The plaintiffs are therefore entitled to a judgment granting a permanent injunction against the acts complained of, unless the defendant, within 10 days after the service of a copy of the judgment to be entered hereon, with notice of the entry thereof, pay to the plaintiffs said sum of $1,500, together with the costs of this action, to be taxed. If the defendant fails to pay said sum, as herein provided, then a judgment for the injunction relief asked may be entered, together with the sum of $150 damages sustained by said plaintiffs to the present time, besides the costs of this action.

HOLLAND LAUNDRY v. TRAVELERS' INS. CO.

(Supreme Court, Appellate Division, Second Department. March 12, 1915.) INSURANCE 388) LIABILITY INSURANCE EXCEPTION WAIVER AND

ESTOPPEL. Defendant issued its policy against loss by reason of liability for personal injuries, except those "caused or sustained by any person employed by the assured in violation of law as to age," stipulating to defend "suits alleging such injuries and demanding damages therefor, although such suits, allegations, or demands are wholly groundless, false, or fraudulent," and after a servant employed by the insured and under the age of 16 was injured undertook the defense, though it might have refused to defend, but denied its alleged liability, if it brought the case within the exception. The insured asserted the insurer's liability and claimed that the servant had represented that she was over 16, and filed a verified answer, denying upon information and belief the employment of a servant under age, and suffered judgment solely on the ground that the servant, when employed, was under age. Held, that the insurer, by assuming the defense, did not waive the benefit of its exception, and was not estopped by its acceptance of the premium on the policy, which continued in force. [Ed. Note.-For other cases, see Insurance, Cent. Dig. §§ 1026, 1027, 1030, 1035, 1040, 1057; Dec. Dig. 388.]

Appeal from Trial Term, Kings County.

Action by the Holland Laundry against the Travelers' Insurance Company. From a judgment for defendant, and from an order denying its motion for a new trial, plaintiff appeals. Judgment and order affirmed.

Argued before JENKS, P. J., and THOMAS, CARR, RICH, and PUTNAM, JJ.

Frederick W. Sparks, of Brooklyn, for appellant.

Frank Verner Johnson, of New York City (William J. Moran, of New York City, on the brief), for respondent.

THOMAS, J. The plaintiff employed a servant under the age of 16 years. Upon the sole ground that the employment was illegal, she obtained a judgment against it for personal injury, which plaintiff paid. Plaintiff now seeks to recover the same from the defendant, who had insured the plaintiff against loss by reason of the liability imposed by law for damages on account of such injuries, except those "caused or sustained by any person employed by the assured in violation of law as to age."

For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

The plaintiff urges that defendant, by assuming the control of the action and continuing it after information that the servant at the time of injury was under the age of 16, waived the benefit of the exception. In the policy of insurance the defendant stipulated to defend "suits alleging such injuries and demanding damages therefor, although such suits, allegations, or demands are wholly groundless, false or fraudulent." That agreement did not apply to illegal hiring. But how, without trial and judicial ascertainment of the facts, could the fact of age be known? It it alleged in the complaint, but the allegation may be untrue, and, if untrue the insurer must defend. Investigation showed that the servant stated to this defendant's agent that she was under 16, and that she claimed to have so stated when employed. But the plaintiff's general manager assured defendant's investigator that she had represented herself to be over 16 years of age. Such attitude he maintained. The defendant could have refused to defend. But that would be at the peril of proving that the case fell within the exception. The alternative was to assume control, and to defend, and, by notice to the assured, disclaim liability if the case proved within the exception. The policy was alive and demanded fulfillment; the exception was inoperative, unless the actual facts proven brought the case within it.

It is insisted that the defendant should have disclaimed the duty of defense, and tendered the conduct of the case to the plaintiff, or have notified the assured that the insurer invoked the benefit of the exception. The plaintiff's general manager received service of the notice under the Employers' Liability Act (Consol. Laws, c. 31), as well as of the summons and complaint, which stated as one ground of liability the illegal employment. He verified the answer on August 23, 1910, denying upon information and belief the employment of the servant under age, and in such verification stating the grounds of belief "are investigations which this deponent has caused to be made concerning the subject-matter of this action, and information. acquired by him during the course of his duties as an officer of the said corporation."

