Dean v. Equitable Fire Ins.

7 F. Cas. 301, 4 Cliff. 575

• Court: U.S. Circuit Court for the District of Massachusetts
• Decided: May 15, 1878
• Status: Published

Opinion

CLIFFORD, Circuit Justice.

Courts of ■equity undoubtedly possess the power to correct mistakes in policies of insurance, even to the extent of changing the material clauses of the instrument which are the subjects of special agreement. But the settled practice is that the power should be exercised with great caution, and only in cases where the proof is entirely satisfactory. Oliver v. Mutual Commercial Marine Ins. Co. [Case No. 10,498]. Instruments of this kind may be reformed in equity, where it appears that by fraud or mistake they do not fulfill, or that they violate the agreement between the parties; but the party alleging the mistake must show exactly in what the mistake consists, and the correction that should be made. Hearne v. New England, etc., Ins. Co., 20 Wall. [61 U. S.] 490; Hunt v. Rousmaniere, 1 Pet [26 U. S.] 12.

The jurisdiction of chancery courts in that regard is everywhere admitted; but the question is, whether the bill of complaint shows a proper case for equitable interference. Matters well pleaded are admitted by the demurrer, but the corporation respondents deny that the complainant has stated such a case as entitles him to the relief prayed for in the bill of complaint. Sufficient appears to show that the title in the premises insured was in the bankrupt; that he, on the 18th of March, 1876, for some unexplained cause, conveyed the same to John H. Haskell and George S. Jellerson, of New York city, and the complainant alleges that the conveyance was without consideration, and in fraud of the bankrupt act [of 1867 (14 Stat. 534)].

Though executed in fraud of the bankrupt law, the clear inference from the allegations of the bill is that the deed was in due form; and it appeals that the grantees, on the 3d of June, 1876, insured the premises in their own name in the company of the corporation respondents, in the sum of $2,500, against loss by fire for the term of- one year from the date of the policy. Prior to that, to wit, on the 8th of May, in the same year, the grantor in the conveyance was adjudged bankrupt, and on the 31st of the same month the complainant was duly chosen and confirmed as trustee of the estate of the bankrupt, and on the 3d of June following became seized of the bankrupt’s estate by due conveyance, as required by law.

Shortly after the appointment of the complainant, information was communicated to him by an agent of the respondents, that he, the agent, held certain policies of insurance on the said premises, payable to Haskell & Jellerson, which he was ready to deliver to the complainant upon payment of the premiums; to which he replied, that if the po Li s were payable to those parties he would not accept the same, that the property belonged to the estate of the bankrupt, of which he was the trustee, and that the policies must be payable to him, as such trustee. Appended to that allegation is the averment of the complainant that he thereby meant and in- ¡ tended that liis interest, as such trustee, in the premises should be insured, and that the respondent company had fair and ample notice of such intention that he desired to have his interest in the property insured by good, effectual policies; but he does not allege that he requested that any such policies should be issued to him, or that any other alteration should be made in the policy issued to the grantees of the bankrupt, than what was subsequently made by the company before the policy was delivered to him as such trustee.

They immediately wrote in the policy, or caused to be written, as follows: “Payable in ease of loss to Joseph F. Dean, trustee,” and forwarded the policy to the complainant; and he alleges that “believing; and having good cause to believe, that «aid policy insured' his interest in said premises, he accepted the same;” that what the complainant wanted was, that in case of loss the insurance should be payable to him, as the trustee of the bankrupt's estate, and that was fully accomplished by the amendment inserted in the policy. Neither party made any mistake in that transaction, and the only mistake subsequently made was that made by the complainant in taking a conveyance from the parties in whose names the policy was issued, without securing the assent of the insurance company. Had he done that, no controversy would ever have arisen.

Plainly it was not a mistake of the company in writing the policy, but of the complainant in allowing the title of the property to be changed without complying with the following condition of tne policy: “If the property be sold or transferred, or upon the passing or entry of a decree of foreclosure, or upon a sale under a deed of trust, or if the property insured be assigned under any bankrupt or insolvent law, or any change take place in title or possession, except in case of succession by.reason of the death of the assured, whether by legal process, judicial decree, or voluntary transfer or conveyance . . . then and in every such case the policy shall be void.” Conditions of the kind are frequently inserted in policies, and though they often operate with great severity, still they are obligatory in ease they are not ■waived by the company.

It is said that the conveyance was without consideration, but that cannot make any dif-. ference, as the formal title was changed before any loss occurred. 'Written agreements, whether executory or executed, may be reformed in equity courts where there is a material mistake of fact. In all such cases, says Story, if the mistake is clearly made out, by proofs entirely satisfactory, equity will reform the contract so as to make it conformable to the precise intent o-l the parties. But if the proofs are doubtful and unsatisfactory, and the mistake is not made entirely plain, equity will withhold relief upon the ground that the written paper ought to be treated as a full and correct expression of the intent of the contracting parties, until the contrary is established beyond reasonable controversy. 1 Story, Eq. Jur. § 152; Adams, Eq. (3d Am. Ed.) 171; Andrews v. Essex Fire & Marine Ins. Co. [Case No. 374). Apply those rules to this case and it is clear that the complainant is not entitled to any relief.

Demurrer sustained and bill of complaint dismissed.