LEWIS, Jr., v. NEW ENGLAND FIRE INS. Co. FIRE INSURANCE - POLICY - FORFEITURE - SOLE, UNCONDITIONAL FEE-SIMPLE A policy-holder who holds the property insured under a contract for its sale and conveyance to him by the owner in fee-simple by deed of quitclaim, on payment of the purchase money named therein, and who has fully paid the purchase money, but has not yet received the deed, is the sole, unconditional, and fee-simple owner of the property, within the meaning of the usual condition in insurance policies, rendering the policy void in case the assured is not the sole and unconditional owner of the property insured, and owns it in fee-simple at law. At Law. William G. Shaw, for plaintiff. WHEELER, J. This is an action on a fire insurance policy in which the defendant, on various conditions, insured the plaintiff against loss by fire or lightning on his steam saw and stave mill. The policy was to become void if, among other things, the assured was not the sole and unconditional owner of the property, or if any building intended to be insured stood on ground not owned in fee-simple by the assured, or if the interest of the assured was not truly stated in the policy, unless consent in writing should be indorsed by the company thereon. The defendant has, by plea, set out these conditions, and alleged, in substance, that the plaintiff had no title or right to the property insured, or the ground on which it stood, except by virtue of a contract in writing between him and the owner of the property in fee-simple, signed by both, by which the owner agreed to sell, transfer, and convey by deed of quitclaim to the plaintiff all the property in consideration of the full and complete payment of three notes of the plaintiff described, possession of the property, and full payment of the notes by the plaintiff, with failure to deliver the deed, without fault or neglect of the plaintiff. To this plea the plaintiff has demurred, and the cause has now been heard on this demurrer. The question raised by this demurrer is whether, on these facts, the plaintiff became the sole and unconditional owner of the property insured, and the owner in fee-simple of the land. If he did not, as there was no consent in writing on the policy, it was by its terms void. According to these allegations, the plaintiff had bought the property, including the land, of the owner in fee-simple,-had paid for it, and got it. There was no condition about the manner of his acquiring it, by which he could be disturbed in his possession and enjoyment of it. No one is shown to have any color of claim whatever but the holder of the prior legal title, and he had left in him the bare record title without ownership. In equity the plaintiff could successfully resist any attempt on his part, by legal proceedings or entry, to deprive the plaintiff of the property or land, or of their possession. The plaintiff so had and held the property that he could defend his right to and possession of it against all the world. This is nothing less than sole and unconditional ownership. By the terms of the contract, the property, including the land, was to be conveyed to the plaintiff. This would signify that the whole interest in the whole was to be conveyed, and the contract could not be answered by the conveyance of a mere life-estate, leaving the remainder in him who had agreed to convey the whole. Nothing short of a deed to the plaintiff and his heirs would be a fulfillment. The plaintiff therefore held the whole for his heirs, and his heirs, forever, all of whom are included within himself, as well as for himself. His estate would descend to his heirs, and it was the whole interest in the land and property. "Tenant in fee-simple is he which hath lands or tenements, to hold to him and his heirs, forever." Litt. § 1; Co. Litt. la. The title by which they are held is immaterial. The description is answered if he hath them to so hold. The estate in the land, and the title by which the estate is held, are distinct from each other. 1. Washb. Real Prop. c. 3, pl. 4. By statute in Massachusetts a person, "having an estate of inheritance or freehold in any town," with certain conditions, gained a settlement in that town. It was held that a mere equitable estate resting on a bond for a deed was sufficient to give a settlement under this statute. Orleans v. Chatham, 2 Pick. 29; Scituate v. Hanover, 16 Pick. 222. And a person occupying land without title, but whose possession was protected by the statute of limitations only, was held to have an estate of inheritance so as to gain a settlement if the other conditions were fulfilled. Brewster v. Dennis, 21 Pick. 233. In Vermont a pauper is not removable from his freehold, and a mere equitable freehold is sufficient to prevent removal. Walden v. Cabot, 25 Vt. 522. The object of these and similar conditions in this and like policies is to make sure that the person seeking insurance is the real and substantial owner of the property, or interest in it, on which he intends to obtain insurance, and thereby to prevent wagering policies and fraudulent losses. The state of the title otherwise than in this view is not material. Therefore, in actions on policies of insurance, the person having the whole interest, has been held to be the true owner. Hough v. Insurance Co., 29 Conn. 10; American Basket Co. v. Insurance Co., 3 Hughes, 251; Franklin Fire Insurance Co. v. Crockett, 7 Lea, 725; Gaylord v. Insurance Co., 40 Mo. 13; Pelton v. Insurance Co., 77 N. Y. 605; Insurance Co. v. Simons, 96 Pa. St. 527; Chase v. Insurance Co., 22 Barb. 535; Insurance Co. v. Dougherty, 102 Pa. St. 568; Insurance Co. v. Haven, 95 U. S. 242; Carrigan v. Insurance Co., 53 Vt. 418. The cases cited in behalf of the defendant do not appear to be to the contrary. In Columbian Ins. Co. v. Lawrence, 2 Pet. 42, and Smith v. Insurance Co., 6 Cush. 448, the condition of the bond for a deed to the assured had not been complied with. These are the most directly in point of any that have been noticed. Demurrer sustained. Plea adjudged insufficient. PRATHER and others v. KEAN and others. (Circuit Court, N. D. Illinois. January 3, 1887.) 