ment" plan. The well-to-do manufacturer, and the consumer of more limited means, enter into a contract which, in form, is a mere lease, by the terms of which the consumer hires the property in question at a stipulated advance rental, payable in weekly, monthly or yearly installments, as the parties may agree. Under the practical operation of such an agreement, the consumer acquires actual possession, while the maker retains actual ownership, of the property which is the subject-matter of their dealings; but coupled with this agreement, and forming a most essential part thereof, is a special covenant to the effect that, whenever the payments of rent shall aggregate a certain designated sum, the property shall belong absolutely to the socalled hirer. As already suggested, such bargains (in their form and terms), are mere leases; but the law, which has a greater regard for the real substance than for the mere form of a business transaction, looks upon them as "conditional sales," and enforces. them as such.

The practical importance of this phase of the commercial law can scarcely be overestimated. From a locomotive to a tooth-pick, it embraces personal property of every known and possible variety. The property which is the subject of negotiation between the parties may be a finished product, like furniture and wooden ware; or it may be the lumber from which that product was wrought; the mill in which that lumber was sawed; the growing timber from which that lumber was made, or an interest in the very soil from which that timber grew. It may be the complete equipment of a railway, turned out from the mines, mills and factories, of the eastern and middle States; the entire contents of a grain elevator, gathered from the prairies of Minnesota and the Dakotas; or a herd of live stock, from the grazing fields of Wyoming, Texas, or Montana. It may be a car load of fresh fruit from California (or of dressed beef from Chicago or Kansas City), the "use of which involves actual, speedy and total consumption; or it may be steel armor plate, the continuous use of which would extend through many years. Nothing is too bulky or too costly on the one hand, nor too insignificant on the other, to form the basis of such a contract. That contract may be executed on the Atlantic sea-board, and enforced on the Pacific

slope. For most obvious reasons, it is of the first consequence to ascertain just when, and by what means, the title passes. There is often a strong probability that the property will depreciate in value, pending the performance of stipulated conditions; and yet, a very substantial appreciation in value is sometimes possible. Female slaves (with their increase), are no longer an article of merchandise; but the cases relating to the former traffic in such merchandise, cases which arose during the first sixty years of the present century (and with which the judicial reports of at least a dozen States abound), are something more than merely ancient history; they show how closely legal ownership of the young, follows legal ownership of the mother; and they may afford a clear and correct exposition of the law governing the sale of breeding live stock in this present year of grace. Business transactions of the kind now under discussion would be greatly simplified could it be safely counted on that no material change, as to parties or property, would occur, pending the performance of stipulated conditions; but any reasonable degree of certainty as to those matters is practically and legally impossible.

Unrestricted and free alienation of property is the true and settled policy of the law generally; and this is more especially true as to the law merchant, which is pre-eminently a law of peace and good-will. In every nook and corner of the habitable globe, free traffic is the only natural traffic. It is scarcely possible to conceive a contract of the kind we are now considering (whether that agreement is to be treated as a conditional sale, or merely as a lease), where each party would not be free to sell and assign his interest in that contract, and in the property thereby covered, to any third person; and yet, this very freedom of alienation, necessary and proper as it is, may lead to complications wholly unforeseen by either of the parties. By way of illustration take the familiar case of a car manufacturer in Delaware, who supplies (on credit), rolling stock, say, for a newly constructed railway in Montana, the property changing hands upon some sort of an agreement between the parties that title shall be retained by the manufacturer until full payment of the purchase money; ordinarily the rights of the respective parties to such an agreement would be governed by the laws

