of their transferers, and the other parties to it, and its apparent genuineness, and they, therefore, deal in .it at their peril. They have no duty to perform in respect to it except that of guarding their own interests, and in buying and transferring it to others, they take the risk of loss, occurring from fraudulent alterations.

The questions arising on such paper between drawee and drawer, however, always relate to what the one has authorized the other to do. They are not questions of negligence or of liability of parties upon commercial paper, but are those of authority solely. In this view it has been held when the check of a depositor was fraudulently altered from £3 to £200 after issue, and was paid by the bank at the latter amount, that the bank was entitled to charge only £3 to the depositor. Hall v. Fuller, 5 B. & C. 750. Bailey, J., said: “ If the banker unfortunately pays money belonging to the customer upon an order not genuine he must suffer, and to justify the payment he must show that the order was genuine, not in the signature only, but in every respect.”

The question of negligence cannot arise unless the depositor has, in drawing his check, left blanks unfilled, or by some affirmative act of negligence has facilitated the commission of a fraud by those into whose hands the check may come. (Young v. Grote, 4 Bing. 253; Dan. on Neg. Inst., § 1659.)

The theory that a party who makes and issues commercial paper, properly and carefully drawn, to express the liability which he intends to assume, is chargeable with negligence on account of the criminal act of another in altering it after its issue, would render him a warrantor against such acts and is repugnant to justice and reason.

In the present ease the plaintiff, on. the 20th of April, intending to be absent from his place of business for a few days? drew his check on the defendant, dated April 22, for $700, payable to his clerk, one Morgan, for the purpose of enabling him to obtain funds to pay wages becoming due to the drawer’s employes on the 22d. The check was left in the drawer’s check-book in his safe, with directions to Morgan, who had a key to the safe, to take the check on the 22d, draw the money and deliver it to his foreman to pay out to the employes in case the drawer did not return before noon upon that day. The plaintiff did not return until after the time appointed, but on the 21st Morgan took the check and having altered the date to the 21st drew the money from the bank and absconded with the funds on the same day.

The check as drawn conferred no authority on the bank to pay it before its date. (Godin v. Bank of Commonwealth, 6 Duer, 76; Mohawk Bk. v. Broderick, 10 Wend. 304; S. C., 13 id. 133.) Such payment did not, therefore, justify the bank in charging the check to the plaintiff. The bank undoubtedly had the same right, as any other person, to purchase a postdated check, and enforce it against the. drawer in case of his liability thereon. This right to enforce payment, however, depended upon the question, whether the purchaser became a bona fide holder of the paper, and also whether it was then a valid obligation of the maker. A material alteration of its terms after execution and before payment would destroy its validity. A change in its date, whereby the time of its payment was accelerated, was undoubtedly such an alteration. Thus it was held in the ease of Vance v. Lowther (L. R., 1 Exch. Div. 176), where the date of a check had been altered from March 2d to March 26th, and as thus altered was attempted- to be enforced against the drawer by one who had paid value to an unlawful holder for it, that such alteration vitiated the check, and no recovery could be had thereon.

Whenever the legal rights and liabilities, of a maker of commercial paper, are changed in a material respect by a fraudulent alteration of the obligation, such alteration vitiates the instrument, and the question whether it is material or not is one of law for the court. (2 Pars, on Motes and Bills, 582 ; 2 Pars, on Cont. 721; Dan. on Neg. Inst., §§ 1373, 1658; Booth v. Powers, 56 N. Y. 29.)

The absence of a date upon a negotiable instrument at its inception, or the fact that it is post or antedated, may not be material upon the question of its validity ; but when a date has been once inserted, and its time of payment has been thus fixed, such date is material and cannot be altered without the consent of the maker. (Dan. on Neg. Inst., 1376-77, 15-77-78; 2 Pars, on Notes, 552; Stephens v. Graham, 7 Serg. & R. 505.)

In the present case the check was never a valid instrument for any purpose, because it had become vitiated by a fraudulent alteration before it had any inception. It never came into the hands of any person, entitled to enforce it for any amount, or for any purpose, as against its maker. The whole object of the check had failed, before the legally appointed time for its payment, by reason of the unauthorized act of the bank in paying it, and thereby enabling the fraudulent holder to abscond with its proceeds. The check was never, therefore, a legal obligation enforceable against the drawer by its owner and holder.

It is claimed by the appellant that even if it be held that the defendant had no authority to pay this check on the 21st, that having become its owner and having kept it until after its true date, it was then entitled to charge it to the plaintiff, because it then coresponded not only as to amount, but as to the time of payment, with the obligation which the plaintiff intended to, and did, in fact, assume. There is some authority for the proposition that a banker after payment, has the right to hold an altered check for its correct amount as against the maker. (Hall v. Fuller, supra ; Susquehanna Bk. v. Loomis, 85 N. Y. 207; Redington v. Woods, 45 Cal. 406.) In these cases, however, the checks had received a legal inception upon their delivery to holders for value, and, as thus delivered, authorized their drawees to pay them, and debit the makers with the sum originally specified therein. Such instruments not only conferred authority to pay their true amount, upon their drawees, but also created a legal liability in case of non-payment, against their drawers for the repayment of that amount, and the right to enforce such power or liability would, no doubt, pass as an incident to the transfer of the check, to any holder in good faith. (2 Pars, on Bills and Notes, 582.) But we cannot see how the principle stated in these cases can benefit the defendant, for the possibility that the check could ever become a legal liability in the hands of any person was destroyed by its fraudulent alteration before inception. In the hands of Morgan the check created no liability in his favor against its drawer. There never existed, therefore, either a valid written obligation against the plaintiff, or an original legal liability to any one, enforceable, after the destruction of the written instrument by its fraudulent alteration.

The transfer of the check by Morgan, under the circumstances, could not, therefore, carry to another a right founded either upon the vitiated check, or upon an original liability which never in fact existed.

When a negotiable instrument constitutes in itself the only obligation existing against its maker, all remedies thereon are lost by its fraudulent alteration, and the law refuses to create a new contract to supply the place of the one destroyed. (Booth v. Powers, 56 N. Y. 31; 2 Pars, on Bills, 572 ; Meyer v. Huneke, 55 N. Y. 412.)

It follows that there is no principle upon which the defendant has the right to charge the check in question for any amount to the plaintiff.

The judgment should, therefore, be affirmed.

All concur.

