
    Martin J. Grossman, Appellant, v. Margarethe Lindemann et al, Respondents.
    (Supreme Court, Appellate Term,
    May, 1910.)
    Damages — Measure for torts — Liability for conversion — Conversion by pledgee.
    Pledge — Rights and liabilities created — Transfer of securities pledged.
    Witnesses — Disqualification by reason of confidential relation—Between husband and wife — Protected communications — Business communications.
    In the absence of an express provision permitting the sale of an insurance policy deposited as collateral, the pledgee has no right to sell or surrender it but only to collect it; and, if the policy is wrongfully surrendered, the debt is satisfied to the extent of the actual value of the security surrendered.
    Where, in an action upon a note against plaintiff’s wife and another, defendant pleads a gift of the interest, the exclusion of evidence of conversations between plaintiff and his wife tending to establish an executed gift of the interest, on the ground that they were confidential communications, is erroneous, they being merely business communications.
    The pledgee of a full paid life insurance policy upon surrendering the same without the authority or consent of the pledgor must either restore to him a full paid policy on the life of the insured for the full amount or be held liable for the face value of the policy; and the defendant is entitled to show that the insured was no longer an insurable risk, thus eliminating the possibility of restoring to the pledgor a policy on his life.
    Appeal by the plaintiff from an order of the City Court of the city of ¡New York, setting asidg a verdict rendered in favor of the plaintiff by direction of the court and ordering a new trial.
    Lewis S. Goebel, for appellant.
    Frederick B. Merkle, for respondents.
   Lehman, J.

The plaintiff sued upon a promissory note for $2,000 on which he alleged that the sum of $1,240 had been paid. At the trial the note was introduced in evidence and showed on its face that the defendants deposited, as collateral security for the payment of the note, a full paid $2,000 insurance policy on the life of Philip Lindemann. The plaintiff testified that he had surrendered the policy and received therefor the sum of $1,240. Since the policy is an instrument for the payment of money, its deposit as collateral security, in the absence of a distinct provision permitting its sale, gave the plaintiff only the right to collect and not to sell or surrender. Wheeler v. Newbóuld, 16 N. Y. 392. If he does surrender the policy wrongfully, the debt is satisfied to the extent of the value of the security surrendered. The value of the policy is not the surrender value. . Toplitz v. Bauer, 161 N. Y. 325. Presumptively, the value is the face value of the instrument (Hawks v. Hinchliff, 17 Barb. 492), but the actual value may be shown. Griggs v. Day, 136 N. Y. 152. The defendants should have been permitted to show that the insured was no longer an insurable risk; and the face value of the policy, properly discounted to the actual or probable date of his death, would be the actual value of the surrendered collateral. Kelly v. Security Mutual Life Insurance Co., 106 App. Div. 352; revd. on other points, 186 N. Y. 16; Toplitz v. Bauer, supra.

The defendants also pleaded a gift of the interest. One of the defendants is the wife of the plaintiff and she was precluded from testifying as to conversations with her husband on the ground that they were confidential communications. If the communications were sufficient to establish an executed gift, they were material; and in any event they were business communications and not confidential, nor induced by the marital relation. Parkhurst v. Berdell, 110 N. Y. 386, 393.

The trial justice properly set aside his direction of a ver- ■ diet, and his order should be affirmed, ivith costs.

Page, J.

I concur in all of the opinion by Mr. Justice Lehman except the statement that the actual value may be shown, and that the actual value was the face value discounted to the actual or probable date of the death of the insured.

The policy pledged as collateral was a full paid policy for $2,000. By the surrender of this policy without the authorization or consent of the pledgor, the pledgee converted the collateral. Having converted it, he must either restore to the pledgor a full paid policy on .the life of the insured for the amount of $2,000 or be held liable for its face value. Bailey v. Gordon, 52 App. Div. 402; affd., 165 N. Y. 672 on opinion below; Ooleb. Coll., § 96. It may be that the defendants might be able to show that, owing to the insolvency of the insurance company, the actual value of the policy was less than its face value (Griggs v. Day, 136 N. Y. 153); but even that is not clear when we consider the language of the court on a subsequent appeal. See Griggs v. Day, 158 N. Y. 1, 17. But that would be upon the theory that the face value would not be paid at maturity. I know of no case that holds the pledgee, who has converted the collateral, liable only for the discounted value at the date of the conversion. The defendants should have been allowed to show that the insured was no longer an insurable risk, thus eliminating the possibility of restoring to the pledgor a policy on his life.

The case of Kelly v. Security Mutual Life Ins. Co., 106 App. Div. 352, was an action by a policy-holder against the company for declaring it lapsed without just cause. The measure of damage in such a case would not be the same as in the case at bar. In Toplitz v. Bauer, 161 N. Y. 325, the insurance company had cancelled the policy for non-payment of a premium, and the only deduction suggested was the value of the premium necessary to keep the policy alive. In the case at bar the policy was fully paid.

Seabury, J., concurs.

Order affirmed, with costs.  