Summary
In Fireman's Fund Ins. Co. v. Williams, 170 Miss. 199, 154 So. 545, 546, the court said, with respect to a contract which could be terminated on 10 days' notice by either party, "the termination of such a contract is not performance of it, but is a mere frustration thereof."
Summary of this case from Stahlman v. National Lead CompanyOpinion
No. 31192.
May 7, 1934. Suggestion of Error Overruled May 21, 1934.
1. FRAUDS, STATUTE OF.
Suit based on oral agreement in 1929 that, until terminated by either party, insurer would renew fire policy yearly, under which policy was renewed for 1930 and 1931 but not 1932, held within statute of frauds barring action on agreement not to be performed within fifteen months (Code 1930, section 3343 (d)).
2. FRAUDS, STATUTE OF.
Statute of frauds may be raised by demurrer in chancery court.
3. CUSTOMS AND USAGES.
Custom and usage cannot be invoked in contravention of law, nor create contract or liability where none otherwise exists.
4. CUSTOMS AND USAGES.
Generally, custom may be read into contract, or in construing contract.
APPEAL from Chancery Court of Grenada County.
Smith, Smith Bloodworth, of Atlanta, Ga., and A.M. Carothers, of Grenada, for appellant.
The courts of other jurisdictions have held repeatedly that the allegations as set forth in the amended bill do not entitle a complaining party to recover.
Murphy Hardware Co. v. Rhode Island Ins. Co., 111 S.E. 808.
A renewal cannot arise out of the custom of insurer's agent to renew a fire policy, where no renewal is actually made because of the agent's illness; at least, where the insured becomes aware, before loss, of the fact that the policy has not been renewed, and makes no effort to procure other insurance. So, it is held that an insurance company is not bound by its agent's mere naked promise to renew a policy when it runs out, especially where it is not shown that the agent had any authority to make such a promise. In fact, it is held that a mere promise by the insurer's agent that he will see that a fire policy is renewed when it runs out, is the individual contract of the agent, and does not bind the insurance company, in the absence of a showing of authority to make the same, although, if the parol contract of renewal is entered into by an authorized agent, it becomes the contract of the insurance company, and not of the agent.
2 Couch Cyclopedia of Insurance Law, 1627, sec. 532; Bridges v. St. Paul Fire Marine Ins. Co., Brown v. Same, 102 Neb. 316, 167 N.W. 64, L.R.A. 1918D 1199; Struzewski v. Farmers Fire Ins. Co., 226 N.Y. 338, 123 N.E. 661.
Generally the custom of insurance companies to renew without a special request is not so well established that an insured can take advantage of it.
Nippolt v. Fireman's Insurance Co., 57 Minn. 275, 59 N.W. 191; 2 Cooley's Briefs on Insurance (2 Ed.), 14035; Republic Ins. Co. v. Moss, 235 S.W. 700.
A usage or trade custom must, as it is frequently stated, possess the following essentials: It must be ancient, certain and uniform, compulsory, consistent, general, continued, notorious, reasonable, and not in contravention of law.
17 C.J. 449, sec. 7; Newark Fire Ins. Co. v. Smith, 167 S.E. 79; National Savings Bank v. Ward, 100 U.S. 195, 206, 25 L.Ed. 621.
Usage cannot make a contract where there is none, nor prevent the effect of the settled rules of law.
Bank v. Burkhardt, 100 U.S. 686, 692; Tilley v. Cook County, 103 U.S. 155; Boorman v. Jenkins, 12 Wend. 566, 27 Am. Dec. 158; Thomas v. Guarantee Title Co., 81 Ohio St. 432, 91 N.E. 183, 26 L.R.A. (N.S.) 1210; 27 R.C.L. 183, sec. 20; 17 C.J. 501, sec. 64.
It is elementary law that usage or custom cannot create a contract or liability where none otherwise exists.
Thomas v. Guarantee Title Trust Co., 81 Ohio St. 432, 91 N.E. 183, 26 L.R.A. (N.S.) 1210; National Savings Bank v. Ward, 100 U.S. 195, 26 L.Ed. 621; 2 Cooley's Briefs on Insurance (2 Ed.), 1403; 26 C.J. 110, sec. 108.
