Phœnix Insurance v. Ryland

Iuvrsra, J., delivered the opinion of the Court. The bill in this case seeks the decree of a Court of equity for the enforcement of a contract for the insurance of a cargo of lumber which was to be taken by sea from Suffolk, Va., to New York City. In October, 1886, the appellees applied to the appellant, an insurance company in New York, for the insurance of a cargo of lumber, which was being loaded on the Schooner Sarah A. Boice, at Suffolk, Ya., and the destination of which was not fixed, but awaited — 444 — the results of negotiation for insurance; it being the design of the appellees to bring the cargo by inside route to Baltimore, if insurance could not be effected; and to send to New York by sea, if it could be insured. The negotiations were conducted through Birckhead & Son, insurance brokers, with Mr. Spice, the general agent of the appellant in the city of Baltimore. The rate of insurance was agreed upon satisfactorily, and the application was submitted by Spice to the insurance company in New York. The application was rejected, because the vessel was supposed to be old and unseaworthy. This being communicated to the appellees, they informed Spice that their information was incorrect, as the appellees were informed, the vessel had undergone thorough repair and was not unseawortlry, as she had been represented to the company to be. Being referred to reliable sources of information, Spice sought for it, and learned that the vessel had been rebuilt, and was a proper subject for insurance. This information was telegraphed to the home office in New York City, which telegraphed Spice, its agent in Baltimore, “ on the strength'of your explanation we accept Schooner Sarah A. Boice.” This telegram was dated November the first, 1886. Spice communicated to Ryland, one of the appellees, the result of this correspondence with his company, and directed him to send his book around to have the risk entered up, but requested that it be sent through Birckhead & Son, the brokers who had initiated the negotiations for this risk.' Spice himself so testifies. Ryland notified Birckhead & Son, but inadvertently the risk was,not actually entered upon the policy book, although all parties interested supposed it had been entered, until information of the loss of the Boice was received, and this suit is to compel the entry of the risk in the policy book and the payment of the loss. — 445 — The form of policy, used in this case, was what is known as an open policy, “with book attached in which the details of each risk were made according to the convenience of parties, after the details became known. These entries, as the book itself and other evidence shows, were often made after the voyage had terminated, and when all risk on the part of the company had ceased. The premiums were never required when a risk was effected, but wore settled for monthly, as the bills for the same were sent in, in accordance with the terms of the policy. The policy provided that no shipment was to be considered as insured until approved and endorsed upon the book by Spice, its Baltimore agent.” This proviso is endorsed on the margin of the policy. Exception has been taken to the admissibility of the evidence touching the method of dealing in respect to the risks entered in this open policy and book ; but it is very clear that the usages of the company in effecting their contracts through an open policy and book, and its agent in a city distant from the home office, must, of necessity, be receivable, iix order to apply correctly the principles of law involved for the protection of either party to the coxxtract xnade or sought to be made, as the case may be. The exception is based on the theory that it is offered to alter axxd vary the terms of a writtexx coxxtract, whereas that is not its object or effect. The object was to explaixx the method of making the coxxtract, and to assist iix determiixiixg whether according to the usages of the conxpaixy and its authorized agexxt, axx agreement had been reached that such written contract shoixld be perfected. The Judge below did not specifically pass*upon this exception, but by implication he overruled it, for he treated the evidence as before him in deciding the case, and we thixxk he was entirely right in so doing. The exceptions on the part — 446 — of the appellees %ve have not found it necessary to consider, for if the excejrtions were overruled it would not affect our conclusion respecting the appeal.- It is well established law that upon clear proof that a contract has been made to do something, the consummation of which involves the execution of a written instrument, which is afterwards refused to be made, a Court of equity will coerce the execution of the written contract which the parol evidence has shown was agreed upon. And, although the contract has been reduced to writing, if it be clearly shown that something has been omitted from the writing which was by the agreement of parties to have been inserted, a Court of equity will reform the contract to make it conform to the original agreement of parties. But in any such case the proof must be full, satisfactory and conclusively convincing to justify the Court's interfering. In Alexander vs. Ghiselin, 5 Gill, 138, our predecessors coerced the specific performance of a contract to create a lien, which could only be made legally effectual by a regularly executed, acknowledged and recorded mortgage. And in Ben. Franklin Ins. Co. vs. Gillett, 54 Md., 212, this Court reformed a contract of insurance by inserting a statement into the written instrument which had been omitted, and which was not discovered until after a loss wider the policy had occurred. It is clearly stated in 1 Wood on Fire Insurance, page 29, that contracts to insure will be enforced in equity, and numerous decisions are cited in support of this statement of the law. A contract of insurance is an executed contract which can be enforced at laAv. A contract to insure is executory and requires the interposition of equity to 'give effect to the agreement of parties. 