New England Ins. Co. v. Swain

On June 1st, 1903, Isaac O. Swain sued the Insurance Company for an alleged fraud of its agent, by means of divers false and fraudulent representations, whereby he was induced to take out a policy of insurance on his life for an annual premium of $429. The declaration contains three counts, in the first of which it is alleged that the plaintiff paid the premium with a promissory note, dated August 2d 1897, payable to the order of the defendant six months after date; that on September 5th, he received the policy and during the month of August the agent fraudulently and wrongfully demanded of the plaintiff an additional sum of $429, as and for an additional premium, falsely and fraudulently representing to the plaintiff that it was then due and demandable and that he had been sent by the defendant to collect it. It then alleges that he, in ignorance that it was not then due and demandable, paid the additional sum of $429 and the agent transmitted it to the defendant. The second count makes the same allegations, excepting it does not refer to the payment of the second premium. The third sufficiently resembles the first to make it unnecessary to refer further to it. Each of the counts concludes with the averment that by reason of the ignorance and inexperience of the plaintiff and of the false and fraudulent representations of the agent, and the concealment of the fraud by him, the plaintiff was not aware of the fraud and did not discover and could not by reasonable diligence have known or discovered the fraud until some time in July, 1902. The defendant filed the plea of the Statute of Limitations; one denying that the plaintiff, by reason of his ignorance inexperience, etc., was not aware of the alleged frauds, etc., until July, 1902, another alleging that he was aware of the alleged fraud three years before the institution of the suit, and general issue pleas. By some apparent inadvertence, the defendant plead that it did not commit the wrongs alleged, that it never promised and that it was never indebted, but no point seems to have been raised about that and issues were finally joined on all the pleas.

The trial below resulted in a verdict for the plaintiff in the sum of $600.95, being the amount of one annual premium and interest. A judgment being entered on that verdict, this appeal was taken. Two bills of exception embrace rulings on the admissibility of evidence, and the third includes the prayers — two of which were offered by the plaintiff, which were granted, and seven were offered by the defendant, the sixth and seventh of which were granted and the others rejected.

The plaintiff is a farmer living in the mountains of Allegany County about ten miles from Hancock. He testified that one, Eichelberger, an agent of the Insurance Company, came to his house in July, 1897, and wanted him to take out a ten thousand dollar policy of life insurance; that he said that it was a good investment and would pay six per cent on the money paid in and he would get $15,000 cash at the end of twenty years, or $20,000 in paid up insurance; that Eichelberger wrote up the application for a ten thousand dollar policy and he signed it and gave his note for the premium, dated August 2d 1897, for $429, payable in six months, to the order of the defendant company; that when it became due he paid it to John R. Lashley, who had purchased it, and then burned it up. The next day Dr. Steigers examined him and a day or two afterwards Eichelberger returned, when he said the company demanded another payment of $429, and he gave him $366.50, in cash, and five shares of bank stock, valued at $62.50. He said he did not get a receipt from Eichelberger for the note or the last payment, but later he got from the company a receipt which was offered in evidence. That was countersigned by F.A. Savage, general agent, August 7th, 1897, and was a printed form used by the company. It states the amount of the annual premium, has blanks for amount of notes given on account of a first premium, has date at top of "August 1st, 1897," and states "Received of Isaac O. Swain, cash, $429." He said he supposed he got the receipt about the 8th of August, and he received the policy by mail about the sixth of September. He testified that he put the policy in a drawer, that he did not read it; that he could not read it; that he could read very little, and could not understand it; can write his name, but cannot read anything to understand it. He received a notice towards the end of the year of another premum being due and finally after some correspondence with Mr. Savage he returned the ten thousand dollar policy to him and took one for a thousand dollars, which he permitted to lapse at the end of the year.