Judgment affirmed.


author: Danforth, J. Earl, J.

text:
    James Hughes, Respondent, v. The Sun Mutual Insurance Company, Appellant.
    The D. L. & W. R. R. Co. shipped on board a boat owned by plaintiff a load of coal which by the bill of lading he agreed to transport to N. H. and deliver to the consignees “ or their assigns (dangers of the sea excepted), they paying freight.” While en route and in tow of another vessel a storm arose, the boat was cast loose, and the captain having attached a buoy to her, left her and she sank. The boat and cargo were insured in separate companies, the latter by defendant. Plaintiff notified the insurers of the “ misfortune,” claiming a total loss ; his policy, however, provided that the insured should not have a right to abandon the boat, except in case of absolute total loss, and" that the acts of the parties in saving the property insured, in case of disaster, should not be considered as a waiver or acceptance of an abandonment, but should “be considered-as done for the benefit of all concerned and without prejudice to the rights of either party.” The insurers refused to receive the loss and notified plaintiff that they intended to raise the boat. The owners of the coal “ sold, abandoned and set over ” their interest in it to defendant ; which company, in connection with the insurer of the boat, entered into a contract with a wrecking company, by which the latter agreed to raise the boat and cargo and deliver them alongside dock in N. H. for a sum specified. The contract was performed by the wrecking company, save a few tons of coal on deck, which were lost, and plaintiff was notified by the insurer of the boat to go to H. H. and take charge of it. The loss was treated and settled as a partial one, and plaintiff paid the expense of recovery. He notified defendant of his claim for freight and forbade the removal of the cargo until it was paid. The defendant, however, removed and sold the coal. In an action for a conversion of the coal, plaintiffs complaint was dismissed. Held (Ruber, Ch. J., Baud and Finch, JJ., dissenting) error; that as payment of freight was made a condition of delivery, the cargo became bound, until, by some default or some event which put an end to the voyage, it became impossible to fulfill the contract, and as the coal in fact reached the port of destination, the contract to carry was apparently fulfilled by plaintiff, and that for delivery would have been, but for the interference of defendant; that neither it nor the original owner of the coal had the right to take it until payment of freight ; that an abandonment of the cargo by the shipper could not affect the boat, and as to it there was no abandonment consummated ; that the voyage was not lost, and under the stipulations of the policy the recovery of the boat must be considered for the benefit and on account of the owner ; that unless voluntarily relinquished by plaintiff, the legal possession which he had of the cargo continued after the accident; and at most the question as to whether or not there was such a relinquishment was one of fact for the jury.
    (Argued June 11, 1885 ;
    decided October 6, 1885.)
    Appeal from order of the General Term of the Court of Common Pleas in and for the city and county of Ifew York, made March 15,1883, which reversed a judgment in favor of defendant, entered upon an order nonsuiting plaintiff on trial.
    The nature of the action and the material facts are stated in the opinion.

      II. Kettell, for appellant.
    Under a bill of lading, there must be delivery at destination. (69 N. Y. 234.) Ifo promise to pay pro raia freight can be implied in this case. (Dunnett v.
      Tomhagen, 3 Johns. 151; Wallerstein v. Columbia Ins. Co., 44 N. Y. 211; 3 Kent, 320, and notes; 69 N. Y. 236 ; 9 Johns. 189; 2 Bosw. 204.) There was no voluntary acceptance of the coal. (69 N. Y. 236; 9 Johns. 188, 191.) The securing by an insurer of his salvage is a very different thing from taking of cargo by a consignee, and the two cases are distinguished in the books. Insurers are never liable for freight. (Marine Ins. Co. v. U. Ins., 9 Johns. 190; 24 N. Y. 454.) The mere fact that the coal reached New Haven is not enough. Salvage service does not entitle the ship-owner to freight. (Wallerstein v. Col. Ins. Co., 44 N. Y. 217.) Assuming a right to freight, plaintiff cannot maintain the action because he had not possession of the coal, actual or constructive, and had no right to the immediate possession. (81 N. Y. 290; Goulet v. Asseler, 22 id. 225; Hill v. Carnley, 11 id. 501; 17 id. 202; Manning v. Monaghan, 28 id. 585; 1 Chitty’s Pl. 154, 169 ; Walker v. McNaughton, 16 Vt. 388.) The principles of law applicable have not been changed by the Code, and plaintiff cannot in any form complain of a taking and sale where he had no right to the possession of the property. (Goulet v. Asseler, 22 N. Y. 238; Manning v. Monaghan, 28 id. 589 ; Hale v. Omaha Nat. Bk., 49 id. 631.) In this case the shippers of the coal are liable. (McKibbin v. Peek, 39 N. Y. 262.) The coal sold to pay the salvage expenses could not be charged with freight. (Atlantic Mut. Ins. Co, v. Bird, 2 Bosw. 204; Daniels v. Atlantic Mut. Ins. Co., 24 N. Y. 453.)

      Edward D. McCarthy for respondent.
    If the owner oi the cargo in a vessel takes it, the carrier’s action can only be maintained for the conversion of his own lien for freight; that is to say, for his special interest in the cargo; but as against any or all other persons who take or intermeddle with it, the action must be brought for the conversion of the whole property. (Morgan v. Condon, 4 Comst. 552 ; Bailey v. Shaw, 4 Foster, 297; White v. Vann, 6 Humph. 70; Little v. Fossett, 34 Me. 545; Ely v. Ehle, 3 Comst. 506; The Propeller Commerce, 1 Black, 574; Merrick v. Brainard, 38 Barb. 574; H.

      R. R. R. Co. v. Lounsberry, 25 id. 597; Wooley v. Edson, 36 Vt. 214; Tuthill v. Wheeler, 6 Barb. 364 ; Benjamin v. Stremple, 13 111. 466; 1 Hill, on Torts, 522, note.) Under the old forms of action trespass was the proper and peculiar form of action to bring. (Ely v. Ehle, 3 Comst. 506.) If, at the time the wrongful act was done, the plaintiff was in possession of the cargo, either actual or constructive, he can maintain this action. He can recover for the full value of the cargo, unless the defendant was the general owner, or had been subrogated to the rights of the general owner. As against the owner he can recover for the value of his lien or special property in the cargo. (Benjamin v. Stremple, 13 Ill. 466; Tuthill v. Wheeler, 6 Barb. 364; 1 Hill, on Torts, 522, note; Story on Bail. [7th ed.], § 588 ; Hunt v. Haskell, 24 Me. 329; Sullivan v. Park, 33 id. 438; Smith v. Wright, 15 Barb. 51; MeKibber v. Peck, 39 N. Y. 262; Hubbell's Case, 74 id. 246; O' Donovan v. Two hundred and forty Tons of Coal, 8 Fed. Rep’r, 368.) Plaintiff, having completed his contract, acquired a full and perfect lien in the cargo, of which no one, not even the true owner, could deprive him. And against every one but the true owner he was entitled, to recover for the full value of the property. (Sprague v. Hosmer, 82 N. Y. 466.) On the facts proved as between shipper and consignee, the law presumes that the consignee was the owner. (Potter v. Lansing, 1 Johns. 215; Lawrence v. Minturn, 17 How. [U. S.] 100.) And as between the carrier and the owner of the cargo, the carrier’s lien would have taken precedence of the wrecker’s lien, even had the latter not been satisfied by full payment. (Hubbell's Case, 74 N. Y. 257.)
   Danforth, J.

The complaint states that in November, 1881, the plaintiff as a common carrier and owner of the boat “ Arizona,” had, upon it and in his possession, coal of the value of $1,000, which he had carried from Hew York to Hew Haven on freight ; that the defendant, a domestic corporation, by violence took it from the boat.

The answer of defendant admits its corporate character, but denies the other allegations. It also set up new matter, but no question arises on the pleadings.

