PELICAN v. MUTUAL LIFE INS. CO. OF NEW YORK. (Supreme Court of Montana, 1911. 44 Mont. 277, 119 Pac. 778.) Action by Jennie Pelican against the Mutual Life Insurance Company of New York. Judgment for plaintiff, and defendant appeals. BRANTLY, C. J. Plaintiff, being sworn, testified that she was the surviving wife of Henry Pelican, the beneficiary named in the policy and that no part of the sum stipulated for therein had been paid. Her counsel then introduced the policy and rested. Thereupon counsel for defendant moved for a nonsuit on the ground that plaintiff had failed to show that Pelican was in good health at the time the policy was delivered. The motion was overruled. Defendant assigns error. Counsel argue that, since in the application Pelican agreed that the contract should not become effective unless the first premium was paid and the policy was issued during his "continuance in good health," it had not become a binding contract in the absence of evidence showing that he was in good health at the date of its issuance. The ruling was proper. * * * The general rule is that a warranty must be a part and parcel of the contract-made so by express agreement of the parties upon the face of the policy. It is in the nature of a condition precedent and must be strictly complied with or literally fulfilled, to entitle the assured to recover on the policy. It need not be actually material to the risk; its falsity will bar recovery because by the express stipulation the statement is warranted to be true, and thus is made material. * * ** "A representation is not, strictly speaking, a part of the contract of insurance, or of the essence of it, but rather something collateral or preliminary, and in the nature of an inducement to it. A false representation, unlike a false warranty, will not operate to vitiate the contract, or avoid the policy, unless it relates to a fact actually material, or clearly intended to be made material by the agreement of the parties. It is sufficient if representations be substantially true. They need not be strictly, or literally, so. A misrepresentation renders the policy void on the ground of fraud, while a noncompliance with a warranty operates as an express breach of the contract." Alabama Gold Life Ins. Co. v. Johnston, 80 Ala. 467, 2 South. 125, 59 Am. Rep. 816. * * * It is true that in the application there is found the statement that the answers made to the medical examiner were true and were made to the company "as an inducement to issue the proposed policy." Yet it appears, from the condition quoted above from the policy itself, that in the absence of fraud these statements were to be "deemed as representations and not warranties." ** * The evidence tends to show that Pelican died of pulmonary tuberculosis, attended by chronic pleurisy and chronic pleuropercarditis. * * * The evidence left in doubt the truth of the answers of Pelican to the several questions, as well as his good faith in making them. If he was suffering from tuberculosis on September 12, 1908, and died in an advanced stage of the disease in July, 1909, the ordinary layman might suspect that he was afflicted with it at the date of his application [August 26, 1908]. Yet the testimony of Dr. Hammond tends to show that he was entirely free from it at that time, and the fact that the doctor found him insurable indicates that he was then in good health. Therefore the truth or falsity of his answers to questions, which all reflected upon the condition of his health, depended upon the proper inferences to be drawn from the evidence. There was evidence tending to show that, when Dr. Matthews visited him, he informed him that he was suffering from influenza. Even though he was then suffering from pleuritic tuberculosis, nevertheless, being a layman, he could not himself be expected to have a better knowledge of diseases or of the condition of his health, than had Dr. Hammond, who about a month later made a careful examination to ascertain if the disease was present. Hence, also, the inference of his good or bad. faith in making these several answers was to be drawn from conflicting evidence. It was peculiarly within the province of the jury to determine whether, upon the whole of the evidence as to any of his answers, Pelican was guilty of fraud within the rule stated above. The apparent haste with which he proceeded to have his life insured, after his illness in 1908, the short time that he was at work thereafter, and the condition of his body as described by the physicians who performed the autopsy, some nine months later, might well be regarded as sufficient to create a suspicion that his statements were intentionally untrue. Nevertheless, the court properly refused to take the case from the jury. * * * * * * The judgment and order are affirmed. KAUFFMAN v. RAEDER et al. (United States Circuit Court of Appeals, Eighth Circuit, 1901. 47 C. C. A. 278, 54 L. R. A. 247.) 