McCallum v. Old Republic Life Ins. Co., 742

• Citation: 259 N.C. 573,131 S.E.2d 435
• Decision Date: 14 June 1963
• Docket Number: No. 742,742
• Parties: J. B. McCALLUM, Jr., Administrator of the Estate of Mrs. May McCallum, v. OLD REPUBLIC LIFE INSURANCE COMPANY.
• Court: United States State Supreme Court of North Carolina

Page 435

131 S.E.2d 435

259 N.C. 573

J. B. McCALLUM, Jr., Administrator of the Estate of Mrs. May McCallum, v. OLD REPUBLIC LIFE INSURANCE COMPANY.

No. 742

Supreme Court of North Carolina.

June 14, 1963

King & Cox, by Jennings G. King, Laurinburg, for plaintiff appellant.

Henry & Henry, Lumberton, and Vance B. Gavin, Kenansville, for defendant appellee.

PARKER, Justice.

This is a summary of the essential allegations of the amended complaint, except when quoted:

The defendant, Old Republic Life Insurance Company, under the terms of a Creditor's Group Insurance Policy issued by it to Lumberton Production Credit Association, agreed to insure the lives of certain debtors of such association, and this association was authorized, under the terms of this master policy, to furnish to certain of its debtors individual certificates of insurance describing the indemnities to which such debtors were entitled, as set out in the master policy. A certificate of insurance so issued was payable, upon the death of the insured, to the Lumberton Production Credit Association as beneficiary as its interest might appear, to be applied by the association to the discharge of the indebtedness then owing by the debtor to the association. Insurance proceeds remaining after the payment of such indebtedness, if any, were payable in the event of death of the debtor to the estate of the debtor or in lieu thereof, at the option of defendant, to certain specified persons by reason of their having incurred expenses occasioned by support, illness, or burial of the insured debtor.

On 30 December 1958 Mrs. May McCallum and her son, J. B. McCallum, Jr., requested the Lumberton Production Credit Association to make them a loan in the amount of $3,000 to be repaid on 1 October 1959, which was to be secured in part by a certificate of insurance upon the life of Mrs. May McCallum in the amount of $3,000, to be issued by defendant to the association under its Creditor's Group Insurance Policy. In response to their request, employees of the association in its office in Lumberton typed and delivered to J. B. McCallum, Jr., an insurance application form which they dated 30 December 1958, together with a note and crop lien and chattel mortgage dated 30 December 1958, so that he might take these instruments to Maxton to be executed and delivered by his mother at a later date.

Mrs. May McCallum, on the night of 30 December 1958, signed and acknowledged these instruments before a notary public, and they were returned to the association on 1 or 2 January 1959.

On 3 January 1959 the Lumberton Production Credit Association accepted these instruments, and made to Mrs. May McCallum and her son a loan in the amount of $3,000. The crop lien and chattel mortgage were filed for recordation on 6 January 1959, and were duly registered that day in the Robeson County Registry.

On 3 January 1959, the day the loan was made, defendant executed and delivered to Mrs. May McCallum, under its Creditor's Group Insurance Policy, certificate of insurance PLD No. 520,909, a copy of which is attached to the amended complaint and made a part thereof, and the association deducted from the proceeds of its loan to the McCallums and remitted to defendant the sum of $150 representing the premium paid to defendant for its certificate of insurance insuring the life of Mrs. May McCallum for one full year in the amount of $3,000 from the date upon which its certificate of insurance was issued and delivered, payable as provided by the terms of its Creditor's Group Insurance Policy and certificates of insurance issued pursuant thereto, as set forth above.

The certificate of insurance issued to Mrs. May McCallum on 3 January 1959 contained the following words and figures:

'Effective date: 12-31-58

Expiration date: 12-31-59

Months: 12 Mo.'

The words before the colons were parts of the printed form; the figures and 'Mo.' after the colons were inserted by the use of a typewriter.

'* * * all parties intended that the certificate of insurance should be issued and dated at the time that the loan was actually made; and that it was not their intention that the certificate should be dated prior to the time when it was actually issued and delivered. The true agreement between the parties, as the plaintiff is informed and believes, was that the effective date of the certificate should be January 3, 1959; that the expiration date should be January 3, 1960, and that the term should be 12 months. The certificate, as written, did not truly and correctly embody the agreement between Mrs. May McCallum and the defendant, in that the effective date was recited to be 12/31/58, and the expiration date was recited to be 12/31/59.

'* * * the figures '12/31/58' and the figures '12/31/59' were inserted in the certificate through inadvertence upon the part of the draftsman who filled out the printed form and by mutual mistake upon the part of the defendant and Mrs. May McCallum; or, if the figures were not inserted by mistake on the part of the defendant, then that the defendant caused them to be inserted with the intent to defraud plaintiff's intestate by dating the policy back to a time when it could not possibly have been in force and effect.'

