Riegel v. American Life Ins. ( 1891 )

Opinion,

Mr. Justice Williams:

The decree now before us was made upon the hearing of a general demurrer to the plaintiff’s bill. The demurrer admitted the truth of every fact alleged in the bill, but denied that, taken as stated, the facts were sufficient to entitle the plaintiff to relief in a court of equity. To determine whether this decree was right, it becomes necessary to look into the bill in order to ascertain what facts were set forth as the basis of the relief sought. These may be stated as follows:

1. That Jacob Riegel was in his lifetime a creditor of one Leisenring, and that to secure his claim he took out a policy of insurance on the life of his debtor, in the company against which the bill was filed, for six thousand dollars, paying an annual premium therefor of one hundred fifty-three dollars and ninety cents.

2. That Riegel paid the premiums eight or ten years, and died, and that the plaintiff, his widow and administratrix, has continued to pay them since, down to the death of Leisenring.

8. That Leisenring died on the tenth of March, 1889, although the fact was not known at the time to Mrs. Riegel or the insurance company, nor had either known his whereabouts for thirteen years.

4. That ten days after Leisenring’s death, and while the fact was yet unknown, Mrs. Riegel surrendered the policy on his life, and accepted a new policy for $2,500, as a paid-up policy, in order to be relieved from the burden of the annual premium of one hundred fifty-three dollars and ninety cents on the first policy.

5. That in making this exchange “ both parties to the transaction were acting in respect thereto on the basis that Leisenring was alive.” This averment was added by amendment on the argument:

6. That when she learned that Leisenring was dead, before the exchange and the surrender of the original policy, she demanded that it be returned to her, but that the company refused to return it.

The case presented on these facts was that of a contract entered into under the influence of a mutual mistake, and a claim for relief from such contract. The mistake was in relation to the fact of Leisenring’s death. Both parties evidently supposed, and acted on the supposition, that he was alive, and that the annual premiums upon his life, which had become burdensome to Mrs. Riegel, must be continued indefinitely until his death should take place. As it had become difficult for her to pay these premiums, the only way in which she could be relieved from them was to surrender her policy and accept a paid-up policy for such smaller sum as the premiums already paid would purchase. Rather than take the risk of losing the entire amount of the policy by her inability to keep up the annual payments, she surrendered her policy for six thousand dollars, and accepted in lieu of it a paid-up policy for two thousand five hundred dollars. This was the contract she made while in ignorance of Leisenring’s death. At the time she made it she was already relieved from the burdensome premiums, and the entire amount of the policy was honestly due her from the company. What was the effect of the mistake upon her ? Simply to take from her the difference between the two policies and give her absolutely nothing for it. She surrendered a policy for six thousand dollars, on which the liability of the company was already fixed, and received one for two thousand five hundred dollars to secure relief from a burden already removed. The company parted with nothing. She secured nothing. The whole transaction was a mistake, and, if the decree of the court below stands, the result will be to take three thousand five hundred dollars from Mrs. Riegel, and give it to the insurance company.

These facts seem to us to present a clear and a strong case for equitable relief, so strong, indeed, that a mere statement of them is the only argument necessary for its support. The duty of a chancellor to relieve in cases of mutual mistake is so well settled that no citation of authorities can be needed. Among the more recent cases, however, in which the subject has been discussed and relief granted, are Babcock v. Day, 104 Pa. 4; Wilson’s App., 109 Pa. 606; Goettel v. Sage, 117 Pa. 298.

The learned judge, who heard this case in the court below and who is thoroughly familiar with the principle to which we have referred, seems to have been misled in regard to the facts set up in the bill. He treats the arrangement made between Mrs. Riegel and the company on the twentieth of March as a compromise of a claim against the company for the alleged death of Leisenring, which Mrs. Riegel was unable to establish, because unable to show the death. As the fact of the death, and the consequent liability of the company on the policy, were uncertain, it was a case for the application of the doctrine that the adjustment of a doubtful claim constituted a valid consideration for the surrender of the policy, and the acceptance of the new one, and upon this theory the decree was entered. But it nowhere appears that Mrs. Riegel made any claim on the company, or supposed that she had any. She was asking relief from future payments of premiums on a policy on which she supposed future payments would have to be made, and to get this relief she was willing to sacrifice more than one half of the sum insured. The company was willing, in consideration of the large reduction of its liability, to give her a policy for what her payments would purchase, and relieve her in future. This is an exchange often made, and adjusted by well-settled rules. It was a compromise of nothing. We do not doubt the correctness of the rule applied by the learned judge in cases to which it is fairly applicable, but this is not one of them. The plaintiff distinctly avers that she did not know of the death of Leisenring until some ten days after the exchange of policies was effected, and that “ both parties to the transaction were acting in respect thereto on the basis that Leisenring was alive.” She distinctly avers that the object of the arrangement was to secure relief for herself from the indefinite payment of premiums that had become burdensome to her; that the new policy was accepted for that reason, and the old one surrendered, at a time when, had she known the fact, she was entitled to demand the entire sum upon which she had so long and so steadily paid the burdensome premiums. Upon these facts, if the attention of the learned judge had not been diverted from them, we feel sure that he would have reached the conclusion that we have reached, that it would be grossly inequitable to hold the plaintiff to a bargain made under the influence of a mistake of facts like that before us. This mistake the demurrer admits. If there had been any circumstance which the defendant could have set up to show that a correction of this mistake at this time would be inequitable, it should have been shown to the court by answer. If such circumstances do exist, they may yet be presented, as this case goes back to enable the defendant to take defence upon the merits.

The decree is reversed, and the record remitted, with direction that the defendant plead to or answer the complaint in the bill; the costs of this appeal to be paid by the appellee.