of Montana. But suppose this property is pushed on into Oregon, thence into Washington, and thence into Minnesota. The manufacturer, having no other security, must follow his goods from State to State, from jurisdiction to jurisdiction. In the case supposed, the manufacturer overhauls his goods in Minnesota; and should he attempt (by legal proceedings) to enforce the original agreement, all his remedies will be governed by Minnesota laws-the law of the forum. Such a case might be still further complicated were the manufacturer to assign his rights under the contract to a citizen of California, while the other party to that contract assigned all his rights to a citizen of Florida. Such assignments are not necessarily executed in the State of the assignor's residence; he may transfer all his vested rights, not only whenever it pleases him, but also, wherever he may chance to be at the moment; he need consult only his own convenience and interest in that matter. Generally speaking, however, the validity of such assignments would depend almost entirely on the laws of the State in which they were actually executed and delivered. In view of these possible complications, and of many others which will readily suggest themselves to the practical man of business, many of the States have thought proper to legislate, more or less, in relation to installment sales. As might reasonably be expected, these statutes differ as widely as possible, scarcely any two of them being alike througout. Certain general principles of justice and fair dealing, however, underlie them all, and facilitate their construction; principles which every practical business man will readily understand and appreciate, for they are rules by which he shapes his own conduct throughout his entire business career. It is to the precise terms of these several statutes, and to the judicial constructions which have been placed upon them, both at home and abroad, that we propose to invite the careful attention of our readers, in a series of short articles, covering the whole ground of legislation and adjudication, in the several States and Territories. By such a discussion, shorn of all barren technicalities, we hope to aid and assist the manufacturer or wholesale dealer who, without receiving full payment, sends

his merchandise abroad (whether for consumption, re-sale, or use);

the consumer or retail dealer who, by virtue of the installment plan, acquires actual possession of (and the pospective title to) any such property; and the banker, or other middleman, who may be called upon to collect or discount paper relating to such contractseach, in his way, to protect himself, and avoid all legal complications.

As already intimated, there are certain general principles underlying all the legislation in question, principles which aid in the construction of each statute, which we should not lose sight of for one moment. For example: In the background of all controversies between buyer and seller, borrower and lender, lessor and lessee, stand the creditors of the respective contracting parties; and yet, not so far in the background as to be invisible to the naked eye of the law of the land; and this one fact of itself helps to explain many of the provisions in each of the statutes we shall quote. And again, mere possession is the original foundation, and the original source, of all legal title to property, whether personal or real. The actuality of possession, coupled with the continuity and notoriety of that possession, will sooner or later establish an indefeasible title to any property whatever. Generally speaking,` a man is presumed by law to own all personal property found in his actual possession-his peaceable, undisturbed possession; and this fact, borne well in mind, will likewise help us to understand the spirit and underlying reason of many provisions of the statutes we are about to examine. The manufacturer who places his wares upon the market naturally prefers and seeks a cash buyer, a purchaser who is prepared to close the deal at once, and with spot cash. Failing of such a buyer, yet preferring to sell on credit rather than not sell at all, the next best thing for the manufacturer or wholesale dealer is proper security; security that is not only sufficient in amount, but which can be enforced without unreasonable delay or expense. The vendor's lien is amply sufficient, so long as the seller retains possession or control of the goods. If, however, such goods pass from the control of the seller, if they come within actual control of the buyer, the vendor's lien is extinguished, and the seller must resort to replevin, or other appropriate remedy; but replevin necessitates the giving of a bond

(perhaps in some remote jurisdiction), to say nothing of incidental expenses, inevitable delay, and the chances that goods may be meanwhile consumed or spirited away. Chattel mortgages may also be resorted to, but they, also, are attended with more or less of expense and delay, incident to their legal foreclosure. Hence comes the device we are now considering; a device whereby actual possession is transferred, while legal title is retained. How is such a device to be acted on and carried out, in order that the party retaining the legal title, also the party acquiring the actual possession, shall each be protected, as against the other, and also against the several creditors of that other? This is a problem which our courts and law makers have been for many years earnestly debating. Bearing in mind that the real object and purpose of all so-called "recording laws" is to protect a grantor against creditors of, and purchasers from, his grantee; and having thus outlined certain preliminary considerations, let us now call the roll of States and Territories, with a view to ascertain, with reasonable certainty, just what a business man must or may do, in each jurisdiction, in the matter of installment sales. GEORGE C. WORTH.

LIFE INSURANCE-PAYMENT OF PREMIUMWITH PARTNERSHIP MONEY.

HOLMES V. GILMAN.

Court of Appeals of New York, June 6, 1893. Decedent misappropriated money of a partnership of which he was a member, and applied a portion thereof to the payment of premiums on life insurance procured by him for his wife's benefit. The amount misappropriated exceeded the amount of the policies: Held, that the surviving partner could recover such proceeds, the wife's insurable interest in the life of decedent not being property in the sense that it was mingled with the money converted, so that only the amount of premiums could be recovered.

