# SPIRES Et Ux. v. Hanover Fire Ins. Co.

> Supreme Court of Pennsylvania · January 16, 1950 · 364 Pa. 52

URL: https://www.frixlaw.com/law-library/cases/9697783

## Case

- **Full name:** Spires Et Ux., Appellants, v. Hanover Fire Insurance Company
- **Court:** Supreme Court of Pennsylvania
- **Decided:** January 16, 1950
- **Citations:** 364 Pa. 52; 70 A.2d 828
- **Precedential status:** Published
- **Opinion:** Concurrence
- **Judges:** Maxey, Drew, Linn, Stern, Patterson, Stearne, Jones, Stearns
- **Cited by:** 159 later opinions in the Frix Law Library

## Citator (automated)

- **Red flag:** Overruled by Guy v. Liederbach, 501 Pa. 47 (1983).
- Negative treatments: 1
- Distinguished by: 0
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/9697783

## Opinion text

Concurring Opinion by
Mr. Chief Justice Maxey :
I agree with the majority opinion that the complaint does not set forth a cause of action against defendant. No man has any cause of action against another unless that other is obligated to him. An obligation must be imposed either by law or by contract. The law imposes no obligation on anyone to insure another in the absence of an agreement to do so. The question is: Did the Hanover Fire Insurance Company obligate itself by an insurance contract with the plaintiffs? If such a relationship existed between plaintiffs and defendant it must have had its origin in an insurance contract. The policy *60 of insurance which is pleaded says nothing about defendant being obligated to plaintiffs in any way. The complaint avers that “M. E. Kaehler and Louis A. Raub [lessees] agreed that they would keep the buildings belonging to the plaintiffs herein on the premises described in Paragraph 3 above insured against loss by fire, . . .” and that “The said M. E. Kaehler and Louis A. Raub carried a policy of fire insurance with the defendant on the hangar and offices located on the land of the plaintiffs herein.” It was averred (Par. 12) that “The insurance carried with the defendant herein was carried for the benefit of . . . the plaintiffs herein.” This is stating a mere conclusion of law and no facts are pleaded in support of it. Nothing is pleaded which shows any legal relationship between the plaintiffs and the defendant. Even if when Kaehler and Raub executed the insurance policy with the defendant they regarded themselves as agents of Spires and his wife, but that fact had not been disclosed to the insurance company, the company would not be obligated to those undisclosed principals. If A and X entered into an agreement to marry and later A informed X that in entering into the contract he, A, was merely acting for B, a theretofore undisclosed principal, X would certainly be under no obligation to marry B.
A contract of insurance is as much a personal one as is a contract to marry. * An insurer is concerned with the moral risk as well as with the material risk involved in an insurance contract. A fire insurance company will not insure a man’s property if the man has had too many fires. A casualty company will not insure a car owner if the owner has had too many accidents. An insurance company cannot be forced to enter into a contractual relationship with anybody.
*61 3 C. J. S., §276, states: “. . . in view of the fact that mutual assent is an essential element of a contract, every person has a right to determine with whom he will be bound by contract and cannot have another person thrust upon him against his expressed will. Therefore, where it is clearly shown, either from the terms of the agreement or the attendant circumstances, that the contract was exclusively with the agent personally, the principal does not become a party thereto and cannot maintain a suit upon it.” (Citing cases.)
2 American Jurisprudence, Section 412, says: “Where the contract made by an agent acting for an undisclosed principal involves elements of personal trust and confidence as a consideration moving from the agent, contracting in his own name, to the other party to the contract, the principal, while the contract remains ex-ecutory, cannot, against the resistance of the other party, enforce it, either to compel performance by the other party or to recover damages for a breach.”
In Birmingham Matinee Club v. McCarty, 152 Ala. 571 , 44 So. 642 , 13 L. R. A. (N. S.) 156, the court said: “. . . if the contract involes elements of personal trust and confidence, as a consideration moving from the agent (of the undisclosed principal), contracting in his own name, to the other party to the contract, the principal, while it remains executory, cannot, against the resistance of the other party enforce it, either to compel performance by the other party, or in damages for a breach. Mechem on Agency, §770; King v. Batterson, 13 R. I. 117, 43 Am. Rep. 13 ; Boston Ice Co. v. Potter, 123 Mass. 28 , 25 Am. Rep. 9 ; Winchester v. Howard, 97 Mass. 303 , 93 Am. Dec. 93 ; 1 Am. & Eng. Enc. Law, pp. 1171, 1172, and notes; Story on Agency, §§160, et seq. and notes. The reason for this exception is manifest. If the party contracting without knowledge of the agency, were bound to take the service or conveyance or property from the undisclosed principal, the well-recognized rule that one *62 •may determine for himself with whom he will deal, with whom he will contract would be directly infracted; and the elements of the contract reasonably attributable to personal confidence and trust, including the financial responsibility of the agent, with whom he-alone deals as principal, would be stricken of force to which under all principles of substantial justice and right the relying party is entitled to the benefit. Of course, it follows that for a failure or refusal, by the party dealing with the agent, to perform the contract, which was in reality, but unknown to be, the undertaking of an undisclosed principal, and not the undertaking of the individual with whom made, the recalcitrant party, cannot be mulcted in damages by the developed principal.”
