The New-York Central Insurance Company against The National Protection Insurance Company

The New-York Central Insurance Company against The National Protection Insurance Company. In making a contract requiring the exercise of judgment or discretion, a person cannot act as the agent of both parties; and where he undertakes to do so, a court ■ of equity will avoid the contract on the application of either of the parties. Under the Code, a party may avail himself of such equitable defence in an action at law upon the contract. Accordingly, where the agent of one insurance company reinsured another, of which he was director and secretary, acting for both; Held, that the contract was voidable in equity, and the defence available in an action at law upon the policy. . An objection to a defence on the ground of defective pleading cannot prevail on appeal where it was not distinctly made at the trial. Action oh a policy of insurance against loss by lire The ¿Etna Insurance Company insured A. Y. Smith & Son on their stock in a woolen manufactory, for the sum of $5000 for one year. The plaintiffs insured $2000 of the ¿Etna Company’s risk for the same time. The policy on which the present action was brought was a reinsurance by the defendants of the plaintiffs’ risk as- insurers of the ¿Etna Company, The complaint averred the execution of the last mentioned policy by the defendants’ president and secretary, and that George F. Stevens, “ who was and who acted therein as agent of said defendants and on their behalf, and by the defendants duly authorized, did countersign the said policy of insurance so executed by the defendants as above set forth, and did deliver the same to the said plaintiffs,” &c. The premises, as was alleged, were consumed by fire within the time covered by the policy, and the ¿Etna Company had recovered against the plaintiffs. The defendants, by their answer, "among other things denied the execution of the policy, in the following language: “ They deny that they made and executed a policy of insurance, or delivered the same to the plaintiffs, as stated in said complaint, and deny that George F. Stevens was the agent of said defendants, or was authorized to countersign the policy of insurance mentioned and set forth in the complaint,” &c. The action was tried in December, 1853, before Mr. Justice Crippen. The plaintiffs proved the original insurance by the ¿Etna Company, the reinsurance by the plaintiffs, and the loss. The policy on which this action was brought, dated June 6, 1852, was then produced, signed by the president and secretary of the defendants’ company. The attestation clause stated that it was not to be binding “ until countersigned by G. F. Stevens, agent of the company.” It was so countersigned. It appeared that George F. Stevens was the local agent of the defendants’ company at Cherry Valley, and had been since December, 185.1. The principal office of that company was at Saratoga Springs. He was also the secretary and a director of the plaintiffs’ company, the principal office of which was at Cherry Valley. He was likewise a member of the executive committee of the plaintiffs’ board of directors. The annual meeting of the stockholders of the plaintiffs’ company was held at their office, in Cherry Valley, on the 7th June, 1852, when Stevens, among others, was rechosen a director for the company. Subsequently and on the same day a meeting of the directors was held, at which a resolution was passed to the effect that its business should thereafter be confined to “ farm property and detached buildings and outbuildings,” and “ that the secretary be directed to reinsure all remaining city risks held by the company "unexpired, and also all risks on mills, factories, machine shops, cabinet shops, joiner shops, and such other risks as the executive committee may think advisable.” In pursuance of this resolution, Stevens, with some other members of the executive committee, on the 7th June, selected the risk in question as one of those to be reinsured. On the 10th June, 1852, Stevens wrote to the defendants’ secretary, as follows: “ J. M. Wheeler, Esq., Dear Sir. I had occasion to use one of'your policies yesterday, but owing to their being mislaid, whilst my office was being repaired, I was unable to find them If you will send me some, I think I can give you quite a, number of risks on property where our company have risks, and on reinsurance. Very respectfully, yours, G. F. Stevens.” The secretary of the defendants thereupon forwarded to Stevens, by mail, twenty blank policies, signed by the president and secretary, and requiring for their validity the counter signature of Stevens as agent. The secretary’s letter inclosing them was dated the 14th June, and was received by Stevens at two or three o’clock in the afternoon of the 15th, and in it he directed that “ in all policies of reinsurance” a particular clause should be inserted, which was accordingly inserted in the policy in question. When the blank policies were received, Stevens filled up and countersigned, as defendants’ agent, the one in suit, and placed it in the depository where the policies