
    William P. Taylor, as Permanent Receiver of The Buffalo Ice Company, Respondent, v. Jesse C. Bowen, Appellant.
    
      Surrender' of policies by an insurance broker, on the appointment of a receiver of the party insured,—liability, of the broker to the receiver for the unearned premiums credited, but not paid,, to the broker by the companies.
    
    Where an insurance broker, after a receiver of the property of a policyholder has. been appointed, surrenders insurance policies drawn upon the standard blanks of the State of New York to the companies which issued them, and procures, new policies to be made out.iri thename of the receiver, the action of the insurance companies in crediting the broker on their books with the unearned- premiums oñ the surrendered policies, and debiting him with the amount of the premiums upon the new policies, coupled with corresponding entries upon the books, of such broker, does not operate to discharge the insurance companies, from liability to the receiver for the linearned premiums on the surrendered policies, nór entitle the receiver to maintain an action against the broker for the conversion of-such unearned premiums.
    Appeal by the defendant, Jesse G. Bowen, from a judgment, of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Erie on the 6th day- of September, 1899, upon a decision of the court rendered after a trial at the Erie Special Term upon an appeal by.said defendant from- a judgment, in favor of the plaintiff rendered by the Municipal Court of Buffalo. , '
    
      George Clinton, for the appellent.
    
      J. H. Metcalf, for the respondent.
   Williams, J.:

The action was brought originally in the Municipal Court of the city of Buffalo, and after a trial in that court an appeal was taken to the Supreme Court, where the trial was had which is here for review. The complaint as printed in the- record does not very ■ clearly indicate whether the action was designed to be one on com tract or in tort. - It was conceded on the last trial, however, that the case was tried in the Municipal Court as an action for conversion, and that some amendment of the complaint was made in that court which did not appear in- the record returned from that court to the Supreme Court., After considerable talk between the trial justice and counsel on the last trial the plaintiff was permitted to amend his complaint again, and the action was conceded to be for conversion, and not upon contract, and the trial was had and the decision was made upon this theory and under the complaint as amended.

The plaintiff is the receiver of the Buffalo Ice Company. He was appointed at first as temporary receiver on the 22d. day of December, 1897, in proceedings commenced for the voluntary dissolution of the company. On the 5th day of May, 1898, the company was dissolved and the plaintiff was appointed. permanent receiver. The company, before the commencement of the proceedings for its dissolution, had dealings with the defendant, who was an insurance agent and broker. The defendant procured insurance, policies for the company upon its property, and gave the company more or less credit for the premiums upon such policies, which defendant advanced or became liable to the insurance companies for, and sometimes took the ice company’s notes for such premiums. On the 22d day of December, 1897, when proceedings for dissolution were begun and the plaintiff was appointed temporary receiver, there were a large number of insurance policies existing covering the ice company’s .property, and which defendant had procured from various insurance companies for the ice company, and at that time the ice company was indebted to the defendant for premiums, upon, such policies in the sum of $687.13, for a part of which the ice company had given defendant notes which had gone to protest and which the defendant had been compelled to and had paid and taken up. All these outstanding policies upon the ice company’s property were, we assume, upon the standard blank, and, therefore, we may take judicial notice had the following clause therein.

“This entire policy, unless otherwise provided by agreement indorsed hereon, or added hereto, shall be void, * * * if any change other than by the death of an insured, take place in the interest, title or possession of the subject of insurance * * * whether by legal process or judgment or by voluntary act of the insured or otherwise * * *.

“ This policy shall be canceled at any time at the request of the insured, or by the company by giving five days’ notice of such cancellation. If this policy shall be canceled as hereinbefore provided or become void or cease the premium having been actually paid, the unearned portion shall he returned on surrender of this policy or last renewal, this company retaining the customary short rate; except that when this policy is canceled .by this company by giving notice it shall retain only the '•pro rata premiums.’ ”

It will be seen that, under these conditions, the policies all became void upon the appointment of plaintiff as temporary receiver and his taking possession of the property, subject to the companies agreeing, if they were so disposed, by a writing indorsed upon or added to the policies,, to continue the policies for the benefit of the receiver.

All parties must have understood this condition of things, and so understanding, the receiver’s attorney called upon the defendant and employed him to look after the policies so as to keep the property covered by insurance until a sale of the property could be made by the receiver. There was dispute upon the trial as to the particular, nature of the employment and instructions given to the defendant by the receiver’s attorney-. The attorney testified that defendant was directed to have all the policies transferred to the receiver. The defendant denied this, and the letters which passed between the parties corroborated the defendant and contradicted the attorney. The court left this question to the jury and they found with the attorney, but it would seem that this finding was against the weight of the evidence, and should not have been made by the jury, or adopted by the court.

