Case Name: MITCHELL AND MITCHELL v. AETNA INSURANCE COMPANY
Court: Delaware County Court of Common Pleas
Jurisdiction: Ohio
Decision Date: 1897-05
Citations: 4 Ohio N.P. 386
Docket Number: 
Parties: MITCHELL AND MITCHELL v. AETNA INSURANCE COMPANY.
Judges: 
Reporter: Ohio nisi prius and general term reports
Volume: 4
Pages: 386–392

Head Matter:
(Delaware Co. O., Common Pleas Court.)
May, 1897.
MITCHELL AND MITCHELL v. AETNA INSURANCE COMPANY.
Amendment of petition after ease remanded from reviewing to trial court—
1. Where on judgment for plaintiff, the case is taken to a reviewing court and judgment below there reversed, plaintiff, on case being remanded for new trial, may be given leave to amend his petition.
Policy of insurance will be reformed, when—
2, Where the evidence and circumstances surrounding the application for a policy of insurance clearly show that it was the intention of the insured to pay for a policy made payable to himself and his brother, covering their mortgage interest in the property insured, and that this was well understood by the company’s agent, but owing to some mistake,the property was insured in the name of the mortgagor by a policy containing a loss payable clause in favor of the mortgagee, under such circumstances the policy of insurance should be reformed by a court of equity,and judgment rendered against the company on the policy as reformed.

Opinion:
WICKHAM, J.
On the 3rd day of October, 1894, the plaintiffs filed their petition in this court against the defendant, in which they allege among other things, that on the 1st day of November, 1893, they were mortgagees of certain real estate situated in the city of Delaware, Ohio, to the extent of $2,100, and accumulated interest; that in consideration of $10.50 paid by them, they procured from the defendant, through its duly authorized agent, at Delaware, Ohio, their policy of insurance, a copy of which is attached to tlie petition, whereby the defendant insured the plaintiffs against loss or damage by fire, to the amount of $1,200 upon a two story frame dwelling house and additions thereto, and appurtenances thereto belonging, situated upon said real estate, the policy to become a contract of insurance from noon of the 1st day of November, 1893, and was to continue in force and effect until noon of the 1st day of November, 1896; that the policy of insurance was issued by the defendant, upon the verbal application of the plaintiffs to insure their interest therein as such mortgagees against loss or damage by Are; that the policy of insurance as-issued by the defendant company with full knowledge on the part of the defendant that the plaintiff's interest in the property to be insured, was that of mortgagee only; that plaintiffs wished to obtain insurance upon their interest only in said property, and that the premium was paid by the plaintiffs; that at the time the policy was issued, the premises were owned by H. L. Hartenstein; that the said H. L. Hartenstein did not participate in procuring tlie policy of insurance, and had no knowledge of the application for, nor the issuing of such policy of insurance, all of which the defendant had full knowledge.
On the 22nd- day' of November, 1894, the defendant Aled its answer, in which, among other things, they allege and admit that it issued the policy, a copy of which is attached to the plaintiffs' petition, and admit that the interest of the plaintiffs in the property described in the policy, was that of mortgagee only. They deny that the policy issued on the property insured the plaintiffs against loss or damage by fire to the amount of $1,200 or any other sum.
They allege that by the express terms of the policy,°it did insure H. L. Hartenstein, the then owner of the property, for the term of three years, from the 1st day of November, 1893, to the 1st day of November, 1896; that at the time of the issuing of the policy, Hartenstein was the owner in fee simple, of the property described in the policy, and they say at the time the policy was issued, there was attached to the policy by defendant, through Arnold Bros., its agents, at Delaware, Ohio, a loss payable clause a copy of which is set out in defendants' answer. They further say, that the policy of insurance contained a provision that the entire policy should be void if any change other than by the death of the insured should take place in the interest, title or possession of the subject of insurance, whether by legal process or judgment, or by act of insured or otherwise; and further, a provision that if with the consent of the company, an interest under the policy shall exist in favor of the mortgagee, the condition hereinbefore contained, shall appljr in-the manner expressed in such provisions- and conditions of insurance relating to-such interest as shall be wirtten upon, attached or appended thereto; that none-of the conditions or provisions in the policy have been waived by the defendant.
