Green v. Security Mutual Life Ins. Company

• Decision Date: 28 June 1911
• Parties: CALVIN GREEN and SOPHIA A. GREEN, Respondents, v. SECURITY MUTUAL LIFE INSURANCE COMPANY, Appellant
• Court: Kansas Court of Appeals

140 S.W. 325

159 Mo.App. 277

CALVIN GREEN and SOPHIA A. GREEN, Respondents, v. SECURITY MUTUAL LIFE INSURANCE COMPANY, Appellant

Court of Appeals of Missouri, Kansas City

June 28, 1911

Appeal from the Clay Circuit Court.--Hon. Francis H. Trimble, Judge.

AFFIRMED.

Judgment affirmed.

Conkling Rea & Sparrow and H. D. Hinman for appellant.

E. E Ball, Claude Hardwicke and Busby Bros. & Withers for respondents.

OPINION

BROADDUS, P. J.

This is an action in equity to set aside and cancel a life insurance policy issued by defendant to plaintiff in exchange for a prior policy, to reinstate the old policy, and for other relief the nature of which will appear in the statement of the case. The circuit judge before whom the cause was tried filed a written statement and opinion which so comprehensively, clearly and accurately expresses our own views of the case that we adopt them as our opinion. They are as follows: "Plaintiff, Calvin Green and Sophia A. Green, husband and wife, and, respectively, holder of and beneficiary in a life insurance policy, No. 57234, issued by defendant in exchange for a former policy, No. 7959, bring this suit in equity to set aside such exchange, cancel the new policy, reinstate the old, and to recover the excess premiums paid on the new policy.

"The ground of their complaint is that fraud was practiced by defendant's agent, upon Calvin Green at the time of the exchange of such policies by obtaining, without Green's knowledge or consent, his signature to a certain 'certificate of loan,' claimed by defendant to have been executed simultaneously with the agreement to exchange policies, and with the application and payment of premium for the new one.

"The certificate of loan states that defendant has loaned on policy No. 57234 the sum of $ 299.10, which, with six per cent interest from date, to wit, October 17, 1903, shall be a lien on the policy and shall be deducted from the amount due thereon when the policy is paid.

"The defendant is a life insurance corporation organized under the laws of the State of New York and, by authority, doing a general life insurance business in the State of Missouri. Prior to 1899 it was known as Security Mutual Life Association, but in that year it was reincorporated and its name changed to the one by which it is sued.

"The original policy, No. 7959, was issued October 13, 1893. Calvin Green was at that time thirty-two years of age, and, under this policy, he was to pay four premiums a year of $ 4.78 each, or $ 19.12 yearly. No provision existed in the policy for any increase in the premium rate, and none whereby the insured was bound to pay more than the sums specified therein. No reference is made in the policy to the articles of incorporation nor to the by-laws; but by section 6 of the articles, it is provided that policy holders shall be liable only for the fees, dues and assessments specified in their respective policies. And section 1, article 7, of the by-laws states that the amount of fees and dues and the amount and payment of premiums shall be determined by the board of directors and shall be stated in the policy issued to each member; while section 4, article 2 provides that 'the policy shall be in the form prescribed by the board of directors and shall contain the specific terms of the agreement or contract between the association and the insured to whom it is issued." According to Missouri law, therefore, the policy was an old line, level premium policy, notwithstanding the fact that it was issued by a company organized on the assessment plan. [Jacobs v. Life Assn., 146 Mo. 537, 48 S.W. 462.] If this be true, then the association had no right to increase the rates thereon. There is a provision, however, in the policy stating that 'the place of this contract is expressly agreed to be . . . in New York.' Under the general rule defining lex loci contractus, it is within the power of the parties, by the terms of their contract, to establish the place according to the laws of which the construction of the contract shall be determined. [22 Am. and Eng. Ency. of Law (2 Ed.), page 1325.] By another clause in the policy the payment of any money thereunder was conditioned upon its being realized from the mortuary payments made by the members or from the reserve fund of the Association. And section 5 of chapter 175 of the New York Insurance Laws offered in evidence says that an association issuing such a policy shall be deemed to be engaged in life insurance business on the assessment plan. It may be that under the law of New York the policy in question is an assessment policy. I have not had opportunity to examine this question. I have not gone into it partly because, in my opinion, its determination is not absolutely essential to a proper decision of this case. The question is material only as bearing on the truth or falsity of the statement made by the agent, Simmerman, to Green as hereinafter recited, that if he did not exchange his old policy for the new one the company would have to raise the rate. The truth or falsity of this statement is merely a circumstance bearing on whether fraud was practiced on Green at the time of the exchange. If the court can say from the evidence that fraud was practiced, without determining whether this particular statement was true or false, then the question whether the old policy is an assessment policy or not is not particularly important.

