McCarty v. Piedmont Mut. Ins. Co.

• Decision Date: 31 July 1908
• Citation: 62 S.E. 1,81 S.C. 152
• Parties: McCARTY v. PIEDMONT MUT. INS. CO.
• Court: South Carolina Supreme Court

62 S.E. 1

81 S.C. 152

McCARTY v. PIEDMONT MUT. INS. CO.

Supreme Court of South Carolina

July 31, 1908

Appeal from Common Pleas Circuit Court of Aiken County; R. W Memminger, Judge.

Action by H. D. McCarty against the Piedmont Mutual Insurance Company. Judgment for plaintiff. Defendant appeals. Reversed.

Gary A. J., dissenting.

Croft & Croft and Carlisle & Carlisle, for appellant.

Hendersons for respondent.

JONES J.

This action is upon an insurance policy issued by defendant to plaintiff November 8, 1906, indemnifying him against loss by fire on a dwelling house, a tenant house, and some household furniture, situated in Aiken county, S.C. On March 16, 1907 the property insured was totally destroyed by fire. Recovery was resisted by defendant under two defenses: (1) Placing an incumbrance upon the property after issuance of the policy without the written consent of the defendant; (2) fraudulent overvaluation of the dwelling house. Judgment was rendered for the plaintiff.

The defendant is a domestic mutual insurance company, regulating its business by means of a constitution and by-laws, of which the insured becomes a member on the issuance of the policy. When application was made for the policy, on November 6, 1906, defendant's agent asked plaintiff if there was any mortgage on the property, and plaintiff answered there was not, but that he expected to put a small mortgage on it soon, and asked him if that would make any difference, to which the agent replied that it would not. Upon this assurance the plaintiff, on January 27th following, gave a mortgage to the Bank of Aiken for $150 without any other consent on the part of the defendant, except what may be deemed involved in the knowledge and representations of defendant's agent in negotiating for the policy. The first question presented under the exceptions is whether the doctrines of waiver and estoppel, arising out of the knowledge and acts of agents, apply to mutual assessment companies as to old line insurance companies. The decisions in this state show that mutual insurance companies and fraternal benefit societies are governed by the same rules of law as the old-line insurance companies. McBryde v. Mut. Ins. Co., 55 S.C. 589, 33 S.E. 729, 74 Am. St. Rep. 769; Sparkman v. Supreme Council, 57 S.C. 16, 35 S.E. 391; Thompson v. Piedmont Mut. Ins. Co., 77 S.C. 486, 58 S.E. 341; Morrison v. Benev. Ass'n, 78 S.C. 398, 59 S.E. 27; Hankinson v. Piedmont Mut. Ins. Co. (S. C.) 61 S.E. 905; Plunkett v. Piedmont Mut. Ins. Co. (S. C.) 61 S.E. 893.

Appellant contends that this rule should not apply to conditions affecting the essence of the contract, the risk assumed, such as a subsequent incumbrance. We see no value in making the distinction contended for by appellant. The mutual insurance company is a distinct entity as a corporation, and, like other corporations, must act through agents. The knowledge acquired by its agents within the apparent scope of their authority ought to be imputed to it, as in the case of any other principal. Certainly until the delivery of the policy the applicant is not a member of the mutual association, and cannot be presumed to even know the constitution and by-laws of the association, much less to be bound thereby, and experience teaches that he acquires very little knowledge of the constitution and by-laws after membership. The agent and applicant are not upon equal terms of knowledge. The applicant is generally ignorant of the powers of the agent and the special rules by which the solicited contract is to be controlled. The agent is generally expert in these matters, and common honesty and fairness demand that the applicant be not misled, to his injury, by the agents in one kind of association as well as the other, whether the subject-matter of waiver and estoppel relate to the form or the substance of the contract.

Another question involved is whether the knowledge and representations of the agent in this case can be the basis of waiver or estoppel, since they did not relate to a known or existing fact, but to something intended to be done in the future. This presents a serious question. Waiver generally involves the relinquishment of a known or existing right. Estoppel by misrepresentation generally involves some misrepresentation of a past or existing fact. Hence, generally, representations de futuro do not form the basis of waiver or estoppel. A leading authority on this subject is Insurance Company v. Mowry, 96 U.S. 546, 24 L.Ed. 674, in which the court said: "The previous representations of the agent could in no respect operate as an estoppel against the company. From the circumstance that the policy subsequently issued alone expressed its contract, and estoppel from the representations of a party can seldom arise, except where the representations relate to a matter of fact, to a present or past state of things, if the representations related to something to be afterwards brought into existence, it will amount only to a declaration of intention, or have been liable to modification or abandonment upon a change of circumstances, of which neither party can have knowledge. The only case in which a representation as to the future can be held to operate as an estoppel is where it relates to an intended abandonment of an existing right, and is made to influence others, and by which they have been induced to act. An estoppel cannot arise from a promise as to future action with respect to a right to be acquired upon an agreement not yet made." This language is made the basis of the text in 11 Encyc. Law, 425, 16 Encyc. Law, 944, and in 16 Cyc. 752, where cases are collated. Among the cases enforcing the doctrine of Mowry's Case, supra, may be cited Morris v. Orient Ins. Co., 106 Ga. 472, 33 S.E. 430, distinguishing Carrugi v. Insurance Co., 40 Ga. 135, 2 Am. Rep. 567; Elliott v. Whitmore, 23 Utah, 342, 65 P. 70, 90 Am. St. Rep. 700; Gray v. Germania Fire Ins. Co., 155 N.Y. 180, 49 N.E. 675.

The point under consideration is not concluded by the case of Williamson v. Association, 62 S.C. 405, 38 S.E. 616, 1008. On the former appeal in that case (54 S.C. 593, 32 S.E. 765, 71 Am. St. Rep. 822) the court, in determining what was the contract between the parties, considered the representation of the association, in its certificate of stock and literature, that the stock shall mature in a definite number of months, which was inconsistent with its by-laws. On the appeal in 62 S.C. 405, 38 S.E. 616, 1008, the question arose whether it was error to refuse to instruct the jury that defendant could not be estopped by representations in certificate of stock and literature, as they related to a future fact. The court, at page 405 of 62 S.C. (38 S.E. 616, 1008), held that there was no error, because the representations were not in reference to a future fact. What would have been the result, had the representations related merely to future expectations or intentions with respect to a contract merely proposed, does not appear, except inferentially. It has frequently been held in this state that if an insurance agent, at the inception of the contract, has knowledge of a fact constituting a forfeiture, such knowledge is imputed to the company, and the issuance of the policy as a valid policy estops the company from asserting the forfeiture. Gandy v. Insurance Co., 52 S.C. 228, 29 S.E. 655; Pearlstine v. Insurance Co., 74 S.C. 250, 54 S.E. 372; Doyle v. Hill, 75 S.C. 263, 55 S.E. 446; Fludd v. Assur. Soc., 75 S.C. 320, 55 S.E. 762; Rearden v. State Mutual Ins. Co., 79 S.C. 526, 60 S.E. 1106.

Imputing to defendant company the knowledge had by its agent, then the case practically stands as if the agent had incorporated in the application plaintiff's intention to place a small mortgage on...