that the parties in interest have been guilty of no negligence or undue delay in not applying for relief at an earlier period," but granted leave for an amendment. We have said nothing in regard to the stock of Peirce, which was not to be delivered until 1893, because the bonds were in 1890 the only thing of value which is the subject of the suit. Where a circuit court dismissed a bill generally upon demurrer, and the supreme court, upon appeal, was of opinion that the bill was demurrable, but amendable, it reversed the decree, and remanded the case, with directions to allow the complainants to amend their bill. House v. Mullen, 22 Wall. 42. Let the decree be reversed, without costs of this court, and the case be remanded to the circuit court, with directions to allow the complainants to amend their bill in conformity with this opinion, or, if they fail to do this in a reasonable time, to dismiss it, with costs. SANDERS v. PECK et al. (Circuit Court of Appeals, Seventh Circuit, May 2, 1898.) No. 394. 1. PRINCIPAL AND AGENT-UNAUTHORIZED SALE BY AGENT-RATIFICATION. Where the owner of property which has been sold without authority by one assuming to act as his agent enters into negotiations with such assumed agent, without reservation, for a settlement, on the basis that the latter is accountable for the price received for such property, he thereby ratifies the sale, and cannot afterwards withdraw such ratification, and claim the property from the purchasers. 2. JUDGMENT-CONCLUSIVENESS-PERSONS BOUND. One for whose benefit certain petitioners in a suit in equity prosecuted their claims, being represented therein by his authorized attorney, is bound by the decree therein, unless set aside by direct proceedings therefor. Appeal from the Circuit Court of the United States for the Northern Division of the Northern District of Illinois. W. A. Foster, for appellant. James L. High, Henry W. Booth, and D. T. Corbin, for appellees. Before WOODS, JENKINS, and SHOWALTER, Circuit Judges. WOODS, Circuit Judge. The bill in this case was brought by Joshua C. Sanders, the appellant, against Ferdinand W. Peck, William R. Page, Harvey W. Booth, and David T. Corbin, to set aside a sale of 22 bonds, of $1,000 each, executed by the Riverside Improvement Company. The sale was made on September 10, 1890, by Corbin, as agent of the owners, to Peck, who was represented in the transaction by Page and Booth, and the bill charges a conspiracy of the defendants to cheat and defraud Sanders out of his interest in the bonds, and in certain decrees in which the bonds, excepting two, had been merged. The appellees answered, deny ing all fraud, averring a purchase in good faith through Corbin, who, as agent and attorney of the owners of the bonds, it is alleged, had full authority to make the sale, and setting up certain orders and decrees of the circuit court of Cook county, Ill., in the case of Peck against Chicago & Great Western Railroad Land Company and others, as an adjudication of Peck's title as against the title asserted by Sanders. It is not found necessary to rehearse the numerous facts incident to this litigation. A few propositions are controlling. That Corbin had no authority to sell the two bonds which had belonged to Hendrickson is clear, and the preponderance of the evidence seems to us to be that the sale made of the other bonds was unauthorized, and that, having been notified of the appellant's ownership and of his denial of Corbin's authority before the purchase money was paid, Peck and his agents proceeded at their peril in an effort to consummate the sale by paying the price to Corbin and by taking assignments of the decrees, which, though obtained in the names of Ver Nooy and Temple, belonged to the appellant. But, though unauthorized, we are of opinion that Sanders ratified the sale by his subsequent conduct, when, with full knowledge of the circumstances, he entered into negotiations with Corbin for a settlement of the account between them on the basis that the sale was valid, and that Corbin was accountable to him for the price received for the bonds or decrees. In that negotiation, which was entered upon without any reservation of a right to repudiate the sale if a settlement should not be effected, a sum was agreed upon as proper compensation to Corbin for making the sale, and the difference between them which prevented an adjustment was in respect to a matter in no way connected with the sale of the bonds. This unreserved assertion of ownership of the proceeds amounted to recognition of the validity of the sale. A ratification once fairly made, it was not revocable. If it be said that this ratification did not extend to the Hendrickson bonds, of which Sanders was not then the owner, he is nevertheless in no better position, in respect of those bonds, because of his failure for more than a year after acquiring Hendrickson's title to question the sale. In respect to the Ver Nooy and Temple bonds, we are of opinion that the decrees and orders of court in the Peck foreclosure suit constitute an estoppel against Sanders to deny Peck's title. The petitions brought in that case in the names of Ver Nooy and Temple, respectively, were brought at the instance of Sanders, and were prosecuted by his attorney, Corbin, for his benefit. Decrees were rendered whereby, through the petitioners, his right to share in the proceeds of the sale was established. After the rendition of the decrees there was a reference to a master, who, acting within the scope of his authority, reported that the decrees in favor of Ver Nooy and Temple had been assigned to Peck, and in pursuance of that report a final decree was entered giving to Peck what otherwise would have been awarded to Ver Nooy and Temple for the appellant. In contemplation of law, the appellant was a party to the proceedings and decree, represented by his attorney, Corbin, of whose unrevoked authority in the premises there is and can be no question, and, if the decree so rendered is not to be regarded as having been consented to by the appellant, it is at least binding upon him until set aside, as of course it might be. on proof of fraud. See Freem. Judgm. §§ 174, 175; Cheney v. Patton, 134 Ill. 422, 25 N. E. 792; Id., 144 Ill. 373, 34 N. E. 416; If anything is due the appellant from Corbin, it should be re- NEW YORK LIFE INS. CO. v. McMASTER. (Circuit Court of Appeals, Eighth Circuit. March 21, 1898.) No. 976. 