Ratliff v. St. Paul Fire & Marine Ins. Co.

• Decision Date: 24 February 1925
• Citation: Ratliff v. St. Paul Fire & Marine Ins. Co., 207 Ky. 492, 269 S. W. 546 (Ky. Ct. App. 1925)
• Parties: RATLIFF v. ST. PAUL FIRE & MARINE INS. CO.
• Court: Kentucky Court of Appeals

269 S.W. 546

207 Ky. 492

RATLIFF v. ST. PAUL FIRE & MARINE INS. CO.

Court of Appeals of Kentucky.

February 24, 1925

Appeal from Circuit Court, Pike County.

Action by Roy Ratliff against the St. Paul Fire & Marine Insurance Company. From judgment of dismissal, plaintiff appeals. Affirmed.

Daugherty & Barrett, of Pikeville, for appellant.

Harman Francis & Hobson, of Pikeville, and F. M. Drake, and Bruce Bullitt & Gordon, all of Louisville, for appellee.

SANDIDGE C.

On April 11, 1922, appellee, St. Paul Fire & Marine Insurance Company, issued to appellant, Roy Ratliff, a fire insurance policy insuring him for one year against loss or damage by fire, not to exceed $1,500, to a stock of merchandise. The premium was $38.25, for which appellant gave appellee his check. The check was deposited the following day, and in the usual course of business was presented to the bank on which it was drawn for payment. The check was dishonored, and returned to appellee marked, "insufficient funds." It thereupon wrote appellant a letter advising him that his check had been dishonored, and directing that he return the policy, with advice that immediately upon its receipt the dishonored check would be mailed to him. The letter contained no suggestion that appellant might have further time in which to pay the premium, and made no suggestion that appellee considered appellant indebted to it by having given the check or accepted the policy, and made no attempt to collect or demand for payment of the check. Before the letter reached appellant, as was stated in his petition, the stock of goods burned. Appellant made demand, and submitted proof of loss under the policy, which appellee declined to pay, and this litigation resulted. At the close of appellant's testimony the trial court took the case from the jury and entered a judgment dismissing appellant's petition. This appeal is prosecuted from that judgment.

There is no controversy as to the facts, and a pure question of law is presented by the appeal. Is an insurance company bound on a policy issued and delivered by it for a cash premium if the check given by the insured for the premium when presented in due course for payment is dishonored, and a fire occurs destroying the property insured before notice by letter promptly written, that the check has been dishonored, and a demand for the return of the policy made by the insurer reaches the insured? A different state of case would be presented if appellee, upon being notified of the dishonor of the check, had then sought to collect the amount of the premium from appellant. That would have been its recognition that the check was accepted in payment of the premium, and that it issued the policy, not for cash, but for the evidence of debt represented by the check. Appellee's contention is, that since this was a cash transaction and the check was accepted and the policy was issued with that understanding, it was incumbent upon appellant to make the check good when presented for payment; and that upon the dishonor of the check the consideration for the insurance policy failed, and hence it was void. It insists therefore that it is not liable for the fire loss that followed.

Under the head of Payment by Checks, in 30 Cyc. page 1207, it is written:

"The acceptance by the creditor of a check without regard to whether it is the check of the debtor or of a third person does not constitute payment unless it is agreed that it shall be taken as an absolute payment."

The rule with reference to checks as payment is thus written in 21 R. C. L. page 60:

"With the exception of a few jurisdictions, the authorities are unanimous in supporting the rule that the giving of a bank check by a debtor for the amount of his indebtedness to the payee is not in the absence of an express or implied agreement to that effect a payment or discharge of the debt, the presumption being that the check is accepted on the condition that it shall be paid and the debt is not discharged until the check is paid or the check is accepted at the bank at which it is made payable."

Under the head of Sales, with reference to the payment of the purchase price by check, the rule is thus written in 23 R. C. L., page 1388:

"The acceptance of a buyer's check is not regarded as payment, but only as conditional payment, and if the check is dishonored on due presentation the seller's right to reclaim the property is not lost."

Under the same heading, in 35 Cyc., page 329, with reference to payment by check, the rule is thus written:

"So if the seller delivers on an understanding express or implied that he is to receive immediate payment or security he may reclaim the goods, or if he delivers on payment by check in lieu of cash and the check is dishonored he may reclaim the property."

In Carter & Co. v. Richardson & Co., 60 S.W. 397, 22 Ky. Law Rep. 1204, this court said:

"The giving of a check is not of itself a payment of a debt unless the parties expressly agreed that it should be so accepted (which is not this case). 18 Am. & Eng. Ency. Law, 158; Bailey v. Robinson, 14 Ky.

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