Gaskill v. Northern Assur. Co.

• Decision Date: 02 June 1913
• Parties: GASKILL v. NORTHERN ASSUR. CO.
• Court: Washington Supreme Court

132 P. 643

73 Wash. 668

GASKILL v. NORTHERN ASSUR. CO.

Supreme Court of Washington

June 2, 1913

Department 2. Appeal from Superior Court, Spokane County; E. H Sullivan, Judge.

Action by Phelbe Gaskill against the Northern Assurance Company. From a judgment for plaintiff, defendant appeals. Affirmed.

Happy Cullen, Lee & Hindman, of Spokane, for appellants.

Barnes & Dillard and Luby & Pearson, all of Spokane, for respondent.

ELLIS J.

The plaintiff, as assignee of A. W. Amick and Nettie B. Amick husband and wife, brought this action to recover for a total loss on a policy of fire insurance issued by the defendant. The property insured was a dwelling house situated on a lot formerly owned by one Frank Egan, who wrote the insurance as local agent for the defendant. He had just sold this property and other property to the Amicks, canceled the policy which he had been carrying upon the same property, and solicited the business of rewriting the insurance in the defendant company. The business was all transacted through Amick, the agent testifying that he did not see Mrs. Amick at all, but that her husband told him to go ahead and write the insurance; that he knew that this property was Mrs. Amick's separate property, but just 'unthinkingly' wrote it up in A. W. Amick's name. The policy was delivered and paid for. The loss occurred during the term of the policy and the defendant denied all liability. The cause was tried to the court without a jury, and judgment was rendered in favor of the plaintiff, from which the defendant prosecutes this appeal.

The only defense advanced is that the policy was invalid because it insured the property in question in the name of A. W. Amick, whereas it belonged to Nettie B. Amick, his wife. The sufficiency of that defense rests upon the question whether the knowledge of the trust ownership possessed by the agent bound the appellant, as principal, so as to make the agent's mistake the mistake of the appellant, of which it cannot take advantage. As to what notice or knowledge of the agent will bind the principal, Mechem, in his work on Agency (section 721), lays down the rule, which he states is supported by the better reason and the clear preponderance of authority, as follows: 'The law imputes to the principal, and charges him with, all notice or knowledge relating to the subject-matter of the agency which the agent acquires or obtains while acting as such agent and within the scope of his authority, or which he may previously have acquired, and which he then had in mind, or which he had acquired so recently as to reasonably warrant the assumption that he still retained it; provided, however, that such notice or knowledge will not be imputed: (1) Where it is such as it is the agent's duty not to disclose; and (2) where the agent's relations to the subject-matter, or his previous conduct, render it certain that he will not disclose it; and (3) where the person claiming the benefit of the notice, or those whom he represents, colluded with the agent to cheat or defraud the principal.'

There is an irreconcilable inharmony in the adjudicated cases; but, whatever their preponderance in number, we are clear that the better reasons support the rule so announced and qualified. It is sustained by Pomeroy, who, after stating the general principle that the information of the agent in order to bind the principal must be acquired while he is agent and usually in the course of the transaction in which the principal is sought to be charged with notice, says: 'The foregoing requisite, general as it is in its application, is subject to an important and well-settled limitation, equally depending upon motives of expediency. Where the transaction in question closely follows and is intimately connected with a prior transaction in which the agent was also engaged, and in which he acquired material information, or where it is clear from the evidence that the information obtained by the agent in a former transaction was so precise and definite that it is or must be present to his mind and memory while engaged in the second transaction, then the foregoing requisite becomes inapplicable; that notice given to or information acquired by the agent in the former transaction operates as constructive notice to the principal in the second transaction, although that principal was a complete stranger to and wholly unconnected with the prior proceeding or business.' Pomeroy's Equity Jurisprudence (3d Ed.) § 672; 31 Cyc. 1593-1595; Wade on Notice (2d Ed.) § 687; Chouteau v. Allen, 70 Mo. 290.