108 Fed. 171, SANBORN, Circuit Judge. May one party to a contract, who has accepted and retained the benefits of its substantial performance by the other party, retain and enjoy these benefits, and still rescind the agreement, and escape all the burdens and liabilities of the contract, because the first party has failed to perform at the exact time stipulated therein a subordinate covenant, incidental to the main purpose of the agreement, which goes only to a part of the consideration, and whose breach be compensated by damages? This is the most important question which this case presents. It will be conducive to brevity and perspicuity to obtain a clear idea of the relations of the parties to the agreement to be considered, their respective covenants therein, and the moving considerations which induced them to make their stipulations before entering upon the discussion of this issue. This conception must be secured by the light of the fundamental rule that the situation of the parties when the contract was made, its subject-matter, and the purpose of its execution are material to determine the intention of the parties and the meaning of the terms they used, and that when these are ascertained they must prevail over the dry words of the stipulations. * * * On June 19, 1895, when this agreement was made, the plaintiff, John W. Kauffman, had made a lease of the valuable premises in the heart of the city of St. Louis, involved in the negotiation, to the Central Realty & Improvement Company for a term of years, whereby he was secured-First, by his legal right to eject the lessee and to take back the premises upon default in the payment of any installment of the rent; and, second, by the covenant of the lessee in the receipt during the year then ensuing of a rent of $35,000 in quarterly payments. The defendants had formed the project of organizing a corporation, the Century Building Company, of purchasing this lease from the lessee, of assuming its covenants, and of constructing a building on the leased premises in the name of this prospective corporation. They could derive no rents or income from the premises during the year then ensuing, while the building was in course of construction, and they desired to carry the time of payment of this $35,000 forward to a period when the building would be completed and the property would be yielding an income. For this purpose they induced the plaintiff to make the contract under consideration. In this agreement the plaintiff and the defendants made certain covenants with each other. By the dry words of the contract the plaintiff covenanted to accept preferred stock of the Century Company at its par value for the $35,000 rent which was coming due in the then ensuing year, and to assign and transfer this stock to the defendants and their associates for $35,000 and interest thereon at 6 per cent. per annum from the time that the rent fell due by the terms of the lease. On the other hand, the defendants covenanted to pay this $35,000 and interest to the plaintiff on or before July 1, 1898. The legal effect, the real meaning, of the agreement was that Kauffman covenanted to release (1) the security of his right to eject the lessee and its assignee, and to recover back the premises, for a failure to pay any installment of this rent, and (2) the security of his lessee's agreement to pay it, and to accept in lieu of this security the personal covenant of the defendants that they would pay the rent, with interest, on or before July 1, 1898, and the preferred stock of the prospective corporation, which he agreed to hold and to deliver to the defendants upon their performance of their covenant to pay the rent. The considerations which Kauffman agreed to give to the defendants for their covenant to pay the rent and interest were (1) the use by the prospective corporation of the leased premises for a year without the payment of any rent; (2) the release of the premises from Kauffman's right to retake them for the failure to pay any installment of this rent; (3) the release of the realty company and of its proposed assignee, the Century Company, from liability to pay this rent; and (4) the assignment and transfer of the 350 shares of stock. The single consideration which the defendant agreed to give to the plaintiff for all these covenants was the payment of the $35,000 and interest on or before July 1, 1898. Thus it will be seen that the main purpose of the contract was the novation, the release by the plaintiff of the leased premises, of the lessee and of its proposed assignee from liability for the rent, and the covenant of the defendants to pay it with interest. The desideratum which induced the agreement and which went to the whole consideration of both sides was this novation. Without that the contract would never have been made. The covenant of Kauffman to take, to hold, and to assign and transfer the stock to the defendants was subordinate and incidental to the main purpose of the agreement, never induced its making, and went only to a part of the consideration. * * * The plaintiff has released his property, his lessee, and its assignee, the Century Company, from liability for the $35,000 rent, has furnished the use of his property to the defendants' corporation for a year without the payment of any rent, has accepted and held the preferred stock from 1896 until the present time, and has offered and still offers to assign and deliver it to the defendants, as he agreed to do. The defendants have accepted, enjoyed, and still retain the use of the leased premises by their corporation during that year without the payment of rent, and the release of the property, of the lessee, and of its assignee from liability for the $35,000. They have received and retained the great desiderata which induced them to make their promise, and yet they refuse to pay a dollar for these benefits and insist that they are absolved from all liability because the plaintiff did not offer to assign and deliver the stock to them in accordance with every legal technicality on the very day when their obligation matured, although he was always ready and willing, and within four months thereafter he offered to do so in compliance with every requirement of the law which the defendants did not waive. Can a party to a contract retain all the