Court Opinion

ID: 8635360
Source: CourtListenerOpinion
Date Created: 2022-11-24 19:44:18.010811+00
Date Added: 2024-06-11T16:55:54.524651
License: Public Domain

CURTIS, Circuit Justice.
This is a suit in equity, the object of which is to correct an alleged mistake in a policy of insurance. On the 7th of November, 1851, the complainant, who is a merchant in Liverpool, being the owner of a vessel called the Liscard, ordered James E. Oliver, his agent at Quebec, to insure, in New York, at the best terms, two thousand pounds on the vessel, and one thousand pounds on her freight, by policies in the complainant’s name. Other insurance on other vessels was ordered at the same time. James E. Oliver, through Henry McKay of Montreal, requested Andrew McLimont, an insurance agent in New York, to procure this and the other insur-anees. On the 2Sth of November, 1851, Mc-Limont wrote by mail to D. R. McKay at Boston, as follows:
“New York, 28th November, 1S51. D. R. McKay, Boston: My Dear Sir, — I am duly favored with yours of the 26th instant. Contents duly noted, also telegraph of this day’s date; and I have advised you by same conveyance to insure in Coasters Mutual Company. I also transmit you the following order to insure:—
On ship Liscard.... $ 8.000 valued at $16.000
On freight money.. 4,000 “ “ 7,200
On ship Wakefield. 2,000 “ “ 11,200
On freight money.. 2,000 “ “ 6,000
$16,000 in all.
“The Liscard is a fine new ship three years old; her destination is Liverpool, and she sailed from Quebec on the 18th instant. The Wakefield is also a fine ship, eight years old; her destination is Greenock, Scotland. She sailed on the 17th instant. I trust you will get these risks done on moderate terms, but you are not limited to a rate. Do the best you can and lose no time. You will please take out special policies for these risks, and inclose them to me, paying cash for the premium, and drawing on me at one day’s sight for the amount. You should get a discount of five per cent, on these premiums. I get it from the offices here, and I am told money is tight in Boston. In fact, you must do your very best to get that discount, as I allow it myself when rendering accounts. Now, as to the commission, all I charge is one fourth per cent, upon amount insured, which has to be divided between your brother and myself; but we always calculate on a handsome scrip dividend for these policies, therefore we shall divide commissions and scrip. I am likely to do a very large business with you, in this way, next year, (if we are both spared.) amounting, perhaps, to twenty thousand dollars of premiums, so that the scrip should be a handsome thing for both of us. I am in hopes of seeing you next month *668on this subject. I have been thinking, that if you saw any safe chance of extending your business with the lower ports, we might make some mutual arrangements for our mutual benefit. I write this hurriedly, and conclude. Yours truly, A. McLimont.'’
Finding that mistakes had been made in the sums mentioned in this letter. Mr. McLimont sent by telegraph, a despatch mentioning the order for insurance, and correcting the mistakes therein. This despatch first arrived; and D. It. McKay went with it to the office of the defendants, and after some conversation with the president of the company, concluded to wait for the arrival of the letter. When that arrived, McKay again went to the office, saw the president, and concluded with him an agreement to effect the insurance ordered on the Liscard. The president wrote in a book of the company the following memorandum:
“December 1, 1851. Ship ‘Liscard.’ Quebec, Canada, to Liverpool, England. $10,000 on vessel valued at $20,000, and $5,000 on freight money valued at 87,200. 514.”
Before McKay left the office, he wrote and handed to the president or secretary, the following memorandum:
“A.
“Insure as follows:—
$10,000 on ship Liscard, valued at $20.(00.
6,000 on freight oí do. “ “ 7.200.
“Sailed from Quebec, Canada, for Liverpool, England, on the 18th November.
“AIbo, $2,600 on ship Wakefield, valued at $14,000.
2,600 on freight-of do. “ “ 0,0J0.
“Sailed from Quebec, for Greenock, Scotland, on the 17th November. D. It. McKay. Boston, December 1,1851.”
During the same forenoon a messenger from the office aplied to him to know the names of parties to be inserted in the policies, and thereupon he wrote and sent the following:
“B.
“Policies for D. R. McKay, on Liscard and Wakefield, to be made out on account of A. McLimont, and payable to him or order.”