of the plaintiffs were kept. He ante-dated it of the 6th June, to make the time it would have to run just ten months. The foregoing facts having been proved, the plaintiffs offered the policy in evidence. The defendants’ counsel objected to its introduction, on the ground that ■ Stevens had no authority to issue it. The objection was overruled and the policy received in evidence. The defendants’ counsel excepted. It was then shown that the goods insured Were destroyed by fire on the evening of the 15th June, the fire commencing at about seven o’clock. Evidence was given couching the preliminary proofs, and to show a recovery by the 2Etna Insurance Company against the plaintiffs of the amount reinsured, with interest, and that the plaintiffs had paid the judgment. The premium payable to the defendants on the policy, assuming it to be valid, was not paid to them prior to the loss, nor had they any notice of the insurance until after that event. The defendants, among other objections, insisted they were not liable, for the reason that Stevens being the secretary and a director of the plaintiffs, could not, as the agent of .the defendants, make a contract between the two parties which would bind them. The judge overruled the objection, it having been made on a motion for a nonsuit, and again as instructions to be given to the jury, and directed a verdict for the plaintiffs for $2000 and the interest. The defendants’ counsel excepted. Verdict accordingly The judgment was affirmed at a general term in the sixth district. (See 20 Barb., 468.) The defendants appealed. John Willard, for the appellants. N. Hill, Jr., for the respondents. [MAJORITY — Denio, C. J.] Denio, C. J. It appears from the opinion of the supreme court, with which we have been furnished, that no doubt was entertained by the judges of that court but that the contract of insurance upon which this action was brought was invalid, nor but that it ought to have been so held, if the defendants had not committed a fault in pleading, by which, as it is decided, they had lost the advantage of that defence. It appears, however, that all the evidence to show the position which Stevens occupied when he executed the policy of insurance, as the agent of both parties, was received without objection; and that as to that question, there was no allusion to the pleadings in the course of the trial. This ground was taken by the defendants’ counsel on the motion for a nonsuit and again after the evidence had closed, and yet no answer based upon a supposed defect in the defendants’ pleadings appears to have been suggested by the counsel or by the court. The answer does deny the fact of the contract, and that Stevens was the agent of the defendants, or was authorized to sign the policy of insurance. I suppose' that, in the mind of the pleader, this denial was predicated of his supposed incompetency to act as the agent of the defendants in a contract when he was at the same time acting as the secretary and agent of the plaintiffs. If the principle admitted by the supreme court is correct, it sustains the general denial in the answer; though it is obvious that it would have been more frank to have averred the special facts out of which his incompetency arose. There is, however, no reason to believe that the plaintiffs were misled or surprised by the defence set up under the general pleading. If they had been, they would naturally have objected to the evidence; and it would then have - been competen t for the defendants, if the point had been ruled against them, to move for an amendment, or for such other relief as would secure them from the loss of their defence. It was argued by the plaintiffs’ counsel that the cross-examination of Stevens, on the part of the defendants, by which his relation to the plaintiffs’ company was made to appear, was competent with a view to his credibility, and therefore that no inference prejudicial to the point now made upon the pleadings should be indulged. This is not quite satisfactory. The examination went much farther than was necessary to disclose the witnesses’ relation to the plaintiffs, with a view to show a bias. The resolution of the directors requiring him as secretary to reinsure a class of risks in which this was embraced was proved on the cross-examination without objection. • This evidence was not pertinent, except with a view to the ground of defence now insisted on. I am of opinion that the defendants are free to rely upon this defence upon this appeal. I think the supreme court was right in the opinion that the contract of insurance was invalid, for the.reason which has been mentioned. As the courts of the state are now constituted, they apply legal and equitable rules and maxims indiscriminately in every case. In a suit which could not formerly have been defended at law, but as to which the defendant would have been relieved in equity, he can now have the like relief in the first action. (Code, §§ 69, 150; Dobson v. Pearce, 2 Kern., 157.) And such relief consists in denying to the plaintiffs a right to recover. It was always theoretically unreasonable (though practically less