Case ID: misc_58/html/0528-01.html
Source: Caselaw Access Project
Author: {"author": "Seabury, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Angus D. McLean, Trustee, Appellant, v. Stephen R. Tobin and Thomas R. Tobin, as attorneys-in-fact of and representing Daniel Nobel et al., Respondents.
    (Supreme Court, Appellate Term,
    April, 1908.)
    Insurance: Requisites and validity of contract — In general — Prepayment of premium — Waiver of prepayment: Actions on policies—Persons against whom action may be brought on Lloyds policy: Adjustment of loss — Necessity of arbitration.
    Contracts — Validity of contracts — Public policy in general — Agreements limiting control of court or depriving it of jurisdiction.
    Where a policy of insurance contains the clause: “No action shall be brought to enforce the provisions of this policy except against the manager as attorney in fact and representing all of the underwriters, and each of the underwriters hereby agrees to abide the result of any suit so brought,” an action can be maintained against the attorneys in fact who are also underwriters.
    A clause in such policy providing that any action on it must be brought in the Supreme Court is invalid, since the jurisdiction of courts is beyond the agreement of the parties.
    The insurers cannot invoice an arbitration clause as a defense to an action, where they neither appointed appraisers nor requested that action he taken under it.
    The fact that no premium was paid does not preclude a recovery on the policy, where it was delivered to the insured without exacting such payment.
    Appeal by the plaintiff from a judgment in favor of the defendants, rendered in the Municipal Court of the city of ¡New York, seventh district, borough of Manhattan.
    
      John J. McKelvey, for appellant.
    George M. Curtis, for respondents.
   Seabury, J.

This action was brought to recover on a Lloyds policy of insurance. The policy was for $500 and covered certain property at Blount’s Creek, Washington county, N. O. The risk insured against was loss by fire. The policy was issued on February 16, 1904; and the property covered by the policy was destroyed by fire on March. 17, 1904. No premium upon the policy had been paid. Proofs of loss were duly filed, and this action was instituted in the Municipal Court of the city of New York. The court below rendered judgment for the defendants. The appeal from this judgment presents for our consideration the following questions:

First. Was the action properly brought against the attomeys-in-fact representing the several underwriters named in the policy ?

Second. Is the clause in the policy which specifies that an action upon it can only be brought in the Supreme Court valid ?

Third,. Was there such a breach of the arbitration clause in the policy as to preclude a recovery by the plaintiff ?

FouHh. Does the fact that there was no premium paid on the policy preclude a recovery by the plaintiff?

These questions we shall now discuss in the order in which they are referred to above.

I. The appellant contends that the action was properly brought against the attorneys-in-fact for' and representing the several underwriters named in the policy. The policy contained the following clause: “No action shall be brought to enforce the provisions of this policy except against the manager as attorney-in-fact and representing all of the underwriters, and each of the underwriters hereby agrees to abide the result of any suit so brought and defended, as fixing his individual responsibility hereunder.”

The right to maintain an action against the attorneys-in-fact of the underwriters, when such attorneys are also under^ writers, has been repeatedly upheld in this department. In Leiter v. Beecher, 2 App. Div. 578, a similar clause was under review and the court held that it was valid and that an action could be maintained against those named in the policy as the attorneys-in-fact of the underwriters. See also the following eases which follow Leiter v. Beecher, supra, and establish the rule which prevails in this department. New Jersey & Penn. C. Wks. v. Ackerman, 6 App. Div. 540; Compton v. Beecher, 17 id. 38; Lawrence v. Schaefer, 20 id. 80; McCredy v. Thrush, 37 id. 465. We do not understand that Gouch v. Satterlee, 32 App. Div. 33, denies the right to maintain the action against the att-orneys-in-fact who are also underwriters. Whatever effect should be given to the views there expressed in determining the ultimate rights of the parties in such an action and the method by which a judgment rendered against them may be enforced, is foreign to the question now presented to us for determination. In any event the defense of misjoinder to be available should have been pleaded. Lowrey v. Bates, 26 Misc. Rep. 407. The action was, therefore, properly brought against the attomeys-in-fact for and representing the several .underwriters named in the policy.

II. The policy also contains the following clause: “Any action brought to enforce the provisions of this policy must be brought in the Supreme Court, County of Mew York, State of Mew York.”

The action was, in direct violation of this provision of the policy, brought in the Municipal Court of the city of Mew York. The question is, therefore, squarely raised, whether this clause is valid. The Constitution and statutes determine the jurisdiction which shall be exercised by the courts of the State; and, their jurisdiction having been lawfully conferred, they cannot be prevented from exercising it, when it is properly invoked, by the private contract of individuals. In Benson v. Eastern Bldg. & Loan Co., 174 N. Y. 83, 86, Judge Cullen said: “ Mor does the condition go to the jurisdiction of the court. That jurisdiction is prescribed by the Constitution of the state and the statutes passed under it. It can neither be added to nor subtracted from by ' the agreement of the parties. It is true that 1 Parties, by their stipulations, may in many ways make the law for any legal proceedings to which they are parties, which not only binds them, but which the courts are bound to enforce (Matter of N. Y., L. & W. R. R. Co., 98 N. Y. 447),’ but the jurisdiction of the court is beyond the agreement of the parties.”

Establishing and defining the jurisdiction of the courts is a matter which lies solely within the sphere of public policy, in reference to which the State alone can prescribe; and no contract which seeks to contravene the State’s policy, in this matter, is sacred, nor does the individual possess or the State permit any freedom of contract for this purpose. An agreement not to sue except in the Circuit Court of the United States has been held to be void (Mutual Reserve Fund L. Assn. v. Cleveland Woolen Mills, 82 Fed. Rep. 508), as has also an agreement not to remove to the Federal court a suit commenced in the State court. Doyle v. Continental Ins. Co., 94 U. S. 535; Home Ins. Co. v. Morse, 20 Wall. 445. In Hancock Leather Co. v. Ayrault, N. Y. L. J., Dec. 14, 1904, Mr. Justice Scott, at Special Term, considered a ease where the policy provided that the action should be brought in the highest court of original jurisdiction.”

Deferring to this clause, the court said: “ This involves the proposition that the parties to the contract could, by agreement, between themselves, lawfully and effectually oust certain courts of their statutory jurisdiction. Such a proposition is wholly untenable (Home Ins. Co. v. Morse, 87 U. S. 445), and the clause relied upon must be held to be wholly inoperative and invalid.”

III. The policy contained the usual arbitration clause; but, as the insurers neither appointed appraisers under it nor requested that action be taken under it, they are not in a position to invoke this clause for the purpose of defeating the plaintiff’s right to maintain this action. Chainless Cycle Mfg. Co. v. Security Ins. Co., 169 N. Y. 804.

IV. The fact that there was no premium paid on the policy does not preclude a recovery by the plaintiff. The defendants were not bound to deliver the policy without the payment of the premium; but, if they saw fit to do so, the validity of the policy was not impaired on this account. Healy v. Ins. Co. of Pennsylvania, 50 App. Div. 327.

It follows that the judgment appealed from should be reversed and a new trial ordered, with costs to the appellant to abide the event.

Gildebsleeve, J., concurs; Dayton, J., taking' no part.

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