⚫330 and so applicable to the case before us, we | not, in reality, the contract as made. A deshall quote from them at some length: fendant cannot be estopped from making the defense that the contract sued on is not his contract, or that his adversary has himself violated it in those particulars which are made conditions to his rights under it, on the ground of negotiations and transactions occurring at the time the contract was entered into, unless the plaintiff is permitted to show from such sources that the contract, as put in writing, does not truly express the intention of the parties. The difficulty lies at the very threshold. An estoppel cannot arise except upon proof of a contract different from that contained in the written policy, and an inflexible rule of evidence forbids the introduction of such proof by parol testimony, when offered to vary or affect the terms of the written instrument. "The leading case in New York is Jennings v. Chenango County Mut. Ins. Co. 2 Denio, 75. This case held, in accordance with a series of cases, beginning with Vandervoort v. Smith, 2 Cai. 155, that parol evidence that the insured truly informed the agent of the insurer, who prepared the application, as to the situation of the premises, was not competent to vary a warranty on that subject, or save the insured from the consequences of a breach of the contract of insurance. This case was recognized as good law by the courts of that state until the decision of Plumb v. Cattaraugus County Mut. Ins. Co. 18 N. Y. 392, 72 Am. Dec. 52, where such evidence was held by a divided court to be admissible, not to change the contract, but to produce the same result under the guise of an equitable estoppel. Plumb V. Cattaraugus County Mut. Ins. Co. was followed in Rowley v. Empire Ins. Co. 36 N. Y. 550. It was justy criticized and condemned as founded on erroneous views, by the Chief Justice in Dewees v. Manhattan Ins. Co. as reported in 35 N. J. L. 366, and with Rowley v. Empire Ins. Co. has been greatly shaken by subse-ceived with a view to the reformation of the quent decisions in the same court, if it was not practically overruled by Rohrbach v. Germania F. Ins. Co. 62 N. Y. 47-63, 20 Am. Rep. 451. In Maher v. Hibernia Ins. Co. 67 N. Y. 283, reformation of the contract of insurance seems to have been regarded as the appropriate method of relief under such circumstances. "The cases usually cited for the proposition that a contract of insurance is excepted out of the class of written contracts with respect to the admissibility of parol evidence to vary or control the written contract, will be found on examination to be, to a large extent, those in which the proof has been repolicy in equity, or to meet the defense that the contract was induced by false and fraudulent representations not embodied in the contract, or are the decisions of courts in which the legal and equitable jurisdictions are so blended that the functions of a court of equity have been transferred to the jury box. The powers of agents of every "The condition of the law on this im- kind of principals, to act for and bind their portant subject in that state is such that it principals, are determined by the unvarying would not be advisable to adopt it, or pru- rule of ascertaining what authority is deledent to endeavor to follow the decisions of its gated to them. How the contract was ef courts. The discordant and irreconcilable fected, whether directly with the insurer or decisions which have grown out of the de- by the intervention of agents, is of no conseparture from the law as held in Jennings v. quence. The question of the admissibility of Chenango County Mut. Ins. Co. are cited by the testimony does not relate to the method Judge Folger in Van Schoick v. Niagara F. by which the contract was made. It conIns. Co. 68 N. Y. 438. Some of the condi- cerns the rule of evidence by which the contions of the policy may be controlled by evi- tract, however made, shall be interpreted. dence of the knowledge of the parties at "Upon principle, it is impossible to perthe time the insurance was effected, and oth-ceive on what ground such testimony should ers not; but no rule or principle has been be received. A policy of insurance is a conpromulgated for ascertaining, in advance of tract in writing, of such a nature as to be the litigation, what stipulations in the con- within the general rule of law that a contract belong to the one class or the other-tract in writing cannot be varied or altered a condition of the law sure to result from the effort to deal with contracts of this kind in disregard of established rules of law and acknowledged legal principles. "It is manifest that the theory that such parol evidence, though it may not be competent to change the written contract, may be received for the purpose of raising an estoppel in pais, is a mere evasion of the rule excluding parol testimony when offered to alter a written contract. A party suing on a contract in an action at