PECKHAM, J.: A careful review of the case convinces us that the findings of fact made by the referee are amply sustained by the evidence, and that the judgment should not be reversed on the facts. We are confirmed in the correctness of this view upon a perusal of the opinions delivered by the learned judges at the general term. there find that the order reversing the judgment upon questions of fact as well as of law was formal merely, the judgment being actually reversed because the court below took a different view of

We

the law from that adopted by the referee upon his own findings of fact.

The claim of the plaintiff to recover the moneys arising from the payments of these policies is based upon the principle which allows a cestui que trust to follow trust funds,. and to appropriate to himself the property into which such funds have been changed, together with the increased value of such property, provided the trust fund can be clearly ascertained, traced, and identified, and provided the rights of bona fide purchasers for value without notice do not intervene. The right has its basis in the right of property, and the court proceeds on the principle that the title has not been affected by the change made of the trust funds, and the cestui que trust has his option to claim the property and its increased value as representing his original fund. The right to follow and appropriate ceases only when the means of ascertainment fail. It is a question of title. Van Alen v. Bank, 52 N. Y. 1; Newton v. Porter, 69 N. Y. 133; Ferris v. Van Vechten, 73 N. Y. 119; Cavin v. Gleason, 105 N. Y. 256, 260, 11 N. E. Rep. 504; In re Hallett's Estate, 13 Ch. Div. 696. It was somewhat akin to the principle decided in Silsbury v. McCoon, 3 N. Y. 379, where corn was wrongfully taken from its owner, and converted into whisky. The court held the property was not changed in the hands of the wrong-doer, and the whisky belonged to the owner of the original material, no matter how much it had been increased in value. The case of Pennell v. Deffell, 53 Eng. Ch. 372, 388, 389, discusses the principle as thus stated, and agrees to it. That a partner occupies a fiduciary position with regard to his copartners and the funds of the firm, and will not be permitted to make a personal profit out of the use of such funds, is. I think, clearly established. 1 Lindl. Partn. (2d Amer. Ed.) 303; Featherstonbaugh v. Fenwick, 17 Ves. 298; Anderson v. Lemon, 8 N. Y. 236; Mitchell v. Reed, 61 N. Y. 123; Riddle v. Whitehill, 135 U. S. 621, 10 Sup. Ct. Rep. 924. Although partners do not, in the strict sense of the term, occupy the position of trustees towards each other and towards the firm funds, yet the position is one of a fiduciary nature, calling for the maintenance and exercise of the greatest good faith between them. Such a relationship authorrizes the same remedy on behalf of the wronged partner as would exist against a trustee, strictly so called on behalf of a cestui que trust: Per Jessel, M. R. in Re Hallett's Estate, 13 Ch. Div. 696, 712. While legally incorrect to describe the fraudulent abstractions made by Gilman of the funds of the firm as embezzlements, the description is harmless. It was a monstrous and gross breach of the duty he owed the firm, and the right of the firm to follow the funds is not affected because the act could not be regarded in law as an embezzlement. The right to follow the funds springs from the fiduciary nature of Gilman's position with regard to them. These general position, are not really denied by the

defendant. It is claimed, however, that the tracing and identification of the funds have not been sufficiently proved in fact, and it is also urged that there has been an actual mingling of firm funds with the private funds of Gilman in the purchase and maintenance of the policies. I have looked carefully through the evidence upon these questions of fact, and I think the findings of the referee are fully sustained, and that no exception can prevail on such grounds. If these preliminary questions be decided against him the counsel for defendant then urges that the rule clearly is, if the trust fund has become mingled with money or property of the trustees or others, equity impresses the proceeds with a trust to an amount equal to the original trust fund and interest, and will go no further. He then claims that the firm funds which went to the purchase of the policies and the payment of the annual premiums were mingled with the property right of the wife, called her "insurable interest" in her husband's life, and so the policies were not wholly the result of the use of those firm funds, and therefore the plaintiff can have only a lien on the policies or the moneys arising from their payment, to the amount of the premiums paid with the firm funds, and the interest thereon. This is really the chief question in the case.

