Sandford v. Trust Fire Insurance

Headnote

Where aparol agreement was made with the president of an insurance company, to insure the buildings of the assured, and the president made a brief memorandum of the terms of the agreement, upon the application book of the company, but no policy was made out pursuant to such agreement, because the assured gaye notice to the company that he wished to have the risk differently apportioned, and no premium' was paid or secured, nor was the premium charged to the assured; . and the assured was notified that he must come to the office and settle the busi

ness, or the company would not consider itself liable in case of loss, but the assured did not call, nor did he pay or secure the premium; Held, that the parol agreement to insure was not a consummated contract, and that the company was not liable for a loss which subsequently occurred.

Whether a parol agreement to insure is valid, by the law of this state ? Quaere.

This was an appeal, from a decree of the late assistant vice chancellor of the first circuit, dismissing the complainant’s bill. The bill was filed by the complainant, as the receiver appointed in a creditor’s suit against Cowles, Brother & Co., to recover compensation for a loss of the property of that firm by fire, on the 17th. of August, 1839; under an alleged agreement of The Trust Fire Insurance Company to insure the same, for one year from the first of July 1839. The facts, as they appeared from the pleadings and proofs, were as follows: Cowles, Brother & Co. consisting of H. B. Cowles, T. G. Cowles & B. H. Hodges, were the owners of the chemical works situate on Troy-street, in the city of New-York, called the Manhattan Chemical Works. In June 1839 Dammers, the surveyor of the respondents, applied to H. B. Cowles, with whom he was acquainted, to know if his firm did not wish to insure; and being informed that they did, he took a survey of the part of the chemic'ál works on the south side of Troy-street, upon the stock, fixtures, engines and buildings, of which they proposed to insure $5000. But as they were then unwilling to pay the premiuni which Dammers supposed that the company would ask, the matter remained open until the evening of the first of July thereafter. On that evening Dammers the surveyor, and Wheelwright the president of the insurance company, met H. B. Cowles, by accident, at the Sans Souci Hotel, where, the president was introduced to Cowles, as one of the firm who had proposed to insure upon the chemical works on the south.side of Troy-street. And after considerable conversation as to the amount of the premium &c., the president agreed verbally to insure $5000 on the premises, for one year, at one and a half per cent premium; to be divided as follows: $3000 upon the stock of the firm, $1000 upon the fixtures, including the steam engine, and $1000 upon the buildings, the time to commence on that day. The next day the president

made a brief memorandum of the terms of the agreement, upon the application book of the corporation, except that in such memorandum the name of the firm of Cowles, Brother & Co. was not correctly stated, nor was there any description of-the character of the buildings to'be insured. No policy was made out, as H. B. Cowles, a few days after the first of July, saw Dammers, the surveyor, and told him that he wanted the risk differently apportioned; and no premium was paid, nor was any premium note given; nor was there any charge made upon the books of the corporation against Cowles, Brother & Co. for the premium-. Dammers, the surveyor, by the direction of the president, spoke to H. B. Cowles, several times, to call at the office of the corporation and determine as to the distribution of the risk, so as to have the insurance completed ; but he neglected to do so. And a few days before the fire, Dammers again called on him, and told him that he must come down and settle the business that afternoon, or the insurance company would not consider itself liable for any loss. But H. B. Cowles did not come down, nor give any information to the officers of the company as to how the risk should be apportioned; nor did Cowles, Brother & Co. ever pay, or oiler to pay, the premium for the insurance, before the fire occurred 5 although by the published proposals for insurance, by the corporation, one of the conditions was that no insurance, whether original or continued, was to be considered as binding until the premium was paid. Shortly after the fire, Cowles, Brother & Co. made a claim upon the corporation, but upon being told by the president the reason, why he did not consider the corporation bound for the loss, nothing further was said. And having rebuilt their works, in the following October they insured them with this company, and took out a policy and paid the premium charged for the risk; which was two and a half per cent. They subsequently failed, and a creditor’s bill having been filed, and a receiver appointed in that suit, in December, 1839, the complainant as such receiver, on the 19th of March, 1840, made a claim upon the corporation for the loss, and tfaeh furnished -the preliminary proof of loss.

The complainant has all the rights of Cowles, Brother & Co. The contract set forth in the bill, of which performance is sought, is fully established, and is a valid and effectual contract of insurance. There is no statute which required this contract to be in writing, unless it was the act of incorporation of the defendants ; and that act did not require it. The sixth section of the act of incorporation, {Sess. Laws, 1836, p. 80,) was intended to enable the company to contract without as well as with their corporate seal. It was not the intention of the legislature to take away, or withhold from the company, the ordinary power ■which they, as well as other corporations, have to make valid contracts, either without writing, or by sealed instruments. It may be that a policy, executed in any other manner than that prescribed by this section, would not be valid ; but the contract of insurance and the policy are two separate and distinct things; the latter is merely the evidence of the contract, ( 23 Wend. 18 ,) and must be made in conformity to it; and if through fraud or mistake it is not, this court has power to correct it and make it conformable. (Phoenix Fire Insurance Co. v. Gurnee, 1 Paige, 278.) It does not follow that because the policy must be executed in a particular way to make it valid, the contract of insurance must be made in that way also; for if so, then all the contracts made in respect to their ordinary business, to be valid, must be in writing and signed as directed by the act.

