Babb v. Paul Revere Life Ins. Co., Worcester, Mass.

• Decision Date: 22 June 1953
• Docket Number: No. 16755,16755
• Citation: 224 S.C. 1,77 S.E.2d 267
• Parties: BABB v. PAUL REVERE LIFE INS. CO., WORCESTER, MASSACHUSETTS et al.
• Court: South Carolina Supreme Court

Page 267

77 S.E.2d 267

224 S.C. 1

BABB v. PAUL REVERE LIFE INS. CO., WORCESTER, MASSACHUSETTS et al.

No. 16755.

Supreme Court of South Carolina.

June 22, 1953.

T. Sam Means, Jr., Spartanburg, for appellants.

E. W. Johnson, Spartanburg, for respondent.

STUKES, Justice.

This action was commenced in November 1951 in the Court of Common Pleas for Spartanburg County, whence it has come to us on appeal by the defendants. It was first removed to the United States Court by the non-resident defendant Insurance Company but was remanded to the State Court by District Judge Wyche in a lengthy order which is reported in 102 F.Supp. 247. Further reference will be later made to this order which plaintiff and defendants expressly agree is binding upon them and is the 'law of the case,' quoting from one of the exceptions.

Plaintiff brought the action individually and as administratrix of her husband's estate. It was alleged in the complaint that the company on May 23, 1947, issued its 'Income Protector Policy', called 'noncancellable,' to Arthur C. Babb, now deceased, who was plaintiff's husband and intestate. The policy provided monthly payments for disability from accident or sickness, under specified conditions and limitations, hospital and medical benefits. Afterward and when the policy was in force the insured became mentally ill, was a patient in a convalescent home and went regularly to a hospital in Augusta, Georgia, for electric shock treatments. By all of the foregoing the insured was entitled to payments under the policy and filed claims therefor on forms furnished by the company. In May 1948 the company, through the individual defendants who were its agents, paid to the insured about $638 and induced him to surrender the policy upon the representation that the insured had falsely stated in the application for the insurance that he had not had arthritis, whereas he had, which would have prevented the issuance of the policy, whereby it was void for the false representation and would have to be surrendered. In fact, the insured had made no misstatement relating to arthritis; the defendants knew, or should have known, that the insured was at that time mentally ill and unable to understand what he did, etc. In a designated second cause of action it was further alleged that in addition to the sums due the insured, now his estate, the policy provided for payment to the plaintiff, who was named beneficiary, the sum of $7,500 in the event of the accidental death of the insured. There follows an itemization of the alleged payments which should have been made to the insured for his disability, medical and hospital bills, aggregating $4,006, upon which the payment of about $638 had been made, and the balance is due and owing unto his estate. It was further alleged that the insured was accidentally killed on March 7, 1951, and proof of death submitted to the company, which entitles plaintiff to the payment of the $7,500 death benefit. Prayer of the complaint was, in substance, for judgment that the surrender of the policy was void, that an accounting be made by the defendants and for judgment on the second cause of action for the balance of the alleged accrued disability, etc., benefits, and the further sum of $7,500 accidental death benefit, and for 'other just relief.'

The answer admitted the issuance of the policy of the terms alleged in the complaint and alleged breach of warranty in the application that the insured had not suffered from rheumatism or arthritis, which in fact he had; the representation was falsely and knowingly made with intent to deceive the company into issuance of the policy, upon which it relied; that when it learned thereof it elected to cancel and rescind the policy and it paid $638 to the insured for the surrender and cancellation of the policy about April 11, 1948, whereupon he executed and delivered a release and discharge of the company from all liability under the policy, at which transaction the plaintiff was present. Further defense was interposed under an alleged condition of the policy against liability for injury by suicide or suicidal attempt, which was alleged to have been the cause of the insured's death. No premiums were paid or tendered after surrender and cancellation of the policy, which was about three years prior to the death of the insured. All liability was denied.

It was concluded in the order of Judge Wyche, by which the litigants agree that they are bound, that, despite the statement of two causes of action, the complaint really alleges one joint cause of action against all of the defendants for fraud and deceit, in which all participated and for which all are responsible. It is not an action for breach of the insurance contract, which it is alleged was surrendered and cancelled. It was held in effect that the action is in tort.

