Michigan Pipe Co. v. Michigan Fire & Marine Ins. Co.

• Decision Date: 28 July 1892
• Citation: 92 Mich. 482,52 N.W. 1070
• Parties: MICHIGAN PIPE CO. v. MICHIGAN FIRE & MARINE INS. CO.
• Court: Michigan Supreme Court

52 N.W. 1070

92 Mich. 482

MICHIGAN PIPE CO. v. MICHIGAN FIRE & MARINE INS. CO.

Supreme Court of Michigan

July 28, 1892

Error to circuit court, Bay county; GEORGE P. COBB, Judge.

Action by the Michigan Pipe Company against the Michigan Fire &amp Marine Insurance Company to recover upon insurance policies. From a judgment for plaintiff, defendant brings error. Reversed.

Hanchett, Stark & Hanchett, (Thomas Bates of counsel,) for appellant.

Hatch & Cooley, for appellee.

GRANT J.

This is an action upon two policies of insurance, dated respectively, July 2 and 3, 1890, for $2,500 each, upon lumber claimed to have been the property of the plaintiff, and situated upon two docks in East Tawas, Mich. The property insured was consumed by fire on the night of July 5th following. One J. H. Schmeck was the defendant's agent at East Tawas at this time, and was authorized to "receive proposals for insurance against loss or damage by fire, * * * to fix rates of premium, to receive moneys, and to countersign, issue, renew, and consent to the transfer of policies of insurance, subject to the rules and regulations of the company, and to such instructions as may, from time to time, be given by its officers." He also was the agent of several other companies. Schmeck's wife was a stockholder of the plaintiff, and his brother-in-law was its secretary and treasurer, and its general office was in Bay City. One Moulthrop was plaintiff's agent at East Tawas, and testified that he made application to Schmeck on the 26th of June for insurance. He said: "I told him I wanted $25,000 of insurance on Lock's dock, $18,000 on Emery's main dock, and $2,000 on the shore." Nothing was said about the rate of insurance, or the time it was to run, or the companies in which it was to be placed. Schmeck said he would write it right away, and Moulthrop testified that he understood that the insurance was to begin at once, and that such was his intention. Neither Moulthrop, nor any one else, on behalf of the plaintiff, paid any further attention to the insurance until after the fire. The fire occurred Saturday night. On Sunday, July 6th, Moulthrop and Smith, the plaintiff's secretary and treasurer, having been notified by telegraph of the fire, went from Bay City to East Tawas, and in the evening saw Schmeck at his house, and asked for the policies. Schmeck said they were locked up in his safe, and he would send them the next day. Mr. Smith received them by mail, July 8th. On July 7th, Schmeck forwarded to defendant by mail the daily reports of this insurance, and also by letter notified it of the loss. The receipt of these communications on July 9th was the first information defendant received of this alleged insurance. Aside from the above, the only evidence of the issuance of these policies, or of any contract of insurance, comes from Mr. Schmeck. He testifies that Mr. Moulthrop applied to him for insurance June 26th; that these policies were written up and signed by him on the 2d and 3d of July. He did not know when they were "ruled up." Some of the policies were ruled up Monday morning, but he did not know whether these were or not. He signed them before they were ruled up. That was his custom. His instructions required him to make a report of all insurance on the day he received it, but he disregarded these instructions. The daily reports were made out Saturday the 5th, placed in an envelope, directed, and deposited in the post office about 7 o'clock that night. Schmeck was postmaster. He went to the post office about 7 o'clock Monday morning, July 7th, changed the post-office stamp back from the 7th to the 5th, and stamped the envelope containing these reports with the stamp so changed. At this time he had not mailed the policies to Mr. Smith. They were not at that hour ready for mailing. They were ruled up after that time by one Sims, his bank clerk. He placed this insurance in 16 companies. On Monday, the 7th, he notified some of these companies by telegram to reinsure the lumber, but did not telegraph the defendant. All the policies were sent to plaintiff at the same time. This is all of his evidence which it is material to mention. The amount of insurance on the lumber upon the Emery dock was written up at $17,500, though the amount ordered was $18,000. August 18th plaintiff sent a check to Schmeck for the total amount of the premiums upon these policies. Schmeck replied to this communication that he placed $125 of this amount to the credit of plaintiff's account, subject to its order, because he had been instructed by the defendant not to receive any premium from the plaintiff. Schmeck's agency for the defendant was terminated July 9th. Plaintiff did not withdraw this money from Schmeck, and made no further offer of payment for the premium. Smith, plaintiff's secretary, testified that at the time he sent the check he did not know that Schmeck's agency had been terminated. Plaintiff also gave evidence showing that G. P. and H. B. Smith, who were the plaintiff's managers, had also been managers for three other lumber companies doing business at East Tawas, and that as such they had obtained large insurance through Schmeck; that their custom had been to take such insurance for a year; that there had been a uniform rate for lumber on these docks, though plaintiff did not know what it was, and that they generally left their policies in Schmeck's hands until they got through sawing; and that the policies were canceled as fast as the lumber was shipped, and that the premiums were paid whenever Mr. Schmeck sent his bill. This testimony was received under objection. Plaintiff had had no dealings with the defendant prior to the insurance here involved. Mr. Moulthrop also testified that the rate of insurance depended upon the exposure; that the different piles upon the mill docks were subject to different exposures; and that the rate would be higher on one lot of lumber on one dock than on another. Plaintiff had sold a part of the lumber on Emery's main dock to E. & B. Holmes. The contract was in writing, and is as follows: "Sold E. and B. Holmes all the lumber to be cut from 6 I. N. logs now in Emery Bros.' boom, being from 2 to 2 1/2 millions feet, at $10 for shipping culls, $20 for common, $37 for uppers, and mill culls, $6. We to sort out coarse top logs, being from 15 to 20 per cent. Said lumber to be the first sawing in the spring, which is expected to commence April 1st, if so, and be finished by May 1st. They to give us their paper for $20,000, to come due between September 1 and October 15, averaging the time. Balance of lumber to be paid by 60-day paper from shipment. If any more time is wanted, they to have it by paying interest. We to insure lumber payable to E. and B. Holmes, as their interest may appear."