1 Wood on Fire Insurance, 29, 30, 31. “A contract of insurance is iir writing, a contract tp insure — 447 — may he by parol.” Ib., 32; Tayloe vs. Merchants’ Fire Ins. Co., 9 Howard, (U. S.,) 390; Commercial Mutual Marine Ins. Co. vs. Union Mutual Ins. Co., 19 Howard, ( U. S.,) 318; Insurance Co. vs. Colt, 20 Wall., (U. S.,) 566; Security Fire Ins. Co. of New York vs. Kentucky Marine and Fire Ins. Co., 7 Bush, 81. In Colt’s Case, 20 Wallace, the. charter of the company required that all contracts of insurance shall he in writing, but the Court said that this provision had reference only to executed contracts hy which the company was legally hound to indemnify against loss, and not to the preliminary arrangements which necessarily precede the formal execution of the papers hy the officers of the company. Justice Field in announcing the opinion in this case said, “ it would he impracticable to carry on its business in other cities and States, or at least the business would he attended with great embarrassment and inconvenience, if such preliminary arrangements required for their validity and efficacy, the formalities essential to the executed contract. The law distinguishes between the preliminary-contract to make insurance or issue a policy, and the executed contract or policy. And we are not aware that in any case, either hy usage, or the by-law of any company, or hy any judicial decision, it has ever been heLd essential to the validity of these initial contracts that they should he attested hy the officers and seal of the company. Any usage or - decision to that effect would break up or greatly impair the business of insurance as transacted by agents of insurance companies.” This case cites with approval The Security Insurance Company’s Case in 7 Bush, 81, where the same principles are strongly announced. In Colt’s Case, as in the case under consideration hy us, credit was allowed for the payment of the premium, but the Supreme Court said it was an indulgence which the agents were authorized — 448 — by general usage to give, and that it did not impair the preliminary contract. That being valid could be enforced in a Court of equity.” These ¡principles and decisions are entirely conclusive of the right of the appellees to the specific enforcement of the agreement on the part of the appellant to insure the cargo of the Sarah A. Boice. There is an entire agreement between all the witnesses on both sides as to the material facts 1 of this case. In the main they have already been recited in the statement of the case, After the insurance company was notified of the seaworthiness of the schooner and her full repair, the company unequivocally accepted the risk, by telegram to its agent Spice, who informed Byland and directed the book to be sent up for the entry to be made. That could not be made unless the risk was accepted, and that' direction was in itself an acceptance if the other evidence was not so positive on the subject. Spice only oould make that entry. The insured could not. Spice having selected the medium for bringing him the book, and having directed for reasons satisfactory to him iihat Birckhead & Son should be entrusted with that <j.uty, the company should bear the consequence and blame of Birckhead & Son’s inadvertent omission. The appellees certainly ought not to suffer for it. They did not know it was not entered, but allowed the voyage to bo undertaken, upon faith of, Spice’s acceptance of the risk and agreement to enter it in the policy book. Indeed all parties supposed the entry was actually made, until the loss was discovered, when Spice refused to make the entry, notwithstanding the premiums were tendered and the demand made for its entry. On the 26th of November he had the book and entered the risk of the Bambo, another boat of appellees, which had been accepted on the 3d of .November,, and which had, when entered,, successfully completed her trip ; but he — 449 — did not enter the Boice because he heard the boat was lost. In entering the Rambo at the time he did, he indicated in the act, the uniform practice which was observed in their dealings with the appellees and their policy book ; and in taking the premium for the Rambo when she had successfully completed her voyage showed that usage required that he should enter the Boice, in pursuance of her acceptance at risk, although she was reported as lost. The voyage having been undertaken with the definite understanding that the risk was accepted and should be entered, the company cannot be allowed to escape the consequences of the agreement, simply because the entry was not actually made. Its entry must be coerced. In so decreeing the Court below also decreed the payment of the loss, the extent of which was fully shown and was uncontradicted. That was right also. All the authorities we have cited as establishing appellees’ right to specific performance in the completion of the instruments are equally conclusive as to the right and propriety of administering full relief by decree of payment of loss when the evidence of its extent is satisfactory, as it is hero. The decree of the Circuit Court will be affirmed. (Decided 23d (November, 1888.) Decree affirmed.