Bostwick v. Mutual Life Insurance Co.

*398The following opinion was filed March 11, 1902:

Mat?.sttat,t.; J.

Two propositions are presented for consideration : First, were tbe applicants for insurance bound by .their applications because of their failure to know what they .signed ? Second, did the retention of the policies by the applicants for several -months, without objection, constitute an acceptance thereof and waive the fraud, if there was fraud, 'in securing the applications? The learned counsel for respondent devoted nearly all their printed argument, as they •did nearly all their oral argument, to the first proposition. As we do not think it is necessarily decisive of the case, we •shall assume that in deciding it the trial court did not err. •On the second proposition the court held that the applicants •did not accept the policies because they repudiated them -within a reasonable time after knowing that the instruments •were not what they supposed their applications called for; that the mere retention of the policies without such knowledge • did not constitute an acceptance. Appellant’s counsel contend that when the policies were received the applicants were, as ordinarily prudent persons, put upon inquiry as to the character thereof, that they should have examined the policies, •and that their failure to do so, and retention thereof for sev•eral months before making any complaint, was an acceptance ■ of them as fulfilling the applications as they supposed such ; applications were made, and a waiver of fraud, if there was -fraud, in obtaining the same.

As we view the turning question above suggested, the law 'has been firmly settled in favor of appellant, and has been applied by this court in many cases. It does not militate, as -counsel for respondent seem to think, against the maxim that a person cannot take advantage of his own wrong, büt en-forces that other one, which is quite as well established, that the court will not constitute itself the guardian of persons of rmature age and ordinary intelligence, protecting them against *399the results of their own negligence; that it will not furnish a person a remedy for a wrong where he cannot prove a legal claim for damages without showing that his own negligence intervened between the act of the alleged wrongdoer and the result complained of, and was the real, efficient, producing •cause of his injury; that in such a case it will be'conclusively presumed that he voluntarily accepted the situation, because, if he had used ordinary care, the injury complained of would have been prevented. Applying that in the decision of the cases, it has been repeatedly held that if a person contracts for an' article to be delivered, and delivery is made ostensibly in fulfillment of the contract, under such circumstances that he has ample opportunity to test the thing delivered by the contract, he is put upon inquiry as to all departures therefrom which are open and obvious to ordinary inspection; that he is bound to see those things which are plainly observable and is charged with knowledge thereof from the time he ought, in the exercise of ordinary care, to have discovered them; and that if he does not, within a reasonable time thereafter, give notice that the thing delivered is not accepted as satisfying the agreement to purchase, he will be deemed to have accepted it and waived obvious departures from the agreement if there are such. Counsel for respondent vigorously attack that doctrine, but it is too firmly intrenched in our jurisprudence, and in the law generally, to be open to question.

The first case in which the principle above stated is distinctly declared in the decisions of this court is Locke v. Williamson, 40 Wis. 377. The court there said:

“We have concluded to hold this rule in respect to an ex-ecutory contract: that when the defects in the goods are patent and obvious to the senses, when the purchaser has a full opportunity for examination, and knows of such defects, he must, either when he receives the goods or within what under the circumstances is a reasonable time thereafter, notify the seller that the goods are not accepted as fulfilling the warranty; otherwise the defects will be deemed waived.”

*400In subsequent cases that rule was considerably expanded in accordance with the current of authority, to the effect that reasonable opportunity for obtaining knowledge is equivalent to knowledge, as the following citations will show. In Mamlock v. Fairbanks, 46 Wis. 415, 1 N. W. 167, it was said that present means of knowledge must be considered; that the doctrine that one must observe what he has reasonable opportunity for knowing in matters of contract is within the rule of caveat emptor; that the law for the protection of persons against fraud will not he extended to those who, “having the means in their own hand, neglect to protect themselves ;” that “the law requires men, in their dealings with each other, to exercise proper vigilance, and apply their attention to those particulars which may be supposed to be within reach of their observation and judgment, and not close their eyes to the means of information which are accessible to them.” “Vigi-lantibus non dormientibus jura subveniunt.” In Warner v. Benjamin, 89 Wis. 290, 62 N. W. 179, it was held that, if a person is put upon inquiry in respect to the quality of a thing offered for sale to him, he is bound to know what is discoverable in regard thereto by the exercise of ordinary care; that he cannot “close his eyes to defects which are before him or to the information which is at hand.” In Farr v. Peterson, 91 Wis. 182, 64 N. W. 863, it was held that, ‘if the defects in the subject-matter of the contract are patent and should be discerned by the exercise of ordinary diligence, the purchaser is bound to discover them at his peril; that in dealings between individuals each is bound to apply his attention reasonably to the subject-matter thereof and to discover those things which are within reach of ordinary observation and judgment, and which they are not prevented from discovering by artifice or fraud.’ Again, in Thompson Mfg. Co. v. Gunderson, 106 Wis. 449, 453, 82 N. W. 299, it was held that if an article is delivered in fulfilment of an executory contract, and the receiver thereof has full opportunity for *401examining tbe same and observing variations therein from the article contracted for, and fails within a reasonable time to give notice that the article is not accepted as fulfilling the contract, the variances, if any, will be deemed waived.

