Carrigan v. Lycoming Fire Insurance

The opinion of the court was delivered by Taft, J. The court directed a verdict for the defendants. The motion for such a verdict embraced four causes : I. The defence claimed that the contract, and the claim under it, embraced liquors' kept for sale contrary to law, and the fixtures used in such illegal traffic, which was carried on by the plaintiff; and that by reason of such illegality the policy was null and void. We think that a contract directly insuring liquors intended for illegal sale in violation of the law of this State is invalid. Such contracts are made in order to áfford the assured protection in his illegal acts. Shaw, Oh. J., says: “ Where the direct purpose of a contract is to effect, advance, or encourage acts in violation of law, it is void. But if the contract sought to be enforced is collateral and independent, though in some measure connected with acts done in violation of law, the contract is not void.” Boardman v. The Merrimack M. Fire Ins. Co., 8 Cush. 583. This principle has been applied to contracts of insurance' against fire, by the courts of Massachusetts, in several recent cases. In Kelly v. Home Ins. Co., 97 Mass. 288, the policy was solely upon liquors and the casks containing them ; and in Johnson and another v. Union M. F. Ins. Co., and Lawrence v. National Fire Ins. Co., 127 Mass. 555, upon billiard and drinking saloons, unlicensed, kept in violation of law. At the time the policies in these cases were issued, it must have been apparent to the insurers that the object of the contracts was illegal, unless the insured were duly licensed ; and the cases do not show that any information upon that subject was sought for ; and the insured would have had no cause for complaint, in case of loss, if the defendants insisted upon the illegal nature of the business as a defence. The same subject has been under consideration in Michigan ; and the Supreme Court of that State, in a case almost iden — 424 — tical with this, held that the policy was valid, stating, that, to make the case analogous to those involving marine policies on unlawful voyages, and lottery insurances which have been uniformly held null, would require the policy to be in express terms insuring the party selling liquors against loss by fire or forfeiture. In speaking of such marine and lottery policies, Campbell, J., says : “ These cases are not at all parallel because they rest upon the fact, that in each instance it is made a necessary condition of the policy that the illegal'act shall be done. The ship being insured for a certain voyage, that voyage is the only one upon which the insurance would apply, and the underwriter thus becomes directly a party to an illegal act. So insuring a lottery ticket requires a lottery to be drawn in order to attach the insurance to the risk. But this insurance attaches only to property, and the risks insured against, are not the consequences of illegal acts, but of accident. Our statute does not in any way destroy or affect the right of property in spirituous liquors, or prevent title being transmitted, but renders sales unprofitable by preventing the vendor from availing himself of the ordinary advantages of a sale, and also affixes certain penalties. If the owner sees fit to retain his property without selling it, or to transmit it into another state or country, he can do so. By insuring his property the insurance company have no boncern with the use he may make of it, and as it is susceptible of lawful uses, no one can be held to contract concerning it — in an illegal manner, unless the contract itself is for a directly illegal purpose. Collateral contracts, in which no illegal design enters, are not affected by an illegal transaction with which they may be remotely connected. It is difficult to perceive how public policy can be violated by an insurance of any kind of property recognized by law to exist.” Niagara Fire Ins. Co. v. De Graff, 12 Mich. 124. If the purpose of the contract in question had been to protect the assured in the sale of intoxicating liquors, it would have been null; but the greater part of the property insured consisted of goods, insurance upon which was subject to no objection. The contract was legal upon its face, nothing appearing to show that the wines and liquors were intended for illegal sale ; and it is a fact not needing proof that in compounding med — 425 — icines, liquors, especially wines and alcohol, are of daily use, and for that purpose their possession and use by druggists legitimate. The assured was a dealer in drugs and medicines, and in that respect legitimately and presumably using liquors. There was evidence tending to show that he illegally sold them, including those not used in compounding medicines ; and the fact may have been, that the latter trade was the larger and his main one. If such illegal traffic was the business of the assured, and his legal traffic and transactions with other property, a mere cover, ostensibly carried on for the purpose of enabling him to secrete and disguise his iniquity, the purpose of the contract would be to protect him in his illegal ventures, and it would therefore be void; but if he carried on business, using alcoholic liquors legitimately in his drug trade, and occasionally sold them in violation of law, we think that if no illegal design entered into the making of the contract in its inception, that it would be so far collateral to the illegal acts that it would be inconsistent, and in accordance with no well-adjudged