67 A.D. 151

Cummer Lumber Company, Respondent, v. The Associated Manufacturers' Mutual Fire Insurance Corporation of the State of New York, Appellant.

(Nos. 1 and 2.)

Foreign corporation what does not constitute doing business in the State of New ¡ York—purpose of the statute on that subject—fire insurance effected- through New York brokers— the retention of proofs of loss waives defects therein duty of the insured where an automatic sprinkler freezes.

Evidence that a corporation, organized under the laws of Florida and engaged in the manufacture and sale of lumber in that State, employed an agent within the State of New York to solicit orders and to make estimates upon lumber to be supplied by the corporation, who had an office for his own use in the city of New York and received as compensation a commission of twenty-five cents per thousand feet of lumber sold; that the orders solicited by him were sent from New York to Florida for acceptance, and that the bills and the goods were sent direct from the office in Florida to the customers, and proof of the further fact that the corporation through a firm of insurance brokers in the city of New York secured policies of fire insurance covering its property located in Florida, do not establish that it was doing business in the State of New York within the meaning of section 15 of the General Corporation Law, which provides that no foreign corporation shall do business in the State of New York without having first procured a certificate from the Secretary of State.

*152Such section was designed to prevent foreign corporations from doing business, in the State of New York under more advantageous terms than those allowed to domestic corporations, and has no relation whatever to the incidental contracts of a foreign corporation with a domestic corporation such, as the insuring- . of its property.

An insurance company, which receives and retains proofs of loss without pointing-out alleged defects therein, is estopped from setting up such alleged defects as. a defense to an. action upon the policy.

Where a policy of fire insurance recites that it is issued on condition “that the'; . assured shall use due diligence to maintain in complete working order, at all. times during the full term of this insurance, the Automatic Sprinkler System now in use, and that no change shall be made in such system without the consent in writing first obtained of this company,” the fact that after the sprinkling system had been installed in compliance with such condition it was rendered inoperative by the freezing of the pipes and had not been completely repaired at the time that the property was destroyed by fire, although the work of repaii" was then in progress,, will not prevent a recovery under the policy.

Appeal by the defendant, The Associated Manufacturers’,Mutual' Eire Insurance Corporation of the State of Hew York, from a. judgment of the Supreme Court in favor of the plaintiff, a\^corporation organized under the laws of Florida, in each of the above-entitled actions, entered in the office of the" clerk of the county of Kings on the 13th day of July, 1901, upon the report of a referee.

Archibald C. Shenstone, for the appellant.

William B. Ellison [Rufus L. Weaver with him on the brief], for the respondent.

Woodward, J.:

The plaintiff brings two actions to recover upon two certain" insur- \ anee policies written by the defendant upon property of the plain- \ tiff, located at Jacksonville, Fla. The property covered by one of' i the policies was the lumber in the plaintiff’s yard, and the other was the sawmill buildings, machinery, dry kilns, dry sheds, docks, etc. The defenses interposed were practically the same in each case, and the cases were tried as one before a referee, who was chosen by consent to hear and determine the issues. .The answers, as amended, upon the trial, set up the defense that the plaintiff’s case falls within the inhibition of section 15 of the General Corporation Law of the-State of Hew York (Laws of 1892, chap. 68J, amending Laws of 1890, chap. 563), which forbids a foreign corporation doing business. *153in this State to bring an action upon a contract made in this State unless it first obtains a certificate authorizing it to do business from the Secretary of State; that there was a change in the exposure of the property covered by the policies; that the plaintiff has failed to show a compliance with the conditions precedent required by the policy, etc. The learned referee found all of the facts in favor of the plaintiff and reached the conclusion that judgments should enter upon the facts found in favor of the plaintiff. From the judgments entered appeal comes to this court.

The plaintiff in this action is a foreign corporation engaged in the-manufacture and sale of lumber at Jacksonville, Fla. The defendant is a domestic fire insurance company duly organized and doing business under the laws of the State of New York and having its principal place of business in the borough of Brooklyn. Some time prior to February 6, 1899, the plaintiff, through a firm of insurance, brokers in the city of New York, took out the two policies in suit, the defendant undertaking to pay any loss or damage which the plaintiff might sustain during the term from February 6, 1899, at. noon, to March 21, 1900, at noon On March 12, 1899, while these policies were in force, the property of the plaintiff was destroyed by fire and, although there were over twenty companies holding risks, upon this property, the defendant alone contests payment.

