Johnson v. Continental Ins. Co. of New York

• Decision Date: 05 December 1907
• Parties: JOHNSON v. CONTINENTAL INS. CO. OF NEW YORK.
• Court: Tennessee Supreme Court

107 S.W. 688

119 Tenn. 598

JOHNSON v. CONTINENTAL INS. CO. OF NEW YORK.

Supreme Court of Tennessee.

December 5, 1907

Appeal from Chancery Court, Knox County; Joseph W. Sneed Chancellor.

Bill in chancery on a policy of fire insurance by J. L. Johnson against the Continental Insurance Company of New York. From a judgment for complainant, defendant appeals. Reversed.

Webb McClung & Baker, for appellant.

Thomas L. Carty, for appellee.

NEIL J.

This action was brought in the chancery court of Knox county on an insurance policy to recover $1,500, the amount of insurance on the property described in the policy. There was a decree entered in favor of the complainant for the amount of the policy and interest, and from this an appeal was prayed and prosecuted to this court, and errors have here been assigned in behalf of the defendant. The complainant also assigned errors on the ground that the chancellor failed to allow to him the 25 per cent. penalty provided by statute in cases where the defenses are frivolous.

In order to properly understand the points made in the assignments of error filed by the defendant, it is necessary to state that Blackburn Bros. acted as agents of the company in securing the policy; that at the time the application was made, and an installment note executed for the premium certain statements were made by Robert J. Blackburn, the member of the firm who conducted the matter, and these statements were objected to on the hearing below as incompetent. There were likewise statements of Blackburn proven by the wife of Mr. Johnson, and also by his father the latter at a different time. All of these were objected to in the court below, but the objections were overruled. We shall presently state the substance of the evidence objected to and the grounds of the objection.

The installment note which was given for the premium was in the following words and figures:

"The company is authorized to insert in this note the number and date of policy.

$116.40. For value received in policy No. B ______, dated the ______ day of ______, 190--, issued by the Continental Insurance Company of New York, I promise to pay to said company, or order, at their office in Chicago, Illinois, with expenses of collection and attorney's fees, and without relief from valuation or appraisement laws, one hundred and sixteen and 40/100 dollars, in installments as follows:

$29.10 upon the first day of December, 1902, and

$29.10 upon the first day of December, 1903, and

$29.10 upon the first day of December, 1904, and

$29.10 upon the first day of December, 1905, without interest.

And it is hereby agreed that, in case of nonpayment of any one of the installments herein named at maturity, this company shall not be liable for loss during such default, and the policy for which this note was given shall lapse until payment is made to this company in New York or to the Western Department at Chicago, and in the event of nonsettlement for time expired, as per terms on short rates, the whole amount of installments remaining unpaid on said policy may be declared earned, due, and payable, and may be collected by law. Given in payment for a policy of insurance. If transferred either before or after maturity, this obligation shall be subject to all defenses as if owned by the payee herein named.

J. L. Johnson."

The note was sent on to the company at Chicago, and some days afterwards a policy was sent to the complainant, and this contained the following upon the same subject covered by the provision at the bottom of the note, viz.:

"But it is expressly agreed that this company shall not be liable for any loss or damage that may occur to the property herein mentioned while any promissory note or obligation, or any part thereof, given for the premium, remains past due and unpaid."

The chief evidence objected to was contained in the deposition of Mr. Johnson, to the effect that during the negotiation for the policy, and before the execution of the note, at the time he was negotiating with the agent about the execution of the note, his attention was called to the dates of payment of the installments, and to the forfeiture clause appearing in the last paragraph of the note, and he told the agent that he was engaged in the contracting business, and could not get his money promptly, and did not know whether he would be able to pay the installments when they became due; that thereupon the agent said to him that he need not pay the installments when they became due, but could take his own time to make the payments when he got the money; and that he would waive, for the company, the provision for forfeiture, based on the failure to pay the installments when due.

Mr. Johnson testified in substance that he relied on this statement of the agent and executed the note.

This testimony was objected to on the ground that its purport and effect was to vary a written contract.

This objection was overruled by the chancellor. In this we think his honor erred.

