Franklin Fire Insurance v. Hamill

An insurance policy for $3000 on machinery, bound the company to pay that sum, in case of damage or loss by fire, unless they “shall, within thirty days after proof of such damage or loss, furnish the insured with a like quantity of any or all of the said goods, and of the same quality as those injured by the fire, or shall make good the, damage or loss by paying therefor,” &c. Held : 1st. The company had the right, under this, policy, to pay the damages in money, or repair the old machinery within thirty days, so as to make it as good as it was before the fire. 2nd. In covenant upon this policy the defendants may show, by parol, that after their liability to repair accrued by their election to do so, and before the expiration of the thirty days, they made a valid arrangement with the plaintiff, by which the time for making the repairs was extended beyond the thirty days, and performance of this agreement by them discharges the covenant. 3rd. Enlargement of the time of performance, waiver of performance by the plaintiff, accord and satisfaction, or tender of performance, after the accrual by election of the liability to repair, are good defences to an action on this policy, and parol proof is admissible to sustain them. In an action upon a bond the defendant may show by parol that the plaintiff has waived a compliance with it3 conditions; he who prevents a thing being done shall not avail himself of the non-performance he has occasioned. The case of Watchman and Bruit, vs. Crook, 5 G. Sf J., 239, decides, that a plaintiff suing upon a contract cannot give in evidence a parol agreement varying or changing its terms, but does not decide that a defendant cannot ■' *’mself of such a defence. A defendant should never be prevented from making a just and moral defence to any action, because he might, as plaintiff, enforce that defence in a separate and independent action at law. But this principle in actions of covenant must be taken as applicable in general to defences resting upon parol agreements, made subsequent to a breach of the covenant, or after the happening of the event by which the liability of the defendant has become fixed. Accord and satisfaction is something more than strict performance or payment; it is doing that by the covenantor which the covenantee accepts in lieu of a performance of the terms of the covenant.

Appeal from Baltimore county court. Covenant by the appellee against the appellants, upon an insurance policy for “$3000 on goods” “viz: on steam engine $500, on machinery $2500,.of a plaster mill,, contained in a three-story brick warehouse,” &c. By the terms of the policy the company agreed to pay, to the extent of $3000, all damage or loss occasioned by fire, within,one year, to said property, “unless the said company shall, within thirty days after the proof of such damage or loss, furnish the insured with the like quantity of any or all of the.said goods, and of •the same quality, as those so injured by fire, or shall make good the damage or loss by paying therefor, according to an estimate thereof to be made by arbitrators indifferently chosen,” &c. The assured was required to give notice to the company forthwith of any loss by fire, and as soon as possible thereafter deliver a particular account and furnish satis.factory proof of such.loss. This is the second appeal in this case, the facts being substantially the same as those upon the first appeal, reported in 6 Gill, 87. The different condition of the pleadings is fully stated in the opinion of this court upon the present appeal. Exception. The plaintiff excepted to the admissibility of the testimony of Smith and Neale, (see 6 Gill, 89 to 91,) under any of the first five defences relied upon by defendants, which exception the court, (Frick, C. J., Purviance and Le Grand, A. J.,) sustained, and to this ruling the defendants excepted. The verdict was for the plaintiff for $2444.48, that upon the former trial having been in his favor for $3049.80. The court having overruled a motion for a new trial, and given judgment in accordance with the verdict, the defendants appealed. 1st. The evidence was admissible to prove an enlargement of the time of performance stipulated for in the policy. It is not a question as to the interpolation of terms into a written contract, but whether, by a subsequent distinct parol agreement, the time for the performance of a contract under seal may hot be enlarged?. When such evidence comes by way of defence, no ease can be found in which it has been rejected. The case of Watchman and Bratt, vs. Crook, 5 G. & J., 239, cited and relied upon by the other side, was the case of a plaintiff'acting aggressively upon a contract which he had not performed, and the court said he could not recover upon the contract without showing performance, and could not be permitted in that action to set up a parol agreement to waive the contract, but the case concedes that such an agreement might have been offered by way of defence. The same doctrine is sustained in 2 Wend., 587, 590, 591, Langworthy vs. Smith. 