his contract, and from the contractor to the respective claimants, and shall enter judgment directing that the city, town, township or other municipality shall pay over to the claimants for the work done and the materials furnished in the execution of said contract or contracts, whose claims or liens it shall hold to be valid and just, in the order of their priority as determined by said court to the extent of the sum found due to said claimants from the contractor, so much of said funds or money which may be due from the city, town, township or other municipality to the contractor, under his contract, against which the lien is filed, as will satisfy their liens or claims, with interest and costs, to the extent of the amount due from said city, town, township or other municipality to said contractor." Gen. St. p. 2079. The questions raised in this case are controlled by this statute. Where the amount due to the contractor is undisputed, the sole question for adjudication is the amount due to the lien claimants, respectively, from the contractor. When that has been ascertained, then the function of the court is to apportion the amount due the contractor among the lien claimants in the proper proportion, provided the fund under the control of the court is sufficient to answer that purpose; if not sufficient, then pro rata until the fund in hand is exhausted. At this stage the jurisdiction of the court under the statute ends No personal judgment, either for or against a lien claimant, can be given; nor does the statute provide for a judgment against a municipality in case the amount due to the contractor exceeds the sums due to the lien claimants. By statute a set-off with respect to the rights and liabilities of the parties to the suit is considered as a cross action brought by the defendant. Prac. Act, § 134 (Gen. St. p. 2555). The statute which gives the right to set off restricts the right to liquidated damages. It also provides that if, on the trial, the amount found to be due to the defendant on his set-off shall equal or exceed the amount due to the plaintiff on his cause of action, the defendant shall be entitled to a verdict and judgment, which verdict and judgment shall, in case of such excess, be for the amount or balance which shall apIpear to be due to the defendant on the adjustment and allowance of the debts and demands of the parties under the act. Gen. St. 3109. In Naylor v. Smith, 63 N. J. Law, 596, it was held by this court that a builder sued under the mechanic's lien act could not set off claims due to him from the plaintiff in a different right. Mr. Justice Garrison, in delivering the opinion of the court, used this language: "The statutory remedy of set-off rests in spirit and in reason upon the avoidance of circuity of action, by compelling the adjustment in one suit of all such mutual demands as are counterclaims. When, therefore, the legislature has created an action that does not admit of this mutuality of ad

justment, it has created one to which neither the spirit, the reason, nor the statute of setoff applies." If the claim set up by the defendants in their answer be considered as a set-off or counterclaim, it cannot be made available to the defendants in any proceeding under the statute in virtue of which this suit is maintained. But the defendants' claim, as set out in the answer, is not a counterclaim for liquidated damages, such as would constitute it a set-off. The claim set out in the answer is for unliquidated damages arising from the failure of the complainant to perform his contract according to its terms. The distinction between a set-off and recoupment is well settled. Recoupment, at common law, was a claim in reduction of the amount due to the party. It was defined in section 129 of the practice act (Gen. St. p. 2555) and in the first section of the supplement of March 30, 1896, in these words: "In actions on contract, whether under seal or not, the defendant may set up as a defense in abatement of the damages to be recovered by the plaintiff, a defect in or partial failure of the consideration of the contract sued on; the defendant may also recoup all damages which he may have sustained by reason of any cause of action arising out of the contract or transaction set forth in the plaintiff's declaration as the foundation of the plaintiff's demand, or connected with the subject of the action." P. L. 1896, p. 186. It will also be borne in mind that the doctrine of recoupment had been adopted in courts of equity long before it was introduced by statute into the practice of courts of law. The principle that lies at the foundation of this doctrine is that the amount which the plaintiff is entitled to recover shall be abated or reduced by reason of his own failure to perform obligations which by the same contract devolved upon him, whereby the defendant has sustained damages. In substance and effect, it may be likened to the reduction of the amount recoverable upon a contract because of a failure of consideration. There is great propriety in the application of that doctrine to cases of this kind. The controversy over the distribution of such a fund concerns all the lien claimants, where there are more than one lien claimant. A court of equity cannot "decide as to the extent, justice, and priority of the claims of all parties" without considering such a defense, if it is properly presented. Inasmuch as a defendant, under such circumstances, has an option either to use recoupment in reduction of the amount recoverable against him, or to waive it in that action and bring a separate suit to recover his damages, it is settled by all the cases that a defendant who has made his election to recoup must give notice of his purpose to do so by an appropriate forin of pleading.

