Riverside Development Co. v. Hartford Fire Ins. Co.

• Decision Date: 02 June 1913
• Docket Number: 16,049
• Citation: 105 Miss. 184,62 So. 169
• Court: Mississippi Supreme Court
• Parties: RIVERSIDE DEVELOPMENT CO. v. HARTFORD FIRE, INS. CO

62 So. 169

105 Miss. 184

RIVERSIDE DEVELOPMENT CO. v. HARTFORD FIRE, INS. CO

No. 16,049

Supreme Court of Mississippi

June 2, 1913

APPEAL from the circuit court of Quitman county, HON. SAM C. COOK Judge.

Suit by the Riverside Development Company against the Hartford Fire Insurance Company. From a judgment for defendant, plaintiff appeals.

The facts are fully stated in the opinion of the court.

Affirmed.

P. H Lowery, for appellant.

Our contention is that with the overruling of this demurrer the plaintiff should have had judgment. That the affidavit and plea with notice are not a compliance with section 755, Code 1906. Therefore, that the court erred in permitting the plea filed as shown by the order on page 25, and in failing to sustain plaintiff's motion as shown on page 31 of the record. Robertson v. Banks, 1 S. & M. 666; Tittle v. Bonner, 53 Miss. 578; Feazell v. Soltzfus 54 So. 444.

The defendant is probably not in a position to question the correctness of the court's ruling on the demurrer as the appeal is by the plaintiff only, but whether or not this is correct, the ruling of the court was clearly right.

This brings us to the real question upon which the defendant obtained its judgment.

Mr. W A. Cox, the defendant's agent, who signed this policy of insurance with the plaintiff, was a stockholder in the plaintiff corporation.

Our contention is that this did not make the policy void, or voidable for two reasons: First, being a stockholder did not disqualify him from issuing the policy as agent of the defendant; second, the policy, while countersigned by the agent is also signed by the president and secretary of the company, and was actually reported to the company and accepted by it many months before the damage.

We further contend, third, that even if the agent was so interested in the property as to make his act not binding upon the company, and if the reporting of the policy to the company and acceptance by it did not make it the company's act and not the agent's, the company ratified the act by holding the premium and not offering to return it and not repudiating the act of the agent, but rather by accepting his act after it had notice that this agent had stock in the corporation which owned the property.

With reference to the first reason above stated we contend that a stockholder in a corporation may insure the property of the corporation against fire even, where he is neither a director, nor an officer.

In the case of Greenwood Ice Co. v. Insurance Co., 72 Miss. 46, the court holds that a stockholder, who is a director and vice-president of a corporation, cannot insure the property of the corporation against fire as agent of an insurance company and bind the company; and in Wildberger v. Insurance Company, 72 Miss. 338, the court holds that a policy issued by a receiver on a stock of goods in his hands in a company in which he is agent does not bind the company. In both of these cases the insurance agent is also agent for the insured.

In the opinion in the Wildberger case, Judge WHITFIELD lays some stress upon the fact that the receiver has an interest in the property to the extent of his commissions but I take it that this is really not the reason for the rule as indicated by the concurring opinion of Judge COOPER. It is noticeable too, that in both of these cases the property was burned before the issuance of the policy was reported to and accepted by the company, making it the act of the agent only. I have found no case and no text-book authority holding that a stockholder in a corporation may not, as agent of the insurance company insure the property of the corporation in the company for which he is agent.

Mr. Ostrander in his work on insurance, second edition, discussing the Greenwood Ice Co. case, page 157, expressly states that being a stockholder would not make it improper on the ground of antagonistic interests for the agent to insure property of the corporation. I have found nothing to the contrary.

The different relations of a mere stockholder and a director in a corporation is admirably discussed in Bird Coal Co. v. Humes (Pa.), 37 Am. St. Rep. 727. The property of the corporation is not the property of the stockholder, and he has neither legal or equitable title to it. Am. & Eng. Ency. of Law (2d Ed.), 899.

