HENSHAW, J.
Plaintiff appeals from the judgment and from the order denying him a new trial. He brought his action against the defendant Llewelyn as maker, and defendant George Larrabee as indorser, to recover upon a negotiable instrument in the form of a check.
Larrabee was a special or soliciting agent of the Mutual Life Insurance Company of Hew York, of which corporation Maxson was the manager for Southern California. The check was given by Llewelyn in payment of the first year’s premium upon a life insurance policy to be issued by the company to him. By its terms the check was made payable upon a day after the date upon which it was agreed the policy should be delivered. Plaintiff pleaded that he was the owner of the check, and that he had purchased it for value before maturity. For answer the defendant made denial, and set up facts constituting misrepresentation and fraud in the procurement of the check, and showing at least a partial failure of consideration. He also averred that plaintiff took the check with knowledge of these facts.
TJpon the trial, he proved that Larrabee represented to him ■ that his company would issue an exceptionally and peculiarly [197]*197favorable policy to him for the sake of other business which it hoped thereby to gain. Defendant signed a written application for a policy, and, not understanding its terms, was assured, in answer to his question, that this particular application would bring the policy agreed upon. Llewelyn thereupon gave his check for five hundred and sixty dollars, payable to Larrabee, but payable upon April 20, 1896. The application was signed and the check delivered upon December 20, 1895. The policy was to follow some time in January, 1896. Larrabee agreed that, if the policy was not as represented, the check would be returned. The policy which was issued was such a policy as was called for by the application, but in essential particulars was a different policy, and one less favorable to the insured than that which Larrabee had represented. Upon January 20, 1896, the defendant Llewelyn received the policy from the plaintiff Max-son. He returned it the same day, with a letter stating that the policy was not in accordance with the understood terms. Upon January 23d Maxson again sent the policy to Llewelyn, and in his accompanying letter said: “I return the policy herewith and shall hold you for its payment.....Tour check, application, and receipt for check were all dated December 20th. Application and- check were in my hands on the 21st of December and immediately became the property of the company and could not be recalled.” Llewelyn once more returned the policy and re- . fused payment of the premium.
I Ho evidence whatever was offered showing that Maxson had any actual knowledge of any misrepresentation by Larrabee. Larrabee made default and was not a witness upon the trial. Upon behalf of Maxson, it was shown that Larrabee presented to him upon December 21st the check and the application for the policy. The application called for a policy such as was regularly issued by the company. Maxson testifies that he gave Larrabee twenty-five dollars upon account of the check, upon the 21st of December, and a few days thereafter, having satisfied himself of the solvency of the maker, gave him seventy-five dollars more. About the sixth day of January he agreed with Mr. Forbes, his superior officer, and the general manager of the company, that he would be responsible for the payment of the premium to the company, and instructed the company to send the policy to him [198]*198for delivery and collection. It was so sent to him, and by him delivered unconditionally to defendant Llewelyn, with an indorsement showing the payment of the first year’s premium. The net amount of the premium, two hundred and twenty-two dollars, was, in a later settlement and adjustment of accounts between him and the general office, made a charge against him, and settled accordingly. The time when the two hundred and twenty-two dollars was thus actually adjusted and settled in the accounts was after plaintiff knew from Llewelyn that he repudiated the contract.
By appellant it is first insisted that the charge of fraud and the evidence in support of it are both insufficient, in that it is not made to appear that at the time Larrabee made the representations to Llewelyn he did not believe he could procure such a policy, and that the only testimony upon the point is that such policy was not, in fact, procured. It would in most eases be extremely difficult, and in many cases absolutely impossible, to procure direct evidence of this nature. In all cases it is permissible to prove fraud by circumstances, and in most cases it is the only evidence available. In aid of the direct facts proved, legitimate inferences are permitted to be indulged to establish other facts not directly in evidence. (Butler v. Collins, 12 Cal. 457; Levy v. Scott, 115 Cal. 39.)
Where a man makes a representation in the reasonable belief that it is true, fraud will not be imputed to him if it afterward be shown to be untrue, but there must be reasonable grounds for his belief. (2 Pomeroy’s Equity Jurisprudence, see. 880; Kerr on Frauds, 57.) In this case no belief upon the part of Larrabee, and no reasonable grounds for belief, are shown; while, upon the other hand, the fact that the policy returned was not at all the policy represented, taken with the circumstance that it would have been to the last degree improbable that an insurance company doing business by legitimate methods would ever use such a policy as that represented, are circumstances enough from which the fraudulent character of the representations may be inferred.
