ABRAHAM fl. BORTH GERlIIAB
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ABRAHAM tI. NORTH GERMAN INS.
Co.
(Of.rcuit Oourt, N. D. Iowa, E. D. December 50, 18811.) L INSUlU.NCE-REFORMATION OF POLICY.
Where the agent of an insurance company agrees to insure properly for the benefit and protR.ction of the owner. and receives the consideration for such contract of insurance, but, in writing out the policy, falls to make it express the real contract entered into, equity will reform the policy, if the company is bound to make good the contract which the agent in fact made in its behalf. 1 Where an insurance company issues a P9licy of insuranca in pursuance of a con. tract made by one assuming to be its agent, it is estopped to deny the agency. The company is bound, not On11 by the contract appearing upon the face of policy, but by that actually made by such agent.
2. 8.
SAME-AGENTS.
SAME.
In Equity. Bill to reform policy of insurance. Blake & Harmel and Ohas. A. Clark, for complainant. " Henderson, Hurd, Daniel8 & Kiesel, for defendant. SHffiAs, J. From the evidence in this case it appears that in 1883 the complainant owned an elevator building at Newhall, Iowa, together with the machinety therein, the same being placed on the land of the Chicago, Milwaukee & St. Paul Railroad Company; the same being used for the reception and forwarding of grain upon said railway. The business was carried on in the name of H. Eyler, and the title of the property was ostensibly in him, but in fact the prope.rtyand business belonged to complainant; Eyler being merely an employe, receiving a fixed salary of $50 per month. In September, 1882, a policy of insurance was issued upon the property by the Coun<;:il Bluffs Insurance Compa.ny, through its agent. George Snyder, then residing at Cedar Rapids, Iowa; the written portion oftha policy being as follows: "$2,500.. H. Eyler, Newhall. $1,300 on his two-story frame, shingle roofed elevator, situated on railroad ground of the C., 101. & St. P. R. R. Co., in the town of Newhall, Benton county, Iowa; $200 on his steam-engine contained therein; $1,000 on his grain therein. Loss, if any, payable to G·.G. Abraham, mortgagee, as his interest may appear." On the 2d day of January, 1883, a policy was iBBued by the North German Insurance Company, the written portion of which is as follows: "$1,000. H. Eyler, Newhall, Benton county, Iowa. One thOlisand on his two-story frame, shingle roofed elevator building, situated on railt'oad ground of the C., M.& St.P. Ry., in the town of Newhall. Benton county,lowa." On the '12th of September, 1883, a fire occurred, destroyingtbe elevator and its contents. Notice of the fire was given to the 'com'panyin the form of an affidavit signed by Eyler, in which' he ai1 As to when equity will grant reformation of writtenlnstruments or other reiiehn the ground of mistake, see "Critchfield v. Kline, (Kan.) 18 Pac. Rep. 898, andno1)e; Appeal of Hollenback, (Pa.) 15 Atl. Rep. 616, and note;. Schwass v. Hershey, (Ill.) 18 N. E. Rep. 272, and. note; Gerdinev. Menage, (Minn.) (8'N. W. Rep. Ill, and note;:a:errick v. Starkweather,S N. Y. Supp. 145. . .
