Court Opinion

ID: 6545615
Source: CourtListenerOpinion
Date Created: 2022-07-19 22:19:19.261881+00
Date Added: 2024-06-11T15:55:57.517514
License: Public Domain

McCulloch, J., (after stating the facts.) There'is no dispute whatever about the facts of this case. It is clear that the form of the policy does not, if its language be held to embrace all of the cotton in the warehouse, express the real agreement and intention of the parties thereto — appellee and the agent of appellant who wrote and delivered the policy and received the premium therefor. They both give the same testimony concerning the .transaction, and both say that they intended to insure, not all the cotton in the warehouse, but only that part of it which appellee held on storage for farmers who held warehouse tickets showing-that their cotton was insured. The only question is whether the contract can be reformed so as to express the real intention and agreement of the parties, whether it is a mistake from which a court of equity will grant relief. An insurance policy may, either before or after the loss, be reformed so as to conform to the real agreement of the parties. Phoenix Ins. Co. v. State, 76 Ark. 180. It is contended on behalf of appellant that, as the parties employed the language which they intended, and only mistook its effect, it was a mistake of law, against which a court of equity should not grant relief by reformation of the policy. It is well, settled that ignorance of the law furnishes no ground to vary or set aside the solemn act of the parties to a contract in reducing it to writing, and that courts of equity will not relieve against a plain mistake of law, unaccompanied by other grounds for so doing. Judge Story, after stating this general doctrine, names certain exceptions, and says: “It is relaxed in cases where there is a total ignorance of title, founded on mistake of a plain and settled principle of law, and in cases of imposition, undue influence, misplaced confidence and surprise.” 1 Story, Eq. Jurisprudence, § 137. “The true conclusion,” says Prof.-Bispham, “as to the general rule, would seem to be that equity will not interfere in the case of a pure mistake of law; but that any additional circumstance will readily be laid hold of by the court, as constituting sufficient grounds for interposition.” Bispham’s Equity, § 188. In Pomeroy’s Equity Jurisprudence it is said: “Whatever be the effect of a mistake, pure and simple, there is no doubt that equitable relief, affirmative or defensive, will be granted when the ignorance or misapprehension of a party concerning the legal effect of the transaction in which he engages, or concerning his own legal rights which are to be affected, is induced, procured, 'aided, or accompanied by inequitable conduct of the other parties. It is not necessary that such inequitable conduct should be intentionally misleading, much less that it should be actual fraud; it is enough that the misconception of the law was the result of, or even aided or accom'panied by, incorrect or misleading statements or acts of the other party.” 2 Pomeroy, Eq. Jurisprudence, § 847; Snell v. Insurance Co., 98 U. S. 85. Snell v. Insurance Co., 98 U. S. 85, was a suit to reform an insurance policy, after the loss of the property by fire, the facts being as follows: Keith, a member of a firm who were owners of a lot of cotton, applied for insurance to the agent of the company, stating to the agent the facts concerning ownership, etc., of the cotton, whereupon the policy was written in the name of Keith individually, and was accepted by him upon the representation and agreement of the agent that the entire interest of the firm was protected by the policy. The court, after stating the general doctrine that “a mere mistake' of law does not, in the absence of other circumstances, constitute any grounds for reformation of a written contract,” granted the relief, and said: “In the case under consideration, the alleged mistake is proved to the entire satisfaction of the court. It is equally clear that the assent of Keith to the insurance being made in his name was superinduced by the misrepresentation of the company's agent that insurance in that form would fully protect the interest of the firm in the cotton. We assume, as we must from the evidence, that this representation was not made with any intention to mislead or entrap the assured. It is, however, evident that Keith relied upon that representation, and, not unreasonably, relied upon the larger experience -and greater knowledge of the insurance agent in all matters concerning the proper mode of consummating, by written agreement, contracts of insurance according to the understanding of the parties. He trusted the insurance agents with the preparation of a written agreement which should ■ correctly express the meaning of the contracting parties. He is not chargeable with negligence because he rested in the belief that the policy would be prepared in conformity with the contract.” The same exception to the rule is stated in the case of Griswold v. Hazard, 141 U. S. 260. . Mr. Beach, in his work on Modern Equity Jurisprudence (vol. 2, § 540) lays down this rule: “Where parties have made an agreement, and there is no allegation of any mistake in it, and in reducing it to writing they, by mistake, either because they did not understand the meaning of the words used, or the legal effect thereof, failed to embody their intention in the instrument, equity will grant relief by reforming the instrument and compelling the parties to perform their agreement as they made it; and it matters not whether such a mistake be called one of law or of fact.” Pitcher v. Hennessey, 48 N. Y. 415; Oliver v. Mutual Com. Ins. Co., 2 Curtis, 277. In Lawrence County Bank v. Arndt, 69 Ark. 406, where the officers of a private corporation, intending only to bind the corporation, were induced to sign their names to a note, adding after their names the respective offices held by them in the corporation, by the representation of the payee of the note that they would not be individually liable, .the court said: “The note sued upon was prepared by the cashier of the bank, and was signed by the makers in the manner directed by him.upon the representation made by him to the effect that they would not be individually liable, and that the note as signed was the obligation of the Manufacturing Company. They relied upon such representation, and they did not act unreasonably in doing so, because his vocation and experience were such as to enable him to better understand how such paper should be drawn and executed to accomplish the desired