Case Name: State Life Insurance Company v. Harvey
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1905-03-21
Citations: 72 Ohio St. 174
Docket Number: No. 8530
Parties: State Life Insurance Company v. Harvey.
Judges: Davis, C. J., Shauck, Price, Summers and Spear, JJ., concur.
Reporter: Ohio State Reports, New Service
Volume: 72
Pages: 174–189

Head Matter:
State Life Insurance Company v. Harvey.
Policy of life insurance — Not to take effect until first premium paid — Agent of company issues policy to himself — Son-in-law of agent, stranger to the policy — Furnishes money to agent to pay premium — Agent does not account to the company for premium — Agent’s wife, the beneficiary, cannot recover on the policy.
1. Where a policy of life insurance contains the provision that the policy “shall not take effect until the first premium shall have been paid to and accepted by the company or an authorized agent,” — the payment of such premium, unless waived, is necessary to put said policy in force.
2. H., who was agent of a life insurance company, procured from said company the issuance to himself of a policy of insurance on his own life, which policy contained the above clause or provision as to prepayment of the first premium. Upon the delivery of said policy, H., being unable to pay said first premium, D., his son-in-law, who was a stranger to said policy, for the purpose of paying said premium for H., furnished or paid to H., himself, as agent for said insurance company, the amount due from the latter to said insurance company as and for said first premium. This transaction was without the knowledge or consent of the insurance company and no part of the money received by H. was ever accounted for or paid over by him to said insurance company.
Held: H. could not act for himself and for his principal in the same transaction, and the payment to and receipt by him pf the money from D. was not a payment of the premium to the insurance company or its authorized agent, apd such payment was not a compliance with the condition of the policy and did,not bind the company or put said policy in force.
(No. 8530
Decided March 21, 1905.)
Error to the Circuit Court of Tuscarawas county.
The facts found in the record in this case, so far as they are pertinent to the question considered and determined by this court, are as follows: -On the eighth day of November, 1900, W. "W. Harvey, by contract and appointment, became an agent of the State Life Insurance Company of Indianapolis, Indiana, for certain counties in the state of Ohio. While this contract and appointment was still in full force and effect, and while said W. W. Harvey was yet acting as the agent of said State Life Insurance Company, he made application to said company for a policy of insurance on his own life. The application so made by him was in writing, was in the usual form and was on one of the company’s blanks such as was ordinarily used in making application for a policy of insurance. In due course a policy for $5,000 was issued upon said application and the same was forwarded to said W. W. Harvey by mail. This policy was by its terms made payable to Margaret S. Harvey, wife of the insured, if living, otherwise to the legal representatives or assigns of the said W. W. Harvey. Before making application for this insurance Harvey entered into an arrangement with one A. V. Donahey, his son-in-law, by which it was understood and agreed between them that if Harvey would make application to said State Life Insurance Company for a policy of life insurance on his own life, for $5,000, and should procure the issuance of such policy, then and in that event if he should at any time be unable to meet and pay the premiums on said policy, as they fell due, he, Dona-hey, -would pay them for him. This arrangement between Harvey and Donahey was not disclosed to, or known by the insurance company. A life policy for $5,000 was issued to W. W. Harvey on December 19,1900, and he being unable to pay the premium of $37.95, which by the terms of the policy was due thereon upon delivery of said policy and the payment of which was a condition precedent to the taking effect of said policy, notified Donahey of his inability to make such payment, whereupon Donahey furnished or paid to him the sum of about $19.00, being the amount of the premium then due, less the commission of Harvey as agent, and Harvey thereupon delivered to Donahey the following receipt which with others had been forwarded to him with the policy for collection.
No. 31356. $37.95.
The State Life Insurance Company, INDIANAPOLIS, INDIANA.
Received from William W. Harvey, of Canal Dover, O., the sum of thirty-seven and 95-100 dollars, being the quarter annual premium on Policy No. 18411, for $5,000, due on the nineteenth day of December, 1900, which pays the regular premium up to the nineteenth day of March, 1901.
This receipt to be valid must be signed by the president or secretary, and countersigned by an authorized agent of the company.