1. BANKS-THEFT OF BONDS DEPOSITED-SPECIAL DEPOSIT-USED FOR COLLATERALS-LIABLE AS PLEDGEES. Plaintiffs, bankers, deposited with defendants, other bankers, certain government bonds as a special deposit. They afterwards asked defendants "to discount for them up to par of the bonds as collateral." On this loan being paid, defendants asked what they should do with the collaterals, and, being directed to hold them as formerly for plaintiffs' use, replied, "Wehold $12,000 U. S. 4%, as special deposit;" and that they held them subject to plaintiffs' further orders. The two banks were in uninterrupted business relation for 10 years. The plaintiffs informed defendants that they wished, from time to time, to overdraw their account on the security of these bonds as collaterals, and plaintiffs, from time to time, made overdrafts on defendants, which were paid. The bonds were afterwards stolen by defendants' assistant cashier. Heid, defendants' liability was that of pledgees. 2 SAME-DEFAULTING CASHIER-WARNINGS-GROSS NEGLIGENCE. In this case it was shown that plaintiffs' bonds were kept in the "treasury" part of defendants' bank safe, where the securities and reserve or surplus funds, not in active use, were kept; that Ker, the defaulting assistant cashier, had access thereto; that defendants examined their cash and counted their securities every month, and examined their special deposits twice a year, to see that they corresponded with the amounts marked on the envelopes, and were otherwise correct; that the collaterals and special deposits were kept together; that no record of the number of bonds held on special deposit was kept, and they could not be counted and checked off. More than a year before Ker fled, defendants were warned that some one in their bank was speculating on the board of trade, of which Ker was accused, and admitted the fact, and on promising not to do so again, was retained in his position. Two months before Ker fled, defendants were again warned, and commenced an examination of their books and securities, but made no effort to see whether the special deposits were disturbed, because, as defendants testified, no record was kept of them by numbers or otherwise, although the numbers of plaintiffs' bonds did appear on defendants' bond register, having been sold by them to plaintiffs. Held, defendants were guilty of gross negligence in not discharging Ker, or placing him in a position of less responsibility, and were liable for bonds belonging to plaintiffs, stolen by him, whether such were held by them at law or special deposit. At Law. H. W. Jackson and Robert Herrey, for plaintiffs. GRESHAM, J. The plaintiffs, who were bankers at Marysville, Missouri, opened an account in 1873 with the defendants, who were bankers at Chicago, and this relation continued until the spring of 1883. Interest was allowed the plaintiffs on their deposits above a certain amount, at the rate of 21 and 3 per cent. per annum, and the deposits averaged from $200,000 to $400,000 a year. On July 7, 1880, the defendants sold to the plaintiffs $12,000 of 4 per cent. government bonds, for which the latter paid, including premium and accrued interest, $13,005. The letter which the plaintiffs wrote ordering the purchase concluded thus: "You will please send us description and numbers of the bonds, and hold same as special deposit for us." In the account which the defendants rendered to the plaintiffs of the purchase, the latter were informed 499 that the bonds were held as a special deposit, subject to their order. The numbers of these bonds appeared upon the bond register which the defendants kept, and they remained in their custody until some time between November, 1881, and November, 1882, during which period they were stolen by their assistant manager, Ker, who disappeared on January 16, 1883, and this suit is brought to recover their value. On October 8, 1880, the plaintiffs wrote to the defendants: "Would it be convenient for you to discount for us, say, up to par of our bonds with you as collateral, and, if so, at what rate?" and in reply to this, on October 11th, the defendants said: "We will discount for you with pleasure, taking your government bonds at par as collateral." On December 22d the defendants discounted plaintiffs' note for $12,000, and on the same day notified them that the bonds were held as collateral security for the loan. This note was renewed, and when it became due, on April 27, 1881, the defendants wrote the plaintiffs: "We debit you $12,000 for your note due to-day, which please find inclosed, canceled. What disposition shall we make of the collaterals?" The answer to this letter was not produced; but Robinson, one