Wholey v. Columbian National Life Insurance

This is an action of the case in assumpsit on a contract of insurance on the life of Timothy V. Wholey, late of the city of Providence, deceased. The action is brought by his widow, Elizabeth V. Wholey, as sole beneficiary under said contract. The case was tried before a jury in the superior court and, at the conclusion of all the evidence, the trial justice directed a verdict for the defendant. The case is before us on exceptions of the plaintiff to this action of the court and to numerous rulings in the course of the trial.

The case was commenced by writ dated December 3, 1937. The plaintiff's declaration contains two special counts and the common counts, all for the same cause of action, as shown by her bill of particulars. The allegations of the special counts are, in substance, as follows: January 15, 1932, at Boston, Massachusetts, Timothy V. Wholey made with the defendant a contract of insurance on his life. The consideration for the contract was the payment by him of twenty-eight annual payments of $1803.03 each, the first such payment to be made on June 2, 1932, and the payment by him, in addition, of a proportionate part of that annual premium for the period from December 8, 1931 to June 2, 1932. On the basis of such premium, the defendant further agreed to insure his life from the 8th day of December 1931 to the 2d day of June 1932. Elizabeth V. Wholey, the wife of the insured and the plaintiff here, was named as sole beneficiary under the contract. At her election she was to receive $250 per month for one hundred and twenty months from the death of the insured, or she was to receive upon his death $25,400, which sum represented the agreed commuted value of such insurance. These counts further allege that the insured, relying on these promises, paid the company a large sum of money; that he died on May 3, 1932, while the contract was in full force and effect; that on May 13, 1937, the plaintiff requested the company to forward to her the policy evidencing said contract, but that the company refused to do so and denied the existence of any such contract.

The defendant filed a plea of the general issue and also seven additional pleas, which, in one form or another, set up the defense that the rights of the plaintiff in respect to the contract of insurance declared upon in the instant case were fully determined in an equity suit brought by the defendant against her, individually and as executrix of the will of Timothy V. Wholey; that the equity suit and an action at law, which the plaintiff brought against the defendant while the equity suit was pending, were based on the same cause of action that is sued upon in the case at bar; that, in compliance with a final decree in the equity suit, the company paid to the plaintiff all sums due her in connection with any insurance or contract of insurance on the life of Timothy V. Wholey; that she received and accepted the same, thereby terminating all obligations of the company on account of any such insurance; that she discontinued her action at law by order of the court in the equity suit; and that neither she nor any one in her behalf made any request for a policy evidencing such insurance as she now sues for until after the equity suit was finally determined.

Plaintiff's answer by way of replication to the company's special pleas was, in effect, a specific denial that the cause of action in the equity suit was the same as the one in the instant case; and further, that the action at law mentioned in certain pleas was brought by the plaintiff as trustee for the Industrial Trust Company, which was the absolute assignee of the insurance policy involved in the equity suit.

At the trial of the instant case, counsel for the plaintiff admitted that the only application made by Timothy V. Wholey for life insurance from the defendant, after his application for a life insurance policy that had lapsed before January 15, 1932 for nonpayment of the premium specified in that policy, was an application for the reinstatement of that policy. Whatever testimony the plaintiff and her witnesses gave or offered to give in support of the contract for insurance relied upon by her in this case was with reference to an application by him for a reinstatement of such lapsed policy and other documents in connection therewith.

Twenty-two exhibits were offered by her to prove her present claim, but all of them, with the exception of plaintiff's exhibit 1, which is a letter dated May 13, 1937 from her attorney to the company demanding a new policy, were excluded by the trial justice. The twenty-one exhibits that were excluded are numbered 2 to 22 "for identification." Excepting exhibits 7, 21 and 22, all such exhibits had been introduced in evidence in the equity suit. Exhibit 7 is a copy of the lapsed policy and attached documents, the originals of which were introduced in evidence in the equity suit; and exhibits 21 and 22 are unpaid premium notes which matured after the death of the insured and were returned to the plaintiff by the company. No other evidence was given or offered by the plaintiff in the instant case tending to show the existence of any contract for insurance except in connection with the lapsed policy.