It further says, that on the 8th day of June, 1898, one Hiram Wood, conveyed the property insured to H. L. Hartenstein; that Hartenstein was the owner of the property at the time of the issuing of the policy; that on the 14th day of December, 1893, after the policy was issued, and while it remained in full force and effect, the said H. D. Hartenstein, sold and conveyed all of his interest and title in said property to one N. P. Goff, by general warranty deed, and that on the 17th day of March, 1894, said deed was filed for record and afterwards duly recorded in the record of deeds of Delaware county; that by reason of the transfer and conveyance by the said H. L. Hartenstein of all of his title and interest in the property without the consent of the defendant, the conditions and stipulations in the policy were broken, and the same became void and of no effect, and was not in effect but was void when the loss to the property by fife occurred.
On Julyl, 1895, the plaintiffs filed their reply, in which they deny that the conditions of the policy had not been waived, and they deny that by the sale and transfer of the premises insured, the policy became void and of no effect, and was of no effect when the loss occurred, and they re-affirm the allegations of their petition, in which they say that the insurance was effected upon the mortgage interest only of the plaintiffs, and more particularly set out the facts occurring at the time, or about the time the application for insurance was made by the plaintiffs, which facts are in their nature evidentiary and not issuable, and they pray, if the court deems it necessary to carry out the intention of the parties, that the policy may be reformed, and that they may have judgment as in their petition prayed.
The issues thus made by the pleadings, were tried at the September term of the court of common pleas, 1895, and the judgment rendered in favor of the plaintiffs, on the 28th of October. Afterward error was prosecuted to the circuit court of Delaware county, and the judgment rendered by the. common pleas was reversed, and the cause remanded to the common pleas for a new trial.
The case came on again for trial at the January term of the court of common pleas, 1897, but before the case was submitted, leave was taken by the plaintiffs to file an amendment to their petition, which was accordingly done on the 3rd day of February, 1897, in which they say that it was the intention, purpose and agreement between the plaintiffs and defendant, to effect an independent insurance upon the interests of the plaintiffs as mortgagees only, upon the property-described in the policy, and to make the plaintiffs the assured in the policy, and not H. D. Hartenstein; but by the mutual mistake of the defendant and plaintiffs, and without any negligence or fault on the part of the plaintiffs, the policy was issued .to H. L. Hartenstein, and the loss-payable clause attached thereto, and in the manner and form attached to the plaintiffs' petition; they further say, that the policy should have been issued to and made payable to the_ plaintiffs; that they did not ascertain the mistake until after the loss occurred. Wherefore, they ask that the policy of insurance and loss-payable clause, may be corrected by making the policy payable to the plaintiffs instead of H. L. Hartenstein, and otherwise reformed so as to express and effectuate the real intention, purpose and agreement of the parties, and for general relief.
To this amendment the defendant files an answer by leave of court, and for its first defense, it denies each and every allegation set forth - in the amendment. For its second defense, it says that before this action was brought, the plaintiffs, through their counsel, were fully informed and advised of the claim of the defendant as to the policy of insurance, namely, that said policy was issued to H. D. Hartenstein, as .owner of the •property therein described, and attached the loss-payable clause thereto, as in defendant's answer set forth, and that said policy was void for reasons in the answer alleged; that with the full knowledge of said claim of the defendant, the plaintiffs brought their action at law on the policy, and submitted the case to the court of common pleas and circuit court of Delaware county, and never made any claim of any mistake in the policy. And they further say, that the plaintiffs thereby waived any and all claims to any mistake in the policy, or to a reformation of the same, and are estopped from now making any claim to any mistake in the policy, or asking any reformation of the same at the hands of the court.
To this amendment the plaintiff filed a general demurrer, both to the first and second defenses set forth therein. As the first defense set up by this amendment is a general denial, the demurrer to that defense would have to be overruled. The demurrer to the second defense raises the question, whether the judgment at law rendered by the common pleas court in favor of the plaintiffs, and afterward reversed by the circuit court, works an estoppel on the part of the plaintiffs from now setting up the facts under which they ask for a reformation of the policy and a judgment on the same as reformed; whether, having first brought their action at law to recover on the policy, that that is an election of the remedy they seek and are bound thereby and are now estopped rom claiming a remedy in equity; whether the action having been commenced at law, it can now be changed to one in equity asking for a reforma tion. I might state here, that it is agreed that the demurrer shall he considered by the court with the whole case, and if overruled, a reply would be considered filed to the second answer to the amendment of the petition.
