Royal Indem. Co. v. Heller

• Decision Date: 12 May 1931
• Parties: ROYAL INDEMNITY CO. v. HELLER et al.
• Court: New York Court of Appeals Court of Appeals

256 N.Y. 322

176 N.E. 410

ROYAL INDEMNITY CO.

v.HELLER et al.

Court of Appeals of New York.

May 12, 1931.

Action by the Royal Indemnity Company against Abraham Heller and others. Judgment of dismissal was affirmed by the Appellate Division (231 App. Div. 812, 246 N. Y. S. 885), and plaintiff appeals.

Affirmed.

LEHMAN, KELLOGG, and O'BRIEN, JJ., dissenting.

Appeal from Supreme Court, Appellate Division, First department.

William E. Lyons and Barnett Cohen, both of New York City, for appellant.

Benjamin Davidson, David Stern, and Nathan S. Zucker, all of New York City, for respondents Heller and Schubert.

John J. Bennett, Jr., Atty. Gen. (Joseph A. McLaughlin and Myles A. Paige, both of New York City, of counsel), for respondent Industrial Board.

POUND, J.

The plaintiff, the Royal Indemnity Company, issued to Abraham Heller, an employer, a policy of insurance under the Workmen's Compensation Law (Consol. Laws, c. 67). The policy bore the date March 9, 1928, but on its face it purports to be in force from February 9, 1928, to February 9, 1929. Henry Schubert, an employee of Heller, was injured on March 7, 1928. He filed a claim for compensation with the State Industrial Board. The plaintiff insurer took the ground that the reference to February 9 in the body of the policy was due to a mistake of the typist in preparing the policy, and that no policy was in force at the date of the accident nor prior to March 9, 1928. It fully presented evidence thereof as a defense before the board which heard the proof on the question, but finally held that ‘the policy itself is the only evidence the Board can consider in determining the obligationsof the parties thereto’ and made an award accordingly in favor of the claimant. From such award an appeal was taken to the Appellate Division, which is now pending.

Promptly after the award, on August 23, 1929, plaintiff brought this action in the Supreme Court for the reformation of the policy ‘to cover said scrivener's mistake.’ The defendants, employer, employee, and State Industrial Board set up the adjudication of the Industrial Board as a defense and denied that the Supreme Court had jurisdiction to grant the relief prayed for. When the case came on for trial no evidence was presented to the court. The trial justice refused to hear the evidence of mistake, holding ‘that the Supreme Court has no jurisdiction to determine the question as to the validity of the policy sought to be reformed herein,’ and ‘that the issues raised by the pleadings are res adjudicata.’ The Appellate Division affirmed the judgment dismissing the complaint ‘on the ground that the uncontroverted facts show the plaintiff to be guilty of laches.’ 231 App. Div. 812, 246 N. Y. S. 885.

The objection of laches will not avail the defendants in a case when the trial judge refuses to hear the testimony and thus takes from the plaintiff the opportunity of explaining its delay and showing that no one has been prejudiced thereby. A full examination of the facts is necessary (Zebley v. Farmers' Loan & Trust Co., 139 N. Y. 461, 34 N. E. 1067), and none was had.

As to the other defense, a novel question is presented. May the Industrial Board, having before it a policy upon its face covering the date of an accident, consider the defense of mistake and enforce the true agreement of the parties, when the issue is tendered by the insurer, or is it bound by the terms of the policy as written? The Industrial Board exists by virtue of article 1, section 19, of the New York State Constitution, which gives the Legislature power, unlimited by other constitutional provisions, to enact laws for the payment of compensation for injuries to employees. The power thus conferred has been exercised by the adoption of the Workmen's Compensation Law (Laws 1922, c. 615, as amended [Consol. Laws, c. 67]). This court has held, in considering the provisions of section 54, subdivisions 1, 2, of the law, that, as the insurance company may be made a party to the original application to the commission for compensation, ‘all its rights may be there litigated and determined,’ including the question ‘whether there was then [at the time of the accident] a valid, outstanding policy issued by it.’ Matter of Skoczlois v. Vinocour, 221 N. Y. 276, 282,116 N. E. 1004, 1005. In the case cited, the policy of insurance had once covered the liability of the employer, and the only question was whether it had been canceled before the accident, as provided in section 54 of the law. This was a legal defense, and, while the court said: ‘Unless this be the correct view of the statute [that the Industrial Board has jurisdiction to hear and determine the question] the scheme contemplated by it [the compensation law] fails, to a large extent at least, of its purpose,’ the decision did not in terms apply to equitable defenses such as mutual mistake.

Where and how has the jurisdiction to consider equitable defenses been wihheld from the board? It is difficult to put one's finger on any constitutional or statutory provision or judicial decision which thus limits its jurisdiction. The...