1. Where the beneficiary in a life insurance policy has been informed by the company that a premium falling due on a certain specified date has been paid, the company, in an action on the policy, is estopped from asserting a forfeiture on the ground that it made a mistake as to such payment, and that it had in fact not been paid, though the action is brought by the assignee of the beneficiary.

2. Where a person in the employ of a life insurance company learned that the premium on a certain policy had not been paid, and thereafter, on leaving the company, procured the assignment of the policy to him for a nominal consideration, he is not precluded, in an action on the policy, from pleading that the company was estopped to deny that the premium had been paid by mistaken statements to the insured as to such payment.

Appeal from supreme court, appellate division, First department.

Action by Henry H. Meeder against the Provident Savings Life Assurance Society of New York. Judgment for plaintiff was affirmed by the appellate division (68 N. Y. Supp. 518), and defendant appeals. Affirmed.

William T. Gilbert, for appellant. Henry W. Jessup, for respondent.

O'BRIEN, J. The defendant, on the 17th day of February, 1896, by its policy of insurance, insured the life of one Dambman for $3,000, payable to one Drentel, a creditor of the insured, or to his legal representatives, within 60 days after proof of death. On the 22d day of April, 1899, the insured died, owing the creditor for whose benefit the policy was issued the full sum payable by the terms of the policy. There is no dispute with respect to the debt of the beneficiary or the presentment of due proof of death. The action is defended on the sole ground that the quarterly premium that became due on the 17th day of November, 1897, was not paid,

and at the time of the death of the insured the policy, for that reason, was not in force. On the 18th day of September, 1899, Drentel, the beneficiary, assigned the policy and all his rights therein to the plaintiff by a written assignment, in which the consideration expressed is $1. The defendant did not ask to go to the jury on any question, and the court directed a verdict for the plaintiff for the amount due on the policy, less the premium in question and all subsequent premiums falling due prior to the death of the insured. The defendant excepted to the direction, and this exception presents the sole question of law in the case. The court below unanimously affirmed the judgment, and the defendant appeals.

All the questions argued are related in some way to the alleged default in the payment of the premium that fell due November 17, 1897. The beneficiary, Drentel, kept a hotel at Orange, N. J., and the insured boarded with him, and in that way contracted the debt secured by the policy. The quarterly premiums were by custom or contract payable within 30 days after they fell due. In other words, there were 30 days of grace in which the insured could pay the premiums. The insured generally paid the premiums, but on at least two occasions when the insured was absent Drentel paid them within the 30 days. On the 26th day of November, 1897, when the insured was absent, Drental, not knowing whether the insured had paid the November premium or not, addressed a letter to the defendant, asking to be informed whether the premium due the 17th day of that month had been paid, and, if not, to forward the bill to him, and he would pay. The next day the defendant replied to the letter, stating that the premium referred to had been paid on the 17th. Drentel rested upon this assurance, and made no further inquiry till September 9, 1898, when he wrote to the defendant again, asking if the premiums had been paid up to date. The defendant replied under date of September 12th to the effect that the policy had expired, by its terms, by reason of the nonpayment of the premium due November 17, 1897,being the very premium which it had already assured the beneficiary had been paid. The company added that, should the beneficiary "desire to again be protected in this manner" they would be pleased to accept another application upon new papers. The defense is based upon the claim of the defendant that there was a mistake in its letter, and that the premium in fact had not been paid. The mistake was not conclusively shown, since it rests largely, if not entirely, upon the fact that the renewal receipt, which should have been delivered upon payment, was found in the defendant's possession. But for all the purposes of this case we will assume that the proof in this respect was conclusive. That the defendant is estopped from asserting now that the premium was not paid,

after misleading the beneficiary by its written assurance for 10 months, and then informing him that the policy was forfeited when it was too late to protect himself, is a proposition that I assume no one will question. It is so plain and reasonable that it would be superfluous to cite authorities to sustain it. The defendant does not question the principle, but seeks to show that estoppels are personal to the parties, and, while it might have operated in favor of the beneficiary himself, it cannot be allowed to operate in favor of the plaintiff, to whom the policy was assigned. This proposition is not supported by principle or authority. The plaintiff became vested with every right that the assignor had by the terms of the assignment and by law, including the right to assert conclusively against the defendant the truth of its own written statement that the premium in question was paid. Estoppels operate not only in favor of the party misled to his prejudice by the statement, but also in favor of his privies in blood or estate. That the plaintiff is in legal privity with the beneficiary to whom the contract was payable is a proposition too plain for argument. One who has a clear right acquired by estoppel can convey his right to any one, and the knowledge or ignorance of the assignee is immaterial. Nickerson v. Insurance Co., 178 Mass. 308, 59 N. E. 814.