We will first consider the question made by the demurrer to this answer.
Are tlie plaintiffs estopped from asking a reformation of the policy?
In support of the affirmative of this question, counsel lor the defendant cite May on Insurance, p. 878, and Ostrander on Insurance, sec. 80. As authorities for the rule laid down in May, are cited, Washburn v. Great Western Ins. Co., 114 Mass., 175, and Stienbeck v. Relief Ins. Co., 12 Hun., (N. Y.,) 640.
The authorities cited by Ostrander are, Thwing v. Great Western Ins. Co., 111 Mass., 93; Sanger v. Wood, 3 Johns. Ch., 416; Ryder v. Ins. Co., 101 Mass., 548; Conant v. Perkins, 107 Mass., 79.
Stienbeck v. Ins. Co., supra, was an action brought on an insurance policy in Baltimore, Md. The case was afterward removed to the federal court, where it was tried in November, 1869, and a judgment rendered for the defendant, which was afterward affirmed by the supreme court of the United States. Subsequently, in 1873, a suit in equity was brought in the state court in New York, asking for a reformation of the policy. The court say: "Having sued upon the contract in its present form, and produced and proved the same as the contract between the parties, in a court of competent jurisdiction, by which a final judgment has been pronounced against his right to recover, he is debarred from showing in a new suit, in a court of equity, that the contract actually made between the parties was different from the written one sued upon and proved in the former action."
Sanger v. Wood, supra, was an action on a contract in which a verdict and judgment was recovered by the plaintiffs. Afterward they filed a bill in equity for additional relief on the ground of fraud, the facts constituting which coming to plaintiffs' knowledge a few days before the trial of the action at law, but they proceeded to take a verdict and judgment for the amount claimed: Held, that by going to trial and taking judgment, the plaintiffs had made their election of their remedy at law. This case was decided in 1818.
Ryder v. Ins. Co., supra, was an action at law, which resulted in a judgment. There was filed a motion to vacate the judgment, and also a petition for a writ of review: Held, that, as all the facts in the case had always been within the knowledge of the plaintiffs they showed no cause for vacating the judgment or granting a review.
Conant v. Perkins, supra, was an action, trial and judgment at law for plaintiffs, from which no appeal was taken. More than a year afterward, creditors filed a bill in equity: Held, the bill was filed too late.
Thwing v. Ins. Co., supra, was an action at law on an insurance policy. A trial had, and by agreement the plaintiffs took judgment. The defendants moved to set aside the agreement, and filed a bill in equity to reform the policy, on the ground that it was not intended that plaintiff's first claim should be covered by the policy; that no proofs of loss had been filed; that owing to the laches of their counsel they had only just discovered that the plaintiff made such claim: Held, motion overruled and bill dismissed.
Washburn v. Ins. Co., supra, was a bill in equity filed December 28, 1868, to reform a policy of marine insurance. On July 13, 1869, the defendant filed an answer to the bill, alleging that the policy was in exact conformity with the understanding and agreement of the parties. At the October term, 1869, while the suit in equity was still pending, the plaintiff brought an action at law on the policy as issued. A trial was had at the April term, 1871, which resulted in a verdict and final judgment for the defendant. The defendant filed an amended answer to the bill in equity, setting up the facts of the action, trial, verdict and judgment at law. On demurrer to the amended answer: Held, that the action, trial and judgment at law was a bar to the suit in equity; that plaintiff had conclusively elected to consider the policy as expressing the true contract between the parties.
The authorities cited by counsel for the plaintiff in support of their contention that the plaintiffs are not estopped, are, Barnes v. Hecla Fire Ins. Co., 39 N. W. Rep., 122, (S. C. 75 Ia. 11,) and Esch v. Home Ins. Co., 43 N. W. Rep., 229.
