Cranston v. West Coast Life Insurance

Mr. Justice Burnett delivered the opinion of the court. The transaction in question was initiated by the original application for insurance about which there is no question and which is quoted in and made part of the policy upon which this action was brought. It states: “This application of insurance to the West Coast Life Insurance Company is the basis and a part of a proposed contract for insurance. I hereby agree as follows: (1) That if this application is accepted the policy hereunder shall not take effect until the first premium shall have been paid and accepted by said company or its authorized agent and such policy delivered to and accepted by me while I am in good health. * *” In the application the following question and answer appears: “Do you agree that only the officers of the company at its home office can accept or reject this or any application and that no knowledge of any person and no statement made or given by or to any person shall bind the company or in any manner affect its rights unless such knowledge and statement are set forth in'writing in this application.” Answer: “Yes.” This application was signed by Walter A. Cranston and, as its terms indicate, was a proposal to the defendant to enter into a contract of insurance. In response to this offer the defendant issued its policy, which may be termed a counter offer, the material parts of which, for the purpose of this opinion, are as follows: “The West Coast Life Insurance Company, San Francisco, California, agrees to pay one thousand dollars to Irene M. Cranston, wife of insured, should she survive him, otherwise to the executors, administrators or assigns of Walter A. Cranston, the insured, or to a duly substituted beneficiary under this policy at its home office upon the death of the insured within one year from date or subsequently if this policy shall be renewed according to its terms and immediately upon receipt and approval of proof of death of the insured. All insurance hereunder is based upon the written and printed application therefor — 436 — which is made a part of this contract, a copy whereof is endorsed hereon, and the payment of $27.95 on September 1, 1910, as the premium for one year’s insurance. * * All premiums upon this policy are due and payable at the home office of the company in the city of San Francisco, but may be paid to agents of the company producing receipts signed by the president, a vice president, secretary or assistant secretary and countersigned by such agents. * * Only the president or a vice president together with the secretary Or assistant secretary (and then only in writing signed by them) have power on behalf of the company 'to issue permits or make or modify this or any contract or to extend the time for making any premium payment and the company shall not be bound by any promise or representation heretofore or hereafter given by any person other than the above-named officers and by them only in writing and signed conjointly as stated.” 1. This policy was dated September 1, 1910, and forms the basis of the plaintiff’s action. It does not recite, as some cases state, that the premium has been paid. By its terms it is based upon the payment of $27.95 on September 1, 1910, which payment consequently is a condition precedent to the requiring of any disbursement on the part of the defendant. As said by Mr. Justice Bean, in Faber v. Hougham, 36 Or. 428 (59 Pac. 547) : “It is familiar law that, if an action be brought on the covenants of an executory contract, it is necessary as a general rule for the plaintiff to aver and prove full performance on his part. * * These questions are learnedly discussed by Mr. Clark in- his excellent work on Contracts, and as applicable to the case at hand we take the rule to be as stated by him: ‘When it appears that one of two covenants or promises is to be performed at an earlier date than the other, the rule is simple and' uniform, namely, that the covenant or promise that is to be performed first is independent and absolute, while the one that is to be performed last is dependent on the performance of the former being a condition precedent to the performance of the latter.’ ” — 437 — If therefore nothing else is shown, it is incumbent upon the plaintiff to show performance of the condition of payment of the premium, and with that principle in view she has alleged: “That up to the time of the death of the said Walter A. Cranston all premiums which accrued on said policy were paid at the time they accrued, and that in all other respects said Walter A. Cranston duly performed all the agreements and conditions of said policy on his part.” Having therefore alleged payment or performance, the plaintiff must prove the same when the allegation is traversed, or she cannot prevail. 