'118
FEDElU.LBEPORTEB,vol.40;
evator, insured by the company, had been destroyed by fire, and his loss amountfld to the sum of $4.800. On the 6th «ay.of October, 1883, proofs of loss were furnished, in the form of an affidavit, signed by Eyler and Abraham, in which it was set forth that Abraham was the real owner of the property and business, and that the latter was carried on in but in fact .'Yas th.e business of Abraham. The defendant company refusing to pay, an' action at law was brought by AbrahaUl, forth the policy"thehappening of the fire, the actual condition and ownership of the property; that the same were known to the at the time the poHcy was issued; and that the policy was in fact intended to cover his The company demurred to the petitil)1l, and the court held that upon the face of the policy it was a contract insuring the interest of Eyler, and not that of Abraham, and that in the action at law relief could not be had on the grounds alleged, but that the same must be,sought by a proceeding in equity. Thereupon the present bill ;was filed,and, issue being joined therein, the cause is submitted upon the. pleadings and evidence; the,o,bject s9ught by the bill being a reformation of the policy so as to conform it to what. it is :el,aimed. was·,tbe· real contract .of. insurance intended. to be represented by it. , The evidence clearly establishes the fact that the elevator, and the business carried on in connectiontberewith, belonged in fact to Abraham, and tpa,tEyler had no money interest therein. If the same was destroyed' by' fi1,'e, the loss woul4 be Abraham's, and not Eyler's, and any inliluranceagainst loss by fire, to be of any value, must be av;ailllble to,Abraham. The oplytestimony touching the interviews had ;l;l;llating to the j,as\laJ;lCe of the 'policies is ofAbraham and Eyler. It is, stipulated by the parties thaUh.e defendant has made due effort to asof,.Snyder, but has been unable to find him or procure his testimQny. Abraham testifies that he had known !Snyder for /:leyeralyears before the policy in the Council Bluffs Company ·was that he was engaged in ,the insurance. business; that, on the Jday of the issuance of the policy in,the Council Bluffs Com pany, Snyto complainant's office; at :Watkins,to see about insuring the elevator; that in that conversation he told Snyder that he owned the ele<yator.ita that Eyler was ,merely ernp)Qye, 011 a J;llonth!y, salary;' tbatthe property and businesEl,.was, keptip,the name pi Eyler 1:>ecause complainantwlls running eJevator .at Watkins, on the Cblcago and Northwestern road, and the 'railways: compatingwith each, other; would not permit both elevators to pe one person; that Snyder.agreedto insure the property; that tp-wit,&75; that theagreem.ent was to. inhlsprgpe,i'ty;}hat be paId Snyder the agreed premlUm; and that 'the latter agreed to, and did, issue',the policy in the Council Bluffs ComlJpaAY' H:e f.l:lttl1.et: wstifies tbatatthis interview he told Snyder of the .fact that there was a mortgage on the property to,Rosenbaum Bros., and bh:n.he had beenatNewhall, .and had gone throughthe 'budding, and knew conJition. Ther.e is nothing to contradict Q1'
its
ABRAlIAMV. NORTH GERMAN INS. CO. !
719
weaken this testimony, except the fact that it comes from complainant, and that his interest would lead him to stretch his recollection to tHe utmosfin aid of his own case. Giving full weight to this consideration, it must still be held that the main facts testified to are proven, unless we a.re to wholly disregard complainant'sJ;estimony. If,.then, it be true that Snyder came to Watkins to see Abraham about the insurance on the property at Watkins, and that the contract was there made and closed by the payment of the premium and the issuance of the policy, is it not clear that Snyder did make the contract of insurance on behalf of the Council Bluffs Company with,Abraham, receive payment from him of the premium, and deliver the policy to him, and can these facts be explained on any other theory than that Snyder knew that Abraham was the real party in interest, the one whose interest in the property was such as to authorize him to contract .for its insurance, and whose interest was to be protected? The policy he delivered for the Council Bluffs · Company,upon its face, provides that in case of loss the amotintdue was to be paid to Abraham, mortgagee,thus showing that. he knew that Abraham . was interested in the property. Theundisp'uted facts that Snyder Came to Abraham for the purpose of getting the insurance upon , thee1evator; that he made the contract with him, received payment of the premium from him, and delivered the policy to him,...,...saow that Snyder knew that Abraham had an interest in the property, aud then, too, · corroborate Abraham's testimony, to the effect that Snyder knew the facts as they existed, and agreed to insure the property, knowing Abraham to be in fact the sole owner thereof. It is clear, beyond question, , that Abraham's purpose