Barnes v. Ins. Co., supra, was an action at law on a policy of insurance. The defendant filed an answer to the petition, alleging that the policy was void by reason of a certain breach on the conditions of the policy in taking-out additional insurance. The plaintiff filed an amendment to his petition, in which he alleged that at the time the policy was issued, it was agreed between the parties, that the plaintiff should have the right to take out additional insurance ; that by mistake this agreement was omitted from the policy, and he asked for reformation of the policy to conform to this agreement. The defendant answered that the plaintiff, having- knowledge of the matters pleaded, was estopped from setting- them up, because he had elected to prosecute an action at law on the policy, and having-made an election of remedies, he was bound thereby: Held, that under the statute in relation to amendments, the plaintiff was not estopped, by bringing-an action at law, from amending- his petition before the ease was finally submitted to the court, so as to change it into a suit in equity. This holding was approved and followed in Esch v. Home Ins. Co., supra.
It will be noticed that all the eases that seem to support the contention of counsel for defendant, are from states where the common law practice prevailed. States having their courts of law and courts of equity; that the judgment rendered in each case was a final judgment, on the merits. On the other hand, the cases cited by counsel for the plaintiff, are from a state (Iowa), having a Code of Civil Procedure, very similar to that of our own. This alone would probably be sufficient to give to the cases from the latter state, greater weight as authority, if they were in conflict; but as no judgments were rendered in those •cases before the amendments were made changing their character, from that of law to equity, they could not properly be said to be in conflict.
It is claimed, however, that the judgment by the common pleas court, in the case at bar, should operate as an estoppel. But the judgment was not a finalty. It is true that it was a valid and binding judgment until it was reversed. But it was reversed by the circuit court, and when reversed, and remanded, by the circuit court, the parties were left precisely where they were before the trial in the common pleas court. If the plaintiffs were entitled to amend their petition by leave of court, before any trial was had in the common pleas — and the Iowa cases above cited are authorities to that effect — I think it would be extremely technical to hold, that because a judgment at law had been rendered in favor of the plaintiffs, and afterward reversed in a reviewing- court, on the application of the defendant, the plaintiffs would be estopped from amending their petition and asking- relief in equity. I do not think that such a holding would be within the spirit of our code of civil procedure.
The demurrer to the second defense of the answer of the defendant to the amendment may be sustained, with exceptions.
Was the policy made void by the alienation of the property by Hartenstein. The affirmative of this question is maintained by the defendant, and constitutes one of its defenses in this suit. It is affirmed by all parties that Hartenstein was the owner of the fee of the property at the time the application was made and the' policy issued, and that he transferred and conveyed all of his interest to one (3-off, after the policy was issued and before the loss by Are', to-wit: On the 17th day of November, 1893. Whether this alienation would operate as an avoidance of the policy would depend: First, whether the policy contained a condition against alienation of the interest of the insured in the property, and Second, whether Hartenstein was the party, or the plaintiffs were the parties whose interest in the property was intended to be insured, and whether there was any fraud or mistake on the execution and issuing of the policy of insurance, which will be considered further along when we come to that branch of the case.
It is claimed and argued by counsel for the plaintiffs, that they would be entitled to recover even though the policy was intended to be issued, and was issued to Hartenstein, by virtue of the ' ' loss-payable clause. ' ' That a loss-payable clause, making the loss, if any, payable to a mortgagee as his mortgage interest may appear at the time of loss, gives the mortgagee such an interest in the policy that could not be avoided as to him by the alienation of the property by the owner and mortgagor, without the consent of the company, in violation of a provision in the policy declaring- the policy void if the owner of the property conveys to another, without the consent of the company, all of his interest in, and title to the property; and in support of that proposition they cite a number of authorities, and among them, Livingstone v. Western Assurance Co., (U. C., 5 Ins. Cases, 1896; Burton v. The Gore District Mutual Fire Insurance Co., Fire Ins. Cases, vol. 5, p. 63; Pollard v. Somerset Mutual Life Ins. Co., 42 Maine, 221; and Tillom v. Kingston Mutual Fire Ins. Co,. 1 Selden, 405. These authorities seem to support the contention of counsel for the plaintiffs; but it will be observed that these cases were against mutual companies; and it is claimed by counsel for the defendant, that the rule would be different in cases of stock companies. However that may be, I think that it is settled in Ohio, that a provision against alienation is binding-on the insured, and a violation of the provision avoids the policy. West et al. v. The Citizens' Insurance Co., 27 Ohio St., 1; Blackwell v. Ins. Co., 48 Ohio St., 533, 540. But, "exceptions in a policy should be strictly construed, and where there are two interpretations equally fair, that which gives the greatest indemnity should prevail," and "stipulations in a contract providing- for disabilities or forfeitures, are to receive, when the intent is doubtful, a strict construction against those for whose benefit they are introduced." And I think the same rule as to avoidance by alienation would apply to a mortgage of property insured in the name of ' the mortgagor, by a policy containing- a loss-payable clause in favor of' the mortgagee; otherwise, there would be no difference between a policy containing such a clause, and a policy made payable directly to the mortgagee.
