Massachusetts Mut. L. Ins. v. Crenshaw , 186 Ala. 460 ( 1914 )

McCLELLAN, J. —

Action, by appellee against appellant, upon two life insurance policies, issued upon the life of John W. Crenshaw, in which the appellee was the beneficiary. The policies are identical except in respect of the sum assured and the amount of the premium exacted therefor.

The following clause appears in the policies sued on: “This policy and the application herefor constitute the entire contract between the parties. All statements made by the applicant shall, in the absence of fraud, be deemed representations and not warranties, and no such statement shall be used in defense to a claim under this policy unless it is contained in the application and a copy of the application is hereto annexed.”

In the said application, signed by the insured, this clause appears: “I agree that the insurance hereby applied for shall not be in force until the acceptance and approval of this application by the company at its home office, the delivery of the policy to me or my agent, and the payment of the first premium as required therein during my present condition of health; and that upon such delivery said policy shall be considered as having become effective upon the date stipulated in the policy as the date on which the insurance begins.” In said application, the applicant answered question 19 in the negative. The question (19) will be set out in the report of the appeal. Question 20, with its answers, was this: “What injuries or diseases have you had in the last ten years? ‘Acute tonsilitis.’ State their character, severity, dates and duration. ‘Completely recovered in two weeks.’ ” Concluding the application, this clause appears: “I hereby declare, on behalf of myself and of any person who> shall have any interest in any policy issued upon this application, that, to the best of my knowledge and belief, each of the foregoing answers in parts 1 and 11 of this application is full, complete, and true, and that I am in sound physical condition, and a proper subject for life insurance.”

The application was made December 17, 1911. The policies date (to be in force after) December 20, 1911. They were delivered February 3, 1912. On that date, at the time of delivery, Crenshaw signed and delivered to the insurer’s agent, Avho had the policies for delivery, the following certificate: “Massachusetts Mutual Insurance Company, Montgomery, Alabama, Feb. 3, 1912. I hereby certify that there has been no change in my family record since my application for policy No. 293071 Avas made, that I am now in good health, have had no sickness, and have not required nor received the service of any physician since the date of said application, except. * *” Upon the delivery of the certificate and the payment of the premiums, the policies were delivered to the insured; and, according to the terms of a provision of the application before quoted, the insurance became effective, and a liability of the insurer,, December 20, 1911, unless vitiating fraud prevented that result. Crenshaw died February 15, 1912.

In the oral charge of the trial court the jury Avas advised that the only issues (aside from the general issue), made by defendant’s pleas that were submitted to the jury, were those raised by special pleas designated as “plea E, plea I, plea 0, and plea L.” There were a large number of other pleas filed, some of which were stricken on motion and some on demurrer. The substance of the four pleas noted will be set out in the report of the appeal. A series of pleas were stricken on motion, because, it appears, of the failure or omission of the defendant to pay into court, for the plaintiff, the premiums paid on the policies, in accordance with [(Che' applicable condition precedent established by Code, § 4573. There was no error in this action of the trial court.

Another series of pleas were stricken on demurrer. This series was faulty, in that, they failed to conform in averments to the requirements of Code, § 4572. That section provides: “No written or oral misrepresentation, or Avarranty therein made, in the negotiation of a contract or policy of life insurance, or in the application therefor or proof of loss thereunder, shall defeat or void the policy, or prevent its attaching, unless such misrepresentation is made Avith actual intent to deceive, or unless the matter misrepresented increase the risk of loss.”

It is to be readily conceded that an “actual intent to deceive” may. be sufficiently averred by the allegation of facts and circumstances coupled with words of equivalent import to those the statute (section 4572) employs; but it cannot be affirmed as a legal result that knowledge of the falsity of a statement and the utterance of that statement necessarily imports, also, an “actual intent to deceive.” Actual intent to deceive imports a purpose to that end, that knowledge of the falsity of a statement does not necessarily comprehend. To knowingly, falsely misrepresent a fact is evidence of an actual intent to deceive; but the legal ultimate prescribed, in this particular, by the statute (section 4572) may he absent notwithstanding the knowingly false misrepresentation. Some of the other pleas indicate that the draftsman realized the distinction, and employed, as is always best in such matters, the words of the statute in characterizing, as a pleader, the purpose behind or inspiring the misrepresentations averred. The other alternative of the statute, with respect to the increase of risk, should have been pleaded, if desired to be invoked,. Avith the like appropriate reference to the words of the statute. The argument for error in sustaining the demurrers to pleas 1 to 6, inclusive, is: First, that they invoke the defense of fraud outside the terms of the contract (application), and thus, it is urged in substance,. the statute is inapplicable; and, second, that the averments made and as made import meaning equivalent to the exceptions made in the last three lines of the statute. —Section 4572. The first proposition is untenable. The ground for avoiding the liability declared on renders the contract voidable only, not absolutely void. If the asserted infirmity affected the contracts, they were subject to seasonable affirmation or ratification or rescission after full knowledge of the facts. So, the effect of the matter of fraud asserted was to rescind a voidable contract. The other proposition has been adverted to before. We do not think that pleas 1 to 6 carried such averments as necessarily required the inferences or employed terms of equivalent import, as the statute (section 4572) prescribes in that relation.

