Mary J. Moulton and William W. Wright, Respondents, v. The Ætna Fire Insurance Company, Appellant

Mary J. Moulton and William W. Wright, Respondents, v. The Ætna Fire Insurance Company, Appellant. Mre insurance—a condition that the policy shall be void if the insured pes'sonal property ‘ ‘ be or become incumbered by a chattel moi'tgage ”— it is not violated by a chattel mortgage made by one member of a firm to another for advances made to the firm — a policy construed most strongly against the insurer. A chattel mortgage upon the personal property of a firm, executed by one partner to another to secure advances made to the firm, simply conveys any interest which the transferring paftner may have in the surplus of the firm property after payment of the firm debts, and brings no stranger into the ownership of the firm property. Such a mortgage does not avoid an insurance policy previously issued upon the mortgaged property under a condition contained in the policy that it shall be void “if the subject of-insurance be personal property, and be or become incumbered by a chattel mortgage.” ^Forfeitures are not favored, and in order to uphold a policy of insurance it will be construed most strongly against the insurer. Appeal by the defendant, The .¿Etna Fire Insurance Company, from a judgment of the Supreme Court in favor of the plaintiffs, entered in the office of the clerk of the county of Onondaga on the 3d day of December, 1896, upon the report of a referee, for $2,765.84 damages, besides costs. Exceptions were filed to the referee’s report. On the 16th day of February, 1893, the defendant' issued its policy of insurance, in consideration of $37.50, to the plaintiffs, insuring them for the term of one year from the 16th of February, 1893, against all direct loss or damage by fire in: the amount of $2,500j on property described in the policy as follows, to wit: “ $2,500. Of leaf tobacco packed or in process of packing and in bulk, and on cases holding the same, their own or held in trust or on commission, or sold but not removed, while .contained in assured’s two-story frame tin-roof tobacco warehouse, situate on west side of street in village of Cicero.” On the 14th of February, 1894, for a valuable consideration, the defendant, by an instrument in writing, renewed said policy and continued it in force and effect for one year from the 16th day of February, 1894. On the 1st day of November, 1894, a fire'occurred by which the property so insured “ was damaged-and wholly destroyed by said fire to the amount and extent of $15,000.00 and upwards.” - The referee found: “ That at all the times in said complaint mentioned the plaintiffs were and now are copartners, carrying on their copartnership business of buying, packing, storing, sorting, casing and selling leaf tobacco at the village of Cicero.” Immediately after the fire, notice was given to the defendant thereof, and within sixty days after the fire, and more than sixty days before the commencement of this action, proofs of loss were made out and delivered to the defendant; and upon the trial- it was-stipulated that due notice of the fire and proper proofs of loss were received by the defendant. . The policy contained the following language : “ This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void * * • *. if the subject of insurance-be personal property and be or become incumbered by a chattel mortgage.” The answer alleges that the personal property so insured “ became,, contrary to the aforesaid condition against chattel mortgages, encumbered by certain chattel mortgages, namely, one dated on or about March 5th, 1894, and a second one dated on or about June 18th,. 1894, both being duly filed in the-office of the town clerk-of the town of Cicero, N. T., which mortgages were executed and delivered by said Mary J. Moulton, -one of the plain tiffs and sole owner of said property, to W. W. Wright one of the plaintiffs herein, for the respective sums of $7,521.32 and $7,-573.00, and that the property described in aforesaid chattel mortgages was, and .was intended. ' by said parties to be, the same property alleged to have been covered by and included in the policy upon which this action is brought.” In the proofs of loss the property destroyed was stated to be 171,733 pounds of tobacco, and the value was named at $21,311.94. The referee found the value of the property damaged and destroyed to be $15,000. The referee found that, prior to, or at the time the written instruments known as chattel mortgages were executed “ said Wright loaned or advanced to said copartnership, in addition to the sums' paid by him into the business of the same, by the terms of the copartnership agreement, certain sums of money; and said written instruments were so executed and delivered to and received and retained in the custody of said Wright, with the intent and purpose of the parties thereto that said instruments should show and represent the amount of said loans or advances, and should also secure, so far as they legally might, the repayment to said Wright of the sums so loaned or advanced out of the property and assets of said copartnership.” The referee also found, viz.: “ That after said fire, and before the plaintiffs rendered said statement or proofs of loss as aforesaid, and after the defendant had full knowledge of the making out, delivery and filing of the two chattel mortgages set out in its answer in this action, the defendant duly requested the plaintiffs to make out and render to it, the defendant, said statement or proofs of loss, and also then and there requested the plaintiffs to comply with the terms of the policy