Empire State Ins. Co. v. American Cent. Ins. Co.
| Decision Date | 06 June 1893 |
| Citation | 138 N.Y. 446,34 N.E. 200 |
| Parties | EMPIRE STATE INS. CO. v. AMERICAN CENT. INS. CO. |
| Court | New York Court of Appeals Court of Appeals |
OPINION TEXT STARTS HERE
Appeal from supreme court, general term, fifth department.
Action by the Empire State Insurance Company against the American Central Insurance Company on a reinsurance agreement. From an order of the general term (19 N. Y. Supp. 504) denying a motion for a new trial, and entering judgment for defendant upon a verdict, plaintiff appeals. Affirmed.
David Hays, for appellant.
I. N. Ames, for respondent.
The firm of Straub & Morris were agents of the plaintiff at Pittsburgh, Pa., in August, 1889, and on the 7th day of that month, as such agents, they issued a policy of insurance whereby the plaintiff insured the Ridgway Lumber Company against loss by fire to the amount of $2,500. Subsequently, on the 20th day of August, the defendant appointed them its agents also. They reported that policy to the plaintiff on the 19th day of August, and it wrote to its special agent, Frank Aull, to have the risk reduced to $1,000, and he notified the agents to cancel the policy, or reduce the risk to $1,000, by reinsurance. Thereafter, on the 21st day of September, Straub & Morris, being then agents for the plaintiff and defendant, reinsured plaintiff's risk with the defendant, to the amount of $1,500, by entering the agreement for reinsurance in their binder book. Subsequently, on the 12th day of October, the property insured was destroyed by fire, before the reinsurance had been reported to the defendant or had come to its knowledge. The plaintiff paid the amount of its liability under its policy for the loss, and then brought this action against the defendant to recover three-fifths thereof under its reinsurance agreement. The defendant refused payment, and defended the action on the ground that Straub & Morris could not bind it by the agreement for reinsurance, because they were at the same time the agents of the plaintiff, and could not act in the dual capacity of agents for both parties in effecting the reinsurance. The court below upheld the contention of the defendant, and whether it was right in so doing is the sole question for our determination.
It is not doubted that the same person may sometimes act as agent for the two parties in the same transaction; but he can do so only in case he has no discretion to exercise for either party. An agent to sell for one party may also act as agent for the buyer, but only in case the price and terms of sale have been fixed by each party, so that nothing is left to his discretion. But an agent to sell, intrusted with a discretion, and thus bound to obtain the best price he can, cannot buy for himself or as agent for another. In such a case he would occupy an antagonistic position, and there would be a conflict of interests. He could not faithfully serve the one party without betraying the interests of the other. He would at least be under great temptation to betray the interests of one of the parties. So a person may sometimes act as agent of both parties in the making of any contract; but he cannot do so when he is invested with a discretion by each party, and when each is entitled to the benefit of his skill and judgment. The rules of law upon this subject have been laid down and illustrated in many cases, of which it is sufficient for the present purpose to cite the following: Utica Ins. Co. v. Toledo Ins. Co., 17 Barb. 132;Ritt v. Insurance Co., 41 Barb. 353;New York Cent. Ins. Co. v. National Protection Ins. Co., 14 N. Y. 85;Claflin v. Bank, 25 N. Y. 293;Murray v. Beard, 102 N. Y. 505, 509, 7 N. E. Rep. 553; Porter v. Woodruff, 36 N. J. Eq. 174;Michoud v. Girod, 4 How. 503. Contracts thus negotiated are void at the option of any nonassenting party thereto. The policy of the law condemns them. It matters not that the agent has acted fairly and honestly, and even that neither party...
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