It is easy to apply the foregoing to the' facts of this case. The applicants for insurance had ample opportunity to examine their policies when the same were received. It was their duty to do that. An examination of the policies, even of a casual character, would have revealed all the material facts. The applicants did nothing by way of examining the papers for months after receiving them, during all of which time the defendant carried the risks it had assumed. What appears to counsel for respondent to be want of harmony in the authorities, in respect to such a situation, in the main, grows out of failure to take in the full scope of the -rule that every person must use reasonable diligence for his own protection, or in confusing it with other rules with which it does-not conflict. Counsel errs most grievously in the idea advanced, that negligence is never a defense in a case grounded on fraud against the wrong-doer, as the cases above cited amply show, though it is true that there are,expressions in legal opinions that may be referred to in justification of the error, and later we will refer to an instance of that kind in our own decisions, and probably there are others. However, on a question so well settled, contrary statements in opinions,, used arguendoought not, it would seem, to lead one astray. In 14 Am. & Eng. Ency. of Law (2d ed.) 115-117, the rule stated is supported by citations from English decisions, and from most of the states of the Union. The author says:

“This doctrine is not based upon any consideration for the-party who has been guilty of the false representations, but upon the ground that public policy requires that persons shall be required to exercise at least ordinary prudence in their-dealings, instead of calling upon the court- to relieve them from the consequences of their inattention and negligence.’'

*402■Counsel for respondent cite to our attention cases to the effect that the time for a person who receives property upon an executory contract, or wlio is defrauded in tbe making of a contract, to rescind the transaction, does not begin to run till he has knowledge of the facts. That is true, but, as we have seen, the rule does not require actual knowledge; constructive knowledge is just as efficient as actual knowledge. A person is presumed to know those things which reasonable diligence on his part would bring to his attention. If he accepts the article furnished without exercising that diligence, he does so at his peril. In that sense the maxim caveat emptor applies, as said in Mamlock v. Fairbanks, supra. The observation in Beetle v. Anderson, 98 Wis. 5, 73 N. W. 560, that “the rule caveat emptor has no application to cases of fraud,” as it might be understood, is wrong. The idea which the court intended to convey is that, where a person is so circumstanced that he may, consistently with reasonable care, rely upon the representations of the person with whom he is contracting, the rule caveat emptor does not apply. That is, where the fraud complained of is actually produced by the wrongful conduct of the defendant, he cannot invoke the doc-, trine of caveat emptor to protect himself from the consequences thereof. But a person acts at the peril of suffering the consequences in relying upon the representations of another with whom he is contracting if the exercise of reasonable care would uncover to him the truth. Cases are cited to the effect that a person cannot profit by his own wrong. That is true as a general proposition, but it is just as true, as we have seen, that a person cannot have the protection of the law where he fails to use reasonable care to protect himself. When it is said that a person cannot take advantage of his own wrong, it is meant that he cannot do so as against a person who is injured by that wrong. The mere fact that one person relies upon false representations made by another to- his injury does not constitute a cause of action against such *403other. There must be a further circumstance. Such person must be induced to rely upon the fraudulent representations, and that circumstance does not exist where such person would not be so induced but for his own heedlessness.

The rule we have discussed has been applied elsewhere generally, and in many cases quite similar to the one before us, some of the more important of which are cited in the brief of counsel for appellant. In New York Life Ins. Co. v. McMaster, 87 Fed. 63, it was held that where a person receives an insurance policy pursuant to an application it is his duty to examine it and see those things in respect thereto which are open to ordinary observation by a person of ordinary intelligence, and that if he neglects to do so, taking it for granted that he has received what he applied for or intended to apply for, he is guilty of inexcusable negligence and in law his conduct amounts to an acceptance of the policy received regardless of whether it corresponds to the policy applied for or intended to have been applied for or not; that representations made by an insurance agent at the time of the application for a policy of insurance is made constitute no excuse for failure of the applicant to look at his policy when it is delivered to him, to see if it corresponds to the one expected, and to discover the facts in that regard if that can be done by a reasonable examination of the paper; that if one fails to read his contract under such circumstances, having full opportunity for doing so and ability to read, he is guilty of gross negligence and cannot be heard successfully to say that he kept it in ignorance of its character; that the rule in that regard applies to all contracts, insurance contracts being no exception. In Fennell v. Zimmerman, 96 Va. 197, 31 S. E. 22, it was held that it is the duty of a person, on receipt of an insurance policy pursuant to his application, to examine it; that he commences receiving benefits immediately upon the policy coming to his hand, and that it is his duty to examine the paper upon its receipt and to return it within a reasonable, *404time if it is not satisfactory, and tbat a failure to do so is in law an acceptance of tbe policy. In McMaster v. New York Life Ins. Co. 99 Fed. 856, cited by counsel for respondent, the doctrine in the previous case, regarding the same policy (New York Life Ins. Co. v. McMasters, 87 Fed. 63), was discussed at length, and it was said to apply both at law and in equity. There are many cases of like character, which might be referred to, but the principle upon which they rest is so universally recognized that we shall omit further reference to cases, except to cite American Ins. Co. v. Neiberger, 74 Mo. 167, as an indication of the current of authority as regards the length of time held by courts to constitute ratification of a policy not issued according to the representations of the agent, where no objection is made in that regard within a reasonable time after the assured has had a fair opportunity to read and understand it. In that case no objection was made for about three months, and it was held that the delay constituted an acceptance of the policy.