The stockholder is not the agent of the corporation and there is no fiduciary relation between him and the corporation, or its stockholders. Ib. 900 and 901.

He may contract with the corporation, enter into business competition with it and sue it. Ib. 957 and 958. I see no just reason why he may not insure its property.

There is still another reason why this policy is valid, even though the agent should be held to be the agent of the corporation, or interested in the property insured, viz.: His duties in issuing this policy were purely clerical and did not involve any matters of judgment or discretion as is the case of insurance against fire. In fire insurance the location of the property, the character of the tenant, the character of the property and many other questions go to make it insurable or noninsurable, desirable or undesirable as a risk but this is not the case with tornado insurance. In fire insurance there is much for the agent to consider while in tornado insurance it is simply a matter of paying the premium and issuing the policy. There are only two rates, viz.: the rates for residences and business property. This is shown by the testimony of the witness, W. A. Cox. The question of desirable or undesirable risks is not involved nor is the question of rate, except as to residences and business property and in this case the business property rate, being the highest, was charged.

It is only where the act of the agent imports discretion that he cannot act for both parties, but this is not the case where there is nothing to call for the exercise of judgment, or skill, or where the agent acts under such definite or specific instructions as to place on him responsibility. Ostrander on Insurance, pages 154 and 155.

The insured of course has nothing to do with the destruction or damage to his property by wind, and there is no reason why the agent might not insure his own property as well as the property of another against damage by wind, even though he is the agent of the company carrying the insurance.

For the second reason above stated, viz.: That the risk had been reported to the company and accepted, this policy was at the time of the wind valid and binding against the company. It is not a case of ratification by the company in which full knowledge might be required but a case of acceptance of the risk by the company. It was not necessary that the company should know all of the stockholders in order to accept, or reject this risk. Had it been insured by some one not a stockholder there would have been no enquiry as to who the stockholders were.

I have referred above to the fact that in the Greenwood Ice Co. case and the Wildberger case, both reported in 72 Miss., the risk had not been reported to the company and accepted, the fire in both cases having occurred before the report was made to the company. When this report was made to the company, the insurance became the act of the company and not of the agent. I have found no case where the risk had been reported and accepted by the company before the fire occurred, holding that the policy was void because countersigned by an agent who was interested in the property.

Mr. Ostrander, after a full discussion on agency, pages 129 to 206 states among his conclusions as follows: "Risks which a company has accepted and on which it has paid the agent his commissions are beyond the control of the latter, etc."

Even if this had been a fire insurance policy and the agent had been in fact a part owner of the property, or an officer in the corporation, the company could not have denied its liability for the damages after having accepted the risk when reported to it by the agent.

If the agent of the insurance company in this case was so interested in the property as to make his issuance of the policy voidable and if the issuance of the policy by him involved such degree of judgment and discretion as to prevent his representing both parties and if the acceptance of the policy, when reported, without full knowledge of the interests of the agent in the property, did not make this a valid and binding contract of insurance, still as stated in the third reason above, the act of the agent was ratified by his company with full knowledge of all the facts and that he was a stockholder in the company insured.

It is shown by the testimony of Mr. Cox, the agent, and by his letter that as early as September 24, 1910, the company had notice that he was a stockholder and of the amount of his stock. That after that, one Mr. Cecil Davis, the agent of the company, seeking to adjust this loss came to Marks and discussed with him the fact that he was a stockholder, and not only did not repudiate his act, or offer to return the premium to the insured but actually made that a ground for his anxiety to settle the claim. This was an affirmative ratification of his act. Mr. Cox says: "He stated that he saw I was a stockholder of the company. I told him I was. He said he would like to settle it on my account."

It is shown also that after a suit was brought to the February court, 1911, and was fought out solely on the ground that there had been no appraisement of the damages, with still no question on the validity of the policy and no offer to return the premium to the insured but actually made that a ground for his anxiety to settle the claim. This was an affirmative ratification of his act. Mr. Cox says: "He stated that he saw I was...