The policy in question was made and sent to McKay, purporting to “cause D. K. McKay, (a member of said company, pursuant to said act and by-laws,) on account of A. Mc-Limont; loss payable to A. McLimont. Esq., him, or his order, to be insured, &c.” It is alleged the vessel and freight were afterwards totally lost by a peril within the policy, the complainant being the sole owner thereof. The scope of the bill is, to reform the policy, so as to have it attach on the interest of the complainant, and to have a decree for the amount due. The complainant, through D. R. McKay, and the respondents through their president, made an agreement for insurance, which preceded, in point of time, the writing of this policy; and which the policy was intended to imbody. If the policy, when drawn, did not correctly express a concluded agreement which had previously been made, which agreement, the policy was designed by both parties to carry into execution, equity will reform it.
In this case the most material inquiries are, at what point of time a concluded agreement was made, what it was, and what were the rights of tb» parties under it when the policy was made out. To a certain extent there is no conflict in the evidence upon these subjects. The president of the company, in his deposition, testifies that he made an agreement, and that he entered the substance of it on the books of the company, in the memorandum already given. In answer to the fifth and sixth cross-interrogatories, he says: “There was a written application made, before it was decided to write the risk, and I made a memorandum embracing the substance of the application, after it was decided to write the risk. I have given the memorandum I made, in the words in which it stands on the book of the company.” Though it is disputed whether a written application was made, it is clear, beyond all ddubt, that an application, either oral or written, was made, that it was assented to, and its substance recorded at the time by the president of the company in the memorandum already given. This memorandum ascertains the name of the vessel, the sum to be insured thereon, her valuation, the valuation of the freight, and the sum to be insured thereon, the voyage, and the premium. Here is every particular necessary to be fixed, in order to make a concluded agreement for a policy in the form and with the clauses usual at that office. The promisor was, of course, to be the insurance company; the promisee. D. R. McKay, with whom the contract had been made. So we must conclude both parties understood it; not only because when the policy was made out, McKay's name was inserted in the policy as the person insured, but also because, in the absence of any stipulation to the contrary, he who makes a proposal for insurance, or any thing else, which is accepted, is by implication, at least, taken to be the person contracted with, unless the contrary is made to appear.
Here, then, was a concluded agreement which embraced every essential stipulation to make a binding contract for a policy; and it covered every point necessaiy to be noticed, except two; the first being, a declaration of the interest, or account, upon which the insurance, when effected, was to attach, and the second, the person to whom the amount of any loss should be made payable. In respect to the last, in the absence of any direction to pay to another, the amount of any loss would be payable to the person who was insured. A failure to make *669any agreement, or rather, I should say, the omission of the assured to give any direction on this subject, would not prevent the issuing of the policy. And it remains only to inquire, whether any thing was at that time agreed on, respecting the interest or account for which the insurance was made; and, if not, what were the rights of the parties in reference thereto. I am entirely satisfied that nothing was agreed on, or declared, on this subject, at the time the agreement for insurance was made. This results from the testimony both of D. K. McKay and the president, who are the only persons having knowledge of the subject, and also from the written memorandum made by both of them. The president testifies that he embraced in the written memorandum made by him in the books of the company, the substance of the proposal. That says nothing as to any interest or account. McKay says he wrote the paper A before he left the office. That is silent on this point. I am aware of the argument concerning the inference to be drawn from McLimont’s letter and other circumstances. But the point at which I have now arrived, is this* When McKay left the office, an agreement for a policy had been concluded, and there was no declaration by him of the interest or account for which the insurance was effected. Had he, at that time, and before any thing more was done, a complete right to a-policy, containing the elements which appear in the memorandum, wherein he should stand insured, as agent, or for whom it might concern? I am of opinion he had this right. Parties who contract for policies of insurance are not expected to insert in the contract every particular, needful to be inserted in the policy. The underwriters, on their part, agree to effect insurance; the numerous limitations of their liability as insurers, which appear in the different memorandums and other special printed clauses in the policy are not mentioned. Their obligation is understood to be, to make out a policy in the usual form, and containing the usual clauses, adapted to the case, made by the agreement of the parties. So if one applies for insurance, makes known that he is an agent only, and the company agrees to effect the insurance, or as the president of this company expresses it, to write the risk, it is a necessary implication that such words shall be inserted in the policy, as are usually inserted in such eases, and as are necessary to make a binding contract. It is to be presumed, that the underwriters intend to earn their premium, and therefore that they expect and desire that the insurance should attach upon some interest, and understand and agree, if a known agent applies for insurance, that the formula, usually inserted when an agent obtains insurance, and which is necessary to the assumption of the risk, shall be in the policy, when it is drawn. I think it may safely be laid down, that when a contract is made for a policy, whatever clause is usually inserted in policies, by reason of a given state of facts, and which it is necessary to insert to adapt the policy to that state of facts, both parties will be understood as agreeing to have inserted, if they are both apprised of that state of facts, and contract in reference to it. That it is usual, and necessary, to insert in policies of insurance effected by agents in their own names, a declaration that they are insured as agents, or for whom it may concern, or some equivalent words, or to declare specially on whose account the insurance is made, will hardly be controverted. That it was known to both McKay and the president of the company, that he was acting as an agent merely, that he himself had no interest, upon which the insurance could attach, and that when the company agreed to write the risk, they contracted to insure .property which belonged to some principal of McKay, is admitted on all hands.