He who pleads an obligation arising from a contract must show the obligor’s assent to the assumption of the obligation. The Hanover Fire Insurance Company never assented to the insuring of these plaintiffs against any loss of property by fire, nor did it in its contract of insurance accept them as creditor beneficiaries. Every insurance company has freedom of choice as to the persons to whom it will be obligated. If, for example, A wished to borrow $10,000 from X and X said, “I will loan you the money provided you take out a policy of life insurance,” and A did so, making his estate- the beneficiary, and then died, X the creditor would have no right of action against the insurance company. He would have a right of- action only against A’s estate, of which the insurance proceeds constituted a part. If A said to the insurance -company: “I wish it: stipulated in the policy that the proceeds be paid to X, my creditor” and the policy contained this stipulation the creditor would after A’s death have a right of action against the insurance company for the proceeds.
Williston on Contracts, Volume 2, Section 369, in discussing the third party beneficiary and creditor rules as.applied to life insurance cases, says: “Presumably *63 everywhere a beneficiary to whom, the insurer has promised the insured that the insurance money shall be paid is given a right to enforce the policy, and generally by a direct action.” (Italics supplied.) (The same rule; applies to fire insurance policies.)
In Hind v. Holdship, 2 Watts 104 , this Court said.: “. . . he for whose benefit a promise is made may maintain an action upon it, although .no consideration pass from him to the defendant, .nor any promise from the defendant directly to the plaintiff.”
Williston on. Contracts, Volume I, Section 22, page 43, says: “Not only.must assent to a contract be manifested by overt acts, but promises in contracts must be made by a manifestation of agreement moving from the promisor to the promisee.” See also Volume 2, Section 357.
Lightner’s Appeal, 82 Pa. 301 ,. has no bearing on this case. The facts in that case were that H.,. being indebted to his bank in a sum larger than the value of some stock which he owned in that bank, when required to give additional security agreed with the bank that he would transfer his stock in the bank as collateral security for his indebtedness, and a power of attorney was accordingly drawn for that purpose, in which H., for value received, irrevocably appointed E., the cashier of the bank, his attorney, to transfer to the bank or other persons his stock. E. died before he had executed the power, and the stock still remained upon the boobs of the company in H.’s name, when H. became a .bankrupt, and his assignee in bankruptcy filed a bill to prevent the bank disposing of the stock. It was held that the power of attorney did not fall by reason of the death of E., the attorney named therein, and that the power.was not only irrevocable by its own terms, but it was so by the legal operation of the agreement which induced it. It was a power coupled with an interest, and the agreement operated as an assignment of the . stock in equity, *64 which the power was intended to perfect. H. had agreed to transfer his stock and he provided the mechanism for the transfer. The transfer was not allowed to fail just because the transfer mechanism failed (upon the death of the attorney-in-fact, who was authorized to effect the transfer).
Procedural Rule 2002 has no relevancy as to whether or not these plaintiffs have any substantive right against the Hanover Insurance Company. Rule 2002 does not purport to affect the substantive rights of anybody. If it did it would be invalid because the Act of 1937, P. L. 1982, which authorized the Supreme Court to prescribe rules of practice and procedure in civil actions in law and in equity provides as follows: “. . . such rules shall be consistent with the Constitution of this Commonwealth and shall neither abridge, enlarge nor m,odify the substantive rights of any litigant nor the jurisdiction of any of the said courts, nor affect any statute of limitations.” (Italics supplied.) No substantive right has its source in a rule of procedure.
The court below correctly held that these plaintiffs were neither donee beneficiaries nor creditor beneficiaries. See Restatement of the Law of Contracts, 133, et seq. Even if they were incidental beneficiaries (which they were not) that status would not give them any right of action against the insurance company. In illustrating incidental beneficiaries Volume 1 of the Restatement of the Law of Contracts, under Section 133, uses the folloAving illustration in paragraph 13 (page 156) : “A, an insurance company, promises B in a policy of insurance to pay $10,000 on B’s death to C, as trustee for B’s Avife, D. C, and not D, is a donee beneficiary. D’s rights must be enforced under the trust.”
Judge Laub of the court below correctly decided this case when he said: “The question is whether, by the terms of the contract itself, the contracting parties have provided that the performance by the promisor, or a *65 part of it, when rendered, is to go to the third party and not to the promisee. Paragraph 12 of the complaint is insufficient to establish this policy as such a contract. Since the complaint does not aver that the policy required the defendant to make payment to the plaintiffs, the complaint does not establish the contract sued upon as a third-party contract.”
In other words, since under the terms of the insurance contract between the lessees and the defendant company, the company assumed no obligations whatsoever in respect to the lessors, it follows that the lessors being strangers to that contract cannot base upon it any right of action against the insurance company. The lessors’ right of action is against lessees on the contract bettoeen lessors and lessees, by which contract the insurance company, being a total stranger to it, is in no way obligated.
Mr. Justice Drew, speaking for this Court, said in Gorman's Estate, 321 Pa. 292, 295 , 184 A. 86 : “A fire insurance policy is a personal contract. An important feature of such indemnity is the personal equation that exists between insurer and insured.”

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9697783. Public record. Not legal advice.