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U.S. Supreme Court

Insurance Company v. Young's Administrator, 90 U.S. 23 Wall. 85 85 (1874)

3 Wall. 85

Insurance Company v. Young's Administrator

90 U.S. (23 Wall.) 85




A., of San Francisco, aged twenty-six, applied, on the 5th of June, 1867, to the agent there of a New York life insurance company to insure his life, the money to be payable "at forty-five, or death," and the policy to take effect from date of the application. The agent acknowledged the receipt of $99.30 as the first quarterly premium, with a proviso that

"said application shall be accepted by the company, but should the same be declined or rejected by said company, then the full amount paid by A, will be returned to the applicant on the production of this receipt."

In fact, A. did not pay any money at this time, but only gave a promissory note for the $99.30, which note he never at any time paid. chanrobles.com-red

Page 90 U. S. 86

Upon the trial, the court below (to which the case was submitted without the intervention of a jury under the Act of March 3d, 1865, which enacts that the court may, by agreement of parties, find the facts, and that the finding shall have "the same effect as the finding of a jury ") found as a fact that the company "accepted" the application and sent a policy to its agent, "but that the policy did not in terms agree with the memorandum as to date and time of payment." The policy sent made the quarterly payment $46.60 (a difference in A's favor), and the policy was antedated so as to run from the 5th day of April, 1867, a day which the policy showed was the applicant's birthday. This variation was of course against his interest. Accompanying the policy sent to the agent were two receipts for premiums, executed by the company in New York, one as of the 5th of April, 1867, and the other as of the 5th of July, 1867, under which receipt was a "Notice to policyholders" that unless premiums were paid on or before the day, they became due, the policy was forfeited and void; that agents were not authorized to make, alter, or discharge contracts, or waive forfeitures; that payments of premiums to agents were not valid unless receipts were given, signed in New York by the officers of the company, the local agents to countersign them as evidence of payment, and that all premiums were payable in New York. The policy and these receipts reached the agent at San Francisco on the 2d of August, having been executed in New York, probably twenty-three to thirty days before. The agent countersigned them, and on the 8th (six days after receiving it) wrote to A., then absent from home, informing him that his policy had arrived and asking whether he would have it sent to him or held subject to his order. It did not appear whether A. received or did not

receive the letter. On the 21st of August, he was shot (becoming at once insensible), and died on the 20th of September. Held that owing to the change of terms in the policy from those contemplated by A., the applicant, the acceptance by the company was a qualified acceptance which A. was not bound to accept; that there having been no evidence that he did accept it, the company was not bound.

Error to the circuit court for the District of California, in which court the administrator of McPherson Young, of San Francisco, sued the Mutual Life Insurance Company of New York (a company incorporated by the State of New York but having a general agent, one H. S. Homans, at San Francisco, and an office there for the transaction of life insurance business) to recover $5,000, which the administrator alleged had been insured by the said company on the life of his decedent and not paid.

The case was submitted to the court under the Act of chanrobles.com-red

Page 90 U. S. 87

March 3, 1865, without the intervention of a jury. This act enacts that parties may submit issues of fact in civil cases in this way; that the finding of the facts by the court may be general or special, "and shall have the same effect as the verdict of a jury." And it adds that "when the finding is special the review may extend to the determination of the sufficiency of the facts to support the judgment."

The case, as found by the court was thus:

On the 5th of June, 1867, the said McPherson Young made application to the said Homans, general agent as aforesaid, for an insurance of $5,000 on his life, and thereupon entered into a contract with Homans, as such general agent, in these words:


"Received, San Francisco, June 5th, 1867, from McPherson Young, of San Francisco, California, $99.30, being the first quarter-annual premium on his application for a policy of insurance of the Mutual Life Insurance Company of New York, for the sum of $5,000 on the life of said Young, payable at forty-five or death, and premiums paid up in full in ten years, said policy of insurance to take effect and be in force from and after the date hereof, provided that said application shall be accepted by the said company; but should the same be declined or rejected by said company, then the full amount hereby paid will be returned to said applicant upon the production of this receipt."

"For the Mutual Life Insurance Company,"


"General Agent for the Pacific Coast"

The finding of the court proceeded:

"The application of the said Young was transmitted to the said company, and was by them accepted, and a policy was made out, signed, sealed, and transmitted to the general agent, who received the same about the 2d of August, 1867. But the policy did not in terms agree with the memorandum as to date and time of payment."

The $99.30 mentioned in this receipt were not paid in money; Young simply gave his note for the amount, payable chanrobles.com-red

Page 90 U. S. 88

to Homans personally at sixty days, which note was never paid.

By the terms of the receipt, as the reader will have noted, the policy contracted for was to take effect and be in force from the date of the receipt, that is to say, from the 5th of June, 1867. The quarterly payments would thus, of course, have been to be made on the 5th of September and the 5th of December, 1867, and on the 5th of March and the 5th of June, 1868, and so on till the ten years had expired or death had supervened. The quarterly payments, too, were to be $99.30.

The policy as issued differed from that contemplated by the receipt, in these particulars:

1st. It bore date the 5th of April, 1867, and instead of being made to take effect from the 5th of June, was made to take effect from the said preceding 5th of April.