The situation presented by the record before us requires a review of the equity suit and the previous action at law which, according to the defendant, are determinative of the instant case. The equity suit was twice before this court. ColumbianNational Life Ins. Co. v. Industrial Trust Co., 53 R.I. 334,Same v. Same, 57 R.I. 325. The former action at law is docketed as No. 89402 in the files of the superior court and never reached this court. The subpoenas in the equity suit, under date of July 22, 1932, were directed to Elizabeth V. Wholey, individually and as executrix of the will of Timothy V. Wholey, and to the Industrial Trust Company. The former action at law was brought against the insurance company by the present plaintiff, as trustee for the benefit of the Industrial Trust Company, by writ dated August 3, 1932.

In the equity suit, the insurance company prayed for the cancellation of a contract for the reinstatement of an existing life insurance policy which it had issued on the life of Timothy V. Wholey. The ground for such relief was material false representations by the insured as to the condition of his health at the time of the making of that contract. In that suit, the respondent Elizabeth V. Wholey demurred to the bill of complaint on the ground that Wholey's illness and his failure to disclose it were immaterial and constituted no defense to a recovery under the policy. The other respondent, the Industrial Trust Company, to which the policy in question had been assigned, as security for a debt, by the insured and by the sole beneficiary, Elizabeth V. Wholey, moved to dismiss the bill of complaint on the ground that the issue presented by the bill might be raised in the action at law which we have above mentioned. On the complainant's appeal from a decree sustaining the demurrer and granting the motion to dismiss, this court reversed the decree and held that: "The issue (fraud) is one over which equity and law have concurrent jurisdiction. The rule is general that a court of equity which has first properly taken jurisdiction of a cause cannot be ousted of its jurisdiction by a subsequent proceeding at law for the reason that the latter tribunal also has jurisdiction." Columbian National Life Ins. Co. v. IndustrialTrust Co., 53 R.I. 334, 342. This opinion was filed June 14, 1933.

While the equity suit was pending for decision on the points involved in the opinion just cited, the insurance company, as defendant in the then pending action at law, filed in that action a plea of the general issue and a number of special pleas, which set up the same facts in defense of that action as it had alleged as grounds for cancellation of the contract for reinstatement of the policy in its bill of complaint. It also filed a plea of tender and, on December 8, 1932, it deposited the sum of $942.17 with the clerk of the superior court, which sum, according to the company, represented all moneys legally due to the respondents upon cancellation of the policy. Following the opinion of this court of June 14, 1933 in the equity suit, a justice of the superior court entered an order staying the prosecution of the action at law until the equity suit was finally determined.

The equity suit then became the source of protracted litigation. In so far as the pleadings are concerned, we need only refer to the answer of the respondent Elizabeth V. Wholey. This answer admitted some of the allegations in the bill of complaint; it denied some others; and it left the complainant to its proof as to such allegations that were neither admitted nor denied. In no manner did she set forth in her answer that the contract which Timothy V. Wholey entered into with the company was a contract for new insurance rather than a contract for the reinstatement of the policy in question. Except for a statement of the basic facts in the equity suit, brevity compels us to refer to the opinion of this court in Columbian National LifeIns. Co. v. Industrial Trust Co., 57 R.I. 325, for a full presentation of the facts in that suit.

The policy involved in the equity suit was issued to the insured on June 2, 1925. It provided for the payment of an annual premium of $1118.25 for thirty-five years. Under this policy, the beneficiary therein named was to receive $250 a month for one hundred twenty months, or the lump sum of $25,400, which was the commuted value of such insurance. The policy lapsed on October 24, 1931 for the nonpayment of premium notes. The reinstatement clause of the policy contained the provision that: "Should this policy lapse, it may be reinstated at any time upon evidence of insurability satisfactory to the Company and payment of all past due premiums with interest at six per cent. per annum . . . ."

