Opinion
Argued June 9, 1885
Decided October 6, 1885
George H. Forster for appellant.
William Allen Butler for respondent.
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. 463; 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 Wortley 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 cum onere; they took it as he held it subject to the payment of the premium 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 New 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 of 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 Wortley 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 Wortley, 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 Wortley 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 Wortley, 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.