The defendant was employed as the broker and agent of the-receiver. As to some of the policies he was agent of the companies, when the policies were issued; as to others he had ho relations with the companies at all, .But whether agent for the companies or not, he could not, after accepting employment from the receiver, assume to act for the companies in transferring these void policies without authority from the companies themselves. There was a moral hazard attached to the risks, by reason of the' icé company’s going into the receiver’s hands, that might well lead the companies to investigate before they agreed to a continuance of the policies, which they might regard as void and at an end by reason, of' the appointment of the receiver and his taking possession of the property. So that the defendant could not undertake absolutely to transfer or have transferred a single one of the policies. He had to negotiate with the '•companies and find out what they would do. Under these circumstances, and in view of the letters passing between the parties which •could not well be changed, the evidence of the attorney should not have been credited. There was every reason to believe that the •defendant’s evidence, supported by the letters, and in view of the surrounding circumstances, was nearer the truth. Naturally the •defendant would have been given a discretion as to whether he should retain the old or secure new policies, the main object being to keep the property insured in some way until the sale thereof could be made. And yet the court found as matter of law that the defendant, having been directed to have the policies transferred to the receiver, and having caused them to be canceled and new policies to be issued, did thereby unlawfully appropriate and convert to his own use the old insurance policies. We think this finding cannot be sustained. The complaint charged no such thing as the conversion of the policies. The charge was the conversion of money, the unearned premiums. The policies were void. As between the companies and the receiver, these unearned premiums belonged to the receiver, and unless the policies were continued and transferred to the receiver the. companies were liable to the receiver for such premiums.

The policies were not con verted by the defendant. The companies. did not continue them, but elected to regard them as void, and the unearned premiums as belonging to the receiver. If the defendant was guilty of any wrong at all, it was not of a conversion of the policies, but of a failure'to obey the directions of the receiver’s attorney for which he might be .liable for damages if the receiver suffered any.

It does not appear, however, that the receiver suffered any damages by reason merely of the old policies being canceled or regarded as void and new ones being issued. The real injury suffered by the receiver, if any, was in his failing to get the unearned premiums, either in cash or by credit upon the premiums under the new policies.

This is what the receiver, by his complaint, was prosecuting his action for. The language' of the amendment to his complaint was, “ and without right ■ or the knowledge and consent of .the plaintiff, did collect and receive unlawfully, wrongfully and illegally apply all of the moneys belonging to this plaintiff, as such temporary-receiver, for rebates upon said policies, to his own use ' and benefit.” This was the issue being tried. -Conversion of moneys, rebates on the old policies alleged to have been collected and received by defendant and appropriated to his own use. ' The court did not find that the defendant had collected or received the money, the rebates on the policies. Such finding could not be made because it was not .true. The unearned premiums were $461.96. The • defendant received but a very small' part of this amount. It could not be found that he received the full amount. What he did as to the balance was to charge the companies with the amount and credit them with the premiums upon ' the new policies. In this way it was said that he had the benefit of the unearned premiums, though lie did not receive the money. This was bookkeeping between him and the companies.- Then, as between himself and the receiver, he claimed that he had a lien upon the old policies for the amount of premiums owing by the ice company to him before it went into the hands of the receiver, being the sum of $687.13, and that he had a right to apply the unearned premiums on those policies, $461.96, upon this old indebtedness, and he presented a bill for the premiums upon the new policies to the receiver’s attorney, $1,015.50, and said that they must be paid or the policies would become void. An arrangement was made between the defendant and the receiver’s-attorney to carry the new policies for one month of the year. The-attorney paid $84.62 for such insurance, and during the month the. sale of the property was made and it passed' into other hands.

This action was brought to recover the unearned premiums from the defendant. Upon this condition of the case the court did not find that the defendant had collected, received and converted the moneys, the unearned premiums, but besides finding the conversion of the-old insurance policies, the court also found that the defendant converted the cash or surrender value of the old policies which he received, or which he had credit for or received the benefit of, and that he thereby became liable to the plaintiff, as receiver, for the damages sustained by such conversion, which was the cash or surrendered value of said policies, $461.96.

It will be seen, therefore, that the complaint charges the conversion of moneys collected and received by the. defendant belonging to plaintiff, the unearned premiums; the finding is conversion of policies and the cash surrender value thereof, no money whatever.

Such a finding cannot be supported under the complaint, nor can there be on the facts a finding of conversion of the policies, and there was no value in them any way; and I do not see how there could be a conversion of a cash or surrender value of the policies. Such a thing is not susceptible of conversion. The various companies are hable to the plaintiff for the amount of the unearned premiums upon the old policies. It does not appear that they ever paid the cash therefor to the defendant, except in a few cases. They merely gave him credit therefor on account. This did not operate as payment so as to constitute any defense by the insurance companies to actions brought by the plaintiff for the unearned premiums. No recovery can be had in this form of action against the defendant for the unearned premiums not actually paid over by the companies to the defendant.

We do not regard it as necessary to pass upon the question as to whether the defendant’s lien upon the old policies was restored by the delivery thereof by the receiver’s attorney to the defendant.

' The decision of the trial court was erroneous for the reasons here- * inbefore stated, and the judgment entered thereon .should be reversed and a new trial ordered, with costs of appeal to the appellant to abide event.

All concurred, except Laughlin, J., not sitting.

Judgment reversed and new trial ordered, with costs to the appelant to abide event.  