On September 26, 1910, the defendant, in writing to the plaintiff, referred to the allegation in the complaint that the servant was il legally employed, with ample notice that if it should be so proven the employer would bear the burden of the verdict, with the statement that the insurer would endeavor to defeat the allegation, and on January 23, 1912, the present defendant's adjuster again wrote this plaintiff that the day of trial was approaching, and disclaimed liability if there was violation of law in the employment. After referring to the evidence that was obtainable to show that the servant was of an employable age, the plaintiff was warned that the case was dangerous, and invited expression of its wishes for a settlement, with a promise, upon being advised, to take up the matter with the servant's attorney. On January 24th the new manager for the plaintiff answered that he would refer the matter to the president of his company, and added:

"I believe from what I hear that it will be very easy to prove that this girl has always claimed to be over 16 years old."

Meanwhile there had been conversation between the agents of the insurance company and the general manager, in which the latter was informed of the results of investigations, and indeed the manager cooperated to obtain information, especially concerning the circumstances of the accident, and the manager continued his assurances of the servant's representations as to age at the time of employment. In February or March, 1911, Mr. Reid, for the present defendant, suggested to the servant's lawyer a possible settlement upon the payment of $1,000, but the latter demanded $3,000. Early in 1912 the plaintiff's president was informed of the demand of $3,000 made by the servant's lawyer to settle the case, and later visited the present defendant's adjuster, Mr. Reid, in New York. Mr. Milier was accompanied by Mr. Blakely and Mr. Lee. The latter was the person who customarily had attended to the insurance business of the plaintiff, and to whom the president had referred such communications as he had received. from the defendant, with the result that Lee had correspondence with the insurance company and showed the various communications from it to President Miller, with whom he had conversations about them. The president was familiar with the statute respecting the illegal employment of infants. He knew of the clause in the policy, and of the position of the insurance company concerning it.

At the meeting in New York the president maintained that the insurance company was liable on the policy, where the employer had used all means to discover the age of a girl and had not willfully hired her under age. He understood that the question was one to be litigated, and he argued that if his company did not know the girl was under 16 years of age the policy covered the loss, and he contended that the insurance company under its policy had agreed to defend the suit. It was during this visit at New York that President Miller visited the office of Mr. Johnson, counsel for the insurance company, for the purpose of hearing what the intended witnesses would say, whereupon some of them were questioned. So that it ap pears that, a short time after the action was brought, the defendant took its position with reference to the exception. It maintained it consistently to the end. It kept the plaintiff fully informed of whatever evidence was discovered, and was constantly encouraged to prepare the defense by the plaintiff's assurance that compliance with the law could be proven.

The plaintiff not only did not suggest intervention for the purposes of defense, much less withdrawal of the case from the control of the insurance company, but rather insisted that the facts brought the case under the policy, and the president at all times maintained that the company was liable under the policy according to his construction of the law. The defendant could only pursue its ordinary course of conducting the case. The defendant did receive an offer of settlement, and sought to show that it transmitted it over the telephone to the general manager, but the evidence was excluded. However, when President Miller came to New York, he was apprised of the offer. He did not suggest that the question of settlement be resumed, but maintained his position that the laundry company was justified in the employment and that the defendant was liable under the policy.

The facts are peculiarly similar to those in Mason-Henry Press. v. Ætna L. Ins. Co., 211 N. Y. 489, 105 N. E. 826. This case falls within the authority of that decision. The defendant was not estopped by accepting the premium on the policy, which continued in force. The servant alleged liability upon other grounds than that of employment under legal age.

The judgment and order should be affirmed, with costs. All concur.

(89 Misc. Rep. 183)

SMITH v. HEDGES.

(Supreme Court, Trial Term, Nassau County. February 16, 1915.)

1. BILLS AND NOTES 315-ASSIGNMENTS-RIGHTS OF ASSIGNEE.

The assignee of notes takes them subject to any defense or counterclaim good as against the assignor.

[Ed. Note. For other cases, see Bills and Notes, Cent. Dig. §§ 751, 753, 756-759, 764, 766-769, 864; Dec. Dig. 315.]

2. SALES 404-REMEDIes of Buyer-RETURN OF PROPERTY.

Where a manufacturer of machinery, to be delivered to defendant and erected upon his land, delivered imperfect machinery, the defendant could return the property, or could notify the manufacturer to remove it at its own cost, and could hold the manufacturer for the expense of restoring his property after removal, or he could take the machinery out and store it at the manufacturer's expense.

[Ed. Note.-For other cases, see Sales, Cent. Dig. § 1146; Dec. Dig. 404.]

