Case Name: Jesse M. Smith v. The Farmer's Mutual Fire Insurance Company
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1869-12
Citations: 19 Ohio St. 287
Docket Number: 
Parties: Jesse M. Smith v. The Farmer's Mutual Fire Insurance Company.
Judges: Brinkerhoff, C.J., and Scott, White, and Day, JJ., concurred.
Reporter: Ohio State Reports, New Service
Volume: 19
Pages: 287–291

Head Matter:
Jesse M. Smith v. The Farmer's Mutual Fire Insurance Company.
Where the charter of a mutual insurance company, consisting of all the parties insured therein, provided that the company should have a lien upon all property insured, and that policies issued upon incumbered property should be void, unless a statement of the incumbrance appeared in the written application for the policy by the party to be insured. Held— That a policy issued without such statement, and upon a written application alleging the insured to be the owner of the property in fee, is void, notwithstanding a verbal notice of the incumbrance, given by the insured to the company’s agent for receiving and forwarding the application.
Error to the court of common pleas of Huron county. Reserved in the district court.
This was an action upon a policy of insurance, and the only question necessary to be considered is, whether the policy is void, for failure of the plaintiff to state in his written application therefor the fact that there was a subsisting mortgage upon the premises insured.
The charter of the company vests the sole power of allowing and issuing policies of insurance in the directors of the company, and provides that such policies shall only be issued upon the written application of the party to be insured, and that in all cases where the property insured is incumbered, the policy issued upon it shall be void, unless the existence of the incumbrance is expressed therein, and in the written application therefor. It also gives the company a lien upon the property insured for their indemnity.
The policy in question was issued upon plaintiff’s written application, which is referred to in the policy and made part thereof. It contains no statement of any incumbrance upon the property insured, but sets forth that the plaintiff is the owner thereof in fee. The company set up as a defence, and proved upon the trial, that at the date of the application for, and issuance of, the policy, there was a subsisting mortgage upon the premises insured, of which the directors had no' notice or knowledge whatever. To avoid this defence the plaintiff offered to prove that the blank form used for the application was filled up by an agent of the company, authorized to receive and forward such applications, and that the agent was notified of the existence of the mortgage at the time of filling up the application. He also offered to prove that the property was of sufficient value, notwithstanding the mortgage, to idemnify the company.
The court refused to admit this evidence, and instructed the jury that the plaintiff could not recover. A verdict and judgment were entered for the defendant, and the plaintiff now alleges that the court erred in rejecting the evidence so offered, and in its instructions to the jury.
Stickney <& Strutton and Jay Yatrick for plaintiff in error:
It is well established, both in law and equity, that notice to an agent, in the transactions for which he is employed, is notice to the principal; for, otherwise, when notice is necessary it might be avoided in every case by employing an agent. This rule applies equally to a corporation as to a natural person. Ang. & Ames on Corp. p. 299; 2 Greenl. Ev., sec. 406; 1 Greenl. Ev., sec. 113.
Notice given to the agent of an insurance company, mutual or otherwise, of the existence of an incumbrance is sufficient, whether any mention of such incumbrance is made in the written application or not, although the apjffication required the applicant to state whether the property was incumbered or not. Hodgkins v. Montgomery Co. Mut. Ins. Co., 34 Barb. S. C. 213; Ang. on Ins. p. 254, sec. 191; Masters v. Madison Co. Mut. Ins. Co., 11 Barb. S. C. 631; Ames v. N. Y. Union Ins. Co., 14 N. Y. (4 Kernan) 263; 2 Am. Law Reg., 510; 2 Ohio St. 466.
The acts of the agent of the defendant, at the time he received plaintiff’s application, are binding on the defendant; such agent being the defendant’s agent and in no sense the agent of the plaintiff, there being no condition annexed to the policy that the assured will be bound by the application for the purpose of taking which the surveyor will be deemed the agent of the applicant as well as of the company. And see Masters v. Madison Co. Mut. Ins. Co., 11 Barb. S. C. 631.
None of the authorities produced on the other side in favor of the claim, that this policy (the application being a part thereof) is a warranty of the plaintiff, and that he is estopped from proving by parol that he did disclose, at the proper time, the fact of the existence of the mortgage, to the defendant’s agent, are parallel to the case at bar. The case of Harris v. The Columbiana Co. Mut. Fire Ins. Co., 18 Ohio, 116, is about parallel with the present case.
The New York authorities, which have gone to uphold the rigid law of warranty against all equity and justice, have been overruled by a late decision. We allude to the case of Rowley v. The Empire Ins. Co., 36 N. Y. (9 Tiffany) 550.
Charles E. Pennewell for defendant in error:
The company cannot insure incumbered property, unless the true state of the title and incumbrances are expressed in the application. 20 Ohio, 174; 11 Ohio St. 477.
The effect of the provision of the charter was sought to be avoided by the plaintiff, by the testimony objected to by • the defendant.
The power of the agent was simply to receive the application. He had nothing to do with determining whether the risk should be taken, whether security to the premium note should be exacted, or the policy be issued or not. The directors were the only body to determine these things.
The evidence offered was inadmissible, because it does not bring notice to the directors, does not comply with the charter of the company, does not avoid the charter restrictions, cannot amount to a waiver of them, and in no sense is an answer to the section of the act which makes the instrument void.
Whether the statements in the application amount to a warranty as to the absence of incumbrances, or simply a representation, is of little consequence, as the company is limited; in its powers. The property must be unincumbered, or the incumbrances must be stated in the application, or the policy is void.
But in this case the application is made a part of the policy, and contains a mis-statement in a matter made material by the charter, and so makes a breach.
If the disclosure to the agent is sufficient, then the charter provision and restriction are of no effect, and do not protect the company.
In support of the ruling of the court, in addition to the cases above referred to, the following are cited: Ripley v. The Ætna Ins. Co., 30 N. Y. 136; Harrison v. City Fire Ins. Co., 9 Allen, 231; Hale v. Mechanics Mut. Fire Ins. Co., 6 Gray, 169; Cooper v. The Farmer's Mut. Fire Ins. Co., 50 Penn. St. 299; Mitchell v. The Lycoming Mut. Ins. Co., 51 Penn. St. 402.

Opinion:
Welch, J.
We see no error in the rulings of the court below. The charter of this company is expressly made 'Obligatory upon all its members. It expressly declares that policies issued upon incumbered property, without a written application containing a statement of the incumbrance, shall 'be void. This provision admits of no construction, and no attempt is made to avoid its effect in the present case •by proof of fraud or mistake. It is the law of the parties, adopted by themselves, and becomes part of their contract. By it they have declared and agreed that this form of writ•ten notice shall be essential to the validity of the policy, and that verbal notice cannot be substituted for it. But even •were this otherwise, we fail to see that the plaintiff offered to prove verbal notice of the incumbrance, to the company. The .power of the agent was limited to receiving and forwarding •applications. Notice to him was no notice to the company. In filling up the application, he acted as agent of the plaintiff, and not of the company. The policy was, therefore, issued not only without the notice required by the charter, but without any notice of the existence of the incumbrance, and by the express provision of the charter was unauthorized and void.
Judgment affirmed.
Brinkerhoff, C.J., and Scott, White, and Day, JJ., concurred.