source: Caselaw Access Project

author: By the Court—Woodruff, J.

license: Public Domain

text:
    Edmund Savage, Plaintiff, v. The Corn Exchange Fire and Inland Navigation Insurance Company, Defendants.
    1. An insurance company, receiving preliminary proofs of loss and of interest which may reasonably be deemed sufficient, and retaining them three or four days, and then refusing to pay the loss without any intimation that the proofs are defective or unsatisfactory, should not be permitted to make that objection after the time allowed for payment by the policy has expired, and an action has been brought.
    2. It is not necessary that the preliminary proofs to be furnished by the assured, should he in a form or under an authentication which would entitle them to be read as evidence of the facts certified.
    3. Where the plaintiff, being a common carrier, effected an insurance on cargoes, on account of himself or others, on his boats or others running on commission or by charter, in a transportation line specified, which was conducted by him, a pass book in which a cargo is entered by the defendant’s agent as duly shipped, the bills of lading, and a regular protest by the master of the vessel averring the fact of loss and the cause thereof and that the cargo was taken possession of by the defendants, are sufficient proof of loss and of interest to require the underwriters to specify defects, if any, and call for further evidence, if they desire it.
    4. A common carrier may, for his own protection, insure goods intrusted to him for carriage.
    5. Where the insurance is upon his own interest alone, it may be material to inquire whether the cause of loss be such that he is responsible to the owners for the value of the goods; but where the insurance is of the goods themselves, on account of himself or others, and the perils insured against are, many of them, such as if a loss happen thereby, he is not responsible therefor to the owners, the insurance will be deemed for the benefit of the owners as well as himself, and the Company are liable for the value of the goods, although the cause of loss be such as to involve him in no liability.
    6. Where the office of the defendants was in Hew York, but the insurance was made in Buffalo, where the plaintiff resided, by the defendants’ agent in Buffalo, and the loss happened on the night of Saturday, on the Hudson river, between Hew York and Albany, and the plaintiff being notified by telegraph, gave notice to the agent at Buffalo on Monday, and by him the defendants in Hew York were notified on Tuesday, this is sufficient to satisfy a requirement in the policy that “ immediate notice of the occurrence of all losses shall be given to the Company.”
    7. Where injury to the cargo is caused by a peril insured against, the omission of the plaintiff’s servants to take precautions to prevent further damage than is necessary, may be given in evidence to reduce the amount of the recovery, but does not operate as a forfeiture to prevent a recovery for the necessary damage, unless so expressed in the policy.
    8. An assignment of the plaintiff’s claim, before suit brought, cannot be given in evidence to show that the action is not prosecuted by the real party in interest, unless that defence is set up in the answer.
    9. It seems that a common carrier insuring goods for account of himself and the owners, has no authority, in case of injury to the goods, to abandon them to the underwriters.
    10. Giving notice of loss, neglecting to take care of the property, suffering the agents of the underwriters, to take measures for its preservation, and their selling the property by the assent of the insured or his agent, pursuant to a stipulation in the policy, which provides that in case of loss the damaged portion shall be separated from the sound, and the amount of damage ascertained by appraisal or sale at auction, the underwriters “ being liable for the loss on the damaged portion only,” do not amount to an abandonment and an acceptance thereof, making the underwriters liable for the sum insured as for a total loss.
    11. Underwriters are not bound, when the assured neglects to take care of property partially injured, to suffer it to be further neglected and go to decay, at the peril of being charged with the same consequences which result from the acceptance of an abandonment. They may take care of and preserve the property if the insured do not.
    12. Hence evidence of the actual extent of the injury by the peril insured against; evidence of negligence by the agents of the assured, in the care of the property after the accident; their refusal to suffer it to be removed, or to accept assistance to remove it for its preservation; evidence of what it actually produced on the sale—are all admissable.
    13. Under a policy which expressly excepts from the perils insured against, “ perils, losses and misfortunes arising from a want of ordinary care and skill in ■lading or-navigating said boat or boats,” if it appear that the master of ths> boat voluntarily and against the will and advice of the captain of a vessel employed to tow her, placed her in a dangerous position for being towed, and the injury happened while she was being towed in that position, it is error to charge the jury that “her position in the tow is of no importance."
    14. The maxim “ causa próxima non remota spectator,” is the general rule by which the liability of insurers is determined, but parties may, by express stipulation, agree upon another.
    15. Where the policy declares that the insurers shall be liable for the loss on the damaged portion of the goods only, to be estimated according to the true and actual value of the property insured at the time the loss happens, the carrier is not entitled to recover, in addition to such value, his freight and charges. Presumptively, the enhanced value at the place of loss, covers the freight, &c., to the place of loss; freight for the distance not carried, is not covered by such a policy.
    (Before Slosson, Woodruff and Pierrepont.)
    Heard, Oct. 7th;
    decided, Dec. 11th, 1858.
    This case was brought to a hearing at the General Term, on motion by the plaintiff for judgment on the verdict had by him on the trial of the action before Chief Justice Oaklet and a jury January 26th, 1857.
    The action is brought upon an open policy of insurance, whereby the defendants insured the plaintiff “against any loss or damage he may sustain on cargoes, on account of himself or others, on his own boats or boats belonging to others, and running in the ‘New York and Indiana Line,’by charter or on commission, loaded at Buffalo or at other ports or places, as may be entered hereon, for the several sums or amounts, and at the rates of premium agreed upon, and entered hereon by John N. Gardner, agent!”
    The perils, risks, &c., insured against, (among others,) were of the canals, rivers and fires, and all other perils and misfortunes, to the hurt, &c., or damage of the goods, &c., laden on board of said boat or boats, in the voyage or trip aforesaid, excepting, (among other things,) “ perils, losses and misfortunes arising from” * * * * “ a want of ordinary care and skid, (such as is com-
    mon in said navigation,) in lading or navigating said boat or boats
    And the defendants agree to make good and satisfy unto the said assured all such loss or damage on the said goods, &c., so laden as aforesaid, not exceeding in amount the sum insured thereon, as shall happen from any of the aforesaid causes, excepting as aforesaid.
    The policy provides that immediate notice of all losses that occurred shall be given to the Company by the assured, and the amount of loss shall be ascertained by the opening of packages, when necessary, by a competent person, and separating the sound from the damaged portion, the Company being liable for the loss on the damaged portion only, which shall be ascertained by appraisement, or by sale at auction, as the Company may prefer; the loss or damage to be estimated at the true and actual value at the time the loss or damage shall happen; and to be paid within sixty days after notice and proof of the loss and interest therein shall have been made by the assured.
    Among other provisions not material to the present case, it is stipulated that no loss is to be paid arising from neglect in not Jeeeping the boat well pumped out, except in case of accident; and also, that in case of a loss or damage by any other vessel, or person or persons, in such manner that such other vessel, or the owners thereof, or such person or persons, shall be liable therefor; then all claims for such loss or damage shall be assigned to the Company, or shall enure to their benefit.
    The policy was signed by the President, and attested by the Secretary of the Company, but it was declared not valid unless countersigned by John N. Gardner, agent at Buffalo, and it was countersigned by him.
    Attached to the policy was what the agent, Gardner, when examined as a witness, calls “an open policy book,” in which were entered each particular risk taken under such policy; and on the 25th September, 1854, the agent, Gardner, entered two risks, which form the subject of the present controversy, and signed such entry as agent for the defendants.
    Cargo of corn, boat J. N. Eiske, from Buffalo to New York, to be reshipped on either lake boat North Star or Hudson, from Albany. Amount insured $8,000; premium -J, $15.
    Cargo of corn, boat J. B. Chapman, as above. Amount insured $2,400; premium •£, $12.
    And these entries conformed to the actual agreement, and the premium was paid.

