Penn Mutual Life Insurance v. Blount

127 S.E. 892, 33 Ga. App. 642, 1925 Ga. App. LEXIS 660

• Court: Court of Appeals of Georgia
• Decided: April 11, 1925
• Docket: 15871
• Status: Published

Opinion

Bell, J.

(After stating the foregoing facts.)

Notwithstanding the acknowledgment in the policy of the receipt of the first premium, under the stipulation in the application, that the contract of insurance should not be in force unless or until a policy should be issued and delivered to the assured and the first premium thereon actually paid during his lifetime and good health, the payment of the premium according to the terms-of the agreement was a condition precedent to the liability of the insurer, unless there was a due or unconditional delivery of the policy by the company. Reliance Life Ins. Co. v. Hightower, 148 Ga. 843 (98 S. E. 469); Volunteer State Life Ins. Co. v. McGinnis, 29 Ga. App. 370 (115 S. E. 287), and'citations.

The agreement signed by the assured in his application, “that neither agents nor examiners have any authority to modify or enlarge contracts,” and the clauses in the policy, that “No alteration of this policy or waiver of any of its conditions shall be valid unless endorsed thereon and signed by an officer of the company, and that “No agent is authorized to modify, alter or enlarge this contract,” placed the assured upon notice that the agents of the company were without any authority to put the policy in force unless the first premium thereon was actually paid during his lifetime and good health. • The limitations as thus expressed applied to all agents, including general agents. A principal may qualify the authority even of a general agent, and will not be bound by acts of such agent beyond the scope of his authority, where the person dealing with him has notice of the limitations thereon. Hutson v. Prudential Ins. Co., 122 Ga. 847 (2) (50 S. E. 1000); Vardeman v. Penn Mutual Life Ins. Co., 125 Ga. 117 (3) (54 S. E. 66, 5 Ann. Cas. 221); Bank of Commerce v. New York Life Ins. Co., 125 Ga. 552 (3) (54 S. E. 643); Rome Industrial Ins. Co. v. Eidson, 138 Ga. 592 (1, 2) (75 S. E. 657); Reese v. Fidelity Mutual Life Asso., 111 Ga. 482, 490 (36 S. E. 637). The present case differs from Fireman’s Fund Ins. Co. v. Pekor, 106 Ga. 1 (1) (31 S. E. 779), and Mechanics & Traders Ins. Co. v. Mutual Real Estate Asso., 98 Ga. 262 (1, 2) (25 S. E. 457), in which the suits were upon contracts of fire insurance, and in which it appeared that the agents dealt with liad authority to issue and deliver the policies. “Nor was this a case of knowledge of an existing fact by an agent issuing a policy, as in the case of Johnson v. Ætna Insurance Co., 123 Ga. 404 (51 S. E. 339, 107 Am. St. Rep. 92).” Brown v. Mutual Benefit Life Ins. Co., 131 Ga. 38 (1), 40 (61 S. E. 1123). It was said even in the Johnson case (123 Ga. 407), supra, that “as to a matter concerning the time when the contract is to become of force, . . the insured, by accepting the policy, would be bound by its terms, and could not set up a waiver which he was bound to know the company’s agent had no power to make.” Furthermore, that case was also a fire insurance case, and “Generally the agent of a fire insurance company has power to fill up and issue the policies, and the acts and knowledge of such agent are the acts and knowledge of the company. There is, therefore, manifest 'propriety in holding that the knowledge of such agent is imputable to the company. This is true even though the policy undertakes to limit expressly the power of the agent. In other words, where the agent is charged by the company with the duty of acquiring knowledge for the company, or is clothed by the company with the actual or apparent authority to act for the company in the issuance of the policy, express limitations upon the power of such agent will not prevent the application of the general rule that knowledge of the agent as to matters within the general scope of his authority is the knowledge of the principal.” New York Life Ins. Co. v. Patten, 151 Ga. 185, 187 (106 S. E. 183).