In the present case the defendants gave notice of their election to recoup their damages by setting out their claim in the answer.

The question then arises as to what disposition shall be made of that part of the answer. The vice chancellor directed that it be struck out. This ruling appears to have been made on the ground that a court of equity cannot entertain a claim for the recovery of unliquidated damages. This prinriple is well settled in terms as laid down by the vice chancellor. Trotter v. Heckscher, 40 N. J. Eq. 656, 4 Atl. 83, and Alpaugh v. Wood, 45 N. J. Eq. 157, 16 Atl. 676. But, nevertheless, we think the order striking out this part of the answer, considered simply as notice of the purpose of the defendants to claim recoupment, was erroneous. We think the fund should be retained in the court of chancery, and the case allowed to stand over until the defendants shall have their damages arising from the breach of contract by the complainant set out in the answer assessed in a court of law, within such time and in such manner as the court of chancery may direct.

The part of the answer which is in the nature of a cross bill is superfluous, and is not adapted to present the defense. It is true that by the act of 1896 it is provided that, if the amount of such damages recouped shall exceed the demand of the plaintiff, judgment shall be given in favor of the defendant and against the plaintiff in such action for such excess, with costs; but that part of the statute is inapplicable to this procedure. There is in this statute no provision for a personal judgment against the contractor as a debtor. The proceeding is in rem,-a controversy over a particular fund, involving only the amount due to the contractor from the owner and the amount due to the lien claimants, respectively. This part of the answer, which is in the nature of a cross bill, was properly struck out by the vice chancellor. To that extent the order appealed from is affirmed; but that part of the order which directed the striking out of the same allegations in the answer should be reversed, and a decree entered in accordance with the views expressed in this opinion. No costs shall be allowed to either party.

(67 N. J. L. 7)

SNYDER et al. v. COMMERCIAL UNION ASSUR. CO., LIMITED, OF LONDON.

(Supreme Court of New Jersey. Nov. 11, 1901.) INSURANCE BROKERS-AUTHORITY-QUESTION

OF FACT.

It appearing that a broker was employed by the plaintiffs to procure insurance for them, and to maintain the insurance up to a certain sum in good companies selected by him; that in the course of such employment he had for several years received from insurance companies notice of cancellation of policies held by the plaintiffs, and thereupon had replaced the insurance in other companies, and that this practice was known to the plaintiffs and not objected to by them,-held, that the question whether the broker had authority to accept notice of cancellation of an existing policy, to

substitute for it the policy in suit, and thereupon to assent to the cancellation of the old policy, without consulting the plaintiffs, was a question of fact, not of law. (Syllabus by the Court.)

Error to circuit court, Essex county.

Action by William V. Snyder and others against the Commercial Union Assurance Company, Limited, of London. Judgment for plaintiffs, and defendant brings error. Affirmed.

This case was tried before the circuit court of Essex county without a jury, with the result stated by the trial judge (Swayze, J.) as follows:

"This is a suit by William V. Snyder & Co. against the Commercial Union Assurance Company to recover the amount of a policy for $2,500 insuring the plaintiffs against loss by fire to a stock of merchandise which was destroyed on the 27th of February, 1900. The policy is a one-year policy, dated February 24, 1900, issued by James E. Garrabrant, an agent of the defendant at Newark. The circumstances under which the policy was issued are as follows: Snyder & Co. were in the habit of carrying $300,000 of insurance upon their stock of goods. One of their brokers for the purpose of placing this insurance was Henry C. Rommel, who had charge of about half of the total amount. He had secured for Snyder & Co. a policy of insurance in the Glens Falls Insurance Company to the amount of $2,500, and this policy had been delivered to Snyder & Co., and was in their safe at the time of the fire. On the 19th of February the Glens Falls Insurance Company requested their agent at Newark, Mr. R. P. Conlon, to cancel this policy. Mr. Conlon gave a verbal notice to Rommel of the desire of the Glens Falls Company to cancel their policy immediately upon the receipt of the request from the company, and apparently as early as the 20th of February. Subsequently, and probably on the 23d of February, at Rommel's request, he gave Rommel a formal written notice, bearing date the 19th, but not served until the date last mentioned. The instructions of Snyder & Co. to their brokers-or, at any rate, their intentions-seem to have been to carry only $300,000 insurance upon their stock. At the time of the fire there were outstanding policies of insurance or contracts for policies to the amount of $312,500. The loss exceeded that sum. The excess of insurance over $300,000 arose from the fact that policies were issued by the Atlas, Caledonian, Svea, and Commercial Union (the policy in suit), amounting in all to $12,500, to take the place of policies for that amount theretofore issued. No claim is made by Snyder & Co. in excess of the $300,000. The only question raised, as far as they are concerned, is whether the four companies last mentioned or the companies which issued the prior policies are responsible. This suit, while brought in the name of Snyder & Co., is really for the bene