The plaintiff was formerly in the defendant's service as a solicitor for insurance, and in that capacity actually procured the policy in question. He left the employ of the defendant on July 3, 1899, with a letter from defendant's secretary expressing regret at his resignation, and recommending him for fidelity and capacity in very flattering terms. There is some proof in the case that while the plaintiff was in defendant's employ he learned that the premium of November 17th had not been paid in fact, and that the company's letter to the contrary was a mistake. The proof is quite vague, and far from conIclusive, but we will assume that the fact is established. It is also said that the policy was assigned to the plaintiff for the nominal consideration of $1, and that under such circumstances it would be inequitable and immoral to allow the plaintiff to take advantage of knowledge that he acquired in a confidential employment. We are unable to perceive any force or merit in this contention, and think the proposition is quite fallacious for two reasons:

First. The plaintiff acquired no knowledge that is of any use to him in this case in a confidential capacity. The thing that is important is the defendant's letter stating that the premium was paid. That was addressed to the beneficiary, and hence published as a fact to all the world. If it be true that the plaintiff acquired the knowledge that this letter was a mistake before he left defendant's service, that knowledge is not of the slightest value to him in this case, but rather a detri

ment. It is the defendant, and not the plaintiff, that is seeking to shield itself from liability on the ground that it made a mistake when it informed the policy holder that the premium was paid. Indeed, it is very obvious that the plaintiff could have done every. thing that he has done just as well, if not better, had he never known or heard of the alleged mistake. So that there is no foundation for the contention that the plaintiff is seeking to make use of knowledge that he acquired in a confidential employment, since that knowledge is not of the slightest benefit to him in the prosecution of this action, or the slightest detriment to the defendant. Moreover, when the plaintiff took the assignment, his relations with the defendant had completely terminated, and he had the same right then to become the owner of the policy as a stranger, or any other party. It is quite difficult to understand the theory of the learned counsel for the defendant, or in what respect the plaintiff's relations of agency which formerly existed with the defendant has any bearing on the case. What the contention must mean is that the plaintiff, in consequence of his prior relations with the defendant, was incapable of becoming the owner of the policy as it existed in the hands of the original owner or beneficiary. We are not aware of any principle or authority that tends to support such a proposition. An agent who has severed his relations with his principal may take an assignment of an obligation in the hands of a third party which the principal has agreed to pay. He has the same right generally in that respect as any other person. If in some particular case, however, there would be any difficulty, it is impossible to perceive any in this case. None has been pointed out, and no authority has been referred to that suggests any.

Second. But the plaintiff is not seeking to enforce any original claim or right that is founded upon his former relations with the defendant. What he is seeking to enforce is a derivative claim or right that has been transferred to him by a third party. The claim has lost none of its validity in the process of transmission. It is just as good a claim in the hands of the plaintiff as it was in the hands of his assignor. Of course, the plaintiff took it subject to all defenses, offsets, or counterclaims, and the court deducted from the face of the policy the premium in question and all other premiums that fell due before the death of the insured. The court may have been somewhat illogical in treating the premium of November 17, 1897, as unpaid, since the defendant had certified that it had been paid; but, if so, that was done upon the defendant's motion, and for its benefit, and hence it cannot now be heard to complain, because the court committed an error, if error it was, in its favor. How much, or in what manner, the plaintiff paid for the policy when it was assigned to him, is a matter that does not concern the defendant. It is enough

that he has the title. The original party could have transferred it to the plaintiff by way of gift if he so elected, and that would not concern the defendant. Such questions sometimes become important in suits upon negotiable instruments, but are of no consequence in a case like this. The failure to pay the premiums that became due subsequent to November 17, 1897, is not an element in the case. No defense was interposed on that ground, and obviously none could be, since the defendant had, by declaring the policy forfeited for nonpayment of the premium due on that day, made the tender of any of the subsequent premiums an idle ceremony. The recovery in this case is in accordance with justice. No rule or principle of law has been violated, and the judgment should therefore be affirmed, with costs.

PARKER, C. J., and GRAY, BARTLETT, HAIGHT, MARTIN, and VANN, JJ., concur.

Judgment affirmed.

(171 N. Y. 439)

CRAVEN v. BLOOMINGDALE. (Court of Appeals of New York. June 10, 1902.)

LIABILITY OF MASTER-TORTS OF SERVANT

PUNITIVE DAMAGES.