2d. The quarterly payments were to be $96.60 instead of $99.30.

3d. The days of payment during the ten years were to be the 6th days of April, July, October, and January, instead of the 5th days of June, September, December, and March.

The policy, in which Young's age was stated to be twenty-six years, witnessed that

"in consideration of the representations made and of the sum of $96.60, to them duly paid by McPherson Young, and of the quarter-annual payment of a like amount on or before the 6th days of April, July, October, and January, in every year during the continuance of the policy, the company agreed to pay the said amount of $5,000 to the said McPherson Young or his assigns, on the 6th of April, 1886, when the above-named person, whose life is hereby insured, shall have attained the age of forty-five years, or, should he die previous to attaining that age, in sixty days after the notice and proof of his death, to his executors, administrators, or assigns, the balance of the year's premium, if any, being first deducted therefrom."

The policy contained a provision that:

"If the said premiums shall not be paid on or before the days above mentioned for the payment thereof, . . . then in every such

Page 90 U. S. 89

case the company shall not be liable for the payment of the sum assured or any part thereof, and this policy shall cease and determine."

At the date of these transactions, the time required to go from New York to San Francisco -- there being then no overland route -- was from twenty-three to thirty days.

The policy after being executed was transmitted by the company in New York to Homans at San Francisco, where it arrived on the 2d of August, 1867. With the policy were transmitted and received two receipts for premiums, assumed to be due April 6th, 1867, and July 6th, 1867, signed by one W. Stewart, secretary of the company in New York, one of them, the one for the April premium, will show the form. It was thus:



"April 6th, 1867"

"Received from McPherson Young $96.60 for the quarter-annual premium on policy No. 65,733, due the 6th of April, 1867. For terms of mutual agreement, see application and policy."



"Countersigned at _____."



On this receipt, as on that for the July premium, was affixed, on the 2d of August, 1867, by the agent, Homans, a cancelled revenue stamp, and the receipts were countersigned by Homans, as indicated in the copy of the one above given.

To both the receipts was annexed a document, thus:


"The agreement is mutual (see application and policy) that unless the premium is paid on or before the day it becomes due the policy is forfeited and void. Agents are not authorized to make, alter, or discharge contracts or waive forfeitures. Payments of premiums to agents are not valid unless receipts be given signed by the president, secretary, cashier, or actuary.

Page 90 U. S. 90

When receipts are sent to agents for delivery, such agents shall countersign the same as evidence of payment to them. All premiums are due and payable at the office in New York. For the convenience of the assured they may be made to an agent, but only upon the production of the receipt above specified. "



On the 8th of August, 1867, that is to say, six days after the policy was received by the agent, Homans, he wrote to Young, addressing him at Vallejo, California, as follows:

"SAN FRANCISCO, August 8th, 1867"


"Vallejo, California"

"DEAR SIR: Your policy of insurance with the Mutual Life Insurance Company has arrived. Please inform me whether I shall send it to you at Vallejo, or if you will call and get it when you are in the city."


"General Agent"

The case, as found, continued:

"But whether said note was delivered to or received by said Young, or when forwarded, and in what manner, does not appear from the evidence. No notice of the acceptance of said application, or of the issue and arrival of the said policy is shown to have been delivered to or received by said Young, nor was any demand made upon him for further payment, nor any receipt or notice requiring payment presented to him."

Young was shot at Vallejo on the 21st of August, 1867, [Footnote U.S. 1] and removed on the next day to an hospital in San Francisco, where he died on the 20th of September following; having, from the time that he was shot, been physically and mentally unable to attend to any business. After his death, the agent wrote "Cancel; dead," on the policy, and sent it with the two receipts of April 6th and July 6th for premium, attached to the policy and uncancelled, and the note for $99.30, chanrobles.com-red

Page 90 U. S. 91

which Young had given to the agent June 5th, 1867, to the office in New York, where the officers, on the 21st of October, cancelled the policy by tearing off the seal and cutting out the name of the president. The note for the $99.30 remained in the company's hands unpaid, but was never surrendered or offered to be surrendered to Young. The word "cancelled" was written across its face in lead, but by whom did not appear. No subsequent premium was ever demanded by the company or paid.

Administration having been granted on the estate of Young, the administrator sued the company.

The declaration alleged that on the 5th of June, A.D. 1867, the company caused to be made a policy of assurance, purporting that, in the consideration of $99.30, then paid, being the first quarterly annual premium for the sum of $5,000 of the life of McPherson Young, payable at forty-five or death, and his promise and undertaking to continue to pay thereafter to the said company, the defendant, like quarterly payments of $99.30 during the term of ten years thereafter, if he should so long live, they did assure, and agree, to and with the said McPherson, that they would pay unto him, upon his attaining the age of forty-five years, or to his executors, administrators, or assigns, in case he should die before attaining that age, the sum of $5,000. And that the said McPherson, in all things, performed the agreement, and all the conditions and promises which by the terms of the said policy were by him to be performed.

