Case Name: James Talcott, Respondent, v. The National Credit Insurance Company, Appellant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1898
Citations: 28 A.D. 75
Docket Number: 
Parties: James Talcott, Respondent, v. The National Credit Insurance Company, Appellant.
Judges: 
Reporter: Appellate Division Reports
Volume: 28
Pages: 75–80

Head Matter:
James Talcott, Respondent, v. The National Credit Insurance Company, Appellant.
Credit indemnity to a commission merchant — what apportionment is contemplated by the use in the 'policy of the word “pro-rated"—application of the policy to goods consigned to the insured and to his advances and commissions on the sale thereof— when an action thereon is not premature — interest is not chargeable after suit brought.
A credit insurance policy insuring a commission merchant for one year against loss from the insolvency of his debtors (no single loss of a debt due from any one individual or firm to exceed §10,000), and also protecting his advances upon goods consigned, provided by its 10th clause that “all settlements accepted, amounts paid, secured or guaranteed, or in process of collection on any claim at the time of final proof of loss, shall first be deducted and pro-rated on shipments made under ” the policy before another condition, providing for additional deductions of fifteen per cent of the amount of the claim, and of five-eighths of one per cent of the amount of the annual sales of the merchant, should apply.
Held, that the word “pro-rated” required an apportionment when a debt was. made up of the purchase price of goods, some of which were sold within the period of the policy, and some of which were not, so that the part insured should receive its due share of a payment; that it did not require, where a debtor failed, that the amount realized upon goods consigned to the creditor, the insured, should be apportioned ratably between the §10,000 of debt covered by the policy and the excess of the debt over $10,000 not so covered;
That the insured was entitled to deduct from the price realized on the sale of goods consigned to him his commissions upon the sales so made before crediting the moneys received on the sale upon the indebtedness;
That as the policy provided that all amounts “secured or guaranteed, or in process of collection ” as well' as those actually paid, should he included in the. proofs of loss, it permitted the insured to sue before he had sold the consigned goods, and that, consequently, as the debt necessarily became fixed as of the date when he brought suit, he could not recover interest which accrued upon his advances subsequent to that date.
Appeal by the defendant, The National Credit Insurance Company, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk- of the county of New York on the 18th day of November, 1897, upon the verdict of a jury rendered by direction of the court after a trial at the New'York Trial Term.
Rufus W. Peckham,.Jr., for the appellant.
Frederic R. Kellogg, for the respondent.

Opinion:
Barrett, J.:
The action is brought upon a policy in the sum of $5,000, insuring the plaintiff- against loss from the insolvency of those to whom he should sell goods (between March 11, 1892, and March 11,1893)^ in excess of five-eighths of one per cent of the amount of his total sales during this period. A rider annexed -to the policy provides, "Advances made on goods, for transacting above-named business (that of dress goods commission merchant)- to be protected and cow ered under the .terms and conditions of this bond." There are sixteen clauses in the policy, setting forth the terms .and conditions upon which .the defendant's liability depends. The- 6-th-clause limits all claims of loss for debts due the plaintiff by any one 'individual or firm to the sum of $10,000.
The plaintiff has recovered judgment for the full amount of the; policy, ivith, interest. His claim is based upon a single transaction,, that with Albert Crenshaw & Co., of Philadelphia. Crenshaw & Co. failed about October 26,1892. At this date they owed the plaintiff nearly $34,000, against which- he held a large quantity of dress goods, consigned to him for sale. These goods were sold from time to time thereafter, and the.net proceeds credited upon the account. They were not all disposed of until about January 1,1897. After adding to the amount of the advances the expenses of sale, including commissions, and deducting the amount realized from the goods and the •other sums specified in the policy, there.remained a balance of over $5,000. The defendant's principal contention is, that this method •of computation was erroneous. It is said that the amount realized from the consigned goods after Crenshaw & Co.'s insolvency should have been apportioned ratably between the $10,000 of debt which the policy covered, and the $24,000 which it did not cover. Such a payment would have been more than sufficient to extinguish the $10,000 of insured debt.
If this contention is to prevail it must, we think, find direct support in the provisions of the policy. The general nature of the insurance does not sanction it. The indemnity is against " losses; " and, as we said upon a previous occasion in construing such a policy, " Money is not ' lost ' which the creditor is able to obtain whether .the payment be made before or after the commission of the act of insolvency." (Goodman v. Mercantile Credit Guarantee Company, 17 App. Div. 474.) The provision which the defendant relies upon in support of its contention is contained in the 10th clause of the policy, which reads: " All settlements accepted, amounts paid, secured or guaranteed, or in process of collection on any claim at the time of final proof .of loss shall' first be deducted cmd pro-rated on shipments made under this bond before condition number eighth shall apply." Stress is laid upon the word " pro-rated," which it is said indicates an apportionment of payments. That is true ; but the nature of that apportionment is disclosed by the context. Payments are to be " pro-rated on shipments made under this, bond." That is, when a debt is made up of the purchase price of goods, some of which were sold within the period of the policy, and some of which were not, a payment upon the debt must be apportioned so that the part insured shall receive its due share. The clause as a whole can mean nothing else.. We. have no such clause here. All the advances were made during the period of the policy; and the only reason why the whole debt is not covered is that the policy limits claims of loss for debts due by any one firm or individual to $10,000. There is not a word in the 10th clause permitting the inference that payments' are to' be apportioned between this $10,000 and the balance of the debt. The provision is general that payments are to be " deducted," which, of course, means subtracted in the ordinary manner. To this is added a provision for apportionment as between shipments made under the bond and shipments not so made. To this extent the first provision is qualified and no further'.