The theory of the defendant is that the plaintiff, being a foreign corporation, and concededly not having complied with the conditions of section 15 of the General Corporation Law, should have been denied the aid of the courts of this State to enforce these contracts of insurance, on the ground that the plaintiff was doing business in this State within the meaning of the statute. The evidence established the fact that the plaintiff employed an agent within this State to solicit orders and to make estimates upon lumber to be supplied by the plaintiff, and that this agent had an office in the city of New York, whose compensation was determined by the commissions earned at the rate of twenty-five cents per thousand feet of lumber sold. The orders were sent from New York to the plaintiff in Jacksonville, where they were accepted, and the bills and the goods were sent direct from the home office in Jacksonville to the customers; a upon these facts, coupled with the fact that, the contract of insu. ce was made in this State through the agency *154of the firm of insurance brokers, the defendant insists that the plaintiff was doing business in this State, and that it is within the inhibition of the provision of the General Corporation Law mentioned above.

: We think this position is not tenable; that it was not the intention of the Legislature to exempt its insurance corporations from the obligations of their contracts by any such transparent fraud upon those who had paid for the protection which the defendant held itself out as affording. The plaintiff’s agent was no more than á traveling salesman, with permanent headquarters in the city of New York, and the evidence clearly shows that he maintained, not an office of the plaintiff, but an office for his own usé, and he did business in this State for the plaintiff only in the sense that every traveling salesman for an individual or a corporation having á domicile or place of business outside of. this State does business for his employer by soliciting orders" to be approved and accepted at the home office. The suggestion that the plaintiff was doing business in this State in taking out its policy of insurance here is too absurd to be considered seriously, for the Legislature is not to be presumed to have intended that it was necessary, in order to bring the patronage and the profits of insurance into this State, and to protect those who thus contributed to the prosperity of the State, that. each foreign corporation so taking out a policy of insurance upon its property in another State should be compelled to have a certificate which would enable it to transact its general business in the State of New York. Such a condition, if violating no positive provisions of the State or National Constitutions, would be opposed to public policy, and it is the duty of the courts to give a reasonable construction to statutes, not to read into them provisions which the Legislature cannot be reasonably supposed to have intended. The section of the General Corporation Law, under which the defendant seeks to be relieved of its obligation to fulfill Its contract with the plain tiff,, clearly indicates the scope of the law, which merely undertakes to regulate the busi-. ness of foreign corporations, so that they shall not do business under more advantageous terms than those allowed to the corporations of this State. It lias no relation whatever to the incidental contracts of a foreign corporation^ made with a domestic corporation,, such as the insurance of the property of a lumber company organized under *155the laws of Florida and doing business in that State. The provisions of the section, without those expurgations which tend to give construction to the whole, make plain what the Legislature intended. It reads as follows:

No foreign stock corporation other than a monied corporation, shall do business in this state without having first procured from the secretary of' state a certificate that it has complied with all the requirements of law to authorize it to do business in this state, and that the business of the corporation to be carried on in this state is such as may be lawfully carried on by a corporation incorporated under the laws of this state for such or similar business, or, if more than one hind of business, by two or more corporations so incorporated for such hinds of business respectively. The secretary of state shall deliver such certificate to every such corporation so complying with the requirements of law. No such corporation now doing business in this state shall do business herein after December 31,1892, without having procured such certificate from the secretary of state, but any lawful contract previously made by the corporation may be performed and enforced within the state subsequent to such date. No foreign stock corporation doing business in this state without such certificate shall maintain any action in this state upon any contract made by it in this state until it shall have procured such certificate.”