W. S. Wynn,
Secretary.
Countersigned this......day of......, 189..
........................Agent.
When the next premium was due Donahey again furnished or paid to Harvey the amount thereof less Harvey’s commission and received from him a like receipt. Neither of these receipts was countersigned by any one. Before the next installment of premium was due Harvey died. At the time of his death no premium had been paid to the company on this policy except in the manner above stated, and no part of the money furnished or paid by Donahey to Harvey was ever turned over or paid to the company or accounted for by Harvey as agent. W. W. Harvey, the insured, died on the fourteenth day of June, 1901, about six months after the policy had been issued. On September 7, 1901, the defendant in error, Margaret S. Harvey, the beneficiary named in said policy, brought her action in the court of common pleas of Tuscarawas county against the plaintiff in error to recover the amount of said insurance. In that action, the defendant, the State Life Insurance Company, pleaded among other defenses that the policy sued on never became and never was a valid contract of insurance for the reason that no premium was ever paid thereon to the company or its authorized agent as required by the terms of said application and policy. This was denied by reply.
At the close of the plaintiff’s testimony a motion was made by the defendant, the State Life Insurance Company, asking the court to direct a verdict in its favor, which motion was overruled and proper exceptions noted. The cause was submitted to a jury and resulted in a verdict and judgment in favor of the plaintiff, Margaret S. Harvey, for the full amount claimed. This judgment was affirmed by the circuit court. Plaintiff in error now asks that this judgment of affirmance may be reversed and that judgment may be rendered in its favor upon the undisputed facts.
Mr. Charles F. Coffin; Mr. P. 8. Olmstead and Mr. Gilbert H. Stewart, for plaintiff in error.
All oral negotiations relating to a contract of insurance are merged in the contract when executed. Elliott on Insurance, sec. 108; Higginson v. Dall, 13 Mass., 96; Insurance Co. v. Lyman, 15 Wall., 664; Insurance Co. v. Mowry, 96 U. S., 544; Fayerweather v. Phenix Ins. Co., 6 L. R. A., 805.
An agent dealing with the subject-matter of his agency in his own name and on his own behalf, will not as to that transaction, be deemed an agent but a principal and as to all acts relating to such transaction he must deal “at arm’s length” with his principal. Kerr on Insurance, sec. 79.
The case of Spare v. Home Ins. Co., 19 Fed., 14, was a case involving the precise question involved here, that is, whether one can, as a matter of law, act as agent in a matter in which he had an interest adverse to his principal for whom he is agent in other matters.
The cases above cited and quoted all announce, and elaborate the reasons for the legal principle, that no man can act for himself and his principal in the same transaction, although the facts in said cases are somewhat different from the facts in the case now before this court. No two cases, arising in different jurisdictions and between different parties, will ever present quite the same facts. But given certain essential facts and the principle controls everywhere.
It is always a satisfaction, however, to he able to cite a case that raises and decides the question at issue on practically the same facts.
It is with pleasure, therefore, that we direct the attention of the court to the case of Neuendorff v. World Mutual Life Ins. Co., 69 N. Y., 389.
. In Ruckman v. Bergholz, 8 Vroom, 437, it is said, “The rule requires a man to put off the character of agent when he assumes that of principal. ’ ’
In Stewart v. Mather, 32 Wis., 344, the court lays down the same rule.
In Batholemew v. Leach, 7 Watts, 472, “The same doctrine is required of a confidential agent while he consents to act as such, and there must be an unambiguous relinquishment of his agency before he can acquire a personal interest in the subject of it.”
It is not deemed necessary to cite further authorities. The logic of the proposition is irresistible.. Though the courts had never spoken on the subject,, it would be none the less true as a pure abstraction that a man cannot be, at the same time, two diametrically contradictory characters.
It is submitted that in so far as it may be contended' that section 3625, Revised Statutes, has for its purpose the authorization and protection of fraud committed by an agent of a life insurance company against the company, such contention will be held void as against public policy and the principles of common morality. Such a statute has its purpose and a legitimate purpose, but it will certainly not be contended seriously that the legislature could authorize and make legal, theft, burglary or murder.