After remand to the State Court the defendants moved to require that the plaintiff elect the cause of action upon which she would proceed, upon the ground that the complaint states the following causes of action, if any:

(a) An action for breach of contract;

(b) An action in contract for the reinstatement of an alleged contract;

(c) An action in tort for fraud and conspiracy.

After consideration the court ruled that the motion should be granted and the plaintiff be required to elect. In compliance, plaintiff's counsel announced as follows: 'I will proceed under the theory announced in Shuler v. Equitable Life Assurance Society, 184 S.C. 485, 193 S.E. 46, which holds that an action will lie for damages by the beneficiary for the wrongful repudiation of an insurance contract, the cause of action residing in the beneficiary where he has a vested interest under the policy. * * * We will proceed under that which says she has an action for damages for wrongful repudiation of the contract, bearing in mind, Your Honor, that under this policy contract which is not yet in evidence, the insured had the right to change the beneficiary at his will and the beneficiary under the policy had no vested interest in it prior to the death of the insured.'

The following colloquy between court and counsel ensued:

'Mr. Means: If Your Honor please, I understand Mr. Johnson says he is suing for damages. Is that in tort?

'The Court: Mr. Johnson, do you proceed on breach of contract or tort?

'Mr. Johnson: Tort, Your Honor.

'The Court: You elect then to choose (c) of the motion, an action in tort, for fraud and conspiracy.

'Mr. Johnson: I think, as I stated yesterday, that actually there are two. What I call No. 2 is an equitable action to revive this contract. He calls it an action on contract to revive the contract, which is a misnomer. It is an action in equity to revive or revitalize this policy. I agree with his statement that those actions have been jumbled and he should have moved earlier to require me to separately state. I think the two actions are consistent. The action in equity, too, which he calls, miscalled number 2. On his motion he says (b), an action in contract for the reinstatement of an alleged contract. There is no such animal as that. I think he meant to say equitable action for reinstatement of alleged contract, but I think it is one in tort and (b). If I have got to elect between those I would like Your Honor to tell me. I think there are two causes of action in there.

'The Court: If you have to elect between (b) and (c)? Yes, sir, I ruled you do have to elect.

'Mr. Johnson: All right. I proceed in (c).

'The Court: Mr. Means, he says he proceeds under the theory of tort.

'Mr. Means: Your Honor, then we will have to argue the motion for demurrer filed in this case.'

The demurrer was upon the ground that the complaint does not state a cause of action because it seeks damages for alleged fraud and deceit practiced upon the insured and any right of action therefor was personal to him and did not survive upon his death.

Order was thereafter made overruling the demurrer. The former proceedings were recited and it was said that the plaintiff upon being required to elect, had elected to proceed, quoting from the order, 'in tort for damages for the repudiation of the contract.' Ex parte Boddie, 200 S.C. 379, 21 S.E.2d 4, was cited for the holding that plaintiff's interest in the policy, because the insured had the right to change the beneficiary became vested, there having been no change, upon the death of the insured and, quoting again, 'if there was a fraudulent repudiation of the noncancellable contract by the defendant, the beneficiary could not bring an action thereon, since she had a mere expectancy, until after the death of the insured.' Shuler v. Equitable Life Assur. Soc. of the United States, supra and infra, 184 S.C. 485, 193 S.E. 46, was cited in contrast. After referring with approval to the order of Judge Wyche, the court cited Dyson v. Commonwealth Ins. Co., 176 S.C. 411, 180 S.E. 475, 476, for the observation that the action might well be construed to be for, quoting from the Dyson case, 'fraudulent breach of a contract, and that a fraudulent breach of contract is a tort.' Challenge of the latter is the gist of the first three of defendant's four exceptions but, in view of the turn which the case has taken upon argument in this court, question thereabout is now immaterial in the consideration of the appeal and will not be passed upon.

The case is thus simplified by respondent's position and argument on appeal. The following quotations are from her brief:

'The plaintiff in the present case makes no contention that the contract issued to her husband was in effect at the time of his death. Her contention is that because of the false and fraudulent acts of the defendants in securing the contract from her husband she...