Cotton States Life Ins. Co. v. Cunningham

• Decision Date: 18 January 1926
• Docket Number: 25373
• Citation: 141 Miss. 474,106 So. 766
• Court: Mississippi Supreme Court
• Parties: COTTON STATES LIFE INS. CO. v. CUNNINGHAM. [*]

106 So. 766

141 Miss. 474

COTTON STATES LIFE INS. CO. v. CUNNINGHAM. ^[*]

No. 25373

Supreme Court of Mississippi

January 18, 1926

Division A

CANCELLATION OF INSTRUMENTS. In absence of special circumstances, no cancellation after insured's death for fraud; this being available as defense to action on policy.

Suit will not lie to cancel life policy after insured's death for fraud in obtaining it, there being no incontestability clause, requiring speedy action, nor other special circumstances; the fraud being available as defense to action on policy.

HON. T P. GUYTON, Chancellor.

APPEAL from chancery court of Holmes county, HON. T. P. GUYTON Chancellor.

Suit by the Cotton States Life Insurance Company against Mrs. R. K Cunningham. From an adverse decree, complainant appeals. Affirmed.

Affirmed.

G. H. McMorrough and Hillman Taylor, for appellant.

An examination of the pleadings and exhibits show that this suit was filed on the theory that a fraud had been perpetrated upon the insurer, that it acted as soon as it ascertained this fact and that it had a right to go in equity court and cancel and avoid said contracts or policies of insurance, because of the fraudulent statements as to material matters by the insured in getting or procuring said insurance policies or contracts.

Our contention is that there was a fraud perpetrated upon the insurance company by the insured at the time he executed and delivered the application (including his answers to the medical examiner), which application was copied into the said policy of insurance and became an integral part thereof and upon which the policies were issued; that the insurer, being misled by the fraud and imposition, is entitled to have the said alleged contracts or policies of insurance cancelled and avoided in a court of equity. 1 Pom. Equity (2 Ed.), sec. 188; Meek v. Spacher (Va), 12 S.E. 397; 2 Pom. Equity (3 Ed.), sec. 918.

It is a well settled question of equitable jurisprudence that if the remedy at law be doubtful, a court of equity will not decline cognizance of the suit. When equity can give relief, plaintiff ought not to be compelled to speculate upon the chance of his obtaining relief at law. Raymon v. Taac. Co. (U. S.), 52 L.Ed. 88, 89; Davis v. Walker, U. S. 39 L.Ed. 578; U. P. R. R. Co. v. Weld Co. (U. S.), 62 L.Ed. 1110. Fraud vitiates everything. See Foxworth v. Bullock, 44 Miss. 457.

If representations were material, and were made either with or without an actual fraudulent intent, and really did mislead the purchaser, and induce him to make the bargain, relying upon him, the contract cannot stand. Oswald v. McGehee, 28 Miss. 351. See, also Davis v. Heard, 44 Miss. 50; Rimer v. Dugan, 39 Miss. 477.

In the following cases instruments procured by fraud were ordered cancelled by courts of equity, even when the fraud might have been successfully pleaded in defense to actions at law which had not been begun when the equitable petition was filed. These decisions are based generally upon the ground that equity has concurrent jurisdiction in such cases with courts of law, and that the propriety of granting relief rests in the sound discretion of the chancellor. See 8 Anno. Cas., page 551 and cases cited in notes; Waddell v. Lewis, 62 Ala. 347; Com. L. Mut. Ins. Co. v. McLoon, 14 Allen (Mass.) 351; John Hancock Mut. L. Ins. Co. v. Dick (Mich.), 43 L. R. A. 566; McTavish v. Kent, 80 N.W. 1086; Fid. Mut-Life Ins. Co. v. Blain, 107 N.W. 877; Whittingham v. Thornburg (Eng.), 2 Vern. 206; Nat'l Life Ins. Co. v. Eagan (Canada), 20 Grant Chan. 269.

When it clearly appears that the party against whom rescission is sought was guilty of fraud, misrepresentation or deceit, or some other wrong of equal force in violating the contract, the circumstance that the contract has been fully and voluntarily perfected before the discovery of the facts giving rise to the right of rescission; will not operate to prevent the court from granting relief. Under such circumstances the right to rescind is none the less avoidable after full performance if the person seeking this relief has not by his conduct waived the right that other party can be put in status quo, and that no adverse rights of third persons have intervened. This principle is sustained by a long list of cases in 1 Anno. Cases, page 517, including Liddle v. Sims, 9 S. & M. 596.