The plaintiff called Mr. Savage, the general agent, who testified that Eichelberger was the agent of the company in this transaction; that he was furnished with a rate book, blank applications, and blank printed notes for premiums; that when an application is signed by an applicant and the medical examiner the agent sends it to him and he forwards it to Boston; that the instruction to agents was not to take a note for full amount — applicant must pay at least twenty-five per cent — but there is nothing on the notes to show that. He also said that the premium receipt was always issued with the policy; that they are countersigned by him as general agent and "sent out in blank in some instances with the policy to the agent and our agent delivered that receipt to the applicant with the policy and does it the day he got the money, and the date over the counter signature is filled in by the agent. The date is not in my handwriting and I expect Eichelberger dated it the date he received the money."

1. The question was asked Mr. Savage "What commission did Eichelberger get on first premium?" That was objected to and the objection being overruled that ruling is presented by the first bill of exceptions. It is said that the object was to show an inducement on the part of the agent to procure insurance, as reflecting upon the question whether he made these alleged fraudulent representations. As the reply of the witness was that the agent received fifty per cent of the first premium, it might in a case of this kind reflect to some extent upon the probabilities of the agent making these statements. It is true that one man might not be influenced by the prospect of securing for himself a large amount, while another would yield to temptation for a smaller sum, but in case of alleged fraud great latitude is allowed and it would be proper to prove that the agent had a personal interest in issuing the policy. It was relevant for another reason. The plaintiff was entitled to trace, if he could, the money paid by him into the hands of the company, for if he could have shown, for example, that the company had received both premiums from Eichelberger it certainly would have been admissible. The question objected to might very well have led up to such an inquiry. But at any rate we do not see how it could possibly have injured the appellant, for it would be more likely to help than hurt the company, before a jury, to prove that it only received $214.50 out of the $858.00 received by Eichelberger.

2. The plaintiff, in order to sustain the issue made as to the Statute of Limitations, claims that he did not know that he had been defrauded until Mr. Bridges called on him in 1902 to take out some insurance. He then told him that he had had insurance, showed him such papers as he still kept, and explained the matter to Mr. Bridges, who told him he had been defrauded. The plaintiff claims that was the first knowledge he had that Eichelberger had been guilty of fraud. Mr. Bridges was called as a witness and started to give his interview with the plaintiff. The defendant's counsel objected to that and it was admitted subject to exception. He then gave the details of the interview, substantially as the plaintiff had. At the conclusion of the case the defendants moved "to strike out all the testimony of the witness Bridges with reference to the conversation between him and the plaintiff, because the same is irrelevant." The Court overruled that motion, which ruling is contained in the second bill of exceptions. Ordinarily of course a party cannot offer conversations between himself and another person (other than the opposite party to the cause), but in this instance the object of the testimony was to reflect upon the question, which was a material one under the pleadings, as to when the plaintiff became aware of what he now claims to be a fraud. As he had sworn that he did not know that he had been defrauded until Bridges told him, it was competent to prove by Bridges that he did have an interview with him on the subject, and what he had done. Some of the statements may not have been admissible, but the motion was to stirike out all of the testimony of Bridges with reference to the conversation between him and the plaintiff, which could not have been done if any part of it was admissible. The Court in passing on it stated in the presence of the jury the object of it, and with that statement we do not see how the defendant could have been injured. It would be difficult to prove in any other way, than by calling the witness, the fact that he had explained to the plaintiff that he had been defrauded. As reflecting upon the time when the plaintiff became aware of the alleged fraud, it was competent to prove the date of the conversation, and in order to fix the date some reference had to be made to what was said.

3. The sixth prayer of the defendant, which was granted, in effect instructed the jury that the plaintiff could not recover the first premium paid — which we understand referred to the note. That was upon the theory that as the plaintiff had the insurance for a year that premium paid for what he had received the benefit of. Its seventh prayer, which was also granted, stated a number of facts which it was necessary for the jury to find in order to render a verdict for the plaintiff, and concluded by requiring them to find "That the plaintiff instituted this suit within three years after he discovered the fraud of defendant's agent, and within three years after he could have discovered said fraud by the use of usual or ordinary diligence on his part."