law must be conclusively presumed to be aware of what the contract contains, and the legal effect of his agreement is that its terms shall be complied with. Extrinsic evidence of the kind under consideration must entirely fail in its object, unless its purpose be to show that the contract expressed in the written policy was by parol testimony. If it be ambiguous in *333 *332 the contract the parties intended to make, as distinguished from what appears, by the written contract, to be that which they have in fact made, is a violation of principle that will open the door to the grossest frauds. A court of law can do nothing but enforce the contract as the parties have made it. The legal rule that in courts of law the written contract shall be regarded as the sole repository of the intentions of the parties, and that its terms cannot be changed by parol testimony, is of the utmost importance in the trial of jury cases, and can never be departed from without the risk of disastrous consequences to the rights of parties." Dewees v. Manhattan Ins. Co. 35 N. J. L. 366, referred to in the case just cited, reports an opinion by Chief Justice Beasley, and from which we shall quote, as it contains, as we think, an able and sound statement of the law on this important subject: 'private stable' is enumerated, and it was shown on the trial, and was not denied, that, at the date of the policy, and at the time of the fire, a part of the building insured was applied by the plaintiff to this use. "It cannot be denied, then, that if we take into view these conditions of the case alone, the plaintiff's action must fall to the ground. He did an act which, by force of his written agreement, had the effect to suspend, temporarily, his insurance. As this fact, having this destructive effect, could not be disputed, it became necessary, in order to save the plaintiff's action, to avoid the effect of the written contract; and this burden was assumed, on the argument, by the counsel of the plaintiff. The position taken with this view was, that the policy was obtained for the plaintiff by the agent of the defendants, and that he knew that the building in question was, in part, used as a stable. "The plaintiff's clairn appears to be a meritorious one, and on this account, and in the hope that there might be found some legal ground on which to support this action, the case was allowed by me, at the circuit, to go to the jury, and the questions of law were reserved for this court. But the consideration which I have since given the matters involved has excluded the faintest idea that, upon legal principles, this suit can be successfully carried through. In my opinion, that end can be attained only by the sacrifice of legal rules which are settled, and are of the greatest importance. Let us look at the proposition to which we are asked to give our assent. * "The contract between these litigants, on the point which I shall discuss, is clear and unambiguous. The defendants agreed to insure a building occupied as a country store, and the stock of goods, consisting of the usual variety of a country store. This, by the plain meaning of the terms employed is a warranty on the part of the insured that the building was used, at the date of the agreement, for the purpose specified. It was a representation, on the face of the policy, touching the premises in question, and which affected the risk; and such a representation, according to all the authorities, amounts to a warranty. The cases are numerous and decisive upon the subject-so much so, that it does not appear to me to be neces- "The contract of these parties, as it has sary to refer to them in detail, as, in my been committed to writing, is, that if the opinion, the character of a representation of plaintiff shall keep a stable on the premises this kind is apparent upon its face. It can insured, for the time being, the policy shall be intended for no other purpose than to be vacated. But, it is said, the agent of the characterize the use of the building at the defendants who procured this contract was date of the insurance; for, unless this be aware that the real contract designed to be done, there can be no restriction on the use made was, that the plaintiff might apply the of the property by the insured, during the premises to this use. This knowledge of the running of the risk. Unless this description agent of the defendants, and which, it is has the force thus attributed to it, the prem-conceded, will bind the defendants, is to have ises could have been used for any of the most the effect to vary the obligations of the writhazardous purposes. A building described ten contract. Upon what principle is this in a policy as a 'dwelling house' could, ex- to be done? There is no pretense of any cept for the rule above stated, be converted fraud in the procurement of this policy. into a mill or a factory. I think it is in- The only ground that can be taken is, that contestably clear that the description of