      The boats J. N. Fislc, J. B. Chapman, and the Hudson, belonged to the plaintiff, and were running, the first named two from Buffalo to Albany, and the Hudson from Albany to New York, in the “New York and Indiana Line," the name by which the plaintiff did business as a carrier from Buffalo to New York.
    J. M. Deshler, the consignee of the property at Buffalo, (a produce forwarding and commission merchant,) delivered the corn at Buffalo, to the plaintiff; 4,000 bushels on board the J. N Fiske, and 3,100 bushels on board the J. B. Chapman; and the memorandum of shipment stated that they were for “ account of S. Robinson & Co., care N. H. Wolfe & Co., New York.”
    On the receipt of the grain for transportation, the plaintiff paid to Deshler §621.25, for charges already accrued upon the corn, for freight to Buffalo and expenses at Buffalo, in course of transportation to New York. The freight, which was to be paid to the plaintiff for transporting the corn from Buffalo to New York was 12¿- cents per bushel, ($887.50,) making in all $1,508.75, payable to the plaintiff by the consignee in New York, on the arrival and delivery of the corn.
    The whole of the corn was transferred to “ the Hudson,” on reaching Albany, to be towed to New York, and the boat or barge Hudson was made fast to a steamboat, (or on the outside of another boat made fast to the steamboat, and also in tow,) for that purpose; and the passage, from Albany to New York, was begun on Saturday, the 14th October, 1854. In the night of that day the Hudson struck bottom, and was so injured that she leaked, and the pumps would not keep her clear of water. The boats were then headed towards the shore, and the Hudson grounded within about six feet of the dock at Castleton, where she was left by the steamboat.
    The next morning (Sunday the 15th) the captain or me Hudson left for Albany, (leaving her in charge of a man who, with the captain, constituted her crew,) and on arriving at Albany notified the person who managed the plaintiff’s business there. They visited the boat on Monday, but nothing was done towards saving the cargo. On that day, or the next, the Company in New York and their agent at Albany were notified of the accident. On Monday, the 16th, Gardner, the defendant’s agent at Buffalo, was notified; and on Wednesday men from Albany, employed by the defendants, “ went to work to get the corn off.” Neither the captain nor the plaintiff’s agent at Albany did anything towards saving the corn, either Sunday, Monday or Tuesday.
    The corn being taken out under the direction of the agents of the defendants, was sold at auction; and evidence was given tending to show that what was done in the removal and sale of the corn was done upon advising with the plaintiff’s agent, and under a mutual agreement between the agents for both parties, that the defendants should take charge of the corn, for the benefit of whom it might concern, and that nothing was done without advising with the plaintiff’s' agent. Tljie plaintiff’s agent was present at the sale, and there was some evidence that the notice of sale stated that the sale was for account of whom it might concern. The defendants’ counsel offered evidence to show how much of the corn was sound and how much was damaged. The Court excluded the evidence, and the defendants excepted.
    The defendants’ counsel also offered to show how much the corn produced at the sale. This was also excluded, and the defendants excepted.
    It was admitted that the value of the corn at the place where the loss occurred, was 78 cents a bushel, at which rate 7,100 bushels would amount to $5",538, a sum greater than the sum insured ($5,400.)
    The plaintiff proved the presentation to the defendants on or about the — day of November, as proof of- loss and interest, the original policy; the policy book annexed, in which was entered the risk assumed upon the two cargoes, signed by Gardner; the two memoranda (or “bills of lading”) of the two shipments by Deshler, above named, specifying the number of bushels; and the protest of the captain of the Hudson, (noted on the 19th of October, and extended on the 16th of November,) which stated the circumstances of the accident, and that she was in charge of the Underwriters on the cargo from the 17th of October.
    The witness testified that the papers remained in the hands of the Company three or four days, and were then returned to him by the President. That they refused to pay the loss without consultation with their counsel. That the President did not call his attention to any defects in the proofs of loss presented. He admitted the proofs of loss but declined to pay.
    A motion was made for a dismissal of the complaint on the grounds:
    1st. That no proof of interest had been given before suit brought.
    2d. That no such interest, loss or damage covered or contemplated by the policy had been shown to exist in or to have been sustained by the plaintiff.
    Sd. That no such immediate notice of loss was given as required by the policy.
    4th. That-the owners and persons in charge of the boat and cargo after she was landed at Castleton having made no exertions and taken no care or precautions on Sunday, Monday or Tuesday, to preserve the cargo from injury, such neglects discharged the defendants.
    The motion was denied, and the defendants excepted.
    The defendants then gave evidence tending to show that the place at which the boat or barge Hudson was placed for towing, was too distant from the steamboat. That the Captain of the Hudson was informed that she drew too much water to tow there safely. That it was not a proper place to tow in, and he was so informed. That the Captain of the steamboat refused at first to permit him to tow in that situation, and told him to tow by a hawser. That the Captain of the Hudson refused, and said he would tow there or not at all. And was finally told, that if he made fast in the place where he was he must tow at his own risk.
    Evidence was also given tending to show that two-thirds of the corn, or a large portion thereof, might have been taken out dry on Sunday, the 15th, and also on Monday, the 16th. That a large portion of the com was then dry. That more than one of the witnesses proposed to the man in charge of the boat to take out the corn; offered to assist and to obtain the assistance of other men near at hand on Sunday morning. That the person in charge refhsed to allow it to be done. And that on Tuesday, the leak continuing, the com swelled and opened the seams of the boat.

      The defendants requested the Chief Justice to charge the jury that if they believed that the grounding of the Hudson was owing to her being too deeply laden to tow with safety in her place in the tow, and that such place was selected by the Captain of the Hudson, the defendants will be entitled to a verdict.
    The request was denied, and the defendants excepted.
    On that subject the charge was, that the position of the boat in the tow was of no importance, and that the responsibilities of the defendants were the same as if she had been towed in any other place which the captain of the tow might have as signed.
    To this the defendants also excepted.
    The defendants also requested the Court to charge, that the owner and persons in charge of the boat and cargo after she was landed at Oastleton, having made no exertions on Sunday, Monday or Tuesday, and having taken no care or precaution to preserve the cargo from further loss or injury, such neglect discharged the defendants. Or, at all events from any greater loss than the actual loss which would have happened if such care had been taken.
    The Judge refused to charge either proposition, and the defendants excepted.
    On that subject the charge was: “It appears nothing was done to take care of the property by the assured, except the facts detailed by the witnesses, and the defense contend that by reason thereof, plaintiff cannot recover, especially as there was-a refusal on his part to permit any interference. • For the purposes of this trial, as there is no dispute about the facts on this point, I instruct you that such omission or refusal forms no obstacle to his recovery.”
    To this instruction the defendants excepted.
    The defendants also submitted further requests to charge, that no such immediate notice of loss was given as was required by the policy. That no abandonment could legally be made by the plaintiff, and that, therefore, the acts of the defendants in taking possession and disposing of the property do not in themselves entitle the plaintiff to recover the full amount of the policy. That under the plaintiff’s interest as disclosed by the pleadings and proofs, he is only entitled to the difference between the value of the whole lot of corn and the net proceeds of the damaged portion. That the advance charges and freight from Buffalo, amounting to $1,508.75, are not covered by the policy, and form no part of the insurable value of the corn.
    And to the several refusals to give these instructions, due exception was taken separately.
    The charge on the last named topic was, that the jury should include the freight and charges in their verdict, if they found for the plaintiff, and to this the defendants excepted.
    And in relation to the notice of loss, the charge was, “ that such notice of loss as is required by the policy has been proved to have been given,” and to this the defendants excepted.
    The case was then submitted to the jury upon certain other questions of fact, under instructions satisfactory to the parties, and they found a verdict for the plaintiff for $5,207.50, {i. e., for the full sum insured, less a sum of $192.50, which was established by the defendants to be due to them for premiums,) with interest on such sum of $5,207.50, amounting to $5,951.46.
    And, thereupon, as the case is settled, the Judge ordered that the case should be heard in the General Term in the first instance on the points reserved at the trial, and exceptions taken by the defendants, with leave to the Court to dismiss the complaint if they should be so advised. Judgment in the meantime to be suspended.
    Under this order the case comes now before the General Term for consideration.