In an action against a master to recover for an illegal arrest caused by his servant, an instruction that the jury had the power, if it thought proper, in addition to compensatory damages, to award punitive damages. without further instructing them that defendant was not liable for such damages unless there was evidence that the acts of the servant were wanton or malicious, and that the master was implicated with the servant therein, or had authorized or ratified such acts, was erroneous.

Appeal from supreme court, appellate division, First department.

Action by Walter S. Craven against Lyman G. Bloomingdale. From a judgment of the appellate division (66 N. Y. Supp. 525) affirming a judgment for plaintiff, defendant appeals. Reversed.

Otto Horwitz, for appellant. John W. Brainsby, for respondent.

BARTLETT, J. We are of opinion that the learned trial judge failed to instruct the jury properly as to the law of punitive or vindictive damages. A brief statement of the facts is necessary in order to present the legal question involved. The defendant is the proprietor of a department store in the city of New York, under the firm name of Bloomingdale Bros. In the conduct of the business a large number of wagons owned by defendant are used in delivering goods purchased. The driver of the wagon involved in this action to recover damages for false imprisonment was employed under a written contract which authorized the defendant to charge him for, and deduct from his wages,

The

any money, or the value of any merchandise, which might be lost, damaged, destroyed, or stolen after being placed in his charge. driver also gave a bond, with surety, under this contract. The plaintiff purchased an article which, on delivery, proved unsatisfactory. It was returned, and another sent in exchange. Full payment had been made on the original purchase, and on the second article a small balance was due defendant. An error was made in defendant's store, by which the driver was required to collect the full price of the article, and not the balance actually due. The driver, on delivering the second article, insisted on full payment, or a return of the property. An altercation ensued between the plaintiff and the driver, and as the latter was denied full payment, or the return of the property, he sent out for a, policeman; and the result was that plaintiff was arrested, taken to the police station, and, on a statement of the facts, at once discharged. The matter being brought to defendant's attention, he said he "was sorry that such a thing had happened," and asked what he could do. The plaintiff demanded the return of his money, and stated he desired to have no further business with the firm. This action was then commenced, and the jury rendered a verdict for $1,250. The appellate division affirmed the judgment entered upon this verdict.

We have here presented the question as to the proper measure of damages in the case of a merchant whose servant, in the delivery of goods, causes the illegal arrest of a customer. The fact that the master was not present when the arrest was made does not necessarily absolve him from liability. If, on the evidence, the jury could find that the master authorized the arrest, or subsequently ratified it, he must respond in damages. In the case before us it is not claimed the master directly authorized the arrest of the plaintiff, or ratified it when brought to his attention. It was, however, a question for the jury to determine, if the evidence warranted it, whether the manner in which the defendant conducted his business, through the intervention of the driver, constituted such a system as to render the act of the driver the act of the master.

After the trial judge had completed his main charge, he took up the plaintiff's requests, and said: "I do not think I made it very clear to the jury, the distinction between compensatory and punitive damages. It is as follows: Damages in an action for false imprisonment, for humiliation, insult, and wounded sensibilities, are regarded in law as compensatory damages. If you find for the plaintiff, when you have reached some sum,-made up your mind; some sum that you think is reasonable and right in the way of compensatory damages,-then you have the power, if you think proper, to add to that some sum by way of punitive or vindictive damages. But your verdict will be

an aggregate sum." At the close of the charge the defendant's counsel excepted to that portion of it in which the court said that it was within the province of the jury to give punitive or vindictive damages; also where the court said that the jury have the right to add a sum for punitive damages. The defendant's fifth request to charge reads, "That if the jury finds in favor of the plaintiff, they may not award punitive damages.' The court refused to so charge, and an exception was taken.