If a usage is entirely local in its nature it is not binding on an insurer domiciled in another state than that in which the usage obtains.
5 Cooley's Briefs on Insurance (2 Ed.), 4094; City Mortgage Discount Co. v. Palatine Ins. Co., Ltd., of London, England, 145 So. 490; German-American Ins. Co. v. Commercial Fire Ins. Co., 95 Ala. 469, 11 So. 117, 16 L.R.A. 291.
Where a local agent's commission empowered him to issue and countersign policies on risks accepted by him; to renew or cancel such policies; and to assent to assignments thereof, before loss; but such authority was subject to the terms and conditions of the company's printed policy, and the agent's acts were not to be in contravention thereof, or to operate as a waiver of them, the agent's authority depended upon two writings, the agent's commission and the printed policy, which was the standard policy, and it provided for renewal under the original stipulations in consideration of premium for the renewed term. It also stipulated that whatever was done by the agent must be done by writing endorsed upon the policy. It was also held, in the absence of proof that the agent's powers had been broadened, or that the insurer had ratified his acts, or that he had ever been held out as having power to bind the company by an oral contract, to insure or to renew existing insurance, that said agent had no authority to make an oral contract of insurance or to renew an existing policy except in accordance with the authority vested in him by his commission and the "printed policy."
1 Joyce on Insurance, page 199; Underwood v. Fire Ins. Co., 134 N YS. 105.
The alleged promise or agreement of Mr. Moody, the agent, to renew the policy, as alleged by complainant, if made, was not binding on the defendant insurance company, as he had absolutely no authority to make it.
New York Life Ins. Co. v. O'Dom, 100 Miss. 219; Newman v. National Fire Ins. Co., 152 Miss. 351.
The alleged arrangement and/or agreement relied upon by complainant for a renewal of the policy referred to in the bill is shown upon the face of the bill to have been in violation of the statute of frauds, section 3343 (d) of the Mississippi Code of 1930, and, therefore, no action lies against defendant whereby to charge defendant thereon.
Gerachi v. Sherwin-Williams Co., 156 Miss. 38, 125 So. 410.
Such a contract, as set forth in the bill, creates a dual agency, contrary to law, and is not binding upon the defendant.
21 R.C.L. 827, sec. 11; Wildberger v. Hartford Fire Ins. Co., 72 Miss. 338; Dohlin et al. v. Dwelling House Mutual Ins. Co. of Lincoln, 238 N.W. 921.
Denman Breland, of Sumner, for appellee.
We submit that this court, in the case of Liverpool London Globe Insurance Company v. Hinton, 116 Miss. 764, 77 So. 652, and in other cases hereinafter cited, has aligned itself with the rule that a legal, binding verbal contract may be made between an insurance company, acting through its agent, and an insured, to renew fire insurance policies.
Mallette v. British American Insurance Company, 91 Md. 471, 46 A. 1005; Abel v. Phoenix Ins. Co., 47 App. Div. 81, 62 N.Y. Supp. 218; Commercial Ins. Co. v. Morris, 105 Ala. 498, 18 So. 34; Georgia Home Ins. Co. v. Kelley (Ky.), 113 S.W. 882.
The court also decided in that case that such a contract to renew will be enforced in equity after the loss.
Franklin Fire Ins. Co. v. Taylor, 52 Miss. 441; Crowell v. New Hampshire Fire Ins. Co., 147 So. 762.
It is well settled by the decisions of this court, as well as the authorities generally that a court of equity has jurisdiction to compel "the issuance and delivery of an insurance policy after a loss, where there has been a valid agreement for one before the loss, and will enforce payment of it as if made in advance."
Palmetto Fire Ins. Co. v. Allen, 148 Miss. 97, 114 So. 145, 141 Miss. 681-90, 105 So. 483, 769.