On November 12, 1931, the insured filled out and executed a printed form of application for reinstatement of the lapsed policy. In connection with this application the company had the insured examined by a physician, who reported that he then was overweight. The company further ascertained that while the policy was in force the insured, by dieting, had reduced an excessive weight and an elevated blood pressure. In view of these facts the company considered the insured an impaired risk and refused to reinstate the policy in accordance with the annual premium therein stated. However, on December 11, 1931, the company offered to reinstate the policy for its unexpired term of twenty-eight years "subject to Table D rating", which meant an annual premium of $1803.03 from June 2, 1932, provided that the insured paid for such reinstatement the sum of $1077.74 as accrued premium at the new rate from December 8, 1931 to June 2, 1932.

On or about January 5, 1932, the insured notified the company that he would pay the required sum of $1077.74 for a reinstatement of the policy at the new rate on condition that he could pay such sum in six monthly payments. The company accepted these terms and, on receipt at its home office in the city of Boston of a small amount in cash and of a series of notes signed by the insured, it sent him a rider, dated January 15, 1932, to be attached to the policy. This rider said: "In consideration of the reinstatement of this policy it is hereby provided and agreed that an extra annual premium shall be added to this policy based on Table D rating to become effective December 8, 1931." The rider also set out the amount of "the extra premium due from December 8, 1931 to June 2, 1932", the next premium date under the policy. In addition to this rider the company also sent to the insured a premium receipt and the old unpaid premium notes.

The insured died May 3, 1932, from angina pectoris and myocarditis. In view of certain representations that the insured had made in his application for reinstatement of the policy, the company soon after his death made an investigation as to the truth of those representations and then instituted proceedings to cancel the policy. In this equity suit no claim was made by Elizabeth V. Wholey that the transaction was a contract for new insurance, separate and distinct from such policy. Her main contentions were as follows: One, that the insured did not believe that he had had angina pectoris, in spite of what happened to him prior to his application for reinstatement of the policy; and that therefore his failure to disclose it to the company was no ground for cancelling the reinstatement. Two, that the contract of reinstatement was made to take effect as of December 8, 1931, and that the applicant was under no duty to disclose anything with regard to his health that occurred after that date. Three, that before the policy was reinstated the insured had the right to elect to take paid-up extended insurance, and that, if the company was to have a right to rescind the contract of reinstatement, it was bound to give the respondent Elizabeth V. Wholey the right to such election. And four, that the company was barred by laches from maintaining its suit for cancellation, because it did not bring it before the death of the insured. These contentions were found to be without merit and the decree of the superior court ordering cancellation of the policy was affirmed by this court in its opinion of February 6, 1937. Columbian National Life Ins. Co. v.Industrial Trust Co., 57 R.I. 325.

In compliance with the final decree in the equity suit, the then pending action at law, prosecution of which had been stayed until a final determination of such suit, was discontinued on March 15, 1937. A notation by the clerk of the superior court on page 6 of the company's pleas in said law action shows that, on October 7, 1937, the sum of $942.17 was withdrawn from the registry of that court and that the receipt therefor was attached to the final decree in the equity suit. Appended to said decree there is an un-dated receipt, signed by the attorney for Elizabeth V. Wholey, acknowledging payment to him of the $942.17. This sum was thus withdrawn in compliance with the above-mentioned decree.

There is merit in the defendant's contention that the plaintiff, having failed to set up her present claim as a defense in her answer in the equity suit, is now precluded from asserting such a claim. A litigant is not entitled to present a case piecemeal by taking clearly inconsistent positions. The facts and inferences upon which the plaintiff relies in the instant case were known to her when she filed her answer to the bill in equity. If, as she now claims, the transaction then in question was a contract for new insurance and not a new contract for the reinstatement of a lapsed policy, as she firmly contended in the equity suit, she could well have urged such claim as a defense in her answer in that suit. Having failed to allege such claim as a defense then, it must be deemed to be waived. A party defeated in one action cannot maintain a second action based on a ground which could properly have been, but was not, set forth and relied upon in the former action. See Di Iorio v. Considine Co.,Inc., 54 R.I. 361; Fraser v. Wright, 54 R.I. 422; Burns v.Burns, 53 R.I. 324. However, in view of the protracted litigation between these parties, we deem it advisable to consider the case more fully than a strict application of that rule would warrant.