The learned appellate division placed its affirmance of the judgment of the trial term upon the rule laid down in Lynch v. Railroad Co., 90 N. Y. 77, 43 Am. Rep. 141, which was an action for false imprisonment, and quoted the language of the court in that case as follows: "It matters not that he [the servant] exceeded the powers conferred upon him by his principal, and that he did an act which the principal was not authorized to do, so long as he acted in the line of his duty, or, being engaged in the service of the defendant, attempted to perform a duty pertaining, or which he believed to pertain, to that service. He detained the plaintiff at the station, caused his arrest, went with the police officer to the police station, there made a complaint, and then the next morning appeared before the police magistrate and renewed his complaint. These were successive steps taken by the gate keeper to enforce the payment of the fare by the plaintiff, or to punish him for refusing to pay it, and for all that he did the defendant is responsible." The appellate division then said: "In the case before us the goods were delivered to the driver under such circumstances as authorized him not only to protect the property of the master, but to do what he believed to be his duty to his principal with reference to that property, and we think the case falls directly within the rulings in Lynch v. Railroad Co. The acts of Blaut [the driver] were quite similar to those committed by the servant of the railway company in the case last cited, with an unimportant exception. According το Blaut's own testimony, the arrest was made and the charge preferred in order to get back the merchandise, and the substance of the charge was a theft. It would scarcely be disputed that, if this article had been taken from the wagon while in charge of Blaut, an arrest caused by him of the person taking it would have been an act performed in the course of his duty to his employer for the protection of the employer's property; and the character of the act in this case does not differ materially from that in the case supposed, although Blaut swears that he stated to the plaintiff, 'I have got to have the stove or the money, because I am responsible for it.' The legal quality of his act does not depend upon his assertion, but upon his relation to his master. It is quite evident that he believed it to be his duty to cause the arrest, and his master placed him in charge of the

merchandise under such circumstances as would authorize an implication of authority to do what was proper or necessary, in the exercise of his judgment, to protect the property intrusted to him." We are unable to see the similarity between these two cases. The gate keeper in the case cited rested under the duty to collect a ticket before a passenger was allowed to pass out. The passenger claimed that he had lost his ticket, and the gate keeper assumed it to be his duty to detain him and prosecute him under the circumstances. The case at bar presents a very different situation. The driver's remark, "I have got to have the stove or the money, because I am responsible for it," should be considered by the jury in determining whether the driver acted for the defendant or himself. If the jury are to pass upon the question whether a system existed in defendant's business authorizing this arrest, they must also consider the circumstances under which the driver was employed. He was required to give security on entering his employment, and was personally liable to his employer for the goods intrusted to his care, or the money called for by his list. Undoubtedly, in the case supposed by the appellate division,-of an article taken from the wagon by a thief while passing along the street, the driver, whether acting in his own behalf or that of his master, would be justified in pursuing the thief and causing his arrest. We are of the opinion that the jury retired without an accurate conception of the rule of damages in actions for false imprisonment. It is undoubtedly the rule that the master is liable in compensatory damages if his manner of conducting business justified the jury in believing that the servant was acting within the scope of his employment, and discharging the ordinary duties imposed upon him.

The case at bar is clearly distinguishable from the recent case of Stevens v. O'Neill, 51 App. Div. 364, 64 N. Y. Supp. 663, affirmed in 169 N. Y. 375, 62 N. E. 424. In that case the plaintiff had been arrested in the store of the defendant under circumstances peculiarly distressing and humiliating. Van Brunt, P. J., in writing for the appellate division, said: "Although there was no evidence of any express malice against the plaintiff individually, the act was done in pursuance of a system which had been adopted in that store; and, if this system was such as to place an innocent customer in the position in which the plaintiff's evidence showed that she was placed, the jury had the right to say that the results of this system were of such a character as to require rebuke by way of punitive damages, in order that innocent people should not be placed in the position which this plaintiff was placed without any fault on her part." The above case, and other cases of like character, involving the conduct of retail stores, disclose a detective system which authorized officers and others in the employ of merchants to subject customers suspected of theft to

personal search and other indignities. A system was thus established which made the acts of those effecting the arrest clearly those of the master. The case at bar is distinguishable from this line of authorities. In Voltz v. Blackmar, 64 N. Y. 440, Judge Andrews (page 444) uses this language: "In punitive actions, as they are sometimes termed, such as libel, assault and battery, and false imprisonment, the conduct and motive of the defendant is open to inquiry with a view to the assessment of damages; and if the defendant, in committing the wrong complained of, acted recklessly or willfully or maliciously, with a design to oppress or injure the plaintiff, the jury, in fixing the damages, may disregard the rule of compensation, and beyond that may, as a punishment to the defendant, and as a protection to society against the violation of personal rights and social order, award such additional damages as, in their discretion, they may deem proper. The same rule has been held to apply in the case of willful injury to property, and in actions of tort founded upon negligence amounting to misconduct and recklessness. Tillotson v. Cheetham, 3 Johns. 56, 3 Am. Dec. 459; King v. Root, 4 Wend. 113, 21 Am. Dec. 102; Tifft v. Culver, 3 Hill, 180; Cook v. Ellis, 6 Hill, 466, 41 Am. Dec. 757; Burr v. Burr, 7 Hill, 207; Taylor v. Church, 8 N. Y. 460; Hunt v. Bennett, 19 N. Y. 173; Millard v. Brown, 35 N. Y. 297." In Cleghorn v. Railroad Co., 56 N. Y. 44, 15 Am. Rep. 375, the question involved was that of the negligence of an employé; and Church, C. J., said: "For the purposes of this case the following rule may be laid down as fairly deducible from the authorities, viz.: For injuries by the negligence of a servant while engaged in the business of the master, within the scope of his employment, the latter is liable for compensatory damages; but for such negligence, however gross or culpable, he is not liable to be punished in punitive damages unless he is also chargeable with gross misconduct. * Something more than ordinary negligence is requisite. It must be reckless and of a criminal nature, and clearly established."