fit of the Glens Falls Insurance Company, which paid Snyder & Co. $2,500, and took an assignment of the claim against the Commercial Union, after the beginning of this suit, in pursuance of an agreement made prior thereto. Immediately after receiving the notice from Mr. Conlon of the cancellation of the Glens Falls policy, Mr. Rommel, Snyder's broker, met Mr. James E. Garrabrant, the agent of the defendant company, and contracted with him for a policy of $2,500. Garrabrant represented several companies, but it does not appear whether he stated in what company he would place the new policy for $2,500. As a matter of fact, he placed it in the Commercial Union, and that policy appears to have been written, or, at any rate, it bears date, February 24, 1900, three days before the fire. It was not delivered, however, to Rommel, until the morning after the fire; and Rommel delivered the policy, after the fire, to Mr. Snyder. Rommel and Snyder both understood that the new policy was to take the place of the Glens Falls policy, and Snyder made a pencil indorsement upon the policy in suit to that effect; but nothing was said to Garrabrant about the new policy being in substitution for the Glens Falls policy. Snyder made proof of loss under all of his policies, but it was understood between him and the insurance companies that the total amount he claimed was only $300,000, and that all he desired was to have it settled which of the companies were indebted to him. The Glens Falls policy seems to have been taken up by the company at the time they bought Snyder's claim against the Commercial Union, and the policy was produced by them marked 'Canceled,' with a slip attached, dated June 1, 1900, whereby the members of the firm of Snyder & Co., in writing, ratified and confirmed 'the action of our broker, Henry C. Rommel, in accepting notice of cancellation from the Glens Falls Insurance Company of $2,500 of insurance upon our stock, located in Newark, N. J., and of the replacing of the same amount of insurance by a binder and by policy No. 205,668 in the Commercial Union Assurance Company, of London, Eng land.' It is evident that this ratification and the actual stamp of cancellation upon the Glens Falls policy took place at the time, as a part of the transaction by which the Glens Falls Company acquired the interest of Snyder & Co. in their claim against the Commercial Union. The defendant insists that the Commercial Union policy was issued only in substitution for the Glens Falls policy, and that it could not become binding until the cancellation of the Glens Falls policy; that that cancellation had not taken effect at the time of the fire; and that, therefore, the Commercial Union policy was not a subsisting contract when the property insured thereby was destroyed. On the other side, it is said that Rommel, having authority to take out insurance for Snyder & Co., had the au

thority to contract with Garrabrant for this insurance; that there was nothing in the contract between Rommel and Garrabrant to indicate that the Commercial Union policy was in substitution for the Glens Falls policy, or that there was any condition precedent to its being effective; and it is argued that a purpose existing in the mind of Rommel or an intention existing in the mind of Snyder to limit his insurance to $300,000 would not avail to relieve the Commercial Union Company from its liability.