The policy on which this suit was brought contained a condition as follows, (omitting some parts): "This entire policy shall be void if any change, other than by death of an insured, take place in the interest, title, or possession of .the subject of insurance, " etc. I think it is clear that the alienation of the property insured by Hartenstein, would be a violation of the conditions of the policy such as would make it void, as to all persons, unless it is not the contract that was intended by the parties to be entered into at the time the application was made.
The next question to be considered is: Was it the intention of the parties to insure the mortgage interest only of the plaintiffs, and that the policy should be made payable to them.
The answer to this question is to be determined from the evidence offered at the trial, and however we determine this question, it will decide whether there was mistake or fraud in the execution of the policy.
There were but-two persons present at the time the application was made to the defendant for insurance; these were Mr. Arnold, the agent of the company, to whom the -application was made, and William Mitchell, one of the plaintiffs and mortgagees, who made the application. The application was verbal, and was made on October 14, 1893. On the subject of what was said at the time, Mr. Mitchell testifies as follows:
Q. Did you explain to Mr, Arnold the nature'of your title to, and interest in the property?
A. Most explicitly. I told him that the insurance having expired, I was desirous of renewing same to protect our interests; that is,my brother's and my interests, as mortgagees of the said property. I explained to Mr. Arnold that Hiram Wood had allowed the insurance on said premises to lapse, and that we were desirous of effecting an insurance for our own benefit.
Q. Who paid the premium for the policy?
A. We did, through our bankers, The First National Bank, Delaware, Ohio, TT. S.
Q. Did you apply for or authorize such policy to be issued in the name of H. L. Hartenstein?
A. Decidedly not. The name was never mentioned.
Mr. Arnold's testimony is substantially the same as that of Mr. Mitchell. He testifies as follows:
Q. State what Mr.Mitchell said to you. State the conversation that took place at the time between you and Mr. Mitchell —when he made the application?
A. I can't remember the exact words of the conversation, but Mr. Mitchell came to the office, and asked me whether Mr. Wood had kept up the insurance on the property. I told him he had not. He said he would go out and see him. He went out and saw Mr. Wood, and came back to the office and told me that Mr. Wood would not insure the property, and that he would insure it himself. He said Mr. Wood had sold the property, and that we should write a policy covering his mortgage interest.
Q. Did he say what his mortgage interest was?
A. Yes, sir. He asked me whether I could do it right away. I told him I could not, from the fact that it was a peculiar kind of policy to write. I had never written pne before. I had been agent for the company about two and one-half years. When the owner of the property made application for the policy I made the policy payable to the mortgagees, I had written those.
Q. What did he say to you, if anything-, about the insurance of his own interest, or the substance of it?
A. He told me he wanted me to write up the mortgage interest of the property; he was ready to pay for it whenever the policy was written.
Q. At the time you liad this conversation with Mr. Mitchell, you knew that he had a mortgage interest in this property? -
A. Yes, sir.
Q,. And you knew that he wanted to insure his interest as mortgagee?
A. Yes, sir.
Q,. What did Mr. Mitchell say to you about that?
A. He wanted to insure his mortgage interest.
Q. Was anything said by him at all as to his wanting to insure anything but his mortgage interest?
A. No, sir.
And on cross-examination he says:
Q,. As a matter of fact, you did not know of any such policy being issued as you speak of?