      Henry L. Clinton, for the plaintiff.
    I. The notice of the loss and abandonment of the property insured, was given to the defendants immediately, as required by the policy. (Rogers v. Traders' Ius. Co., 6 Paige, 583; Boynton v. Clinton and Essex Mutual Ins. Co., 16 Barb., 254; Sexton v. Montgomery Co. Mutual Ins. Co., 9 Barb., 191; Bumstead v. Mutual Ins. Co., 2 Kern., 81; Martin v. Fishing Ins. Co., 20 Pick., 389.)
    II. The plaintiff, as common carrier, had a special property in their goods, and- an inter'est in their safety, entitling him to effect a valid insurance thereon, and to recover the whole value thereof in case of loss. (1 Phil, on Ins., §§ 173,424 ; 2 Park., 235 ; Van Natta v. Mutual Security, 2 Sand., 490 ; De Forest v. Fulton Ins. Co., 1 Hall, 84, 110; Crowley v. Cohen, 3 B. and A., 478; Oliver v. Green, 3 Mass., 133; Barlett v. Notler, 13 id., 267; Story on Bailments, § 507a.; 2 Kent. Com., 597, 598; Chase v. Washington Mutual Ins. Co., 12 Barb., 595.)
    A common carrier who insures against the risks for which he is answerable to another, is subject to the same rules and exceptions, and possesses the same right of abandonment as in original insurances. (1 Phil, on Ins., § 378; Crowley v. Cohen, 3 B. and Ad., 478; Walker v. Mortland, 5 B. and A., 171.)
    III. The facts and circumstances warranted the plaintiff .in an abandonment of the property insured.
    The vessel and cargo were submerged, constructively destroyed, and the voyage broken up, by the direct operation of the perils insured against. (2 Phil, on Ins., §§ 1606,1607,1623; Anderson v. Roy. Exch. Co., 7 East., 38; Fuller v. McCall, 1 Yeats, 464; S. C., 2 Dall., 219; 2 Phil, on Ins., § 1493.)
    The acts of the defendants in taking possession and disposing of the property, were not only a waiver of the form and sufficiency of the notice, but an acceptance of the abandonment. (2 Phil, on Ins., §§ 1692, 1693; Rule v. Mercantile Ins. Co., 3 Mason, 27.)
    The legal effect of the abandonment was to pass the interest of the insured in the property, and all its incidents to the insurers, who could not restrict their liability by assuming to dispose of it, “ on account of whom it may concern.” (Gardner v. Columbian Mutual Ins. Co., 7 Johns., 520; Pierce v. Ocean Ins. Co., 18 Pick., 83; Putman, J., in Badger v. Ocean Ins. Co., 23 Pick., 347; Gould v. Citizens Ins. Co., 13 Miss., 324.)
    IV. The plaintiff having abandoned the property as a total loss, the omission or refusal of his agents or servants to take care of it, or make exertions to preserve it from loss or injury, forms no obstacle to his recovery. (2 Phil, on Ins., §§ 1490, 1491, 1730, 1732; Gould v. Citizens’ Ins. Co., 30 Miss., 524; Gardner v. Columbian Ins. Co., 7 Johns., 520.)
    V. Where the immediate cause of the loss to a vessel is a peril expressly insured against, it is not a defense that the negligence or mistake of the master and crew occasioned such peril, or brought her within it, supposing that she is provided with a competent master and crew, and there is no want of good faith and honesty of purpose. (2 Phil, on Ins., § 1049; Mathews v. Howard Ins. Co., 1 Kern., 3.)
    YI. The freight and charges might properly have been recovered if the sum insured had exceeded the actual value of the property. But here the value exceeded the amount of the insur- ' anee. The policy, in terms, makes actual value the measure of damages, and the verdict is for the sum insured, which is less than the value. The verdict is therefore right.

      T. O. T. Buckley, for the defendants.
    I. The complaint should be dismissed.
    1. Mo proof of interest was given, as required by the policy, the only papers ever presented to the Company being the proofs of loss.
    2. Mo such interest, loss or damage as was covered by, or contemplated in the policy, was shown to have been sustained by the plaintiff.
    The contract of insurance in the case of carriers being eminently a contract of indemnity, his liability should affirmatively appear. (Chase v. Wash. Mut. Ins. Co., 12 Barb. R., 595; 14 Barb., 524.)
    3. The neglect of the owners and persons in charge of the boat, to take any care or precaution to preserve the cargo from further injury, and their refusal to permit it to be done, was a violation of the duty they owed to the insurers, which discharges the defendants. (Parsons’ Mer. Law, 470-472; Schieffelin v. N. Y. Ins. Co., 9 J. R.. 21; Mathews v. Howard Ins. Co., 1 Kern., 15.)
    LE. The judge erred in holding that the acts of the defendants, in taking possession of and disposing of the property, in themselves entitled the plaintiff to recover the full amount of the policy
    1. The acts in themselves are not sufficient to entitle the plaintiff to recover a total loss. (2 Phil, on Ins., p. 389, Mo. 1692.)

      2. The plaintiff could make no abandonment, and transfer no title. (Parsons’ Ins. Law, 468; 2 Am. on Ins., 1161; 1 Phil, on Ins., § 424.)
    3. All the plaintiff can claim under the insurable interest which, admitting him to be a carrier, he would possess, is to be indemnified for what the owners of the property could recover against him. (2 Sand. R., 495.)
    III. The judge erred in holding that the position of the boat in the tow, selected by the Captain of the plaintiff, was of no importance. (Mathews v. The How. Ins. Co., 1 Kern., 15 ; 6 Ellis & B1., 937, 952.)
    IY. The advanced charges and freight from Buffalo were not as matter of law covered by the policy, and form no part of the insurable value of the corn. (2 Phil, on Ins., 44.)
   By the Court—Woodruff, J.

The defendants received the papers which were submitted to them as preliminary proofs of loss and of interest, retained them for examination three or four days, and then declined paying. No intimation was given that there was any defect in these preliminary proofs. On the contrary, the witness says the President admitted the papers as •proofs of loss, but declined paying without consultation with their counsel. It is well settled that when the assured in good faith submits his preliminary proofs with a view to set the time a running (the sixty days) after which the insurance is payable, and they are received by the insurers and examined, he is entitled to be treated with reasonable frankness, and if the insurers admit their sufficiency as preliminary proofs, they cannot afterwards, when the* sixty days have elapsed, and an action is brought to recover the loss, raise an objection to those proofs which might, had any defect been pointed out have been supplied or obviated. The insurers here, we think, must be held to have waived any defect in the proofs even if they were defective.

We think moreover that they were quite sufficient. If the insured had any insurable interest in the property, it appeared by the papers, and the loss was also established prima facie by the Captain’s protest. It is not necessary that the assured should furnish his proofs in a form which would entitle them to be read as evidence of the facts therein certified, on the trial of the action. (Lawrence v. The Ocean Ins. Co., 11 J. R., 242; Talcott v. Marine Ins. Co., 8 id., 308; 4 Wend., 83; 3 Sandf., 26.)

The policy and the entries by the defendants’ agent showed the insurance and specified the property. The memoranda of shipment showed the quantity and the fact of shipment. These papers showed that the plaintiff was a common carrier and received the grain for transportation, the destination, and for whose account the grain was shipped, and the amount of the charges and freight. The protest showed the fact of loss or damage, and the company by its agents having previously taken the grain from the barge, and it having been sold under their direction, no fact was wanting to them, which was material, to show what the interest was which was the subject of insurance, or the fact of loss. The proofs were the original documents, and such as might reasonably be deemed satisfactory; if the Company wished for any more precise or formal proofs they should have required them. And this is especially true where, as in this case, the policy does not prescribe any form or mode of authentication of these proofs.

