American Cent. Life Ins. Co. v. Rosenstein

• Decision Date: 24 June 1910
• Docket Number: No. 6,530.,6,530.
• Parties: AMERICAN CENT. LIFE INS. CO. v. ROSENSTEIN.
• Court: Indiana Appellate Court

46 Ind.App. 537

92 N.E. 380

AMERICAN CENT. LIFE INS. CO.

v.ROSENSTEIN.

No. 6,530.

Appellate Court of Indiana, Division No. 1.

June 24, 1910.

On rehearing. Affirmed.

For former opinion, see 88 N. E. 97.

MYERS, J.

This action was brought by appellee against appellant June 22, 1906, on a policy of life insurance issued by the appellant, insuring the life of Frank Rosenstein. The complaint was in one paragraph, and its sufficiency is not questioned. Appellant answered in eight paragraphs. A demurrer of want of facts was sustained to each of said paragraphs, except the first, which was a general denial. Appellant then withdrew its general denial, refused to plead further, and thereupon the court rendered judgment in favor of the appellee. From that judgment this appeal was taken. The errors here relied upon are based upon the action of the lower court in sustaining a demurrer to each of the several paragraphs of answer, and that the judgment rendered was contrary to law.

The policy named appellee, the mother of the insured, as the beneficiary. Said policy was issued December 29, 1905, and the insured died January 19, 1906. Each of said paragraphs of answer, except the first, proceeded upon the theory that the insured had procured the appellant to issue to him a policy on his life by misrepresentations and false statements in his application for said policy, and by false answers to the company's medical examiner; that is to say, he falsely stated that he had never made any application to any other life insurance company which application had been declined; that he falsely stated that he had never engaged in the sale of intoxicating liquors; that he falsely stated his use of intoxicating liquors, and that he falsely stated the attendance and treatment by a physician; that the insured by said application agreed “that each and all of the following statements, answers and agreements, as well as all statements and answers made to the company's medical examiner, shall be and are warranties that the facts and things therein contained are true.” The policy recited that it was issued “in consideration of the agreements and warranties in the written and printed application for this policy of insurance, which is hereby made a part of this contract.”

In each the second, third, and fourth paragraphs of the answer, the pleader sought to have the contract rescinded on the ground of alleged breaches of warranty, without any showing of a return, or offer to return, the premium paid by the insured upon its discovery of the alleged breaches. The failure to return, or offer to return, the money received by it on account of the contract was fatal to each of the paragraphs as against a demurrer for want of facts. United States, etc., Ins. Co. v. Clark, 41 Ind. App. 345, 83 N. E. 760, and cited cases; Burgett v. Teal, 91 Ind. 260;Worley v. Moore, 97 Ind. 15;Sandage v. Studabaker Bros. Mfg. Co., 142 Ind. 148, 41 N. E. 380, 34 L. R. A. 363, 51 Am. St. Rep. 165.

Upon examination of the record, we find that the first four and no other paragraphs of answer were filed September 15, 1906, and the demurrer to all except the first was sustained on October 13, 1906. Then follows an entry of date March 15, 1907, showing the filing of the amended fifth, sixth, seventh, and eighth paragraphs of answer. The transcript does not show the filing of the paragraphs which the ones now being considered are said to amend, nor does it show anything with reference to the facts set forth in such original paragraphs, if such were filed. Each of these so-called amended paragraphs proceed upon the theory that the policy in question was issued under such circumstances as rendered it voidable at the election of the appellant, and that the appellant elected to rescind the contract and offered to return the premium received by it on account thereof. The averments of each answer respecting appellant's offer to return said premium are as follows: “Defendant says that, on learning that said answer (referring to a certain answer in the application) was false and untrue, the defendant took steps to return the premium received on account of said policy, and made inquiry at the office of the clerk of the circuit court of Marion county to ascertain if letters of administration had issued on the estate of said Frank Rosenstein, or if said estate had been in said court, and that defendant was informed by said clerk that no proceedings relative to said estate had been taken in said court.” It was also averred that the insured left surviving him his wife, Ida Rosenstein, who on the last day of October, 1906, by proper proceedings in the Marion circuit court, had set over to her by order of that court the entire estate of the insured, in value less than $500; “that upon learning of the fact that the Marion circuit court had set over to said Ida Rosenstein, widow of Frank Rosenstein, the entire estate of said Frank Rosenstein, it on or about the 1st of November, 1906, tendered to said Ida Rosenstein the sum of $68.25, being the premium paid by said Frank Rosenstein to the defendant for and on account of said policy of insurance herein sued upon;” that she refused said tender, and refused to accept said sum “for and on account of said policy, as aforesaid, and the defendant now brings in court the said sum of $68.25, and by leave of court deposits the sum with the clerk of this court for the benefit of said Ida Rosenstein, widow, or for the benefit of such other person or persons as the court may determine is or are entitled thereto.” In March, 1906, appellant learned of the untruthfulness of certain answers in said application.