in entering into the contract of insurance'must have been to procure insurance for his own benefit; and the entire evidence, therefore, fully justifies the conclusion that Abraham, on the one part, and Snyder, on the other, intended to, and did in faot, contract · for insUring the property in question for Abraham's benefit, and for his · protection, as the actual owner thereof. When Snyder filled out the < polioy, .he so worded it that it failed to embody the contract he had made . with Abraham. He seems to have thought that, as the property and : business were ostensibly carried on in the name of Eyler, the poliey · must bernade in his name, with the provision that in case of.1oss payment was to be made to Abraham, mortgagee. In thus writing the pol· icy, Snyderfailed to express the contract he had in fact made, and failed to give any insurance upon the property which could be enforced. Under such circumstances,· unless the policy can be reformed, the contract ,whicbwas in,fact be enforced. But it may be very truthfully said that in all the acts thus done by Snyder he was acting as the , agent of the Council Bluffs Company, having no relation with the defend· a.nt; and that proving tbat a ,case ,for the reformation of the one policy ·. eJi'ists does not show that 'a,like case as against the present defend"ant. In. one senSa, this:istruej yet the true force lind significan.ce of ·;the ItCtsof the parUeston<::hing the policy issued by the :pany cannot he understood without reference to the acts of the same paT!,ties co.ul1t1<:ted, with the,tirstpolicy. issued. Touching :the
720
FEDERAL REPORTER,
vol. 40.·
by the defendant, it appears that Abraham concluded 'that he should have a larger amount of insurance upon the property than was afforded by the policy in the Council Bluffs Company, and told Eyler that, incase he (Eyler) should see Snyder before he himself did, he should tell him that he wanted additiortal insurance. Abraham testifies thai in January, 1883, Snyder came to him at Watkins for the purpose of discussing the question of additional insurance; that he was busy at the time, and told him to see Eyler about it. Eyler testifies that Snyder canle to Newhall, and told him that Abraham had sent him there to see about taking out additional insurance, to the amount of $1,000, on the elevator property; that Snyder inquired whether there had been any changes in the property since he had insured it, before, in the Council Bluffs Company; that witness told him there had been no change; that there was the mortgage to Rosenbaum Bros. still on it; that Snyder said the Council Bluffs Company would not take a further risk on the property, but that he was agent for the North German Company,and that Abraham could get additional insurance in that company; that he went over the building, examining it; that he said the premium for $1,000 insurance would be $30; that the witness paid· him $30, out of money belonging to Abraham, and Snyderagreed to send the policy from Cedar Rapids; that the policy came to him by midI a day or two afterwards. As has .been already said, there is nd testimony contradicting that of Eyler and Abraham. Can there be, then,an1 reasonable doubt that when Snyder arranged for the issuance of the additional insurance for $1,000 he knew the facts touchinj:( the elevator property just. as fully as when he issued the first policy, or, in other words, that he knew that Abraham was the owner of the property sought to be insured; that it was his interest "that was to be protected; that the money paid him was so paid for the purpose of. securing protection for Abraham, and for no other purpose? This being so, can there be any doubt that Snyder intended to, and did, contract to insure the property for the benefit of Abraham, as the owner thereof, 'just as Eyler testifies he agreed to do? If he in fact agreed to insure the property for the benefit and protection of Abraham, and received the consideration for such contract of Insurance, but, in writing out the policy, he failed to make it express the real contract he had entered into, is it not clearly a case for reformation of the policy, provided the defendant company is bound to make good the contract which Snyder in fact made in their behalf? This brings us to a consideration of the relation in which Snyder stood to the defendant company. Upon this question the defendant has introduced no evidence whatever, but insists that the burden is upon complainant of establishing the fact of his agency and the extent of his powers. This is undoubtedly true, YElt, as it is within the power of the defendant company to readily show the limitation on his powers and authority, if any exists, the court is justified in assuming from the silence of defendant that his authority was as'extensive and complete as the uncontradicted evidence fairly shows it to have been. It appears beyond question that Snyder nssumed to act for the defendant company. He
ABRAHAM V. NORTH GERMAN INS. CO.