There is another reason why the defendant's contention must fail. The 10th clause provides for -the deduction of payments " before condition number eighth shall apply." The 8th clause provides for two other deductions, viz., fifteen per cent of the amount of the claim, and five-eighths of one per cent of the amount of the annual sales. Thus, after subtracting all payments, there are still other deductions to be made before the claim is in a condition to be included in' the proofs of loss. But, in . order to apportion payments between the $10,000 of insured debt and the uninsured surplus, it is necessary to know the exact excess of the claim, after all deductions are made, beyond the sum of $10,000. Thus,, if we are to adopt the defendant's construction,- the 10th clause directs an apportionment to be made at a time when it is impossible to make it.
We thus conclude that, under this policy, sums realized after insolvency should simply be deducted in full, and not apportioned between the insured and uninsured part of a debt contracted wholly during the period of the policy. We came to just the opposite conclusion in the Goodman Case (supra) with' reference to the policy then under consideration. This was due to a specific clause in that policy providing that, " When only a part of a loss is covered by this contract,' the proportionate part of everything realized or secured by the indemnified shall be credited to so much of the loss as is covered by this contract." There is no such provision here or any fair equivalent; and the two policies are quite dissimilar so far as concerns the point we have been considering.
The defendant also contends that the plaintiff improperly deducted from the proceeds of the goods his commission for selling, them. It is said that he was insured only for " advances " made, and that this commission was for services rendered. The argument is based upon a misapprehension. The plaintiff's claim is founded upon advances made to Crenshaw & Co., which are directly covered by the policy. From the total amount of this debt, the sum realized from the consigned goods must be deducted. The only question is whether the gross or the net proceeds should be subtracted. We think that, without doubt, the latter is the proper credit. The sum which Crenshaw & Go. owed the plaintiff is the measure of the defendant's liability; and there can be no doubt that, as between Crenshaw & Co. and the plaintiff, the latter is entitled to his commissions. In allowing them to be deducted from the gross proceeds' of. sale we are not permitting the plaintiff to recover upon a cause of action for services. We are merely ascertaining the precise amount of the debt due by Crenshaw & Co. for the advances made to them. In ascertaining that precise amount, commissions - are just as much to be deducted as freight, cartage, or any of the other expenses of sale. The defendant might, with just as great reason, argue that the policy does not cover these latter claims.
We think, however, that it was error to include in the claim interest upon the advances which accrued subsequent to July 27, 1893, the date when the action was begun. The suit was not premature. The plaintiff was not bound to wait until all the consigned goods were sold. The policy plainly contemplates the inclusion in the proofs of loss of claims which are not yet liquidated. It provides that all amounts "secured or guaranteed," as well as those actually paid, shall be included in the proofs. It also provides for the' deduction of sums paid, secured, etc., " or in process of collection." Adjustment is to be made within sixty days after the presentation of proofs of loss, and payment within sixty days after adjustment. Thus the defendant might have to adjust and pay a claim not wholly liquidated, or stand suit upon it. It had to decide upon the facts placed before it what was, in fact, the amount " secured " •— that is, what the security would bring. If it could not come to an agreement with the insured as to this, it was either boiind to pay and obtain subrogation, or take the chances of a suit.
Thus the plaintiff's cause of action was complete on July 27, 1893. He may recover what the defendant, owed him on that date, with interest. But the defendant owed only what Crenshaw & Co. owed on that date; and manifestly the latter were not liable for interest which had not yet accrued. It is true that it was the plaintiff's duty to proceed with the sale of the goods. But this did not, as we have seen, prevent his cause of action from accruing. He could and did bring suit long before all the goods were sold, and he secured a trial just as speedily as though rio such subsequent sales had been necessary. It is true, also, that the result of this further action was relevant in arriving at a determination of what was due when the suit was brought. It was evidence, and, as it existed at the time of trial, perhaps controlling evidence, of the extent to which the debt was secured. What it was admitted to prove, however, was riot the amount due at the period when the last of the goods were sold, but the amount due when the suit was brought. It is impossible in this view to permit the plaintiff to recover interest upon the advances during the period of liquidation. That would be to compensate him, by that allowance, for the time spent in ascertaining, in a jpa/rticular way, the precise amount of the debt when suit was brought. Such an allowance of interest would only be possible or permissible in case the sale of the goods had been a condition precedent to the enforcement of the. plaintiff's rights; and, if that were so, the action was premature. As we have seen, however, the sale of the goods was not such a condition precedent. The cause- of action was complete when the suit was commenced, and consequently the plaintiff can only recover what was then due, without regard to the time spent or the practical method adopted, in the process of ascertainment. To permit him to recover this running interest would be to permit a recovery upon a default which had not occurred when the suit was brought. After July 27, 1893, the only default for which the plaintiff could recover was the defendant's default in nof'paying what was due on that day. This default is represented by the interest on the verdict, and that is all to which the plaintiff is entitled.
It follows that interest accruing on the advance subsequently to July 27, 1893, should have been excluded from the claim, and the judgment must be modified accordingly. Upon the settlement of the order we will determine whether, upon the facts appealing in the record, the modification can properly be made. If' not, the judgment must be reversed, and a new trial ordered.
Van Brunt, P,. J., Rumsey Patterson and McLaughlin, JJ., concurred
Judgment reversed, new trial ordered, costs to appellant to abide event, unless modification made as indicated' in opinion.