3. SALES 404-REMEDies of Buyer-ACTION FOR DAMAGES-COUNTERCLAIM. In such case, the defendant also might keep the machinery and sue for his damages for breach of the contract or upon warranty, and on the latter ground could maintain a separate and distinct action, or, if sued by the manufacturer for the price, could counterclaim.

[Ed. Note. For other cases, see Sales, Cent. Dig. § 1146; Dec. Dig. 404.]

4. SALES 347-REMEDIES OF BUYER-FRAUD AND BREACH OF CONTRACT. Where personal property, the subject of sale or manufacture, has been delivered and retained by the buyer after its imperfections are discovered, the buyer, in an action for the price, cannot set up a breach of contract and fraud as a separate and distinct defense.

[Ed. Note.-For other cases, see Sales, Cent. Dig. §§ 962-972; Dec. Dig. 347.]

5. CONTRACTS 320-PARTIAL PERFORMANCE

"BUILDING"-"REAL ESTATE." The construction of machinery for an asphalt plant under written contract, and its delivery to the buyer and erection on his land, so that its removal would break the walls and foundations and destroy brick and cement work, did not make the machinery and plant a "building" or "real estate," within the rule that a contractor for the construction of a building cannot recover unless there has been a substantial performance, and that the owner of the real estate may keep the improvement without paying for it, if the contract therefor has not been substantially complied with.

[Ed. Note.-For other cases, see Contracts, Cent. Dig. §§ 1459, 1469, 1493-1527; Dec. Dig. 320.

For other definitions, see Words and Phrases, First and Second Series, Building; Real Estate.]

For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

Action by S. Dimon Smith against Dayton Hedges. Judgment directed for plaintiff, and defendant moves for an order setting it aside and permitting service of an amended answer. Motion denied. See, also, 150 N. Y. Supp. 1112.

Edwards & Levy, of Freeport (Gustav Lange, Jr., of New York City, and Elvin N. Edwards, of Freeport, of counsel), for plaintiff. John R. Vunk, of Patchogue, for defendant.

CRANE, J. [1] This action is brought upon two notes given as part consideration by the defendant for construction and erection of an asphalt plant and machinery. The plaintiff, as an assignee of the notes, took them subject to all the equities, so that any defense or counterclaim, good as against the assignor, the Pioneer Iron Works, would be good against him, at least to the amount of the notes. Seibert v. Dunn, 70 Misc. Rep. 422, 126 N. Y. Supp. 974; Zabriskie v. Central Vermont R. R., 131 N. Y. 72, 29 N. E. 1006; Phillips v. Taylor, 49 N. Y. Super. Ct. 318.

The machinery was constructed under written contract by the plaintiff's assignor, the Pioneer Iron Works, delivered to the defendant, and erected upon his land, but turned out to be of insufficient capacity and not in accordance with the contract. This latter assertion, although disputed, will be assumed for the purposes of this motion. The defendant has kept the asphalt plant and machinery, and, although complaining of defects, never offered to return it, but, on the contrary, continued to use it.

[2, 3] The defendant, upon ascertaining that the Pioneer Iron Works had not fulfilled its contract and had delivered improper or imperfect machinery, was afforded two remedies by law. He could return the property, or he could notify the manufacturer to come and get it, removing it at its own cost from the foundations, and could. hold the manufacturer for the expense of restoring his property, which might be damaged by reason of the removal, or he could rip the machinery out and store it at the manufacturer's expense. The second remedy would be to keep the machinery and sue for his damages for breach of contract or upon warranty. For this latter relief he could maintain a separate and distinct action, or, if sued by the manufacturer for the price, he could counterclaim.

In this case, as the defendant kept the asphalt plant and machinery and used it after knowing of the defects, he has but this second remedy, which he availed himself of as follows: He brought an action in the Supreme Court of Suffolk county against the Pioneer Iron Works for damages for breach of contract and for fraud, and, although his complaint in the first instance has been declared insufficient, I have permitted him to amend upon the payment of costs.

[4] The defendant was also sued in the Supreme Court, Nassau county, by the assignee of the manufacturer for the price of the asphalt plant; that is, upon notes given in consideration therefor. That suit is this present action. The answer did not set up a counterclaim, as it might have done, for the reason that a separate action was brought, as above stated, for the causes which would have constituted the counterclaim. An attempt was made, however, in the an