2. “Payment” is the discharge of an obligation by the delivery and acceptance of money or of something equivalent to money which is regarded as such at the time by the party to whom the payment is due. Said Mr. Chief Justice Lord, in Bush v. Abrham, 25 Or. 336 (35 Pac. 1066) : “Payment, in a restricted sense, is a discharge in money of a sum due. As usually understood, it means the transfer of money from one person who is the payer to another who is the payee in satisfaction of a debt. In such sense it would not include an exchange or compromise or an accord and satisfaction, but would mean the full satisfaction of the debt in money. But in its general sense payment is the performance of an agreement or the fulfillment of a promise or obligation whether it consists in giving or doing. The discharge of a contract or obligation in money or its equivalent with the assent of the parties would constitute payment. It may be made in something else than money; in fact, anything that the creditor may accept as payment. It is a mode of extinguishing obligations. To constitute payment, therefore, money or some other valuable thing must be delivered by the debtor to the creditor for the purpose of extinguishing the debt and the creditor receive it for the same purpose.” Other definitions are as follows: “A payment is defined to be the performance of an obligation for the delivery of money.” — 438 — “Payment is defined to be the act of paying. The delivery of money in payment in the course of business.’-' “Payment is defined to be the act of paying or that which is paid to discharge the obligation or duty; satisfaction of a claim or recompense; the fulfillment of a promise or the performance of an agreement; .the discharge in money of a sum due.” • “In legal contemplation, payment is »the discharge of an obligation by the delivery of money or its equivalent and is generally made with the assent of both parties to the contract.” 6 Words and Phrases, 5247, and authorities there cited. 3. It is alleged in the reply in substance that a note was given by Cranston to Waite Thurston and accepted by the latter in full and complete payment of the first premium on the policy. It is not alleged that the defendant knew of this transaction with Thurston or ratified it, or that the note was given to the defendant itself, or even that Thurston had authority to bind it by such a transaction. In Stringham v. Mutual Insurance Co., 44 Or. 447, 459 (75 Pac. 822), Mr. Justice Wolverton says: “It has been firmly settled by this court that the acceptance of a note is not to be considered as taken in discharge or payment of the debt unless it is at the time so agreed and understood. Black v. Sippy, 15 Or. 574 (16 Pac. 418) ; Johnston v. Barrills, 27 Or. 251 (41 Pac. 656: 50 Am. St. Rep. 717) ; Schreyer v. Turner Flouring Co., 29 Or. 1, 4 (43 Pac. 719) ; Kiernan v. Kratz, 42 Or. 474 (69 Pac. 1027: 70 Pac. 506.)” There is not a word of testimony disclosed by the bill of exceptions tending to show that there was any agreement between Cranston and Thurston that the note should be accepted by the defendant in payment of the premium or, for that matter, that it was understood or agreed that Thurston, himself, should accept it as payment for the premium. Even though the allegations of the reply in that respect should be considered as well pleaded, yet they fail for want of proof to sustain them. — 439 — As disclosed by the testimony, the utmost that can be said in that connection is that the note of Cranston to Thurston for $27.95 was extant and that the latter solicited the application for the insurance. A strong circumstance tending to show that the note was not intended as payment is a declaration of the policy itself which was accepted by the insured and upon which she here relies, in these words: “That the insurance hereunder is based upon the written and printed application therefor which is made a part of this contract, a copy whereof is indorsed hereon, and the payment of $27.95 on September 1, 1910, as the premium for one year’s insurance.” According to its own terms as disclosed by the evidence, the note in question was not due or payable until 60 days after August 24, 1910, or October 23d of that year. It is plain that the note could not have been intended as payment, for the policy itself requires payment as such to be made on September 1st a different date from that of the maturity of the note. 4. Without showing any agreement even by Thurston or Cranston to that end, the plaintiff relies upon the act of Thurston in taking a note payable