the the agent, knowing that the premises were use of the premises in this case was meant to be, in part, used as a stable, should have to define the character of the risk to be as- so described the use in the policy. The assumed by the defendants. sumption is, and must be, that the warranty, in its present form, was a mistake in the agent. But a mistake cannot be corrected, in conformity with our judicial system, in a proper case of this kind, an equitable remedy exists. "There cannot, at the present day, says Mr. Justice Story, 'be any serious doubt that a court of equity has authority to reform a contract, where there has been an omission of a material stipulation by mistake; and a policy of insurance is just as much within the reach of the principle as any other written contract. Andrews v. Essen F. & M. Ins. Co. 3 Mason, 10, Fed. Cas. No. 374. "But, besides this, it is plain that the written contract was violated, in a fatal particular, by the assured. By the express terms of one of the stipulations of the in-court of law. No one can doubt that, in a surance, it is declared that, if the premises should be used 'for the purpose of carrying on therein any trade or vocation, or for storing or keeping therein any articles, goods, or merchandise denominated hazardous, or extra hazardous, or specially hazardous, in the second class of the classes of hazards annexed to this policy, etc., from thenceforth, so long as the same shall be so used, etc., the policy shall be of no force or effect.' Among the extra hazardous risks, that of keeping a *335 "It is possible, therefore, that in this case, sense of the written terms, but in the sense in equity the present contract might be re- of the oral evidence, and that the practical formed, so as to contain a permission for the result was precisely the same as though the plaintiff to keep his stable in this building; instrument had been reformed in conformity but I think it has never before been supposed to such evidence at the trial. I think there that this end could be reached in this state, is no doubt that this application of the docby proof before the jury in a trial at the trine of estoppel to written contracts is an circuit. The principle would cover a wide entire novelty. In the long line of innumerfield, for, if this mistake can be there cor- able cases which have proceeded and been derected, so can every possible mistake. If the cided on the ground that parol evidence is plaintiff can modify the stipulation with re- not admissible as against a written instruspect to the restricted use of the premises, ment, no judge or counsel has ever intimated, on the plea of a mistake in such stipulation, as it is believed, that the same result could on similar grounds it would be open to the be substantially attained by a resort to this company to modify the policy with respect circuity. It is true that, if there be a subto the amount insured. I am at a loss to stantial ground in legal principle for its insee how, on the adoption of the principle troduction, the fact that it is new will not claimed, we are to keep separate the func-debar from its adoption; but I have not been tions of our legal and equitable tribunals. able to perceive the existence of such subNor do I think, if this court should sustain stantial ground. In my apprehension the the present action, that it could be practi-doctrine can be made to appear plausible only cable to preserve, in any useful form, the by closing the eyes to the reason of the rule great primary rule that written instruments which rejects, in the presence of written conare not to be varied or contradicted by parol tracts, evidence by parol. That reason is, evidence. The knowledge of the agent in the that the common good requires that it shall present transaction is important only as be conclusively presumed in an action at law, showing what the tacit understanding of the in the absence of deceit, that the parties contracting parties was. Suppose, instead have committed their real understanding to of proof of such tacit understanding, the writing. Hence it necessarily follows that plaintiff had offered to make a stronger case all evidence merely oral is rejected, whose by showing that the agent expressly agreed effect is to vary or contradict such expressed that the building might be used, not only understanding. Such rejection arises from as a country store, as the policy stated, but the consideration that oral testimony is unalso as a stable, and that the restraining reliable in comparison with that which is stipulation did not apply to the extent ex-written. It is idle to say that the estoppel, pressed. Can anyone doubt that, according if permitted to operate, will prevent a fraud to the practice and decisions in this state, or inequitable result; most parol evidence such proof should have been rejected? A contradictory of a written instrument has rule of law admitting such evidence would the same tendency; but such evidence is rebe a