Brooklyn Clothing Corp. v. Fidelity-Phenix Fire Insurance

Kelby, J.: A bailee may insure in his own name, for their full value, the goods intrusted to him, and upon proof of loss he may recover the full value, not exceeding the sum insured, holding the remainder, after deducting his own loss, as trustee for the bailor. Such a policy covers the merchandise itself and not merely the interest or claim of the bailee for account of the bailor. (Stillwell v. Staples, 19 N. Y. 401; Home Insurance Co. v. Baltimore Warehouse Co., 93 U. S. 527; Rohrbach v. Germania Fire Ins. Co., 62 N. Y. 47, 54.) And the bailee need not specify the nature of his interest in the property. (Phoenix Insurance Co. v. Erie Transportation Co., 117 U. S. 312.) But here the bailee was insured under a policy that limited the insurance to the bailee’s interest in and its legal liability for property held by it in trust. It is clear that the goods were not held by plaintiff in any of the ways specified in the policy, except “ in trust.” Goods held by a bailee for account of his bailor are held in trust. (Stillwell v. Staples, supra.) What was the plaintiff’s “ interest in and legal liability for ” the property of the Fox Company held by it in trust? It is argued by the plaintiff that the word “ interest ” means all of the plaintiff’s [747] insurable interest, which in turn would embrace the plaintiff’s own interest in the goods and the interest of the Fox Company in the goods left with plaintiff to have work done upon them. It seems clear that the plaintiff was insured, first, on goods that were owned by it; second, on goods which had been owned by it but which were sold but had not been removed from its premises; third, for its own interest in the property of others upon which it was at work. The only interest plaintiff had in the goods of the Fox Company was the value of the work and material that it had put into them. If the words “ their interest in ” had been left out of the policy, it is quite clear that this insurance, no matter what its nature, whether fire, riot, commotion or otherwise, would have inured to the benefit of the owner of the goods under the cases above cited. But with these words of limitation in, it cannot be held that the owner’s interest in the goods is covered by the word “ interest.” There remains the other clause in the policy, or “ their legal liability for similar property held by them * * * in trust.” What was the legal liability of the plaintiff to the Fox Company for goods left with the plaintiff as bailee? It is urged by the defendant that the only thing that a bailee is liable to a bailor for is the bailee’s negligence. It is a familiar rule of law that when a bailor calls upon the bailee for the delivery of goods theretofore intrusted to him, the non-production of the goods raises a presumption of negligence on the part of the bailee. This presumption can, however, be rebutted by showing that the goods were destroyed by fire, or by theft, providing the fire or the theft was not occasioned by the bailee’s negligence. Strictly, however, the bailee is never liable to the bailor except for the bailee’s negligence. It will be noted, as above stated, that this policy was supposed to indemnify the assured against loss of property caused by riot and civil commotion. If the defendant’s construction of the policy prevails, it was receiving premiums for insurance upon which there never could be any legal liability. In fact the defendant urges that the bailee here cannot be liable for riot in any event, and that it is liable for negligence only. By the same token the defendant admits that it was receiving part,of the premiums for insurance upon which there was no legal liability on its part. This construction should not be permitted. It seems quite reasonable that people engaged in business such as the plaintiff, rather than suffer a loss of custom, would agree with the owner of the goods that on failure to produce the goods they would reimburse the owner for their value. The words “ legal liability” in this policy must be held to embrace the contractual liability which the plaintiff assumed on receipt of the goods from the owner. This construction [748] is adopted solely because of the evidence of the character of the insurance; otherwise the policy means nothing at all concerning the plaintiff’s interest in the goods of the owner. As to this question, namely, whether plaintiff agreed with the owner to become liable for the goods, has a question of fact been raised by the pleadings and papers? If it has, the court erred in granting summary judgment; for such a judgment can be granted only when no issue of fact is presented. (Dwan v. Massarene, 199 App. Div. 872.) On its part the plaintiff makes the bare statement that “ it was further agreed that the plaintiff would be liable ” to the owner in case of loss, damage or injury to the coats. It presents no proof of such agreement, and it makes no mention of it, either in the affidavit of its president or the affidavit of William Fox, except that in his affidavit the president “ reiterates and realleges the allegations ” of paragraph 4th of the complaint, which is the paragraph that contains the allegation in question. The defendant on its part, in the answer, denies that as to thé alleged agreement it has any knowledge or information sufficient to form a belief; such form of denial being doubtless the only one that it was in a position to make. The affidavit of defendant’s secretary states that on the trial it will present evidence to show, among other things, that the plaintiff had no legal interest in or no legal liability for the property. The defendant’s denial is at least as strong and as plausible as the plaintiff’s affirmation. Where a plaintiff’s allegations are unsatisfactory and are made as to matters concerning which the defendant could not be expected to have knowledge, the defendant should not be penalized for denying them in the only manner possible to him. It may be that upon a trial the plaintiff would not be able to convince the jury that it did agree with the owner to extend its liability beyond the legal liability of a bailee who receives goods for the purpose of doing work upon them. It may be that the defendant would be able to show, by cross-examination or otherwise, that there was no such agreement. In Chelsea Exchange Bank v. Munoz (202 App. Div. 704) the court cites the English case of Saw v. Hakim (5 T. L. R. 72) and quotes: “ The general principle had been laid down, that if a fair case for a defense was made out by the defendant, unless it was displaced by some undoubted documentary evidence, as an account showing a balance due or a letter promising to pay, the defendant ought to be allowed to defend. * * * It was an action in which there was prima facie a case for the plaintiff and prima facie a case for the defence and then as to facts the affidavits were entirely contradictory.” In Saw v. Hakim. there was a concurrence by [749] Manisty, J., who said: “ He had the greatest distrust of affidavits upon disputed questions of fact and would never consent to try such questions upon affidavit.” Peninsular T. Co., Inc., v. Greater B. Ins. Corp., Ltd. (200 App. Div. 695) holds: “Plaintiff’s motion under rule 113 of the Rules of Civil Practice for summary judgment and to strike out the answer should not have been granted in an action on a policy of insurance issued to the plaintiff as owner of a schooner, where it appeared that there were issues duly joined with respect to the subject and amount of the insurance and the cause and extent of the loss which cannot be determined summarily on conflicting affidavits, * * *. A motion under rule 113 * * * should be denied, unless it is perfectly plain that there is no substantial issue to be tried, * * One of the cases cited in the last quoted case is Lloyd’s Banking Co. v. Ogle (L. R. [1876] 1 Ex. Div. 262), where Bramwell, B., writes: “ Had this matter come before me in the first instance, I think I may say that I should not have made this order, for the power to sign judgment was, in my opinion, intended to apply to those cases which almost on the admission of the defendant are undefended, and not to cases in which the defendant might reasonably say, ‘ I do not know i£ your case is well founded or not, but I require you to prove it.’ ” The appellant makes the claim, alsb, that “ the plaintiff fixes the value of the goods and of his interest therein to suit himself; ” and that as defendant has denied all of this, the plaintiff’s claim is not a liquidated claim. The judgment and order should be reversed on the law, with costs, and the motion for judgment denied. Kelly, P. J., Manning, Young and Kapper, JJ., concur. Judgment and order reversed on the law, with costs, and motion for judgment denied.