to himself as payment of the first annual premium. No attempt whatevér is made to show that the company knew anything of this note prior to the death of the insured. In cannot be claimed by plaintiff that the act of Thurston in taking the note, even if it was agreed by him that it would bind the company as payment of the above premium, was within the scope of his real or apparent authority for the reason that in the beginning Cranston, in his application for the policy, agreed that no knowledge of any person and no -statement by or to any person should bind the company or in any manner affect its rights unless this knowledge and statement should be set forth in writing in the application. Again, one of the conditions of the — 440 — policy which he accepted and upon which the plaintiff depends is to this effect: “Only the president or vice president together with the secretary or assistant secretary and then only in writing signed by them have power in behalf of the company to issue permits or make or modify this or any contract or to- extend the time for making any premium payment and the company shall not be bound by any promise or representation heretofore or hereafter given by any person other than the above named officers and by them only in writing and signed by them jointly as stated.” Further, it is said as one of the conditions of the policy:' “All premiums upon this policy are due and payable at the home' office of the company in the city of San Francisco but may be paid to agents of the company producing receipts signed by the president, a vice president, secretary, or an assistant secretary and countersigned by such agent.” In the face of his own agreement in the application authorizing such conditions and his acceptance of the policy, the insured had no right to deal with Thurston in any way inconsistent with these terms for they acted as limitations on the authority of the soliciting agent within the knowledge of the assured. As said by Mr. Chief Justice Eakin in Baker v. Seaweard, 63 Or. 350 (127 Pac. 961) : “It may be stated generally that a principal is not bound by the acts of his agent unless within the real or apparent scope of the authority of such agent, and one dealing with an agent is bound at his peril to ascertain the extent of the agent’s authority, and is chargeable with knowledge thereof. * * Where a party relies upon a contract made with a person claiming to be the agent of another, he must prove, where the agency is disputed, that he was expressly empowered to make the contract, and that its terms were within the scope of his authority.” — 441 — The rule is thus stated in 31 Cyc. 1329: “Limitations which are known to a person dealing with an agent are as binding upon such person as they are upon the agent, and he can acquire no rights against the principal by dealing with the agent contrary thereto. The principal may make the authority of the agent, as broad or as narrow as he will, and any lawful limitations which he chooses to impose upon the agent’s powers and which are not in the nature of secret instructions will be as binding upon third persons legally charged with notice of them as upon the agent himself; and, if the authority is a restricted and limited one, then ■ such limitations form part of the power itself, and third persons must know them at their peril. If specific instructions are brought home to the knowledge, of the third person dealing with the agent, it cannot matter whether he is a general or special agent; in either case his power to bind his principal will be limited by these known instructions or limitations.” The following citations are instructive on this subj ect: Hutson v. Prudential Ins. Co., 122 Ga. 847 (50 S. E. 1000) ; Lucas v. Rader, 29 Ind. App. 287 (64 N. E. 488) ; Carson v. Culver, 78 Mo. App. 597; Bybee v. Embree-McLean Carriage Co. (Tex. Civ. App.), 135 S. W. 203; J. I. Case Threshing Machine Co. v. McClamrock, 152 N. C. 405 (67 S. E. 991) ; First National Bank v. Bean, 141 Wis. 476 ( 124 N. W. 656: 135 Am. St. Rep. 50) ; Bronson v. Weber Implement Co., 135 Mo. App. 483 (116 S. W. 20) ; Dietz v. Hastings City Nat. Bank, 42 Neb. 584 (60 N. W. 896) ; Catoir v. Am. Life Ins. Co., 33 N. J. Law, 487; Gilbert v. Deshon, 107 N. Y. 324 (14 N. E. 318) ; Marvin v. Universal Life Ins. Co., 85 N. Y. 278 (39 Am. Rep. 657). The note ought to be laid out of the case because of the utter absence of any testimony tending to sustain the allegations of the reply that Thurston accepted the note in payment of the first premium. Moreover, Thurston, not having been equipped with the receipt mentioned in the policy, was, within the knowledge of the assured* — 442 — not authorized to accept