Court Opinion

ID: 8784430
Source: CourtListenerOpinion
Date Created: 2022-11-26 13:29:17.816347+00
Date Added: 2024-06-11T17:03:00.078285
License: Public Domain

LACOMBE, Circuit Judge
(dissenting). I am unable to concur with the majority of the court. It seems too clear for discussion that McIntosh, the old president of the company, had no authority — express, implied, or to be inferred — to make a contract of insurance binding on Kline Bros. & Co. He certainly had no such express power conferred upon him as president. The powers of the president as defined by the articles of incorporation were merely to preside at all meetings; to have supervision of the affairs of the company under the direction of the board of directors; to sign or countersign all certificates, contracts, and other instruments of the company, as authorized by the board of directors; and to make reports. When this strictly limited delegation of authority is compared with the paragraph in the fourth article, quoted infra, it is manifest that the corporation was scrupulously careful not to give the president the power to effect contracts of insurance which should be binding on it. That paragraph reads as follows:
•“All purchases and sales of any kind by the company and 'all contracts or ohUyations of any Ivmd which may be entered into shall he made hy the hoard of directors, who, acting jointly, shall have the entire control and management of the affairs of the company, the receipt and disposal of its assets and the payment of its obligations, and the incurring of any liabilities for the company.”'
Nor does the record disclose any delegation to McIntosh, by the board of directors, of authority to make this or any other binding contract. At a meeting of the incorporators held December 16, 1908, McIntosh, Rogers, and E. A. Kline were elected the board of directors. *479Subsequently on the same clay the board elected McIntosh president, Kline vice president, and Rogers secretary and treasurer, “to hold office until the first regular election of officers under the by-laws of the company and until their successors are chosen.” At that same meeting the board passed a resolution providing that McIntosh as president, for a period! of four months from the date of the resolution, be paid a salary of $62.50 per month, for acting as president of the company and giving his time and services towards the preservation of the assets of the company and their disposition, under the direction and control of the hoard of directors. This resolution reserved to the board their power to make contracts. The president could enter into any specific contract only when directed to do so by the hoard. The rqcord is barren of any evidence tending to show that prior to the attempted making of the contract in suit he had undertaken to bind the company by making any contract which they had accepted. There is not a scintilla of proof on which plaintiff could ask a jury to infer that McIntosh was being held out to the world as a person authorized to make contracts beneficial to the company.
As to ratification I am in entire accord with Judge Hand’s discussion of the question, and as to his conclusion that until after the fire “defendant had no knowledge that McIntosh had not bound the plaintiffs assignor to pay the premium and that its own undertaking had. therefore, been without consideration from the outset.” I cannot reach the conclusion that there is no unfairness in the application of the doctrine of ratification to the case at bar. It seems to be an element of that dbetrine that the party sought to be bound by the ratification of a contract, until then void because of lack of mutuality, should have a fair and equal opportunity to withdraw at any time before ratification. It certainly is a very harsh rule which would allow Kline Bros. & Co. to hold this policy, it may be for weeks, without ratification, able to defend against a suit for premium on the ground that it never made a contract, but with the privilege of consummating the contract by ratification as soon as a fire might break out. It can only be sustained on the theory that until ratification either side has the right to withdraw; but the insurance company’s “right to withdraw” is a mere illusion, if it has no knowledge of the facts which would authorize it to exercise such right. The proposition is peculiarly wicked in this case, because of what happened at the trial to defendant’s so-called “second defense.” The trial judge struck it out entirely at the very outset of the trial. He did so because he understood that, by a prior decision of another judge upon a motion in reference to the pleadings, it had been held that the matters set up in this part of the answer constituted no defense. The policy contained a provision that:
“This entire policy shall lie void if the insured has concealed * ® * any materia! fact or circumstance concerning this insurance or the subject-matter i hereof.”
The answer set up that McIntosh, when he applied for the policy, concealed the fact that there were internal dissensions within the company. These were not merely ordinary controversies between con*480flicting interests. They had reached! such a stage that one party had! secured an alternative mandamus to secure its possession of its property, books, and papers, and the leader of the other party had taken forcible possession of the personal property which was the subject of insurance at the point of a pistol. It is contended that these facts were material, that they had an important bearing upon the subject-matter, indicating the presence of what is called in insurance law a moral risk, of the existence of which good faith required! that an applicant should advise the party with whom he seeks to effect insurance. It would seem that these circumstances might reasonably induce the underwriter either to decline to issue a policy or to charge a premium commensurate with the increased risk.
Unadvised as' to these circumstances and as to the further fact that McIntosh’s dealings with its agent had given it no right to exact payment of a premium from Kline Bros. & Co., the insurance company, it seems to me, was misled) as to its right to withdraw before ratification, and has good ground to complain of the application of the doctrine of ratification.