There is no better settled principle of the law than that in all cases where the knowledge of an agent is to' be imputed to the principal, such knowledge will not be so imputed where the conduct of the agent is such as raises a clear implication that he would not communicate the fact in controversy to his principal, as when the communication of such fact would necessarily prevent the consummation of a fraudulent scheme the agent was engaged in perpetrating.
' Upon this question the court is referred to the following authorities: Innerarity et al. v. Merchants’ Nat. Bank, 1 N. E. Rep., 282; Western Mortgage & Investment Co. v. Ganzer, 11 C. C. A., 371; Thomson-Houston Electric Co. v. Capitol Electric Co., 12 C. C. A., 643; Hudson v. Randolph, 13 C. C. A., 402.
A beneficiary in a life insurance policy, even though she may be the wife of the insured and may have a “vested right” in the policy, takes her interest with all of the restrictions of the policy and subject to every defense, which the company issuing the policy might have had as against the insured himself. Mutual Life Insurance Co. v. Kelly, 114 Fed., 268; Keller v. Home Ins. Co., 69 S. W. Rep., 612; Carpenter v. Insurance Co., 5 Fed. Cas., 105; Treat v. Merchants’ Life Assn., 64 N. E. Rep., 992; Forbes v. Union Central Ins. Co., 51 N. E. Rep., 84; Burruss v. N. L. Association, 32 S. E. Rep., 49.
First: We think that we have shown by an abundance of authorities that the court committed error in overruling the motion of plaintiff in error to strike out certain parts of the petition of defendant in error and in admitting the testimony of Donahey as to conversations touching a contract of insurance which was afterward reduced to writing.
Second: Inasmuch as an agent employed with reference to certain subject-matter, ceases to be an agent the moment he deals with such subject-matter for his own benefit, the court erred in instructing the jury that payment of a sum of money equal to the premium on his policy of insurance by Donahey to Harvey was a payment to the company, and for same reason the court erred in charging the jury that since Harvey was the agent of the insurance company generally, the company Would be charged with knowledge of the fraud that Harvey was engaged in perpetrating against the company and would therefore be deprived of its defense to such 'fraud by the provisions of the Ohio statute.
Third: We think we have shown, beyond any possible doubt that every beneficiary of a life insurance policy takes his or her rights • under such policy by virtue of the terms and stipulations of the policy contract, and that such beneficiary is bound by all the statements made by the assured in his application for such policy.
Messrs. Richards & McCullough, for defendant in error:
Proofs of death were duly made although waived in writing by the company, which denied all liability upon the policy upon the grounds:
First: That Harvey could not act as its agent in dealing with Donahey for the policy, of which Harvey’s wife was the beneficiary.
Second: That the premiums were not received by the company, and that payment to Harvey was not payment to the company.
Third: That the policy is void by reason of certain answers made by Harvey in the application upon which the policy was issued.
If the first objection is resolved against the company, the second and third must fall; for it is conceded by the record that Harvey was the agent of the company when he filed the application and sent it to the company, and hence must have had knowledge ■of the truth or falsity of the answers therein; hence if he was the agent of the company, the third objection comes within section 3625, Revised Statutes.
Further, it is conceded by the record that Harvey was the agent of the company when he collected the premiums from Donahey. We claim that if he was agent of the company, payment to him would be payment to the company.
Was Harvey the agent of the company in the procurement of this policy for his wife?
By section 3112, Revised Statutes, husband and wife may enter into any contract or transaction with each other, or with any other person, which either might if unmarried; and by section 3114, Revised Statutes, she may take, hold, and dispose of property, real or personal, the same as if unmarried.
If a married woman can contract directly with her husband, a contract made for her benefit with him as agent of another, is certainly good.
Harvey was the duly commissioned agent of the defendant, authorized to make contracts of insurance, collect premiums and forward them to the ■company, and deliver policies of insurance to parties contracting therefor.