Our statute provides that "In all actions where a party has a cause of action of which he has keen kept in ignorance by the fraud of the adverse party, the right to bring suit shall be deemed to have first accrued at the time at which such fraud shall or with usual or ordinary diligence might have been known or discovered." Code of 1904, Art. 57, § 14 (sec. 13 of Code of 1888). The case of Wear v. Skinner, 46 Md. 257, is the leading one in this State on the subject. JUDGE ROBINSON in delivering that opinion said it was well settled by Courts ofequity that where a party has been injured by the fraud of another and such fraud is concealed, or is of such characteras to conceal itself, whereby the injured party remains in ignorance of it without any fault or want of diligence on his part, the bar of the statute does not begin to run until the fraud is discovered, though there be no special circumstances or efforts on the part of the party committing the fraud to conceal it from the knowledge of the other party." The Court held that the Act of 1868 (now codified as above) "was passed for the purpose of enabling parties to set up the fraud of the defendant in a Court of law as well as in a Court of equity," and that the "Legislature meant that the nature and character of the fraud, which a party was thus allowed to plead, should be governed by the well-settled rules of law on the subject, as recognized by Courts of equity and Courts of law at the time when the Act was passed." Accordingly it was held in that case that our statute did not mean that in all cases a party must commit a fraud distinct from, and independent of the original fraud, for the purpose of keeping the injured party in ignorance of his cause of action, and "where one practices fraud to the injury of another, the subsequent concealment of it from the injured party is in itself a fraud, and if he is thereby kept in ignorance of his cause of action, he is kept in ignorance by the fraud of the adverse party." The only other cases in this State on that statute are those of State v. Henderson, 54 Md. 332, and Cummings v. Bannon, an unreported case referred to in 66 Md. XIV (s.c. 8 Atl. Rep. 357). In the former this Court held there was no evidence of fraud and no concealment, and in the latter the facts upon which the plaintiff relied to show a fraudulent concealment were shown to be known to him for more than three years before suit. Unless the contention of the appellant that if there was fraud it was that of the agent, and not of the defendant, be correct (and we will consider that later), it is manifest that the law as announced by the Court inWear v. Skinner, required the Court to reject the third andfourth prayers of the defendant, as they asked the Court to say there was no evidence of fraud by the defendant. The subsequent concealment of fraud practiced being itself a fraud, and the defendant having concealed or failed to disclose it, there was evidence tending to show that the plaintiff was kept in igorance of his cause of action within the very terms of the decision inWear v. Skinner.

The defendant's first and second prayers were equally faulty because they sought to have the Court instruct the jury that the plaintiff did not sue within three years from the time he discovered or could by the use of usual and ordinary diligence have discovered the fraud. That was a question for the jury. It may seem strange that any one could be misled by some of the alleged representations of this agent, yet it is possible that an ignorant man, such as the appellee is represented to be, could be made to believe just what he said Eichelberger told him. He certainly must have believed that he had to make the second payment or he would not have made it, and he swore most positively that he did believe the statements and did not know they were false, until Mr. Bridges told him he had been defrauded. In Barndt v. Frederick, 78 Wis. 1, it was argued that the alleged false representation was too absurd and incredible for any sane man to believe, and hence the plaintiff could not have relied on its truth. The Court said, "It is difficult to draw a line beyond which human credulity cannot go, especially in speculations in mining stocks. If the representations were so extravagant that sensible, cautious people would not have believed them, that is a proper consideration for the jury in determining whether the plaintiff believed and relied upon them; but it does not preclude a finding that the plaintiff did so, nor relieve the defendant from liability for his fraud, if he committed fraud. It is as much an actionable fraud wilfully to deceive a credulous person with an improbable falsehood, as it is to deceive a cautious, sagacious person with a plausible one. The law draws no line between the two falsehoods." In Kendall v. Wilson, 41 Vt. 567, the Court said, "The law will afford relief even to the simple and credulous who have been duped by art and falsehood."