objectionable than has been supposed), that in one branch of the judiciary the court should hold that the party prosecuted had no defence, while in another branch the judges should decide that the plaintiff had no right to recover. The authors of the Code, aiming at greater theoretical perfection, have abolished the anomaly; and now when an action is prosecuted we inquire whether, taking into consideration all the principles of law and equity bearing upon the case, the plaintiff ought to recover. It has been settled by a long course of adjudications in the courts of equity, that a trustee or agent of one person cannot make a valid contract respecting the subject matter to which the trust or agency relates, where he has a personal interest. His constituent, it is said, is entitled to have all his skill and judgment employed in his service; xbut if he is himself the other party to the contract, the utmost which could be expected from a very honest man would be the ordinary fairness of an umpire. The English.cases are, for the most part, collected in Paley’s Principal and Agent., by Lloyd, 33, and the notes. The courts of this state have followed the principle of these cases with great constancy, and the rule 'may be considered perfectly well settled. (Torrey v. The Bank of Orleans, 9 Paige, 663; Van Epps v. Van Epps, id., 237; Hawley v. Cramer, 4 Cow., 736; Bostwick v. Atkins, 3 Comst.., 53.) It is not necessary for a party seeking to avoid a contract on this ground-to show that an improper advantage has been gained over him. It is at his option to repudiate or to affirm the contract irrespective of any proof of actual fraud. The principle has been most frequently applied to executed contracts and to sales of land or goods, but in its nature it is equally applicable to executory agreements and to other subjects. The parties to the contract in this case are both corporations, and must of course transact their business through the instrumentality of agents; and Mr. Stevens was the agent of both parties. The plaintiffs were entitled to all his skill and abilitv, and the defendants had the like claims upon him. Neither required the services of an indifferent person, whose object might be to secure equal advantages to both the contractors. No one will contend that he, as the defendants’ agent, could have made a contract to insure himself; but his duty to the plaintiffs required that he should act in their behalf with all the sagacity and discretion which a fair man would have exercised in his own business. There was therefore a manifest inconsistency in his attempting to negotiate this insurance as the agent for the insurers and the assured. The precise case of one person assuming to act as the agent of both parties has been considered as within the rule. (Copeland v. Mercantile Ins. Co., 6 Pick., 198; Story on Agency, § 211; Paley on Agency, by Dunlap, 33 and note (3); ex parte Bennett, 10 Ves., 381.) It is unnecessary to go the length of saying that there was no contract, in strictness of law, though there are some cases which hold that where a bargain is made by a person representing both parties as the agent of each, it is simply a nullity for want of the aggregatio mentium which is necessary to the existence of a contract. (Florence v. Adams, 2 Robinson's, 556; Beal v. McKinnan, 6 Lou. R., 407.) It is enough for the present case to hold that this policy was made under circumstances which would enable the defendants to avoid it upon the principles of equity, and that it is sought to be enforced in a court where these principles are among the grounds of decision. The same question now presented lately arose upon a policy of insurance in the supreme court in the fifth district, and that court held the contract void. (Utica Ins. Co. v. Toledo Ins. Co., 17 Barb., 132.) The opinion of the court, by Mr. Justice Allen, contains a sound exposition of the law. The letter of Mr. Stevens to the defendants’ secretary did not disclose his connection with the plaintiffs’ company. What is said, as to “ risks on property where our company have risks,” would not necessarily or probably be understood to refer to a company of which the writer was an officer. The expression would naturally be regarded as having reference to an insurance company located in the village in which the writer resided. But if this were otherwise, the answer of the secretary did not authorize tne policies which he sent to be issued to that or to any other company in particular, or in a case where it would not be lawful to use them. If it shall be shown on a future trial that the officers of the defendants’ company knew or had information of the fact that Mr. Stevens was the secretary of the plaintiffs, it will raise a different question from the one now discussed and decided. The judgment of the supreme court must be reversed and a new trial ordered. All the judges except Mitchell, J., who delivered an opinion in favor of affirmance, and Comstock, J., who having been counsel in the cause took no part in the decision, concurred in reversing the judgment on the ground stated in the foregoing opinion. Judgment reversed