Orient Ins. Co. v. Dunlap

• Decision Date: 25 October 1941
• Docket Number: 13896.
• Citation: 17 S.E.2d 703,193 Ga. 241
• Parties: ORIENT INS. CO. v. DUNLAP et al.
• Court: Georgia Supreme Court

17 S.E.2d 703

193 Ga. 241

ORIENT INS. CO. v. DUNLAP et al.

No. 13896.

Supreme Court of Georgia

October 25, 1941

Rehearing Denied Nov. 20, 1941.

Second Motion for Rehearing Denied. Dec. 2, 1941.

Syllabus by the Court.

1. While in a proper case equity may reform a written contract which, because of mutual mistake, does not express what the parties intended, it can do so only to the extent of making it speak the actual agreement, and cannot make a new and different contract for them. According to the petition, the agreement as actually made and intended was one for marine and war-risk insurance covering transportation from Germany to this country of what was believed to be a genuine pearl necklace of the value of $60,000; and there was no agreement or intention as to insurance of a necklace of different and inferior quality, such as a necklace made of Japanese or cultured pearls and worth only about $60. In the circumstances, the policy could not properly be so reformed as to insure a necklace of the latter character instead of a necklace of genuine pearls. The petition did not state a cause of action for reformation.

2. Although the amount of the premium may have been agreed upon by the parties under a mutual mistake as to the character and value of the article insured, it cannot after payment be recovered by the insured in any part merely because of the subsequent discovery of such mistake, but it must also appear that the insurer cannot in good faith retain the sum paid.

(a) The petition shows affirmatively, that, whatever may have been the real extent of the risk under the law and the actual facts, the insurance company was exposed to an apparent risk comparable at the agreed rate with the amount of the premium paid, and might have been subjected to liability accordingly, if the article had been lost in transportation. Therefore the premium may in equity and good conscience be retained by the insurer.

(b) The petition did not state a cause of action for any of the relief sought, and the court erred in not sustaining the general demurrer filed by the insurance company.

R. C Dunlap, Giles Hardeman and Marion Smith, as executors of the estate of Mrs. Ilah D. Little, deceased, filed a suit in equity against Orient Insurance Company, seeking reformation of a policy of war risk and marine insurance covering transportation of certain personal effects, including a pearl necklace, to this country from Germany, where Mrs. Little died, and to recover a portion of the premium paid in so far as related to the necklace; the alleged basis for the relief sought being mutual mistake of the executors and the insurance company as to the character and value of such necklace. General and special demurrers to the petition as amended were overruled, and the defendant excepted.

The petition as amended contained substantially the following allegations: Mrs. Little died on July 26, 1939, while visiting in Carlsbad, Germany, having with her at the time sundry personal effects, including jewelry and wearing apparel. In pursuance of the law of Germany, a court commissioner took possession of the personal effects that she had in her possession at the time of her death, and on July 26, 1939, issued 'an official protocol' containing an inventory of the same. In this inventory was a valuation of each article, based upon an appraisal made under the exclusive supervision of said court commissioner. One item so listed and appraised was one 'genuine pearl necklace,' valued in the inventory at 150,000 reichmarks which was the equivalent of $60,000 in money of the United States. The protocol and inventory listed numerous other items, including cash, but contained the statement 'There is sufficient cash available for the death taxes.' Petitioners, on receiving their appointment as executors of Mrs. Little and as a part of their duties, undertook to bring back to this country and obtain possession of said personal property and personal effects, which were in charge of the German court commissioner after Mrs. Little's death. Accordingly, petitioners employed the American Express Company, which is a corporation of this country, having branch offices in Germany, to attend to the details of bringing the aforesaid property back to this country, and into possession of the duly appointed executors. Petitioners were able through the American consul in Dresden, Germany, to obtain an official copy of said protocol, and this document was the only source of information to petitioners as to the property and effects of Mrs. Little then in Germany. Petitioners show that Mrs. Little was a widow and was accompanied on her trip only by a lady traveling companion, who was also in Germany at the time of Mrs. Little's death; and that no inquiry from any person disclosed any list of the property in Mrs. Little's possession at the time of her death or its value. Petitioners deemed it advisable and in accordance with their duties as executors, to obtain war-risk and marine insurance covering comprehensively all risks of loss of said property during its passage from Germany to this country, and they requested the American Express Company to obtain such insurance.