The condition upon which the certificate of the Secretary of State is to issue is “ that the business of the corporation to be carried on in this state is such as may be lawfully carried on by a corporation incorporated under the laws of this state for such or similar business,” and its intent is further indicated by section 16 of the same act (as amd. by Laws of 1895, chap. 672), which provides that before granting such certificate the secretary "of state shall require every such foreign corporation to file in his office a sworn copy in the English language of its charter or certificate of incorporation and a statement under its corporate seal particularly setting forth the business or objects of. the corporation which it is engaged in carrying on or which it proposes to carry on within the State, and a place within the State which is to be its principal place of business, and designating in the manner prescribed in the code of civil procedure a person upon whom process against the corpora*156tion. may be served within the State. The person so designated must have an office or place of business at the place where such corporation is to have its principal place of business within the State.”' This language clearly contemplates the transaction of the business-for which the foreign corporation was primarily, organized, and not the incidental business of insuring its property located in another State, nor yet the employment of an agent to solicit orders to be-sent to and accepted by such foreign corporation doing business in another State. This statute was simply declaratory of the policy of the State that foreign stock corporations should not carry on any business in this State which similar corporations organized under its-laws could not lawfully conduct. Its purpose was not to avoid contracts, but to provide an effective supervision and control of the-business proposed to be carried on here by foreign corporations(Neuchatel Asphalte Co. v. Mayor, 155 N. Y. 373, 377), and it. is absurd to contend that it had any reference to the facts established by the evidence in the case at bar. To permit the defendant to accept and retain the consideration of its contracts of insurance-upon the property of foreign corporations located in other States, and where the primary business of such corporations is carried on, and then to avoid the obligation by pleading that such foreign corporation was doing business in this State under the facts disclosed by the evidence, would be shocking to every sense of justice, and thecóntention of the defendant cannot prevail.

We are equally persuaded that the plaintiff has performed all of the conditions precedent necessary to maintain this action, and that, the defendant, having received and retained the proofs of loss without pointing out to the plaintiff the defects which it now urges,, if we assume them to be defects, is estopped from setting tip such alleged defects in defense. (Joyce Ins. § 3362, and authorities there-cited ; Trippe v. P. F. Society, 140 N. Y. 23, 28.)

Mor can we agree with the defendant in the contention that there-was no evidence of value at the time and place of the fire. The evidence is quite complete and satisfactory; Mr. Cummer was-shown to be fully familiar with the construction and cost of buildings and machinery, such as were involved in this controversy,, and he testifies as to the value of the property and its destruction, with quite as much detail as was necessary under the circumstances,, *157no one having challenged the presumption that the statements of loss were true.

The principal point upon the merits arises under that provision -of the contract of insurance which provides: “ It is understood and .agreed that this policy is issued and the rate of premium charged therein fixed and determined on condition that the assured shall use due diligence to maintain in complete working order, at all times •during the full term of this insurance, the Automatic Sprinkler System now in use, and that no change shall be made in such system without the consent in writing first obtained of this company.” On the 8th day of February, 1899, it is conceded that there was a sprinkler system installed and in working order in the buildings upon the premises of the insured. On the twelfth day of February there was a freeze, which froze the heads of the water pipes and broke some of the heads, pipes and fittings in the exposed part of the plant, and the sprinkler system thus became inoperative. Before the pipes, fittings, etc., could be procured and the system repaired the fire which caused the destruction of the property occurred, and, although the evidence shows that the plaintiff used more than ordinary care to keep watch of its plant and to provide protection, and that it used a degree of diligence which can hardly be claimed to be less than “ due diligence,” the defendant urges that by reason of the sprinkler system being out of order the risk was increased, and that the repairs in the system constituted a change, etc., vitiating the contract.

This is rather an excuse for contesting payment than a legal obstacle to the plaintiff’s right of recovery. The contract, fairly and intelligently read, contemplates that the system may get out of order, and it provides for this contingency by requiring the plaintiff to use due diligence to restore it to its normal efficiency. The provision that there shall be no change does not relate to changes in pipes, fixtures, etc., as the defendant would have us believe, but to the system ; the jmovision of the contract is that “ no change shall be made in such system ”— the system approved by the contract — without the consent of the company. There was no change in the system; the plaintiff aj>plied to the company which installed the system, ordered the fixtures necessary to make the repairs and sent for the company’s expert to make them, and the work was well *158under way at the time of the fire. The plaintiff had' certainly performed its j>art óf the contract; the evidence shows that everything within reason was done to put the system in ' order, and. that the plaintiff employed extra watchmen during the-time that the system was out of order, and that no rights of the defendant were prejudiced by any action or by any failure to act of the plaintiff.

. We have examined all of the matters called to our attention ; we have considered the evidence as we find it in the record, and we are convinced that the judgments entered are in accord with justice and the law and that they should be affirmed, with costs.

Goodrich, P. J., Bartlett, Hirschberg and Jenks, JJ., concurred. .

Judgments affirmed, with costs.

Cummer Lumber Co. v. Associated Manufacturers' Mutual Fire Insurance
67 A.D. 151

Case Details

Name
Cummer Lumber Co. v. Associated Manufacturers' Mutual Fire Insurance
Decision Date
Jan 1, 1970
Citations

67 A.D. 151

Jurisdiction
New York

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