In this case the representations made to the applicants for insurance in no way prevented them from examining the policies when they were received. It was their duty to malee such examination. Had they performed that duty they would have easily discovered all that they complain of. The opening lines of the letter sent appellant with his policy told the whole story. A casual glance at it would have informed him that the policy was not such as he expected to receive. Certainly he cannot, under any rule, be excused for omitting to read the first three lines of a letter addressed to him on so important a business matter, which contained other information of interest to him than that with reference to the character of his policy, viz., information in regard to the amount of his annual payment. All the parties were insured for months before appellant had any intimation that the policies were not satisfactory. It cannot be doubted that, if death had come to any of them in that period, his policy would have *405been enforced. Under those circumstances the applicants for insurance must be presumed to hare accepted their policies long before their attempted rescission thereof and demand for the payment of the money paid thereon. The trial court and the learned counsel for respondent fell into a grievous error in supposing that the omission by the policy holders to look at their policies can be justified by what occurred at the time thempplications for insurance were made, and that as against a party charged with fraud in the making of an executory contract the injured party was not bound to object in order to preserve his rights, till he has actual knowledge; that negligence on his part in failing to make the discovery is not to be considered. The law is otherwise, as we have seen. It seems perfectly clear that plaintiff entirely failed to establish any cause of action against the defendant, and that the complaint should have been dismissed.

By the Court.- — The judgment of the circuit court is reversed and the cause remanded with directions to render judg-ement in favor of defendant for costs.

On June 19, 1902, a motion by the respondent for a rehearing was granted.

For the appellant there was a brief by Fethers, Jeffris & Mouat, and oral argument by M. Q. Jeffris.