The power of corporations to contract by parol, and by writing, with or without their corporate seal, and their liability upon contracts express and implied, are now well settled; and the rule appears to be that they may be bound by the acts of their agents, as well as their own, although not under their corporate seal, and even when they are not reduced to writing, except in those cases where, by the provisions of the statute of frauds or otherwise, the contract must be in writing to render it valid if made by a private person. (2 Kent, 288, &e. with the cases cited. Moss v.- Oakley, 2 Hill, 265 . The Attorney Gen. v. The Life and Fire Insurance Co. In Chancery,

decided 15th March, 1842. The American Ins. Co. N. Y. v. Charles Oakley, decided in this court 5th April, 1842.)

A parol contract of insurance is valid ; there is no law prohibiting it, and the power of contracting in this way will not be taken from a corporation by implication. It is the common .way in which insurance companies do their business. A contract of insurance is made, and that is followed up by a delivery of the policy of insurance, or in other words, the evidence of the contract; but if that evidence be unjustly withheld, and the contract of insurance can be otherwise established, the insured may come into this court and claim to,have the policy executed and delivered, or, in case of loss, payment of the loss. {Perkins v. Wash. Ins. Co. 4 Cowen, 645. Lightbody v. N. American Ins. Go. 23 Wendell 18 . Thayer v. Middlesex Ins. Co. 10 Pick. Rep. 326 . 2 Phillips on Ins. 396. 6 East, 583. 4 ¿Yates, 475.) Unless the defendants can show that the contract was so vague, uncertain, or ineonsummate, as to have rendered it impossible for them to make out a policy, they cannot object to their liability for the want of it. The promise to pay the premium was a sufficient consideration to support the contract. And the payment of the premium was not a condition precedent, to be performed by the insured, before the contract of insurance became binding. Payment of the premium is not essential to the validity of a contract of insurance; it only becomes so, when the company, at the time of contracting, or at the time of delivering the policy, make it a condition precedent; it then comes into operation like conditions precedent in all other contracts. (See Kohm v. Ins. Co., 1 Candy’s Marshall, 335; .1 Wash. C. C. R. 93.) It was almost the invariable custom of the company to deliver the policy before or at the time they received the premium.

The payment of the premium, as a condition precedent, was waived by the president’s informing Cowles, at the time the contract was made, that they might consider themselves insured from that time. (Thompson v. Todd, 1 Peters C. C. R. 380.) The contract, once made, could only be rescinded, by the consent of both parties. (4 Paige, 17. 17 John. 357 ,)

The application to have the apportionment of the amount insured altered, did not in any manner affect the validity of the. other part of the contract. (Disbrough v. Nutson, 3 John. Cas. 81. Giles v. Bendley, 2 Id. 253.) It had no other effect upon the contract than it would have had if the defendants had refused to alter the apportionment, when the application was made. The preliminary proofs were, under the circumstances, furnished in due time. (McLaughlin v. Wash. Co. Mut. Ins. Co. 23 Wend. 525 . Cornell v. LcRoy, 9 Id. 163. Barker v. Phoenix Ins. Co. 8 John. R. 317. 7 Cowen, 645. 11 John. 260 .) The furnishing preliminary proofs was waived by the company. The president,' when applied to for payment of the loss, repudiated the contract and refused to recognize it as a valid contract, and for that reason he refused to pay the loss. This ¿repudiation of the contract of insurance, rendered it unnecessary to furnish the proofs. (Francis v. Ocean Ins. Co. 6 Cowen, 408; S. C. 2 Wend. 64 . McMasters v. Bruce, 25 Id. 379. Lawrence v. Columbia Ins-. Co. 10 Peters, 507. 17 Wend. 385 , above cited. Vos v. Robinson 9 John. 193 . 8 Id. 307 . 7 Id. 315 .

If a vendee of real estate tell the vendor, before the day of performance, that he will not perform his contract, a tender of the deed is unnecessary. (Franchet v. Leach, 5 Cowen, 506.. Calhoun v. Vechio, 3 Wash. C. C. R. 165.)

