Lee & Hall, the plaintiffs, were lumber commission-merchants, and, for several years prior to 2d August 1856, were in the habit of receiving from Adsit & Co., the defendants, consignments of lumber for sale. On that day, lumber of the defendants to the value of about $5000, remaining unsold in the plaintiffs’ yard, was destroyed by an accidental fire. This action was brought to recover a balance of account for charges and advances over and above the proceeds of the lumber sold. The plaintiffs’ demand is not questioned; and the whole controversy grows out of the defendants’ claim on account of their loss by the fire.
A referee allowed this claim, and judgment was entered on his report against the plaintiffs for $2116.50, with interest and costs. Exceptions were taken, and, on the plaintiffs’ appeal, a general term, sitting in the third district, reversed the judgment and granted a new trial. The defendants appealed to this court, consenting that in case of affirmance, judgment absolute be rendered against them.
The complaint alleges that it was “ expressly agreed * * that the plaintiffs were not required to effect any * * insurance against fire, * * and that so far
As stated, this agreement consists of ordinary stipulations between a consignor and consignee, on other matters, but without any which could be construed as referring to insurance, and without any allusion whatever to that subject, except a statement that the agreed eight per cent, commission to the plaintiffs, was to be in full for sales, guarantee, and all charges connected with receiving, piling, storing and sale, “not including charges for insurance.” The defence does not allege instructions to insure, but avers that the defendants “ never did, at any time, or in any manner, forbid or prohibit the plaintiffs from procuring and effecting, as such factors as aforesaid, for the security and benefit of the defendants, an insurance or insurances on the lumber.” Except in the somewhat indirect and incidental way hereafter particularly stated, the defence does not intimate that there was any duty to insure; and, except by reason of the insurance actually effected by the plaintiffs, it does not make any claim against them.
The precise ground of the defendants’ claim is thus stated: Prior to the 1st January 1856, the plaintiffs, without the defendants’ knowledge, constantly kept on foot insurances, effected in their own names, upon all lumber held by them in trust or on commission; the expenses' of such insurances assignable to plaintiffs’ lumber did not exceed one-half of one per cent, on the sales thereof; the plaintiffs, concealing their said insurances and the cost thereof, fraudulently, with intent to extort, &c., charged to the defendants, from time to time,
*Tbis defence then alleges, that in 1856, prior to the loss in question, but without express directions, the plaintiffs, as they lawfully might, and as they were bound to do, in the proper and faithful discharge of their duty to the defendants, as factors and consignees, “ did procure and effect * ^ insurances ¡t¡ * * upon lumber held by the said plaintiffs in trust or on commission.” It further alleges, that these insurances covered the defendants’ interest; that on learning of their existence, after the loss, the defendants notified the plaintiffs that they adopted and ratified the same, as having been effected for their benefit, and that after-wards the plaintiffs recovered the whole amount insured.
The following facts appeared on the trial : At the time of the fire, the plaintiffs held policies, amounting, in the aggregate, to $30,000, by the terms of which the insurers “ do insure Lee & Hall against loss or damage by fire, on lumber, their own, or held by them in trust or on commission, or sold but not delivered, contained” in their lumber yard. The policies required the insured to furnish a statement and an affidavit of the interest of the assured therein; and they also contained a printed clause in these words: “ Property held in trust, or on commission, must be insured as such, otherwise the policy will not cover such property; and, in case of loss, the names of the respective owners shall be set forth in the preliminary proofs of such loss, together with their respective interests therein.”
There was in the plaintiffs’ yard, at the time of the fire, and destroyed thereby, not only the defendants’ lumber, and about $4000 worth of lumber belonging to
*-^or the business of 1853, the plaintiffs charged and received from the defendants one and one-half per cent, on account of insurance. Then, and before the business of 1854 commenced, the defendants refused to pay one and one-half per cent, for insurance, on the ground, that it was too much. At the close of the years 1854 and 1855, accounts were settled between the parties, no charge being made for insurance, in either instance. At an interview between the defendant Adsit, and the plaintiff Lee, in 1856, before the business season commenced, Adsit expressed a willingness to pay one per cent, for insurance, but Lee charged one and a half per cent., which Adsit refused to pay. In the winter of 1855-6, Adsit stated to two persons, that the defendants did not get their lumber insured, but ran their own risk, or insured themselves.'
The defendants had no' knowledge of the insurances in question, until three days after the fire. They then gave the notice of adoption and ratification alleged in the answer. The plaintiffs paid no attention to this notice. The defendants’ lumber, being piled separately, was not included in the inventories taken by the plaintiffs,- at intervals of ten or fifteen days, during 1856, for the purpose of keeping their insurances full. Each of the plaintiffs testified, that he did not intend to insure the defendants’ lumber.