* *

In

In Railroad Co. v. Prentice, 147 U. S. 101, 13 Sup. Ct. 261, 37 L. Ed. 97, the law of punitive damages is exhaustively discussed. Mr. Justice Gray, writing for the court, said: "The single question presented for our decision, therefore, is whether a railroad corporation can be charged with punitive or exemplary damages for the illegal, wanton, and oppressive conduct of a conductor of one of its trains towards a passenger. * this court the doctrine is well settled that in actions of tort the jury, in addition to the sum awarded by way of compensation for the plaintiff's injury, may award exemplary, punitive, or vindictive damages, sometimes called 'smart money,' if the defendant has acted wantonly or oppressively, or with such malice as implies a spirit of mischief or criminal indifference to civil obligations. But such

guilty intention on the part of the defendant is required in order to charge him with exemplary or punitive damages. The Amiable Nancy, 3 Wheat. 546, 558, 559, 4 L. Ed. 456; Day v. Woodworth, 13 How. 363, 371, 14 L. Ed. 181; Railroad Co. v. Quigley, 21 How. 202, 213, 214, 16 L. Ed. 73; Railroad Co. v. Arms, 91 U. S. 489, 493, 495, 23 L. Ed. 374; Railroad Co. v. Humes, 115 U. S. 512, 521, 6 Sup. Ct. 110, 29 L. Ed. 463; Barry v. Edmunds, 116 U. S. 550, 562, 563, 6 Sup. Ct. 501, 29 L. Ed. 729; Railroad Co. v. Harris, 122 U. S. 597, 609, 610, 7 Sup. Ct. 1286, 30 L. Ed. 1146; Railroad Co. v. Beckwith, 129 U. S. 26, 36, 9 Sup. Ct. 207, 32 L. Ed. 585. Exemplary or punitive damages, being awarded not by way of compensation to the sufferer, but by way of punishment to the offender, and as warning to others, can only be awarded against one who has participated in the offense. A principal, therefore, though, of course, liable to make compensation for injuries done by his agent within the scope of his employment, cannot be held liable for exemplary or punitive damages merely by reason of wanton, oppressive, or malicious intent on the part of the agent. This is clearly shown by the judgment of this court in the case of The Amiable Nancy, 3 Wheat. 546, 4 L. Ed. 456. No doubt a corpora

tion, like a natural person, may be held liable in exemplary or punitive damages for the act of an agent within the scope of his employment, provided the criminal intent necessary to warrant the imposition of such damages is brought home to the corporation. Caldwell v. Steamboat Co., 47 N. Y. 282; Bell v. Railway Co., 10 C. B. (N. S.) 287; Id., 4 Law T. (N. S.) 293. Independently of this, in the case of a corporation, as of an individual, if any wantonness or mischief on the part of the agent, acting within the scope of his employment, causes additional injury to the plaintiff in body or mind, the principal is, of course, liable to make compensation for the whole injury suffered. Kennon v. Gilmer, 131 U. S. 22, 9 Sup. Ct. 696, 33 L. Ed. 110; Meagher v. Driscoll, 99 Mass. 281, 285, 96 Am. Dec. 759; Smith v. Holcomb, 99 Mass. 552; Hawes v. Knowles, 114 Mass. 518, 19 Am. Rep. 383; Campbell v. Palace Car Co. (C. C.) 42 Fed. 484." The learned judge states in this connection that the law applicable to this case has been found nowhere better stated than in Hagan v. Railroad Co., 3 R. I. 91, 62 Am. Dec. 377. In that case it is stated (page 91, 3 R. I., and page 377, 62 Am. Dec.): "In cases where punitive or exemplary damages have been assessed, it has been done upon evidence of such willfulness, recklessness, or wickedness, on the part of the party at fault as amounted to criminality, which, for the good of society and warning to the individual, ought to be punished? If in such cases, or in any case of a civil nature, it is the policy of the law to visit upon the offender such exemplary damages as will operate as punishment, and teach the lesson of