3 Johns., 528, Fleming vs. Gilbert. 9 Do., 115, Freeman vs. Adams. There may even be a substituted contract. 14 Johns., 330, Lattimore vs. Harsen. See also 7 Cowen, 48, Dearborn vs. Cross. 1 Bailey’s Rep., 538, Neil vs. Tilman, (note a.) Breese’s Rep., 132, Baker vs. Whiteside. 4 Seargt. Rawle, 241, Le Fevre vs. Le Fevre. Such is the law in England, 1 Esp., 35, Ratcliff vs. Pemberton. 2nd. It was admissible to show a waiver of the condition of the covenant. This depends upon the former position and follows as a necessary consequence from it, for the enlargement of the time of performance necessarily waives the contract. 3rd. It was admissible to show accord and satisfaction. 22 Eng. C. L. Rep., 89, Good vs. Cheesman. 23 Do., 165, Cartwright vs. Cooke. I agree that accord and satisfaction before breach is not a good plea, because until then there is nothing to satisfy. But here there was a breach, for the property was burned and the mode of satisfaction alone was left open. 4th. It was admissible as tender of performance and refusal. 14 Pick., 156, Lord vs. Tyler. 2 Bibb., 219, Majors vs. Hickman. 4 Wash. C. C. Rep., 622, United States vs. Howell. 8 Iredell, 179, State vs. Cordon. 10 Do., 193, Cabe vs. Jameson. 5th. It was admissible to show fraud. The contract of insurance is purely one of indemnity, of the purest good faith, and the evidence shows that the plaintiff intended and designed a fraud, for the damage complained of was repaired by an expenditure of only $300, and yet the plaintiff, by his own agreement, having got rid of the thirty days, comes in with his bill of $3000 upon the policy. We are trying an action of covenant, and the principles of the common law governing that action are Alíe applicable to the case. We therefore insist that the proposed testimony was inadmissible for any of the purposes for which it was offered, because: 1st. The policy does not give the company the right to elect to repair, but imposes the obligation to pay. The property insured was goods and chattels within the terms of the policy, and the insurers were bound to furnish the insured with the like quantity and quality of any or all said goods, or to pay the damages. An offer to repair was therefore no compliance with the requirements of the covenant. 2nd. The testimony shows that the agreement to extend the time was made before the estimate of loss was furnished, and therefore before breach of the covenant. The breach did not occur upon the happening of the fire. The contract is that if a fire occurs in one year, and the party gives notice and furnishes his estimate and proof of loss, &c., and the agreement was made more than twm weeks before this estimate was made. Suppose the case of a bond payable one year after the happening of a certain event; it cannot be said •there is a breach after such event has happened, but 'before the year has elapsed. The authorities are clear that a parol agreement before breach cannot be pleaded in an action of covenant. 1 Chitty's Pl., 487, 488. 1 Leigh's Nisi Prius, 699. 29 Law Lib., 75, 76, 79, 3 H. & J., 291, Peters vs. Johnson. 5 G. & J., 239, Watchman and Bratt, vs. Crook. 4 G. & J., 305, Geiser vs. Kershner. 6 H. & J., 38, Watkins vs. Hodges. 1 H. & J., 675, Harper vs. Hampton. Such is the law in England. 8 East, 344, Braddick vs. Thompson. 7 Taunt., 656, Thompson vs. Brown. 8 Do., 31, Sellers vs. Bickford. Do., 596, Cordwent vs. Hunt. 40 Eng. C. L. Rep., 609, West vs. Blakeway. Even in New York, loose as the rule is, it has been restricted within limits narrower than those contended for on the other side. 13 Wend., 71, Delacroix vs. Bulkley. 10 Do., 180, Suydam vs. Jones. The case in 4 Wash. C. C. Rep., 420, concedes that a parol agreement made with the defendant himself would not discharge the covenant. See also 3 Term Rep., 590, Littler vs. Holland. It will be conceded there was no contract upon which we could recover except the policy. Now what was this? It was a contract by which (hey insured us to the amount of $3000 upon certain goods, and in case (hey were injured, they were to pay us the damage or repair, (according to the theory on the other side,) within thirty days. We must sue upon this policy, and to recover must aver and prove: — 1st, (he execution of the policy; 2nd, the fire; 3rd, notice of loss; 4th, estimate of loss; 5th, expiration of thirty days. Now if there had been an agreement to repair wilhiu a less time, say .ten days, and the underwriters had said they would do so or pay, could we have sued on the policy until after the thirty days? I