A. Yes, I did. I knew there were policies issued insuring mortgage interests of the property, but I had never issued any.
Q. You had no authority to issue such a policy, and, therefore, asked for instructions?
A. Yes, I had authority to issue the policy..
Q,. How did you come to ask for instructions?
A. As to how to do it. I didn't know how to do it.
As appears from the testimony of both these witnesses, it was arranged that the policy should be written and left at the First National Bank for the plaintiffs, and that at the same time Mr. Arnold was to receive the premium on the policy. That immediatelyj| after making the application, at least within a clay or two, Mr. Mitchell left Delaware for London, England. Mr. Arnold says he saw him once after the conversation occurred between them, he thinks it was the next day, when Mr. Mitchell asked him if he had heard from the policy, and was informed that he had not; ancl that was the last that he saw Mr. Mitchell.
He immediately wrote a letter to the company asking for instructions how to issue the policy, and in response to his inquiry he received a letter enclosing a loss-payable clause, and was instructed by the agent of the company to draw up a policy payable to the owner of the property, Hartenstein, and attach the loss-payable clause, which was accordingly done. He immediately took the policy to the First National Bank, and the bank, in accordance with the instructions left them by Mr. Mitchell, paid the premium on the policy.
There is one statement made by Mr. Arnold which seems to me to be conclusive of this question as to what was the intention of the parties at the time. He says, "When the owner of the property made application for the policy and I made the policy payable to the mortgagee, I had written those." Meaning that he understood perfectly well how to draw a policy made payable to the owner of the property with a loss-payable clause for the benefit of the mortgagee, but not having had any experience in writing policies covering the mortgage interest only of the applicant, it was necessary for him to write to the agent at Cincinnati for instruc • tions. If it had been an application for a policy to be drawn payable to Hartenstein, the owner of the property, with a loss-payable clause for the benefit of the mortgagee, the plaintiffs, Mr. Arnold would have needed no instructions as to how the policy should be written, for he says, "I had written those."
I think from the testimony of the witnesses, and the circumstances surrounding them at the time the application was made for this policy, that it is clear beyond any doubt that' it was the intention of Mr. .Mitchell to pay for a policy made payable to himself and his brother covering this mortgage interest in the property insured, and that this was well understood by Mr. Arnold, and that it was his intention to write such a policy until he received the instructions from his company.
The last question to be considered, was the policy issued under a mistake such as would authorize a court of equity to grant the relief prayed.
In the amendment to the petition, the plaintiffs allege all the facts and circumstances surrounding the application for, and the issuing of the policy, and claim that by the mutual mistake of the parties, the policy was.made payable to Hartenstein instead of the plaintiffs; and the burden of the argument of counsel for the plaintiffs is that by a mistake of facts or law the policy was made to read differently from what was intended by the parties, in the particular I have mentioned. That a written contract will be reformed by a court of equity, and enforced as reformed, when it is shown by irrefragible proof that mistake of fact has occurred, will not be disputed. But "the power of courts of equity to reform written instruments is one in the exercise of which great caution should be observed." 2 Pomeroy Equity, section 859; Potter v. Potter Exr'x., 27 Ohio St. 84; Elstner v. The Cincinnati Equitable Insurance Co., 1 Disney, 413-19; Meiswinke v. St. Paul Fire and Marine Insurance Co., 6 Law Rep. Ann. 200 and note; Ostrander on Insurance, section 29, 41 N. W. Rep., 78.
The evidence must be proven beyond a reasonable doubt. The presumption is strongly in favor of the instrument. "This principle rests upon the soundest reason and upon undisputed authority, and if not adhered to by the courts, the security and safety reposed in deliberately written instruments will be frittered away, and they will be left to all the uncertainty incident to the imperfect and 'slippery memory of witnesses.". Potter v. Potter Exr'x, supra. Moreover, the mistake must be mutual. Unless there is a meeting of the minds, there is no contract. Courts do not make contracts; they only enforce them when justice and equity require it.