There are a great many cases in our Reports upon the general subject; some stating the rule, and some the exceptions to the rule. It is often difficult to decide when a case falls within one of the exceptions. The rule is that the contract cannot be contradicted or varied by parol. There are exceptions to the effect that an independent collateral agreement may be proven, and also that, when a prior parol contract is only partly reduced to writing, parol evidence may be heard to supply the parts omitted from the writing. The rules and many exceptions may be found stated in the case of Hines v. Willcox, 96 Tenn. 158, 33 S.W. 914, 34 L. R. A. 824, 832, 54 Am. St. Rep. 823. But it has never been held that the added matter could contradict the written portion of the contract, or the written contract; but the direct reverse has been held.

In Stewart, Gwynne & Co. v. Insurance Co., 9 Lea, 104, 112, it is said:

"It will be observed that under these authorities parol proof may be heard as to an independent collateral agreement, or where there has been a parol agreement, and a part only reduced to writing, the whole contract may be proven; but in neither case is the writing to be contradicted." Again, on page 113, the court said: "We think the evidence was properly rejected. It was certainly not an independent collateral agreement. There was but the one contract, either the one specified in the receipt or the parol contract which the defendants offered to prove. Both contracts cannot stand. They are different in their terms and in their practical results, and one must give way to the other. Nor is it a case where only part of the contract was reduced to writing. As we have seen in such cases, there is to be no conflict between the parol contract and the writing. They stand together and are consistent. The only difference is the writing does not embrace it all. In our opinion, the parol proof in this case contradicts the writing, and is therefore not admissible."

It has often been held that parol proof cannot be heard to show that a promissory note was payable at a different time and in a different manner from that set forth in the instrument itself. Hancock & Powell v. Edwards, 7 Humph. 349, 354; Campbell v. Upshaw, 7 Humph. 185, 46 Am. Dec. 75; Ellis v. Hamilton, 4 Sneed, 514; Bender v. Montgomery et al., 8 Lea, 586, 593.

The general rule upon the subject is well stated in Bryan v. Hunt, 4 Sneed, 544, 545, 70 Am. Dec. 262:

"It is a well-settled rule of the common law, independently of the statute of frauds, that where a contract has been reduced to writing, and is complete in its terms and free from ambiguity, verbal evidence is not allowed to be given of what passed between the parties, either before the written instrument was made, or during the time it was in a state of preparation, so as to add to or subtract from, or in any manner to vary or qualify, the written contract. The written instrument must be considered as containing the true agreement between the parties, and as furnishing the best evidence of their final intentions and acts. And this rule, excluding prior or contemporaneous stipulations or conversations, applies with no less force to simple contracts than to contracts by specialty." See, also, Richardson v. Thompson, 1 Humph. 154; Blakemore v. Wood, 3 Sneed, 474; Bridges v. Robinson, 2 Tenn. Ch. 723; Rice v. Steger, 3 Tenn. Ch. 328; Klein v. Kern, 94 Tenn. 37, 28 S.W. 295; Hines v. Willcox, 96 Tenn. 158, 33 S.W. 914, 34 L. R. A. 824, 832, 54 Am. St. Rep. 823; Lewis v. Turnley, 97 Tenn. 197, 36 S.W. 872; Lyons v. Stills, 97 Tenn. 514, 37 S.W. 280; Quigley v. Shedd, 104 Tenn. 560, 58 S.W. 266; Myers v. Taylor, 107 Tenn. 364, 64 S.W. 719; Turner v. Abbott, 116 Tenn. 718, 94 S.W. 64, 6 L. R. A. (N. S.) 892.

In Insurance Co. v. Mowry, 96 U.S. 544, 24 L.Ed. 674, it is said:

"By the express conditions of the policy the liabilty of the company was released by the failure of the assured to pay the premium when it matured, and the plaintiff could not recover unless the force of this condition could in some way be overcome. He sought to overcome it by showing that the agent, who induced him to apply for the policy, represented to him, in answer to suggestions that he might not be informed when to pay the premiums, that the company would notify him in season to pay them, and that he need not give himself any uneasiness on that subject; that no notification was given him before the maturity of the second premium, and for that reason he did not pay it at the time required. This representation before the policy was issued, it was contended in the court below and in this court, constituted an estoppel upon the company against insisting upon the forfeiture of the policy.

...