But as we have already intimated, "whether or not the plaintiff's failure to discover his cause of action was due to failure on his part to use due diligence, or to the fact that defendant so concealed the wrong that plaintiff was unable to discover it by the exercise of due diligence, is ordinarily a question of fact for the jury." Faust v. Hosford, 119 Ia. 97 (s.c. 93 N.W. Rep. 58); Rosenthal v. Walker, 111 U.S. 185;Barndt v. Frederick, supra. Under our practice if there be a total absence of evidence to establish such facts in favor of a plaintiff suing after the period fixed by the Statute of Limitations, the Court can so determine, as will be seen by reference to Cummings v. Bannon and Wear v. Skinner,supra, but, although we may think it strange that the appellee did thus remain in ignorance so long of the fact that he was defrauded, if he was, and that he did not make some inquiries about it, we cannot say there was no evidence on the subject to be submitted to the jury, or that the evidence shows he did not use such diligence as the statute requires. If it be true that Swain did not know that Eichelberger had not done anything which he did not have the right to do, and did not know that his other representations were false, his inaction is easily accounted for. If he had supposed he had been defrauded by Eichelberger it is altogether probable that he would have said something about it in his correspondence with Mr. Savage, but the latter did not intimate anything of the kind when he was on the stand.

The fifth prayer of the defendant asks the Court to instruct the jury that there was no evidence that Eichelberger was the agent of the defendant in collecting the second premium. There was perhaps more evidence tending to show his authority to collect the cash than to take the note. He actually remitted to the company its share of the cash, and the general agent sent the premium receipt to Eichelberger with the policy. That receipt shows that the premium was paid in cash, and the note which he had previously taken was not due until the following February, and never came into the hands of the company, beyond Eichelberger. Mr. Savage testified that he never allowed his agents to take a note until the policy was delivered, although he had blank notes in his possession. Eichelberger was undoubtedly clothed with power to receive the proper premium that was to be collected on this policy, and while his principal did not authorize him to collect two premiums for one year, it did give him considerable authority and he did impose on this ignorant man. It was a part of the agent's business to inform an applicant for insurance how much he was to pay for his policy, and how he was to pay it, and it was admittedly within the scope of his employment to collect the first premium. When therefore this agent was vested with such powers as he confessedly had, and during the course of the dealings between the company, through him, and the appellee, he represented to the latter that the company required this payment in cash, the Court could not, as a matter of law, declare that there was no evidence that Eichelberger was the agent of the company in collecting this premium, but it was a question that was proper to be submitted to the jury.

The only other question concerning the defendant's prayers is the one we referred to above which was intended to be raised by the third and fourth — that the evidence did not show fraud on the part of the defendant, but if there was any, it was that of the agent. In Tome v. P.B.R. Co., 39 Md. 36, this Court quoted with approval from Story on Agency (7 ed.), sec. 452, where the author, after saying a principal was not ordinarily liable in criminal proceedings for the acts of his agent, said, "Yet he is liable to third persons in a civil suit for the frauds, deceits, concealments, misrepresentations (italics are ours,) torts, negligence, and other malfeasances, or mis-feasances, and omissions of duty of his agent in the course of his employment, although the principal did not authorize, or justify, or participate in, or indeed know of such misconduct, or even if he forbade the acts or disapproved of them. In all such cases the rule applies respondeat superior; and it is founded upon public policy and convenience; for in no other way could there be any safety to third persons in their dealings either directly with the principal, or indirectly with him through the instrumentality of agents. In every such case the principal holds out his agent as competent and fit to be trusted, and thereby in effect he warrants his fidelity and good conduct in all matters within the scope of the agency." That has been followed inWestern Md. R.R. Co. v. Franklin Bank, 60 Md. 36, and Lamm v. Port Deposit Co., 49 Md. 241, in all of which cases the doctrine was said to be applicable to corporations as well as to natural persons. There are some cases cited in 19 Am. Eng.Ency. of Law, 249, to sustain the statement that the equity rule affecting the Statute of Limitations is confined to cases where the fraudulent concealment was by the defendant, or with his knowledge or consent, and that it does not embrace a case where the concealment or fraud is committed by an agent and the principal has no knowledge of or connection with it, but in the note on that page of the Encyclopedia it is said that where the defendant is a corporation, and can therefore act only through its agents, the rule of the text does not ordinarily apply. It would be a dangerous rule to announce at this day, when almost every conceivable kind of business is carried on by corporations, who must act through agents, and we cannot give our assent to it — especially in view of the prior decisions of this Court cited above. We think the third and fourth prayers were properly rejected.

