McCullough v. The American Workmen

• Decision Date: 04 June 1942
• Docket Number: 15421.
• Parties: McCULLOUGH v. THE AMERICAN WORKMEN.
• Court: South Carolina Supreme Court

20 S.E.2d 640

200 S.C. 84

McCULLOUGH v. THE AMERICAN WORKMEN.

No. 15421.

Supreme Court of South Carolina

June 4, 1942

McDonald Macaulay & McDonald, of Chester, for appellant.

Gaston & Hamilton, of Chester, for respondent.

BONHAM Chief Justice.

This is an action for an alleged fraudulent breach of contract founded upon a complaint alleging that the plaintiff-respondent purchased from the defendant-appellant which was a fraternal benefit association , a life and health and accident insurance policy which contained a statement that the dues would never increase; that subsequently the dues were increased, and that thereafter the appellant refused to accept the former dues and demanded additional dues, and thus brought about the unlawful lapse of the policy by the appellant.

The complaint contains an allegation that the defendant authorized and empowered its agents to deal with the plaintiff, a colored woman of simple mind, with no business experience, and easily imposed upon and cheated, and that all acts of the appellant's agents were within the scope of their agency and employment. It is alleged that the plaintiff believed and relied upon the statements of the agent, and upon the statements printed in the policy, which she therefore accepted and paid the monthly premium of $1.15.

The complaint alleges further that in October, 1940, the defendant refused to accept the monthly premium above stated demanding instead the monthly amount of $1.35, and that such action by the defendant was for the purpose of bringing about an unlawful cancellation of the policy, or in order to force plaintiff to pay more than the amount guaranteed in the policy and thus enrich itself at the plaintiff's expense and to her detriment, that such action was wilful and wanton, and in violation of the provisions of the policy, and that such action constituted a breach of contract accompanied by unlawful and fraudulent acts, entitling plaintiff to actual and punitive damages in the sum of Three Thousand Dollars.

The defendant, by its answer, admitted that it is a fraternal mutual benefit insurance company (of which plaintiff was a member), operating on a lodge system. It admits the issuance of the policy substantially as alleged by the plaintiff. It alleges that by the acceptance of her application for membership in the defendant society, and the issuance to her of the policy, the plaintiff became subject to the constitution and by-laws of the society, from which certain quotations are incorporated in the answer. The substance of the quoted portions is that members shall pay such dues and assessments as are levied by the Supreme Board of Trustees upon the class of certificate issued, that a notice of such assessment shall be given to the members, who, upon failing to pay such dues, shall stand suspended and cease to be entitled to any benefits, and that his certificate shall be lapsed except under certain conditions which are not pertinent here.

The defendant further alleged that upon an audit being made, it was found by the actuary of the society that it would be necessary to increase the monthly assessment upon all policies of this type in order to maintain proper reserve, and for other reasons which it sets forth in its answer, and that the plaintiff was duly advised in writing of the above mentioned and other facts which made the increase necessary, the increase being in the amount of seven cents per month so long as no sick or accident claim was filed, and that the plaintiff thereupon advised the defendant that she was quitting. The defendant denied all allegations in the complaint except such as it specifically admitted.

The case was tried at the March term, 1941, of the Court of Common Pleas for Chester County, before the Honorable A. L. Gaston, presiding Judge, and a jury, and resulted in a verdict in the plaintiff's favor for $200 actual damages and $800 punitive damages, the amount of the actual damages being later reduced to $184.59 by order nisi following a motion for a new trial. In all other respects the defendant's motion for a new trial was overruled by the trial Judge, whereupon the defendant appealed to this Court upon fourteen exceptions, based upon alleged errors of the Circuit Judge in overruling defendant's motion for a directed verdict, and its motion for a new trial, and in refusing and modifying certain requests to charge the jury, and in respect to certain matters which were charged. The questions raised by the appeal, as stated by the appellant, are as follows:

"1. Where the plaintiff who as a member of a Fraternal Benefit Association holds a benefit certificate which provides that dues would not increase, who brings an action for fraudulent breach of contract when the dues are subsequently increased, remain bound by the Constitution and By-Laws of the Society?

"2. Did the Court err in charging the jury that the plaintiff would not be bound by the Constitution and By-Laws of the Association if she was induced to become a member by reason of fraud or misrepresentation founded upon such statement in the policy?

"3. Did the Court err in submitting to the jury the question of fraudulent inducement of a contract in the absence of appropriate allegations in the complaint charging fraud and deceit in the inducement?

"4. Was there any evidence in the record establishing a fraudulent breach of contract?

"5. Does the evidence support the amount of the judgment for actual damages?"

We think that this case can be determined by deciding the two following questions: First, did the complaint contain such allegations charging fraud and deceit in the inducement of the policy as to warrant the issue of fraud and deceit in its inducement being submitted to the jury; and, second, did the trial Judge err in his charge to the jury, and in refusing appellant's motion for a new trial, on the question of whether a fraudulent breach of contract existed in the case.

The plaintiff could have brought an action charging fraud and deceit in the inception of the contract, but this she has not done. A study of the complaint reveals that although she alleges that she relied upon and believed the statements made to her by the agent of the defendant, she does not allege what statements might have been made, nor that they were made for the deliberate purpose of deceiving and defrauding her, nor that they were made with knowledge or a reckless disregard of their falsity, nor that she acted upon any specific statements to her injury. Although she alleges, with reference to the inception of the contract, that the agents of the defendant in Chester County were authorized to deal with her, and that their acts were within the scope of their agency, and that she is easily imposed upon and cheated because of her simple mind and her inexperience, her complaint fails to draw deductions of fraud therefrom. With reference to her acceptance of the contract of insurance, she does not allege that she was cheated or imposed upon, or that her simple mind and lack of business experience had any relation to any scheme or design to defraud her, or that any such scheme or design existed in connection with inducing her to purchase the policy. She does not allege that any agent made a false statement to her, nor is there an allegation that the statements in the policy itself were made with the intention to deceive, defraud, or mislead her, nor is there an allegation that at the time the certificate was issued, the defendant was not acting in good faith. In fact, the allegations pertaining to the issuing of the policy might have been made in connection with the purchase of any normal policy. Although there was no allegation in the complaint sufficient to support an action for fraud and deceit in the inception of the contract, there were intimations, allusions and implications throughout the complaint sufficient to confuse the Court, and apparently to confuse counsel for appellant, and to create the appearance of such an action.

Therefore, although the Court instructed the jury that the action was one for fraudulent breach of contract, nevertheless His Honor repeatedly charged upon fraud and deceit in inducing the contract. The appellant has based a number of its exceptions upon the charge in this respect, from which we quote several passages:

"Well now that is a question of fact for you as to whether or not the defendant made any statement whatsoever and if so whether or not those statements were true or untrue at the time the defendant made them, and whether the defendant made them for the purpose of misleading the plaintiff.

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"Nor would the Insurance Company have the right to misrepresent any of the terms or conditions of the policy; nor would the Insurance Company have the right to falsely make statements and induce the plaintiff to join the Insurance Company, and pay premiums to the Insurance Company, when the company knew, and if the company did know that such statements were false.

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