1. SPECIFIC PERFORMANCE-FRAUD-MISTAKE. A contract may be reformed in equity where a parol agreement was made which failed of embodiment in the subsequent written contract through the fraud of one, or the mistake of both, of the parties to it; but such agree- ment, and the fraud or the mistake, must be clearly proven before any such 2. INSURANCE-PRELIMINARY NEGOTIATIONS-CONSIDERATION. Where an insurance company, in preliminary negotiations, agreed with an applicant, when he signed the application, to insure him for a longer time than was subsequently fixed by the policy, the oral agreement is not bind- ing, since nothing was paid in consideration thereof, and the applicant was at liberty to reject the policy before payment of the premium. Customary negotiations for insurance do not constitute a contract, where there is no intention to contract otherwise than by policies made and delivered upon 3. SAME REFORMATION OF CONTRACT-ESTOPPEL. Where it is sought, on the plea of fraud, to reform a policy so as to give It the legal effect claimed under an oral agreement made in preliminary nego- tiations, the insurance company is not estopped from denying that the actual contract was the oral agreement, unless there was on its part a willful in- tent to deceive, or such gross negligence as is tantamount thereto, involv- ing some moral turpitude or breach of duty. 4. SAME-ACCEPTANCE OF POLICIES-KNOWLEDGE OF CONTENTS. An applicant for insurance, who accepts policies, the provisions of which are plain, clear, and free from all ambiguity, is chargeable with knowledge of the terms and legal effect of these contracts. It is his duty to read and know the contents of the policies before accepting them, and, where he fails to do so, he is estopped from denying knowledge thereof, unless he proves that he was dissuaded from reading the policies by some trick or fraud of 5. REFORMATION OF CONTRACTS-MISTAKE. The mistake which will warrant the reformation of a contract must be made in common by the parties to it. A court of equity may not reform a written agreement, on the ground of mistake, so as to impose on one of the parties obligations which he did not intend to assume. 6 WRITTEN CONTRACTS-PAROL NEGOTIATIONS. No representation, promise, or agreement made, or opinion expressed, in the previous parol negotiations, as to the terms or legal effect of the re- sulting written agreement, can be permitted to prevail, either at law or in equity, over the plain provisions and just interpretation of the contract, in the absence of some artifice which concealed its terms, and prevented the 7. LIFE INSURANCE-REFORMATION OF POLICY. An application for life insurance was signed December 12, 1893, when the agent told the applicant that one premium would carry his policy 13 months. The agent wrote on the application, "Please date policy same as applica tion." The policy was dated December 18th, and required payment of premiums December 12th, annually, with a provision for 1 month of grace. The first premium was paid and policy delivered December 26th. December 12, 1894, a collector called for the second premium, and was told that insured did not intend to keep up the insurance, but that, if he decided to do so, he would pay the premium within the month of grace. He did not pay, and never objected to, or complained of, the policy or its terms. He died January 18, 1895; and a bill was filed to so reform the policy as to advance the term of insurance 6 days, making it run 13 months from December 18. 1893, and so cover the death on January 18, 1895. Held, that the relief must be denied, in the absence of proof that through the fraud of one, or the mistake of both, of the parties, the policy failed to embody the preliminary parol agreement, or that the agreement was on a valuable consideration. Appeal from the Circuit Court of the United States for the Northern District of Iowa. This is an appeal from a decree which so reformed five policies of life insur ance as to advance the term of insurance described in them six days, and which in this way made them cover a death which occurred on the sixth day after the policies had expired by their terms. Each of the policies was dated on December 18, 1893. By each, the New York Life Insurance Company, the appellant, insured the life of Frank E. McMaster in the sum of $1,000, for the benefit of his executors, administrators, and assigns, in consideration of his written application, "and in further consideration of the sum of twenty-one dollars and cents, to be paid in advance, and of the payment of a like sum on the twelfth day of December in every year thereafter during the continuance of this policy." Each policy contained these stipulations: "If any premium is not thus paid on or before the day when due, then (except as herein otherwise provided) this policy shall become void, and all payments previously made shall remain the property of the company. After this policy shall