Where moneys have been misapplied, and have been used as a portion of a larger amount, which has been invested in other property, the property thus acquired does not, as a whole, belong to the owner of the moneys misapplied. It does not belong to him because it has not been purchased or acquired wholly with his money or funds, and hence it is that such property is held charged with a lien at least to the amount of the trust funds invested in it. It is not necessary to here decide it, because we take another view of the facts, but I am not all prepared to admit that under no circumstances is the cestui que trust entitled to recover back anything more than the amount of his property and interest, where there has been a mingling of funds. In case the trustee took a thousand dollars of trust funds and five hundred of his own, and purchased property, which advanced in value to twice its original sum, I have seen no case where the point has been determined that the whole increased value belongs to the trustee, and that only the original sum was wrongfully taken, and interest, can be given to the cestui que trust, although it was by reason of the wrongful use of the trust funds that the trustee was enabled to realize such value. If, in such case, the cestui que trust were not allowed to at least participate proportionately in this increased value, is would appear to be a violation of the principle that the trustee cannot ever be permitted to make a profit out of the use of the trust funds. It seems to me to be a case for the application of the doctrine that the parties became coowners of the property at the option of the cestui que trust, in the proportion which their various contributions bore to the sum total in

vested. In this case, however, the defendant is enabled to claim a mingling of funds and property only by treating the right of a wife to insure the life of her husband for her benefit as a species of property which has been mingled with the funds of the firm, the result of the combination being the procurement of the policies,

We do not regard this right as property in any such light as to bring the case within the princi- . ple of the authorities upon the subject of a mingling of funds in the purchase, or acquisition of other property. The right of a wife to insure the life of her husband for her own benefit is not property. It is more in the nature of a power or a privilege to make a valid contract. It is a status and not a property right. The common law upon motives of public policy held that there must be what was termed an "insurable interest" in the life which was insured, or else the policy was a dangerous kind of a wager, and therefore void. To take a policy out of such a class it was necessary to show that the insured had some interest in the continuance of the life of the cestui que vie. Who had such an interest as to give a right of insurance was frequently a matter of some discussion and of possible doubt. It may not even now perhaps be said that the precise nature, character, and extent of the interest in another's life, which shall render that life insurable, have been formally and plainly laid down. It is said by the federal supreme court that one essential is that the policy shall be obtained in good faith, and not for the purpose of speculating upon the hazard of a life in which the insured has no interest. Insurance Co. v. Schaefer, 94 U. S. 457, 460. An interest which is insurable must be an interest in favor of the continuance of the life, and not an interest in its loss or destruction. If any person could be thought to have an interest in the continuance of the life of another it would be a wife in the life of her husband. Judge Allen, in Baker v. Insurance Co., 43 N. Y. 283, regarded the question as decided that a wife had at common law an insurable interest in the life of her husband. Judge Andrews held to the same effect in Brummer v. Cohn, 86 N. Y. 11, 14. These cases favor the view that the statutes upon the subject of the insurance of the husband's life in favor of his wife, while it regulates, does not create, the right. I do not intimate that, if the statute created the right, it would in any way alter its nature. That such a policy was valid at common law simply makes it clearer that it is the nature of the relationship between man and wife that makes the policy valid, and relieves it from the objection that it is a wager policy. That relationship is not property in any fair sense of the term. It creates an insurable interest in the life of another, of a nature the same as a parent has in a child or a child in a parent; that is, an interest in the preservation of the life, and not in its destruction. Being so circumstanced, a policy of insurance upon such life is not a wager policy, and is therefore a valid policy. It is the same