submit not. It is perfectly well settled, (hat where .there is a contract to pay money on a certain day, no matter what is done in the mean time, n.o right to sue upon the contract arises until the time comes round. Now if a shorter .time would not deprive us of the right to sue, it would seem to follow that we ought not to be deprived of our right because the parol agreement dispensed the time for more than thirty days. Now why is this? Because it is a different contract. A contract under seal cannot be discharged except by a contract under seal, or performance. This is a fixed rule. Now is there any exception or qualification which will take this case out of its operation ? This evidence is offered for five purposes. If admissible for either, it is impossible to conceive a case in which a contract under seal may not be waived by a subsequent parol agreement. It may be that a suit may be instituted upon such subsequent parol agreement by the party injured by it, but when suit is brought upon the original contract he must show compliance with the terms of it, or its release by a contract under seal. Such was the case of Watchman and Bratt. If, by a parol agreement, any vital part of the original contract under seal is varied or waived, it cannot be set up as a defence to a suit upon the contract. 8 Taunt., 596, Cordwent vs. Hunt, was a case where a landlord was prevented from putting up a building by request of the tenant, yet the latter sued him upon his lease, under seal, for not putting up the building and recovered, though this subsequent request was set up by way of defence. In 13 Wendell, 71, Delacroix vs. Bulkley, it is decided, that a sealed executory agreement cannot be released or varied by any kind of parol agreement. But it is also clear, that if a breach has occured, within the meaning of the law, which can be compensated in damages, these may be released by a parol agreement. Now to bring this case within this exception, they must show that we could sue before the agreement was made. We could not sue when the policy was made nor after the fire, for we were to furnish an estimate of the loss; we could not sue until the expiration of the thirty days. The agreement was made a few days after the fire, and of course before the breach in contemplation of law had occurred. What is meant by a sealed instrument being broken is, that a right of action then accrues; and this right of action is what may be waived by a parol agreement. I have so far considered the right to repair as vested in the company under (he policy. If they had no light to repair, of course the evidence was properly rejected. Now had they this right? It was an insurance on goods as distinguished from one upon real estate. In such case the obligation is to furnish other goods of the same quantity and quality, or to pay the money. The parol agreement was made for the benefit of the assured and at his request, and was fully carried out by the company. It is argued that this evidence was not admissible in an action' for damages: — 1st, because the company had no right to elect to repair, and the agreement was, therefore, a nude pact. Even if there was no such stipulation in the policy, it might be an inquiry whether the agreement to repair would not be' as valid as if embodied in the policy itself. But there is no ground for this question, for the true construction of the policy gives the right to elect to repair. The goods were to be restored. How restored but by reparation? The only mode of returning the goods was by repairing them. Such has been the view of all the counsel in the case up to this time. The nar assumes it; the prayers at the original trial assume it; so in the second trial the plaintiff’s prayer assumes the same thing. When the case came up to the Court of Appeals, in 6 Gill, 87, no such question was raised or argued, but the court assumed such to be construction of the contract. 2nd. Assuming the company had the right to elect, the question occurs as to the admissibility of the evidence under the pleadings. The object of a policy is to protect a party against fire: it is an indemnity against the consequences of fire. This policy proposes to accomplish this in two ways:— 1st, by repair; 2nd, by payment. Now when did the liability for the damages attach under the policy ? Was it superinduced by the fire, or was it dependent upon any thing subsequent to the fire? We say the occurrence of the fire being the casus contemplated by (he policy, fixed the liability of the company, not the notice or the estimate of loss, for these are but the means of ascertaining the quantum of damages; they do not fix tbe liability of the company, which aiises from the policy and the fire. If the party elected to repair, the policy did not require any estimate of loss. The loss was incurred by 4he