case to hold it null. In Boardman v. Merrimack M. Fire Ins. Co., supra, the policy was upon a building insured as a “ shoe manufactory ” ; but it was, during the life of the policy, used in the drawing of a lottery. Now a policy insuring a building for the latter purpose would be null and void ; but the court, by Shaw, Ch. J., held that its subsequent use for that purpose, by the consent of the assured, did not affect their contract with the insurance company; and the plaintiff recovered. The distinction is between the cases where the contract is void in its inception, entered into for the purpose of protecting a prohibited traffic, and those cases where the contract is collateral, and into which no illegal design enters, although by the subsequent acts of the assured, it becomes remotely connected with illegal transactions. We think, therefore, that the case should have been submitted to the jury in accordance with the views herein indicated, for the purpose of determining the nature and design of the contract; and whether liquors were unlawfully sold or not. II. The property insured by one item of the policy was a “ stock in trade consisting principally of groceries, provisions, — 426 — drugs and medicines, fancy goods, and other such merchandise as is usually kept in a country store, including wines and liquors.” This description is in what is called the written portion of the policy. It is provided in the printed portion that if the assured should keep benzine without written permission in the policy, then the policy should be void. Did the keeping of benzine, which is conceded, have that effect ? The evidence had a tendency to show that at the time the policy was issued, the general agent of the defendant told the assured that benzine was covered by the policy ; and there are two items of property insured, under either of which such might have been the fact, viz., “ such other merchandize as is usually kept in a country store,” and “ drugs and medicines.” If benzine is a drug, or is usually kept in a country store, then there was written permission in the policy, and it was insured by it; and in that event we do not think that any further written permission was necessary to enable the assured to keep it without rendering the policy null. If it was included in the terms used in the policy, then there was written permission to keep the article as fully as though the policy had read, “ On benzine, &c.” Niagara Fire Ins. Co. v. De Graff, supra, in which case it was left to the jury to say, as a question of fact, whether the term “ groceries ” included wines and liquors. Whore the written and printed portions of a policy are inconsistent, the written portion prevails, as it expresses the special agreement and declared intention of the parties at the time of the contract, and the printed parts should be construed in a qualified sense, so as to confine them, as is said, to the “ declared purpose and intention of the parties as expressed in the written clauses.” This principle is too well settled to need the citation of authorities. Webster defines a drug, as including any mineral substance used in chemical operations ; and the court cannot say that as matter of law benzine is not included in that term. This question, as well as the one whether benzine is an article usually kept in a country store, were proper questions for the jury, and shquld have been submitted to them if there was any evidence legitimately in the case upon either question. There was evidence that at the time the policy was granted the defendant’s agent made statements that benzine was — 427 — included in the policy ; and we think this competent evidence legitimately tending to show that fact; it was the construction that the company itself put upon the terms used in the policy ; and it would be rank injustice for them now, to escape a just liability upon any such pretext. If a company insures goods, using in the description of them, general terms, and tells the insured that the description includes benzine, they should be estopped, in case of loss, from claiming that benzine is prohibited, not permitted upon the premises ; that he cannot recover its value, and that its being there renders his insurance upon other property void, — an apt illustration of the old adage of “ adding insult to injury.” In case benzine was covered by the policy, the question raised by the defendant’s counsel as to the power of the agent to waive any of the conditions of the policy does not arise, as the article itself was insured, and it did not require, to render the policy valid, a waiver of the condition, which, being printed, is controlled by the written part of the policy. But in case the jury should find that benzine was not included in the property insured, the question arises as to the effect of a waiver by Mr. Francisco, should the jury find one shown. The policy contains a condition that no agent is empowered to waive any of its conditions without special authority in writing from the company; and the defendant insists that to permit it, without such authority in writing, is to violate the well-settled doctrine that written agreements cannot be altered in that manner. We are not inclined to depart from the doctrine that no parol stipulation, contemporaneous with the contract, can be shown, to vary, add to, or contradict it. A court of law must act on the agreement as made by the parties ; but it is a doctrine no less well settled that a contract not under seal can be changed by a subsequent parol