The said protocol valued all of the property contained in said inventory, including the supposed pearl necklace, at $68,035. The American Express Company was furnished a copy of this protocol, and was requested to obtain insurance in this amount. Pursuant thereto, this information was submitted to the defendant, and insurance in this amount was taken out with defendant, covering all hazards and risks of loss to said property during its passage from Germany to petitioners. The American Express Company in the course of its business as a private organization was often called upon to obtain insurance on many shipments handled by it. For this reason, and as a matter of convenience, the defendant herein has given to the American Express Company a master policy under the terms of which policy a separate certificate is issued for each separate insurance contract executed. The marine insurance was issued for a premium of thirty cents per $100, or a total of $204.11, and the warrisk premium was computed at three and three-fourths per cent. of value, being a premium of $2,551.31, and the total insurance premium amounted to $2,755.42. This premium was paid on behalf of petitioners to the defendant herein. Said property and personal effects were shipped from Germany on or about June 1, 1940, aboard the steamship 'Manhattan,' and arrived in New York on or about June 11, 1940. Said package of property was opened at the office of the Guaranty Trust Company of New York, in the presence of R. C. Dunlap, one of the petitioners herein, a representative of the American Express Company, and a representative of the Guaranty Trust Company. The package did not contain any genuine pearl necklace. Petitioners thereupon called in jewelry experts of New York City, who examined the contents of the package, and placed on it a total valuation of $7,296. The discrepancy between the valuation so made and the valuation appearing in the German protocol was due primarily to the absence of the genuine pearl necklace, valued in the official German protocol at $60,000 as aforesaid. When the shipment arrived in the United States, it was discovered that the pearls were Japanese pearls, that is, of inferior quality to what is commonly known as genuine pearls, and that such pearls had a maximum valuation of approximately 200 reichmarks, or approximately $61.50. According to common understanding and common usage the term 'genuine pearls' refers to jewels of an entirely different kind and nature from those known as 'cultured' or 'Japanese' pearls.

Petitioners are advised and therefore allege that there never was among the effects of Mrs. Little a genuine pearl necklace upon which the insurance so taken out could have applied. On the contrary, said insurance contract was taken out covering this genuine pearl necklace on a mutual mistake of fact on the part of your petitioners and the defendant herein, and the said premium was paid by petitioners to the defendant on the basis of this mutual mistake of fact. Immediately upon becoming acquainted with the facts herein alleged, the defendant was notified of the said mistake on July 19, 1940, and was requested to reform said insurance policy in accordance with the actual facts, and to refund to petitioner that portion of premium which had been collected by defendant by reason of said mistake; notwithstanding which the defendant refused and still refuses to take any action in the matter. In equity and good conscience petitioners are entitled to recover from the defendant $2,430 paid to defendant by reason of said mutual mistake of fact. In bringing this suit, petitioners are acting on the bona fide belief that both parties were mistaken as to the existence of the genuine pearl necklace insured. If it be shown that petitioners are now mistaken in that belief, and that there was a genuine pearl necklace in existence and insured by defendant, then and in that event petitioners expressly reserve the right to claim the full amount for which said necklace was insured; that is $60,000 by reason of its loss.

As shown by exhibit attached to the petition, the certificate as based on a master policy stated the amount of insurance to be $68,035, and described the subject-matter as 'Shipment miscellaneous jewelry & personal effects, valued at sum insured.' Copies of various clauses of the master policy also were attached as exhibits. A further exhibit was a copy of a 'subsequent protocol' issued by the German commissioner and dealing especially with the pearl necklace. This instrument was dated August 30, 1940, and purported to...