The inference justly deducible from the acts and declarations of the Company was, not that they refused to pay because the preliminary proofs were defective, but because they doubted the right of the plaintiff to recover. (See Miller v. The Eagle Life and Health Ins. Co., 2 E. D. Smith, 286, and cases there cited; and Peacock v. New York Mutual Ins. Co., 1 Bosw., 338.)

If therefore the plaintiff had any insurable interest, and had sustained any loss or damage which was covered by the policy, the defendants were not entitled to a dismissal of the complaint.

A common carrier may insure goods entrusted to him for transportation for his own protection. He has a special property therein, and an interest which is the proper subject of insurance. (Van Natta v. The Mutual Security Ins. Co., 2 Sandf. S. C. R., 490, and cases therein cited; Chase v. Washington Mutual Ins. Co. of Cincinnati, 12 Barb., 598.)

Had the insurance been upon his interest as common carrier only, it might be material to inquire whether the cause of loss in this instance was such that he was liable to the owners for the value of the goods. (3 Barn, and Ad., 478.) But the insuranee here was against any loss or damage he might sustain on cargoes on account of himself or others. The true construction of this language, in connection with the declaration of the perils and risks assumed, viz.: of the seas, canals, &c., &c., and all other perils, losses and misfortunes that shall come or happen to the hurt, detriment or damage of the goods, &c., laden on board, is, we think that the insurance was as well on his own account as on account of the owners, and although the loss might happen from a cause for which he would not be responsible to the owners, still if it was caused by a peril insured against, the Company are liable. The language is peculiar; it cannot be satisfied without applying it to losses sustained on cargoes held on account of other parties. And in this respect it is strikingly like an insurance by a factor on goods belonging to himself or held in trust or for account of others. And where the policy plainly imports an insurance upon the goods themselves, and not merely upon a special interest therein, the assured may recover their full value. (De Forest v. The Fulton Fire Ins. CDo., 1 Hall Sup. Crt. R., 84.)

This construction is fortified by the fact that the defendants were aware, when the insurance was made, that the plaintiff was a common carrier. They insured goods which he should transport as such, and they, by the very words of the policy, took upon themselves perils and risks of loss by causes for which he would not be responsible to the owners of the goods, and excluded nearly all losses arising from causes for which he would be responsible.

A policy should be construed rationally, and we cannot assume that the defendants received, or the plaintiff paid, a premium for insuring against perils, with full knowledge that if a loss was caused thereby, the insurers would not be liable; and yet this would be the effect of the transaction, if the defendants were not to pay for any loss unless it arose from a cause for which the plaintiff was liable to the owners.

We think the policy was a contract with the plaintiff, in view of his special interest in the property as carrier, but also upon the goods themselves, covering their value to the amount insured, for the benefit of the plaintiff and of those for whose account he held the goods. That they are therefore liable for the value of the property. Whether the plaintiff is, in this aspect of the case, to be regarded as a trustee of an express trust in so far as bis recovery will enure to the benefit of the owners of the goods, or whether the owners should be parties to the suit, it is not necessary to inquire, since no such question has been raised, and the objection that there is a defect of parties, is waived, if not made by answer or demurrer. (See 2 Sandfi, ubi supra, and Grinnell v. Schmidt, id., 706; Stilwell v. Staples, 6 Duer, 63; Bogart v. O'Regan, 1 E. D. Smith, 590.)

The plaintiff received notice of the accident at Buffalo, by telegraph, on Sunday or Monday after it occurred, and as early as Monday the defendants’ agent was notified, and through him the defendants were informed thereof on Tuesday. The accident happened in the night of Saturday. Considering the fact that the "plaintiff lived at Buffalo, and that the accident occurred near Albany, it is impossible to say that even extraordinary diligence was not used to comply with the requirement to give immediate notice.

There is nothing in the claim that this was not done. This ground for dismissing the complaint was properly overruled.

The further ground of the defendants’ motion, viz., that the defendants were -discharged from their obligation by the omission of the plaintiff’s agents to make exertions and take precautions, &c., to preserve the cargo from further loss or injury during the three days, Sunday, Monday and Tuesday, which elapsed before the agents of the defendants arrived, was no reason for granting a dismissal of the complaint. Whether these facts might operate to limit the recovery, will be considered in connection with the charge and the defendants’ exceptions. But such neglect did not deprive the plaintiff of a right to recover for damages already sustained. There was no such condition in the policy, nor is there any rule of law by which, in the absence of some provision of that import in the policy, a forfeiture of all right to recover anything results from negligence in the care of the property after it is injured by a peril insured against.

There was no error in rejecting evidence offered to prove that the plaintiff had assigned his claim before suit brought, and was not the real party in interest. The pleadings did not raise any such question. If the suit was not brought in the name of the Teal party in interest, the objection was waived by its not being set np as a defense.

Heither did the order drawn on the defendants, requesting them to pay 1ST. H. Wolfe & Co. for the corn, retaining for the plaintiff the freight and charges, furnish any reason for dismissing the complaint. It did not necessarily operate as a partial assignment of the claim, and if not paid, it wrought no change in the rights of the parties.

To the proper consideration of many, if not all of the remaining exceptions, it is necessary first to notice the obvious ground upon which the rulings excepted to proceeded. And it seems just, also, to say that these rulings were evidently made, not as an expression of the deliberate opinions of the eminent jurist, (now deceased,) before whom the trial was had, but were in a measure pro forma, with a view to the submission of the controverted questions of fact to the jury, and to leave to the General Term the determination of the questions of law arising upon the facts, which he deemed undisputed, and in relation to which the exceptions were taken.

The ground of many of these rulings seems to have been that the acts of the plaintiff’s agents amounted to an abandonment, (as understood in the law of insurance,) to the underwriters, and that the acts of the defendants, by their agents, amount to an acceptance of that abandonment; so that the grain insured became the property of the defendants, and they became liable to pay, (to the extent of the sum insured,) the value thereof.

Under this view of the subject, it was deemed wholly immaterial what portion of the corn was sound when taken from the barge, and what portion was damaged; and evidence on that subject was excluded. In the same view, it was wholly immaterial what price the corn produced at the sale; for if it had become the defendants’ property, their disposal thereof, at whatever price, could not impair the plaintiff’s right to recover its value, to the extent of the sum insured.

So, also, assuming that the defendants had accepted an abandonment, this may have been deemed a sufficient reason for holding the defendants concluded, and hence to have waived any objection to the manner in which the captain of the Hudson had been guilty of negligence in selecting his position in the tow, and any defense arising out of any alleged neglect of the plaintiff’s agents in taking care of the property, and their refusal to permit the corn to be landed when that was proposed.

We think there is nothing to warrant the idea of abandonment, and an acceptance thereof, disclosed by the proofs. -

Indeed it is not clear that the plaintiff had any such interest in the property, or any such authority over it, that he could abandon it to ■ the insurers. (Van Natta v. The Mutual Security Ins., Co., 2 Sandf., 495.) Had the actual owners of the property claimed the entire proceeds of the sale, we do not perceive that the defendants could have resisted that claim by asserting title acquired through the plaintiff.

But the proofs show no abandonment or attempt to abandon, if the plaintiff’s authority were conceded. Although no particular form is necessary, an abandonment must be unequivocal and explicit. Here there is no pretence that any actual notice of an intention to abandon was given, nor that the plaintiff did or said anything affirmatively, indicating an intention to abandon. It is not, therefore, the case of an attempt to abandon, or of an abandonment, defective in respect of the sufficiency of the notice actually given, where the abandonment has been acted upon by the insurer, so as to waive defects in the notice and constructively to accept the abandonment. The most that can be claimed by the plaintiff is that his agents did nothing towards the care or preservation of the property, while the agents of the defendants, on learning its condition, took measures to save it, and to dispose of it, as by one of the provisions of the policy was stipulated.

But there was distinct testimony that what was done by the defendants was not done under any idea of making the property their own, or of incurring any responsibility founded on any such idea, and that this was known to the plaintiff’s agents, and assented to by them.