fire, — the means of ascertaining the damagés was to be In one of the two ways, by repairing or estimating the loss. This is the contract to which the principles of the authorities •are to be applied. The principles are: — 1st. Where the terms of the covenant are absolute to do certain things, no parol evidence can be received by which to discharge them. 2nd. Where the covenant is sounding in damages and a breach has occurred, there parol evidence may be offered as to recompensing the damages. I admit the law of die first .proposition, but no case can be found in which an agreement to enlarge or extend the.time of the performance of the contract is not good, provided it be founded upon a good consideration. So in the case of unascertained damages, the evidence was admissible under all the pleas of the defendant. The case of Watchman and Bratt, 5 G. & J., 239, only decided that the plaintiff could not maintain the suit, because he was obliged to set out the performance of the obligations of the covenant, which were conditions precedent to the payment of the money — time being of the essence of the contract. The court say, that though the parties cannot recover upon the original covenant, they may recover upon the subsequent agreement: this, of course, concedes that they had the right to make — that it was not void but was valid, and founded upon a sufficient consideration. The plaintiff here could have sued upon the subsequent agreement. The case in 3 H. & J., 291, Peters vs. Johnson, asserts no other principle. The case in 4 G. & J., 305, was one of a partial payment, which does not discharge one from the obligation to pay the whole. The case in 6 H. & J., 38, Watkins vs. Hodges, et al., was an action of assumpsit, and decides that such a contract may be extended by agreement of parties, but they do not say, that in case of a sealed contract the agreement to extend the time is not good. There is then no Maryland case which decides, that the agreement is not good and binding between the parties, and if violated would have been the foundation for an action. The English cases, 1 East., 619, Heard vs. Wadham, is the same as that of Watchman and Bratt, that a plaintiff could not maintain an action upon the covenant without avering and proving thé performance of the conditions precedent; in 625 it is conceded that a party may defensively set up an agreement to extend the time. The case in 16 East., 344, Braddick vs. Thompson, decides, that an agreement by parol, without any consideration, to abandon and relinquish the whole covenant could not be pleaded. This does not touch the question as to the extension of the lime of performance. Such is the distinction taken in all the cases. The case in 7 Taunt., 656, Thompson vs. Brown, (2 Eng. C. L. Rep., 247,) was an action upon a charter-party which had not been complied with, and is like that in 1 East., where a party cannot sue upon a covenant which he has not himself performed. The case in 8 Taunt., 596, Cordwent vs. Hunt, is the only case where a defendant set up the plea, and that was one, the effect of which was to discharge and rescind the entire contract, not one to extend the time. The covenant was one to do some absolute fixed thing and not one sounding in damages. The cases on which we rely maintain the doctrine for which we contend, that in the case of a defendant he may set up the defence. 1 Esp., 35, expressly decides, that a contract to enlarge the time for the discharge of a vessel beyond the terms 'of the charter-party was a good and valid defence to any claim for damage, and was a bar to the action. This is precisely our case. In 2 Wendell, 587, a parol enlargement of the time set up in the sealed instrument for the performance of the covenants is decided to be good. 3 Johns. Rep., 528, Fleming vs. Gilbert; 9 Johns., 116, Adams vs. Freeman, both recognise the distinction between plaintiffs and defendants. So in 7 Cowen, 50, and 10 Iredell, 193. But upon another defence the evidence was clearly admissible. We have plead tender and readiness to perform and refusal on the part of the plaintiff to accept. Can there be a doubt but that in an action upon a covenant performance or a tender to perform is a good defence? Breese, 132, Baker vs. Whiteside. 1 Bailey, 538, note a. In a policy of insurance you may waive every stipulation by parol. Allegre vs. Maryland Ins. Co., 6 H. & J., 408, shows, that if a company refuses to pay, this waives the obligation to produce the estimate of loss. If they can do this may they' not waive or enlarge the time ? The right of action immediately accrues upon the refusal. As to the question of fraud: It would be monstrous if a party could put an underwriter off his guard by such an agreement as this, and then come in and sue for the non-compliance which he had himself superinduced.