This contract did not provide for inspection, but it was agreed that one Chamberlain should inspect the lumber when shipped and that the expense should be borne equally between them. Early in June all the Holmes lumber had been sawed, and piled upon the dock, separate from all other lumber, and marked with the log mark, and three vessel loads had been shipped under the direction of the Holmes. The note for $20,000 had been given; the vendees were at liberty to ship it at any time they chose, and were to pay for loading it. In May previous to the fire Mr. Henry B. Smith, on behalf of the plaintiff, made a contract with one Hazard for the sale of 1,000,000 feet of lumber. This contract rested in parol. Mr. Smith testified in regard to it as follows: "The bargain was closed up in the early part of May. Hazard was to take 1,000,000 or more feet of lumber, at $21 straight, except the mill culls. $6 was the price fixed on the mill culls. This lumber was sawed out during the early part of the year, up to the first of June. After the close of the bargain with Hazard, about one third of the lumber had yet to be sawed. Mr. Chamberlain was to inspect it. In the course of the business the inspecting, measuring and scaling of the lumber was to take place probably along in June, the scaling to be done when the lumber was shipped. Each cargo would be scaled as it would be put on the vessel." Mr. Moulthrop testified in regard to this lumber: "At the time of the fire the amount of lumber on the Lock & Steven's dock was 1,851,735 feet. Of that, from 430,000 to 540,000 feet had been sold to C. P. Hazard, and stood in piles by itself on the dock ready for shipment, marked up to Hazard. It was marked, 'Sold to C. P. H.' The balance of the lumber sold to Hazard had been shipped." Again, he testified as follows: "I put this mark on the lumber piles by no one's direction, to distinguish that lumber from other lumber. No one representing Hazard was present when I put the mark on. They were put on for my own convenience. This lumber sold to Hazard was a part of a larger mass of lumber, so that, before he could get at what was coming to him, it had to be separated from the remainder. As to the marking of the piles, it is customary to do that to distinguish lumber from other lumber, so that anybody could readily see what lumber it is. * * * In order to determine what he was to pay for each shipment, it would have to be measured and inspected, in order to separate the better lumber from the mill culls, and to determine the amount." The policies were to run one year from the 2d and 3d days of July, at noon, and covered "lumber, lath, and shingles owned by the assured, or held in trust or on commission, or sold, but not delivered, piled on the docks of Temple Emery, and of Lock & Stevens." The above full statement of the evidence is necessary to an understanding and determination of the questions raised. The defendant introduced no evidence, and the court directed a verdict for ...