When the certificate of insurance was issued, Mrs. May McCallum was 83 years old and very feeble, and this was well known by defedant's agent. By reason of her age and condition, she did not read the certificate of insurance, and did not know the certificate of insurance had a date prior to its issuance and delivery, and such was not known by her during her life.

The loan by the association to Mrs. May McCallum and her son was paid in full on 4 December 1959.

Mrs. May McCallum died on 2 January 1960, and under the terms of defendant's certificate of insurance, the amount of the insurance is payable to her estate. Plaintiff is the administrator of her estate. Defendant refuses to pay any part of its certificate of insurance.

Defendant demurred to the amended complaint on the ground that it alleged no facts constituting mutual mistake of the parties, and no facts constituting a mistake on the part of Mrs. May McCallum induced by fraud on the part of the defendant, and no facts constituting fraud on the part of the defendant, which would entitle plaintiff to reform and enforce the certificate of insurance sued upon.

The Court said in Textile Insurance Co. v. Lambeth, 250 N.C. 1, 15, 108 S.E.2d 36, 45, quoting from Williams v. Greensboro Fire Insurance Co., 209 N.C. 765, 769, 185 S.E. 21, 23, and citing additional authorities in support of the quotation from that case: "It is well settled that in equity a written instrument, including insurance policies, can be reformed by parol evidence, for mutual mistake, inadvertence, or the mistake of one superinduced by the fraud of the other or inequitable conduct of the other.' Williams v. Greensboro Fire Insurance Co., 209 N.C. 765, 769, 185 S.E. 21, 23; 29 Am.Jur., Insurance § 241; 44 C.J.S. Insurance §§ 278, 279; 7 Appleman, Insurance Law and Practice, § 4256. ' To the same effect, 76 C.J.S. Reformation of Instruments § 30; 45 Am.Jur., Reformation of Instruments, sec. 62.

In 76 C.J.S. Reformation of Instruments § 29 b (1), pp. 371-372, it is said: 'Fraud or inequitable conduct, to warrant relief by way of reformation, has been held to consist in doing acts, or omitting to do acts, which the court finds to be unconscionable, as * * * in drafting, or having drafted, an instrument contrary to the previous understanding of the parties and permitting the other party to sign it without informing him thereof * * *.'

As a general rule, the parties may agree as to the terms and conditions and effective date of a policy of insurance, provided, of course, that they do so voluntarily, and are not influenced by fraud, misrepresentation or similar elements, and that the terms and conditions are not in violation of legal rules and requirements. Lentin v. Continental Assurance Co., 412 Ill. 158, 105 N.E.2d 735, 44 A.L.R.2d 463; 29 Am.Jur., Insurance, sec. 310; 44 C.J.S. Insurance § 223. The parties may expressly agree that a policy of insurance be antedated and take effect from that date. Mutual Life Ins. Co. of New York v. Hurni Packing Co., 263 U.S. 167, 44 S.Ct. 90, 68 L.Ed. 235, 31 A.L.R. 102; Couch on Insurance, 2d Ed., Vol. 1, sec. 8:2, Dating Policy. In this section of Couch it is stated: 'It is customary, but not necessary, to date policies. If the policy is dated, however, the contract of insurance is deemed to have been made as of that date, and takes effect therefrom, unless a different day is specified therein, or it is apparent from the construction of the contract that another day was intended. * * * The date is not conclusive evidence of the fact that a contract of insurance was completed and was to become effective as of the date written in the policy, and is not necessarily the effective date of the policy.'

G.S. § 1-151 requires us to construe liberally a pleading challenged by a demurrer with a view to substantial justice between the parties. In passing on defendant's demurrer, we are confined to a consideration of the amended complaint, and the certificate of insurance made a part thereof. Moore v. W O O W, Inc., 253 N.C. 1, 116 S.E.2d 186; Little v. Wilson Oil Corp., 249 N.C. 773, 107 S.E.2d 729. The demurrer to the amended complaint admits, for the purpose of testing the sufficiency of the pleading, the truth of factual averments well stated and relevant inferences of fact reasonably deductible therefrom. But it does not admit inferences or conclusions of law asserted by the pleader. Hedrick v. Graham, 245 N.C. 249, 96 S.E.2d 129; Strong's N.C. Index, Vol. 3, Pleadings, pp. 625-627. The admissions inherent in a demurrer are not absolute, because the conditional admissions made by a demurrer forthwith end if the demurrer is overruled. Erickson v. Starling, 235 N.C. 643, 71 S.E.2d 384.

The demurrer...