In this state the rule is well settled by a long line of decisions, beginning with the case of Calhoun v. Davis, 2 Ind. 532, that, before a party will be allowed to rescind his contract, he must restore or offer to restore the other party to his original situation. But this rule must be considered in connection with another equally as well supported, to the effect that, before a party can have a rescission of a contract for fraud or for breach of warranty, he must not only return or offer to return whatever of value he had received by the contract, but he must elect to rescind and place the other party in statu quo within a reasonable time, or “with reasonable promptitude” after knowledge of the facts relied on for a rescission. A failure to pursue this course affirms the contract. Horner v. Lowe, 159 Ind. 406, 64 N. E. 218;Modern Woodmen v. Vincent, 40 Ind. App. 711, 80 N. E. 427, 82 N. E. 475; United States, etc., Ins. v. Clark, supra; Fisher v. Wilson, 18 Ind. 133;Watson, etc., Mining Co. v. Casteel, 68 Ind. 476;Schreiber v. German-American Ins. Co., 43 Minn. 367, 45 N. W. 708;Insurance Co. v. Gray, 44 Kan. 731, 25 Pac. 197. In such cases a reasonable time is ordinarily a question of fact, but where the facts have been ascertained, or where they are undisputed or admitted, it becomes a question of law. American, etc., Glass Company v. Indiana, etc., Company, 37 Ind. App. 439, 76 N. E. 1006;Pickel v. Phenix Ins. Co., 119 Ind. 291, 300, 21 N. E. 898;Employers', etc., Corp. v. Light, etc., Co., 28 Ind. App. 437, 63 N. E. 54; Hill v. Hobart, 16 Me. 164; Wingate v. King, 23 Me. 35.

We are not unmindful of that line of cases holding that it is unnecessary for the insurer to refund the premium in order to avail itself of a stipulation in the contract, providing that it shall be void in case the applicant shall misrepresent a fact material to the risk, or in case of misrepresentations in the application which are made warranties. In the contract before us there is no such stipulation. Had it contained such a stipulation, it would not be void under the settled law of this state, but voidable at the election of the appellant, for the obvious reason that the insurer alone, in case of a warranty may waive or take advantage of it. Masonic, etc., Ass'n v. Beck, 77 Ind. 203, 40 Am. Rep. 295;Excelsior, etc., Ass'n v. Riddle, 91 Ind. 84;Glens Falls Ins. Co. v. Michael, 167 Ind. 659, 74 N. E. 964, 79 N. E. 905, 8 L. R. A. (N. S.) 708; United States Ins. Co. v. Clark, supra; Ætna Life Ins. Co. v. Bockting, 39 Ind. App. 586, 79 N. E. 524;Selby v. Mutual Life Ins. Co. (C. C.) 67 Fed. 490. The case last cited was an action on three life insurance policies, to which the defendant answered in avoidance untrue statements of the insured in his written application upon which the policies were issued. In that case it was said: “A complete defense on the ground of a breach of the warranty could be made only by alleging that the defendant had claimed and exercised its right within a reasonable time, and that there had been an actual rescission of the contract, or, at least, the answer should disaffirm the contract, and plead a tender of the premiums. 3 Am. & Eng. Enc. Law, 929, 932; Pars. Cont. (7th Ed.) 677, 681.” Glens Falls Ins. Co. v. Michael, supra, was an action brought upon a fire policy, wherein it was provided: “This entire policy shall be void if the insured has concealed, or misrepresented in writing or otherwise, any material fact or circumstance concerning this insurance or the subject thereof; or if the interest of the insured in the property be not truly stated herein. *** This entire policy, *** shall be void *** if the interest of the insured be other than unconditional and sole ownership.” It was shown that the interest of the insured in the property covered by the policy was that of life tenants only, that the policy was issued without any oral or written statement, and that they had no knowledge of the condition in said policy with reference to title. In that case it was held that the word “void” was used in the policy in the sense of voidable.

The transcript before us shows that the insured died January 19, 1906. In March, 1906, appellant knew the facts upon which it might base a rescission of the contract. It then inquired of the clerk of...