721
agreed to take insurance for the sum ,of $1,000 on the property of the defendant company. He fixed the rate of premium to be paid. He received payment of the premium, and agreed to have the policy written out and forwarded. He did not take a written application for insurance, setting forth the condition of the property, and agree to submit that to the company, but he examined the building himself, made inquiries regarding the title and other matters connected with the property, and closed the contract of insurance on the spot, received payment of the premium, and agreed to have the policy written out and forwarded, which was done in due season. No communication, written or verbal, eyer passed between the company and Abraham or Eyler touching the issuance of the policy, except that had between Snyder and these parties. The company issued the policy by reason of the contract entered into by Snyder. The policy, as issued by the company, acknowledges the receipt of the premium. issuance of the policy by the company is a ratification of the action of Snyder in their behalf, and justifies the con'clusiou that he was their agent.in that transaction. Thus, in BronaO'll'8 &'r v. Chappell, 12 Wall. 681, it is said: "Agents are special, general, or universal. Where written evidence of their appointment is not required, it may be implied from circumstances. These circumstances are the acts of the agent, and their recognition or acquiescence by the principal. The same considerations fix the category of the agency and the limit's of the authority conferred. Where .one, without objection. su11'ers another to do acts which proceed upon the ground of authority from him, or by his conduct adopts and sanctions such acts after they are done, he will be bound, although no previous authority exist, in all respects, as if the requisite power had been given in the most formal manner. If he has justified the belief of a third party that the person Rssuming to be his agent was authorizpd to do what was done, it is no answer for him to say that no authority had been given, or that it did not reach so far, and that the third party had acted under a mistaken conclusion. He is estopped to take refuge in such a defense."
The inference to be fairly drawn f1'l 'J the act of the company in issuing the policy is that in contracting for the insurance of the property Snyder was their agent. In dealing with Abraham, Snyder assumed to act on behalf of the company, as their agent, and the company, by issuing the policy, recognized and affirmed such action on his part; and the court, therefore, is entirely justified in finding that Snyder represented the company in contracting for the insurance upon the property, and that the company is bound by his acts in that particular. It is argued for defendant that it can only be properly bound for the contract appearing upon the face of the policy; that it consented to make that contract, and no otheri and that it cannot be inferred that Snyder had authority to make any other contract than that evidenced by the policy as issued. If this contention is correct, it practically' eliminates Snyder from the case, and holds that he was not the agent for the company in any sense, and that the defendant is not bound by anything that took place ,before the issuance of the poliey. The evidence, beyond question, shows that the actual contract of insurance was made at Newhall. It was at Newhall that the amount of the insurance was agreed vAOF.no.13-46
722
. FEDERAL REPORTER,
voL 40.
, upon,the price to be paid the payment thereof made and received. If Snyder represented the company, the contract was made at Newhall, and at no othet time or place. What was afterwards done by the company was solely in recognition of this contract. The · company, by its action, justifies the conclusion that it recognized the authority of Snyder to contract for the company touching the insurance of the property in question. It was upon the faith ofthe contract made with Snyder that Abraham, through Eyler, paid the premium agreed upon. The company has received the premium thus paid, and cannot now be permitted to say that it is not bound by the contract made by ·Snyder. The company, through its Snyder, contracted to insure ,the property in question for the' benefit of Abraham, the real owner , thereof, and :was paid by him for so, doing. The company, through its agent, filled out the policy, but so worded it that in legal effect it insured Eyler's interest, in whose name the business was carried on. This is not what the parties intended or contracted for. It is said that the policy was written as the parties agreed should be done; and that the mistake as to its legal effect is a mistake oflaw; and , that a court of equity will not grant relief in such cases. In entering , into contracts, parties are deemed to know the principles established by law, and contracts are construed with reference to the law applicable to :thesnbject-matter of the contract; and therefore, in that sense, the la.w, as it actually is, enters into< and forms part of the contract that the parIf,however, in a given caSe, the parties actually mistake or ,misunl,lerstand the principle of lawappIicable to the subject-matter of ·the contract, and reach an agreement'irelying upon this mistake of the law, thereiallo ground upon which'S court of equity can reform the contract.· The court cannot know whether the parties, if they had correctly uhderatoodthe law, would have entered into any cOI;ltract on the subject, or whattkrmsthey might have reached touching the same. While the court might, therefore, be entirely satisfied that the parties, .had they in correctly understood the principles of law applicable 'to the case, would not have made the' contract they did make, the court cannot know -what, contract they would have made, if any; and therefore, in such case; the :aourt cannot reform the contract, although it might blil Justified .in setting, it, aside. When, however, the mistake lies,not ina misunderstanding j:lfthe principles of the law as controlling the subject of the contract, or thei'ights of the parties connected therewith, but: merely in the terms:,;proper to be used in defining the actual contract of the parties, such 8 mistake, though in one sense a 'mistake of law, is one that a court of equity will correct. The mistake sought to be reformed in the present case falls within the latter' category. The evidence clearly eStablishes the fact that t4e .actual agreement of the parties was that the property was to , be insured for the benefit of Abraham, who was the teal owner, and that the company entered into this contraot with frill knowledge of the condition of the property, ofthe ,ownership thereof, and the incumbranae , thereon;', It is not a case, therefore, oia mistake in the contract. actually :: mage,but ob mistake in the terms used in filling out the policy,whereb.y
WOpLWORTH tI. ROOT.