The result seems to me to be, that before McKay had sent his second memorandum (paper B) he had a complete right to a policy insuring him as agent, or for whom it might concern, or declaring specially his principal. In other words, I consider the right of McKay under this contract, to have been a right to a policy upon the Liscard and freight, on a voyage from Quebec to Liverpool, for the sums, and under the valuations, and at the rate of premium mentioned in the memo-randuin on the books of the company. And that as no declaration was made by McKay at the time the contract was made, respecting the interest upon which the insurance was to attach, he had the power, either to leave that point open in.the policy, by having it made for whom it might concern, or to declare the interest, and have it inserted, in terms, in the policy. It was at this point, and in the exercise of this power, that the mistake was made. I do not consider it a broad question, whether a mistake was made in reducing to writing an oral contract for insurances, as it has been treated at the bar; but a much narrower question, whether a mistake was made, in the execution of a power belonging to one of the parties, to declare the interest upon which the. insurance should artacli. Such a mistake, when occurring in the execution of a similar power reserved in a policy, has been allowed to be corrected even at law. In Bobinson v. Tou-ray insurance was made on the 17th of July, at and from Archangel to Great Britain, on goods to be thereafter valued and declared. On the 16th of October, the brokers declared in writing, that the interest attached on goods on board two vessels named in the memorandum, and the underwriters put their initials to it. Subsequently, it was acertain-ed by the brokers, that their principals had no goods on board those vessels; and they called on the defendant to correct the mistake, and declared the insurance attached on goods on board the America. *be defend*670ant refused to assent. Lord Ellenborough was of opinion that the declaration of interest did not require an assent on the part of the underwriter; that the contract was complete when the policy was signed; that the declaration of interest was merely the exercise of a power reserved to the assured; and if a blunder was made, it could be corrected. Of this opinion was the court of king’s bench, when a rule to show cause was applied for. 3 Camp. 157; 1 Maule & S. 217.
To state fully and precisely the grounds upon which X think this case rests, I should say that when a complete contract for a policy, is made by a known agent, and nothing is said respecting any declaration of interest, the contract, is to insure the property of his principal, and in order that this contract may take effect, power is impliedly reserved to the agent specially to declare the interest upon which the insurance is to attach, and to have such declaration inserted in the policy, when drawn, or to have the policy drawn so as to insure him as agent, leaving the declaration of interest to be made afterwards, in case of loss. Either is within the known usage of agents and underwriters; and the conduct of the respondents in sending to McKay to obtain this declaration, and of McKay in making it, sho%v, if any proof were needed, that it was understood by both, he possessed this power. And when a mistake was made in declaring the interest, it was, as Lord Ellenborough said, a mistake in executing a power reserved to the agent by a complete and binding contract, in which power the underwriter has no interest, save that it should be rightly executed, so that he may obtain the premium, and have a valid title to retain it, and over which he can, justly, exercise no control.