On the trial of the issues before a judge and jury, the character and ownership of the plaintiff was proved, and that the coal, in all two hundred and seventy-three tons, including seventeen on deck, was shipped under a bill of lading by the D., L. & W. Railroad Company “ for account of" R. H. Williams & Co.” of New Haven, and to be delivered to them “or their assigns (dangers of the seas excepted), they paying freight at the rate of seventy cents per ton.” While on the voyage and near Hew Haven a heavy storm was encountered, and the captain having first tied “ a big buoy to the end of the boat, and located her where she would be easily found,” left the boat and it sunk.

The boat and cargo were insured; the boat by the Buffalo Insurance Company ; and in pursuance of the terms of the policy the owner notified them of the “ misfortune,” claiming a total loss. But the policy provided that the insured should “ not have a right to abandon the vessel, except in the case of an absolute total loss,” and that “ the acts of the insured or insurers, or their agents, in recovering, saving and preserving the property insured, in case of disaster, shall not be considered a waiver or an acceptance of an abandonment, nor as affirming or denying any liability under- this policy, hut such acts shall he considered as done for the benefit of all concerned, and without prejudice to the rights of either party.”

Under these provisions the insurers refused to receive the loss, and in reply to the owner’s notice, informed him that they intended to raise the boat.

The defendant insured the cargo on account of the IX, L. & W. Railroad Co., and they, in consideration of the payment of its value, “ sold, abandoned and set over ” the coal and their interests in it to the defendant. Soon thereafter negotiations between the two insurance companies and the Baxter Wrecking Company resulted in a proposal by the latter, in substance, to raise the boat and cargo of coal, “ and do-liver them alongside dock in Hew Haven, to be discharged for and in consideration of the sum of $1,000, to be apportioned between the boat and cargo according to the laws and usages of general average in such eases.” This was agreed to. Under the agreement the boat was raised, and with all its cargo on board save the seventeen tons deck-load, taken to the wharf at Hew Haven. While there the plaintiff was notified by the Buffalo Insurance Company to go to Hew Haven and take charge of the boat. He notified the defendant of his claim for freight money and forbade the removal of the cargo until it was satisfied. The president of the company replied “he was not obliged to pay it, and would take the coal in spite of him.” After this the coal was sold by defendant’s directions, the wrecking company’s charges satisfied, and the balance paid over to the defendant.

At the close of the trial the court was asked to direct a verdict for the plaintiff, and this being denied, the plaintiff requested the trial judge to submit to the jury the question whether or not the plaintiff neglected and declined to raise the cargo and complete the voyage, and also whether or not he abandoned the cargo and the boat.’ ’ This also was refused, and on motion by defendant the complaint was dismissed.

The General Term granted a new trial. We think properly. When, as in this case, payment of freight is a condition of delivery, the cargo becomes bound to the boat from the time it is received on board, until by some default on its part, or some event which puts an end to the voyage, it becomes impossible to fulfill the contract of affreightment (Abb. on Ship. 595), and if, in fact, it reaches the port of destination, so that delivery can be made, whether by the boat named or by another agency set in motion by the original carrier, or by one standing in his place, freight is earned, the lien continues and can be enforced. This follows from the rule, entirely well settled, that as between the owner and insurer a total loss of freight arises only where the ship and cargo are wholly lost, but if, although the ship itself be wrecked and utterly lost, the master can reship and forward the goods by reasonable endeavor and reasonable cost, it is his duty to do so. (Hubbell v. Gt. W. Insurance Co., 74 N. Y. 246.)

Here it is undisputed that all save the deck-load did reach the place of destination and was there disposed of by the assignees of the cargo, to whom its shippers undertook to transfer it. Apparently, then, the contract to carry was fulfilled, and the contract to deliver would have been but for the interference of the defendant. If by preventing delivery to the consignees, it has prevented the boat earning full freight, that circumstance cannot be to its advantage. The defendant assumes that the shippers were the owners and had the right of control. If so the abandonment of the cargo to its insurers' can have no other effect than to put them in aplace of the insured, and make a delivery of the coal to them, as valid for the purpose of earning freight as would have been a delivery to the owner, but neither could take it against the will of the ship?naster until payment of freight.

The learned counsel for the appellant does not claim that on the part of the owner of the ship there was a consummated abandonment. He says the plaintiff “ tried to abandon. Under a clause in his policy he could not do this if insurers refused to accept abandonment; they did refuse.” Again he says : The refusal of his insurers to accept his abandonment was notice that the insurers would attempt to raise the boat, and they told him so from the first.” The terms of the ' policy, already referred to, justify that claim. How, then, can it be said that there was an abandonment by him ? An abandonment of the cargo by the shippers or owners could no[ affect the boat. An actual abandonment of the boat to its insurer would have presented a different question. The freight pending would go with it as incident to the ownership, and if finally earned, would belong to the abandonee. It would have not only the title to the boat, but the possession and the advantages resulting from a completion of the voyage. But there' was no abandonment to the insurers. The appellant’s claim. is that the plaintiff abandoned the voyage and treated it as put an end to, without the possibility of renewal and without the intention of resuming it. If that be so, then the contract was indeed dissolved. On the other side is the contention that the question was not one of law,--but at most one of fact for the jury to answer upon the evidence. In that case the exception to the refusal of the trial judge to submit it to them was well taken. It is to be observed that the boat was in tow from Hew York, aided neither by sails of its own or steam, but carried along by the motive power of another vessel; that, when by stress of weather it was cast loose and submerged, the place was marked by a buoy, to which before sinking it was attached. The object of this was that it might easily be found. No other consequences in fact or law resulted from the sinking of the boat through the water to the bottom than would have attended its stranding. In either ease, although disabled from completing her voyage, the owner might still earn the whole freight by making the necessary repairs, or by sending the cargo to the place of its destination in another boat. Here the boat, as the event clearly showed, was in position to be reached, repaired and sent on; no removal, even of the coal, being necessary. The voyage, therefore, was not lost, and under the stipulations of the policy the recovery of the boat must be considered as undertaken for the benefit and on account of its owner. The insurance on the boat was for the voyage. Neither boat nor cargo were in fact lost. The boat was insured for $1,200. The owner was paid $150, and of that about $300 went to the Baxter company. The loss was a partial loss only, and so treated. The boat at no time ceased to be the property of the plaintiff, and the expense of recovery was borne by him.

Upon the point now before us the evidence of the plaintiff and the president of the defendant is important. The former testified that he at once, after the accident, informed the defendant of the attachment of the buoy and its purpose, and that the Buffalo Insurance Company were going to raise the boat. He claimed his lien and forbade the removal of the cargo until freight was paid. The testimony of the president hardly raises a conflict. He remembers the interview with the plaintiff soon after the loss, and while unable to remember the exact language used, says; “ The effect of it, and the conclusion.! came to was that he didn’t mean to do any thing to get the vessel up; I think I said to him that being insured in the Buffalo company to the amount of $1,200, I supposed he had abandoned it, and we would have to make our own arrangements I can’t remember the exact language, but that is the conclusion we came to, and he gave me to understand that.” He testified, however : “ Hughes did not tell me in .so many words that he had abandoned the boat and would have nothing to do with it; he gave me the impression he was going to have nothing more to do with it,” and admits he was forbidden to take the cargo from the boat. But if there was contradiction, -the construction of the testimony was for the jury. Hnless voluntarily relinquished by the plaintiff, the legal possession which he had of the cargo continued after as it was before the accident, and 1 am unáble to find any thing in the appellant’s points which should relieve the defendant from answering for such damages as the plaintiff sustained by being deprived of it. The case should, therefore, have been given to the jury.