The referee decided, that the plaintiffs were not required by law to insure, or to obtain insurance on
The referee found, that the defendants had no notice of the insurances having been effected; but nothing in his findings, or in the evidence, gives the least color for any imputation on *the motives or good faith of the plaintiffs. The case involves nothing but pure questions of law. I proceed to examine these questions.
I. Rightly understood, the answer does not allege that the plaintiffs were bound to insure the defendants’ lumber, or to procure any insurance thereon. Its only reference to a duty in that respect is merely incidental, and by way of an argument in support of the defendants’ alleged right to adopt the insurances which were actually effected. No fact is found having any tendency to establish such a duty; and the express finding of the referee, that it did not exist, does not appear to have been objected to. Not only was there no affirmative proof, but the negative was shown. There was no conflict, and the evidence given, if legally admissible, showed a perfected understanding between the parties, that the plaintiffs were not bound to insure or procure insurance for the defendants, and were not to receive any compensation for so doing. The terms of the second defence, and of the notice of adoption given by the defendants, after the loss, alike imply a con
II. That a contract made for his benefit, but without his consent or knowledge, may be ratified and adopted by a principal, whether made in the agent’s name, or in his own, may be assumed. Perhaps, if made by a total stranger, or by a special or general agent, contrary to an express prohibition, the contract might still be subsequently adopted. Nay, if a principal, desiring to curb an officiously-disposed agent, should exact from him a bond to abstain from any such action, it may be, that, in case his interest should dictate, he might elect to adopt a contract perversely made for his benefit by the agent, despite of all his precautions to prevent it.
*The rule that a subsequent ratification is equivalent to an original authority, and has a retroactive energy, is highly beneficial. I shall not attempt to define its extent, or the boundaries by which its influence may be limited. (17 Penn. St. 298.) If, upon all the admissible evidence in this case, it could be adjudged that the insurances in question were made for the defendants, for their benefit, or to cover their interest in their lumber, then it may be assumed, that they had the right of adoption to the whole extent claimed.
III. Contracts made by an agent, in his own name, for the benefit of his principal, or his principal’s business, may generally be enforced by and against his principal. And the action on such contracts may be brought, by or against the agent, or by or against the
The contract of insurance is not regarded as a wager, irrespective of interest, that the res shall not be destroyed or injured by the peril insured against. It is a contract for indemnity, and its real subject is the interest of the person insured in the res. The reason of this is obvious. The res is constantly under the control of the insured, and the risk may be diminished, in proportion to his vigilance and good faith, and enhanced, if he be careless or dishonest. It is of the utmost importance to insurers, to know the person whom they insure; and, therefore, policies of insurance, in the ordinary form, are not within the general principle, that an agent may take a contract in his own name, for the use and benefit of his principal. The ordinary policy covers no interest save that of the party named as the assured. But it often happens, that insurers are content to insure whomsoever it may concern, relying upon the character of the person to whom the insurance is granted, as a sufficienty warranty of the fairness of his principals; or, without any such prudential reflections, they may choose to take the risk. When this is the case, the policy is framed accordingly. For this class of cases various formulas have been adopted: sometimes, A. is insured as “agent;” sometimes, the insurance is for “owners,” or “ for whom it may concern.”
*In all these cases, it is well settled, that, in prosecuting a claim against the insurers, extrinsic evidence may be, and must be, resorted to, for the purpose of ascertaining the interests intended to be covered; and, as the insurers are not always possessed of any information themselves, the intent of the agent in effecting the insurance, or of the person under whose instructions he acted, is oftentimes the only guide. Mr. Duer, in his ninth lecture, § 22, lays down the doctrine
*Phillips on Insurance (3d ed., p. 213, § 383) states this to be the law, with equal precision, but with much brevity; “A policy made in the name of a particular person ‘for whom it may concern,’ or
These positions are fully sustained by the authorities, and, indeed, are quite familiar; yet it appears from his opinion, that the learned referee in this case was governed, in some degree, at least, by a supposal, that in another part of their works, these same writers had laid down an opposite rule. The extent to which, in this class of cases, resort may be had, even to a mere emotion of mind on the part of the agent or person effecting the insurance is well exemplified in Mr. Phillips’s sections 884, 385.