It will thus be perceived that the grounds on which X rest the decree in this case, are free from all doubt in point of fact. It is a point much contested, whether McKay showed to the president the letter of MeLimont, and made him acquainted with its contents, so as to apprise him that MeLimont was merely an agent. But however this may be, there is no doubt whatever, that the president knew, that McKay was acting as an agent, that the interest to be covered was not his, and that no agreement was made, when the contract for the policy was completed, and McKay left the office, to coniine the insurance to the interest of any particular person, or in any way to restrain the power which belonged to the agent, rightly and truly to declare the interest, so as to make the insurance effectual, in behalf of his superior, whoever he might be. When the messenger of the defendants came to McKay afterwards, he was then, for the first time, called on to execute this power. That he knew MeLimont was not the owner, and did not intend to cover his interest, but the interest of McLimont’s principal, I cannot doubt He made a blunder in declaring the insurance to be for McLimont’s account; and in my opinion,' equity and good conscience require it to be corrected, and the policy reformed. That courts of equity possess the authority to correct mistakes in policies of insurance, even to the extent of changing the most material clauses therein, which are the subjects of special agreement in each case, has not been controverted, and is too well settled to admit of doubt. Motteux v. London Assur. Co., 1 Atk. 545; Collett v. Morrison, 12 Eng. Law & Eq. 171; Phoenix Fire Ins. Co. v. Gurnee, 1 Paige, 278. It is to be done only with great caution, and upon such proof as is entirely satisfactory. But there is a considerable difference between the reformation of a written contract and the correction of mistakes in the execution of powers. In the latter class of cases, courts interfere much more readily, and upon the footing of presumed intention. 1 Story, Eq. Jur. §§ 169-179; 2 Sugd. Powers, 94; Ashhurst v. Mill, 7 Hare, 502. But I do not think it necessary in this case to press the power of the court at all beyond the narrowest limits which have been assigned for the correction of mistakes; because I proceed wholly upon evidence in which there is no conflict, and upon those rights and duties which are the legal results of the admitted relations of the parties, and of the contract evidenced by the written memoranda which preceded the policy.
It has been argued that MeLimont was not authorized to procure insurance in Boston; nor in Any name but that of the complainant; and that he and McKay intentionally departed from their instruction in this last particular, and had the policy made out insuring McKay on account of MeLimont, so that they might share the scrip dividends made by this mutual insurance company, in fraud of the complainant. This requires examination. Not that I think it, of itself, important, that the agent deviated from his instructions, in the particulars mentioned; because a subsequent ratification by his principal, even after a loss, would remove the difficulty; Routh v. Thompson, 13 East, 274; Hagedorn v. Oliverson, 2 Maule & S. 485; and this bill of complaint itself affords the necessary evidence of ratification. Finney v. Fairhaven Ins. Co., 5 Metc. [Mass.] 192; Finney v. Bedford Commercial Ins. Co., 8 Metc. [Mass.] 350. Nor have these respondents anything to do with a fraud, practised, or attempted, by an agent of the complainant on him; that being, as to them, res inter alios. But the effect of these circumstances on the case, if any, arises from their bearing on the intent of McKay; and in this point of view, and upon the facts which clearly appear, the argument must be this: MeLimont intended to obtain insurance for account of Oliver, the complainant; McKay intended to obtain it for McLimont’s principal, not knowing who he was: but they desired to place them*671selves in a position in which they would have the benefit of the scrip dividends; and therefore, when McKay came to execute the power to declare the interest, he purposely, and not by any mistake, declared it in Mc-Limont. If this were so, a court of equity could not treat an attempted fraud as an innocent mistake; and though the principal, in? such a cáse, would be in. no fault, it could not relieve him, but must leave him to his remedy against his agent. But this is a charge of meditated fraud; and it is incumbent on the respondents to make >t out in proof. Prima facie this is a case of mistake by McKay. Por he was apprised, by McLi-mont’s letter, that the insurance was not to be for his account. Indeed, the very ground taken by the respondents assumes this; for they say; he and McLimont, designed to get the scrip dividends to their own use, or that McKay designed to assist McLimont to do so, in fraud of his principal. If McKay knew McLimont had a principal, and that the insurance was meant to attach on the principal’s property, and obtained a policy in such a form that it would not attach on the property of McLimont’s principal, this departure, from the sole object of his agency, must either have, been intentional, or unintentional; if the latter, it was a mistake; if the former, a fraud; and this is not to be presumed, but must be proved by the respondents who allege it.