It does not follow that the recovery should include the full value of the cargo. It may extend no farther than the value of the plaintiff’s special property, and this again be diminished by subjecting it to a share of the expense incurred for its recovery. Heither of these questions are before us. It is enough that we now concur with the court below in the decision that the plaintiff was improperly turned out of court.

The order appealed from should, therefore, be affirmed, and the plaintiff, in pursuance of the stipulation, have judgment absolute.

Earl, J.

(dissenting). It is not important to determine upon this appeal whether the plaintiff was entitled to any freight for the transportation of the coal, nor, if any, how much. He was probably entitled to the whole of his freight less his share of contribution on account thereof with the vessel and cargo to the salvage expenses; and for the purposes of this appeal we will assume he was. His complaint was, however, properly dismissed at the trial. The action is purely one for a wrongful conversion of the coal. There is no allegation in the complaint of any contract or of any money due or earned for freight. The allegations are as follows: “ That the defendant now is, and at the time mentioned in this complaint was, a domestic corporation. That heretofore, to-wit, on the 5th day of ¡November, 1881, this plaintiff, who then was and now is a common carrier, had in his possession and on board the boat “Arizona,” of which he was owner, a large quantity of coal, which he had carried from the port of ¡New York to the port of ¡New Haven on freight. The value of said coal was at least $1,000. On the day last aforesaid the defendant, by its agents and servants, entered upon said boat and by force and arms took therefrom the cargo aforesaid, in all to the damage of this plaintiff in the sum of $1,000, for which sum he prays for judgment against the defendant with interest and the costs and disbursements of this action.”

It appears that the coal was shipped by the Delaware, Lackawanna and Western Bailroad Company and insured for it by the defendant, and that the railroad company assigned, transferred and abandoned the coal and all its claim and interest therein to the defendant. Hence the defendant had all the right to the coal of a general owner and cannot be treated as a wrongdoer in ordering it to be sold and removed from the boat unless at the time of such sale and removal the plaintiff had a lien thereon for his freight.

While there was not formal proof that the railroad company owned the coal, it may be inferred, in the absence of other proof, that it was owner, from the fact that it shipped the coal and insured it. And further, it was assumed upon the trial that it was owner, and the point that the defendant had not shown sufficient title to the coal and did not stand in the place of the original owner was not taken at the trial.

It remains only to be determined, whether, at the time of the alleged conversion of the coal, the plaintiff had a lien thereon for his freight which was destroyed by the acts of the defendant.

Carriers by land and water have a lien upon the goods transported for their freight, but the lien is lost when they voluntarily allow the goods to pass out of their possession, and in this way we think the plaintiff lost his lien.

Plaintiff’s vessel with the coal was sunk in not less than forty feet of water on the 5th day of .November, 1881, and he left it where it sank, never thereafter attempting to rescue it, or to complete its voyage, or manifesting the least intention to do so. The cargo was insured for the owner by the defendant, and the vessel was insured for the plaintiff by the Buffalo Insurance Company. Soon after the sinking of the vessel the plaintiff gave notice thereof to the Buffalo Insurance Company, the defendant, and the shipper of the coal, and he made to the Buffalo Insurance Company proofs of a total loss and offered to abandon the vessel. That company refused, under the terms of its policy, to accept an abandonment for a total loss, and announced its intention, in pursuance of the policy, to try to recover the vessel for the benefit of all concerned.

Thereafter, on the 17th day of November, the Buffalo Insurance Company and the defendant made a contract with the Baxter Wrecking Company to recover the vessel and cargo and deliver them at New Haven, the port of destination, for' the sum of $1,000, to be apportioned between the vessel and cargo according to the laws and usages of general average in such cases. The wrecking company raised the vessel and cargo and by means of pontoons transported them to New Haven, and while they were there and the vessel was unable to float alone, being held up by chains passing under it and fastened to the pontoons, the defendant ordered, the agent of the. wrecking company to discharge and sell the coal, and this he did; and after deducting the share of the salvage expenses chargeable to the coal he paid over the balance of the proceeds to the defendant.

After the vessel and coal had reached New Haven, the plaintiff notified the defendant not to remove the cargo from the vessel without paying his freight. But he did not resume actual possession of the vessel until after it was unloaded and removed to a dry dock at Jersey City. The claim of the plaintiff is that he remained during all this time in the constructive possession of the vessel and that the insurance companies and the wrecking company could be treated as his agents. They were not his agents; they did not assume to act as such, and they could not bind him by any thing they did. He was not bound by the agreement made with the wrecking company, nor bound to pay the compensation agreed upon. The three companies were all engaged as salvors, and their primary purpose was to secure benefits to themselves and not to the owner of the property. The fact that the plaintiff might derive some benefit from the salvage service did not make the salvors his agents. The primary purpose of all salvors is to benefit themselves by what they can make out of the salvage, and the fact that the owners of the vessel or cargo may also derive benefits never makes the salvors their agents.

Here the Buffalo Insurance Company owed the plaintiff no duty as to his freight which they had not insured, and it was under no obligation to aid him in earning that. Its sole duty was to indemnify him as to the vessel to the extent of its insurance. It was not bound to raise or save the cargo. For the purpose of raising the vessel it could have removed the coal therefrom and left it beneath the waters without violating any right of the plaintiff. So, too, neither the defendant nor the shipper owed the plaintiff any duty to raise either the coal or the vessel. In the contract with the wrecking company the defendant was seeking to save the coal and the Buffalo Insurance Company to save the vessel, and the one was really to pay for raising the vessel and the other for raising the coal. Under them and for them the wrecking company undertook to perform the salvage service, and it took possession of the vessel and cargo, and took both into the port of Hew Haven. It cannot be doubted that it then had possession of the vessel and coal and had a lien upon both for the salvage service. It was while it thus had possession that the coal was discharged and sold by it under the direction of the defendant.

It cannot be said that the original taking of the vessel while it was beneath the water was unlawful because that was with' the assent of the plaintiff. When informed that the insurance company intended to make efforts to recover the vessel he made no objection. By his silence, making no objection, and making no effort to recover the vessel or cargo, he must be held to have assented to all that was done until the boat reached New Haven, and at that point of time the boat and cargo were out of his possession, and the owner of the cargo had resumed control of the same, and the plaintiff had thus lost his lien.

Thereafter his remedy, if any, for his freight was an action ex contractu against the shipper or the defendant, and not an action in tort on account of any lien upon the cargo ; or he might have brought an action in equity against the shipper, the insurance companies and the salvors, and thus obtained an adjustment of the salvage expenses and an award for the balance due him for his freight.

If we hold, as we must, that the plaintiff is not in any form of action entitled to recover for his freight more than what was left, after deducting therefrom his share of the salvage expenses, then it is certainly quite extraordinary to hold that a recovery can be had in a pure action" of tort against the defendant, also liable to contribute to salvage expenses, without the presence of all the parties liable to such contribution ; or in other words, that in an action of trover or trespass to recover the value of the whole cargo against the owner thereof, the salvage expenses can be adjusted between freight, cargo and vessel without the presence of the other parties interested therein.

