Cranston v. California Ins. Co.

• Decision Date: 25 November 1919
• Citation: 94 Or. 369,185 P. 292
• Parties: CRANSTON ET AL. v. CALIFORNIA INS. CO, [a1]
• Court: Oregon Supreme Court

185 P. 292

94 Or. 369

CRANSTON ET AL. v. CALIFORNIA INS. CO, ^[a1]

Supreme Court of Oregon

November 25, 1919

In Banc.

Appeal from Circuit Court, Baker County; Gustav Anderson, Judge.

Action by Earl F. Cranston and another, doing business under the firm name of Cranston & Masters, against the California Insurance Company. From a judgment of involuntary nonsuit plaintiffs appeal. Affirmed.

The defendant is a California insurance corporation. After reciting this fact, the complaint proceeds as follows:

"That heretofore, and on or about the 23d day of June, 1916, in consideration of the premium then paid and for value received, the above-named defendant duly and regularly made, executed, and delivered to plaintiffs their certain certificate of insurance in words and figures following, to wit: 'Hughes & Co., Real Estate and Insurance Agents. Baker, Oregon, June 23, 1916. Messrs. Cranston & Masters Baker, Oregon--Gentlemen: Pending receipt of our covering notes, this will serve to protect you against loss or damage resulting from fire or theft on the following cars in the amount indicated from noon of this date, said coverings being in the California Fire Insurance Company viz.: Studebaker Six 17 Series No. 645718, $970.00, rate 1.25. Thanking you for the favor of this business and soliciting your further commands, we beg to remain very truly yours, [Signed] Hughes & Co.'--and promised and agreed to indemnify plaintiffs against loss by fire in the said sum of $970, and that no covering notes as aforesaid were ever issued to or received by plaintiffs, or either of them, and that when said insurance was issued, and when said loss by fire occurred, the plaintiffs were the owners of said automobile, which was of the value of $1,200."

The primary pleading of the plaintiffs concludes with the statement that the automobile in question was destroyed by fire about September 6, 1916, of which fact the plaintiffs notified the defendant and presented proof of loss, but the defendant refused to pay them therefor.

The answer traverses the whole complaint, except the allegation about the corporate character of the defendant. It affirmatively alleges the defendant's version of the transaction, to the effect that at the time mentioned in the complaint the plaintiffs applied to Hughes & Co. for insurance; that the latter executed the instrument quoted in the complaint, without any authority whatever from the defendant to do so; that Hughes & Co. delivered the instrument to the plaintiffs as a temporary device, to serve only until the proper forms could be obtained from the defendant covering the insurance on the car in question in what is known as a dealer's policy, or a "floater" policy, to be evidenced in part by what are known as covering notes; that the defendant issued such documents and placed them in the hands of Hughes & Co. for delivery to the plaintiffs, but that, although the plaintiffs well knew the documents issued by the defendant were in possession of Hughes & Co. ready for delivery, they waived delivery of the same. The answer further sets up the provisions of the policy in part as prescribed in the standard policy law of this state, and avers matter showing a breach of the contract by the plaintiffs, in that they had sold the car and placed it in the actual and exclusive possession of the purchaser, all without the knowledge or consent of the defendant.

This matter is denied by the reply, and other allegations are made by way of estoppel. At the close of the testimony for the plaintiffs, the court sustained a motion for a judgment of involuntary nonsuit, and the plaintiffs appeal.

O. B. Mount, of Baker, for appellants.

William Smith, of Baker (J. J. Heilner, of Baker, on the brief), for respondent.

BURNETT J. (after stating the facts as above).

As stated, the instrument upon which the plaintiffs rely is set out at large in the complaint. It is true the pleading says that the defendant made this instrument and thereby promised and agreed to indemnify the plaintiffs against loss by fire etc. In Somers v. Hanson, 78 Or. 429, 153 P. 43, Mr. Chief Justice Moore declared the law of such a pleading in these words:

"When the contract sued upon is set out in hæc verba, it will be so construed that its legal effect will be recognized. If the writing is thus declared upon, it is superfluous to state what its legal effect is. 4 Ency. Pl. & Pr. 918. If there be any discrepancy between the averments of a pleading and the terms of a writing properly identified or attached to a statement of facts constituting a cause of action or a defense, the language of the exhibit will control in determining its legal effect. 31 Cyc. 563; Patrick v. Colorado Smelting Co., 20 Colo. 268, 38 P. 236; Lewy v. Wilkinson, 135 La. 105, 64 So. 1003. The promissory note having, in effect, been set forth in the complaint in the exact language employed in the negotiable instrument, the allegation of the legal effect of the writing as stated in the pleading must be disregarded as superfluous and variant."

Taking, then, the language of the instrument itself, it is the duty of the court as a matter of law to give it the proper legal construction. The wording of this document contains nothing binding upon the defendant. It is purely the statement of Hughes & Co. The complaint seems to be drawn upon the theory that Hughes & Co. was the agent of the defendant.

"A contract by an agent should be in the name of his principal, so as to show beyond question that it is the principal who contracts, and not the agent, since the intention of the parties, as legally evidenced by the terms of the contract itself, is always the governing consideration in determining who is bound by the contract. It is not alone sufficient that the agent has authority to bind the principal, but he must in fact make the contract the obligation of the principal in terms, in order to bind him. No particular form of words is necessary for this purpose; the material thing is that it appear on the face of the instrument that it is the principal who makes the grant or incurs the obligation, which induces the contract to be made by the other party." 2 C.J. 670.

"Generally the agent, and not the principal, is personally bound by a contract containing apt words to bind him, if he executes the contract in his own name, and makes the promises and undertakings his own, without any suggestion or indication that he is contracting for another, although he recites that he is an agent, or the other party knows that he is such, and the agent also will be liable when he so executes the contract as in terms to bind both himself and the principal; and it has been held that where the contract is signed by the agent with an affix indicating his agency and principal, and the consideration moves to the principal, both may be held liable." 2 C.J. 682.

On its face the instrument pleaded does not amount to anything except the personal promise of Hughes & Co. It indicates nothing more than that Hughes & Co. promises as an insurance broker to procure from the defendant certain insurance in favor of the plaintiff. Containing no language which is binding upon the defendant, it cannot be given a legal effect to charge the company. In view of the doctrine announced by Mr. Chief Justice Moore in Somers v. Hanson, supra, the complaint does not state facts sufficient to constitute a cause of action against the defendant.

On the evidence as disclosed by the record the plaintiffs are not in any better plight. Their narration of the history of the document upon which

they rely is substantially as follows: They were dealers in automobiles at the time in question. Having received a new stock of six machines, they telephoned to a woman employé in the office of Hughes & Co., saying they wished some insurance on these cars. She went to their place of business, and with the assistance of one of the firm took the numbers of the machines and returned to her office, where she wrote out and mailed to the plaintiffs the instrument in question. Afterwards, without the knowledge or consent of the company, directly or through any agency, so far as the evidence discloses, the plaintiffs parted with possession of the automobile, delivering it to George Duncan under a contract for its purchase by the latter, who drove it into Nevada, where it was destroyed by fire. This of itself would defeat plaintiffs' recovery, because it would constitute a breach of the required provisions mentioned in the standard policy law, making the "entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, void, * * * if any change other than by death of an insured, take place in the interest, title, or possession of the subject of insurance." Laws 1911, c. 175. The "covering note," so called, which the defendant issued in connection with the policy, is in evidence and contains this provision:

"It being understood and agreed that this insurance is subject to all the terms and conditions of the automobile floater policy now in use by the California Insurance Company covering

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