A provision in an insurance policy making it incontestable after the lapse of a specified time does not cease to operate when the insured dies within the time specified but continues thereafter for the benefit of the beneficiary and therefore, if contest is not instituted within the time specified, it is too late. Mut. Life Ins. Co. v. Hurnia Pack. Co. (U. S.), 68 L.Ed. 235.

The commencement of an action on an insurance policy within the time allowed for contest does not extend the time as provided thereby for the period allowed for filing an answer, but the contest must actually be made within the time specified. Mo. State Life Ins. Co. v. Crawford (Ark.), 31 A. L. R. 93. The cases of Monohan v. Mut. Life Ins. Co., L. R. A. 1918 D. 1196 (Ill.) and Becker v. Ill. Life Ins. Co. (Mich.), 198 N.W. 884, hold that the said defense cannot be pleaded after two years, even if the insured died within the two years. Hence this complainant at bar could not protect itself in any other way than by filing this suit, as nothing had been done by defendant except to demand payment of the policies. She could have waited one day less than six years after the death of insured and filed suit on the policies in the circuit court of Holmes county or possibly in the chancery court, and the insurance company would have been powerless to defend on the ground of fraud and misrepresentation on the part of the insured and the replies to the question of the medical examiner. Or even beneficiary (defendant herein) could have filed suit in the circuit court before the policy was two years old and afterwards taken a non-suit and at a later date (less than six years from death of insured) filed a new suit and cut the insurance company off from its legitimate defense of fraud on the part of the insured.

Barbour & Henry and Boothe & Pepper, for appellee.

The appellee, defendant below, interposed a demurrer to this bill upon the ground that there was a full, complete and adequate remedy at law. This is based upon the proposition that the alleged fraud, or false answers, in the application could be pleaded successfully and defeat recovery in any suit brought by the beneficiary upon the policy in a law court.

The policy here involved must be in force two full years during the lifetime of the insured. In that event, it is incontestable. The allegations of the bill show that it had been in force something less than a year. Therefore, it is contestable whenever the insured, within six years under our statute of limitations, brings suit in an action at law to recover the amount provided in the policy to be payable upon the death of the assured. Therefore, in the absence of some special circumstance, whereby it is made to appear that the defense of fraud cannot be effectually interposed in an action at law, the right of the insurer to make this defense is plain, adequate and complete.

A thorough examination of the authorities shows that equity will not entertain a bill to cancel in the case like this, unless some special circumstances are shown to exist whereby the adequacy and completeness of the remedy at law is impaired. One of the leading cases on the question is Home Insurance Co. v. Stansfield, Fed. Cases 6660. Another leading case is Phoenix Mutual Life Ins. Co. v. Bailey, 13 Wall. 616, 20 L.Ed. 501. See, also, Cable v. U. S. Life Ins. Co., 191 U.S. 288, 48 L.Ed. 188. A reference to Rose's notes will show that the Cable case and the Bailey case have been followed by practically every court in the Union. Woefle v. The Sailors (Tenn.), 12 L. R. A. (N. S.) 881 and note; Bankers Reserve Life Ins. Co. v. Omberson (Minn.), 48 L. R. A. (N. S.) 265 and note.

Counsel for appellant relies upon John Hancock Mutual Life Co. v. Dick, 43 L. R. A. 566, which is a Michigan case. This case is discussed in the note to the Woefle case, supra, and it is there shown that Michigan stands alone in supporting the contention of appellant.

OPINION

MCGOWEN, J.

From a decree sustaining a demurrer to the amended bill filed by the Cotton States Life Insurance Company, appellant here, against Mrs. R. K. Cunningham, appellee, the life insurance company appeals.

The bill alleges: That Mrs. Ruby K. Cunningham was the widow of John Emmet Cunningham, and beneficiary under two policies of life insurance issued by it upon the life of John E Cunningham, deceased. That he died on July 23, 1924, and that the defendant Burwell had been duly appointed administrator c. t. a. of the decedent's estate. That in August, 1923, John E. Cunningham made application and requested complainant to issue insurance upon his life in the amount of ten thousand dollars. That the medical examination was made by Dr. Turnipseed. That the medical examination, including Cunningham's answers thereto, to the medical examiner, was the basis upon which complainant issued the life insurance policies of five thousand dollars each. Copies of the policies were attached to the bill. The applications signed by Cunningham were a part of the policies, and were also attached. That the applications, including the answers to the medical examiner by Cunningham, the insured, were warranties. That the insured made the following answers to the following questions: "Are you now, and for the past five years have you been in good health?" To which the applicant answered, "Yes." "When did you last consult a physician, and for what...