I am, therefor, of opinion that the order of the General Term should be reversed and the judgment of the Trial Term affirmed, with costs.

Rapallo, Andrews and Miller, JJ., concur with Danforth, J., for affirmance, Roger, Oh. J., and Finch, JJ., concur with Earl, J., dissenting.

Order affirmed.

Judgment accordingly.


author: Earl, J.

text:
    Grant H. Schley, Respondent, v. Robert L. Fryer, Appellant.
    (Argued June 15, 1885 ;
    decided October 6, 1885.)
    Where a conveyance is made, subject to a mortgage upon the premises, which the grantee, by the terms of the deed, “assumes,” he thereby becomes personally liable for the mortgage debt; the covenant to assume is the equivalent of one to pay.
    Where it appeared that the grantee in such a deed had given to another, by whom the purchase of the land was made, general authority to deal in real estate in his name, held, that he was bound by the covenant, although he permitted the ostensible agent to reap the benefits of his dealing, and although he did not know that the clause was in the deed, and never specially authorized its insertion.
    Appeal from judgment of the General Term of the Supreme Court, in the third judicial department, entered upon an order made December 18, 1882, which affirmed a judgment in favor of plaintiff, entered upon decision of the court on trial without a jury.
    This action was upon an alleged covenant contained in a deed from Hugh Tunny to defendant.
    The clause in the deed in question is as follows: “ This conveyance is made subject to two certain mortgages of $4,000 each, which the party of the second part assumes, with interest.”
    Plaintiff as owner of the mortgages and accompanying bonds foreclosed the same, and claimed to recover herein a deficiency arising on sale. It appeared that the purchase of the land in question was made by W. JV Fryer, father of defendant, who had general authority from him to deal in real estate in his name, such dealings, however, to be for the benefit of the father. Defendant gave no special authority to his father to accept a deed containing such a clause, and never saw the deed in question, and did not know that it contained the clause in question.

      Gr. L. Stedman for appellant.
    The defendant is not liable, under the terms of the covenant in the deed, upon the bond or for the debt. (Thomas on Mortg. 11, 12, 16; Carr v. Carr, 52 N. Y. 251; Severance v. Griffith, 2 Lans. 38, 40; R. S. [7th ed.] 2195, § 140; Culver v. Sisson, 3 N. Y. 264; Mack v. Austin, 95 id. 513; 1 R. S. 738, § 139; 3 R. S. [7th ed.] 2195, §139 ; Pratt v. Huggins, 29 Barb. 277; Belmont v. Coman, 22 N. Y. 438.) ' The grantee has never been held liable, except when the covenant was “ to pay ” or “ assuming the payment.” (Burr v. Bier, 24 N. Y. 178; Garnsey v. Rogers, 47 id. 233 ; Campbell v. Smith, 71 id. 26; Marshall v. Davies, 78 id. 414; Calvo v. Davies, 73 id. 211 ; Cushman v. Henry, 75 id. 103 ; Hand v. Kennedy, 83 id. 150 ; Pike v. Seiter, 15 Hun, 402; Meyer v. Lathrop, 10 id. 67; Fleischauer v. Dollner, 9 Abb. N. C. 372.) To constitute a covenant there must be an agreement or assent on the part of the one assuming to make it. A covenant in a deed given to one who received the deed in ignorance of the covenant, does not bind him. (Kilmer v. Smith, 77 N. Y. 226 ; Albany Co. Sav. Bk. v. Burdick, 87 id. 40.) Assuming an arrangement existed whereby W. J. Fryer was authorized to take titles in the defendant’s name, these instances (none of them before the transaction) do not prove or constitute an agency of that kind. (Condit v. Baldwin, 21 N. Y. 219.) Power to purchase in the name of another does not confer or imply a power to make a covenant, note or bill in his name. (Bank v. Bugbee, 3 Keyes, 464; Tabor v. Cannon, 8 Metc. 456 ; Page v. Stone, 10 id. 160; Smith v. Tracy, 36 N. Y. 79; Rossiter v. Rossiter, 8 Wend. 494; White v. Madison, 26 N. Y. 117.) Receiving the proceeds without full knowledge of all that has been done is not a ratification. (Baldwin v. Burrows, 47 N. Y. 215 ; Smith v. Tracy, 36 id. 79; Cle. Sav. Bk. v. Walker, 66 id. 429 ; Smith v. Kidd, 69 id. 142) There is no "ratification except with a full knowledge of the facts. (Craighead v. Peterson, 72 N. Y. 285; Condit v. Baldwin, 21 id. 224; Benninghoff v. A. Ins. Co., 93 id. 501.) The rights of the plaintiff rest so entirely upon a valid agreement between the defendant and his grantor that he has no rights operating as an estoppel against the defendant. (Garnsey v. Rogers, 47 N. Y. 233 ; Burr v. Beers, 24 id. 178.) A purchaser of a chose in action must always abide by the case of the person from whom he buys. (Davis v. Austin, 1 Ves. 247; Schafer v. Reilly, 50 N. Y. 61; Bush v. Lathrop, 22 id. 535.)

      Isaac Lawson for respondent.
    Precise and formal words are not necessary, as in all other cases of contract the inquiry is, what was the intention of the parties. (Belmont v. Coman, 22 N. Y. 439.) The word “assumes ” was clearly not used to express, as the appellant claims, that the defendant took the conveyance subject to the mortgage, as that he had done by express words in a preceding part of the same clause, and the words are entirely inapt to express such an idea. (Sparkman v. Gove, 27 Alb. L. J. 33; 44 N. J. 252; Braman v. Dowse, 12 Cush. 227; Drury v. T. Imp. Co., 13 Allen, 168 ; Stout v. Folger, 34 Iowa, 71; Locke v. Homer, 131 Mass. 93; 41 Am. Rep. 199.) The facts clearly establish a general authority on the part of the father to deal in lands in the defendant’s name, and to bind him by such covenants as the one here in question. (Story on Agency, §§ 17, 22, 54-57, 85, 89, 95, 97 ; Dunlap’s Paley on Agency, § 199, note 209; 2 Kent’s Com. 854, 857.) Hot only does the evidence establish an original authority in the father sufficiently broad to cover the taking in the plaintiff’s name of deeds containing covenants such as the one in question, but it also establishes a ratification thereof. (Childs v. Clark, 3 Barb. Ch. 52; Gilbert v. Peteler, 38 N. Y. 166; Jumel v. Jumel, 7 Paige, 594; Dexter v. Harris, 2 Mas. U. S. C. C. 454; Lord v. Doyle, 1 Cliff. U. S. C. C. 453; Morriss v. Vandreise, 1 Dall. 64; Welles v. Butcher, 2 Binn. 466; Irvin v. Campbell, 6 id. 119.) The general rule that ratification cannot be' held to have taken place without full knowledge of all the facts is subject to this qualification, that the party against whom the ratification is claimed should not have had the means of knowledge. (Davidson v. Stanley, 2 Man. & G. 721; Combs v. Scott, 12 Allen, 497.) The principles of resulting trusts are applicable to personal property, as stocks, bonds and mortgages, and the prohibition of the Revised Statutes only applies to resulting trusts in lands. (1 Perry on Trusts, 134, §§ 125, 130.) Even where the owner has voluntarily conferred the apparent absolute ownership upon another, it is only a bona fide purchaser for value who can defend against the equities of the real owner. (Moore v. Met. Bk., 55 N. Y. 41; Angell v. Bonn, 38 Barb. 425; 1 Perry on Trusts, §§ 117, 125; 2 id., §§ 828-831; Mayer v. Mordeci, 1 So. Car. [N. S.] 398 ; 1 Perry on Trusts, 135,13th subd. of note.) It is no defense that the assignment was, in fact, as security for George Lasher’s indorsement of his brother’s note, as the assignment on its face is absolute. (Allen v. Brown, 44 N. Y. 228; Daby v. Emerson, 45 id. 786; Sheldon v. Wood, 2 Bosw. 267; Greene v. Ins. Co., 6 Hun, 128.) The defendant by assuming the mortgage became the principal debtor. (Ayers v. Dixon, 78 N. Y. 318.)
   Earl, J.