Babcock, one of the witnesses, and agent of the defendants, testifies that he saw James Savage, the agent of the plaintiff, who transacted his business at Albany,” before the agents of the defendants intermeddled with the grain, and that J. Savage “told us what was best to do, which we carried out to the best of our knowledge for the benefit of all concerned,” and got scows and boats and took out the corn. “We did nothing without advising with him.”' “ It was mutually agreed we were to take charge of the corn for the benefit of whom it may concern; Savage assented * * and was present at the adjourned sale of the corn.”

This testimony is corroborated by Vanderhook,. the defendants’ surveyor.

James Savage, though examined as a witness, does not contradict this. If there are any circumstances at all in conflict with this testimony, (which, however, we do not discover,) still it must be taken as true, or the question should have been left to the jury, if the plaintiff insisted that the acts of the parties amounted to an abandonment and an acceptance thereof.

Again the policy in terms provided for the ascertainment of the loss by an examination which could only be had by landing the corn, and for the sale of the damaged portion, to ascertain for how much the Company was liable.

Moreover, the plaintiff had been apprised of the accident. If the authority of James Savage to act for him were doubtful, we have still no hesitation in saying that when the plaintiff took no measures to save the property, and his agents neglected to give; it any attention, the defendants were not bound to suffer it to remain, and go to decay at the peril of being charged with the same consequences that would result from having accepted an abandonment, viz.: with having made the property their own and become liable, as for a total loss.

And finally, no abandonment, nor anything tantamount thereto, is alleged in the complaint; a loss actually total is the sole ground of claim there asserted.

The idea of such an abandonment must therefore be excluded from our consideration in disposing of the defendants’ exceptions. And thereupon it becomes, we think, clear that the inquiries, what portion of the corn was damaged and what portion was not, and how much the damaged portion was damaged, became material and propér; and the sale at auction being the agreed mode of ascertaining the amount of the loss on such damaged portion, the price which it produced was also competent proof of the extent of the loss.

As insurers, the defendants were “liable for the loss on the damaged portion only." These are the very terms of the policy. No proof was given respecting the disposition made of the proceeds of the sale. Perhaps we ought to assume, under all the circumstances, that the whole proceeds are in the defendants’ hands. If so, then under the arrangement they hold them for the benefit of whom it may concern. They are not prosecuted in this action to recover those proceeds as such, and so far as those proceeds arose from the sound corn, at least, there are no allegations in the complaint suited to a recovery for them; for them they are not liable as insurers, and the measure of their liability depends not at all upon the policy or the sum insured, but upon the amount of actual proceeds received by them on the sale.

So, also, laying the question of abandonment and its acceptance out of view, the question whether the captain of the boat was guilty of negligence, or, in the terms of the policy, “ want of ordinary care and skill ” in insisting upon having the boat towed in the position it was, assumes importance.

The policy expressly excludes liability for “ perils, losses and misfortunes arising from or caused by want of ordinary care and skill in' lading or navigating said boat.”

It is undoubtedly true, that in general where a loss arises from a peril insured against, the title of the assured to recover cannot be defeated by proof of mistake or error in judgment, or even negligence by the master or mariners employed in navigating the vessel, which brought the vessel within the peril; not because negligence and want of skill are perils insured against, but because, in general, the law looks to the immediate cause of loss, the peril which is insured against, and not to the secondary or remote cause, the negligence. (Mathews v. The Howard Ins. Co., 1 Kern., 3.)

But parties may specially agree upon a different rule, and this, we think, they did in this case. The defendants excepted a loss arising from want of ordinary care and skill in lading or navigating said boat. Now suppose the boat had been laden so heavily as to make the attempt to tow her on the Hudson river an act of manifest inprudence, evincing an entire want of skill or ordinary prudence, we should not hesitate to say that the defendants had protected themselves against the consequences of a loss which, but for such improper lading, would not have occurred, although the immediate cause was her encountering a storm, in which, in that condition, she could not be kept-afloat.

We are not able to say, upon the evidence, that the case is so clear upon the question whether the captain was guilty of a want of ordinary care and skill, that the jury should have been directed to find for the defendants on that ground, or that we should direct a dismissal of the complaint, pursuant to the leave reserved at the trial. There is some evidence tending to show that the conduct of the captain in this respect was not of the character claimed, and that such a condition of the tow was not unusual. We think that question should have been submitted to the jury.

So, also, we think that the negligence of the plaintiff and his agents, in taking no care of the property and in refusing to permit it to be taken from the boat when partially submerged, was material in determining the extent of the defendants’ liability, and that the charge was in this respect erroneous.

Indeed, the charge is now sought to be sustained only on the ground of an abandonment, which has already been considered.

The assured is always bound, when the circumstances only warrant a claim for a- partial loss, to use ordinary care in preserving the property insured, after the danger is past. He is not at liberty, by sheer neglect, to suffer the goods to decay, and so needlessly aggravate the loss. To sanction this would be to permit the assured and his agents to convert a partial into a total loss by their own voluntary neglect. On the contrary, where the insurance is on a vessel, if repairs can be made, it is the duty of the master to repair. If the insurance is on freight or goods, if the vessel be lost and the goods are saved, it is the duty of the master to forward them by another vessel, if one can be procured, and on a principle of even more obvious obligation, he is bound to use ordinary cafe in preserving the goods from needless deterioration. These principles are, we think, too well .settled to require- extended discussion.

If, then, as one witness testifies, the means of removing the ■corn were at command, and were even tendered, and two-thirds of the corn might have been removed on Sunday and Monday, •dry and uninjured,' it was gross neglect to decline offers of assistance, and keep the corn on board until, by the swelling of the portion that was wet, the seams of the vessel were opened and further damage was thereby caused.

There may be difficulty in determining how much of the damage to the corn resulted from this negligence, but if the plaintiff is in fault, the defendants should not be made to suffer thereby. The principle is not altered in his favor by a difficulty in proving the facts, when that very difficulty arises from the plaintiff’s fault.

The judge directed the jury to include in their verdict, if they found for the plaintiff, the amount of the charges paid on the corn by the plaintiff, and his freight. If the company were in truth liable for a total loss, and the value of the corn was (as it was admitted to be), of a greater sum than the amount insured, this instruction could not affect the result, and was therefere wholly immaterial; for whether the freight and charges were included or not, the plaintiff was entitled to recover the sum insured, less the defendants’ counterclaim, and no more.

But if the plaintiff was entitled^ only to recover for a partial loss, then it is material to consider the propriety of this instruction. And here, we think, the terms of the policy are conclusive. The insurance was on goods, and not on freight. The policy declared that the loss should be ascertained “ by separating the sound from the damaged portion—the company being liable for the loss on the damaged portion only—to be ascertained by appraisement or a sale at auction, the loss to be estimated according to the true and actual value of the said property hereby insured, at the time the same shall happen.” Here the elements of computation are given, and they clearly exclude the idea of increasing the amount by adding charges or freight, ipsis nominibus.

On the contrary, by adopting the actual value at the time as the standard, they do practically and presumptively include freight and charges in that actual value; because the value is presumptively enhanced to the full extent that charges have been incurred and freight earned; and as to freight not earned, we think that it was not covered by this policy.

For these reasons the verdict must be set aside and a new trial ordered, the costs of the trial and of the hearing at the General Term, to be costs in the cause, and abide the event of the suit.

Ordered accordingly.


text:
    James W. Elwell, Receiver of The Reliance Mutual Insurance Co., Plaintiff, v. Eben B. Crocker and George Warren, Defendants.
    1. The maker of a premium note given to a Mutual Insurance Company for . the nominal premium upon an open policy executed to cover such risks as may be afterwards indorsed thereon, is liable to the Company on such note only to the amount of the actual premiums upon risks assumed by the Company, and indorsed on the policy.