723
it does not represent the con'tract actually existing between the parties. The power of the court to correct a mistake of this nature, and to conform the policy to the contract as actually made, cannot be questioned. Williama v. Insurance Co., 24 ,Fed. Rep. 625; SneU v. Insurance Co., 98 U. S. 85. Complainant is therefore entitled to a decree for the reformation of the policy of insurance issued by the defendant company, as prayed for in the bill of complaint, and for costs.
·WOOLWORTH 'l1. ROOT.
(O{rcuft Oourt, D. Nebraska. December 28, 1889.)
L
J'tmGJmN'l'-RBS AD.roDICATA-DBBDs-Ell'FBOT OJ' RBOORD.
M., to be the owner of a certain traot of land, brought suit against defendant to.qulet title. A decree was entered Mav 8, 1878, quieting title In M. On June 24, 1878, M, deeded to complainant an undivided one-half. On the same day he the otjle1' undivided one-half to W., and on June 4, 1879, the executors of W.conveyed that undivided one·half to complainant. Defendant asserting title, and entering into possession of the land, complainant brought suit to quiet title In , It appeared that 14" prior to the commencement of the suit, had executed a deed to W., dated August 19, 1869, and recorded September 15, 1869; and defendant claimed that 14., therefore; had' no title when he filed the biR, and that the deer¢ewas obtained by fraud upon the court; that defendant was not aware of the condition of the title at the time of the suit and decree, and was therefore not pre. oludedfrom raising the question. Held, that the deed from M. to W" being recorded, WII.I! oonstructive notice to defendant, and he was conoluded by the deoree against him divesting his title, and vesting it in M. As. :theevidence showed prior to the filing of the bill, W., who was the brother of M., called on complamant, and produced a writing signed by the two brothers, the effect of whioh was to revest the title In M.; that by direotion of W. complainaJit brought the suit in the naUle of M., who afterward confirmed all that had been stated; and that after the decree of 1l;l78 it was agreed that M. should con'vey to complainant an undivided one·half of the p1'emises,-this testimony removed all suggestion of fraud or wrong· ATTACK.
.. BAMB"'""Il'RAtro.
'Defendant oould not, hiRattempt to avoid the efl'eot of the deoree on the , . ground'of' the insutllciehOY of the deed from M. to W., in 1869, because there were DO witnesses to It.
..
4.
,
AI1VBRSE' POSSESSION.
All, by the deoree and.the deed made in pursnan<-e of it, all title and right tJ,f pos.sesslon in defendant was transferred to M., no retention of possession by defendant was adverse to the title oonveyed, and be could set up no title based upon that pOlluntil he had first given notice of his intention to claim POWBRS.
A will which specifically authorizes and empowers the executors "to grant, barliain,sell, and convey, and, if necessary, to mortgage, any and all real estate, and 'ileeds, releases and morgagel'l to make and acknowledge, as fully and amply as I could do were I living, " gives to the executors a power under whloh they can oonveyafter the probating of the will, although no previous license was obtained from the probate oourt.
In Bill for. nn i n J l l n c t i o n . , 4., J.l'fl/JPletoo and J. M. WQobvorth, Gewge W. Covell and J. L.Webster, fQr d,efendant.,
,1Il &.ge:n.foral 1o'lay, these may be stated
J. This is a bill tocarryi,nto effect a dec.ree of thisC9urt. rt\ugust 27, 1870,
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