For the respondent there was a brief by Buyer & Buyer, and oral argument by Wm. Buyer. They contended, inter alia, that there was no negligence in plaintiff’s failing to read the applications and policies; that the plaintiff did not, either at the time of signing the application or after receipt of the policy, owe to the defendant any duty requiring him to suspect that its representations were false, and take precautions accordingly by reading the application before signing, or the policy when received; that the defendant is estopped from imputing negligence because of plaintiff’s reliance upon its representations; that mere negligence in failing to guard *406against injury is not a defense in favor of a party intentionally inflicting it, through false representations, or other wrong doing involving evil motive; imprudence or carelessness is not necessarily negligence in contemplation of law. Dowd v. C., M. & St. P. R. Co. 84 Wis. 105, 115; Groth v. Thomann, 110 Wis. 488, 496; 16 Am. & Eng. Ency. of Law, 466, 468, 469, 472; Shearman & Redfield, Negligence, §§ 1, 5; 1 Thompson, Commentaries on Negligence (2d ed.) §§ 1, 3, 192, 193; Klix v. Nieman, 68 Wis. 271; Zieman v. Kieckhefer E. M. Co. 90 Wis. 497; Peake v. Buell, 90 Wis. 515; Kellogg v. C. & N. W. R. Co. 26 Wis. 223, 255; McClellan v. Scott, 24 Wis. 86, 87; Broom’s Legal Maxims, 228; Wharton, Negligence, § 131; Terre Haute & I. R. Co. v. Graham, 95 Ind. 293; Strohn v. D. & M. R. Co. 21 Wis. 554, 561; Birdsey v. Butterfield, 34 Wis. 52; Warder, B. & G. Co. v. Whitish, 77 Wis. 433, 434; Barndt v. Frederick, 78 Wis. 11; Beetle v. Anderson, 98 Wis. 5, 8, 9; McCarty v. N. Y. Life Ins. Co. 74 Minn. 530, 77 N. W. 426, 428; Palmer v. Hartford Ins. Co. 54 Conn. 509, 510; Fireman’s Fund Ins. Co. v, Norwood, 69 Fed. 77; Hay v. Star F. Ins. Co. 77 N. Y. 235; McElroy v. British Am. A. Co. 94 Fed. 1000; Kansas, M. O. & M. Mut. Ins. Co. v. Central Nat. Bank, 60 Kan. 630, 57 Pac. 527; Equitable Safety Ins. Co. v. Hearne, 20 Wall. 494; McMaster v. N. Y. Life Ins. Co. 99 Fed. 856; Duffield v. E. T. Barnum W. & I. Works, 64 Mich. 293, 31 N. W. 314; Nat. Bank of Dakota v. Taylor, 5 S. Dak. 99, 58 N. W. 299; Baker v. Lever, 67 N. Y. 309; Fargo G. & C. Co. v. Fargo G. & E. Co. 4 N. Dak. 219, 59 N. W. 1067; Strand v. Griffith, 97 Fed. 856; Erickson v. Fisher, 51 Minn. 300, 53 N. W. 638; Stanley v. M’Gauran, L. R. 11 Ir. 331, 334, 343; Hale v. Philbrick, 42 Ia. 83; C. Aultman & Co. v. Olson, 34 Minn. 450, 26 N. W. 451; Bennett v. Mass. Mut. Life Ins. Co. 107 Tenn. 371, 64 S. W. 760. The doctrine of constructive notice is equitable and cannot be invoked for the purpose of allowing a party guilty of fraud to profit thereby; *407it will serve equity but not inequity. 21 Am. & Eng. Ency. of Law (2d ed.) 585, 590, 684; Kilbourn v. Sunderland, 130 U. S. 518, 519; Stanley v. M'Gauran, L. R. 11 Ir. 331, 334, 343; Converse v. Blumrich, 14 Mich. 109; Groton Sav. Bank v. Batty, 30 N. J. Eq. 131; Gill v. Hardin, 48 Ark. 412; Wild v. Gibson, 1 House Lords Cas. 623; Kerr, Fraud & M. 80; Cordova v. Hood, 17 Wall. 8; Hopkins v. Langton, 30 Wis. 379, 381, 382; Brinkman v. Jones, 44 Wis. 519; Dutchess Co. M. Ins. Co. v. Hachfield, 73 N. Y. 226, 228; 1 Thompson, Commentaries on Negligence, sec. 846. Tbe doctrines of laches, acquiescence and waiver have the same purpose of serving equity as the doctrine of constructive notice, and largely the same elements and scope of application; it is essential to a waiver of a right by plaintiff that there be facts sufficient to create, in favor of the defendant, an equitable estoppel to assert the right. 18 Am. & Eng. Ency. of Law, (2d ed.) 97, 99, 101-103, 111, 115; 28 Am. & Eng. Ency. of Law, 526; Ripley v. Ætna Ins. Co. 30 N. Y. 136, 164; Ross v. Swan, 7 Lea (Tenn.) 467; Deihl v. Adams Co. Mut. Ins. Co. 98 Am. Dec. 307; Pence v. Langdon, 99 U. S. 581; Ellis v. S. W. L. Co. 102 Wis. 407; Tarkington v. Purvis, 128 Ind. 182, 25 N. E. 880; Bennecke v. Conn. Mut. L. Ins. Co. 105 U. S. 359. The plaintiff was never insured; the sending to him of a policy he never applied for, and his retention of the same in ignorance of its character, did not operate to make it even a voidable contract, — it was absolutely void. Strohn v. D. & M. R. Co. 21 Wis. 561; Walker v. Ebert, 29 Wis. 194; Blaeser v. Milwaukee M. M. Ins. Co. 37 Wis. 31, 40; Aultman v. Olson, 34 Minn. 450; Bishop, Contracts, sec. 646-8, 671. A person cannot raise an equity in his own favor by his own wrong doing. Guckenheimer v. Angevine, 81 N. Y. 397; Neblett v. Macfarland, 92 U. S. 105; Dunn v. Amos, 14 Wis. 115; Honzik v. Delaglise, 65 Wis. 500, 501; Titus v. Glens Falls Ins. Co. 81 N. Y. 419; Bidwell v. Astor M. Ins. Co. 16 N. Y. 266; Hamlin v. Sears, 82 *408N. Y. 331; Girod v. Michoud, 4 How. 503, 561; Conn. Gen. L. Ins. Co. v. Eldredge, 102 U. S. 245; Gay v. Havermale, 27 Wash. 390, 67 Pac. 806; Hendrickson v. Hendrickson, 51 Iowa, 68, 50 N. W. 287; Directors C. R. Co. of V. v. Kisch, 2 Eng. & Ir. App. 120; Redgrave v. Hurd, L. R. 20 Ch. Div. 13.