Sullivan v. Germania Life Insurance

Hunt, J. — We are very clearly of the opinion that the arrangement or agreement made by Fred Doremus with Sullivan, whereby the rentals due by Doremus to Sullivan for his private apartments should be deemed payment of plaintiff’s premium, was wholly beyond the scope of Doremus’ power as the manager or general agent of the defendant company, and was not binding upon the company, unless authorized by pre-vious authority or subsequent sanction. “Whatever an agent does can be done only in the way usual in the line of business in which he is acting. There is an implication to this effect arising from the nature of his employment, and it is as effectual as if it had been expressed in the most formal terms. It is present whenever his authority is called into activity, and — 534 — prescribes the manner, as well as the limit, of its exercise.” (Hoffman v. Hancock Ins. Co., 92 U. S. 161; Gould v. Blodgett, 61 N. H. 115; Benjamin on Sales, § 1099.) But appellant contends, with much earnestness, that, even if the arrangement referred to was beyond the scope of the agent’s power, there was an affirmance of it, and that plaintiff may recover upon the familiar principle that, when an agent makes a contract beyond his power, the principal cannot ratify any part of the unauthorized contract, but must ratify the whole of it, or, as plaintiff well expresses the rule, “he cannot accept what is advantageous and reject the remainder.” The facts, however, prevent the application of the principle invoked to the case under consideration. The company, being ignorant of and in no way bound by the agreement of its agent with relation to his private debts, had a right to rest upon the conditions of its policy, which provided, among others, as follows: “conditions and agreements of this insurance. “This policy shall cease and be null, void, and of no effect, and the company shall not be liable for the payment of the sum assured, or any part thereof, but all premiums previously paid shall be the absolute property of the company, without any account whatever to be rendered therefor. “Permanent conditions: 1st. (Payment of premiums.) If the premiums mentioned within, or any of them, shall not be paid on or before noon of the several days stipulated for the payment thereof respectively, or within three days thereof respectively.” “Agents holding an appointment from the company are authorized to receive premiums at or before the time when due only upon production and delivery of the receipt of the secretary of the company, but not to make, alter, or discharge contracts or waive forfeitures.” Mr. Sullivan knew by the provisions of the contract of insurance entered into between himself and the defendant that the premium for 1890 would be due November 30th. Instead of paying it, he communicated with the agent Doremus, and relied upon him to relieve himself (Sullivan) of the liability to the defendant because of the private contract which they — 535 — bad entered into concerning the rentals of apartments. Such arrangement, however, being without defendant’s knowledge when entered into, was a fraud on Doremus’ part against k?s principal, and cannot bind the company, unless subsequently ratified by it. (Huffman v. Insurance Co., 92 U. S. 161; Castoir v. Insurance. Co., 33 N. J. L. 487.) The plaintiff ought to have inquired into the authority of the agent Doremus when entering into the arrangements made. He seems in good faith to have relied upon the character of the defendant’s agent, and the general reputation of the company, but his mistaken confidence in the personal integrity of Fred Doremus cannot, under all the facts, affect the company in this matter, or relieve him from the consequence of his failure to pay the premium for 1890 on November 30th, or within the prescribed time thereafter. In First Nat. Bank v. Hall, 8 Mont. 341, it was said, in relation to the reliance placed upon the authority, or the supposed authority, of an agent: “This transaction appears to have been entered into by the bank without sufficient scrutiny into the authority of Camp. While hardship may result from such confidence, it is better so than to relax the familiar rule, that an agent cannot bind his principal by acts done without authority, and that other rule that all persons dealing with an agent are bound to ascertain the scope of his authority, or otherwise they act at their peril. (Blum v. Robertson, 24 Cal. 140, and cases cited.)” The plaintiff argues that by reason of the information given by him to Doremus, Sr., secretary and general manager, in July, 1891, of the arrangement between himself and Fred, and by the silence of Doremus, Sr., at that time, as well as by his statements made in November, 1891, the company ratified such agreement; but it must be remembered that, by the terms of the policy itself, the contract of the plaintiff had not been carried out, because, when he failed to pay the cash premium due in November, 1890, or soon thereafter, his policy had become null and void, and the company could claim a forfeiture thereof. In New York Life Ins. Co. v. Statham, 93 U. S. 24, the court, with great ability, state the reason and necessity for — 536 — promptness in the payment of life insurance premiums, in the following language: “All the calculations of the insurance company are based on the hypothesis of prompt payments. They not only calculate on the receipt of the premiums when due, but on compounding interest upon them. It is on this basis that they are enabled to offer assurance at the favorable rates they do. Forfeiture for nonpayment is a necessary means for protecting themselves from embarrassment. Unless it were enforceable the business would be thrown into utter confusion. It is like the forfeiture of shares in mining enterprises, and all other hazardous undertakings. There must be power to cut off' unprofitable members, or the success of the whole scheme is endangered. The insured parties are associates in a great scheme. This associated relation exists whether the company be a mutual one or not. Each is interested in the engagements of all; for out of the coexistence of many risks arises the law of average, which underlies the whole business. An essential feature of this scheme is the mathematical calculations referred to, on which the premiums and amounts assured are based. And these calculations, again, are based on the assumption of average mortality, and of prompt payments and compound interest