
    The Phœnix Insurance Company, App’lt, v. William H. Parsons, Survivor, etc., Resp’t.
    
      (New York Superior Court, General Term,
    
    
      Filed February 3, 1889.)
    
    1. Insurance (Marine)—Warranty—When implied warranty will arise.
    Where in an action to recover hack the amount of an insurance policy, paid to defendants, the defendants had advanced for the owners of a bark, certain disbursements, and had secured a charter for the bark, they effected an insurance in the plaintiff company of their advances and commissions. The bark made a total loss being wrecked. The defendants applied for payment of tlie-insurance, and upon their assigning to the plaintiff the policy of insurance, and a draft for advances made to the captain of . the bark, which they had accepted, the plaintiff paid the insurance to the defendants. Held, that there arose an implied warranty from the assignments that I he claims described therein, were valid and existing claims, and to which the defendants had title.
    2. Same—Subrogation—Rights under assignment of insurance policy.
    
      Held, that where the defendants insured for themselves and not for the benefit of the owners, and had not agreed with the owners that payment upon the policy should discharge to the extent of the payment, their claims, the plaintiffs under the assignment would be subrogated to the defendant’s; claims.
    3. Same—Right of insurer when insured holds for benefit of third PARTIES.
    
      Held, where the defendants hold for the benefit of the owners, if the insurer is subrogated, he would take no substantive original claim of his own, against the third party, but only the rights of the insured as they are upon the payment of the policy.
    4. Same—Insured not bound to disclose relations between himself AND THIRD PARTY.
    
      Held, that an insurer is bound to ascertain -for himself what are the relations between the insured and third parties; the insured is in no way bound to inform him on the subject.
    5. Same—Assignment of policy—Consideration—When insurer not-LIABLE.
    Where the right of the plaintiff to resort to the owners under the assignments of the defendant's claims, was extinguished by an arrangement between the defendants and the owners, which was in contravention of the policy providing “ In case of any agreement or act past or future, by the insured, whereby any right of recovery of the insured against any persons- or corporations, is released or lost, which would on acceptance of abandon-. ment or payment of loss by this company, belong to this company, but for such agreement or act * * * the company shall not be bound to pay any loss,” Held, that the insurance paid by the plaintiff was a good consideration for the assingnments, and for the implied warranty, as there was. no liability of the plaintiffs upon the policy.
    Appeal by plaintiff from judgment dismissing the complaint.
    
      George A. Black, for app’lt; IT. H. Goodrich, for resp’ t_
   Sedgwick, Ch. J.

The complaint was dismissed and as to that the question now is whether there was sufficient proof to take the case to the jury upon issues presented by the pleadings.

The defendants had advanced, for the owners of a bark, certain moneys disbursed upon the bark, had procured a charter of the bark and were entitled to commissions for attending to the business. They took a policy of marine insurance upon the bark with the plaintiffs in the sum of $1,500 payable to Parsons & Loud on account of whom it may concern. The bark made a total loss. The defendants applied for payment of the policy. The plaintiffs, refused to pay, unless the defendants would make certain instruments. The defendants made the instruments and thereupon the plaintiffs paid the amount named in the policy save a few dollars.

One instrument was an endorsement upon the back of the master’s draft for disbursements drawn upon, the defendants and held by them in the sum of $1,125. The endorsement was, “In consideration of amount insured as ■advances on this vessel being paid, all claims on account of this draft is assigned to Phoenix Ins. Co.”

The other instrument was, “For and.in consideration of the sum of $1,500, the receipt whereof is hereby acknowledged, we hereby assign and transfer to the Phoenix Insurance Company, etc., fifteen hundred dollars (amount insured by us in said Phoenix Insurance Company, March SI, 1884, as advances), of our claim of $1,570.47 which we have against bark, “Elliott Ritchie,” and owners for advances, commissions, etc., for her late voyage, etc., on which voyage she became a total wreck.”

I see no reason to doubt, that from these assignments there arose an implied warranty that the claims described were existing valid claims to which the defendants had a title which they might transfer, and that at least they had never been satisfied or discharged by the act of the defendants. Ledwich v. McKim, 53 N. Y., 307; Ross v. Terry, 63 N. Y., 613.

The next question is whether these were facts upon which the jury might have found that there had been a breach of this warranty, that is, were the claims assigned valid existing claims which had not been satisfied or discharged.

At the time the- policy was underwritten, that is on March 31, if the defendants insured for themselves and not for the benefit of the owners, or in other words had not agreed with the owners that payment upon the policy should discharge to the extent of the payment, the claim which the defendants had against the owners, for the ad- ■ vanees, then upon payment there would have been a claim to which the plaintiffs would have been subrogated.

The learned counsel for the respondents insists that at the time of the taking out of the policy they insured themselves only, and that there remained unimpaired their claim against the owners, without an agreement that it should be discharged by payment to the defendants. I will assume that this is correct, at least so far as the matter is to be determined by the facts that existed on March 31st, although the defendants charged the owners with the amount of the premium as paid on March 31.

Afterwards, on April 1, the owners wrote to the defendants, among other things, “therefore, please get the advanees insured if you have not already done so, so that in case of loss you will not call on the owners for advances.”