Aside from these considerations, our conclusion is that no prejudicial error attended the court’s rulings on defendant’s pleas. The defendant had open to it, under the pleas designated by the court in its oral charge, the full benefit of the defenses, in substance, intended to be asserted in other pleas upon which the court visited its disfavor.

The policy provision first quoted before did not exclude the right of the insurer to avail of such false and fraudulent statements as come within the exceptions provided in section 4572, even though such alleged fraudulent statements only attended the delivery of the policies and were not contained in the application in question. The contracts, evidenced by the application and the policies, manifestly contemplated a delivery sub-, sequent to, even, the acceptance and approval of the application. One of the provisions of the application, quoted above in this opinion, takes unmistakable account of the fact that delivery succeeds the perfection, signature, and acceptance of the application; and, in so doing, prescribes that the applicant shall have remained in the state of health shown by the application. Obviously, it was not the intent of the provision first quoted before to restrict the basis for fraud to conditions prevailing at the time the application was made; since misrepresentations possible of utterance subsequent thereto only could not, of necessity, have been incorporated in the application. That paper fixed the standard of the condition of health whereby the condition of health at the time of delivery was to be measured. The policy provision under consideration cannot be otherwise construed without rendering vain, in important particulars, the provision contained in the application.

To plea L, designated by the court, the plaintiff replied, specially, in the language of the policy provision, first quoted before, and then averred that the instrument relied on in that plea (among others) was not a part of the application or of the contract as constituted by the said quoted provision. Other replications expressed the like idea in different forms. The court overruled the demurrers to these replications. These demurrers invoked the interpretation of the policy provision quoted which this court has approved, viz., that that provision of the policy did not intend the restriction of the possible basis for vitiating misrepresentations so as to deny — when the exceptions of the statute, section 4572, were invoked — the company the right to avail of such fraud in respect of the delivery of the policy. The court therefore erred in overruling the demurrers to replications asserting the policy provision in avoidance of the facts averred in the plea L, or other pleas sufficiently averring fraud in respect of inducement to delivery.

The court also erred in excluding the health certificate signed by Mr. Crenshaw and delivered by him to Mr. Meyers, the company’s agent at Montgomery, who had the policies for delivery to Mr. Crenshaw. The bill shows that this ruling was upon the broad ground of irrelevancy, incompetency, and immateriality, and not because of the fact that a photographic copy was offered; the original having been sent to the company, the home of which is the state of its name. The health certificate was quoted in plea L, which was correctly adjudged to be a sufficient plea. The defendant was entitled to prove that which, in this particular, it had (alleged; and the effort to that end was not the offer of irrelevant, incompetent, or immaterial evidence.

It is recited in the bill that the court instructed as follows: “The plaintiff, to make out her • case prima facie and to carry the burden upon her under the plea (evidently meaning the general issue), has done so when she introduced in evidence the policies sued upon, and shows notice of proof of death has been supplied by her to the defendant, and that the policies have not been paid.” This statement of the rule of burden of proof, on the issues made, was correct. Appellant would invite the opposite conclusion upon its interpretation of Powell v. Prudential Co., 153 Ala. 611, 45 South. 208. It is urged by counsel for appellant that the there adjudication, that the provision with reference to payment of premium and the continuation of the same state of health as when the application was made, established “two conditions precedent” to the consummation of the contract. It will be observed that the court was not there treating the burden of proof at all. Furthermore, there was not there present, as .was the case here, an actual delivery of the policies and premiums paid by the applicant. The reliance to avoid the attaching of liability — the consummation of the contracts — is fraud, and that is never presumed. It must be alleged and proven. The presumption is in favor of innocence— against wrong, whatever its grade. The policies were delivered. Fraud at any stage of the negotiations or in or about the act of delivery of the policies, if such there was, was matter of defense, and no initial obligation, in the proof, rested upon the plaintiff to do more than the court defined in the quotation from the oral charge.

The defendant sought to submit to the jury testimony to the effect that the company had so- restricted the power of the Montgomery agent as that delivery of the policies could not be effected unless the applicant made an ‘unmodified health certificate,” and that this limitation was communicated to Mr. Crenshaw before delivery of the policies. In this connection, defendant also offered to introduce the mentioned written limitations upon the general agent’s (at Montgomery) authority to deliver these policies. Our opinion is that there was error in these rulings. Where the actual limitation upon a general agent’s authority is made known to the other contracting party, it is manifest that the rule which forbids reliance by the principal upon secret limitations upon the agent’s authority is without bearing or effect. The testimony offered in this connection Should have been admitted. It. was relevant and competent as tending to show that the delivery of the policies was induced by the “health certificate” tendered as evidence, as averred in plea L; and also as tending to support the averment that the alleged false statements were characterized by an intent to deceive, as averred in plea L.

For the several errors indicated, the judgment is reversed and the cause is remanded.

Reversed and remanded.

Anderson, C. J., and Sayre and Somerville, JJ., concur.