A life insurance agent, soliciting and procuring for an insurance company, risks and applications upon which policies are to be issued, who fills up the application, is the agent of the insurance company and not of the applicant for insurance, and if he makes a mistake in preparing the application and stating the facts in it, or makes a false statement therein, the insurance company is hound thereby. Mieritz v. Insurance Co., 11 Dec., 759; 8 N. P., 422.
And he is the agent of the company notwithstanding a contrary stipulation in the application. Insurance Co. v. Chamberlain, 132 U. S., 304.
It was as though Mrs. Harvey had procured the policy upon the life of her husband and paid the premiums thereon, making the policy her own separate property upon which even her husband’s creditors could have no claim.
So that Harvey was, in fact, a stranger to the transaction as to any benefit to accrue therefrom, after the policy was issued.
It was not necessary that Mrs. Harvey should pay the premiums. Another person might pay them for her.
The interest of the beneficiary is so distinct from that of the person whose life is insured, that even the acts or declarations of the latter are not evidence against the beneficiary; and the wife, as to the policy, is to be treated as a feme sole. Insurance Co. v. Applegate, 7 Ohio St., 292; Insurance Co. v. Cheever, 36 Ohio St., 201.
Where a policy of insurance is taken by one for the benefit of another, it is in the nature of an executed gift, and the beneficiary may maintain an action on the promise. Manhattan Ins. Co. v. Smith, 44 Ohio St., 163; Pingrey v. Insurance Co., 144 Mass., 382.
There is also a rule of law in the matter of agency that has long been recognized by the courts, and that is a rule of ratification, which may be either expressed- or implied. It may be inferred from circumstances, which the law considers equivalent to an express ratification. 1 Am. & Eng. Encv. Law, 1195 and 1196, first note.
Now, in the application made by Harvey to the company, is a place for the signature of the person who ivas acting as the agent of the company ivhen the> application was made, and turning to the application upon which the policy was issued, we see that Harvey signed it as to his answers, and then his name is signed to it as agent and general agent of the company, thus notifying the company that in this matter he was acting as agent for it; and the company, thus notified by the application, ratified the action of Harvey as its agent, issued the policy, and sent it to him for delivery to the beneficiary.
The conduct of the principal will be liberally construed in favor of a ratification or adoption of the acts of the agent. Szymanski v. Plassan, 96 Am. Dec., 382.
Further, Harvey being the agent of the company at the time the application was made, and necessarily knowing the truth or falsity of the answers therein, the company is bound by virtue of section 3625. Revised Statutes, by such answers, for the legal effect of-the statute is the same as if copied into and made a part of the policy. The John Hancock Life Ins. Co. v. Warren, 59 Ohio St., 46; Metropolitan Life Ins. Co. v. Howle, 62 Ohio St., 204.
It is contended that the premiums were not received by the company and that payment to Harvey was not payment to the company. As Harvey was the duly commissioned agent of the defendant, authorized to make contracts of insurance,, collect premiums and forward them to the company, and deliver policies of insurance to parties contracting therefor, payment to Harvey was payment to the company.
But the policy which the company forwarded to Harvey as its agent, for delivery, acknowledges the receipt of the first premium, and where an insurance company delivers a policy which on its face acknowledges the receipt of the first premium.
The presumption is that the premium was paid on delivery of the policy. Kerr on Insurance, 290; Elliott on Insurance, sec. 358.
But the record shows that the company only not only received from Harvey the application signed by him as agent, not only forwarded the policy to him for delivery and collection of the first premium, but sent to him, from, time to time, receipts to be delivered by him on Ms collection of the premiums.
The company having treated Harvey as its agent to receive the premiums and sent him receipts therefor which he delivered to Donahey on payment of the premiums, is estopped as against Mrs. Harvey to deny that they were paid. Insurance Co. v. Hamilton, 41 Ohio St., 275.
Another person than the beneficiary may pay the premiums. Kritline v. Beneficial Assn., 5 Dec., 592; 7 N. P., 439.

Opinion:
Crew, J.