upon which this action is brought. “ Eighteenth. That thereafter, and in compliance with said request, the plaintiffs made out and rendered to the defendant said statement or proofs of loss, as hereinbefore set out. “ Nineteenth. And the plaintiffs, by said request of the defendant, and their compliance therewith, were then and there subjected to the trouble, inconvenience and expense of making out and rendering to the defendant said statement or proofs of loss. “ Twentieth. That the said request of the defendant, after it had knowledge of the execution, delivery and filing of the two chattel mortgages set out in said answer, to wit: That the plaintiffs make out and render to it, the defendant, said statement or proofs of loss, as hereinbefore set out, and the compliance of the plaintiffs there.with, as aforesaid, was a waiver by the defendant of-any and all defenses,, if any it had, that the policy upon, which this action was brought had. become null- or void by reason of the making, delivery and filing of the two chattel mortgages set out in sai,d answer, and .then and there fully reinstated and made valid said policy if a recovery thereon had theretofore been forfeited by the execution, delivery and filing of the two chattel'mortgages set out.in said answer.” The referee'also found that: “ The defendant requested the plaintiffs to submit to an examination under oath by virtue of the terms and conditions of the policy upon which this action is brought, and that in compliance with such request the plaintiffs did, on the said 19th day of February, 1895, at the city of Syracuse, N. Y., submit to such an' examination under oath, which was then and there conducted by the defendant, or its duly authorized agent or attorney, and that such an examination was reduced in writing, and the .plaintiffs, by said request of the defendant, and their compliance therewith, were then and there subjected to the trouble, inconvenience and expense of such examination.” The referee found as a conclusion of law that the - chattel mortgages, executed by the plaintiff Mary J. Moulton to W. W. Wright, March 5,1894, and June 18,1894, “ did not operate, and neither of them operated, in law as a transfer of the property described therein-to a' third person, or stranger, but solely as an increase of the interest of one partner in the firm assets as between themselves. “ Second. That said instruments, executed and delivered by one partner to the other partner, and received and retained by him, did ■ not operate in law as a chattel mortgage of said property, or any interest therein, with the scope and legal intendment of the pro- . visions in the- policy of insurance- in respect to chattel mortgages.” Newell B. Woodworth, for the appellant. I. N. Ames, for the respondents. Sic. [MAJORITY — Hardin, P. J.:] Hardin, P. J.: ■ The evidence before the referee sustains the finding of fact made by him that the plaintiffs were copartners. . That copartnership was formed in the fall of 1890. There were no written articles of copartuership, hut a verbal agreement was made. Mary J. Moulton was to put in $2,000 and the use of her warehouse, and W. W. Wright was to put in $4,500 in cash, and Frank Moulton was to be employed as agent of the firm, and he was to receive $50 per month for his services, and the plaintiffs were to share alike in the profits and losses. After such an arrangement was made, the plaintiffs commenced buying and selling tobacco, with the aid of the services of Frank Moulton, son of Mary. We think the evidence warrants the conclusion reached by the referee that, at the time- the policies were issued and renewed, all the property covered by the policies and renewals was the property of the copartnership, and that the contention of the appellant, that the evidence indicates that the property belonged to Mary J. Moulton individually, ought not to be sustained. (2) It is contended in behalf of the appellant that the chattel mortgages issued by the female plaintiff to the male plaintiff rendered the policies void, and the learned counsel for the appellant calls our attention to the clause in the policy as follows: “ If the interest of the insured in the property be not truly stated herein, or if any change take place in the interest, title or possession of the subject of insurance, or if the subject of insurance be personal property and be or become incumbered by a chattel mortgage,” the poli- ■ cies are avoided, and he calls our attention to the case of Woodward v. Republic Fire Insurance Company (32 Hun, 365). That case differs from the one before us, as in that case, when the policies, were issued, the property was subject to a chattel mortgage given to one Vandewalker; and it was said in the course of the opinion that “ the effect of a chattel mortgage is to convey the title of the-property to the mortgagee, and thereafter the mortgagor’s interest is that of an equity of redemption, and nothing more. * * * Therefore, the interest of the assured in the personal property was not that of a sole,«entire and unconditional ownership, and so much of the contract as related to that class of property was void by the. very terms of the condition.” In the case in hand it will be observed that, at the time the policies were issued and renewed, the property belonged to the copart- • nei’ship, and that the chattel mortgages were executed several months subsequent to the issuing of the policies, to wit, one on the 5th of ' March, and the other on the 18th of June, 1894. Appellant’s learned counsel calls our attention to Gray v. Guardian Assurance Company (82 Hun, 380). That case differs from the one