On April 2 the defendants answered: “ We have covered the amount only to Buenos Ayres, presuming that the amounts due would be remitted from there.”

I am of opinion that from this time at least the defendants held the policy for the benefit of the owners in the sense that payment upon it would extinguish the claim, against them to the extent of the payment.

The letters amounted to a declaration of trust or to an agreeement that the defendants would hold for the owners, the defendants being estopped from asserting want of consideration, the owners being induced by the answer of April 2d to forego obtaining insurance for themselves. And they contained evidence as to the nature of the defendant’s acts in the taking out of the policy on March 31.

■ Although in such a case there may be a right of subrogation, the insurer takes only the rights of the insured, as they are, upon payment of the policy. The insurer will have no substantive, original claim in its own right against the third person. It is an equitable assignee. The third person, under circumstances like the present, may deal with the insured so as to extinguish the obligation between them rightfully as respects the insurer. The insurer must ascertain for himself what are the relations between the insured and the third person. The insured is not bound to inform the insurer on this subject. Kernochan v. The N. Y. Bowery Fire Ins. Co., 17 N. Y., 428.

It would seem that the cited case is not an appeal from the case in 5 Duer., 1. It is an appeal from a judgment in the case after a new trial as granted according to 5-Duer., 1.

The testimony disclosed that upon the payment of the-$1,500 to the defendants, they consummated the arrangement, evidenced by the letters of April 1st and April 2d, and credited the owners with the amount upon the claim for advances, commissions, etc.

It, therefore, appeared on the trial that there was a. breach of the implied warranty, because the transaction based upon the previous agreement discharged and extinguished the claims that the assignments purported to-transfer.

It is here argued by the learned counsel for the respondents that there was no consideration for the assignments or for the implied warranty, inasmuch as the $1,500 paid, to the defendants was already due to them by the plaintiffs under the policy.

Several considerations are relevant to this position. I advert to one of them. The policy was an open policy, loss payable to “Parsons & Loud on account of whom it may concern.” The entry in the book accompanying the policy was with other matters. (Description of goods, seller of bills.) Advances $1,500; rate of premiun two and. a half per cent.

The insurable interest, which wopld sustain the policy and the right of action upon it in behalf of the defendants, would be the right to a lien upon the vessel and the indebtedness of the owners to them for the advances.

The policy contained the following provision: “Incase of any agreement or act, past or future, by the insured,, whereby any right of recovery of the insured against any persons or corporations is released or lost, which would, on acceptance of abandonment or payment of loss by this company, belong to this company but for such agreement, or act, * * * the company shall not be bound to pay any loss.”

In this case the letters of April 1st and April 2d, the policy being made March 31st, disclosed a future act of the insured, by which the right of the insurer to resort to the owners, or the vessel or its proceeds, through the claim for advances of the insured, was lost. The operation of the-arrangement was to provide for an extinguishment of the-claim, to which the insurer would otherwise have been subrogated. For this reason the $1,500 paid was a consideration for the assignment, as there was no liability of the insurers upon the policy. Platt v. The R. Y. R. and C. R. Co., 108 N. Y., 358, and the cases there cited.

In this case the legal extinguishment of the claim of the insured against the owners occurred after the payment of the $1,500 as a consideration for the assignment; and so it may be argued the claims were in existence and were valid at the time of the assignment, and there was no breach of' the implied warranty. This is not correct, for by the arrangement between the defendants and the owners the payment would extinguish the claim, and that payment was made before the execution of the assignment.

It may be asked how can the plaintiffs take the position that the $1,500- payment was not upon the policy when they take advantage of an arrangement by which payment upon the policy was to be the thing which would extinguish the claim. The answer to this is, that the testimony-does not show an absolute payment of the loss under the-obligations of the policy, but a payment conditional upon, the execution of the assignments in its promissory as well as executed aspects which include the obligation upon the-implied warranty. There would be absolute payment sub.ject to» the defendants’ fulfilment of that warranty. And ■on the other hand, the insurer could not interfere with the legal rights of the other parties to extinguish the claim, binder the agreement between them, by their applying to the claim the $1,500, treating it between themselves as a payment of the loss.

I am of opinion that rejecting a good many allegations ■of the complaint as surplusage, there were left sufficient "to support a pause of action of the kind that has been described in this opinion. The learned judge referred to it in supposing that the defendants did not covenant that their ■claim was valid.

The complaint did not proceed upon a fraudulent representation or concealment by the. defendants as the grava■men of the action.

Upon this point it has not been necessary to say more than that the testimony was sufficient to take the case to the jury. The plaintiff’s exception to the dismissal of the complaint was therefore valid at the timé. After the dismissal the plaintiff moved the court to direct a verdict for the •plaintiff, but took no exception to the denial of the motion. There can therefore be no review of the denial. This does not impair the plaintiff’s right to a review of his previous ■exception, as I think, even if the case were such that on the motion to dismiss the complaint it appeared that the motion should have been denied for the reason that on the Tindisputed facts there should have been a verdict for the ■plaintiff. In my opinion, it did so appear.

The judgment should be reversed and a new trial had, with costs to abide the event.  