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January 5, 1903



Fuller, Harlan, Brewer, Brown, Shiras, Jr., White, Peckham, McKenna, Holmes

Author: Brewer

[ 187 U.S. Page 473]

 MR. JUSTICE BREWER, after making the foregoing statement, delivered the opinion of the court.

The question is whether at the time of the fire there was a valid and subsisting contract of insurance. The negotiations in respect to the policies were not between the insurer and the insured directly, but between agents of each. As shown by paragraphs 2 and 3 of the agreed statement of facts, the agent of the insurer delivered the policies to the agent of the insured upon a condition, which was agreed to by both. That condition failed, notice of which was given by the former to the latter, accepted by the latter as putting an end to the policies, and the former notified to come and get the policies. Several times the former went to the office of the latter to receive the policies, but failed to obtain them owing to the absence of the latter from his office. Both agents treated the policies as dead, and no charge for premiums was presented on the one hand or asked for on the other. Unintentionally the policies were on the day before the fire handed in a package with other papers to the treasurer of the Ivy City Brick Company.

In view of these facts thus agreed upon the question broadly stated above narrows itself to one whether there can be a conditional delivery of a policy of insurance? If there can be, then (as there is no question of estoppel and as there was a failure of the condition) these policies had no binding force at

[ 187 U.S. Page 474]

     the time of the fire. That as to contracts generally there can be a conditional delivery, and that the failure of the condition prevents the contract from taking effect is not doubted. In this court the question is at rest. Burke v. Dulaney, 153 U.S. 228, 238. That was an action brought on a promissory note executed and delivered by the defendant to the plaintiff, and it was held, reversing the trial court, competent to show a parol agreement between the parties made at the time of the delivery of the note that it should not become operative as a note until the maker could examine the property for which it was given and determine whether he would purchase it. Mr. Justice Harlan, delivering the opinion, reviewed several authorities and summed up by stating that "according to the evidence so offered and excluded the writing in question never became, as between Burke and Dulaney, the absolute obligation of the former, but was delivered and accepted only as a memorandum of what Burke was to pay in the event of his electing to become interested in the property, and from the time he so elected, or could be deemed to have so elected, it was to take effect as his promissory note, payable according to its terms. His election, within a reasonable time, to take such interest, was made a condition precedent to his liability to pay the stipulated price. The minds of the parties never met upon any other basis, and a refusal to give effect to their oral agreement would make for them a contract which they did not choose to make for themselves." See also Quebec Bank of Toronto v. Hellman, 110 U.S. 178.

If an instrument containing an absolute promise to pay may be conditionally delivered, it is difficult to perceive any good reason why an instrument containing a promise to pay upon a contingency may not likewise be conditionally delivered. If the failure of the condition in the one case prevents the instrument from becoming definitely operative, why not in the other? The rule as to conditional delivery and the effect of a failure of the condition has not been limited to promissory notes, but has often been applied to other instruments, as, for instance, a deed of land; Leppoc et al. v. National Union Bank of Maryland, 32 Maryland, 136; Clark v. Gifford, 10 Wend. 310; a

[ 187 U.S. Page 475]

     sight draft, Benton v. Martin, 52 N.Y. 570; a guaranty, Belleville Savings Bank v. Bornman, 124 Illinois, 200; Merchants' Exchange Bank v. Luckow, 37 Minnesota, 542.

But, coming closer to the case at bar, let us see what has been decided in respect to insurance policies. In Brown v. The American Central Insurance Company, 70 Lowa, 390, the plaintiff applied to an agent of the defendant for a policy of fire insurance. The agent doubted his authority to insure the particular property but executed a policy therefor, and, with the consent of the plaintiff, placed it, after receiving the premium, in the hands of a third party to hold until he could communicate with his principal and ascertain whether the risk would be accepted. The defendant refused to accept the risk. The property was destroyed by fire before the notice of its refusal had been received. The court held that there was no delivery of the policy save upon the condition that the insurance company accepted the risk, and that, as it did not accept it, the policy never became operative.

In Millvill Mutual Marine & Fire Insurance Company v. Collerd, 38 N.J. Law, 480, Perrin, the lessee of Collerd, the owner of a mill, applied for fire insurance, as required by his lease. Three policies, each in a different company, were sent him by the insurance agent to whom he had applied. He retained the policies, paying the premium on two, and sent word to the agent to the effect that he would look into the standing of the other company, and if satisfied about that would pay the premium on its policy. The property having been destroyed by fire before any notice or other action by him, he went to the agent and offered to pay the premium, which the latter declined to accept. In an action on the policy it was held that the company was not liable. In the course of the opinion the court said (p. 483) that Perrin "merely held the policy in his possession until he could examine it; or, to use his own expression, 'look into the standing of the company.' He distinctly ...

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