Mutual Life Ins. Co. of New York v. Krejci

• Decision Date: 14 November 1941
• Docket Number: No. 7554.,7554.
• Citation: 123 F.2d 594
• Parties: MUTUAL LIFE INS. CO. OF NEW YORK v. KREJCI et al.
• Court: U.S. Court of Appeals — Seventh Circuit

123 F.2d 594 (1941)

MUTUAL LIFE INS. CO. OF NEW YORK v. KREJCI et al.

No. 7554.

Circuit Court of Appeals, Seventh Circuit.

November 14, 1941.

G. B. Christensen, Gerard E. Grashorn, and George W. Ott, all of Chicago, Ill., for appellant.

Harry J. Myerson and J. S. Pressman, both of Chicago, Ill., for appellees.

Before SPARKS and KERNER, Circuit Judges, and LINDLEY, District Judge.

LINDLEY, District Judge.

Plaintiff appeals from a judgment dismissing upon defendants' motion its amended complaint for a declaratory judgment.

It was averred in the complaint that defendant Bohumil W. Krejci, the insured under a policy issued by plaintiff providing for waiver of premiums and payment of disability insurance in case of the insured's total and permanent disability, had in 1936 and periodically thereafter represented himself to be totally and permanently disabled and claimed payments therefor; that the claims had been allowed, the insurance paid and payment of further premiums waived until about January 15, 1940, when plaintiff for the first time discovered that after February 15, 1938, the insured had not suffered from any impairment of mind or body which rendered it impossible for him to follow a gainful occupation but that contrary to his representations "as hereinbefore stated," the insured had been able to follow and did from and after January 28, 1938, follow a gainful occupation and has not since February 15, 1938 been totally and permanently disabled. It was further averred that the false representations of the insured that he was totally and permanently disabled had been made for the purpose of inducing plaintiff to continue making disability payments; that plaintiff had relied upon them and, not knowing of their falsity, has paid him, since he ceased to be totally and permanently disabled, some $3,800 as disability benefits and waived premiums aggregating $858; that, upon discovering the falsity of the representations, plaintiff refused to make further payments and to extend further waivers.

Plaintiff prayed that the court take jurisdiction and determine whether the insured is totally and permanently disabled and whether plaintiff is entitled to set off the amount due it by reason of the alleged fraud against any rights the insured has in the policy; that unless the insured repay the sum plaintiff has paid him as a result of the alleged fraud the policy be declared lapsed and that the court enter a declaratory judgment declaring and adjudicating, as provided in the Declaratory Judgment Act, 28 U.S.C.A. § 400, the rights and obligations of defendants, the insured, his wife and conservatrix and the City of Chicago, a garnishee creditor, and of plaintiff and the legal and equitable relations between plaintiff and defendants involved in the existing controversies and such further relief as might be deemed equitable.

The City of Chicago was made defendant because it had begun an attachment suit against the insured and procured a writ of garnishment against plaintiff in an effort to recover and apply upon an alleged debt due from the insured to the city, the cash surrender value of the policy.

Defendants filed motions to make the complaint more specific, to require plaintiff to supply a bill of particulars and to dismiss the bill. Upon the first two, the court made no ruling; upon the third, it dismissed the complaint.

In what we deem a controlling case, Aetna Life Insurance Co. v. Haworth, 300 U.S. 227, 57 S.Ct. 461, 464, 81 L.Ed. 617, 108 A.L.R. 1000 the court held that jurisdiction attached under the declaratory judgment act. Here, as there, there is a dispute between the parties to an insurance policy in an adversary proceeding — a dispute which relates to the legal rights and obligations arising from the contract; not a hypothetical, moot or abstract controversy but a definite and concrete dispute concerning which the parties have taken adverse positions with regard to the disability benefits which by the contract were to be paid upon prescribed conditions. In the words of that court: "On the one side, the insured claimed that he had become totally and permanently disabled and hence was relieved of the obligation to continue the payment of premiums and was entitled to the stipulated disability benefits and to the continuance of the policies in force. The insured presented this claim formally, as required by the policies. It was a claim of a present, specific right. On the other side, the company made an equally definite claim that the alleged basic fact did not exist, that the insured was not totally and permanently disabled and had not been relieved of the duty to continue the payment of premiums, that in consequence the policies had lapsed, and that the company was thus freed from its obligation either to pay disability benefits or to continue the insurance in force. Such a dispute is manifestly susceptible of judicial determination. It calls, not for an advisory opinion upon a hypothetical basis, but for an adjudication of present right upon established facts." This language is directly applicable to and decisive of the sufficiency of the complaint here involved.

Defendants insist that whether the complaint in a declaratory judgment proceeding should be approved is one of discretion for the trial court and...