Lauer v. Gray ( 1897 )

The opinion of the court was delivered by

Lippincott, J.

Ho question has been or could be made against the validity of the issuance of the certificate of guarantee or -policy of insurance to the appellants on June 12th, 1893. It is only assailed upon the ground that the condition of the clause under which the appellants seek to establish liability was never complied with. The certificate was in form a renewal certificate, as distinguished from an original certificate. It is clear from the terms of the renewal that it had relation to a prior certificate, and besides that the agreement to renew was made in view of the fact that a prior policy existed upon which, and in accordance with the terms thereof, a liability for losses had arisen. The original policy, by its terms, only insured losses on credits for merchandise sold and delivered where the sales had been made and the losses incurred before or on the date of its expiration, but it contemplated specifically a renewal which would cover and include losses for goods shipped before its expiration where such losses did not actually occur until after its expiration.

Under this renewal certificate not only losses occurring before its expiration on goods shipped during its life were provided for, but it also, by this special clause, covered losses incurred during the same period on sales and shipments of merchandise during the life of the prior certificate. That the renewal certificate succeeded a prior certificate is conceded, and the only defence to its effectiveness in the respect claimed is that the premium or guarantee fee for which this renewal was made was not paid before the expiration of the original or prior certificate.

The conclusion reached is that no such defence has been sustained by the evidence presented to the court. The losses sustained by the appellants under the prior certificate were sustained before its expiration on May 31st, 1893. These losses were subject to adjustment, payable to the appellants on or before that time. These losses, amounting to the sum of $580, retained by the insurer, and the cancellation of the certificate, related to the date of its expiration, and thus all of the benefits which could ever arise to the appellants from it were surrendered to the insurer as of the date of its expiration. The amount of losses was not only retained, but the policy, perhaps covering other losses than those which had been adjusted, was extinguished by the assent of the appellants, upon the condition that they were to receive from the insurer a renewal policy, and which was duly and formally issued and delivered. The negotiations, which resulted in the agreement which accomplished these ends, continued over a period of ten days after the expiration of the prior certificate, but all the benefits and considerations of the renewal were in the hands of the insured before the expiration of the prior certificate and related to a period prior to that date, and must upon every process of reasoning be held to have been a fair and substantial compliance with the condition of the clause in question, which required that certificate must be paid for on or before the expiration of the original certificate, and if this be true it would matter little when the renewal certificate was actually issued and delivered.

It must be recalled that the terms of the renewal certificate must govern in its construction and the effect to be given to its different provisions. In order to make every clause effective it only required the payment prior to the expiration of the original certificate. The renewal policy not only included this special clause but also others covering the different losses which might be incurred. The prior certificate may have contained terms antagonistic to the validity of this clause of the renewal, but the renewal being the legally-substituted contract, liability must be determined by it. The only condition of the renewal, in order to make every provision, including the one in question, effective, was that whatever was considered and agreed upon as the premium for the renewal must be paid or satisfied before or on the date of the expiration of the prior certificate. If this was done, the renewal became the right and due of the appellants in such form as would cover the losses contemplated. The satisfaction or payment, if that term is to be chosen, being found in the existence of the liability of the insurer to the appellants, during the life of the prior policy and before its expiration, under the agreement to renew, the obligation of the insurer arose to carry out the intention of the parties to so devote this previously-existent liability to the purpose of this renewal. The nature of the transactions between the insurer and the appellants not only exhibited the intention of the parties that this was to be so, but I think indicated conclusively that the renewal was based upon the benefit of the retention of the losses occurring under the old policy during its life, and the extinguishment of liability of the insurer under it on the day of its expiration.

It is difficult to perceive upon what course of reasoning or upon what principle of equity it can be contended that the letter as well as the spirit of this contract of insurance have not been complied with, or upon what ground liability can be equitably and honestly avoided. It can be fairly concluded that in order to arrive at this conclusion, there exists no need of construction or interpretation of the agreement between the parties for the renewal policy. It has direct reference to the satisfaction or payment of premiums, by applying the losses arising out of the prior policy incurred before its expiration, and upon such express reference, it is discovered that under it, and during its life and before its expiration, the full premium for a renewal had been retained, and by express agreement these considerations are made to answer for the payment of the premium for the renewal policy. This is conceded by the insurer, but the answer is made that the agreement making this application was not made until after the prior policy had expired. Under the renewal policy it may be a question when the expiration of the prior policy occurred, but conceding that it expired at the time claimed by the insurer, the mere delay of embodying the renewal agreement in a formal certificate did not alter or extinguish the obligation, for the obligation once being established, the application of equitable principles imputes an intention to fulfill it, and if necessary to protect the parties in their just rights and enforce them, equity will assume, the obligation to have been fulfilled in accordance with the doctrine that equity looks upon that as done which ought to be done.

It is therefore concluded that according to the terms of the contract between the insured and the insurer, there was a satisfaction and payment of the premium or guarantee fee of the renewal certificate during the life and before the expiration of the prior policy.

It is not necessary to consider the other grounds urged to establish the liability of the insurers upon this clause of the renewal.

The receiver, therefore, was bound, under the terms of this renewal policy, to make allowance for the losses of the appellants, upon merchandise shipped during the term of the prior certificate where the losses occurred after its expiration and during the life of the renewal certificate, and include the same in the calculation of losses under the renewal certificate, for a pro rata distribution of the assets of the United States Credit Sytem Company.

The decree dismissing the appeal from the disallowance by the receiver must be reversed, with costs.

For reversal — Dixon, Garrison, Lippincott, Magie, Van Syckel, Barkalow, Bogert, Dayton, Hendrickson, Nixon — 10.

For affirmance — Depue, Gummere — 2.

With this result the petition for permission to bring suit against the receiver for a reformation of the renewal certificate becomes unnecessary, and therefore the decree denying the permission to bring such suit must be affirmed, without costs.

For affirmance — Depue, Dixon, Garrison, Gummere, Lippincott, Magie, Van Syckel, Barkalow, Bogert, Dayton, Hendrickson, Nixon — 12.

For reversal — None.