      2. The receiver appointed upon the insolvency of the Company can recover no greater amount.
    3. Where a Mutual Insurance Company is organized under the statute of 1849, providing for the incorporation of voluntary associations by filing a certificate with the Secretary of State, and a copy of the charter agreed upon, notes given by subscribers in pursuance of agreements to insure for the premiums in advance, which notes by the fifth section of the act, are to be considered a pan of the capital stock, are valid and collectible in the hands of the Company, or in the hands of the receiver if the Company become insolvent, whether risks have been actually taken and premiums earned to the amount of such notes or not.
    4. Such notes last named are subscription notes, and are held for the security of dealers, and may be negotiated or collected for the payment of losses and debts, and are valid obligations to the full amount thereof) whether any premiums have been actually earned or not.
    5. But when the Company has been duly organized under the act, and has received from subscribers the requisite amount of capital, either in cash or in notes given in advance for premiums under agreements to insure as provided in the said fifth section, the Company may conduct its business with ordinary dealers, subject to the same principles as though incorporated specially either on the mutual plan or with a capital stock paid in cash, and the makers of premium notes give in advance upon open policies are only liable thereon to the amount actually earned.
    6. A stipulation in the charter of a mutual company voluntarily associated and incorporated under the act that “notes received in advance of premiums on open policies shall in no case be deemed liable for any losses that may accrue beyond the actual earnings on such policies,” is not inconsistent with the statute, but is binding on the Company and on its receiver if the Company is insolvent.
    7. The distinction between “subscription notes” and “premium notes,” and tiie rightp and liabilities of the makers thereof respectively, and of the Company, and its receiver considered.
    (Before Slosson, Woodruff and Pierrepont, J. J.)
    Heard, Oct. 8th;
    decided, Dec. 11th, 1858.

      This action is brought upon a promissory note for $2,506.35, made by the defendants, payable to the Reliance Mutual Insurance Company or order,. seven months after date, and dated August 22d, 1854.
    Before the maturity of the note the payees became insolvent, and on the 28th day of March, 1855, the plaintiff was appointed receiver of the goods, property, &c., of the Company, in and by proceedings had in the Supreme Court, and an order made therein. And among the assets which eame to his hands by virtue of that appointment, was the note on which the action is brought.
    The only defense set up in the answer in relation to which any proof was given, is that the note was given in advance for premiums on an open policy of marine insurance effected by the defendants with the Reliance Mutual Insurance Company. That no part of the premiums for which the note was given was ever earned, and no risks were ever taken by the Company after the giving of the note. And that the Company became publicly insolvent soon after the note was given, and before assuming or taking any risks under the said policy.
    The action was brought to trial before Mr. Justice Boswobth and a jury, on the 23d of December, 1857.
    The defendants proved that the Reliance Mutual Insurance Company commenced business about the 15th of August, 1853. That on the 20th of January, 1854, the defendants effected an insurance with the Company by an open policy for an aggregate sum of $146,910, to cover risks which might thereafter be indorsed on the policy, the premiums on risks to be fixed at the time of indorsement. That the defendants at that time gave the Company a note in advance for the premiums to be earned thereon, to the amount of $2,939.46, payable seven months after date. That at the maturity of that note, the premiums upon risks which to that time had been indorsed upon the policy, amounted to only $433.11, which was paid by the defendants, and the policy was thereupon renewed, and the note now in suit was given by the defendants as an advance to cover further premiums on risks which might thereafter be indorsed on the policy, but that in fact no risk was indorsed on the policy; no insurance was effected by the defendants with the Company, and no premium was ever earned under that policy after the note was given.
    The Vice-President of the Company testified that “the Company had a capital of subscription notes amounting to about $100,000, which were raised by a subscription contract containing the terms on which they were given, and -which were drawn in a different form from the premium notes. That the subscription notes were entitled to a bonus of five per cent per annum from the Company, but the premium notes had no bonus.”
    That the Company “ had a large amount of notes similar to this one in suit, given in advance for premiums on open policies. Probably the amount first and last was $800,000 and over.”
    It farther appeared that the Reliance Mutual Insurance Company was professedly organized under the act of April 10th, 1849, entitled “ An Act to provide for the incorporation of insurance companies.” (Sess. Laws of 1849, p. 441, chap. .808.)
    The declaration and charter agreed upon by the associates under which such organization was effected, declare that the business of the Company should be
    1. To make insurance on vessels, &c., (otherwise described as taking marine risks.)
    2. To make insurance on buildings, &c., (otherwise described as taking fire risks.)
    It provided for a cash capital of $250,000, and-that the subscribers to this capital should be entitled to all the earnings from fire risks and the interest on investments of such capital and all earnings in the fire department. That all losses in the fire department should be borne by and liquidated from receipts of fire premiums and earnings of capital stock; and all marine losses and losses on inland navigation risks and expenses should be paid from earnings of the marine department; but should losses accrue beyond the actual earnings of the marine department, then the capital stock of the Company should be liable to make good such deficiency.
    And that the profits arising from the business of marine insurance should be divided among the marine policy holders (in the form of a per centum upon the premiums received and earned); in the first instance by issuing scrip certificates to them bearing, interest at six per cent per annum, and ultimately, when the accumulated earnings in the marine department should amount to $500,000, then such certificates might be redeemed by the Company m money. All interest, upon the accumulated earnings in the marine department to enure to the benefit of that department only.
    By the ninth section it is provided as follows: “This Company shall have power to receive notes for premiums in advance of such persons as may intend to receive its policies, as well as the usual premium notes for specific risks, and may negotiate such notes for the purpose of paying claims or otherwise in the regular transaction of its business; but notes received in advance of premiums on open policies shaU in no case be deemed liable for-any losses that may accrue beyond the actual earnings on such policies.”
    The other provisions of the declaration and charter do not seem to be material to the questions to be considered.
    TJ pon these proofs the parties rested the case, and “ the jury under the direction of the Court, found a verdict for the plaintiff for” (the amount of the note in the suit, with interest,) “$2,988.74, subject to the opinion of the Court at General Term; a case to be made with liberty to the Court to order judgment for the defendants ; the counsel for the parties agreeing, at the time, in open court, that judgment might be given by the Court, at General Term, for the defendants, if so ordered, and in that event, the case to be so drawn as to stale that the jury at the trial were directed to and did find for the defendants, and on exception to such direction by plaintiff’s counsel.”

      William H. Leonard, for the defendants.
    I. The charter of the Company is a part of the contract with the defendants. The note in suit was given on the terms and conditions offered by that charter. The ninth section of that charter provides that “notes received in advance of premiums on open policies, shall in no case be deemed liable for any losses that may accrue beyond the actual earnings on such policies.”
    The Company and its dealers, creditors as well as debtors, are bound in their rights and liabilities by the provisions of this public act of organization.

      II. The note in suit was given on an open policy, upon which no premiums were ever earned. A recovery would be a violation of the conditions on which the note was given, and a fraud on the defendants.
    III. The judge should have directed the jury to find a verdict for the defendants, and judgment ought now to be entered accordingly, with the costs of the defense.

      E. C. Benedict, for the plaintiff.
    In mutual insurance companies, notes given in advance of premiums are to be considered as part of the capital stock, and whether the premiums be earned or not, those notes are security to all persons for the obligations of the Company, and must be paid to the receiver to be applied and distributed by him according to law. (Deraismes v. The Merchants’ Ins. Co., 1 Comst., 371; White v. Haight, 16 N. Y. R., 310.)
   By the Court—Woodruff, J.

It is proved in this case, without contradiction, that the note upon which the action is brought, was given in advance for premiums of insurance upon an open policy, intended to cover such insurance as might, after the note was given, be effected by the defendants with The Reliance Mutual Insurance Company, and be evidenced by indorsements upon such policy.

And the arrangement between the defendants and the Company plainly contemplated the payment by the defendants, at the maturity of the note, of such sum only as had then bpen earned for premiums upon the risks, which had, up to that time, been assumed by the Company and indorsed on such policy.

Considering the rights of the Company and of the defendants, without reference to the provisions of the public statute, under which the Company was organized, it is clear that the Company could collect from the defendants no greater sum than the amount of premiums earned by the Company.