have been in force three months, a grace of one month will be allowed in payment of subsequent premiums, subject to an interest charge of five per cent. per annum for the number of days during which the premium remains due and unpaid. During the said month of grace the unpaid premium, with the interest as above, remains an indebtedness due the company; and, in the event of death during said month, this indebtedness will be deducted from the amount of insurance." Each policy was issued upon a written application, which was dated on December 12, 1893. The policies were delivered to McMaster, and the first premiums were paid, on December 26, 1893. He never paid the premiums due on December 12, 1894, and he died on January 18, 1895, on the sixth day after Ithe policies had expired. Fred A. McMaster, the administrator of the estate of the deceased, and the appellee in this case, exhibited his bill in the court below to so reform these policies that their terms of insurance should commence on December 18, 1893, and should expire at midnight on January 18, 1895, after the death of the insured. In his bill he set forth two grounds for the relief which he sought: (1) That, after the insured had signed his applications for these policies, the agent of the insurance company wrote into them, without his knowledge, the words, "Please date policy same as application," and the company made the annual premiums due on December 12th in each year, when they would have been due on December 18th if those words had not been inserted in the applications; and (2) that the contract for the insurance was that the insured should have policies of the kind which he received, which should remain in force 13 months from the time when the first annual premiums were paid, without further payments, and that the policies actually delivered remained in force only 12 months and 17 days after their delivery. The answer denied the averments of the bill, and these facts were established by the evidence: In order to induce the insured to make his applications for the policies, the solic itor of the company told him that its policies gave him 13 months of insurance for the first annual premium, and in answer to this direct question, "Did you, or did you not, agree for the company that they would furnish him a policy that would be good for thirteen months, and that, in order to secure the thirteen months of insurance, all that he had to do was to pay one premium?" he answered, "Yes, sir; I stated to Mr. McMaster that the one premium he paid carried his policy for full thirteen months." McMaster signed the applications for the policies at the time of this conversation, on December 12, 1893, but he did not pay any premiums until December 26, 1893; and there is no evidence that, at any time before the policies were delivered, on December 26, 1893, he ever agreed to take the insurance, or to pay any of the premiums. After the applications were signed, the agent who procured them wrote into them the words, "Please date policy same as application," for the purpose of securing a bonus or extra commission which the company allowed its agents on December business. In November, 1894, written notices were sent to the insured by the company that his second premium on each policy would be due on December 12, 1894. On December 11 or 12, 1894, a collector called on him for his second annual premiums, and asked him to pay them. He replied that he did not intend to keep the insurance in force, and did not care to pay the premiums. The collector told him that he had 30 days of grace in which to make the payments, and told him when the days of grace would expire. He answered that. if he decided to keep any of the insurance, he would come to the office and pay the premiums before that date. He did not come, and he never objected to, or complained of, the policies or their terms. Upon this record the decree which is challenged by this appeal was rendered. W. E. Odell, for appellant. F. E. Gill, for appellee. Before SANBORN and THAYER, Circuit Judges, and PHILIPS, District Judge. SANBORN, Circuit Judge, after stating the facts as above, delivered the opinion of the court. In In form, this is a suit in equity to reform written contracts. fact, it is a bald attempt to supersede written agreements with the parol negotiations which preceded and induced them. It is contended that the insurance company agreed in the preliminary negotiations that it would issue policies which would insure the life of the deceased for 13 months, in consideration of the payment of the first annual premiums, and that, either by mutual mistake or by the fraud of the company, policies were issued which insured his life for only 12 months and 17 days, in consideration of those premiums. A contract may be reformed in equity where a preliminary parol agreement is made, which fails of embodiment in the subsequent written contract through the fraud of one, or the mistake of both, of the parties to it. But the oral agreement and the fraud or the mutual mistake must be clearly proved before any such relief can be granted. The chief difficulty with this case is that neither the oral agreement nor the fraud nor the mutual mistake are established by the evidence. It is an indispensable requisite of a binding agreement that it should have a good or a valuable consideration. If the insurance company agreed with the deceased when he signed his applications that it would issue policies which would insure his life for 13 months, in consideration of the payment of the first annual premiums, there was no consideration for that agreement, because McMaster neither paid nor agreed to pay anything for this 87 F.-5 |