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Argued before KRUSE, P. J., and ROBSON, FOOTE, LAMBERT, and MERRELL, JJ.
H. D. Blakeslee, Jr., of Buffalo, for plaintiffs.
LAMBERT, J. This action is brought upon a contract for socalled credit insurance. The plaintiffs are engaged in the hardwood lumber business at Buffalo, N. Y., and the defendant, so far as appears, is engaged in the business of insuring credits. On October 6, 1911, in consideration of $275 premium paid by the plaintiffs, the defendant issued to plaintiffs a certain insurance policy whereby, among other things, it guaranteed the plaintiffs"against actual loss to an amount not exceeding five thousand dollars ($5,000.00) on such covered amounts as may be proved under the terms, conditions, and limitations of this contract, which the guaranteed may lose on bona fide sales, shipments, and delivery of merchandise
made in the usual course of the guaranteed's business of hardwood lumber, between the 1st day of December, 1911, and the 30th day of November, 1912, both dates inclusive, in excess of the initial or own loss to be borne by the guaranteed, being one-half of 1 per cent., but in no event to be less than seven hundred and fifty dollars ($750.00) on the gross aggregate amount of all the guaranteed sales and shipments up to two hundred thousand dollars ($200,000.00), and nine-twentieths of 1 per cent. on gross sales and shipments, if in excess of two hundred thousand dollars ($200,000.00) during that period."
The contract further provided that the amount of loss to be claimed by the guaranteed under the contract should be limited by the conditions and requirements of the contract. Under the heading “Coverage of Accounts” it was stipulated :
“But no account against any one debtor shall be covered for more than two thousand dollars ($2,000.00). These limits shall apply to the amount which the debtor owes the guaranteed at the time of insolvency."
There are many further requirements and conditions in this contract relating to the class of accounts covered by the policy and the manner of applying salvage upon such accounts between insurer and the assured. A scheme is presented for the prorating of such salvage and the ascertainment of the real net loss, and then follows this provision:
"From the net loss thus ascertained is to be deducted the initial or own loss to be borne by the guaranteed, and the remainder, if any, not exceeding the limit of the guaranty, is to be the amount due the guaranteed under this contract."
To such contract there were affixed some three several riders, but this controversy presents questions only as to rider No. 2. The conditions of this rider are as follows:
“In the event of the insolvency of any individual debtors coming within the terms and conditions of this contract, owing the guaranteed at the date of insolvency in excess of the $2,000.00 single account limit mentioned in the body of this contract, such excess, not exceeding $1,000.00 (thereby increasing the single account limit to $3,000.00), shall also be taken into calculation of losses under this contract, subject to the stipulated percentage of capital rating and all other terms and conditions of the contract; in that event, however, the guaranteed's initial or own loss of one-half of 1 per cent. not being less than $750.00 as provided for in the body of this contract shall be increased by such
sum as will equal one-half of the difference between the original single account limit as above specified and the largest single account reported in excess thereof, within the limit above specified. All the terms and conditions of the contract to remain in force."
Within the term of this contract the assured suffered a total loss upon an account owing by one Gouveneur E. Smith & Co., to the amount of $3,869.08, upon which account there was no salvage. It is conceded that all the preliminary requirements on the part of the assured have been fully met, and the controversy presented is merely as to the amount which the defendant is liable to pay under this contract on account of such loss. The parties agree that the first initial or own loss provided for in the contract amounts to the sum of $1,055.23. They differ as to the amount of additional or own loss provided for by rider No. 2, and further differ as to whether such total initial or own loss is to be deducted from the amount of the Smith claim, to wit, $3,869.08, or from the $3,000 limit of liability prescribed by the contract as enlarged by rider No. 2. These two questions are all those presented by this record.
The general scheme of the contract of insurance does not admit of much doubt. Before the addition of rider No. 2, the company liad apparently thereby agreed to pay such loss as the assured should suffer upon poor accounts of the prescribed character and rating, up to the sum of $5,000, and limited only by the special provision relative to losses upon a single account, whereby it stipulated that it should not be liable upon any one account in excess of the sum of $2,000. In any event the assured obligated themselves to stand all loss arising in connection with their business, up to a specified percentage upon their total business, and this the assured covenanted to bear before any liability arose against the defendant.
