Western Assur. Co. of Toronto v. Ward

SPEER, District Judge (after stating the facts). The power to reform a written contract which does not, in material matters, correctly set forth the agreement of the parties, is definitely settled, upon principle and authority. In the case of Thompson v. Insurance Co., 136 U. S. 295, 10 Sup. Ct. 1019, there was an agreement between Receiver Kearney and the company that the insurance should run to him as receiver, and to his successors, and also to those whom it might concern, and that by inadvertence, accident, and mistake, upon the part of both Kearney and the company, the policy was not so framed. The court (Mr. Justice Harlan delivering the opinion) declared: [341] “if, by inadvertence, accident, or mistake, the terms of the contract were, not fully set forth in the policy, the plaintiff is entitled to have it reformed so as ro express the real agreement without the necessity of resorting to extrinsic proof. The case made hy the amended hill is within the decision in Snell v. Insurance Co., 98 U. S. 85, 88, where the court sa.id: ‘We have before us a contract from which, by mistake, material stipulations have been omitted., whereby the true intent and meaning of the parties are not fully or accurately expressed. A definite concluded agreement as to insurance, which iu point of time preceded the preparation and delivery of the policy, is established by regular and exact evidence which removes all doubt as to the understanding of the parties. In the attempt to reduce the contract to writing, there has been a mutual mistake, caused chiefly by that party who now seeks to limit the insurance to an interest in the property loss than that agreed to he insured. The written agreement did uot effect that which the parties intended. That a court of equity can afford relief in such a case is, we think, well settled hy the authorities.’ ” This clear and unanimous holding of the supreme court is conclusive. Enough, then, as to the power of the court. The objection that there is an adequate remedy at la,w, which will defeat the application in equity, may he disposed of with equal facility, and by reference to the same high authority. In the case of Tayloe v. Insurance Co., 9 How. 390, the complainant relied upon correspondence of the insurance company, in which the latter made known the terms upon which it was willing to insure; and the insult'd placed a letter in the post office, accepting the terms. There the court, compelled the issuance of the policy, although the loss occurred while the letter of acceptance by the persons seeking insurance was in process of transmission through the mails. The complainant prayed the interposition of a court of equity, and the exercise of its power to compel specific performance. It was objected tluit the suit might have been brought at law on the contract as expressed by the correspondence, and, since there was an adequate remedy at law, there was no necessity to apply to a court of equity. “This,’’ said Mr. Justice Nelson for the court, “may very well be admitted, but it by no means follows from this that the court of chancery will not entertain jurisdiction. Had the suit been instituted before the loss occurred, the appropriate, if not the only, remedy would have been in that court, — to enforce a specific performance, and compel the company to issue the policy. And this remedy is as appropriate after as before the loss, if not as essential, in order to facilitate the proceedings at law. No doubt, a count could have been framed upon the agreement to insure, so as to have maintained the action at law, hut the proceedings would have been more complicated and embarrassing than upon the policy. The party, therefore, had a right to resort to a court of equity to compel a delivery of the policy, either before or after the happening of the loss; and, being properly in that court after the loss happened, it is according to the established course of proceedings, in o-rder to avoid delay and expense to the parties, to proceed and give such final relief as the circumstances of the case demand. Such relief was given in the case of Motteux v. Assurance Co., 1 Atk. 545, and in Perkins v. Insurance Co., 4 Cow. 646. See, also, 1 Duer, Ins. 66, 110, and 2 Phil. Ins. 588. As the only real question in the case is the one which a court of equity must necessarily have to decide in the exercise of its peculiar jurisdiction in enforcing a specific execution of the agreement, it would be an idle technicality for that court to turn the party over to his remedy at law upon the policy. And. no doubt, it was a strong sense of this injustice that led the court, at an early day, to establish the rule that having properly acquired jurisdiction over the subject, for a necessary purpose, it was the duty [342] of the court to proceed and do final and complete justice between the parties,, where it could as well be given in that court as in proceedings at law.” There are, moreover, numerous authorities to the effect that, before an application to equity can be defeated for the reason that there is an adequate remedy at law, it must be made to appear that the latter, both in respect of the final relief and the mode of obtaining it, is as sufficient as the remedy which equity could confer under the same circumstances. Kilbourn v. Sunderland, 130 U. S. 505, 9 Sup. Ct. 594. This principle is otherwise expressed in Barber v. Barber, 21 How. 591: “It is not enough that there is a remedy at law. It must be plain and adequate, or, in other words, as practical and efficacious to the ends of justice and its prompt administration as the remedy in equity;” citing Boyce’s Ex’rs v. Grundy, 3 Pet. 210; U. S. v. Howland, 4 Wheat. 108; Osborn v. Bank, 9 Wheat. 814, 842. It remains to be determined, did the complainants’ averments, admitted as they were by the defendant, make a case which gave the court in equity jurisdiction, and which will support the decree? It is sufficient to say that we have before us the clear and uncontested proof that there was between the agent of the defendant and the complainants a contract, for insurance at that time and thereafter, to be taken out upon property, which, within the knowledge of both parties, was incumbered, and which in the course of business was to be further incumbered. This contract, by the result of a mutual mistake, was not expressed in the policy issued by the company and accepted by the insured. Then the latter has a clear right to compel a reformation of the policy so that it will speak the truth of the actual contract itself. It follows that we must regard the action of the court below in overruling the demurrer as in accordance with the settled principles of equity. In one respect only do we think the decree should be modified. It is plain that complainants did not comply with their obligations to keep 80 per cent, of the value of the tobacco described in the policy covered by insurance. It appears from the testimony of T. L. Ward, one of the complainants, that the market value of the tobacco in the warehouse at the time of the fire was $20,000. The loss was $11,933.80, and the insurance on all the tobacco was $16,000. The defendants, then, are liable only for 5/s2 of the amount, with interest from 60 days after the proof of loss was filed with it, or $1,864.65, with such interest. The decree of the court below was for the full amount of the policy, and interest from some date not apparent; and it should be modified by reducing the amount to $1,864.65, with interest thereon from March 20, 1894, and as so modified the decree should be affirmed. Each party will pay his own costs arising out of this appeal. And it is so ordered.