Phœnix Fire Insurance v. Hoffheimer, Bros. & Co.

Peytoít, C. J.: On tke 25tk of May, 1868, Solomon Hoffkeimer, Isaac Hoffkeimer, Abram Hoffkeimer, Jokn Meyer, Max Hoff-keimer and Moity Backrack, partners in trade, domiciled and resident at Saint Louis, in tke state of Missouri, negotiating under tke name, firm and style of Hoffkeimer Brotkers & Co., filed tkeir bill in tke chancery court of Warren county against tke Pkoenix Insurance Company to reform a policy of insurance against fire, and to enforce tke payment of tke amount insured. Tke bill alleges tkat, in tke month of August, 1865, complainants started a mercantile business in tke city of Vicksburg, in tke state of Mississippi, for tke sale of liquors, tobacco, groceries and other wares and merchandise, and put tke same in charge of and under tke control and management of Philip Sartorius, as agent, at a fixed salary for his services in conducting said business ; tkat in tke months of August and September in tke year 1865, they supplied said Sartorious, agent, with a stock of goods, which was insured from time to time during tke latter part of tke year 1865 and tke year 1866. Tkat on tke 25th of September, I860, tke said Philip Sar-torius, agent as aforesaid, applied to William A. Fairchild for insurance against loss and damage by fire on tke goods so kept by him for sale, to tke amount of $1,500, in and with tire said Fairchild, as tke legally constituted agent of tke Etna Insurance Company, a corporation doing business in said city of Vicksburg, Mississippi, through tkeir said — 655 — agent; that, at the time the said Sartorius applied to said Fairchild, agent for said insurance company, he informed said Fairchild, agent as aforesaid, that he, the said Sartorius, held said merchandise, and was selling the same, as agent for complainants, his principals, and owners' of said merchandise ; that said insurance company, through said Fair-child, their agent, on the said 25th day of September, 1865, issued to said Sartorius, agent, a policy of insurance, assuming a risk of $1,500 against fire on said merchandise for the period of three months, the said Sartorius, as agent, paying therefor the premium. That said Fairchild was the agent of the Etna Insurance Company, the Phoenix Insurance Company, and the Hartford Fire Insurance Company; and that, on the 19th of February, 1866, the first policy having expired, the said Sartorius applied to said Fairchild, agent of said Etna Insurance Company, for another policy of insurance against fire, risk to the same amount, on the said goods and merchandise, to be issued on the same day with-the former, to the said Sartorius, agent, who paid said Fair-child therefor the premium; that, at the issuance of the first policy, in September, 1865, the said Fairchild had notice and full knowledge of the facts that the said goods and merchandise were the property of complainants, that Sartorius was their agent, and that the policy was for their benefit, and that said first policy was, in fact, issued to said Sartorius as agent of complainants, with the intent and for the purpose of protecting the interests of his principals in said goods. That, on the 19th day of February, 1866, the said Fairchild, agent of the said Phoenix Insurance Company, being instructed by said Sartorius, agent, to make out the policy, then applied for in said company, like the first one made out by said Fairchild, agent, for said Sartorius, agent, in the Etna Insurance Company; and, knowing that it should be filled up so as to make the same valid and effectual to cover the interests of complainants in the merchandise, did at said time issue a policy, taking a risk of $1,500 on said goods and merchandise, and received from said — 656 — Sartorius, agent, the premium for the same; but, by accident or mistake, the defendants, by their agent, Fairchild, omitted and neglected to insert in said policy that P. Sar-torius, agent, was insured; and that, on the 19th of May, 1866, the said policy was renewed for nine months, which would expire on the 19th of February, 1867; that, at the time the renewal was made, it was confidently relied upon and believed by said Sartorius that said policy, which was continued by said renewal, covered and protected the interests of complainants in said merchandise, which was destroyed by fire on the 23d of December, 1866. The bin prays that said policy of insurance, and the renewal thereof, may be corrected and reformed by inserting therein that said insurance was made by P. Sartorius, agent, or of P. Sartorius, for whom it may concern, or of P. Sar-torius, for account of complainants, or such other words as will cover and protect the interests of complainants in said goods, and that complainants may have the benefit of said policy of insurance, so corrected and reformed, and that the sum, so insured by said defendants, on said goods and merchandise, be paid