"As I look at the case, this contention of the plaintiffs cannot be sustained, unless by virtue of the subsequent ratification by Snyder. While it is true that a purpose existing in the mind of Rommel or an intention on the part of Snyder to limit his insurance to $300,000 would not affect the validity of the contract with Garrabrant, the real question on that branch of the case (aside, as I say, from the question of ratification, which I will deal with presently), is with regard to Rommel's authority to make the contract; and Rommel's authority to contract for Snyder & Co. was limited to the amount of insurance outstanding. He had no authority to make the contract, unless for the purpose of substitution; and Snyder would not have been bound to pay the premiums on any more insurance than he had authorized. I think that this is the practical construction, also, which has been given to the matter by Snyder & Co. in limiting their claims under the policies to $300,000, and not attempting to set up a claim to $312,500. It is conceded by the defendant that, if the Glens Falls policy was properly canceled prior to the fire, then the Commercial Union policy became a subsisting contract, and the plaintiffs must prevail. The oral notice of cancellation was given more than five days before the fire. The written notice was not given earlier than the 23d. Neither notice, however, was brought to the attention of Snyder & Co., either by Conlon, the agent of the Glens Falls Company, or by Rommel, until after the fire. It is well settled by the authorities cited at the argument that a broker who is merely employed to obtain insurance is not thereby authorized to receive notice of cancellation. Grace v. Insurance Co., 109 U. S. 278, 3 Sup. Ct. 207, 27 L. Ed. 932; Herman v. Insurance Co., 100 N. Y. 411, 3 N. E. 341, 53 Am. Rep. 197; Wilson v. Insurance Co., 140 Mass. 210, 5 N. E. 818. But, while this is the general rule, the broker may be authorized to receive notice of cancellation. Each case depends upon its own facts. Stone v. Insurance Co., 105 N. Y. 543, 12 N. E. 45; Karelsen v. Fire Office, 122 N. Y. 545, 25 N. E. 921; and the very recent cases of Hamm Realty Co. v. New Hampshire Fire Ins. Co., 83 N. W. 41, decided by the supreme court of Minnesota in 1900, and White v. Insurance Co., in the United States circuit court, in Rhode Island, in 1899 (93 Fed. 161). The judgment in the last case was affirmed in the circuit court

of appeals for the First circuit on June 15, 1900. The opinion by Colt, circuit judge, is to be found in 43 C. C. A. 216, 103 Fed. 260. But the record did not present the real question in dispute, and the opinion in the court of appeals adds nothing to the opinion in the circuit court. The question in every case is a question of fact. The broker is not authorized to receive notice of cancellation by the mere fact that he is the broker through whom the policy was procured. He may be authorized to receive notice of cancellation either by express authority, or, as more usually happens, by the course of business between the parties. In this case I find that Rommel was authorized by Snyder to receive notices of cancellation of policies procured by him, and was also authorized to procure new policies in place of those thus canceled. He says himself that he had charge of substitutions, and that he had received all the notices of cancellations of all the policies he had placed during the whole term he had served Mr. Snyder as broker,-some seven or eight years; that his custom, upon receiving such notices, was to replace the insurance in some other company, take the policy to Snyder's office, and take up the policy that was ordered canceled; that he cannot recall a case where he did not receive the notice; and that Snyder took the substituted policies and paid the premiums. This testimony is uncontradicted, and, I think, brings the case within the rule laid down in the Case of Hamm Realty Co. and the case of White v. Insurance Co., above cited. See, also, Arnfeld v. Assur. Co., 172 Pa. 605, 34 Atl. 580; Dibble v. Assurance Co., 70 Mich. 1, 37 N. W. 704, 14 Am. St. Rep. 470.

tiff's agent, at the time of the fire. In the present case there was a binding contract between Snyder's agent and Garrabrant at the time of the fire, dependent only upon the cancellation of the outstanding policy. In the Stebbins Case the court said: 'Neither the plaintiff nor his agent had any knowledge of the existence of the policy previous to the fire. It was not an existing contract of insurance when the loss happened, and the subsequent delivery was ineffectual to give it validity.' The same remarks apply to Wilson v. Insurance Co., 140 Mass. 210, 5 N. E. 818.

"Finding, as I do, that Rommel had authority to accept notices of cancellation, and to negotiate for new policies, it becomes unimportant to decide whether or not the Glens Falls policy was canceled by the expiration of the five days provided for in the standard policy; for, as a matter of fact, Rommel waived the time limit, and the Glens Falls policy ceased to be binding as soon as the new policy procured in substitution for it became effective. This was as early as the 24th of February, on which day the policy bears date, and three days before the fire. Even if, however, Rommel had not been at the time authorized to cancel the Glens Falls policy and substitute the Commercial Union policy, I think the subsequent ratification by Snyder would remove that difficulty. It has been held in this state (Marts v. Insur ance Co., 44 N. J. Law, 478) that a per son for whose benefit an insurance policy is taken out may ratify the transaction either before or after the loss, and, a fortiori, I see no reason why the assured may not ratify a cancellation after a loss. The ratification must be complete, and of the whole transaction, and the ratification of the contract for the substituted policy would necessarily carry with it a ratification of the cancellation of the old policy. In this case Snyder ratified Rommel's action by the pencil indorsement on the Commercial Union policy. He subsequently ratified it in writing on June 1, 1900. I do not think Snyder lost any rights by making proof under both policies. That was, I think, a proper precaution for him to take. The fact that he made an unfounded claim against the Glens Falls Company cannot relieve the Commercial Union from his just claim.