It only remains to consider the two prayers of the plaintiff, and we are of the opinion that there was error in granting them. We have said, in considering the defendant's fifth prayer that the question whether Eichelberger was the agent of the company in collecting the second premium was for the jury. We have stated some rules which might seem to impose a considerable burden on a principal for acts done by his agent. As those rules were in accordance with our understanding of the law, we of course had to be governed by them, but a principal's liability, under circumstances such as those in this case, is not unlimited and depends upon proof of important facts, some of which we think have been overlooked. Both prayers granted for the plaintiff wholly omit any reference whatever to the question whether Eichelberger was acting within the scope of his employment when he collected the second premium. Take the first, for illustration. It instructs the jury that, if they find that on or about the 2nd day of August, 1897, Eichelberger was theduly authorized agent of the defendant to solicit insurance, that he solicited the plaintiff and made the false statements therein recited, that the plaintiff believing his statements to be true was thereby induced to take out the policy and sign and deliver to the agent the note spoken of, in payment of the first premium, and afterwards in the month of August said agent falsely and fraudulently represented to the plaintiff that another premium was due, that defendant had sent him to collect it and wanted it in cash, when in fact the second premium was not then due, that the plaintiff paid it in ignorance of the fact that it was not due and believing and relying on the agent's statement that it was, and other facts therein stated, then they must findtheir verdict for the plaintiff for said sum of $429, with interest in their discretion. It did not require the jury to determine whether the agent was acting within the scope of his employment in collecting the second premium, but if the jury found he was a soliciting agent for the company and did the things mentioned, including the collection of said premium, the company was liable under the terms of the prayer, whether he had authority to collect it or not. Under the law it is not necessary to show that he had actual authority, an apparent authority in the exercise of his employment was sufficient, Tome's case,supra, but the company would not be liable for such an act of its agent unless it was within the scope of his employment, actual or apparent. The plaintiff testified that the agent told him the premium was to be $429, and after paying it once with his note, it is certainly remarkable that he could be so easily induced to pay it again, a few days afterwards. If the agent had already collected the premium once as the plaintiff says he had, of course it cannot be assumed that he had actual authority to collect it again, and therefore the Court should have explicitly directed the attention of the jury to the question whether he was acting within the scope of his authority. It was an important question under the circumstances of this case and the right to require it was not waived by the defendant in leaving it out of the seventh prayer or in any other way. In Andrews v.Clark, 72 Md. on p. 434, the Court said "Whether the act or acts of the agent in question were within the scope of the recognized powers or duties of such agent, or were of the class of acts or transactions that the agent was allowed to do, or perform in the name of the defendants, in the course of their dealing with customers generally, or with the plaintiff, were questions of fact that were properly submitted to the finding of the Judge, by the prayers of the plaintiff, upon the whole evidence." That case was tried before a Judge, sitting as a jury, and the defense made was, first, that one Palmer was not the agent of the defendants at the time of the act complained of; second, that if the plaintiff was then entitled to treat Palmer as still in their employ the transaction was not within the scope of his authority and therefore not binding on the defendants; and, third, that the plaintiff in conducting the transactions with Palmer was guilty of such negligence and want of ordinary care as to operate as an estoppel and so preclude the right of recovery for loss sustained by the fraud of Palmer. The prayers of the plaintiff did properly submit the question whether the act was within the scope of Palmer's authority, but as they did not submit the estoppel the judgment was reversed. In this case the defendant had the right to have the question whether the collection of a second premium was within the scope of Eichelberger's authority (real or apparent) passed on by the jury and both of the plaintiff's prayers were defective for not submitting it. We have already shown, in passing on some of the defendant's prayers, that there was some evidence of such authority but it was for the jury to pass on, and a fact which was necessary to be found to entitle the plaintiff to recover. We do not think the special exceptions to these prayers were well taken and will not discuss them. For error in granting the plaintiff's two prayers, for the reasons given, the judgment must be reversed.

Judgment reversed and new trial awarded, the costs to abidethe final result.

(Decided March 22d 1905.)