The policy now in very common use, by which an agent is insured against property, “ his own, or held by him in trust or on commission,” was devised to enable a factor or commission-merchant to keep insured, so far as occasion might require, and without inconveniently numerous applications to the insurers, a stock that was not only fluctuating as to articles, but as to owners. These policies are not expressed to be for the benefit of any other person than the party in whose name the insurance is effected, nor do their terms necessarily imply such a purpose; in this respect they differ from all the other forms in use. Property held “on commission” is almost invariably subject to a lien in favor of the holder, for charges or advances, or both. This gives him an insurable interest, which, of itself, might be deemed to satisfy the terms of the policy. As much or more, to the same, purpose, might 'be said in reference to the terms “in trust.” Hence arose a doubt whether these policies could be construed as applicable to the interest of a consignor. Judge Oakley, in De Forest v. Fulton Fire Insurance Co. (1 Hall 135), furnishes an apt solution of the doubt, by suggesting that
In this case, the consignees lost no property of their own; they held on commission $30,000 worth of property, which they had engaged to insure, and about $10,000 worth, which they were not bound to insure. If the consignees had been insolvent, and refused to enforce the policies,, 'the consignors would have been obliged to sue the insurers. They must all have been parties to the action, either as plaintiffs or defendants. If they were very numerous, one might bring the action as well for himself as for all others in interest; but this would only have been a variance in form.. In such cases, before a final disposition can be made, every party in interest must be brought in, before a master or referee, or by his default, after notice,
The defendants claim to be paid in full; and they recovered before the referee on that basis. They certainly could not recover to that extent, in a controversy between them and the other consignors. Nor do I conceive, that in such a controversy, the. defendants, or Morgan & Co., could recover any portion of the fund. Evidently, the other class of consignors would be entitled to the whole. Perhaps, it might be suggested, that the defendants would be content to share pro rata. The unreasonableness and "injustice of such a claim might be made more, striking, though not more clear, by altering the figures so as to present a supposed parallel to this case. Let it be supposed, that the stock destroyed by the fire was worth $100,000.; that nine parts of it belonged to the defendants and Morgan & Co., and one part to the other class of consignors, for whom the plaintiffs were bound to insure, and that insurance had been effected only to $10,000. Even in the mitigated form last suggested, the defendants’ claim, if sustainable, would cut down to a ten per cent, divi-' dend the consignors, who, upon every principle of justice and fair dealing, were entitled to full indemnity.
A method of applying the principles of law which
Catlett v. Pacific Insurance Co. (1 Wend. 575) is a direct authority for the admission óf such evidence, even in an action against the insurers on the policy. In that case, an insurance was effected by an agent, “on account of the owners.” There were, in fact, three owners. Two of 'them sued upon the policy, and the non-joinder of
I consider it quite clear, therefore, that, even in an action on the policies against the insurers, parol extrinsic evidence would be admissible, to show that the plaintiffs were not bound to insure, or instructed to insure, and did not intend to insure, the defendants’
IV. This is not an action against the insurers, or upon the policies. The rule that parol extrinsic evidence shall not be received to contradict or vary a contract which is in writing, applies only in controversies between the parties, promissor and promissee, in such contract. It is founded upon the just and rational presumption, that the parties have made all the stipulations for the protection of their respective interests, on which they were agreed, and have, in language chosen by themselves, placed such stipulations in a more certain form than mere oral discourse, for the purpose of excluding all such loose and uncertain media of proof. The writing is not conclusive as between one of the contracting parties and a third person. This doctrine is asserted, in general terms, *in a multitude of authorities; but, in many instances, it is accompanied by remarks from which it might be contended that the privilege of explaining the written document was not accorded to him who was a party to it, but only to his adversary. (1 Greenl. Ev., § 279; New Berlin v. Norwich, 10 Johns. 230; Evans v. Wells, 22 Wend. 345.) But it is not so' confined. According to Co. Litt. 352 a, “ every estoppel ought to be reciprocal—that is, to bind both parties; and this is the reason that, regularly, a stranger shall neither take advantage of, nor be bound by the estoppel.” To this effect see Gaunt v. Wainman (3 Bing. N. C. 69; Jewell v. Harrington (19 Wend. 472); Sparrow v. Kingman (1 N. Y. 246, 253); Cattle v. Snyder (10 Mo. 769).
In Reynolds v. Magness (1 Ired. 30-31), after stating
In Walton v. Cronly (14 Wend. 67), the right of a party to a deed to explain it, as against a third person, was maintained, though such third person was a privy in estate. Besides, although written contracts may not be varied by extrinsic parol evidence, in an ordinary action between the parties, yet, when, as sometimes happens, there is a mistake in the writing, a party affected thereby is not remediless. By an action in equity, he may have the writing reformed, and made to express the actual intent. In such an action, it is not necessary nor allowable, nor possible, to make all the world parties; those between whom the contract was made are alone heard. And, of course, if they happen to be both honest and intelligent, no suit for reformation can ever be requisite. This may suffice to illustrate the position now assumed.
