Main v. Professional & Business Men's Life Ins. Co.

• Decision Date: 16 July 1963
• Docket Number: No. 9997,9997
• Citation: 80 S.D. 288,122 N.W.2d 865
• Parties: Lester Laverne MAIN, Plaintiff, v. PROFESSIONAL AND BUSINESS MEN'S LIFE INSURANCE COMPANY, a Corporation, Defendant. Lester Laverne MAIN, as guardian ad litem for Marlin Laverne Main, Plaintiff, v. PROFESSIONAL AND BUSINESS MEN'S LIFE INSURANCE COMPANY, a Corporation, Defendant. Orel Charles SANDS, Plaintiff, v. PROFESSIONAL AND BUSINESS MEN'S LIFE INSURANCE COMPANY, a Corporation, Defendant. James PETIK, Plaintiff, v. PROFESSIONAL AND BUSINESS MEN'S LIFE INSURANCE COMPANY, a Corporation, Defendant. Lester Laverne MAIN, as guardian ad litem for Max Stuart Main, Plaintiff, v. PROFESSIONAL AND BUSINESS MEN'S LIFE INSURANCE COMPANY, a Corporation, Defendant. Clare E. HOFFMAN, Plaintiff, v. PROFESSIONAL AND BUSINESS MEN'S LIFE INSURANCE COMPANY, a Corporation, Defendant. Ray MAIER, Plaintiff, v. PROFESSIONAL AND BUSINESS MEN'S LIFE INSURANCE COMPANY, a Corporation, Defendant.
• Court: South Dakota Supreme Court

Page 865

122 N.W.2d 865

80 S.D. 288

Lester Laverne MAIN, Plaintiff, v. PROFESSIONAL AND BUSINESS MEN'S LIFE INSURANCE COMPANY, a

Corporation, Defendant.

Lester Laverne MAIN, as guardian ad litem for Marlin Laverne

Main, Plaintiff, v. PROFESSIONAL AND BUSINESS MEN'S LIFE INSURANCE COMPANY, a

Corporation, Defendant.

Orel Charles SANDS, Plaintiff, v. PROFESSIONAL AND BUSINESS MEN'S LIFE INSURANCE COMPANY, a

Corporation, Defendant.

James PETIK, Plaintiff, v. PROFESSIONAL AND BUSINESS MEN'S LIFE INSURANCE COMPANY, a

Corporation, Defendant.

Lester Laverne MAIN, as guardian ad litem for Max Stuart

Main, Plaintiff, v. PROFESSIONAL AND BUSINESS MEN'S LIFE INSURANCE COMPANY, a

Corporation, Defendant.

Clare E. HOFFMAN, Plaintiff, v. PROFESSIONAL AND BUSINESS MEN'S LIFE INSURANCE COMPANY, a

Corporation, Defendant.

Ray MAIER, Plaintiff, v. PROFESSIONAL AND BUSINESS MEN'S LIFE INSURANCE COMPANY, a

Corporation, Defendant.

No. 9997.

Supreme Court of South Dakota.

July 16, 1963.

Rehearing Denied Sept. 9, 1963.

Martens, Goldsmith, May & Porter, Pierre, for defendant and appellant.

Johnson & Price, Lemmon, for plaintiffs and respondents.

RENTTO, Judge.

These seven lawsuits, concerning different policies of life insurance purchased by the respective plaintiffs, at about the same time, are substantially similar. Each is premised on the general proposition that they were induced to buy the policies involved by false and misleading representations and statements of the defendant company and its agent. After a consolidated trial the circuit court entered findings and conclusions favorable to the plaintiffs and awarded each of them judgment in the amount of the premiums paid with interest from the date of payment. The defendant company appeals from the judgments.

Defendant made a motion that the plaintiffs be required to elect whether they were affirming the contracts involved and seeking to recover the damages caused by the alleged fraud or were disaffirming them and seeking their rescission. The denial of this motion is defendant's basic complaint on these appeals.

