Berry v. American Cent. Ins. Co. of St. Louis

Citation132 N.Y. 49,30 N.E. 254
Decision Date08 March 1892
CourtNew York Court of Appeals


Appeal from supreme court, general term, fourth department.

Action by Herman Berry against the American Central Insurance Company of St. Louis. From a judgment of the general term affirming a judgment for plaintiff, defendant appeals. Affirmed.

I. N. Ames, for appellant.

Hannibal Smith, for respondent.

The other facts fully appear in the following statement by BROWN, J.:

Action to set aside a compromise settlement, and a cancellation of a policy of insurance against fire, and a release thereof, and to recover upon the policy. The policy insured the plaintiff to the amount of $875 on buildings and $225 on personal property. Defendant was to make good all loss or damage, etc., not exceeding the above named amounts, ‘nor the interest of the assured in the property,’ etc. The policy provided that it should be void if, without notice to this company, and permission therefor in writing indorsed thereon, the ‘interest of the assured be other than the entire, unconditional, and sole ownership; or if the property insured be a building standing on ground not owned by the assured in fee-simple.’ If further provided that ‘no agent has any power to waive any condition of this policy.’ ‘No notice to and no consent of or agreement by any agent of this company shall be binding on this company until such notice, consent, or agreement, as the case may be, is clearly expressed and indorsed in writing hereon, and signed by such agent.’ The legal title to the real property was in the plaintiff's son, and the plaintiff was in possession under a verbal agreement, whereby he was to occupy the property during his life, and in consideration thereof was to keep it insured, in repair, and pay the taxes thereon. There was a total loss by fire of the buildings within the life-time of the policy, and a loss on personal property of $128.20. Subsequent to the service of proofs of loss, plaintiff, upon the representations of defendant's adjuster that the policy was void by reason of the breach of the conditions as to title, agreed to accept $400 in settlement of his claims, and thereupon received from such adjuster a draft, signed by the general agent, upon the defendant, for such sum, payable to his order, and attached to a blank receipt, and which provided ‘that it would not be paid if detached from the receipt therein referred to.’ Upon receiving this draft plaintiff executed a paper canceling said policy, and delivered it to the agent. Thereafter, being advised that his policy was not void, he offered by letter to return the draft, and demanded full payment of his loss, which being refused, he brought the present action. Further material facts appear in the opinion.

BROWN, J., ( after stating the facts.)

There was in this case no misrepresentation as to any fact which was material to the plaintiff's right to recover upon the policy. Indeed, there is no evidence but that the adjuster personally acted in entire good faith, and, having no knowledge of the information received by the agents as to the title when the insurance was effected, doubtless believed that the policy was void; but any knowledge or information which any of the defendant's agents received during the transaction with the plaintiff is by law imputed to it, and assuming that the plaintiff, at the time of effecting the insurance, stated correctly the facts as to the title, the statement made by the adjuster, that the policy, by reason of its conditions, and the fact that the plaintiff's son was the owner, was, as emanating from the defendant, fraudulent in law, and deceitful. The court found, in substance, that the settlement and the cancellation of the policy were procured by the statement made to the plaintiff that the policy was void, and that, relying upon such statement, plaintiff was led into a mistake as to his legal rights thereunder. The evidence on the subject was that the adjuster read to the plaintiff the clause in the policy declaring that it should be void if the interest of the assured was other than that of sole and unconditional ownership, and-told him that he was well acquainted with the law of insurance, and, because the property belonged to his son, plaintiff had no right to insure it in his own name, and the policy was for that reason void, and nothing could be collected upon it. The plaintiff was a man of little business experience, although he had education enough to understand the transaction, and read the papers which he signed; and he made the settlement voluntarily, without any coercion upon him, but relied upon the representation as to the law governing his case, which the defendant falsely made to him. There is no question, of course, but that a court of equity cannot grant relief solely upon a mistake of law. But there was here more than a mistake. There was a surrender of legal rights, intentionally induced and procured by a false representation as to the law governing the case. The defendant must be presumed to have known that it was liable for the whole loss; and, by falsely representing that, under the law applicable to the case, the policy was void, when in fact it was valid, it induced the plaintiff to rely upon the superior knowledge that it possessed upon the subject, and to surrender to it his claim. This clearly constituted fraud, and there would be manifest injustice in upholding a settlement under such circumstances. We think the case falls within well-settled rules of equitable jurisdiction, and that the decision of the special term was right. 2 Pom. Eq. Jur. §§ 847-849; will. Eq. Jur. pp. 68, 69; Busch v. Busch, 12 Daly, 476; Wheeler v. Smith, 9 How. 55;Cooke v. Nathan, 16 Barb. 342;Boyd v. De La Montagnie, 73 N. Y. 498;Jordan v. Stevens, 51 Me. 78;Insurance Co. v. Bowes, 42 Mich. 19;Freeman v. Curtis, 51 Me. 140. The appellant does not, however, question the power of the court to grant relief in such a case, and the only point seriously urged upon us in this connection is that the plaintiff made no proper or sufficient tender of the draft to the defendant before bringing suit. The plaintiff offered in his complaint to deliver up the draft, and upon the trial produced it in court, and by the decree it was to be deposited with the clerk, and delivered to the defendant or its agent. It was unnecessary for the plaintiff to do more than he did. In fact he had received nothing from the defendant. Between parties the note of one of them is not property, but a mere promise to pay, which is avoided by rescission of the contract. The draft which plaintiff held was drawn upon defendant by its own agent. It was of no greater force or value that the defendant's note would have been, and in such a case a tender and surrender upon trial was all that was essential to the plaintiff's right to the relief sought. Thurston v. Blanchard, 22 Pick. 18;Nichols v. Michael, 23 N. Y. 264;Gould v. Bank, 86 N. Y. 75-82. But in an equity action to rescind a settlement the rule invoked by defendant has no application. If the plaintiff had failed on the trial, the settlement would have stood, and be would have been entitled to retain and use the draft. And it is sufficient in such an action for the plaintiff to offer in his complaint to restore what he has received, and the rights of the parties are then regulated and protected in...

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