Neither are the terms of a written contract conclusive as to the shares or proportions in which a set of parties on one *side of the contract are interested in its fruits, as between themselves. Such questions do not usually enter into the consideration of those who settle the forms of written contracts. Each party, in framing the contract, considers only what, by its terms, he may exact from the other, and what the latter may thereby exact from him. The parties of the first part in a contract may have no joint or mutual interest in the subject-matter; one may be merely the agent, clerk or servant of the other; yet the paper would warrant,
Y. In his ninth lecture, § 26 (2 Duer on. Insurance, pp. 38, 39), Mr. Duer takes up a position which he imputes to Mr. Phillips, and condemns it. It is, that one seeking to recover on a policy taken in his own name, applicable by its terms to his own interest, and on which he claims, cannot recover, if, in fact, through some mistake or misapprehension, he had in his mind, at the time he effected the insurance, and intended thereby tov cover some other and different interest. He discusses this defence by an insurer at great length, onward to the end of § 29, page 48. He pronounced it novel, unreasonable, unconscientious and dishonest. He concludes, by asserting that, as in such a case the policy is applicable, in terms, to the subject claimed upon, the insurer cannot be permitted to contradict it by parol extrinsic evidence of an intention on the part of the insured not to cover that subject.
Mr. Phillips, in a subsequent edition of his work, puts this very peculiar point as a qusere, and suggests that “the jurisprudence on this subject is contradictory.” (Phillips on insurance (3d ed.), §§ 393-394.) These positions of Phillips and Duer are relied upon by the referee, as justifying the exclusion of extrinsic evidence in the present case. Stating the point which' they thus present must suffice to show that they have
The policies, in the most express terms, covered Lee & Hall’s interest in all the defendants’ lumber, that is to say, their lien for advances, &c. Let it be supposed, that Lee & Hall had brought an action against the insurers, on the policies, with a view of recovering, for their own benefit, the amount of that lien, and that the insurers, for the purpose of defeating the recovery, had offered to show that Lee & Hall, when obtaining the policies, did not intend to cover that interest. Such, we may see, was the fact; and, if the evidence was admissible, and allowed to have any effect, it would exonerate the insurers. Mr. Duer says that such a defence is inadmissible, because it would be an offer to prove that the intent of parties to a written contract was precisely the reverse of that which the written contract, made by and between them, explicitly affirms. Mr. Phillips thinks “the jurisprudence on this subject is contradictory.” It is enough for us to say, that the point is not presented by the controversy between the litigants in this case.
Turner v. Burrows (5 Wend. 546), and the same case m error (8 Wend. 152), are relied upon as showing that parol extrinsic evidence of the intent of the party effecting the insurance is inadmissible, in an action between him and a third person claiming to participate in the insurance money. The judgment of the superior court ■was not reversed on the ground that there was error in receiving such evidence. The same controversy was again before the supreme court, and the final decision is reported in 24 Wend. 276. Parol extrinsic evidence of the intent was again received. The court held that it was properly received, and that nothing to the contrary could be inferred from the previous decision. These cases are, therefore, authorities in favor of the
VI. If the plaintiffs were insured on their own interest in the defendants’ lumber, by virtue of their lien for advances and charges, they did not claim or receive anything from the insurers on that account; nor was this particular point made a ground of defence on the trial. The plaintiffs tendered evidence that the defendants were perfectly responsible, and that the policies were not intended to cover even this interest. As between the parties to this action, I think, this evidence was admissible. But, whether this be so or not, the defendants having waived the point at the trial, and again by this appeal, it cannot now be available. The advances and charges were debts due from the defendants to the plaintiffs. The lien was only a security therefor. The insurer of a creditor’s lien is entitled, on paying the loss, to be subrogated to the demand of the creditor. Consequently, the defendants lost nothing by the plaintiffs’ omission to claim from the insurers their charges and advances on the lumber in question. Of course, a different rule applies, where the debtors pay or allow themselves to be charged with the premium paid by their creditors, on an insurance made by the creditors to cover their own specific property as lien-holders. (Phillips on Ins., 3d ed., § 397.) Further answers to any claim of this sort might be stated, but these should suffice.
The order appealed from should be affirmed. Judgment absolute should be rendered against the defendants for $1156.37, and interest thereon' from 1st January
Order affirmed, and judgment absolute.
2.
And see Dakin v. Liverpool, London and Globe Insurance Co., 77 N. Y. 600; s. c. 13 Hun 122.