In so far as liability of the defendant is concerned, it seems equally clear that rider No. 2 merely increased defendant's liability upon each single account from $2,000 to $3,000, and in that particular leaving the main contract otherwise unchanged. Such conception of the structure of this contract is borne out by the express provision, above quoted, that from the net loss was to be first deducted the initial or own loss, borne by the guaranteed, and that the remainder, not exceeding the limit prescribed, was the amount of the liability of the defendant. It seems clear, therefore, that the deductions by way of initial or own loss, both under the main contract and under rider No. 2, are to be deducted, not from the $3,000 limit of liability, but from the amount of loss sustained by the assured on the single account, and that the defendant is to be liable for the difference up to the sum of $3,000.
The more serious question arises as to the additional initial loss provided for in rider No. 2. It will be noticed that this additional initial loss is therein prescribed to be one-half the difference between the original “single account limit as above specified, and the largest single account reported in excess thereof, within the limit above specified.” The construction of this phraseology turns upon the meaning of the two expressions "original single account limit" and "largest
single account reported in excess thereof within the limit above specified.”
The defendant contends that the expression "original single account limit” refers clearly to the $2,000 limit of liability prescribed under the original contract, and in that connection calls attention to the fact that rider No. 2 deals exclusively with single account losses. It is further pointed out that in the same rider reference is made to "the $2,000 single account limit mentioned in the body of this contract. It concludes that necessarily, therefore, the original single account limit referred to is the $2,000 limit originally in the contract and again referred to in this rider. Defendant further contends that the reference to the largest single account reported within the limit above specified must necessarily refer to the $3,000 increased limit, and that the largest account that could be reported within that limit would be $3,000, and the defendant assumes that, the account in question having exceeded that limit, the computation provided for by this rider as an additional initial loss must necessarily be half of the difference between $2,000 upon the one hand and $3,000 upon the other, giving a result of $500 to be added to the first initial loss.
The plaintiff suggests the expression "original single account limit” does not refer to the $2,000, but refers to such an account as, after deducting the first initial loss, will leave the company liable for the full limit of $2,000; in other words, that in this instance the original single account limit would be the sum of $2,000 plus the first initial loss of $1,055.23, or $3,055.23. The plaintiff upon the same reasoning construes the reference to the "largest single account reported in excess thereof within the limit above specified" to refer, not to the sum of $3,000, but to an account which will leave the company liable for just $3,000 after deducting the first initial loss to be borne by the assured. Upon plaintiff's construction of the latter provisions of rider No. 2 the additional initial loss to be borne by assured amounts to $406.93.
Again referring to rider No. 2, the initial or own loss, provided in the original contract, was increased by-"one-half of the difference between the original single account limit as above specified ($2.000), and the largest single account reported in excess thereof, within the limit above specified ($3,000).” (The underscoring and figures in pa rentheses are mine.)
It seems to me reasonably clear that the added initial or own loss to be deducted, if we give effect to the underscored words above quoted, must mean just what the rider reads, viz., the difference between the original single account limit in the rider specified, which certainly was $2,000, and the largest single account reported in excess thereof, within the limit specified in the rider, which was $3,000. If I am right, the initial or own loss of nine-twentieths of 1 per cent. on gross sales and shipments made by plaintiff during the year, which initial loss concededly amounted to $1,055.23, was by rider No. 2 increased by $500; that being one-half the difference between $2,000 and $3,000.
This view leads to the holding in this case that the additional initial loss provided for by rider No. 2 amounts to $500. This sum is to be
added to the first initial loss of $1.055.23, making the sum of $1,555.23, total initial loss to be borne by the assured. This sum is to be deducted from the amount of the loss of $3.869.08, leaving the amount of liability of the defendant $2,313.85. This sum is within the liability limit of $3,000, and hence plaintiff should have judgment for that amount, with interest thereon from February 23, 1912, together with the costs of the submission.
Judgment directed for the plaintiff upon the submission for the sum of $2.316.85, with interest and with costs. All concur, except FOOTE, J., not sitting
FAIRCHILD v. SCARSDALE ESTATES et al.
WHITE PLAINS DEVELOPMENT CO. v. REED et al.
(Nos. 66 E, 67 E.)
(Supreme Court, Appellate Division, Second Department. February 19, 1915.) 1. VENDOR AND PURCHASER (8 327*)—PURCHASER UNDER SPECIALTY-AGENCY.
A purchaser of land under a contract under seal could enforce a claim for shortage in the amount conveyed, although she took title for another,
Ed. Note.-For other cases, see Vendor and Purchaser, Dec. Dig. 8 327.*] 2. ACTION ($ 65*)-RIGIITS ACQUIRED PENDING ACTION-CLAIM TO SUE FOR
SHORTAGE OF LAND CONVEYED-RIGHT TO MAINTAIN ACTION.
