Haden v. Farmers & Mechanics Fire Ass'n

Fauntleroy, J., delivered the opinion of the court. On the 19th of September, 1883, the appellee, a corporation created under the laws of Virginia, sent its agent, one II. P. Kyle, to the house of the appellant, in the county of Botetourt, to solicit an insurance of the said house and of the furniture and household property therein. The said agent examined the house and household furniture, and valued the dwelling-house at $1800, and the furniture at $300; and fixed the insurable value of the former at $1200, and of the latter at $200; making the total insurable value $1400; and estimated the amount of premium and charges for such insurance to be six dollars, which the appellant then and there paid to the said agent, who was one of numerous agents of the said association in the counties of Iioanoke and Botetourt, whose power and duty was to solicit applications for membership, by insuring in said association, by filling up the blanks in a printed form of application, to be signed by the applicant, and to be forwarded with the premium paid for the proposed risk, to the secretary of the asssoeiation, upon the express condition and understanding that the application had to go before the board of directors or ex — 689 — ecutive committee of the said association, to be passed upon and approved by them before the secretary could issue a policy of insurance and complete the contract of insui’ance. The application, in printed form, was filled up by Kyle with the answers of the appellant, and was signed by the latter, and delivered to Ivyle, together Avith the premium, six dollars, to be sent to the secretary of the association. If it should be approved, then the secretary would issue a policy of insurance on it; if it should be rejected, it was to be returned, together with the premium, to the appellant. Kyle retained the application until November 3, 1883, when he forwarded it to the secretary at his office at Cloverdale, in Botetourt county, with information that the dwelling-house and furniture had been consumed by fire on the 1st November, 1883. The secretary referred the application to the executive committee, which did not approve it, the property having been destroyed by fire, but referred it to the whole board of directors, who disapproved and rejected it, and returned it, together with the premium, to Kyle, who tendered them- to .appellant, who refused to receive or accept either, and made a formal demand upon the appellee for the amount of the alleged insurance, which being refused, the appellant filed his bill in the circuit court of Botetourt county for specific performance of the alleged contract of insurance, and for general relief. The defendant demurred and answered, ayerring that Kyle made no contract, to insure the complainant’s house and furniture; that he had no authority, as their agent, to make such contract; and that if he did make such contract, and ivas authorized so to do, the contract ivas null as to the said house, because the complainant, in his application, had represented his title to be fee simple, whereas it was only an estate for his own life. The court overruled the demurrer, and adjudged the complainant entitled to recover the value of the furniture, but that he ivas not entitled to recover anything for the house, because the contract of insurance was null as to the — 690 — reason of complainant’s misrepresentation of bis title. In October, 1884, tbe appellant filed his “petition for review and rehearing ” of the said decree for alleged errors on its face. To this petition the appellee demurred and answered, and the court sustained the demurrer and affirmed the said decree. From these two decrees the appeal was taken. The error assigned by the appellant is, that the circuit court erred in decreeing that the contract of insurance was null and void as to the dwelling-house, because the appellant had misrepresented his title to said house as fee simple, when it was only a life estate. On the other hand, the appellee asks this court to consider the whole record under the IXth Hule, and reverse the decree of September 2, 1884, for error against the appellee, and amend the said decree so as to make it as the circuit court should have entered it. The appellee is a corporation created by an act of the general assembly of Virginia, passed April 2, 1873, and amended April 7, 1882, with power to insure its members against loss by fire, and to pay the same by assessments upon its members. It is of the plan denominated mutual; and, as its name imports, it is a local association, purely and solely for benevolent purposes — oi’ganized for self-protection of its members only. By its charter it is authorized to make ordinances, by-laws and regulations for the government of all under its authority, and for the management of its business; and it has done so. Its rules as to receiving members and taking risks are strict, and its agents are limited to the mere and narrow authority of receiving applications and premiums for membership and forwarding the printed forms of application filled up by the proposals of the applicant and signed by the applicant, together with the premium, for the action of the board of directors, who, by the sixth section of their constitution, has the sole and exclusive power to receive members by approving, in their discretion, applications for insurance and to issue policies; which duty the said board of directors usually discharge through its — 691 — executive committee. Its officers consist of a president, vice-president, secretary and treasurer, and so many directors as its by-laws may provide for. It is, and lias been, tlie rule and practice of the association that no insurance shall ever be made exeeqit by a policy issued upon an application duly made, in its printed form, with the blanks filled up with the proposals of the applicant, signed by the applicant, and presented to the board of directors for their approval, or rejection, commonly acting through their executive committee. Kyle was, on the 19th day of September, 1883, aii agent of the association, ivith. power only to take the formal application of the appellant, which does not purport to be a contract, but only his -proposal for a contract of insurance, and to forward it to the board of directors, through their secretary, for their approval or rejection; he had no power to bind the association. And the appellant, in dealing with the said association, through him, was bound to take notice of its charter, constitution and by-laws. Bockover v. Life Association of America, 77 Va. (2 Hansbrough) 91, quoting from Rolfe v. Rundle, 13 Otto, 222. This court, in Woody v. Old Dominion Insurance Co. 31 Gratt. 