We have carefully read the transcript and all of plaintiff's exhibits herein previously described. Assuming, without deciding, that such exhibits were erroneously excluded by the trial justice, the record before us, including the contents of those exhibits, clearly shows that the fundamental facts upon which the plaintiff relies in the instant case are the same as those in the equity suit. Having once stated them in this opinion, it would be idle to repeat them here.

The plaintiff's present contention, which is quite contrary to the one urged by her in the equity suit, is that upon the company's refusal to reinstate the policy "the parties continued further negotiations and finally entered into a new contract of insurance in January 1932 at Boston, Massachusetts and agreed that such insurance should date back to December 8, 1931 the annual premium rate of $1803.03 being payable in June of each year and a proportional part of such annual rate to be paid from December 8, 1931 to June 1932. It was also agreed that such annual premium could be paid in monthly installments." She therefore concludes that "a contract of insurance on which the premium was $1803.03 was in law and fact an entirely new and different contract from a contract on which the premium was $1118.25," namely, the contract evidenced by the lapsed policy.

It is fundamental that a contract should be so construed as to give a lawful and effective meaning to the intention of the parties as gathered from the attending circumstances. Under this rule the determinative question in the instant case is whether the object of the contract, which Timothy V. Wholey and not the plaintiff here made with the company, was to reinstate the lapsed policy or to buy entirely new insurance. It is his intention and not hers that controls.

The plaintiff now strongly relies upon two letters from the company's Providence agent to its assistant actuary in Boston, and one from the latter to the former. These letters, which are plaintiff's exhibits 2, 3 and 4 for identification, are dated December 21 and 23, 1931, and January 5, 1932. All of them clearly refer to policy "#143356", which is the lapsed policy, and, as already stated, were in evidence in the equity suit.

In exhibit 2 the company's Providence agent, after acknowledging receipt of a letter from the assistant actuary "outlining figures for the reinstatement of the above policy", asks for further details concerning those figures and also asks whether the increased premium demanded by the company for such reinstatement "is as of the attained age of the insured or is it at the age the policy was written at?" (italics ours)

In exhibit 3 the assistant actuary gives the requested information and says that "the annual extra premium is taken at the attained age of the insured". In exhibit 4 the Providence agent acknowledges receipt of the last-mentioned letter "regarding the reinstatement of the above policy", and notifies the assistant actuary that the insured had agreed to pay the premium then due at the increased rate "providing that it can be paid in six monthly payments; the first payment to be due January 15th". (italics ours) Basing her argument mainly upon these letters, the plaintiff argues that "without taking up individually all the exhibits for identification which were refused admittance as evidence . . . there could be no clearer proof of the creation and existence of the contract sued upon than these three letters show".

The weakness of this argument is twofold. First, it misconceives the true import of those letters, which were written for the purpose of reinstating the lapsed policy and not with the object of writing new insurance. Secondly, it treats those letters as independent documents, when as a matter of fact they are necessary but minor links in a chain of circumstances, which must be considered as a whole in order to effect the object that the parties actually intended to accomplish by the contract.

The conclusion that the plaintiff draws in such general terms from the above-mentioned letters fails to take into consideration that, on November 12, 1931, Timothy V. Wholey signed a printed application furnished by the company applying "for the reinstatement or placing in force of the policy or policies listed below, . . . Policy No. 143356 — Amount of Insurance 24,500 . . ."; that following such application the company refused to reinstate that policy in accordance with the premium therein fixed because of his then condition of health; that further negotiations were had with such object in view until December 11, 1931, when the company offered to reinstate the policy at an increased rate; and that still further negotiations, including the letters upon which the plaintiff now so strongly relies, culminated in an agreement whereby Wholey agreed to accept a reinstatement of the lapsed policy at the increased rate, subject to certain conditions as to the payment of the then due premium at that rate, which he requested and the company accepted.