And the same degree of proof is required to establish the mutuality of the mistake, as that a mistake has in fact been made. Counsel for the plaintiffs have very ably contended that the mistake in this ease was one of law, and they cite the case of Eseh v. Home Insurance Co., 43 N. W. Rep., 229, in support of their contention. An examination of that case will show a different state of facts, in this, that the policy was issued directly to the plaintiffs, who would be presumed to know its contents; that after the transfer of the property insured from the owner and mortgagor, to the mortgagees, the plaintiffs, they went to the agent of the company to inquire about their insurance, and whether their policy ought to be charged, and with knowledge of all the facts, the agent informed them that no change in their policy was required ; that the policy insured their property.
In the case at bar, the plaintiffs went to the agent of the defendant and made application for a policy covering their mortgage interests only. The agent had authority to issue such policies, but as he had never issued any policies of that kind, he informed plaintiffs that he would have to write to his company for instructions. It was agreed that upon receipt of his instruction's from the company, the agent would write such a policy as was applied for, leave it at the First National Bank of Delaware, and at the same time receive form the bank the premium. Arrangements were made by the plaintiffs with the bank to receive the policy from the agent, and pay the premium out of the funds of the plaintiffs then on deposit at the bank, and immediately afterward the plaintiffs left America and went to .London, England, where they have since remained.
F. A. Owen and J. S. Jones & Sons, for Plaintiffs.
McElroy and Carpenter, for Defendant.
Pursuant to this agreement, the agent, on October 14, 1893, wrote to his company for instructions as follows: "How can we insure a mortgage interest in a property?" Three days later the company wrote to .their agent, enclosing a loss payable clause, with instructions to write a policy payable to the owner of the property, and attach the loss payable clause making the loss payable to the plaintiffs, a very different policy from the one applied for. The agent, in obedience to these instructions, wrote the policy in the name of Hartenstein, attaching the loss payable clause, deposited the policy with the bank, and received the premium. The policy remained at the bank until after the loss of the property by fire. The plaintiffs never saw it, nor was there any one to examine the policy for the plaintiffs; the bank was the mere custodian of the policy. The whole matter of writing the policy and depositing it at the bank was intrusted to the agent of the company. How can it be said, in view of these facts, that there was a mistake of fact or law, mutual to the plaintiff and the defendant?
I think the plaintiffs have mistaken the ground of which they are entitled to the relief sought. The proper ground, in my judgment, is that of fraud, but it does not follow that because they have denominated the ground "mistake" instead of "fraud," the relief should not be granted. The policy applied for would cast upon the company all the burdens incident to the risk, such an alienations, additional insurance by the owner, etc., and the plaintiffs had a right to that kind of a policy in return for the premium paid. If the company did not desire to issue such a policy, it should have so informed the plaintiffs, instead of writing one wholly different, and taking advantage of the confidence reposed in the defendant by the plaintiffs, and the fact that neither the plaintiffs, nor any one for them could have an opportunity to examine the policy before it was delivered, and the premium collected. I do not mean to be understood as saying that the agent, Arnold, was guilty of actual fraud in the transaction, or that there was any active fraud practiced on the plaintiffs. I believe that all Mr. Arnold did, was done in good faith, and with the best intentions. But the company and its agent are, in law, one and the same as to all transactions within the scope of the agent's authority. The company, therefore, is chargeable with the knowledge of all the facts surrounding this transaction, known to the agent; and is chargeable with all the consequences resulting from the acts of the agent. The company, then, knowing the kind of policy applied for by the plaintiffs, and being intrusted to draw it up, and preparing a different kind of policy, which would not relieve the plaintiffs from the risk of forfeiture of the policy, by alienation, or additional insurance by the owner of the property, and collecting- the premium thereon, without informing- the plaintiffs, or giving them any opportunity to know the kind of policy they were getting, was a constructive fraud on the plaintiffs. But whether it be called fraud or mistake of law, I think it would be unconscionable to give the defendant the advantage of its own wrong or mistake; and from a consideration of the evidence in the case, and the law applicable thereto, it is the judgment of the court that the policy of insurance should be reformed as prayed, and that a judgment be rendered against the defendant, on the contract, as reformed, for the sum of $1,416.60, and a decree and judgment may be entered accordingly.