Among other stipulations and provisions contained in the application made by W. W. Harvey to the plaintiff in error, the State Life Insurance Company, for the policy of insurance that is here in suit, — which application by the express terms of said policy became itself a part of the contract of insurance, was the following clause or provision, to-wit:
"It is hereby agreed that all the foregoing statements and answers, and also those I make to the company's medical examiner, are warranted to be full, complete and true, and are offered to the company as a consideration for the contract, which shall not take effect until this application, which I agree to complete by submitting to a medical examination, has been accepted by the company, at the home office in Indianapolis, Indiana, and the first premium shall have been paid to and accepted by the company or an authorized agent during the life and good, health of the person herein proposed for insurance."
The above stipulation or provision, that the contract of insurance shall not take effect until the first premium shall have been paid to and accepted by the insurance company or an authorized agent during the life and good health of the person proposed for insurance, being a reasonable and proper limitation or condition, was one the insurance company had a legal right to make. And being a condition precedent such prepayment of the premium, unless waived, was necessary to be made in order to put said policy in force, or to make said contract of insurance effective so as to bind the insurance company. Primarily the performance of this condition rested upon Harvey whose duty and obligation it was, if he would have the benefit of his contract and would put said policy in force, to pay to the insurance company, or to some one of its agents authorized to receive the same, the amount of said first premium. How, if at all in the present case, did he fulfill or discharge this obligation? It is not •claimed, nor would the facts justify such claim, that Harvey himself ever paid said premium or that he ever in any manner accounted to the State Life Insurance Company therefor. The only payment of such premium relied upon or claimed in the present case, is a payment alleged to have been made by Donahey to W. W. Harvey himself. As recited in the statement of facts in this case, it appears from the record, that after the policy of insurance upon which this suit was brought had been issued to and received by Harvey, that he, being unable to pay the premium which was due thereon upon the delivery of said policy, communicated that fact to Donahey, his son-in-law, who thereupon, but without the knowledge or consent of said insurance company, furnished or paid to Harvey by way of attempted settlement or payment of said premium a sum of money equal to the amount of the premium then due on said policy, less Harvey's commission as agent. It is the contention or claim of counsel for defendant in error, that the alleged payment so made was a sufficient payment of the premium then due, that it was made to an agent of said insurance company authorized to receive it, and that it was therefore in legal effect payment of said premium to the insurance company itself. Or differently stated the claim made is, that the payment by Donahey to Harvey as agent for and on behalf of Harvey as obligor, of the debt or obligation owing from the latter to the insurance company, was an authorized payment, and that it had the effect to satisfy and discharge the insurance company's claim for the premium then due and to thereby put in force said policy or contract of insurance.
This claim, we think, is untenable, and its fallacy and unsoundness is to be found in the premise upon which it is predicated, namely, the assumption that in such transaction Harvey was the authorized agent of the insurance company. The principle is elementary, and the rule of law well settled by adjudication, that an agent dealing with the subject matter - of his agency can not enter into a contract with himself in respect thereto that will be binding upon his principal, unless the contract be approved by the principal with full knowledge of all the facts. He cannot at the same time and in the same transaction be both obligor and obligee. And where an agent undertakes to act for himself in any matter, he cannot in the same transaction and as to the same matter act for and represent his principal, but in such case, as to such transaction the law will regard the relation of principal and agent as at an end and will treat him as a principal. Applying this rule to the present case it follows, we think, that Harvey could not bind the insurance company to the receipt of money paid to himself at his own instance and on account of his own debt or obligation owing to said insurance company, where such payment was made, to and received by him without the knowledge or consent of the company, and where the money so received was never accounted for or paid over by him to the company. In that transaction, Harvey was acting not for the insurance company, but for himself, in his own interest and on his own behalf. In legal contemplation he was not then the agent of the insurance company, but was a principal, and therefore could not bind the company by his act, and such payment to and receipt by him would not constitute or be, payment to tbe company. We are of opinion, therefore, upon this record, that the circuit court erred in not reversing the judgment of the court of common pleas for overruling the motion of the plaintiff in error asking the court to direct a verdict in its favor.
The judgment of the circuit court ivill he reversed and judgment entered for the plaintiff in error upon the undisputed facts.
Davis, C. J., Shauck, Price, Summers and Spear, JJ., concur.