undertaking, and in many instances the companies will be estopped from setting up claims in accordance with the contract as originally made, by having permitted the assured to act in the honest belief that the terms of the contract had been legally altered. The evidence of Francisco’s statement, that the assured might keep benzine, as showing that it was a part of the contract, would be clearly inadmissible, but as showing that the defendant had knowledge that it was kept by the assured, it — 428 — was certainly competent, and if knowing this, they subsequently treated the policy in force and levied assessments upon it, as the papers in the case show they did, until they had received in premiums quite a proportionate share of the face of the policy, we think it violates no rule of law to hold that the contract was changed by the subsequent acts of the parties. For anqther reason we think this clause in the contract is not applicable to any state of facts which the testimony has any tendency to establish. The person who has no power to waive any condition of the contract unless specially authorized in writing, is an agent. There is as substantial a difference between agents transacting a local business, and who have certain limited powers, and general agents, who have a supervision over the business of the company for large territories, and who are supposed to possess great experience and capacity, and have an inspection of the business transacted by local agents, as there is between the president and secretary. And we think that the clause in question refers to local and not general agents, and that, in the absence of proof to the contrary, the latter are presumed to possess authority to transact all business relating to insurance, and the business of the company generally. The policy shows that Francisco executed it as general agent; he was general agent for the State ; and we think it was not necessary, to give validity to his acts in this respect, that he should be authorized in writing. As to the authority of general agents, see May on Insurance, 145. This authority has been very much enlarged within the past few years, and in this respect is about co-extensive with that of the company itself. III. The policy was dated and originally issued on the 21st day of April, 1875, to Dennis F. Mullin and James Mullin. There is a provision in it that “ if the interest of the assured in the property be any other than the entire, unconditional and sole ownership of the property for the use and benefit of the assured . . . it must be so represented to the company and so expressed in the written part . . . otherwise the policy shall be void.” At the time the policy was issued the plaintiff held a lien upon an undivided half of the property, to secure a debt due him from — 429 — James Mullin. This fact was not represented to the company ; and the defendant claims that the policy was therefore void. This in our opinion depends upon the construction given to the words entire, unconditional and sole ownership. This latter word means the right to own, legal or just claim, or title, proprietorship. If one holds the legal title to property, he is the owner, and he is no more so, by adding the adjectives, entire, unconditional and sole; he is as much the owner in one case as in the other. The fact that an encumbrance exists upon the property is not inconsistent with the fact that the assured is the owner or holds the legal title. In the connection in which the word, interest, is used, we think it is synonymous with title, the right to the property, the ownership of it; and it is settled by numerous cases that it is unnecessary to mention encumbrances and liens in answer to inquiries as to title or ownership. The Manhattan Ins. Co. v. Baker, 7 Heiskell (Tenn.) 508. And this view is confirmed by the fact that in the application for such contracts the inquiry as to the title is almost invariably followed by another as to the encumbrances upon the property, the plain inference being that information as to the latter inquiry is not expected in answer to the first. The question raised by the brief for the defendant, is not the one made by the motion for the verdict, and not having been made below, will not be considered here. We think, therefore, that the policy was valid at its date; and this renders it unnecessary to pass upon the question of the effect of an assignment of a void policy. IV. In October, 1878, the plaintiff became the owner of the insured property, and the policy was transferred to him by consent of the defendant, but the defendant claims that the ownership of the plaintiff was not properly represented to the defendant; that it was not the entire, unconditional and sole ownership, for his use and benefit, which the policy required. If it was not, then the policy was void. We think that admitting all that the testimony in the case has any tendency to show as to the right of the Mullins to any reconveyance of the property to them, that the facts thus proved would not divest the plaintiff of his legal title and owner — 430 — ship of the goods, and his complete control of them in every respect. Until they had complied with the conditions entitling them to a reconveyance they would have no more interest in the goods than a stranger. The property in the goods was in the plaintiff and properly insured in his name. The case is nearly similar to Boutelle v. Westchester Fire Ins. Co., 51 Vt. 4, and should be governed by the same principle. Judgment reversed, and cause remanded.