This action is based upon a clause in a deed of Hugh Tunney to the defendant which reads as follows : “ This conveyance is made subject to two certain mortgages for $4,000 each, and which said party of the second, part assumes with interest from the 22d day of August, 1871.”

The defendant claims that the word “ assumes ” is not broad enough to impose a personal liability upon him to pay the mortgage in question. If it had been intended simply to provide that he should take the land subject to the two mortgages, the further language in this clause, in which the word “assumes” appears, would not have been necessary. Unless that word was used to impose a personal liability upon the defendant to pay, it was wholly unnecessary and serves no purpose and .adds nothing to the force of the language used. A rule of construction requires us to give force and effect, if possible, to all the language used. That word is frequently used in deeds to impose a liability to pay upon the grantee, and we believe it is generally understood among conveyancers to impose such liability. Such effect has been given to the word when so used in several well-considered cases in other States. (Braman v. Dowse, 12 Cush. 227; Drury v. Tremont Imp. Co., 13 Allen, 168; Locke v. Homer, 131 Mass. 93; Stout v. Folger, 34 Iowa, 71; Sparkman v. Gove, 44 N. J. Law, 252.) The word must, therefore, have the same meaning which it would have if the words “to pay” followed it. If not, what does it mean %

It is also claimed on the part of the defendant that as he assumed the mortgage merely which contains no covenant to pay, he did not become liable to pay the bond, and therefore incurred no personal liability. This construction of the language used would also render the latter portion of the clause quoted entirely useless. In that event the defendant simply took the land subject to the mortgages and assumed nothing. In cases of this kind where the grantee has been made personally liable by an assumption of a mortgage upon the granted premises, the liability has generally been imposed by an agreement or covenant to assume or pay the mortgage with no special reference to or designation of the mortgage debt or the bond to which the mortgage was collateral. Force must be given to the language used, and we think that it was the clear intention of the parties that the grantee should assume the payment of the mortgage debt, and not merely take the real estate subject to the mortgage: If the language does not mean that, what was its purpose and why was it used ?

We think, upon the evidence, that the defendant was bound by the clause in the deed quoted as if he had consciously and intentionally assented thereto. It is undoubtedly true that he did not know that the clause was in the deed, and that he never specially authorized its insertion therein. And it may be true that he never intended to be bound by such a clause. But it appears that his father had general authority to deal in real estate in his name. He could purchase real estate incumbered or unincumbered; he could take titles affected with conditions and contingencies, perfect or imperfect, and with covenants running therewith, which might bind the grantee!; he could take deeds with or without covenants; he could purchase upon credit or pay cash; he could pay after deducting incumbrances which were permitted to. remain. It is qúite common for the grantee of land to arrange a portion of the purchase-money by assuming an incumbrance, for which the grantor is liable. Such an assumption binds the grantee to pay no more than the purchase-price.

The defendant in this case is bound, just as he would have been if the dealing in real estate had been for his benefit instead of his father. The business was done in his name; he was the ostensible principal, and it matters not that he permitted his father to reap the benefits thereof. It cannot be presumed that a principal would object that his agent, having general authority to purchase real estate for him, should, as part of the purchase-price, assume the payment of mortgages upon such real estate. It cannot be said, therefore, by the defendant that this clause of assumption was unauthorized by him, as he was bound by what his authorized agent did.

Upon the facts found at the Special Term we do not think that the defendant was effectually discharged or released from his liability under the clause referred to.

The agreement of assumption, therefore, contained in the deed was binding and effectual against the defendant, and the judgment should be affirmed.

All concur, except Rapallo, J., dissenting, and Danforth, J., not voting.

"Judgment affirmed.


author: Danforth, J.

text:
    William Fullerton et al., Appellants, v. The National Burglar and Theft Insurance Company et al., Respondents.
    An insurance company transferred to a trust company, as security for its policy-holders, certain bonds and mortgages, “ and all moneys due and to grow due thereon for principal,” reserving to itself the right to collect and receive the interest. The assignment provided for a foreclosure of the mortgages, and in case of payment or collection of any part of the- principal, the same was to be held by the assignee for the purpose of the trust. The insurance company thereafter executed a general assignment to B. for the benefit of its creditors, and at his request the mortgages were foreclosed. The sums realized from the sales to be applied on the mortgages were in each case less than the amount of interest due. In an action to determine, among other things, as to whether the trust company or B. was entitled to the proceeds of the sales, held, in the absence of evidence that there were no policy-holders to be protected, the trust company was entitled thereto; that the rule applicable as between debtor and creditor that payments are to be applied first to the extinguishment of interest had no application in such a case.
    (Argued June 18, 1885;
    decided October 6, 1885.)
    Appeal from, judgment of the General Term of-the Supreme Court, in the first judicial department, entered upon an order made November 24,1882, which affirmed a judgment in favor of defendant, The Farmers’ Loan and Trust Company, entered upon a decision of the court on trial without a jury.
    The nature of the action and the material facts are stated in the opinion.

      John H. Bergen for appellants.
    The appeal by the plaintiffs will lie. They are not only parties to the action, but are aggrieved by the judgment as they are thereby deprived of the opportunity to realize their claim against the assignee of the insurance company for professional services rendered to him as such. (Bockes v. Hathorn, 78 N. Y. 222.). The title to the trust fund in such a trust as the one in question did not vest in the trustee upon the delivery of the bonds and mortgages and assignments to it, for so far as this record shows there were no persons to take under the trust, and until there were policyholders the trust would not take effect. (Urket v. Coryell, 5 W. & S. [Penn.] 81; Perry on Trusts, § 66.) The trust does not in such a case “take effect until the eestuis que trust are identified.” (Perry on Trusts, § 66; Urket v. Coryell, 5 W. & S. [Penn.] 61, 81.) The effect of the foreclosure was simply to bar the equity of the mortgagors and their grantees in the mortgaged premises, and had no operation upon the rights of the insurance company and the trust company as between themselves. (Hoyt v. Martens, 16 N. Y. 231.) It cannot bo said on behalf of the trust, company that the interest and principal of the mortgage debts were merged in the foreclosure judgments, .and that all then owing became principal. In equity merger never takes place when the requirements of the parties demand that it shall not, and especially where parties have agreed to the contrary. (1 Barb. 271; 19 id. 604; 35 N. Y. 279.)