payment in any form so as to bind the company, and, again, it is not pretended that during the lifetime of the assured the action of Thurston came to the knowledge of any of the officers whom the assured agreed could be the only ones who could extend the time for any premium payment. Taking the note out of the case would make good the ruling of the court in excluding the letter of Cranston to Start above quoted. The whole issue about the note was spurious and irrelevant because on behalf of the defendant it is not admitted in any way that the note was given to or received by the company in payment of the premium. Neither is it alleged on behalf of the plaintiff that the note was accepted by the company in payment of the premium, or that its existence was known to any person authorized on behalf of the company to extend the time of payment and upon whose knowledge of the situation alone could any waiver be predicated. Under the pleadings therefore it is wholly immaterial whether Cranston repudiated the note or not, or whether it was paid or not. It could not affect the case as the parties have made it by their allegations and denials. 5, 6. Of course, it would be competent for the defendant through its properly authorized officers to waive all those provisions respecting payment, and the authority of its agents, and to enter into a new contract of novation as is attempted to be pleaded in the reply whereby the company would agree to accept its agent’s obligations to pay in lieu of the decedent’s engagement, upon the latter agreeing to pay the agent. But such waiver must be pleaded in the complaint. It is well settled in this State that if a plaintiff relies upon such a change in the contract it must be stated in his initial pleading. The reason for this is that the plaintiff must aver the whole truth of his case at the outset and cannot be allowed to shift his position after having once challenged the — 443 — defendant to contest upon the grounds stated in his complaint. Lillienthal v. Hotaling, 15 Or. 371 (15 Pac. 630) ; Deering v. Creighton, 9 Or. 118 (24 Pac. 198: 20 Am. St. Rep. 800) ; Bruce v. Phoenix Ins. Co., 24 Or. 486 (34 Pac. 16) ; Long Creek Bldg. Ass’n v. State Ins. Co., 29 Or. 569 (46 Pac. 366) ; Hannan v. Greenfield, 36 Or. 97 (58 Pac. 888) ; Young v. Stickney, 46 Or. 101 (79 Pac. 345). As taught in Shattuck v. Smith, 5 Or. 125, “a contract cannot be predicated upon a separate agreement between different parties unless there has been a novation by which the new parties in the separate agreement agree to accept the performance in the first contract as a consideration for the second.” Also, it is said in Smith v. Foster, 5 Or. 44, “the principle appears to be well settled that mere agreement to substitute another agreement or anything in lieu of the original obligation is void unless actually carried into execution and accepted as satisfaction.” Granting in this case that Cranston agreed to pay the premium to Thurston, it nowhere appears that the defendant agreed to accept Thurston as its debtor or to release Cranston. Further granting that the defendant charged the amount of the policy to Booth, it does not appear that Cranston agreed to pay Booth. Finally, the stubborn fact remains that no payment has been shown nor any performance of the pseudo nova-tions mentioned in the pleadings. Several authorities are cited on behalf of the plaintiff to the effect that the delivery of a policy is evidence of payment of the premium. An analysis of these cases will show them to be properly divided into two classes. One is where the policy itself acknowledges the receipt of payment in some form or other, in which event the defendant company is estopped from denying the provisions of its own contract. An inspection of the policy in suit will show that it does not belong to the first class. The .other class is where the policy was delivered — 444 — by an agent who was authorized to receive the premium, and payment was made to him, or some other transaction was agreed upon by the parties as a substitute for payment. In this latter case the precedents all rest upon the theory that the payment is thereby waived; but, as we have seen, the rule laid down in this State is that waiver must be pleaded in the complaint. Moreover, as we have already shown, Thurston was not authorized to receive payment, and the decedent, knowing that he was not equipped with the receipt mentioned in the policy, was aware of the defects of Thurston’s authority to bind the company by accepting a note in place of the payment. The judgment of the circuit court is reversed, and the cause remanded for further proceedings not inconsistent with this opinion. Reversed.