On the point as to the binding and enforcible effect of such an oral agreement to renew the policy and the authority of the agent to make such an agreement, we refer the court to a number of decisions of other states. A large number of these authorities is collected in the annotated note to the case of Oklahoma Fire Ins. Co. v. Virginia Fay Mercantile Co., 153 P. 153, L.R.A. 1916C 779.
Massachusetts Bonding Insurance Co. v. Vance, 180 P. 693, 15 A.L.R. 995.
It has been held that an insurance company may contract by parol for the renewal of a policy, although it is stipulated in the face of the policy that this shall not be done.
Cohen v. Continental Fire Ins. Co., 67 Tex. 325, 60 Am. Rep. 24, 3 S.W. 296; McCabe Brothers v. Aetna Ins. Co., 9 N.D. 19, 47 L.R.A. 641, 81 N.W. 426; Boos v. Aetna Ins. Co., 22 N.D. 11, 132 N.W. 222; Hartford Fire Ins. Co. v. Buckwalter Lbr. Co., 116 Miss. 822, 77 So. 798; Wiebeler v. Milwaukee Mechanics' Mutual Ins. Co., 30 Minn. 464, 16 N.W. 363; Fireman's Fund Ins. Co. v. Searcy, 157 Ky. 749, 163 S.W. 1103; Gresham v. Norwich Union Fire Ins. Co., 157 Ky. 402, 163 S.W. 214; Baubie v. Aetna Ins. Co., 2 Dill. 156; Home Ins. Co. v. Adler, 77 Ala. 242; Abel v. Phoenix Ins. Co., 47 App. Div. 81, 62 N.Y. Supp. 218; Wilson v. Hartford Fire Ins. Co., 188 Ill. App. 181.
Our court has held in a long line of cases that an insurance agent, clothed with authority to make contracts of insurance, or to issue policies of insurance, stands in the stead of the principal, that is, the fire insurance company itself, to the insured. Such acts and declarations of such an agent, in reference to fire insurance, are the acts and declarations of the company itself. The company is not only bound by notice to such agent, but is likewise bound by anything said or done by such agent with reference to such contractural relations either before or after the contract is made.
Liverpool London Globe Ins. Co. v. Hinton, 116 Miss. 754, 77 So. 652.
It was mutually understood between the complainant and the defendant company, and relied on by the complainant, that the policy had been renewed, on February 3, 1932. This was such a mistake of fact as this court can and should correct. The court can and should enforce the contract that the parties understood was in force and effect between them.
2 Miss. Digest, sec. 5, pages 47 et seq.; 11 Southern Digest, page 235, sec. 8; 2 Miss. Digest, sec. 57, page 61; Hardee v. Cheatham, 52 Miss. 41; 11 Southern Digest, sec. 57, page 257.
As to notice by the insurer and custom of its general agent, we think that the principles as to the authority of the general agents is convincing that any custom of the general agent of an insurance company in transacting the business of the company, and any knowledge had or gained by such general agents with reference thereto, is not only notice but knowledge of the insurance company itself. This is bound to be the rule; otherwise, the rule that the general agent is the insurance company itself in all matters and things said or done by the general agents and connected with the insurance company's business, or which he had general charge and control, would be meaningless.
5 Cooley's Briefs on Insurance (2 Ed.), 4094.
The general rule with reference to the contract to renew this policy is stated in 25 R.C.L. page 453, section 27, and we quote the applicable portion of that authority as follows: "The statute includes, as a general rule, a contract which cannot be finally and fully performed until after the expiration of a year from the time at which it is made, whether the delay arises from the remoteness of the period at which performance is to commence or the length of time for which it is to continue."
25 R.C.L., secs. 28, 29 and 30.
The earlier decisions passing on the question whether a contract which depends on a contingency for its performance within a year is within the statute of frauds, are reviewed in the notes to Nonamaker v. Amos, 4 Ann. Cas. 170, and Okin v. Selidor, Am. St. Rep. 588.