The defendant pleaded the general issue, and also two special pleas:

1st. That the policy was issued and delivered to the deceased on the 6th of April, 1867; that the premium therein agreed to be paid was not paid, and had never been paid; and that by the rules of the company, of which the decedent had full knowledge, this nonpayment operated as a forfeiture.

2d. That another premium, the second, came due July 6th, 1867, that this had not been paid, and that the nonpayment operated as a forfeiture &c., all as before. chanrobles.com-red

Page 90 U. S. 92

The court below gave judgment against the company, and the company now brought the case here. chanrobles.com-red

Page 90 U. S. 105

MR. JUSTICE SWAYNE delivered the opinion of the Court.

The question presented for our determination is whether the findings warrant the judgment. The facts found lie within a narrow compass. chanrobles.com-red

Page 90 U. S. 106

Several objections, some of them technical, have been taken by the counsel for the plaintiff in error to the judgment rendered. We shall confine our remarks to one of them. It is fundamental, and goes to the right, justice, and law of the case. The receipt of the 5th of June was the initial step of the parties. It reserved the absolute right to the company to accept or reject the proposition which it contained. There was a necessary implication that if it were accepted the response and acceptance were to be by a policy, in conformity with the terms specified in the receipt as far as they extended, and beyond that, in the usual form of such instruments as issued by the company. But it was clearly within the power of the company, under the condition expressed, wholly to reject the application without giving any reason, or to accept the proposition with such modifications of the terms specified, and of the usual conditions of such policies, as it might see fit to prescribe. The entire subject was both affirmatively and negatively within its choice and discretion. The acceptance was a qualified one, and there was none other.

It was by a policy departing from the terms specified in the receipt in the particulars before mentioned but containing as to the conditions imposed otherwise, nothing beyond what was usual in such cases. At this stage of the business, the company was not bound according to the receipt, because it had not agreed to a part of the terms specified, and those terms were material and of the essence of the proposition. Clearly the company never did agree to those terms. What it would have done if the applicant had refused, as he might have done, to take the policy it is not material to consider. It is enough that the company did not so agree.

This Court has no power to make such an agreement for it. The indispensable element of the consent of one of the parties is shown not to have existed. The contrary appears by the policy transmitted to the agent. The consent of the applicant appears, but that alone is unavailing. That fact, in any sound legal view of the case, is as if it were not. In chanrobles.com-red

Page 90 U. S. 107

the analysis of the case the receipt, for the reasons stated, must be laid out of view.

This brings us to the examination of the controversy as respects the policy of insurance. Here the position of the parties is reversed. The applicant assented to the proposition contained in the receipt, but the company did not. The company assented to the policy, but the applicant never did. The mutual assent, the meeting of the minds of both parties, is wanting. Such assent is vital to the existence of a contract. Without it, there is none and there can be none. In this case it is not established by any direct proof, and there is none from which it can be inferred. This is not controverted. If it be alleged there was fault on the part of the agent for which the company is responsible in not communicating promptly and fully with the applicant upon the arrival of the policy, there are several answers to the imputation. Such fault, viewed in any light, cannot be taken as the legal equivalent of the assent of the applicant to the terms of the policy. But no such fault is shown. The applicant knew that the company was not bound and would not be bound until it chose to become so, and that it had the right to do what it did. It was his duty to keep up the necessary communication with the agent by calling upon him when the answer from the office in New York might have been expected to arrive, and if he intended to be absent, by giving the agent his address during his absence, and taking from him a promise to communicate the result as soon as the reply was received.

It does not appear that he took any step whatever in this way. Neither he nor his personal representative, therefore, had any reason to complain. If he had received notice of the proposition made through the policy, it would have been at his option to give or refuse his assent. He was certainly in nowise bound until such assent was given. Until then, there could be no contract on his part, and if there was none on his part, there could be none on the part of the company. The obligation in such cases is correlative. If there is none on one side, there is none on the other. The requisite chanrobles.com-red

Page 90 U. S. 108

assent must be the work of the parties themselves. The law cannot supply it for them. That is a function wholly beyond the sphere of judicial authority. As the applicant was never bound, the company was never bound. The policy was therefore no more a contract than the receipt. Both had the same fatal defect, the want of the assent of one of the parties.

Even where the parties supposed they had agreed and it turned out there was a misunderstanding as to a material point, the requisite mutual assent as to that point being wanting, it was held that neither was bound. [Footnote U.S. 2]

The deceased paid nothing. The contest is an effort on that side to gather where he had not sown. The law involved is expressed by the phrase "it takes two to make a bargain."

In this view of the case, irrespective of the other considerations which have been urged upon our attention, we hold that the facts found do not warrant the conclusion reached.

Judgment reversed and the case remanded with directions to enter a judgment in favor of the plaintiff in error.

[Footnote U.S. 1]

The shooting was stated, in the opinion of the court below, to have been accidental.

[Footnote U.S. 2]

Baldwin & Forbes v. Mildeberger, 2 Hall 176, a case at law; Coles v. Browne, 10 Paige 526, a case in equity; see also Calverley v. Williams, 1 Vesey Jr. 210, and Crane v. Partland, 9 Mich. 493.


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