benefits of a substantial performance of it by the other party, and then escape all its burdens and repudiate all his obligations by means of such a technicality as this? This issue will be considered and discussed on the assumption that the defendant's theory of this case is sustained by the facts-on the assumption that the plaintiff made no sufficient offer to assign or deliver the stock until after July 1, 1898, and that his failure to make this offer was never waived by the defendants. The evidence, however, is conclusive that within four months after that date an adequate offer on the part of the plaintiff to complete his performance of the agreement was made and still the defendants refused to pay any part of the $35,000, and interest.. * * There is another principle of law which equally prohibits the maintenance of the theory of the defendants in this case. It is stated by Lord Mansfield in Boone v. Eyre, 1 H. Bl. 273, in these words: "Where mutual covenants go to the whole of the consideration on both sides, they are mutual conditions, the one precedent to the other; but where they only go to a part, where a breach may be paid for in damages, there the defendant has a remedy on his covenant, and shall not plead it as a condition precedent." * * * * * The breach of a covenant of the first class-a dependent covenant, one which goes to the whole consideration of the contract-gives to the injured party the right to treat the entire contract as broken and to recover damages for a total breach. * But a breach of a covenant of the second class, an independent covenant, a covenant which does not go to the whole consideration of the contract and is subordinate and incidental to its main purpose, does not constitute a breach of the entire contract, does not authorize the injured party to rescind the agreement, but he is still bound to perform his part of it, and his only remedy is a recovery of damages for the breach. * * * Now, the covenant of the plaintiff to assign and transfer the stock to the defendants did not go to the whole consideration of the contract, but was subordinate and incidental to its main purpose, as has already been shown. Its breach was susceptible of compensation in damages. Therefore, even though the plaintiff committed a technical breach of it, the defendants, who had accomplished the main purpose of their contract, and had accepted the benefits of the plaintiff's performance of that part of his covenants which went to the whole consideration of the agreement, the use of the leased premises by their corporation for a year without payment of the rent, and the release of the prem ises, of the lessee, and of its assignee from liability therefor, were still bound by their agreement to pay this rent and interest, and their only remedy for the plaintiff's breach was compensation in damages. A large number of cases have been discussed which simply hold that, before a party to mutual dependent covenants which are to be performed at the same time can maintain an action for the breach, he must perform or offer to perform his part of them, unless the offer is waived by the other party to the contract. * But none of these decisions hold that a failure of one party to perform or to offer to perform on the day fixed releases the other party from his obligation to fulfill his covenants. * * * * * The facts of this case bring it squarely under the salutary rules that (1) when a covenant goes only to a part of the consideration of a contract, is incidental and subordinate to its main purpose, and its breach may be compensated in damages, such a breach does not warrant a rescission of the contract, but the injured party is still bound to perform his part of the agreement, and his only remedy for the breach consists of the damages he has suffered therefrom, and (2) where one party to a contract has received and retained the benefits of a substantial partial performance of the agreement by the other party, who has failed to completely fulfill all his covenants, the first party cannot retain the benefits and repudiate the burdens of the contract, but he is bound to perform his part of the agreement, and his remedy for the breach is limited to compensation in damages. The first party upon plea and proof of his substantial partial performance, and without plea or proof of his complete performance, may maintain an action either for specific performance or for damages on account of the failure of the second party to perform, and the latter may secure his damages for the plaintiff's breach either by counterclaim or by an independent action. The failure of the court below to try this case in accordance with these established principles of the law necessitates a reversal of the judgment in favor of the defendants and another trial of this case. SECTION 8.-TENDER OF PERFORMANCE AS A DELAWARE TRUST CO. v. CALM et al. (Court of Appeals of New York, 1909. 195 N. Y. 231, 88 N. E. 53.) VANN, J. When the assignors of the plaintiff exercised the option. given by the sixth clause of the agreement in question, the arrangement became a contract, whereby one party agreed to purchase, and, by necessary implication, the other party agreed to sell "for cash, all the right and interest of" the latter "in said business" and said "agreement." The buyers were to pay for the actual amount of cash "paid out or expended" by the sellers "in and about said business." * The evidence warrants the inference that both real and personal property had been acquired in the business, and that the evidence of title stood in the names of various individuals, some of whom, and among * * |