The express provisions of the contract are not avoided by the allegations of the petition with reference to a custom between the company and its agents whereby the agents were allowed to make delivery of policies and give credit for premiums, and the company would charge the agents with liability therefor for a period of sixty days. Under the language of the particular policy the question is not what was the custom and practice of the company in dealing with its agents with respect to the collection and payment of premiums generally, but what was done in the particular case. Parties in the making of contracts may disregard a prevailing custom or usage, and if their stipulations are contrary thereto they will be presumed to have intended to exclude it from the particular agreement. Haupl v. Phœnix Mutual Life Ins. Co., 110 Ga. 146 (35 S. E. 342).

In the absence of an understanding to the contrary, “a custom of the trade, if of such universal practice as would justify the conclusion that it must by implication have formed a part of the agreement, could be proved in aid of an otherwise incomplete or ambiguous writing. This rule does not authorize proof of a custom where it runs counter to or is inconsistent with an expressed provision of the agreement. Stamey v. Western Union Tel. Co., 92 Ga. 613, 616 (18 S. E. 1008, 44 Am. St. R. 95); Vardeman v. Penn Mutual Life Ins. Co., 125 Ga. 117 (2), 120 (54 S. E. 66, 5 Ann. Cas. 221); Lowery Lock Co. v. Wright, 154 Ga. 867 (4).” Mays v. Hankinson, 31 Ga. App. 473 (3) (120 S. E. 793); Vaughn v. American National Ins. Co., 19 Ga. App. 660 (91 S. E. 1057); Bank of Commerce v. New York Life Ins. Co., 125 Ga. 552 (3) (54 S. E. 653). If the company accepted the liability of either of its agents for the premium, any custom that might prevail between it and its agents in other cases would be immaterial. Williams v. Empire Mutual Life Ins. Co., 8 Ga. App. 303 (9) (68 S. E. 1082). Any general course of dealings would likewise be immaterial if the company did not agree to the arrangement in the particular case, and the petition fails to allege that it did so agree.

It follows from what has been said that the petition can not be sustained either upon the hypothesis that the company’s general agent could and did waive the stipulation that the policy should not become effective until and unless the first premium should be paid in cash during the good health of the assured, or upon the theory that the stipulation was ineffective because ¿lie company was accustomed to accept the liability of its agent or agents -in lieu of the payment of the premium .by persons generally upon whose lives it issued contracts of insurance,—both of which propositions the plaintiffs (the defendants in error here) have insisted upon.

But, as we have already intimated, if the company made a due and unconditional delivery of the policy, it would be presumed to have waived the requirement that the premium should be actually paid during the good health of the assured as a condition precedent to its liability and to have extended credit for the premium. In that case the recital of payment as contained in the policy “would become a covenant of the contract, and it would not be open to the insurer to deny the payment of the first premium for the purpose of avoiding the policy, although the insurer might deny and disprove the recital merely for the purpose of enforcing payment of the first premium.” Reliance Life Ins. Co. v. Hightower, supra. If the company could thus bind itself by its own delivery, it could do so by ratifying, an unauthorized delivery by one of its agents. Civil Code (1910), §§ 3571, 3569. It was alleged in the amendment to the petition that the policy was absolutely and unconditionally delivered to the assured and remained in his possession for seven days, and was entrusted back to the company for the sole purpose of changing the beneficiary; that credit for payment of the first premium was extended both by the local agent and the general agent; that the company accepted and complied with the request of the assured for a change of the beneficiary, and thereafter returned the policy to its general agent “for delivery to the insured;” and that in these things the company was acting with knowledge of the acts of its agents. Such allegations supported further averments by way of conclusion that the defendant ratified the conduct of its agents in making the original delivery of the policy and in extending credit for the first premium, and thereby waived any right it might have had to repudiate such acts, and is estopped from pleading the incompleteness and invalidity of the contract by reason thereof. Civil Code (1910), § 3591.