to them, and for such other or further relief as may be consistent with the facts of the case. The defendants in their answer deny that P. Sartorius ever notified them, or gave them any information, that the complainants were the owners of the goods insured. They admit, as stated in the bill, that said Sartorius did business “as agent,” both by publication and by his sign, but deny that they ever knew that he was in reality agent of the complainants, as they supposed Sartorius adopted that mode of doing business for purposes of his own, and insist that -he was the only person known to them in the transaction, and that the insurance was effected in his own name and on his own account. Upon the final hearing of the cause on bill, answer, exhibits and proofs, the court decreed that the policy of insurance mentioned in the bill be so corrected and reformed as to express the idea that said P. Sartorius was, — 657 — by said policy, insured as agent, for and on account of complainants, so as to coyer the interests of complainants in the goods insured by the policy of the defendants, and the court, haying corrected and reformed said policy as aforesaid, decreed that the defendants, the Phoenix Insurance Company, pay to the complainants the sum of $1,500, with $341 25, interest on the same at 6 per cent, from the 1st day of April, 1867, to the date of this decree, and that the complainants haye execution, etc. From this decree the defendants appealed to this court, and assigned for error: 1st. It was error to decree that the policy of insurance exhibited in the bill should be altered, changed or amended, as decreed; 2d. It was error to decree the payment of money, to be made by the appellants to the appellees, as decreed. We will consider the errors assigned together, as they deny the right to reform the policy of insurance, and to enforce it as reformed. The interposition of a court of chancery to correct mistakes, by ordering a proper deed to be executed, according to the true intent of the parties, is a very ancient doctrine. If, on inquiry, it appears that the instrument does not contain what the parties intended it should, and understood that it did, it may be reformed by proof, aliunde, so as to make it the evidence of what was the true agreement between the parties. It is wholly immaterial from what cause the defective execution of the intent of the parties arose. There cannot be any doubt that a court of equity has authority to reform a contract, where there has been an omission of a material word or stipulation by mistake, And a policy of insurance is within the principle; but a, court ought to be extremely cautious in the exercise of such an authority. It ought to withhold its aid where the mistake is not made out by the clearest evidence; 1 Phillips on Ins. 72; 2 ib. 560; Phœnix Fire Ins. Co. v. Gunce, 1 Paige, 278. It would be a great defect in what Lord Eldon terms the moral jurisdiction of the court, if there was no relief for such a case. The cases concur in — 658 — the strictness and difficulty of the proof, but still they admit it to be competent, and the only question is, does it satisfy the mind of the court? And the doctrine is well established in this country, that equity will relievé against mistake as well as fraud, in a deed or contract in writing ; and parol evidence is admissible to prove the mistake, though it is denied in the answer; and this, either where the plaintiff seeks relief, affirmatively, on the ground of mistake, or. where the defendant sets it up as a defense or to rebut an equity. Gillespie v. Moon, 2 Johns. Ch. 585; Hillman v. Wright, 9 Ind. 126; Davidson v. Greer, 3 Sneed, 384; Lambert v. Hill, 41 Me. 475; Adams v. Stevens, 49 ib. 366. While chancery has no power to make contracts for parties, or to substitute one for another, it can and will decree that they shall reform those which they have actually made ; and if the paper does not fulfill or violates their understanding it will be rectified and made to conform to it. And a court of equity will grant relief, in cases of mistake, in written agreements, not only where the fact of the mistake is expressly established, but is fairly implied from the nature of the transaction. 