It will be noted that the cases discussed in the note of First Baptist Church v. Brooklyn Fire Ins. Co., 19 N.Y. 305, and Phoenix Ins. Co. v. Ireland, 9 Kan. App. 644, 58 P. 1024; Struzewski v. Fireman's Fund Ins. Co., 179 App. Div. 318, 166 N.Y. 366, are directly in point with our position on this question.
A contract of employment which is possible to be performed within the space of one year from the making thereof is not within the statute.
Duff v. Snider, 54 Miss. 245; Smith v. Jones, 75 Miss. 325, 22 So. 802; Jackson v. Illinois Central Railroad, 24 So. 874.
The contract in the case at bar does not come within the fourth section of the statute of frauds.
The cancellation of a debt of insurer's agent to the insured in payment of premiums is discussed in 14 R.C.L., page 965, par. 137. There is authority to the effect that such an arrangement amounts to a valid payment of premiums.
Western Assurance Co. v. McAlpin, 23 Ind. App. 220, 55 N.W. 119, 77 A.S.R. 432; 32 C.J. 1920.
From a decree of the chancery court overruling a demurrer to a bill in equity filed by Homer J. Williams against the Fireman's Fund Insurance Company, the court below allowed an appeal here to settle the principles of the case.
Briefly, the bill alleged that on February 3, 1929, appellee entered into a written contract of insurance with appellant through its general agent, T.E. Moody, in Grenada, Mississippi, whereby the insurance company insured, for a period of one year, appellee's household and kitchen furniture and personal effects located in his residence in said city; that Moody, as general agent with authority to issue and deliver contracts of insurance, and all other authority of a general agent of the insurance company, agreed with appellee orally that the insurance company would keep the policy renewed from year to year until either of the parties to the oral agreement should give notice to the other that he desired the policy to be discontinued, or not renewed. It was alleged that, in pursuance of this oral agreement, the policy was renewed for the years 1930 and 1931. The policy was not renewed, in pursuance of the oral agreement, on February 3, 1932, and within twenty-six days after the renewal date the property described in the policy was totally destroyed by fire, due to accident. Appellee had relied upon the oral agreement, and believed that the policy was in force at the time of the fire.
The bill further alleged that Williams was entitled to have the policy actually renewed by decree of the court, and that he was entitled to recover the face value of the policy. The bill charged that for a long period of years it had been the custom of agents of appellant and other insurance companies to transact insurance business by oral agreement to keep property insured, and that, due to the custom, a contract that said policy be renewed arose by implication.
The demurrer challenged the sufficiency of the equity of the bill in several particulars, but we will only state the following: (1) The bill showed on its face that the alleged agreement for renewal of the initial policy, relied upon by appellee, was a general, indefinite, and unilateral agreement on the part of the agent to renew the policy for an indefinite period of time, without consideration, and such an agreement did not bind the appellee; (2) the bill showed on its face that it was in violation of the statute of frauds, section 3343 (d), Code 1930, which is in this language: "An action shall not be brought whereby to charge a defendant or other party: . . . (d) Upon any agreement which is not to be performed within the space of fifteen months from the making thereof;" and (3) custom and usage, as set forth in the bill of complaint, are insufficient in law or equity to form the basis of a right to the renewal of the policy sought to be renewed in this case.
Conceding, without so deciding, that the bill sufficiently alleges a contract, which would be enforceable otherwise, and that the general agent had full authority to enter into the alleged contract, we shall discuss the case from only two angles: First, does the quoted section of the statute of frauds apply? Second, if it does, can custom and usage be availed of to defeat the statute? We are of the opinion that the statute of frauds is an insuperable barrier to a recovery in this case. True it is that, in pursuance of the alleged agreement, the policy was renewed twice, but the action is based upon the oral agreement, entered into on February 3, 1929, to execute a written contract of insurance on February 3, 1932. There was a partial performance of the contract by the renewals in the intervening years. There are decisions upholding similar contracts to renew insurance policies. First Baptist Church v. Brooklyn Fire Ins. Co., 19 N.Y. 305;
Phoenix Ins. Co. v. Ireland, 9 Kan. App. 644, 58 P. 1024; Struzewski v. Farmers' Fire Ins. Co., 179 App. Div. 318, 166 N YS. 362, would seem to be authority, as to this section of the statute of frauds, for the maintenance of the allegations of the bill as sufficient in equity. The main case, however, is the First Baptist Church Case, supra.