repeal of the principle, giving a control-jected, not because, if true, it ought not to be ling efficacy to written agreements. The received, but because the written instrument memory and understanding of those present is the safer criterion of what was the real at the formation of the contract would be intention of the contracting parties. In the quite as potent as the written instrument. case now criticized, the party insured stipu"I have not found that it is anywhere sup-lated against the existence of buildings withposed that this general rule which illegalizes in a definite number of feet from the insured parol evidence under the conditions in ques- property; by the admission of parol testition has been relaxed with respect to con- mony, this stipulation was restricted and tracts for insurance. Decisions of the ut- limited in its effect. This result, no doubt, most authority, both in England and in this was strictly just, if we assume that the parol country, propound this doctrine as appli- evidence was true; but, standing opposed to cable to policies in the clearest terms." the written evidence, the law presumes the reverse. The alternative is unavoidable-it is a choice between that which is written and that which is unwritten. In the case cited, the effect of the rule adopted by the court was to give a different effect to the written terms from that which they intrinsically possessed-a result induced by the admission of oral evidence. This, I cannot but think, was a palpable alteration of the agreement of the parties. The mistake of the court appears to have been in regarding simply the legal effect of the facts which were proved by parol. Receiving that testimony into the case, a clear estoppel was made out; but the error consisted in the circumstance that such oral evidence was, on rules well settled, inadmissible. The question presented was purely one as to a rule of evidence, but it was treated as a problem relating to the application of general legal principles to an ad After citing a number of cases, the Chief Justice took notice of the case of Plumb v. Cattaraugus County Mut. Ins. Co. 18 N. Y. 392, 72 Am. Dec. 52, in the following terms: "In the case from New York here referred to, there was, in the application for the policy, a misdescription of the distance of the adjacent buildings from the premises insured, and to this defense the reply was, that the agent of the company had made the measurements, and had obtained the signature of the plaintiff, on the assurance that the application was all right and just as it should be.' The court decided that this declaration of the agent could not be offered for the purpose of altering or contradicting the written contract, but that it was admissible as an estoppel in pais. Now it is at once obvious that, by force of that view, the agree ment in question was enforced, not in the mitted state of facts. The case was not deeided by a unanimous court, three judges dissented, and, in my judgment, that dissent was based on satisfactory grounds. The facts now before us do not present the elements of an estoppel. Such a defense rests on a misconception as to a state of facts, induced by the party against whom it is set up. The person who seeks to take advantage of it must have been misled by the words or conduct of another. Now, in the present case, the agent did not make any statement, nor did he do anything which led the plaintiff to alter his condition. The most that can be laid to his charge is that from carelessness he omitted properly to describe the use of the premises insured. But this was not a misstatement of a fact on which the plaintiff acted, because the plaintiff was aware of the circumstance that the building was put to another use. The alleged error in the description is plain on the face of the policy, and the law incontestably charges the parties with knowledge of the meaning and legal effect of his own writ ten contract. To found an estoppel on the ignorance of the plaintiff of the plainly expressed meaning of his own contract would be absurd." In Pennsylvania, it has always been held that courts of law will not permit the terms of written contracts to be varied or altered by parol evidence of what took place at or before the time the contracts were made, and that policies of insurance are within the protection of the rule. Thus, when it was stipulated in the conditions of insurance that a false description of the property insured should avoid the policy, it was held that a misdescription defeated the plaintiff's right to recover under it, though the statements were known to be false by the insurer's agent, who prepared the description, and informed the plaintiff that in that respect the description was immaterial. Smith v. Cash Mut. F. Ins. Co. 24 Pa. 320; Columbia Ins. Co. v. Cooper, 50 Pa. 331. In Com. Mut. F. Ins. Co. v. Huntzinger, 98 Pa. 41, the subject was examined at length and the previous cases considered, and it was held that mere mutual