question, but it may perhaps appear a little clearer when it is asked whether the power or privilege of a parent or child or creditor to insure the life of his parent or child or debtor is property. A man has an insurable interest in his own life. If he take trust funds and procure such insurance, has he thereby mingled those funds with other property, i. e., with his right to insure his own life? And can it be said that the policy is the product of such mingled funds and property, so that nothing but the original amount of the trust funds and interest can be recovered back from the estate? The fact is apparent that a policy of insurance upon a life is not a policy of indemnity. The sum named in the policy is to be paid when the insured life has ceased, no matter how really valueless such life may have in the mean time become. The power of the wife to procure insurance is not in the least unfavorably affected by the fact that insurance in her favor has already been secured. As was said by Shaw, C. J., in Loomis v. Insurance Co., 6 Gray, 396, the amount of the insurance is immaterial. The premium is computed, upon the law of averages, to be the exact equivalent for the risk. So, if insurance had been taken out by the husband on his life in the wife's name, she could herself take out more upon just as favorable terms, and just as expeditiously as if none had been taken. No one company might desire to go above a certain amount upon any one risk, but the ability to procure further insurance is practically unrestrained. The wife has therefore suffered no loss by the original procurement of this insurance, and its subsequent maintenance unknown to her, so long as the premiums have not been paid with her moneys or in any way from her estate. In other words, her property has not been used for any purpose. Her power to obtain valid insurance upon his life remained wholly unimpaired and unaffected by the insurance already obtained. The fact that she had what is termed an "insurable interest" was only material for the purpose of upholding the validity of the insurance in question. I cannot see how it can be regarded as property in any event. That a life insurance policy has not the features of a contract of indemnity, and is not such a contract, has been unquestioned for a number of years. Rawls v. Insurance Co., 27 N. Y. 282; .Olmstead v. Keyes, 85 N. Y. 593.

The case of these policies is very much like that in Baker v. Insurance Co., supra, where Judge Allen said the insurance was effected by the husband for the benefit of his wife, and as a provision for her in case of his death. It was there stated that the case would not be changed if the policy were regarded as having been procured by the wife, because the husband was in truth the actor, and represented the wife, and she in claiming the benefits of the policy, necessarily ratified and confirmed the compact as it was made, and with all its terms and conditions. Therefore this case is to be looked at with reference to the fact

that every dollar of the moneys which procured and maintained these policies in existence belonged to the firm represented by the plaintiff, and that Gilman had no more right to invest or use these funds in the manner he did than would any third person who had procured them without any right or title. It has been said that the husband, when he procures an insurance for his wife's benefit, acts as her agent, or represents her, and that she has a vested interest in the policies the moment they are delivered by force of the statute permitting them to be made in this form. Whitehead v. Insurance Co., 102 N. Y. 143, 6 N. E. Rep. 267. This is doubtless true in the case of the husband procuring the insurance with funds which belong to him or to his wife, but where the premiums are paid with moneys which in truth do not belong to him, and which the husband misapplies in so paying, and by which he violates his obligation to the true owner of the moneys thus used, the wife in such case must claim the policy subject to the means by which the husband procured it, and she must adopt all his methods. The moneys in the hands of the company could not be recovered back by the cestui que trust if received by the company in good faith, because it would stand in the position of a bona fide purchaser, yet the policy itself would stand as the representative of these trust moneys, and the right of the wife would be to that extent subordinate. This principle has, in effect, been decided in New Jersey in the case of Shaler v. Trowbridge, 28 N. J. Eq. 595. It was there held, upon almost identical facts, that there was no public policy which favored the wife at the expense of the principle that trust funds could be followed, and that no profit could in any way arise in favor of the trustee who used them. It also held that the wife could not be permitted to avail herself of the proceeds of policies paid for by her husband with trust funds. It is true, in that case the policies were originally 'taken out in the name of the husband, and subsequently made payable to the wife, and it is urged that there is a difference in the two cases, because in the New Jesrey case it was the husband's insurable interest which was insured, and then assigned, and that in this case it is the wife's interest which was originally insured; but we hold, upon the facts in this case, that the taking out of the policies in the name of the wife does not alter the principle as to trust funds. The cestui que trust is entitled to follow his funds, and to take the moneys or the policy at his option.

The case of Bank v. Hume, 128 U. S. 195, 9 Sup. Ct. Rep. 41, is not in point. The moneys there used were in truth the property of the husband, although he was insolvent, and he used some of his property to purchase insurance for the benefit of his wife and children. The supreme court held that a policy of insurance taken out by the husband in the name and for the benefit of the wife made the contract a contract with the wife, and that, even though the premiums were paid