in hand, as the policy there was issued on the 18th of June, 1892, to Davis Brothers,, who “ executed a chattel mortgage on the property insured to one Henrietta Briggs,” a third party in no way connected with the firm, of Davis Brothers. In the case in hand the mortgages were executed ¡by Mary J. Moulton to W. W. Wright, and so far as they were expressed to be mortgages. of the entire property held by the firm, they were inoperative, as she only had an undivided interest in the property. Besides a transfer from one partner to another of supposed interest in partnership property has been considered not to be a violation of the provisions of a policy inhibiting the. change of title or interest of the assured. Such transfer simply transfers the interest the partner may have in any surplus remaining after payment of the firm debts and the settlement of firm accounts. (Menagh v. Whitwell, 52 N. Y. 146 ; Wood v. American Fire Ins. Co., 149 id. 385.) In the case of Dresser v. United Firemen's Ins. Co. (45 Hun, 299) the policy contained a provision, viz.: “ This policy shall, become void and of no effect * * * by the sale or transfer, or any change in title or possession of the property insured.” The policy was issued to Dresser & Co., and the firm was dissolved subsequently, and the interest of Callanen in the firm property was transferred to Dresser and Dresser executed a chattel mortgage on the property for $2,000 to Callanen to secure such purchase price, and it was held “ that the dissolution of the partnership, the transfer of Callanen’s interest in the property to Dresser, and the giving of the chattel mortgage by Dresser, did not work such a transfer of interest as to avoid the policy.” That case was affirmed (122 N. Y. 642). By the use of the language we have quoted, evidently it was the object of the company to guard" against “ controversies with strangers or persons other than those with whom they contracted.” (Dey v. Poughkeepsie Mutual Ins. Co., 23 Barb. 627.) In Wilson v. The Genesee Mutual Ins. Co. (16 Barb. 511) it was held, viz.: “ Where an insurance is effected upon goods belonging to a copartnership, a transfer of interest in the partnership property and, in the policy of insurance, from one partner to the other, will not prevent a recovery in case of loss, notwithstanding a clause in the policy declaring that the interest of the assured therein is not assignable without the Written consent of the insurers. An assignment from one partner to another is not within the principle on which the prohibition is founded.” . In the course of the opinion delivered in that case it was said : “ When underwriting for a firm the insurers are presumed to know, and to be satisfied with, each and every of its members. * * * They, therefore, agree, in effect — for such is the legal inference —■ that a transfer of interest from one partner to the other is within the original understanding, and that it shall form no objection, in case of loss, to the right of recovery. It is an assent, necessarily implied from the nature of the contract, and given in advance, and, therefore, requiring no subsequent notice.” In Germania Fire Ins. Co. v. H. Ins. Go. (144 N. Y. 199) it was said : “ This right of. the insurance company was in nowise invaded when this court held that a sale by one partner to another of his interest, where both were insured, did not avoid the policy. It is only when a stranger is to be brought into contractual relations with the insurance company that the consent of the latter is essential.” It seems reasonable to construe the language used in the defendant’s policy as intended to prevent ownership or interest in the insured property by any third person, rather than to limit the respective rights of the members of a firm to which the policy was issued. In Darrow v. Family Fund Society (116 N. Y. 537) it was held that: “ For the purpose of upholding a contract of insurance its provisions will be strictly construed as against the insurer. When its terms permit more than one construction that will be adopted which supports its validity. It is only when no other is permissible by the language used that a construction which works a forfeiture will be given to it.” In Bailey v. Homestead Fire Ins. Co. (80 N. Y. 23) it - was said : “ When a clause in a contract is capable of two constructions, one of which will support and the other defeat the principal obligation, the former will be preferred. ■ Forfeitures are not favored, and the party claiming a forfeiture will not be permitted, upon equivocal or doubtful clauses or words, contained .in his own contract, to deprive the other party of the benefit of the right or indemnity for which he contracted.” ' . In commenting upon Hoffman v. Ætna Ins. Co. (32 N. Y. 405), where the policy provided that if the property insured be sold or conveyed the policy should be void, and the court held that this -provision was not intended to forbid changes of interest among the partners themselves, but related exclusively to assignments and alienations, to third persons, in Keeney v. Home Ins. Co. (71 N. Y. 402) Andrews, J., said : “ The court regarded the condition against alienation as intended to protect the company against liability, in-case of a transfer of the insured property to strangers to the contract. The company by issuing the policy had shown its willingness to insure all the persons composing the firm, and the suggestion that they might have been unwilling to insure two of them without the'other, was considered fanciful and unsound.” The foregoing views lead to an affirmance. All concurred. ■ Judgment affirmed, with costs.