"The result is that I find in favor of the plaintiffs and against the defendant, and assess the damages at $2,500, besides interest. The interest may be calculated by counsel. 1 will allow counsel for the defendant time to frame his exceptions to my conclusions on questions of law, and to frame such requests to find and exceptions as may be proper to secure him a review of my conclusions on questions of fact, as far as the same may be reviewable."

Argued June term, 1901, before DEPUE, C. J., and GARRISON, COLLINS, and DIX

E. A. & W. T. Day, for plaintiff in error. Riker & Riker and Richard & Heald, for defendants in error.

PER CURIAM. The learned judge of the circuit court found as a fact that the broker who procured for the plaintiffs the policy in suit had the authority of the plaintiffs to do so. He deduced this fact from testimony showing that the broker had been employed by the plaintiffs to procure insurance for them, and to maintain the insurance up to a certain sum in good companies selected by him; that in the course of such employment he had for several years received from insurance companies notice of cancellation of policies held by the plaintiffs, and had thereupon replaced the insurance in other companies; and that this practice was known to the plaintiffs, and was not objected to by them. The legal propriety of this deduction is sufficiently vindicated by the opinion above set forth, and, the authority of the broker being thus established, no further question calling for consideration on writ of error remains.

The judgment is affirmed.

If one receiving a guaranty of future credits does not give reasonable notice of its acceptance, the guarantor will not be bound.

Action by John Wanamaker against George W. Benn. Judgment for defendant.

Action of assumpsit based upon a written guaranty for the payment of a book account for goods sold and delivered to another person. The said instrument, which was ac mitted in evidence, was in the following form:

"Form 4. Monthly. 500-8, 22, 98. In consideration of the firm of John Wanamaker, as now constituted or hereafter formed, granting credit for the purchase of merchandise to Mrs. Grover (Rebecca A.) Smith, at present residing at No. 225 South Ninth St., Philadelphia, Pa., to an amount not exceeding fifty dollars per month, I hereby agree to guarantee the payment of, and will pay on demand, said monthly accounts on the fifth day of the month following said purchases. Notice of separate transactions is waived. This guarantee is to continue from month to month until revoked by me in writing, and the amount due thereon is settled in full to date of revocation. Dated the 3d day of September, 1895. G. W. Benn. Witness:

guaranty by the plaintiff were proved. Plaintiff also proved his book account against Mrs. Grover Smith, and then rested.

Mr. Ridgely, for defendant, moved for a nonsuit on two grounds: First, that it had not been averred in the narr., nor proved, that the plaintiff ever gave notice to the defendant that he accepted his guaranty; second, that there was no proof of any notice given to the defendant of any transaction with Mrs. Grover Smith, or of any default upon her part.

Mr. Van Dyke, for plaintiff: The principle of law contended for by the defendant's counsel does not apply to this case. The common counts in the narr. are sufficient of themselves, and averments of acceptance of the contract by the plaintiff, and notice of the same to the defendant, are unnecessary. There is an express promise in this contract to pay, and an express waiver of notice. Argued before LORE, C. J., and SPRUANCE and BOYCE, JJ.

Robert H. Van Dyke, for plaintiff. Henry Ridgely, Jr., and Frank M. Davis, for defendant.

LORE, C. We think this nonsuit must be granted. The principle of law contended for by the plaintiff is very clearly settled in the cases of Taylor v. McClung, 2 Houst. 24, and Bank v. Tatnall, 7 Houst. 287. In the former case the statement is as follows: "If the guaranty be prospective in its character, to cover future credits, the party tendering it is entitled to notice of its acceptance, and the party receiving it, and for whom it is intended, is bound to give reasonable notice of its acceptance, or the party offering it will not be bound by it."

Let a nonsuit by entered.