Appellant further alleges that, whatever were the parol representations, the agreement of the parties was cast into writing in the application signed by defendant Llewelyn, and that in re[199]*199sponse to that application the precise policy called for therein was delivered to defendant; but the application itself, prepared by the special agent, was of such a nature as not to be readily understandable, if understandable at all, by one not versed in insurance matters. It seems not to have been understood by the defendant, for he asked specifically whether the application which he sent would bring the desired policy. It thus appears that defendant’s signature to the application was procured by misrepresentation and fraud sufficient to vitiate the transaction. Section 856 of the Code of Civil Procedure, which declares that no evidence may be received of the terms of an agreement which has been reduced to writing, other than the contents of the writing, expressly admits evidence to establish illegality or fraud. In Union etc. Ins. Co. v. Wilkinson, 13 Wall. 222, it is well said: “By the interested or officious zeal of the agents employed by the insurance companies in the wish to outbid each other and to procure customers, they not infrequently mislead the insured, by a false or erroneous statement of what the application should contain; or, taking the preparation of it into their own hands, procure his signature by an assurance that it is properly drawn, and will meet the requirements of the policy. The better opinion seems to be that, when this course is pursued, the description of the risk should, though nominally proceeding from the insured, be regarded as the act of the insurers. (Rowley v. Empire Ins. Co., 36 N. Y. 550.)
“The modem decisions fully sustain this proposition, and they seem to us founded in reason and justice, and meet our entire approval.
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HENSHAW, J.
Plaintiff appeals from the judgment and from the order denying him a new trial. He brought his action against the defendant Llewelyn as maker, and defendant George Larrabee as indorser, to recover upon a negotiable instrument in the form of a check.
Larrabee was a special or soliciting agent of the Mutual Life Insurance Company of Hew York, of which corporation Maxson was the manager for Southern California. The check was given by Llewelyn in payment of the first year’s premium upon a life insurance policy to be issued by the company to him. By its terms the check was made payable upon a day after the date upon which it was agreed the policy should be delivered. Plaintiff pleaded that he was the owner of the check, and that he had purchased it for value before maturity. For answer the defendant made denial, and set up facts constituting misrepresentation and fraud in the procurement of the check, and showing at least a partial failure of consideration. He also averred that plaintiff took the check with knowledge of these facts.
TJpon the trial, he proved that Larrabee represented to him ■ that his company would issue an exceptionally and peculiarly [197]*197favorable policy to him for the sake of other business which it hoped thereby to gain. Defendant signed a written application for a policy, and, not understanding its terms, was assured, in answer to his question, that this particular application would bring the policy agreed upon. Llewelyn thereupon gave his check for five hundred and sixty dollars, payable to Larrabee, but payable upon April 20, 1896. The application was signed and the check delivered upon December 20, 1895. The policy was to follow some time in January, 1896. Larrabee agreed that, if the policy was not as represented, the check would be returned. The policy which was issued was such a policy as was called for by the application, but in essential particulars was a different policy, and one less favorable to the insured than that which Larrabee had represented. Upon January 20, 1896, the defendant Llewelyn received the policy from the plaintiff Max-son. He returned it the same day, with a letter stating that the policy was not in accordance with the understood terms. Upon January 23d Maxson again sent the policy to Llewelyn, and in his accompanying letter said: “I return the policy herewith and shall hold you for its payment.....Tour check, application, and receipt for check were all dated December 20th. Application and- check were in my hands on the 21st of December and immediately became the property of the company and could not be recalled.” Llewelyn once more returned the policy and re- . fused payment of the premium.
I Ho evidence whatever was offered showing that Maxson had any actual knowledge of any misrepresentation by Larrabee. Larrabee made default and was not a witness upon the trial. Upon behalf of Maxson, it was shown that Larrabee presented to him upon December 21st the check and the application for the policy. The application called for a policy such as was regularly issued by the company. Maxson testifies that he gave Larrabee twenty-five dollars upon account of the check, upon the 21st of December, and a few days thereafter, having satisfied himself of the solvency of the maker, gave him seventy-five dollars more. About the sixth day of January he agreed with Mr. Forbes, his superior officer, and the general manager of the company, that he would be responsible for the payment of the premium to the company, and instructed the company to send the policy to him [198]*198for delivery and collection. It was so sent to him, and by him delivered unconditionally to defendant Llewelyn, with an indorsement showing the payment of the first year’s premium. The net amount of the premium, two hundred and twenty-two dollars, was, in a later settlement and adjustment of accounts between him and the general office, made a charge against him, and settled accordingly. The time when the two hundred and twenty-two dollars was thus actually adjusted and settled in the accounts was after plaintiff knew from Llewelyn that he repudiated the contract.