Where suit was brought on a claim for an alleged shortage in the amount of land conveyed to another, a subsequent assignment of the claim to plaintiff gave no authority to maintain the suit previously brought, or ti intervene by counterclaim in a suit in equity concerning the land, also begu: before the assignment.
[Ed. Note.-For other cases, see Action, Cent. Dig. $$ 735, 736; Dec.
Dig. $ 65.*] 3. DEEDS ($ 158*)-CONDITIONS THAT RUN WITH THE LAND-STIPULATION AS
TO SHORTAGE IN AMOUNT CONVEYED.
A stipulation in a deed as to a shortage in the amount conveyed does not run with the land.
(Ed. Note.-For other cases, see Deeds, Cent. Dig. $8 502-504; Dec. Dig. f 158.*) Appeals from Special Term, Westchester County.
Action to foreclose a mortgage by Josephine M. Fairchild against the Scarsdale Estates, the White Plains Development Company, the Guardian Trust Company, as trustee, and others, and action at law by White Plains Development Company against Emma E. Reed and another and the Scarsdale Estates. In the foreclosure action, both plaintiff and the defendants White Plains Development Company and Guardian Trust Company appeal from parts of a judgment for plaintiff Fairchild; and in the action at law, the White Plains Development Company appeals. Judgment in the equity action affirmed in part and reversed in part, and judgment in the action at law affirmed.
See, also, 151 N. Y. Supp. 1114.
Argued before JENKS, P. J., and THOMAS, CARR, RICH, and PUTNAM, JJ. *For other cases see same topic & $ NUMBER in Dec. & Am. Digs. 1907 to date, & Rep’r Indexes
Elmer E. Cooley, of New York City, for appellant Fairchild.
William S. Bennet, of New York City, for appellants White Plains Develoj ment Co. and Guardian Trust Co.
William L. Rumsey, of New York City, 'for respondent.
THOMAS, J. The trial court decided correctly that the plaintiff purchased an interest in the mortgage limited to the principal sum of $150,000. Payment therefor, with interest, and no more, is sought in the complaint; proof of such an interest, and no greater, was shown; judgment for such amount was moved; the formal assignment of that interest, and no more, was made. It does not concern the plaintiff who owns the remaining interest. The Scarsdale Estates, in its resolution authorizing the sale of the land, contemplated a shortage of acreage, which the map long in its possession showed to exist, and for which there was a provision in the resolution authorizing the contract, while the contract itself provided that if, upon survey, a shortage of acreage should appear, there should be a deduction from the purchase price at the rate of a given price per acre, “such amount to be deducted from the sum to be secured by the second mortgage." The contract was made June 8, 1906, and the closing, set for August 2d, was adjourned to August 10th, and then had at a law office in the city of New York. Of the principal representatives of the parties, Hitchcock was dead and the other in prison, but several persons. including the lawyer for the Scarsdale Estates, were witnesses; but none of them had any recollection that the question of shortage was involved in the adjustment, although 10 acres of land that the vendor was privileged to reserve were made a part of the sale at a price which a witness said was fixed at $20,000. But the purchase price was advanced only by $8,700, which was quite inadequate to meet the value of the 10 acres. How the balance of the $20,000 was paid is not known, and it is the merest conjecture that the shortage was used to make up the deficiency. There was a map, made in 1897, produced by the vendor at the closing and used therefor, which showed the shortage. Nevertheless, the deed and mortgages which had been earlier drafted were redrafted, and yet the original full acreage was stated in them as if no treatment of the acreage had been had.
It is clear enough that the vendee's agent in charge had, before August 22, 1906, full opportunity to see a map made by its engineer which showed the true acreage, and the inference is justified that he did see it, as the engineer carried it when he went on the land with either Hitchcock or Jennings It is a fair inference that at the closing the acreage was known. For several years the interest was paid on the mortgage, and finally, after financial embarrassments, Jennings and the vendor recast the arrangement for payments, and Jennings paid a large sum pursuant thereto. If a claim for shortage existed, it would have been too helpful to be disregarded by Jennings. The contract evidently intended that a new survey should be made and the shortage discovered thereby deducted from the sum “to be secured by the second mortgage.
That shows intention that the deduction should be made before the mortgage was given. One fact is