Without going over the evidence in detail, it is sufficient to say, that 1 am not satisfied the insertion of McLimont’s name, as the person for whose account the insurance was made, or the omission to add the words, as agent, or for whom it may concern, was intentionally done, for the purpose alleged by the respondents. In the first place, the only communication between Mc-Limont and McKay, which could have led to this asserted fraudulent concert, is the letter of McLimont above copied; certainly this shows, clearly, an intention to take, to his own account, or to share with McKay, the scrip dividends, as part of the profits of the agency of obtaining insurance. Speaking in reference to one of these mutual insurance companies, I understand the scrip dividends to be, the evidences of that share of the profits of the company, during a fixed period, to which each person, obtaining insurance during that period, is entitled, under the charter and by-laws, in proportion to the amount- of premium which he has contributed to the funds of the company. And if this be the correct view of it, I have no hesitation in saying that the principal who orders the insurance, and whose money pays the premium, on account of which the dividend of profits is made, is the party equitably entitled to those profits; and I should hesitate long before I sanctioned any usage, or allowed effect to any supposed consent of the principals, to permit the agents to take such profits to their own use. I do not say that it would be impossible to make -out such a usage, or to show a practice which would induce a legal conviction that the principal had consented to part with what justly belongs to him; I cannot express an opinion on that question till it is before me, with all the lights which belong to it. But in this case, and upon the facts now before me, there is no pretence for- saying that these profits belonged to the agents; and any attempt on their part, secretly to appropriate them to their own use, would be a fraud on tneir principal. But though it does appear that McLimont probably intended to take the expected scrip dividend, if any, on account of this policy to his own use, or to share it with McKay, it does not appear that he intended to do it secretly, or otherwise than with the consent of his principal. Indeed it is difficult to perceive how he could have done so; for the policy was to go into the hands of the principal, and that must show him that the insurance was made by a mutual company, and how it was effected. Besides, there is no connection between the power over the scrip dividends, or the right to them, and the declaration that the insurance was for the account of McLimont. As appears from the testimony of the secretary of the company, McKay, who was insured, and thereby became a member of the company, was the person to whom the company would account for any such dividends, whether he declared the interest in McLi-mont, or the complainant.
It is further urged by the defendant’s counsel, that McKay gave a direction in writing to have the policy made for account of McLimont; that the defendants assented, and made it so; that it is, therefore, in point of fact, just what the parties intended it should be; and if they, or one of them was mistaken in the legal effect of what they purposely did, equity will not relieve. It is true, as settled by the supreme, court in Hunt v. Rousmanier, 1 Pet. [26 U. S.] 1, that the inquiry in all these cases must be, not how the parties intended, or expected, an instrument to operate, but what they intended it to be. But there is a wide distinction between a ease where an instrument is, what the parties agreed it should be, but its legal effect is unexpected, and a case where an instrument was designed to carry into effect an existing binding agreement, but by mistake fails to do so. In the former case the party never had a rignt to anything more than he has got. He may be disappointed in finding that what he acquired was less valuable than he expected, but he acquired all he bargained for, and there is no ground upon which a court of equity can give him anything more. On the contrary, in the latter case, the party had a complete right, by an existing contract, to something which, by mistake, he has failed to get. And this contract, and the right under it, still subsists, in point of equity; *672because, though the parties attempted to execute the contract, by mistake they failed to execute it; and therefore a court of equity interposes, and upon the footing of an existing contract, unexecuted, proceeds to put the party in that condition, to which his contract entitles him. And in this class of cases I apprehend it is wholly immaterial whether the party has failed to obtain that to which he was entiled through a mistake of fact or of law.
Suppose a contract in writing, for a valuable consideration, to convey a tract of land; and through mutual mistake of the law, some legal formality is omitted, which renders the deed inoperative. Inasmuch as a court of equity would have decreed specific performance of that contract if no deed at all had been given, so it will give effect to the contract by reforming an invalid deed. Findlay v. Hynde, 1 Pet. [20 U. S.] 241. In Hunt v. Rousmanier [supra], a position is laid down which precisely covers this point. “Where an instrument is drawn and executed, which professes, or is intended to carry into execution an agreement, whether in writing or by parol, previously entered into, but which, by mistake of the draftsman, either of fact or law, does not fulfil, or violates the manifest intention of the parties to the agreement, equity will correct the mistake so as to produce a conformity of the instrument to the agreement.” Now here was a previous agreement to insure property of McKay’s principal. The president of the company says he supposed Me-Limont to be that principal. If so, he was mistaken in point of fact; but his mistake is not important, because it was respecting a matter which was not a subject of stipulation between the parties, but only of the exercise of a power by one of them. McKay, either intended to have the secretary insert, after the words “for account of Mc-Limont.” the words “as agent.” or “for whom it may concern.” or he was ignorant that those words were necessary to make the policy an effectual execution of the contract to insure the property of his principal; in the last event it was a mistake of law by McKay, whereby he failed to obtain effectual insurance on the property of his principal. to which he was entitled, under his contract with the company; in the former event it was an omission, by the secretary, in consequence of ignorance of the fact that McLimont was an agent merely, which omission, McKay did not perceive, or have corrected at the time, and so the policy, as drawn, failed to execute the agreement.
My opinion is. that the complainant, is entitled to a decree to reform the policy; but as the defendants contest their liability under the policy, when reformed, an issue must be put to the jury to find whether the defendants are liable for anything, and if so, for how much, under the policy as reformed.