Knowledge of all the facts is, of course, essential to a ratification (Dolvin v. American Harrow Co., 125 Ga. 699 (5), 54 S. E. 706, 28 L. R. A. (N. S.) 785), but such knowledge being alleged, the petition set forth a cause of action upon the theory that the company by ratifying the originally unauthorized unconditional delivery of the policy became bound as if the delivery had been made by its proper officers. The general demurrer was properly overruled.

Certain allegations of the petition with respect to acts of the agents upon which the assured relied to effectuate the contract were demurred to, because, as insisted by the demurrers, they were mere conclusions of the pleader, and because the authority of the agents was not shown. Since the relation of principal and agent arises wherever one person either authorizes another to„ act for him or subsequently ratifies the acts of another in his behalf, and since ratification relates back to the act ratified (Civil Code of 1910, §§ 3569, 3591), and since the petition as amended is construed as sufficiently alleging a ratification, there is no merit in any of the special demurrers just alluded to.

The defendant demurred to the allegations by which the plaintiffs tendered the premium into court, upon the ground that the defendant was under no obligation to accept it. If the policy was not effective at the date of the assured’s death, the case would not be altered by a subsequent tender of the premium, but since it appears by the averments of the petition that the policy did become effective and thus that the premium should be paid, the tender-as set forth in the petition was not irrelevant. The plaintiffs, if they so desired, were entitled to make the tender in order to prevent the accrual of interest thereon.

The defendant demurred to the allegations and prayers for the recovery of attorney’s fees- and damages, upon the sole ground that there could be no recovery for these items because the plaintiffs had no right of recovery whatever under the policy. This demurrer is disposed of by the conclusion reached above that the petition set forth a cause of action for the recovery of principal. The demurrer does not raise any question as to whether, if a cause of action was otherwise set forth, the facts as set out in the complaint were sufficient to Show bad faith.

Paragraphs 13 and 14 of the petition were as follows:

“13. As plaintiffs desired possession of the policy in order to attach it as an exhibit to their petition in this suit, they decided to exhaust all reasonable efforts to obtain possession of the policy, and on Dec. 11 addressed a letter to the insurance commissioner of Georgia, giving him a resume of the facts, and asking whether under the rules of his department he could.afford any relief by. compelling the surrender of the policy.

“14. The insurance commissioner addressed a communication to the company and received from it a letter under date of December 15, giving as the reason for refusal, as previously stated, that it denied liability on the policy, and the insurance commissioner on December 18, 1922, sent a copy of that letter to said Fleming [plaintiff’s attorney], with the statement that the insurance department could afford no relief; leaving a suit at law as the only recourse to plaintiffs.”

A special demurrer interposed to these averments, upon the grounds that they were irrelevant, should have been sustained. Even if the insurance commissioner had any authority in such a matter, the action of the plaintiffs therein, being ex parte, could not be taken advantage of by them in'the subsequent suit upon the policy.

From what we have said in the first division of this opinion it follows that the court below ought also to have sustained the special demurrers to sub-paragraph 6 of paragraph 19 of the amendment wherein it was sought to bind the defendant by an alleged custom. The defendant sought by demurrer also, to bring into question the allegations with respect to the alleged custom as contained in paragraph 4 of the original petition and sub-paragraph 2 of paragraph 19 of the amendment, but since the demurrer in each of these instances included in the attack other matter which was not subject thereto, there was no error in the court’s ruling thereon. Southern Ry. Co. v. Phillips, 136 Ga. 282 (1) (71 S. E. 414).

It may be that the judgment would not be reversed if there were no other error than in the overruling of the demurrer to the allegations with respect to the communications between the beneficiaries and the insurance commissioner. These allegations, though irrelevant, might possibly be treated as harmless surplusage if no other error appeared, but it is unnecessary to determine this question, since the court committed substantial error in overruling the demurrer attacking the averments with respect to the alleged custom.

Judgment reversed.

Jenkins, P. J., and Stephens, </., concur.