There are no facts here involved upon which to invoke either of the three exceptions to the rule noted by Mechem. The case falls sequarely within the rule itself. The agent testified: 'I traded that property, together with other property, to Mr. Amick for a ranch, and in the trade * * * that particular house and the property was to be Mrs. Amick's; I understood that at the time.' When asked if he knew it at the time he wrote the policy, he answered: 'Well, I had known it all the time up to that time.' And again he testified: 'I canceled the policy I had and I solicited the business to write it for the Northern Assurance Company, and just unthinkingly wrote it up in A. W. Amick's name. I didn't see Mrs. Amick at all, and he told me to go ahead and write the insurance, that he wanted the insurance, and I wrote the policy up, and I didn't think anything more about it. Of course, I knew it was Mrs. Amick's; at least, it was my understanding that it was Mrs. Amick's property, and I didn't think anything about having to go and search the records to find out who had the right or title in his name.' It is plain that the agent had actual knowledge that Mrs. Amick owned this property. He acquired this knowledge almost simultaneously with the writing of the policy. He does not claim to have forgotten it, but unhesitatingly says that he knew it all the time, but just 'unthinkingly' wrote it up in Amick's name. If there ever was a case in which actual contemporaneous knowledge of a material fact on an agent's part should be held to bind the principal, these facts present it. We held in Deering v. Holcomb, 26 Wash. 588, 67 P. 240, 561, that knowledge acquired by an attorney while employed by the principal a year before bound the principal in another independent employment of the same attorney by the principal after the lapse of that year, so as to start running the statute of limitations against the principal from the date of the last employment. We there said: 'It is a general rule that notice to the attorney is notice to his client; that this rule applies to all notices arising in the progress of a case, or as to other matter in which the relation of attorney and client exists at the time of the notice, and it applies not only to knowledge acquired by the attorney in the particular transaction, but to knowledge acquired by him in a prior transaction in which he acquired material information, if the information was so precise and definite that it is or must be present to his mind and memory in the last transaction. The Distilled Liquor Spirits, 11 Wall. 356 ; 2 Pomeroy, Equity Jurisprudence, § 672; Wittenbrock v. Parker, 102 Cal. 93, 36 P. 374, 24 L. R. A. 197, 41 Am. St. Rep. 172.' To hold the principal affected with notice in that case where there was no continuous employment, and to hold the contrary in this case where there was a continuous employment covering the period when the knowledge was acquired, because the notice was acquired in a matter in which the agent was acting for himself, would be to ignore the rationale of the rule, namely, that it was the duty of the agent to divulge the facts to his principal and to act upon them for his principal, if material to the business in hand and present in his memory.

The cases relied upon by the appellant are not, as we read them controlling on the facts here. In Pacific Manufacturing Co. v. Brown, 8 Wash. 347, 36 P. 273, the attorney had been employed by each of the antagonistic parties. He owed an equal duty to each. He occupied a position of divided allegiance. Though the opinion does not advert to this point, his prior knowledge was acquired in his professional relations to a former client. His case would seem to fall within the first and second exceptions noted in the rule as announced by Mechem. 1 Am. & Eng. Enc. of Law, 1145. In Meyers v. Gerhart, 54 Wash. 657, 103 P. 1114, there was no agency in the ordinary sense requiring the communication of the knowledge to the principal, but a mere subsequent employment of a former servant of the adverse party. There was no agency to do anything requiring the exercise of such knowledge in the new master's business. Whatever knowledge he had was, in the language of the opinion, 'acquired by him long before his employment by the respondents,' who were sought to be charged with his knowledge. His knowledge was not only acquired at a distant time, but before the supposed agency ever came into existence. The distinction from the facts here is too plain to require further amplification. In the case of Wheeler v. McGuire, 86 Ala. 398, 5 So. 190, 2 L. R. A. 808, the notice was received before the agency was created, which is...