On this subject, what is called the charter of the Company— its constitution, as agreed upon by its founders—is explicit in providing, that although the Company might negotiate notes received for premiums in advance, from persons who might intend to receive its policies, for the purpose of paying claims or otherwise in the regular transaction of its business, yet that “notes received in advance of premiums on open policies, should in no case be deemed liable for any losses that may accrue beyond the actual earnings on such policies.”

This provision describes the note given by the defendants, and now in suit. And although by its terms the defendants took the hazard of being compelled to pay their note in full, had it been negotiated to a third person by the Company in payment oD claims, in due course of business, and of seeking reimbursement from the Company, in so far as the amount had not been earned; yet the Company itself could not require the payment of more than had been so earned upon risks indorsed on the policy for which it was given.

Under the terms of the charter, the notes and the policy were not independent contracts, so that the Company could collect the notes, whether the premiums already earned were greater or less, and treat the open policy as itself the consideration of the note. As between themselves, the note and the policy are to be deemed in subordination to the provisions of the charter, and the note payable, to the Company, only to the extent of premiums earned.

Indeed, if it were not in terms so provided in the charter, we think it clear that even if it were conceded that the Company might require the defendants to continue their insurance until the amount provided for in the open policy had been insured; the Company from time to time receiving premiums actually earned, an'd renewing the premium note for the amount unearned; still if the Company ceased its'business and became unable longer to insure the defendants’ property, they could require the defendants to make no further payment. And* if the defendants’ note is to be treated as a “ premium note,” as distinguished from a “ subscription note,” as hereinafter explained, then the defendants were not bound to continue their insurance, but might at any time require the note to be surrendered, on paying the premiums already earned. (Brouwer v. Hill, 1 Sandf., 629.)

This view of the constitution of the Company, and of the contract between the parties, under which the note in suit was given, renders it material to inquire whether there is anything in the nature or scheme of the organization of the Company, or in the public statute under which tnat organization was made, which makes notes so received by the Company a security for the payment of the debts of the Company, or entitles the receiver of the Company acting primarily for the "benefit of creditors, to collect the notes, whether the premiums have been earned or not?

The statute of 1849, (Sess. Laws of 1849, p. 441, chap. 308,) permits an organization for the purposes for which The Reliance Mutual Insurance Company was formed, and requires the associates to file a declaration in the office of the Secretary of State, with a copy of the charter proposed to be adopted by them, and, on complying with the requirements of the act, it makes them an incorporated company.

It permits the associates, after publishing a required notice and filing their declaration and charter, to open books for subscription to the capital stock of the Company, and to keep the same open until the full amount specified in the charter is subscribed; or in case the business of such Company is proposed to be conducted on the plan of mutual insurance, then to '<open boohs to receive propositions and enter into agreements in the manner and to the extent hereinafter specified.

The fifth section of the act then proceeds, (so far as it is material to this case,) in these terms: “Ho joint stock company organized for the purposes mentioned in this act, shall be organized in the city of Hew York * * * with a smaller capital than $150,000; nor shall any company formed for the purpose of doing the business of marine or fire or inland navigation insurance, on the plan of mutual insurance, commence business, if located in the city of Hew York, * * until agreements have been entered into for insurance with at least one hundred applicants ;—the premiums on which, if it be marine, shall amount to $300,000; or if it be fire or inland navigation, shall amount to $200,000; and notes have been received in advance for the premiums on such risks, payable, at the end of, or within twelve months from date thereof, which notes shall be considered a pari of the capital stock and shall be deemed valid, and shall be negotiable and collectible for the purpose of paying any losses which may accrue or otherwise.”

The Legislature have thus proposed a double scheme, in each of which security is provided for dealers with the corporations organized under the act. One authorizes an incorporation, with a cash capital paid in; the other authorizes association upon the plan of mutual insurance, on the terms prescribed in the act.

The one contemplates the contribution, (by the associates and such as may become subscribers,) of a cash capital, to an amount not less than $150,000, which shall be the security and form the reliance of those who may deal with the Company, for the payment of all.claims arising from losses or otherwise.

The other contemplates the making of agreements for insurance by at least one hundred applicants, and the contribution by them of notes, given in advance for premiums thereon, to the amount of $300,000: which notes shall be considered a part of the capital stoclc. And these notes become and are constituted the security of the dealers, by being made collectible for the purpose of paying losses, &c., whether the agreements for insurance are performed or not, and whether, therefore, the premiums for which the notes are so given are earned or not.

Under this last mentioned arrangement it is obvious that those who enter into such agreements cannot withdraw until the whole amount which they have subscribed has been paid in premiums to the Company, and their notes meanwhile stand in lieu of capital paid in. By this means the result is made certain, (if the agreements be performed or the subscribers continue solvent, which the act seems to assume,) that a capital of at least $300,-000 will accrue from subscriptions and constitute the capital, for the security and protection of its dealers.

When the requisites of the act have been complied with, there appears no legal objection to the making of contracts of insurance by the. corporation with parties desiring to insure, upon any terms to which they may agree, e. g., if the Company have organized upon the basis of a cash capital, they may take specified single risks receiving the premium therefor in money or by note for the exact amount, giving such credit as shall be agreed upon; or they may, for the convenience of dealers, issue open policies, applicable only to such particular risks as may be indorsed thereon, protecting themselves by receiving a note for the aggregate premium, to be reduced from time to time as premiums are earned, and with a liability of the dealer to pay to the Company only such premiums as maybe payable for the risks so indorsed. And where the organization of the associates and subscribers was upon the basis of mutual assurance, (the requisites of the act being complied with,) they may in like manner take single specified risks or issue open policies with the like results. In either case the design of the Legislature is accomplished ; the dealers are made presumptively. secure by the capital paid in or the premiums subscribed and. agreed to be paid as capital; and this being done, all dealers stand upon an equal footing in respect of security for the payment of losses; those who pay their premiums in money on specific risks singly insured, and those who receive open policies and make the risks specific, by indorsements*thereon from time to time, as the exigencies of business require.

This construction of the act of 1849 shows the difference between what are in common parlance called “ subscription notes,” {i. e., notes given in advance for premiums on insurance which the makers have agreed to effect with the Company, and which are by the statute to be considered a part of the capital stock,) and notes received by the Company in due course of business after its organization for premiums upon open policies to be earned as risks may from time to time be indorsed thereon, and which are called in general phrase “ premium notes,”

The first class are by the terms of the statute made negotiable and collectible for the purpose of paying any losses which may accrue or otherwise. The others are subject to the ordinary rules of law governing the liabilities of the makers of promissory notes, and as between them and the payees, or any one who claims by no higher equity, subject to the agreement between them.

This same distinction arose and was acted upon in defining the liabilities of the makers of notes of each description under various, special charters granted before the act of 1849 was passed. (Brouwer v. Appleby, 1 Sandf. S. C. R., 158; Hone et al. v. Alien et al., id., 171; Hone et al. v. Folger et al., id., 177; The Same v. Ballin et al., id., 181; The Merchants' Mutual Ins. Co. v. Leeds, id., 183; Deraismes v. The Merchants' Mutual Ins. Co., 1 Comst., 371; and especially Brouwer v. Hill, 1 Sandf., 630,) which last case recognizes not only the difference between subscription notes and premium notes taken on open policies in the ordinary course of business, but also the right of mutual companies to deal in this respect with their customers on the same terms as to the premiums; payable on such policies only to the extent of the risks indorsed thereon, as other companies may do.

The act of 1849, in its leading provisions, so far as they contemplate the plan of mutual insurance, is strikingly like the special charters under which the above cited cases arose. (Laws of 1842, p. 261; Laws of 1843, pp. 66, 73, 50.) And when the particular provisions of the charter agreed upon by the associates forming The Reliance Mutual Insurance Company are read in connection with the act, the resemblance is still nearer.