The agreement, as consummated, is evidenced by the rider of January 15, 1932, which we described earlier in this opinion. A photostatic copy of this rider and such a copy of Wholey's application of November 12, 1931 for reinstatement of policy #143356 are attached to the copy of that policy, which the plaintiff offered in evidence as exhibit 7 for identification.

It is urged by the plaintiff that when the company refused to reinstate the policy in accordance with its terms, Wholey was free to buy new insurance in the open market at his attained age, and that instead of so doing he chose to secure such insurance at that rate with the defendant company. This is a fallacious argument. The plain answer to it is that there is no evidence even remotely tending to show that Wholey ever sought to secure any new insurance from this or any other company; and, further, that such a construction of the contract under consideration would disregard his entire course of conduct in the premises. Since he decided for himself what he deemed best for his own interests in the circumstances confronting him in 1931, and as his decision is evidenced by subsequent unequivocal conduct on his part, there is now no room for others to conjecture or speculate as to what he might otherwise have done.

Under our well-established rule, the evidence and the reasonable inferences therefrom are to be construed most favorably to the plaintiff on defendant's motion for a directed verdict. Applying this rule in the instant case, we are clearly of the opinion that, as a matter of fact, the object of the contract under consideration was the reinstatement of the lapsed policy, with premiums at an increased rate, and not a contract for new insurance, as the plaintiff alleges in this case. This same view of the contract was expressed by this court in its two opinions in the equity suit hereinbefore discussed.

The plaintiff, however, contends that, under all circumstances and as a matter of law, a contract for the reinstatement of a lapsed policy at a premium rate greater than the one fixed in such policy is not a contract for the reinstatement of that particular policy but a contract for new insurance. With the exception of a statement which she quotes in her brief from Sussex v. Aetna Life Assurance Co., 33 D.L.R. 549, without reference to its context or the facts in that case, the plaintiff has cited no authority in support of the all-inclusive rule of law for which she contends, and we have found none.

The Sussex case, which was decided in 1917 while the first World War was in progress, is clearly distinguishable in its facts from the instant case. There the insurer arbitrarily refused to reinstate a lapsed policy, except on condition that should the insured enter any military or naval service outside of the Dominion of Canada, he would agree to pay an extra annual premium of $50 per thousand of insurance, notwithstanding the express provision in the policy that it contained no restrictions regarding change of occupation, residence, travel or service in the militia or army or navy in time of war or in time of peace.

In this situation, we believe that the court was fully justified in rejecting defendant's contention by saying that what would be done under the company's offer "would be to issue an entirely new policy insuring the respondent at a different and higher rate." It is a palpable distortion of the court's language to say that it was then stating a general rule of law which was applicable in all cases and under all circumstances involving the reinstatement of a lapsed policy.

When, in the instant case, the company refused to reinstate the lapsed policy in accordance with its terms, Wholey, a business man of experience, might well have sought the assistance of the law, as did the insured in the Sussex case, if he believed that the company's refusal was improper or arbitrary. But instead of invoking such aid, he saw fit to attain his main object, namely, the reinstatement of the lapsed policy, even though at an increased rate of premiums, by negotiations which led to the contract in question. There is nothing unlawful in such a contract. He having knowingly entered into a contract which, if validly obtained by him, would have accomplished his main purpose, it is not now within the power of the beneficiary to have that contract treated as a radically different one.

Upon a careful examination of all the facts and circumstances disclosed by the record before us, we are of the opinion that, even with the evidence offered by the plaintiff and excluded by the trial justice, there was no competent evidence to support a contract for new insurance, as set forth in plaintiff's declaration. In the circumstances, the direction of a verdict for the defendant was without error.

All of the plaintiff's exceptions are overruled, and the case is remitted to the superior court for the entry of judgment on the verdict as directed.

FLYNN, C.J., dissents.