Salene v. Queen City Fire Insurance

Mr. Justice Burnett delivered the opinion of the court. It may well be conceded that the standard mortgage clause attached as a slip to the policy, if executed with authority or ratified afterwards by the company with full knowledge of the facts, would constitute an inde [300] pendent contract between the insurer and the mortgagee upon which the latter may bring an action directly against the former. Brecht v. Law Union & Crown Insurance Co., 160 Fed. 399 (87 C. C. A. 351: 18 L. R. A. [N. S.] 197); Bacot v. Phoenix Fire Insurance Co. (Miss.) (50 South. 729: 25 L. R. A. [N. S.] 1226). In these cases, as well as in all those cited by the appellant in support of this proposition, the insurance was effected by agents having authority to bind the insurance company and acting solely in the interests of the company. They all contain the feature that the mortgagee had no knowledge of misrepresentation as to title or condition of the property or other disqualifying act of the mortgagor. This element pervades all the cases cited and puts the mortgagee in the role of an innocent party. In this case, however, the innocence is on the other side. It is conceded that the defendant never received the premium for the policy in question and, furthermore, had no notice whatever of the transaction between the mortgagor and mortgagee until after the building had been destroyed by fire. 1. It is granted by the appellant that the policy was absolutely void as to Eowland for the reason that, without the knowledge and ratification of his principal, the agent cannot bind the principal in a transaction carried on in the agent’s own interest. Arispe Mercantile Co. v. Capital Insurance Co., 133 Iowa 272 (110 N. W. 593: 9 L. R. A. [N. S.] 1084). The basic reason of this principle is that no man can serve two masters. An agent cannot act in his own interest and at the same time in the adverse interest of his principal without the affirmative knowledge and approval of the principal. 2. It is contended that, inasmuch as Eowland was the local agent of the defendant, it was bound by his acts within the scope of his real or apparent authority; but it is equally true that, if one dealing with an agent assum [301] ing to act for his principal and. at the time knows the limitations of the agent’s authority, the former takes nothing by any act of the agent in excess of that authority. 3. Here, the plaintiff knew that Rowland was the owner of the property to be insured, and also knew that he was undertaking to act as the agent of the company in his own interest as against that of the company in the transaction. She knew that Rowland was providing a security for the possible payment of his debt out of the funds of the company. Aware of all these things, she dealt with him at her peril, and, if she would recover from the company, she must bring home to the latter knowledge of the whole transaction before any liability arose upon the policy and further show that it approved or ratified the same, having such knowledge. The law imputes to her knowledge of the legal effect of the agent’s operating in his own interest and adversely to the principal whom he claimed to represent. The conclusion of the whole matter is that the contract embodied in the standard mortgage clause attached to the policy was not executed as to the defendant because the person assuming to act for and bind the defendant had no authority to so act and plaintiff knew he had no such authority. Her rights cannot rise above their source, which, as we have seen, is the void act of the mortgagor, Rowland. The contract thus executed furnishes her no cause of action. The judgment is affirmed. Affirmed.