result, and to express the obligation the makers thereof intended to assume. They and the bank believed .that the note was not their individual obligation, but the note of the Manufacturing Company. As evidence of this fact, each appended to his signature the name of the office he héld in the Manufacturing Company. The conduct of the agents of the bank superinduced this mistake, and they accepted the note as obligation of the Manufacturing Company. Under such circumstances, a court of equity cannot deny relief without aiding the bank to take unconscionable advantage of a mistake for which its agents were chiefly responsible.” In the present case the insured relied upon the superior knowledge of the insurance agent, who knew all the facts concerning the location of the property, the method of handling and keeping account of same and the particular class of cotton upon which insurance was desired. He had a right to so rely. The language of the policy is peculiarly the language of the insurer. The policy is prepared by the insurer, and must be accepted, if at all, by the insured as prepared, without change, and when he does so upon representation of the authorized agent of the company that it covers certain property agreed to be insured, then a court of equity should reform it if not in accordance with the agreement and intention of the parties. Such circumstances form a distinct exception, as held by the authorities herein cited, to the general rule that mistakes purely of law will not be corrected by reformation of written instruments. Nor does it alter the rule that the original mistake occurred before the issuance of this policy, many years ago, when this kind of insurance first came into use in that locality. It was nevertheless caused by reliance upon the superior knowledge of appellant’s agent at the time of the issuance of the policy, and on account of it the policy failed to express the real intention of either party. But it is urged that the authority of the agent was limited, and he was not authorized to issue a policy such as is claimed this should have been. This view is not sustained by the facts. Bridewell, as agent for the company, kept policies for execution and delivery, passed upon applications, received premiums, countersigned and issued policies, and was therefore a general agent for such purposes. Having the conceded power to issue a policy on all the cotton in the warehouse, he undoubtedly had the authority to issue a policy on any portion of it. Insurance Co. v. Brodie, 52 Ark. 11; Phoenix Insurance Co. v. Public Parks Amusement Co., 63 Ark. 187; German-American Insurance Co. v. Humphreys, 62 Ark. 348. The method of bookkeeping practiced by appellee appears to have been in' literal compliance with the express terms of the policy and was sufficient. That clause- of the policy cannot be reformed, as asked by appellant, as the proof does not show that there was any agreement concerning this feature of the insurance, other than that expressed in the policy. All alleged defects in the proof of loss were waived by denial of liability and refusal to pay, based on other grounds. Planters’ Mut. Ins. Assoc. v. Hamilton, ante p. 27, and cases cited. Thus far I have expressed the view of the majority of the court, but, speaking for myself alone, I find other reasons for reforming the policy and holding the appellant liable for the amount claimed. The alleged mistake was no more than a mistake in the description of the property intended to be covered by the policy of insurance. In the case of Knight v. Glasscock, 51 Ark. 390, where the parties to an agreement for-sale of land used the language intended in the description of the land, but made a mistake as to its effect in properly describing the land, this court' held that a court of equity should reform the contract so as to -conform to the real intention of the parties. I see no reason why the same rule should not be' applied in this case. It is my opinion also that the policy needed no reformation, and that parol testimony would have been admissible to identify and establish the subject-matter of the contract. The language of the .policy does not in express terms describe necessarily all the cotton in the warehouse. The language is “$2,000. On cotton in bales,” etc., in the warehouse, and it is only by implication that it can be said to describe all the cotton in the warehouse. It is a well-settled rule of evidence that parol evidence is always admissible to identify the subject-matter of a'written contract. 17 Cyc. pp. 724-728 and cases cited; 2 Parsons on Contracts, p. 549; Aetna Ins. Co. v. Strout, 16 Ind. App. 160; Franklin, etc., Ins. Co. v. Drake, 2 B. Mon. 47; Weber v. Illing, 66 Wis. 79; Goff v. Pope, 83 N. C. 123; Bigelow v. Capen, 145 Mass. 270; Pierce v. Parker, 4 Metc. 80. The following is stated to be the law on this subject: “The general rule that parol evidence is not admissible to vary or contradict a written instrument precludes the admission of evidence to identify the subject-matter of a contract or the property described therein, when such evidence is inconsistent with what appears in the writing. But where a portion of the description is erroneous,' the fact may'be shown by parol evidence, and the property intended to be described may be identified, as this amounts' merely to the rejection of the' false reference in the description, pursuant to the well-settled rule of interpretation, falsa demonstratio non nocet.'’ 17 Cyc. p. 734, and citing cases. The Supreme Court of Massachusetts in the case of Bigelow v. Capen, supra, said: “Parol proof of extrinsic circumstances may be admitted to apply a description to the subject-matter- of a contract. - If it appears that the description is not in all respects accurate, it may to a certain extent be rejected, and what remains alone regarded, if that be sufficient to identify it.” There is no reason why this rule should not apply to an insurance policy, as well as to any other contract, and if was so applied in some of the cases cited above. Aetna Ins. Co. v. Strout, supra; Franklin Ins. Co. v. Drake, supra. Applying this rule to the facts of this case, it would be no contradiction of the terms of the policy to show by parol evidence that not all the cotton in the warehouse was insured by the policy, but only a certain portion of it. Of course, it would be different if the policy in terms read to cover all the cotton in the warehouse. Then it would be a contradiction to show that only a part was insured. No error is found in-the decree of the chancellor, and the same is in all things affirmed. Battle, J., dissents.