      Herbert B. Turner for the Farmers’ Loan and Trust Company, respondent.
    The object of the execution of the assignments by the insurance company to the trust company was to create a trust for the protection and security of the policyholders of the insurance company. When, therefore, these agreements were executed, and the securities delivered to and accepted by the trust company, they became impressed with that trust (Watts v. Shipman, 21 Hun, 598 ; Matter of Le Blanc, 14 id. 8 ; 75 N. Y. 598.) After that trust had been created, the title passed to the trustee, and it was not within the power of the insurance company to revoke the trust, even although the policy-holders had not been informed of its creation. (Martin v. Funk, 75 N. T. 134.) The ordinary rule to the effect that payment is to be first applied in liquidating the interest due is not pertinent in a case like this. The rule applies only between creditor and debtor, not between two creditors, as in the present case. (Sewell v. Brainerd, 38 Vt. 364; Miller v. R. & W. R. R. Co., 40 id. 399.) In the absence of any particular application of a payment, the law would apply according to the justice of the case. (U. S. v. Kirkpatrick, 9 Wheat. 720; Bailey v. Wynkoop, 10 Ill. 449; Oliver v. Phelps, 20 N. J. L. [1 Spencer] 180; Smith v. Lloyd, 11 Leigh, 512.)
   Danforth, J.

The facts are simple. On the 26th of October, 1877, the insurance company owned two bonds and mortgages, one for $12,000 of principal, made by O., the other of $92,000, by K., both bearing interest and not then due. On that day, by separate instruments, it transferred them “ together with all its right, title and interest in and to said bonds and mortgages, and all moneys due and to become due thereon for principal, and to the premises described therein, because of said mortgages,” to the trust company, to be held and retained by it as a security for the holders of policies in the insurance company, until, among other things, other securities were substituted, or its obligations to holders of policies settled and discharged,” but reserving to itself “ the right to collect and receive any and all interest which may become due and owing upon the principal sum named in said mortgages, and to retain such interest, when received, for its own use. It also provided that upon request the trust company should permit the foreclosure of the mortgages in its name, “ on being indemnified by the insurance company against the costs and expenses of such foreclosure; and in the event that any part of the principal of said mortgage is paid or collected, then said Farmers’ Loan and Trust Company is to hold the proceeds of such payment or collection ” for the purpose before stated.

In September, 1878, the insurance company assigned its property to Ritter for the benefit of its creditors, and he in that capacity became indebted to the plaintiffs for professional services other than those connected with the mortgages. In November of that year, at his request as assignee, the bonds and mortgages were delivered by the trust company to the plaintiffs, to be enforced by foreclosure. On O.’s mortgage $1,175.82 was due at the time of sale, and the mortgaged premises produced only $1,000. On K.’s mortgage the interest amounted to $13,800, and the premises sold for $5,000. In the first case $389.13, and in the other $4,068.25 was paid to the plaintiffs as attorneys in the proceedings, and were the sums realized after payment of taxes, costs of foreclosure and referee’s fees. It is thus apparent that the money applicable upon these mortgages is, in each case, less than the interest, and with proper allegations this action was commenced to have it determined, first, whether the trust company, or Ritter as assignee of the insurance company, was entitled to it; and second, if the latter, then for an accounting with him in respect to the indebtedness above referred to. The trial court held that the money should be paid to the trust company,'and that decision having been affirmed by the General Term, the plaintiffs appeal.

Although the insurance company and Bitter, its assignee, acquiesce in the judgment which has gone in favor of their co-defendant, the trust company, and against themselves, the question involved must still be treated as between Bitter as assignee and the trust company. For if Bitter has no valid claim upon the money in the plaintiff’s hands, the action must fail. They are merely his creditors and claim to have through that relation a certain equity in the fund. Bitter’s position as assignee is not different from that taken by the insurance company upon the execution of the assignments. It must be assumed, therefore, that there were policy-holders to be protected, and in the absence of evidence to the contrary, that the trust, and the security for it, still continues. It is also true, as the appellants claim, that the trust embraced only the principal of the mortgages, and as they secured also such interest as might accrue. the case may be regarded in the aspect most favorable to the appellants, as one where part only of a debt has been assigned, the assignor reserving the other part to itself. In such ease it is obvious the parties,must either share jyro rata in the security, or one must have priority over the other. It seems most reasonable that in the absence of a plain declaration to the contrary, it should be applied first to the payment of that part of the debt which was assigned. (Van Rensselaer v. Stafford, Hopk. 569; Bryant v. Damon, 6 Gray, 564.) Otherwise since the mortgaged land was not sufficient to satisfy both, the assignor would gain priority over its cestuis que trust. The injustice of such a claim is manifest. It is not warranted either by the words of the assignment, or any intention which can be implied from them. One recites the mortgage as given to secure the principal sum of $12,000; not only transfers, in the most comprehensive words, the entire mortgage, but includes in terms all its right and interest in the bond and mortgage, and all moneys due or to become due for principal, and even the premises described therein. Nothing is reserved from it, and the whole, whether in its then condition as a pecuniary obligation, or as replaced by other securities, or converted into money, is to remain solely with the trust company. Until the trust was discharged nothing was left to the assignor. So is it with the other.

Eeliance is placed by the learned counsel for the appellants upon the clause by which is reserved to the insurance company the right to collect and receive all interest which may become .due, and owing upon the principal. But this relates to payments • of interest by the debtor in compliance with his contract obligation. So paid it would not diminish the security, or exhaust the source from which the principal might be drawn. It would leave the interest of the "policy-holder the same as at first. It cannot relate to a payment obtained by process of law, out of the property pledged for the principal sum. That was to -be unimpaired, and so the arrangement provided that if any part of the principal should be paid or collected, the part so paid should be still held- under the original trust. Such a provision as this becomes unimportant, if by the mere accumulation of interest for the benefit of the assignor, the whole property be taken away. In Mechanics' Bank v. Bank, of Niagara (9 Wend. 410), the assignment was of a part of a mortgage debt, with a proviso that it should not be so construed as to prevent the mortgagee from receiving or disposing of the residue mortgage moneys. Upon foreclosure there was not enough to pay the assignee, and it was held the assignor could not share. The principle applies here. The land out of which the money in controversy was drawn was specifically pledged for the principal and must stand in place of the security. No doubt the general rule is that payments are to be applied first to extinguish the interest. That is the rule between debtor and creditor. It may be different between third parties, and has no application in a case like the present. The payment was not contributed by the debtor outside of the mortgage, but produced from the mortgaged premises by legal process. It should go into the hands of the trustee. The decision of the court below carried out the intent of the parties as declared not less by the nature of the transaction, than the words used by them in effecting it. The judgment appealed from should be affirmed.

All concur, except Earl, J., not voting.