The provisions of the fifth section of the act of 1849 above recited, here mainly relied upon by the plaintiff’s counsel, are, we apprehend, to receive a construction similar to the twelfth section of those special charters. True, it does not say that the notes therein mentioned may be taken “ for the better security of its dealers,” but it makes them part of the capital stock; which works the some result, in connection with the authority to negotiate and collect them for the purpose of paying losses, &c.

The difference (thus recognized and sanctioned) between subscription notes and premium notes received upon open policies, is also, we think, contemplated and provided for in the sixth section of the charter of the Company to whom the note in question was given. It provides for “ notes received for premiums in advance of such persons as may intend to receive its policies" * * These are subscription notes. The same notes provided for in the fifth section of the statute, and almost in the words of the statute, it provides that the Company may negotiate such notes, for the purpose of paying claims or otherwise, in the regular transaction of its business; justas it may “the usual premium notes for specific risks,” which are of course the Company’s property, and payable when due. “ But notes received in advance of premiums on open policies shall in no case be deemed liable for any losses that may accrue beyond the actual earnings thereon.”

The first class constitute in part the capital of the Company. Those who intend to receive its policies and give their notes in advance as a subscription to enable the Company to commence business, are bound as those who give their notes under the twelfth section of the special charters above referred to for the better security of dealers were bound, and they cannot withdraw their obligation until the whole amount has been paid for premiums on policies received or otherwise, and on the other hand those who as mere dealers receive open policies and give their premium notes therefor are only liable for premiums earned.

And this distinction was further kept up and observed by the Company by providing, as the Vice-President testified, that the givers of the notes called subscription notes,” should be entitled to receive five per cent per annum upon the amount of their notes for the risk which they run in thus advancing their notes to the Company with the liability to pay them in full even though the premiums on the insurances actually effected should not amount to so much. This was also a peculiarity of the subscription notes given under the special charters above referred to and in the cases above cited, this consideration had an important influence in the determination of the liability of the makers. (See particularly opinion of Ch. J. Jones in Hone et al. v. Allen and Paxson, 1 Sandf., 171.)

The construction of the act of 1849 has quite recently been considered in the Court of Appeals, in White, Receiver, &c., v. Haight (16 N. Y. R. [2 E. P. Smith], 310). In that case the Union Mutual Insurance Company had, by its charter, provided for conducting its business upon a system of giving notes which were not to be paid or collected at all events, nor to be negotiated, but 'which were to operate as guarantees for the payment of only such share of the losses and expenses as the makers might legally be called upon to pay. But that Company had also, as the very foundation upon which it was by the fifth section of the act of 1849, to commence business, a capital made up of notes, given in advance under agreements for insurance, and it was held that it is to notes of this latter description the provisions of that section alone are applicable. In that case it was conceded that the note in suit was one of those furnished, at the organization of the Company, for the purpose of complying with the provisions of the fifth section, and, therefore, that as the Company had become insolvent, it was payable to the plaintiff absolutely, while the notes, -which, in the conduct of the business of the Company, were received under the stipulation in the charter which limited the liability of the makers, were deemed to stand upon a different basis, and to be only of the force and obligation which the charter defined.

This view of the act of 1849, seems to us to meet precisely the case before us, and it further disposes of the suggestion of the plaintiff's counsel, that the stipulation .that the notes given in advance of premiums upon open policies should in no case be deemed liable for losses beyond the actual earnings on such policies, is illegal and void, because inconsistent with the fifth section of the statute. The Chief Justice says: “The general act of 1849 does not prescribe the manner in which the business of mutual insurance shall be carried on by the companies created under it. The particular mode of operation was left to be provided for by the charter.. * * * I entertain no doubt but that the charter of the Company is legal, so far as it provides for premium notes intended as guarantees, to be available only to the extent of the proportion of losses and expenses properly chargeable thereonand he holds that if the note be of the latter class, the obligation created thereby was that defined in the charter, and the receiver could hold the maker to no greater liability ; while if given as a basis of the organization for risks contracted to be taken, it was to be considered capital, valid, negotiable and collectible, not only to pay losses, but to obtain money for any other lawful purpose.

In this view the statute is consistent with the stipulation in the charter respecting the premium notes, which, in the conduct of the business of the Company, after its organization was completed, and the required subscriptions were secured, they might take from those who received open policies. The object of the Legislature was accomplished when the capital was provided and secured for the protection of those who might sustain losses, <&c. The opinion of the Chief Justice seems to us fully to sustain the view already suggested, and to furnish an exposition of the statute, which, irrespective of its force as an authority to us, commands our full concurrence.

The application of these views is obvious; the proof stands uncontradicted that the note in suit was not one of the subscription notes taken under agreements to insure as a basis of the Company’s institution. But a premium note received in the ordinary course of business for premiums upon an open policy,, which the charter makes available to the extent of premiums earned, and no further, applying to them the ordinary rule applicable to such notes when given to other companies.

The practice of issuing such open policies to dealers, and taking such notes, is believed to be very extensive with all marine insurance companies—a practice of long standing and of great convenience to those who have occasion to make daily or frequent shipments in small amounts, which are specified and protected by a brief indorsement on the policy.

The circumstance that the policy holder becomes, in the case of mutual insurance, entitled to a dividend of profits, if any accrue beyond the accumulation which is provided for, does not alter his liability on his note. That is also one of the conditions upon which his note is given. He is not entitled to dividends in proportion to the amount of his note, but in proportion to the amount of premiums earned on his policy—i. e., in proportion to the amount which he pays in.

And in this the public have no interest; in respect to this the Legislature have imposed no restriction. The act does not prescribe the manner in which the business shall be conducted. It looks to the security to be afforded by a proper amount of subscription notes to be given before the Company shall commence business at all, and these are held to be payable absolutely. When these notes are procured and for that purpose, it leaves the Company to carry on its business under any other arrangements with its dealers which may be agreed upon.

We have discussed the case with some particularity, not because we believed the principles governing the subject were not settled by the previous adjudications, but because the notes which, in the cases referred to were the subject of contest, were found to be in fact “ subscription notes ” in the sense above explained, and our discussion may serve to show that these principles, applied conversely to “ premium notes,” taken in due course of business after the organization of the Company, on open policies, give them validity in favor of the Company, or of its receiver (when the Company becomes insolvent), only to the amount in which premiums have been earned on such policies.

It is uot insisted here that the incorporation of The Reliance Mutual Insurance Company was itself defective. It provided for insurance partly with a cash capital and in part upon the mutual plan. It was doubtless believed that the cash capital ($250,000), being liable to policy holders, whether under fire or marine risks, it was a sufficient compliance with the requirement of the fifth section of the statute, to secure agreements for insurance on the mutual plan and take subscription notes to the additional amount of $100,000, together making up the sum of $350,000, which, under that section, would be regarded as capital. Nor does it seem to us material to enter upon the inquiry whether the incorporation of the Company was legal, or whether' it was. authorized to commence business when $100,000 of notes were so procured. Upon those questions we express no opinion, for if there was in this respect any error or defect, though it might expose the associates to the penalties prescribed in the act, or even though it should leave them without corporate protection, it could not, we think, alter nor affect the liability of dealers upon the notes subsequently received.

Our conclusions of fact, therefore, are, that the note in suit is not a note given by the defendants or received by The Reliance Mutual Insurance Company, in pursuance of an agreement for insurance, and in advance for premiums on such risks, which, under the provisions of the fifth section of the act of 1849, is to be deemed •a part of the capital stock, &c., but is a note received in advance for premiums upon an open policy issued in due course of business by the Company after its organization, and after it had commenced business, and was given in renewal in part of a previous like note for such amount as remained unearned on the policy at the date thereof.

And also that after such renewal the Company failed and became insolvent before any further risk was taken or premium earned on such policy.

And thereupon we are of opinion that the defendant is entitled to judgment, and pursuant to the leave reserved by consent of both parties at the trial, the judgment for the defendant should be here entered.

Judgment for the defendant, with costs.