knowledge by the assured and the agent of the falsity of a fact warranted is entirely inadequate to induce a reformation of the policy so as to make it conform with the truth; that it is rather evidence of guilty collusion between the agent and the assured, from which the latter can derive no advantage. "The conditions of insurance," said the court, "provide that notice of additional insurance, or of any change in existing insurance, shall be given to the company by the insured in writing, and shall be acknowledged in writing by the secretary; and no other notice shall be binding or have any force against the company. In absence of evidence of waiver of the notice required in this stipulation, we do not think 'the jury would be justified in inferring that the knowledge of the agent will bind the principal of notice of subsequent insurance or surrender of previous insurance.' The parties agreed that written notice should be given, and in like manner acknowledged by the secretary; mere knowledge of an agent is not the equivalent of that." That the law enunciated in these and numerous other cases in Pennsylvania was not overturned by the case of Kalmutz v. Northcrn Mut. Ins. Co. 186 Pa. 571, 40 Atl. 816, as claimed in the brief of defendant in error, will appear on examining the facts of that case and the reasoning of the court. The opinion shows that the court refused to hold that what was alleged to have taken place at the time the contract was entered into might be received to change the legal effect of the policy, Sterrett, Ch. J., saying: "The policy in suit contains this provision as to other insurance: 'Policies of all other insurance upon property herein described— whether made prior or subsequent to the date hereof-must be indorsed on this policy, otherwise the insurance shall be void.' The existence of such other insurance of which no indorsement was made on the policy, was conceded; and, in order to avoid the effect of the condition above quoted, the plaintiff undertook to prove that the defendant company, by its own acts, had waived the condition, and was thereby estopped from setting it up as a bar to his recovery. As is usual in such cases, there was more or less conflicting testimony as to what passed between the plaintiff and the defendant's agent at the inception of the contract. In the court beiow, as well as here, it was forcibly contended on plaintiff's behalf that the testimony referred to was sufficient to warrant the jury in finding such facts as legally constitute an estoppel; but, inasmuch as the record discloses other undisputed evidence which necessarily leads to the same conclusion, it is unnecessary to consider in detail the conflicting testimony that was submitted to the jury on that question. The policy in suit was issued in April, 1894, and the last assessment thereon was made in October following. Defendant company's secretary testified that he had notice of the additional insurance on the first Wednesday of November, 1894. Notwithstanding that notice to the company, the policy was neither recalled nor canceled; the premiums or assessments collected were not returned, nor was any effort made to return the premium note given by plaintiff, binding him to pay the premiums at such times and in such manner as the company's directors might by law require. These facts were admitted; and if, as the authorities appear to hold, they operated as an estoppel, it will be unnecessary to consume time in the consideration of other questions sought to be raised by several of the specifications of error." The court then cited Elliott v. Lycoming County Mut. Ins. Co. 66 Pa. 26, 5 Am. Rep. 325, where Justice Sharswood said: "Undoubtedly, if the company, after notice or knowledge of the over insurance, treated the contract as subsisting, by mak ing and collecting assessments under it from the insured, they could not afterwards set up its forfeiture. It would be an estoppel, which is the true ground upon which the doctrine of waiver in such cases rests.' Enough has been said to show that upon the undisputed evidence in the case the learned trial judge would have been warranted in holding, as matter of law, that the defendant was estopped from setting up the condition above quoted as a bar to plaintiff's claim, and in instructing the jury accordingly." As, therefore, there was no limitation put in the policy upon the powers of the company's secretary, and as the company, after having received notice of the existence of other insurance, declined to avail itself of the right to rescind the contract, but, on the contrary, elected to enforce payments under the terms of the policy as a subsisting contract, and these facts having been made to appear by undisputed evidence, the court would seem to have been justified in applying the doctrine of estoppel. It must be conceded that it is shown, in the able brief of the defendant in error, that, in several of the states, the courts appear to have departed from well-settled