"Green paid the premium required of him by this policy, and it was in full force and effect at the time he exchanged it for the new policy, as hereinafter stated.

"After defendant had reincorporated into its present status, it began getting the policy holders under the old regime to exchange their policies for others in the new organization, and one W. W. Simmerman was one of defendant's agents engaged in this work.

"On May 11, 1904, Simmerman appeared at Carrollton, Missouri, where plaintiffs resided, and, over the telephone, arranged for Green to meet him at the hotel, and to bring his old policy with him. They met in the hotel lobby about 6 o'clock in the evening. Simmerman introduced himself and told his business. He showed Mr. Green a copy of the new policy, and represented that it was much better than the old one. He pointed out the benefits mentioned in the new policy and told him that in case of his death his beneficiary would receive not only $ 1000 due on the policy but also certain guaranteed additions specified therein. He also gave him a card showing such guaranteed additions, and further told him that after the expiration of three years he could borrow money on his policy. His attention was called to the fact that he would have to pay premiums on his old policy as long as he lived, and he was then told that if the policy were not exchanged, the company would raise the rate thereon. The proposition was then made to exchange the old policy for a new one on the twenty payment plan and date it back ten years to the date of his policy, and, while the future premiums thereon would be $ 20.08 semi-annually instead of $ 4.78 quarterly, still they would cease entirely at the end of ten years, and upon Green's death his wife would receive the $ 1000 plus the guaranteed additions. In short, he was offered a twenty payment policy on which ten years have already elapsed, and is artfully led to believe that the payments he has made for ten years on his old policy will take the place of the first ten years of the new one. In fact, he is told this is effect, because Green asked him if the $ 20.08 semi-annually was all he would have to pay and Simmerman assured him it was. Not a word was said to him about any back premiums to be paid on the new policy, nor was any note or certificate of loan or lien on the policy for the payment of back premiums or the creation of a reserve fund for it mentioned in any way. All that Green would have to do would be to sign a note for $ 20.08, the first premium, and an application for the new policy. Simmerman was in a great hurry; said he wanted to catch a train for Kansas City, and told Green that if he was going to exchange policies he must make up his mind right away.

"Green, thus suddenly confronted with this problem, agreed to make the exchange, and Simmerman had him to sit down at a small table in the corner of the lobby, whereon he had a number of papers and writing materials.

"Simmerman, standing at his side, first handed him the application for the new policy and asked him to read it over, which Green did. Simmerman then laid the application to one side and handed Green the note, which Green read over and then signed. Thereupon Simmerman laid on the table the application--or what Green thought was the application--and indicated the place where Green was to sign and Green attached his signature. About two or three minutes elapsed between the time Green read over the application and the time he signed it. The moment Green finished signing his name, Simmerman quickly picked up all the papers and put them away, handed Green a receipt for his old policy and hurriedly left the hotel. The entire conversation and transaction did not occupy over fifteen or twenty minutes.

Neither the card given Green by Simmerman, nor the application which he read over before signing, contained any reference to a 'certificate of loan,' or other lien, whatever. And no mention is made of it in the new policy. It says it is "granted as of date October 17, 1893, in consideration of the surrender and cancellation of policy No. 7959 and of the application for said policy and the application for this policy and of the payment in advance, October 17, of $ 20.08 and of the payment of a like amount on or before the 17th days of October and April in every year thereafter...