371, says: “The courts of Massachusetts give the greatest effect to the by-laws of a mutual insurance company in restricting the powers of its officers.” Ye think the circuit court erred in holding that the appellant had misrepresented his title to the property sought to be insured; — either by his answer to the 9th question — “What is your title to, or interest in the property to be insured?” viz: “Fee simple;” or by his answer to the 10th question — “Is your property encumbered?” viz: “None.” The appellant undoubtedly acted in the most perfect good faith, and his interest in the house to be insured was substantial and exclusive against any and all others for his life; and his contingent or reversion-ary interest might, at any time, have become a fee simple interest; while the only encumbrance was a claim of his sister, Mrs. Hood, to a reversionary interest in the,land, which was in — 692 — significant and unimportant in proportion to the value of the whole land, exclusive of the house. Such as it was, however, technically the record shows that he stated the facts to the agent, Kyle, who filled up the blanks with his answers, “Fee Simple” and “None.” The misrepresentation, if any. was simply technical and unintentional; and was immaterial, withal. “Any material misrepresentation will -avoid a policy.” Flanders on Insurance, 361. We are of opinion that the circuit court erred in overruling the demurrer to the bill, the ground of which was want of jurisdiction in the court of equity to entertain the case set out by the bill. A court of equity has jurisdiction to enforce specific performance of a contract of insurance made with the agent of an insurance company, having authority to issue policies or to make binding contracts for said company to issue a policy, and the premium has been paid; but where, before the policy has been issued, or the application has been referred to, and considered and approved by the only authority in the association, which, by its charter, constitution and by-laws, can make a complete and binding contract of insurance for the company or association, the property proposed to be insured is consumed by fire, there can be no complete contract which a court of equity can enforce. Woody v. Old, Dominion Insurance Co., 31 Gratt. 362; Haskins v. Ag. Fire Insurance Co., 78 Va. (3 Hansbrough) 700. But the bill must, on its face, distinctly state that such contract was made, and show when, where, how, and by whom it was made, and that the person making it had the authority to bind the company. The bill says that on the 19th of September, 1883, at appellant’s house, It. P. Kyle insured appellant’s house and furniture, and received the premium therefor, six dollars, and that the property was destroyed by fire before the policy was issued; and that the appellee refused to issue a policy after the house and furniture were burned; and also refused to pay the appellant any part of the sums of money at which said property was alleged to have been insured by its — 693 — agent, Kyle. But the bill does not state, distinctly or sufficiently, that the alleged contract was by parol or in writing; that it was by the taking of the application in writing, wdiich was signed by the applicant, and- not by the appellee, or its agent, and the payment of the premium, six dollars; or that it was by something outside of said application. The bill does show that the appellant was hadly treated by the negligence of the appellee’s agent in not sending on promptly and duly his formal application and proposal for insurance to the proper authorities of the association for their approval or rejection; but the negligence or tortious conduct of the defendant, or its agent, is not ground for jurisdiction in such a case as this in equity; the contract must be distinctly stated in the bill to protect it from a demurrer; and the contract must be proved, as stated in the bill; and, as stated and proved, it must be certain, fair and just, in all its parts, in order to support and maintain the bill, and to entitle the complainant to relief in equity. Haskins v. Fire Insurance Co., supra. Nor does the bill charge that Kyle, the agent, had the authority to bind the appellee by his contract so averred to have been made to insure said house and furniture; and the very idea- and fact of a written application taken by an agent from an applicant desiring to have his property insured by the agent’s principal, to be forwarded to that principal for approval or rejection, and making proposals for a contract of insurance by a policy yet to be issued or denied by that principal, is repugnant to the idea that a contract of insurance had already been made; that the formal application and terms proposed and submitted for a policy and contract of insurance, was a contract of insurance. The demurrer should, therefore, have been sustained. But, upon the evidence in the cause, the circuit court erred in decreeing that the appellant had established, by proof, such a contract of insurance with the appellee as entitled him to relief, in whole or in part; and that he recover of the appellee the value of the furniture alleged to have been insured, and which was destroyed by fire. — 694 — Iii the case at bar, Kyle was an agent to solicit and receive applications and proposals for insurance, and to forward them, with the premiums, to his principal for acceptance or rejection. He was supplied only with printed forms of application for this end and purpose; and this was the extent of his agreement with the appellee. Negligence cannot- make a contract of insurance; delay cannot make a contract of insurance. Winnesheik Insurance Co. v. Holzgraff, 53 Ill. 516.. In Haskins v. Ag. Fire Insurance Co. 78 Va. (3 Hansbrough) 700, Judge Lacy says, for this court: “ The fact that an application has been made for insurance, and a long time has elapsed, and the rejection of the risk has not been signified, does not warrant a presumption, of its acceptance. In such cases there must be actual acceptance, or there is no contract.” Without a contract of insurance, this suit for specific performance cannot be maintained here, whatever might be the remedy and relief in an action at law for damages for the negligence of Kyle. Kyle was not authorized to make contracts of insurance for the appellee; and the evidence does not show that he made one. He explains his declarations to the appellant that his property was insured; he says he told him that it would be insured if the executive committee approved his application. Doubtless, he thought and said that the executive committee would approve it; but such a prediction or declaration, made after appellant’s signing the application and paying the premium, did not, and could not, constitute a contract of insurance. The decree complained of is erroneous, and must be reversed, and the appellant’s bill be dismissed. HintoN, J., dissented. Decebe ebveesed in favor of the appellee.