doctrines, in respect both to the incompetency of parol evidence to alter written contracts, and to the binding effect of stipulations in policies restricting the authority of the company's agents. The nature of the reasoning on which such courts have proceeded will receive our consideration when we come to discuss the particular terms of the contract before us. Leaving, then, the state courts, let us inquire what is the voice of the Federal authorities. been treated by this court as invariable and salutary. The rule itself and the reasons on which it is based are adequately stated in the citations already given from the standard works of Starkie and Greenleaf. Policies of fire insurance in writing have always been held by this court to be within the protection of this rule. The first case to be examined is Carpenter v. Providence Washington Ins. Co. 16 Pet. 495, 10 L. ed. 1044. The importance of this case is great, because, if the conclusion there reached was sound when expressed, and if it has not been overruled by our subsequent decisions, it is decisive of the case before us. And first, as to the facts of that case, in so far as they resemble those with which we have now to deal. They were thus stated by Mr. Justice Story, who delivered the unanimous opinion of the court: "This is a writ of error to the circuit court for the district of Rhode Island. The origi nal action was brought by Carpenter, the plaintiff in error, against the Providence Washington Insurance Company, the defendants in error, upon a policy of insurance under written by the insurance company of $15,000 on the Glenco Cotton Factory, in the state of New York,' owned by Carpenter, against loss or damage by fire. The policy was dated on the 27th of September, 1838, and was to endure for one year. Among other clauses in the policy are the following: 'And provided further, that in case the insured shall have already any other insurance on the property hereby insured, not notified to this corporation and mentioned in or inWe do not consider it necessary or profit- dorsed upon this policy, then this insurance able to examine in detail the decisions of the shall be void and of no effect.' 'And if the circuit courts or of the circuit courts of ap- said insured or his assigns shall hereafter peals. It is sufficient, for our present pur- make any other insurance on the same proppose, to say that the circuit court of appeals erty, and shall not with all reasonable dilifor the seventh circuit has held consistently gence give notice thereof to this corporation, to the doctrines on this subject laid down by and have the same indorsed on this instruthe English and American courts generally ment, or otherwise acknowledged by them in (United Firemen's Ins. Co. v. Thomas, 47 writing, this policy shall cease and be of no L. R. A. 450, 27 C. C. A. 42, 53 U. S. App. further effect. And in case of any other in517, 82 Fed. 406), and that the court of ap-surance upon the property hereby insured, peals for the eighth circuit, in the present case, has, by a majority of its members, adopted and applied the view that a written contract may, in an action at law, be changed by parol evidence, and that such clauses as restrict the power of agents of insurance companies to contract otherwise than by some writing should be given effect, if at all, as they respect such modifications of a policy as are made or attempted to be made after it has been delivered and taken effect as a valid instrument, and should not be considered as having relation to acts done by the company or its agents at the inception of the contract. 41 C. C. A. 207, 101 Fed. 77. In such divergence of decisions, we have deemed it proper to have the present case brought before us by a writ of certiorari. As to the fundamental rule, that written contracts cannot be modified or changed by parol evidence, unless in cases where the contracts are vitiated by fraud or mutual mistake, we deem it sufficient to say that it has 22 S. C.-10. whether prior or subsequent to the date of this policy, the insured shall not in case of loss or damage be entitled to demand or recover on this policy any greater portion of the loss or damage sustained than the amount hereby insured shall bear to the whole amount insured on the said property.' Annexed to the policy are the proposals and conditions on which the policy is asserted to be made, and among them is the following: 'Notice of all previous insurances upon property insured by this company shall be given to them, and indorsed on the policy, or otherwise acknowledged by the company in writing, at or before the time of their making insurance thereon, otherwise the policy made by this company shall be of no effect.' "The declaration averred that during the continuance of the policy he, Carpenter, was the owner of the property by the policy insured, and was interested in said property to the whole amount so insured by the com'pany; and that on the 9th of April, 1839, the ⚫341 |