New York Life Ins. Co. v. Adams

• Decision Date: 13 May 1931
• Docket Number: No. 26041.,26041.
• Citation: 202 Ind. 493,176 N.E. 146
• Parties: NEW YORK LIFE INS. CO. v. ADAMS.
• Court: Indiana Supreme Court

202 Ind. 493

176 N.E. 146

NEW YORK LIFE INS. CO.

v.ADAMS.

No. 26041.

Supreme Court of Indiana.

May 13, 1931.

Appeal from Superior Court, Vanderburgh County; Edgar Devore, Judge.

Action by Tina Adams against the New York Life Insurance Company. Judgment for plaintiff, and defendant appeals.

Affirmed.

Gavin & Gavin, of Indianapolis, for appellant.

James T. Walker, Henry B. Walker, and Denton & Denton, all of Evansville, for appellee.

MYERS, C. J.

Appellee, beneficiary in a life insurance policy for $1000 issued by appellant, brought an action thereon and recovered judgment. From that judgment appellant appealed, assigning as errors certain rulings of the trial court which together present two questions: (1) Did the court commit reversible error by striking out appellant's cross-complaint; and (2) under all the facts and circumstances of this case, was appellant's defense of fraud in procuring from it the insurance contract barred by the incontestable stipulation therein?

The policy made a part of the complaint was issued to Henry W. Adams October 6, 1919, and contained this stipulation: “This policy *** shall be incontestable after two years from its date of issue, except for non-payment of premiums.” The insured died October 10, 1920. Notice of his death and proofs thereof were submitted, as required by the policy. Appellee commenced this action on October 31, 1921. On January 24, 1922, appellant answered in two affirmative paragraphs, and at the same time filed two paragraphs characterized as a cross-complaint. Each of these pleadings included the application for the policy, and specifically referred to certain material statements therein, claiming that they were false and fraudulent, and known to be false and fraudulent by the applicant; that appellant relied upon the truth of the statements, and issued the policy; that it received the notice of the death of the insured with proofs in November, 1920, and immediately began an investigation of the circumstances of the insured's death; that on February 3, 1921, it learned of the false and fraudulent statements, and thereupon not only notified appellee of the falsity thereof, but that it desired to, and did, rescind the policy, and repaid to appellee the premiums paid with interest. Each paragraph of answer closed with the statement that the policy had been rescinded and was no longer in force and effect. The cross-complaint prayed for a cancellation of the policy. On motion of appellee, both paragraphs of cross-complaint were stricken out on the ground that appellant had an adequate remedy at law.

[1] This court and the Appellate Court have a number of times said that, where there is an adequate remedy at law, equity will not interfere (Stark v. Lamb, 167 Ind. 642, 78 N. E. 668, 79 N. E. 895;Hay v. White, 201 Ind. 425, 169 N. E. 332;Ploughe v. Boyer et al., 38 Ind. 113;Geiser Mfg. Co. v. Lee, 33 Ind. App. 38, 66 N. E. 701;Rembarger v. Losch, 70 Ind. App. 98, 118 N. E. 831), but this statement must be limited when speaking of available defenses.

Our Civil Code provides that “the defendant may set forth in his answer as many grounds of defense, counter-claim and set-off, whether legal or equitable, as he shall have. Each shall be distinctly stated in a separate paragraph, and numbered, and clearly refer to the cause of action intended to be answered.” Section 370, Burns' 1926, section 347, Rev. St. 1881. “A counterclaim is any matter arising out of or connected with the cause of action which might be the subject of an action in favor of the defendant, or which would tend to reduce the plaintiff's claim or demand for damages.” Section 373, Burns' 1926; section 350, Rev. St. 1881.

[2][3] Defenses mentioned in the statute as set-off and cross-demand are not applicable to the facts in this case, and a cross-complaint is unknown to our Code. A cross-complaint would signify a cause of action by one or more defendants against one or more codefendants, or against a person not a party to the action involving the subject-matter therein. But in this jurisdiction it appears that the courts have used the words “cross-complaint” and “counterclaim” indiscriminately, but, strictly speaking, they are not synonymous. However, the name given to a pleading does not always truly characterize it. It is the material facts incorporated therein that determine its force and effect.

[4] Where, as in this state, law and equity are blended and enforced in the same forum upon the theory of reform procedure, equitable defenses to actions at law, under the circumstances defined by our Code, may be asserted. American Food Co. v. Halstead, 165 Ind. 633, 76 N. E. 251.

[5] In the instant case appellee's cause of action was based upon the insurance contract issued by appellant. Appellant denied liability on the ground that the insured procured the contract by fraud. Obviously, as it seems to us, appellant's defense, as set forth in its so-called cross-complaint, involved and was directly connected with the transaction upon which appellee relied for her cause of action. Moreover, the alleged fraud and the cause for challenging the validity of the contract might well have been the subject of an action in appellant's favor for cancellation, if timely and properly asserted. The authority for the pleading in question is within our Code definition of a counterclaim, and we will so treat it. Rooker v. Fidelity Trust Co., 191 Ind. 141, 131 N. E. 769;Standley v. Northwestern Mutual Life Ins. Co., 95 Ind. 254.

From what we have already said, this was one of a class of cases to which a timely tendered counterclaim alleging false statements would not be improper, and ordinarily it would be error to strike it out, for the reason appellant would be deprived of its right to amend in case it was insufficient to withstand a demurrer for want of facts. Moorhouse v. Kunkalman, 177 Ind. 471, 96 N. E. 600;Wilson v. Tevis, 184 Ind. 712, 111 N. E. 181;Huffman v. Newlee, 189 Ind. 14, 124 N. E. 731;Minor v. Sumner, 80 Ind. App. 269, 140 N. E. 580.

But was the error thus committed by the trial court harmful to appellant and one that would justify this court in reversing the judgment?

Here we may say, parenthetically, that, had appellee dismissed her action after the filing of the counterclaim and before final judgment, such dismissal would not, for that reason alone, have taken appellant's counterclaim out of court.

Looking to the record and the issues tried, it will be observed that appellant's paragraphs of answer, upon their face, presented a good equitable defense to appellee's cause of action. The reply in five paragraphs presented a state of facts which, if true, would not only avoid the answer, but would be a defense to appellant's counterclaim. The reply was upon the theory that appella...