In the case of Green v. Hartford Fire Ins. Co., 157 Miss. 316, 128 So. 107, 69 A.L.R. 554, we held that an oral agreement to keep a fire insurance policy in force, and to issue a new policy three years from date of the agreement, was within the statute of frauds, and there declined to follow the conclusion reached in the First Baptist Church Case, supra. We there held that the contract to renew was the basis of the action, and not the terms of the written contract proposed and contracted orally to be renewed.
In the case at bar, the contract to renew insurance, made in February, 1929, was breached on February 3, 1932, and hence was to be performed more than fifteen months from the date of the making of the oral contract. In the case of Box v. Stanford, 13 Smedes M. 93, 51 Am. Dec. 142, this court held that it was the settled doctrine in this state that part performance would not take a parol sale of lands out of the statute of frauds, and that no exceptions of that character would be engrafted on the statute. McGuire v. Stevens, 42 Miss. 724, 2 Am. Rep. 649; Gumbel v. Koon, 59 Miss. 264; Niles v. Davis, 60 Miss. 750, and Washington v. Soria, 73 Miss. 665, 19 So. 485, 55 Am. Rep. 555. The statute of frauds may be raised in a proper case by demurrer in the chancery court. Box v. Stanford, supra.
The view we take, that the contract of renewal is the essential basis of action whether in a court of law or in a court of equity, has been sustained by the case of Klein v. Liverpool London Globe Ins. Co., 57 S.W. 250, 22 Ky. Law Rep. 301, wherein that court held that a parol contract entered into in 1895, to issue a policy of fire insurance on June 24, 1895, and on the same day of each year thereafter until otherwise directed by the insured, was within the statute of frauds, as to the policy to be issued in 1897, not being a contract to be performed within one year (the statute in that state being one year instead of fifteen months as in our state); nor can the fact that the policy was partially performed by the issuance of a policy for each of the two preceding years take the verbal contract out of the statute. Also to the same effect are the cases of Harrower v. Ins. Co. of North America, 144 Ark. 279, 222 S.W. 39; Aetna Ins. Co. v. Richey (1918, Tex. Civ. App.), 206 S.W. 383.
However, it is said that there was an agreement in this case whereby either party, by giving ten days' notice to the opposite party, might terminate the contract. The termination of such a contract is not the performance of it, but is a mere frustration thereof. Meyer v. Roberts, 46 Ark. 80, 55 Am. Rep. 567; Bernier v. Cabot Mfg. Co., 71 Me. 506, 36 Am. Rep. 343; Blanding v. Sargent, 33 N.H. 239, 66 Am. Dec. 720; Wagniere v. Dunnell, 29 R.I. 580, 73 A. 309, 17 Ann. Cas. 205; Jilson v. Gilbert, 26 Wis. 637, 7 Am. Rep. 100. We are of the opinion that the contract described herein was within the statute of frauds, to be performed beyond fifteen months from the date of the making thereof, and cannot be enforced in the courts of law or equity in this state.
Next, it is insisted that the custom and usage alleged is sufficient in this case, independent of the oral agreement, to create an enforceable contract by implication. We are unable to perceive the validity of this contention. The patent and obvious answer to this view is that it is elementary law that usage and custom cannot create a contract or liability where none otherwise exists, and custom and usage may not be invoked in contravention of law. 17 C.J. 449, par. 7; National Savings Bank v. Ward, 100 U.S. 195, 25 L.Ed. 621; First Nat. Bank v. Burkhardt, 100 U.S. 686, 25 L.Ed. 766. We think it is the universal rule that custom or usage may not be invoked to change the law. Generally, custom may be read into a contract, or the incidents thereof, or in construing the contract. The law of usage and custom and the courts cannot make contracts for parties. For the reasons stated, the court below erred and should have sustained the demurrer.
Reversed and remanded.