of the plaintiffs, testified that he directed the defendants to "hold the bonds, as formerly, for our [plaintitfs'] use," and to furnish a list of them, giving numbers. On May 5th the defendants wrote to the plaintiffs: "Your favor of the second inst. at hand. We hold $12,000 Ů. S. 4%, as special deposit;" giving the numbers, and informing the plaintiffs the bonds were held subject to their further orders. On October 11, 1882, the defendants discounted the plaintiffs' note for $10,000, at 60 days, receiving as collateral security therefor a number of notes given to the plaintiffs by their customers. This note was paid at maturity, and the collaterals returned. Robinson testified that, in a letter which he wrote to the defendants asking for the last loan, he informed them the plaintiffs preferred giving the notes of their customers in place of the bonds as collateral, as they wished to use the bonds in case of emergency. He also stated that after the purchase of the bonds, the plaintiffs had overdrawn their account from time to time, and that their overdrafts had been honored. On November 24, 1880, the plaintiffs wrote to the defendants: "We are carrying a large amount of hogs and cattle at this time for our customers, and we shall wish to overdraw our account for a small amount, and we will thank you to honor the same, and will consider our bonds in your hands as security for the same. We do not wish to overdraw, but stock may be detained on the road;" and two days later the defendants replied: "Yours of the twenty-fourth inst. received. In reply, we beg to say, should you have occasion to check on us as you suggest, we will pay your checks with great pleasure.” Robinson testified that on January 16, 1883, he wrote to the defendants asking for another loan of $10,000 on the notes of their customers, as the plaintiffs wished to keep the bonds for emergencies, meaning to meet overdrafts as previously. On January 29th the defendants replied to this letter, apologizing for the delay which had occurred through oversight on the part of their corresponding clerk, saying: "We telegraphed you to-day that it is all right, meaning to say that your request for discount is granted." If the defendants did not know when they wrote this letter that Ker had stolen the bonds, they had abundant reason for believing he had. On March 5, 1833, the defendants wrote to the plaintiffs: "Do your books show that you should have a special deposit of government bonds with us; if so, what issue of bonds, and what amount?" to which the plaintiffs replied, on March 8th: "We refer you to your advice of July 7, 1880, in regard to our bonds held by you." Kean, one of the defendants, told Robinson in July, 1883, so the latter testified, that he (Kean) did not know until about the middle of January of that year that Ker had stolen the bonds. At the time the plaintiffs demanded the bonds, or their equivalent, there was nothing due from them to the defendants; and the latter refused to comply with the demand on the sole ground that the bonds were held as a special deposit, without reward, and that they were not liable for their loss. Ker acted as book-keeper for about 10 years previous to May, 1881, when he became assistant cashier, at a salary of $2,000 a year. The plaintiffs' bonds were kept in the "treasury" part of the safe, where the securities and reserve or surplus funds, not in active use, were kept. Ker took $21,500 of the defendants' funds, and $35,000 in bonds, including those sued for. Kean also testified that he did not know when the plaintiffs' bonds were last seen in the vault; that it was their habit to examine their securities and count their cash every month, and to examine their special deposits twice a year, to see that they corresponded with the amounts marked on the envelopes, and were otherwise correct; that the collaterals and special deposits were kept together; that Ker took none of the collaterals, presumably because he was aware of the habit of the bank to examine them and the cash; and that no record of the numbers of bonds held on special deposit was kept, and they could not be counted and checked off. More than a year before Ker left, the defendants were cautioned that some one in their bank was speculating on the board of trade. Kean testified that, after receiving this caution, he made a quiet investigation, and the facts pointed towards Ker, if any one; that he thereupon called Ker up, and accused him of having been so speculating, to which he replied, "I have made a few transactions, but I am not doing anything now, and do not propose to do anything more." He admitted that what he had done was against the rules of the bank, and said: "I know I ought not to do it, and I am not going to do any more of it. I am ahead a thousand dollars, all told." Ker's salary appears to have been his only income. The defendants do not claim that he had accumulated any means or property from this or any other source, or that they thought he had; and yet they retained him in his position, which afforded him access to their own assets as well as the securities of others, without making any effort to verify the truth of his statements, or ascertain whether he had been tempted to appropriate to his own use the property of others. About two months before he left, Preston, one of the defendants, residing at Detroit, wrote to the bank at Chicago, calling attention to |