thereon. Delinquency cannot be tolerated nor redeemed, except at the option of the company. This has always been the understanding and the practice in this department of business. Some companies, it is true, accord a grace of thirty days, or other fixed period, within which the premium in arrear may be paid, on certain conditions of continued good health, etc. But this is a matter of stipulation, or of discretion, on the part of the particular company. When no stipulation exists it is the general understanding that time is material, and that the forfeiture is absolute if the premium be not paid. The extraordinary, and even desperate, efforts sometimes made, when an insured person is in extremis, to meet a premium coming due, demonstrates the common view of this matter.” We regard the statements made by plaintiff to Fred Dore-mus in July, 1891, as wholly immaterial. And we may assume that there could have been a waiver of the forfeiture by the consent of Cornelius Doremus, as secretary and general — 537 — manager; yet, we can find no act, express or implied, on the part of Doremus, Sr., as general manager, from which the court can fairly infer that there was any approval of the unauthorized acts of defendant’s agent, Fred, or any waiver on the company’s part of the forfeiture of plaintiff’s policy, which had occurred long before the interviews, and by operation of the policy itself. The silence of Doremus, Sr., at the July interview was not a waiver, nor was the company at that time obliged to do or say any thing to make the forfeiture effectual. (Titus v. Glenns Falls Ins. Co., 81 N. Y. 410.) Coming to the November, 1891, interviews the fact must be always borne in mind that the policy of plaintiff had lapsed — it was dead. Plaintiff told Doremus, Sr., that he would like to pay both premiums. “ I had had some correspondence,” testified plaintiff, “ with Fred in regard to the matter, and he had been a little slow. I don’t know whether the conversation drifted at that time as to how the premium had been paid in the first instance, but I think it did. When I spoke to him about the amount of the premium which was due in 1891 I believe I told him what amount was due. I did not make any tender to him at that time.” Doremus, Sr., said Fred was not in, and, “ if I would come in in the afternoon, no doubt I would find him and fix matters up. The next morning I saw Fred Doremus. I went there at that time expecting to get every thing all straightened up, and fixed up, and receipts, and I was rather surprised and disappointed from his conversation soon after getting to his office, but his father, as he said, would not do any thing with it, would not do any thing with the matter of receipts.” Doremus, Sr., then came in, and said “ that he proposed to take a hand in this matter; that he would not allow his son to be bulldozed, nor the company either, and, if we wanted any thing from this company, we would have to get it.” The tender of the $151 was then made and peremptorily refused. “ There was talk previous to this about the contract which I had with Mr. Fred Doremus; there had been a general talk about it previous to that time. He knew the situation very well. I knew he knew the situation by conversation with him. I had told him the arrangements that were made that I have testified to here. I — 538 — think that was at my interview with him in July. I explained as to the first premium, the second, and also the premium for 1891. There was not much further conversation took place at this November interview.” Just before the notice that the policy had lapsed was presented, “he [Doremus, Sr.] said ‘I don’t remember any thing about it. I don’t know. I will go and see.’ He went to the book-keeper and presently brought back that paper, and he says, ‘The book-keeper says this lapsed in 1891.’ He laid the piece of paper down on the desk. I read the paper. I said, ‘No, I guess it cannot be lapsed, it is n’t due until the 30th of this month, but, inasmuch as I was here, I thought I would step in and straighten the matter up, and, whatever balance there was, pay it.’ He said, ‘ It is a matter I have not paid much attention to.’ He said, ‘Fred will be here shortly. He will fix it up. If there is any mistake about it will correct it, no doubt.’ He said Fred had been attending to those matters, ‘and if there is any mistake he will make it all right; whatever he does will be satisfactory.’ He says, ‘I don’t understand this,’ but, he says, ‘If you will wait I think he will be in shortly.’ ” After carefully considering all the statements made to the plaintiff by the general agent we find them insufficient to establish a waiver of the forfeiture of the policy. And it is significant in interpreting the words, and the whole conduct of Doremus, Sr., that the tender of the plaintiff was always, and even aggressively, refused; that plaintiff was always told, after investigation by Doremus, Sr., that his policy had lapsed; that the receipt for the premium was never offered to him, and that no recognition of any agreement between plaintiff and Fred was ever made in behalf of the company. It is plain, too, that Doremus, Sr., in referring plaintiff to his son, did not delegate, and did not mean to delegate, any authority to Fred to waive the forfeiture, or to do any other act which would bind the company. He was most careful to avoid doing so himself, and it is altogether unreasonable to construe the facts and circumstances attending his actions in any other light. Being of opinion, therefore, that, at the time of the New York interview, the plaintiff’s policy was forfeited, and null — 539 — and void, and that it was not revived, and that there was no act of the company at any time ratifying the unauthorized conduct of its agent, and that there was no waiver of any rights by the company, it follows that the district court correctly granted the motion for nonsuit. The plaintiff’s situation is precisely described in the case of Ferebee v. North Carolina Mut. Home Ins. Co., 68 N. C. 11, where the court say: “The plaintiff risked everything upon his private arrangement with Speed, and paid no attention to the warnings of the company. This was his misfortune, and he is now left to his action against Speed for damages, but has no claim upon a company with which he contracted upon certain conditions, which conditions have never been fulfilled on his part, although he was (repeatedly) requested to do so.” The judgment is affirmed. Affirmed. De Witt, J., concurs.