1 Story’s Eq. Jur. 161, § 162; Wyche v. Greene, 11 Ga. 171, 172. In the case of Tilton v. Tilton, 9 N. H. 385, tenants in common agreed to make partition pursuant to the award of referees, and executed deeds for that purpose. In the deed to the complainant, a tract of land assigned to him was omitted by mistake. The parties took possession according to their deeds. The defendant in his answer denied the mistake. The court held that the mistake should be rectified, and that a specific performance of the contract, as to the tract omitted, should be decreed. But in such cases the mistake must be made out in the most clear and decided manner, and to the entire satisfaction of the court; and the proofs must be clear and convincing when the mistake is denied in the answer. — 659 — In the case of Mosby v. Watt, 23 Miss. 81, it was beld that a bill would lie to correct a mistake in a written contract, and enforce a specific performance of the contract as corrected. But to authorize a court of equity to reform and enforce the contract, the evidence of the alleged mistake should be free from doubt. And in the case of Oliver v. M. C. Marine Ins. Co., 2 Curtis, 291, the court says: “If one who applies for insurance makes known that he is an agent only, and the company agrees to effect the insurance, it is a necessary implication that such words shall be inserted in the policy, as are usually inserted in such cases, and as are necessary to make a binding contract. It is to be presumed that the underwriters intend to earn their premium, and therefore that they expect and desire that the insurance should attach upon some interest, and understand and agree, if a known agent applies for insurance, that the formula, usually inserted when an agent obtains insurance, and which is necessary to the assumption of the risk, shall be in the policy; when it is drawn, I think it may safely be laid down, that when a contract is made for a policy, whatever clause is usually inserted in policies, by reason of a given state of facts, and which it is necessary to insert to adapt the policy to that state of facts, both parties.will h>e understood as agreeing to have inserted, if they are; both apprised of that state of facts, and contract in reference to it.” That it is usual and necessary, to insert in policies of insurance effected by agents in their own names a declaration that they are insured as agents, or for whom it may concern, or some equivalent words, or to declare specially on whose account the insurance is made, will hardly be controverted. In the case under consideration, it is admitted by the defendants in the court below by their answer, that Sar-torius did business in Yicksburg as “ agent,” both by publication and by?his. sigh. William A. Fairchilds, . agent for the Phcenix Insurance Company, states in his testimony that on the 25th of September, 1865, the Etna Insurance Company, — 660 — through him as their agent, insured P. Sartorius as agent to the amount of $1,500. Sartorius, in his testimony, states that, when he took out first policy of insurance as above stated, on the 25th of September, 1865, he informed said Fairchild that he was doing business for the Hoifheimer Brothers & Co., of St. Louis, as their agent, and as the first policy was issued to him as their agent, he requested Fair-child to make out the subsequent policies of insurance which were issued to him as the first was made out, and taking it for granted that Fairchild had done so, he never examined them until after the fire. This was but a reasonable confidence, which he reposed in Mr. Fairchild, who, if we are to judge from his testimony, does not entertain a very exalted opinion of the integrity of Mr. Sartorius. There can be no doubt that Mr. Fairchild had seen the sign and the advertisements of Mr. Sartorius, as agent; but he may have supposed, as we may infer from his testimony, that this mode of advertising was adopted merely “to cover up his goods.” W. T. Page, who was an agent for several insurance companies at Yicksburg, at the time the policy of insurance was issued, states in his testimony, that if the applicant for insurance makes known to the insurance agent, that he is selling goods as agent, it would be the duty of the insurance agent to fill up the policy to the applicant as agent. It is very clear from the testimony, that Sartorius was doing business a& agent when these policies of insurance were taken out, and that by the first of them P. Sartorius was insured as agent, and there is no perceivable reason why the word “agent” should have been omitted in the subsequent policies of insurance. There is no evidence of a change of circumstances between the issuance of the first and the subsequent policies which would authorize the underwriters to believe that there was a change of the ownership, in the interim, of the property to be insured. We are entirely satisfied that the policy sought to be corrected — 661 — and reformed was intended by the parties to insure P. Sar-torins, agent, and, therefore, there is no error in the decree of the court below in this respect. If the court has a competent jurisdiction, as we have seen it has, to correct such mistakes, the agreement, when corrected, and made to speak the real sense of the parties, ought to be enforced as well as any other agreement, perfect in the first instance. It ought to have the same efficacy and be entitled to the same protection when made accurate under the decree of the court as when made accurate by the act of the parties. The decree is affirmed. Mr. Justice Simrall not sitting.