By appellant it is first insisted that the charge of fraud and the evidence in support of it are both insufficient, in that it is not made to appear that at the time Larrabee made the representations to Llewelyn he did not believe he could procure such a policy, and that the only testimony upon the point is that such policy was not, in fact, procured. It would in most eases be extremely difficult, and in many cases absolutely impossible, to procure direct evidence of this nature. In all cases it is permissible to prove fraud by circumstances, and in most cases it is the only evidence available. In aid of the direct facts proved, legitimate inferences are permitted to be indulged to establish other facts not directly in evidence. (Butler v. Collins, 12 Cal. 457; Levy v. Scott, 115 Cal. 39.)
Where a man makes a representation in the reasonable belief that it is true, fraud will not be imputed to him if it afterward be shown to be untrue, but there must be reasonable grounds for his belief. (2 Pomeroy’s Equity Jurisprudence, see. 880; Kerr on Frauds, 57.) In this case no belief upon the part of Larrabee, and no reasonable grounds for belief, are shown; while, upon the other hand, the fact that the policy returned was not at all the policy represented, taken with the circumstance that it would have been to the last degree improbable that an insurance company doing business by legitimate methods would ever use such a policy as that represented, are circumstances enough from which the fraudulent character of the representations may be inferred.
Appellant further alleges that, whatever were the parol representations, the agreement of the parties was cast into writing in the application signed by defendant Llewelyn, and that in re[199]*199sponse to that application the precise policy called for therein was delivered to defendant; but the application itself, prepared by the special agent, was of such a nature as not to be readily understandable, if understandable at all, by one not versed in insurance matters. It seems not to have been understood by the defendant, for he asked specifically whether the application which he sent would bring the desired policy. It thus appears that defendant’s signature to the application was procured by misrepresentation and fraud sufficient to vitiate the transaction. Section 856 of the Code of Civil Procedure, which declares that no evidence may be received of the terms of an agreement which has been reduced to writing, other than the contents of the writing, expressly admits evidence to establish illegality or fraud. In Union etc. Ins. Co. v. Wilkinson, 13 Wall. 222, it is well said: “By the interested or officious zeal of the agents employed by the insurance companies in the wish to outbid each other and to procure customers, they not infrequently mislead the insured, by a false or erroneous statement of what the application should contain; or, taking the preparation of it into their own hands, procure his signature by an assurance that it is properly drawn, and will meet the requirements of the policy. The better opinion seems to be that, when this course is pursued, the description of the risk should, though nominally proceeding from the insured, be regarded as the act of the insurers. (Rowley v. Empire Ins. Co., 36 N. Y. 550.)
“The modem decisions fully sustain this proposition, and they seem to us founded in reason and justice, and meet our entire approval. This principle does not admit oral testimony to vary or contradict that which is in writing, but it goes upon the idea that the writing offered in evidence was not the instrument of the party whose name is signed to it; that it was procured under such circumstances by the other side as estops that side from using it or relying on its contents; not that it may be contradicted by oral testimony, but that it may be shown by such testimony that it cannot be lawfully used against the party whose name is signed to it.”
The court found that the plaintiff was not a purchaser of the check for value before maturity, and, indeed, that he was not a purchaser at all, but that Larrabee indorsed the cheek to plain[200]*200tiff, and plaintiff took it, as the agent of and for the Mutual Life Insurance Company of New York, and that at the time of the commencement of the action the insurance company was the owner and holder of it. If there be any substantial evidence in the record supporting this finding, it is determinative of the case in respondent’s favor. By appellant it is insisted that all the evidence shows that he was an innocent purchaser of the check, for value, before maturity, that he gave to Larrabee one hundred dollars for it, and that he paid the insurance company two hundred and twenty-two dollars more. For respondent it is contended that this evidence is all in harmony with the theory that the insurance company, and not the plaintiff, was.the owner of the check; that plaintiff, as the superior of Larrabee, paid to him upon behalf of the company one hundred dollars for his commission, and on behalf of the company held the check for collection; that the proved fraud of the agent was the fraud of the principal, and that by showing that Larrabee’s principal was the owner of the check this action for its collection is as successfully defeated as it would have been had Larrabee himself prosecuted it. In support of this argument respondent adverts to the admission in plaintiff’s letter above quoted. Upon January 23, 1896, plaintiff wrote to Llewelyn that the check upon the 21st of December <rbeeame the property of the company and could not be recalled.” This is affirmative evidence from the plaintiff himself in support of respondent’s position, and against his own contention that he was the purchaser of the instrument. It is evidence sufficient, taken with the other circumstances, to support the finding.
The judgment and order appealed from are affirmed.
McFarland, J., and Beatty, C. J. concurred.
Hearing in Bank denied.