No contract of insurance, binding on the company, was ever made. A verbal contract of insurance is void. Invariable practice, ever since the contract of insurance was known, has established that it must be in writing, by an instrument denominated a policy. This invariable practice has resulted necessarily from the nature of the contract, which consists of a great variety of stipulations and conditions as to the situation and circumstances in which the subject insured is and is to be used. And these stipulations are of the substance of the contract. For a party to agree to insure the house of another against loss by fire, without making the usual stipulations and conditions, would be no more a contract than if one should agree to

build a house for another without specifying the materials, size or plan. That the law is settled, that these contracts must be in writing, is strongly, if not conclusively, inferred from two facts. First, That such is obviously the understanding of the legislature, as is evinced by the provisions contained in all charters of insurance companies as to the manner of executing this contract, to wit, by a policy, “ signed by the president and countersigned by the secretary” and in other similar particulars which are inconsistent with the supposition that this contract could be made verbally. And this understanding o.f the legislature is also to be deduced from the great improbability of their omitting to make any special provision for this contract of numerous details, which, though it may always be executed within a year, is seldom expected to terminate until the end of a year; whilst they have required all contracts, however simple, which are to be continued for a year, to be in writing. Second, that no case has been found, by the complainants’ counsel, in which a verbal contract of insurance has ever been sanctioned bp a court.

The provision in the charter that “ there shall be distinctly and legibly printed or written upon the face of every policy of insurance, or other contract or obligation made by said corporation, the amount of its capital actually paid in,” not only, by a necessary implication, inhibits the making of any contract which cannot by possibility be made in compliance with this provision, but it also contains an obvious expression of the understanding of the legislature, as is urged above, that there is no such thing known as a contract of insurance, except a written or printed policy of insurance. (See Sess. Laws of 1836 p. 244 § 6; Id. of 1839, p. 209, changing the name.) The insured are not only by law chargeable with notice of the provisions of the charter, (Salford v. Wychoff, 1 Hill 16 ,), but the complainant expressly claims the contract to have been made by the company under the authority conferred upon if by its charter. If this company might have made a verbal contract, their president was not authorized to make such a contract for them. Corporations, like natural persons, are bound only by the acts and contracts of their agents when done and made within the scope of their

authority. (2 Kent’s Com. 292, 2d ed.) No authority on the part of the president, to make this contract, is shown, and no such authority could be inferred from the duties which presidents of insurance companies usually perform, or from any act of this company, or any provision of its charter. What passed between the president and Mr. Cowles was not a contract, or understood to be one by the parties. The company did not make out the policy, or make any entry of the contract in their books, or in any manner carry it into their business. And Cowles, Brother & Co. did not ask for the policy, or any other evidence of the contract, or pay the premium. But if what was said at the time, was intended for a contract of insurance in itself, it was void for want of consideration, no premium being paid. If it is said that it was an agreement in .which the mutual promises are respectively the consideration for each other, it was an executory mutual agreement, in which each party must show performance, on his part, before he can claim performance of the other. In this case, Cowles, Brother & Co. did not offer to perform until performance on the part of the company was rendered impossible, by the destruction of the subject of the insurance. If a binding contract was made on the 1st of July, it was conditional and temporary, to continue only long enough to make the contract in form, and to pay the premium and execute a policy, and it tetrminated with the lapse of the time proper for this purpose.

The complainant cannot ask this court to decree a specific performance, by executing a policy, or to give relief as though a policy had been executed. This court will lend its aid to compel a party, who has made a contract, to furnish the requisite evidence of that contract, to enable the other party to enforce it in a court of law; or it will give the same relief here as the party would be entitled to at law if the contract had been in due form; but this court does not make contracts for parties. Unless a contract of insurance was actually made, the complainant has no more claim to relief here than he could have at law; and it is supposed to have been already shown that no contract was made.

The contract originally made, whether it be considered a contract of insurance in itself, or an agreement giving the complainant a claim to a specific performance, was abrogated when Cowles, Brother & Co. gave notice that the amounts were not divided as they- wished, and proposed to call and make a hew division. The insured have abandoned and lost their claim to indemnity, by not complying with the ninth condition of insurance, by furnishing the preliminary proofs as soon as possible after the loss. That the furnishing the preliminary proofs as soon as possible after the loss is a condition precedent, without the performance of which the insured cannot recover, is abundantly established by numerous cases in our courts of recent date. (Inman v. The Western Fire Ins. Co., 12 Wend. 482 , and cases cited by the court. The Mina Fire Ins. Co. v. Tyler, 16 Id. 385, opinion of the chancellor, p. 401. M ’Laugh-lin v. The Washington Co. Mutual Ins. Co., 23 Id. 525.) In none of the cases cited were the insurance companies held to have waived the preliminary proofs entirely, but simply to have been estopped from objecting to formal defects in the proofs. In every case the'proofs had been furnished in due season, and the company, after having examined them, or had an opportunity to do so, communicated with the insured upon the subject of the claim, without objecting to the defect, or, as in one of the cases, when the objection was made, refused to return the proofs so that they might be corrected.

All the cases concur in establishing that the acts on one side which will excuse the performance of this condition, by the other, are such as lead him to suppose that such performance will not be required.