Judgment affirmed.


author: Andrews, J.

text:
    The People, ex rel. Robert L. Kent, Respondent, v. The Board of Fire Commissioners, Appellant.
    (Argued June 17, 1885 ;
    decided October 6, 1885.)
    The provision of the Code of Civil Procedure (§ 2141), authorizing the court, upon a hearing on return to a writ of certiorari, to “ make a final order annulling or confirming, wholly or partly, or modifying the determination reviewed,” does not authorize the review or modification of the determination of inferior jurisdictions in matters within that jurisdiction which are confided to their discretion.
    Said provision is to be read in connection with the preceding one (§ 2140), which defines the questions which may be determined by the court upon certiorari, and simply gives power to correct an erroneous adjudication instead of reversing it absolutely.
    Where, therefore, the General Term, on certiorari to review an order of the board of fire commissioners of the city of New York dismissing the relator from service as fireman, modified the order by directing his suspension for six months, and there was no question of jurisdiction, procedure or evidence, giving to the General Term jurisdiction to interfere with the order, held error.
    Appeal from order of the General Term of the Supreme Court, in the first judicial department, made the first Monday of March, 1885, which modified an order of the board of fire commissioners of the city of New York, dismissing the relator from service as fireman.
    The nature of the modification and the material facts are stated in the opinion.

      D. J. Dean for appellant.
    The fire commissioners had jurisdiction to make the order dismissing the relator, and in their proceedings have complied with every condition prescribed in the statute which defines their powers. (Consolidation Act, § 440.) It was the province of the commissioners to decide whether or not intoxication was proven, and since the General Term assented to the finding of guilty, and differed only as to the amount of punishment to be inflicted, it must be considered on this appeal that the proof was sufficient to authorize the determination that the relator was intoxicated. (People, ex rel. Murphy, v. Fire Com’rs, 92 N. Y. 306.) The law confers upon the commissioners the power to determine the punishment to be inflicted, and it is not within the province of the court to modify the' order of the commissioners in such respect, when it does not reverse the finding of the commissioners upon questions of fact. (People, ex rel. Hart, v. Fire Com’rs, 82 N. Y. 358; People, ex rel. Masterson, v. Fire Com’rs, 96 id. 644; People, ex rel. Folk, v. Board of Police, 69 id. 411; 82 id. 255 ; People, ex rel. Jackson, v. Grant, Daily Reg., January 22, 1884; People, ex rel. v. Board of Police, 39 N. Y. 517; 82 id. 358.) The matters charged and proved against the relator were of a sufficiently grave and serious character to warrant his removal. (Consolidation Act, § 454.) As in the case at bar the court found no defect of jurisdiction or irregularity of procedure, or deficiency of proof, it has no power to modify the order. (Code, § 2140 ; Whitehead v. Kennedy, 69 N. Y. 462; Cassin v. Delano, 38 id. 178; Moffett v. Sackett, 18 id. 522 ; People, ex rel. Masterson, v. Fire Com’rs, 96 id. 644.)

      Wm. King Hall for respondent.
    The proceedings of the board of fire commissioners in dismissing the relator, a member of the uniformed force, are reviewable by writ of certiorari. (Code of Civ. Pro., chap. 16, tit. .2, §§ 7, 2120, 2138.) The proceedings are reviewable. (Code of Civ. Pro., § 2140; People, ex rel. v. Jourdan, 1 Civ. Pro. Rep. 328; People, ex rel. v. Fire Com’rs, 30 Hun, 376 ; affirmed, 96 N. Y. 666 ; People, ex rel. v. Porter, 25 Hun, 602; People, ex rel. v. Board of Police, 72 N. Y. 415 ; 39 id. 506; 45 id. 777; People, ex rel. v. Board of Fire Com’rs, 96 id. 672.) The court below had power to modify the determination reviewed. (Code of Civ. Pro., §§ 12, 194, 330, 1317,2141; People v. Ferris, 35 N. Y. 218.)
   Andrews, J.

The relator was duly charged with having been under the influence of liquor while engaged in the performance of official duty at the Star Theatre to such an extent as to render him unable to perform the duty for which he was detailed. The charge was publicly examined by the commissioners, upon notice to the relator, and in his presence. The testimony tended to sustain it. The relator admitted that he drank a glass of liquor before going to the theatre, but claimed that he did it because he was unwell. There was some conflict as to the extent of the intoxication. It is not claimed that illegal evidence was admitted, or that any rule of law was violated by the commissioners in the course of the proceedings. The proceedings, trial and judgment were in all respects regular, and the commissioners in dismissing the relator, kept within their jurisdiction. The intoxication of a policeman while on duty, to an extent sufficient to interfere with its performance, is a violation of the rules of the department, and the statute makes the violation by a member of the force, of such rules, or neglect of duty, or conduct injurious to the public welfare, or any conduct unbecoming an officer, punishable by the board, by reprimand, forfeiture of pay for a period not exceeding ten days, or dismissal from the force. There was no question either of jurisdiction, procedure or evidence upon which the General Term could interfere with the decision of the commissioner, it, however, modified the sentence by substituting in place of dismissal from the force (the punishment imposed by the commissioners), suspension from duty without pay for the period of six months. The only question is whether the General Term had power to review the' discretion of the commissioners in respect to the punishment, and impose a milder punishment upon its view of the circumstances and gravity of the offense. It is clear that no power was vested in the General Term to review the discretion of the commissioners, unless given by section 2141 of ' the Code of Civil Procedure. It was originally held in this State that on a common-law certiorari to review the judicial action of boards, commissioners or inferior officers, the court was limited to the question of jurisdiction. The scope of the proceeding was subsequently enlarged, and it came to be held that the court would look into the proceedings to see whether any rule of law had been violated, or whether there was an absence of evidence to support the adjudication. {People v. Board of Police, 39 ¡N. T. 506; People v. Same, 72 id. 416; People v. Boa/rd of Fire Com’rs, 82 id. 358.) But questions of fact arising on conflicting evidence, or matters of judgment or discretion, were held not to be reviewable. {People v. Board of Police, 69 ÍT. T. 408.) This was the state of the law when section 2141 of the Code was enacted. It is contained in the article relating to the writ of certiora/ri, and is as follows: The court on the hearing may make a final order, annulling or confirming, wholly or partly, or modifying the determination reviewed, as to any or all of the parties,” This section considered alone would justify the action of the General Term and subject the adjudication of inferior jurisdictions to the supervisory power of the court, whether resting in discretion or depending upon legal principles. If this was intended, the section greatly enlarges the scope of the writ, and vests in the court a jurisdiction which it never before possessed. But reading section 2141 in connection with section 2140, which defines the questions which may be determined by the conrt, it seems quite clear that section 2141 is an auxiliary section, enacted merely to complete and supplement the jurisdiction conferred by the previous section, and to remove a doubt which might be entertained in view of the prior decisions as to the power of the court on certiorari, to correct an erroneous adjudication, instead of reversing it absolutely. Beading the two sections together the result is that section 2140 regulates the jurisdiction of the court in respect to the questions to be reviewed, and section 2141, the mode in which its determination may be declared and its ■judgment made effectual. The latter section was not we think intended to confer jurisdiction over subjects other than those embraced in section 2140, or to change the settled policy of the law that the determinations of inferior jurisdictions in matters confided to their discretion are not reviewable on certiorari.

The order of the General Term should therefore be reversed, and that of the commissioners confirmed.

All concur.

Ordered accordingly.