After alleging the dates when the representations and statements were made the complaints, each containing only one count, proceed to particularize them. In essence these are similar to those the court found were made by the same agent in Sabbagh v. Professional and Business Men's Life Ins. Co., S.D., 116 N.W.2d 513 and detailed in our opinion, in that case, which incidentally was filed after the appeals in these cases were taken. These are followed by averments that the defendant knew the were false and made them with intent to deceive the plaintiffs and induce them to purchase the policies in question; and that plaintiff were ignorant of their falsity and relied thereon in purchasing the policies involved and paying the premiums therefor.

The complaints also state that the policies received were not as represented by the defendant and were never accepted by the plaintiffs. It is then alleged in each action:

'That the Plaintiff over a considerable period of time objected to the Defendant Company as to the contents of said policy and demanded of the Defendant Company that stock be issued as required by the representations of the Company and that upon learning that the Company would not issue stock and that the stock and right to dividends or earnings thereon was supposedly represented by the said resolutions, Exhibit A, the Plaintiff demanded of the Defendant the return of the premium paid and the Plaintiff tendered and does hereby tender to the Company return of said policy which has never been accepted under the provisions of SDC 31.0603(1).'

'That by reason of the fraud and deceit of the Defendant Company, all as set forth above, the Plaintiff sustained a loss of $_____, the same being the direct and proximate cause of the deceit, fraud and false representations of the Defendant Company to this Plaintiff upon which he relied.'

Judgment is asked in the sum alleged, which was the amount of the premium paid, with interest from the date of its payment together with an allowance of punitive damages.

Where a party has been induced to enter into a contract by false and fraudulent representations, upon acquiring knowledge thereof, he must elect whether to rescind the contract because of the fraud or affirm it and claim damages. 17 C.J.S. Contracts § 167; 12 Am.Jur., Contracts, § 146. We have frequently recognized this rule. Northwestern Mut. Hail Ins. Co. v. Fleming, 12 S.D. 36, 80 N.W. 147; Lunscheon v. Wocknitz, 21 S.D. 285, 111 N.W. 632; Union Not. Bank of Columbus, Ohio v. Mailloux, 27 S.D. 543, 132 N.W. 168 and Kerr v. Stauffer, 59 S.D. 83, 238 N.W. 156. In the sense that one of these theories of recovery is premised on the repudiation of the contract and the other on its affirmance, they are inconsistent. Helleckson v. Alick, 61 S.D. 546, 250 N.W. 36. However, this rule applies only when there is an existing contract.

In opposing defendant's motion, counsel for the plaintiffs took the position that in these actions they were not required to either affirm or disaffirm the policies of insurance because there were no contracts. It was his view that because of defendant's fraud the policies were void. In this he was in error. In the Sabbagh case, we said: 'The cases generally seem to take it for granted that contracts of insurance procured by the fraud of the insurer or its agents are not void, but only voidable at the election of the insured.' SDC 10.0302 declares: 'Consent which is not free is not void but voidable and may be rescinded in the manner prescribed by the statutes on rescission.' This enactment affords to the defrauded party the opinion of affirming a contract so procured. Williston on Contracts, Rev. Ed., Vol. 5, § 1526.

The Sabbagh case also makes it clear that in the described circumstances, in addition to the remedies of a suit for damages for fraud in procuring the contract or an action seeking rescission of the contract, a third course of action is available to the defrauded party. He may rescind the contract by his own act, as authorized in SDC 10.0804, and sue at law for what he parted with by reason of the fraud. This remedy is not a suit on the contract because that has been done away with by the rescission. It is often referred to as a suit on a rescission to distinguish it from a suit for a rescission, such as is provided for in SDC 1960 Supp. 37.07. See comment in 21 Cal.L.Rev. p. 130.

Manifestly, the pleadings of the plaintiffs are not models of...