New York Life Ins. Co. v. McMaster

• Decision Date: 21 March 1898
• Docket Number: 976.
• Parties: NEW YORK LIFE INS. CO. v. McMASTER.
• Court: U.S. Court of Appeals — Eighth Circuit

87 F. 63

NEW YORK LIFE INS. CO. v. McMASTER.

No. 976.

United States Court of Appeals, Eighth Circuit.

March 21, 1898

This is an appeal from a decree which so reformed five policies of life insurance as to advance the term of insurance described in them six days, and which in this way made them cover a death which occurred on the sixth day after the policies had expired by their terms. Each of the policies was dated on December 18, 1893. By each, the New York Life Insurance Company, the appellant, insured the life of Frank E. McMaster in the sum of $1,000, for the benefit of his executors administrators, and assigns, in consideration of his written application, 'and in further consideration of the sum of twenty-one dollars and-- cents, to be paid in advance, and of the payment of a like sum on the twelfth day of December in every year thereafter during the continuance of this policy ' Each policy contained these stipulations: 'If any premium is not thus paid on or before the day when due, then (except as herein otherwise provided) this policy shall become void, and all payments previously made shall remain the property of the company. After this policy shall have been in force three months, a grace of one month will be allowed in the payment of subsequent premiums, subject to an interest charge of five per cent. per annum for the number of days during which the premium remains due and unpaid. During the said month of grace the unpaid premiums, with the interest as above, remains an indebtedness due the company and, in the event of death during said month, this indebtedness will be deducted from the amount of insurance. ' Each policy was issued upon a written application which was dated on December 12, 1893. The policies were delivered to McMaster, and the first premiums were paid, on December 26, 1893. He never paid the premiums due on December 12 1894, and he died on January 18, 1895, on the sixth day after the policies had expired. Fred A. McMaster, the administrator of the estate of the deceased, and the appellee in this case, exhibited his bill in the court below to so reform these policies that their terms of insurance should commence on December 18, 1893, and should expire at midnight on January 18, 1895, after the death of the insured. In his bill he set forth two grounds for the relief which he sought: (1) That, after the insured had signed his applications for these policies, the agent of the insurance company wrote into them, without his knowledge, the words, 'Please date policy same as application,' and the company made the annual premiums due on December 12th in each year, when they would have been due on December 18th if those words had not been inserted in the applications; and (2) that the contract for the insurance was that the insured should have policies of the kind which he received, which should remain in force 13 months from the time when the first annual premiums were paid, without further payments, and that the policies actually delivered remained in force only 12 months and 17 days after their delivery. The answer denied the averments of the bill, and these facts were established by the evidence: In order to induce the insured to make his applications for the policies, the solicitor of the company told him that its policies gave him 13 months of insurance for the first annual premium, and in answer to this direct question, 'Did you, or did you not, agree for the company that they would furnish him a policy that would be good for thirteen months, and that, in order to secure the thirteen months of insurance, all that he had to do was to pay one premium?' he answered, 'Yes, sir; I stated to Mr. McMaster that the one premium he paid carried his policy for full thirteen months. ' McMaster signed the applications for the policies at the time of this conversation, on December 12, 1893, but he did not pay any premiums until December 26, 2893; and there is no evidence that, at any time before the policies were delivered, on December 26, 1893, he ever agreed to take the insurance, or to pay any of the premiums. After the applications were signed, the agent, who procured them wrote into them the words, 'Please date policy same as application,' for the purpose of securing a bonus or extra commission which the company allowed its agents on December business. In November, 1894, written notes were sent to the insured by the company that his second premium on each policy would be due on December 12, 1894. On December 11 or 12, 1894, a collector called on him for his second annual premiums, and asked him to pay them. He replied that he did not intend to keep the insurance in force, and did not care to pay the premiums. The collector told him that he had 30 days of grace in which to make the payments, and told him when the days of grace would expire. He answered that, if he decided to keep any of the insurance, he would come to the office and pay the premiums before that date. He did not come, and he never objected to, or complained of, the policies or their terms. Upon this record the decree which is challenged by this appeal was rendered.

W. E. Odell, for appellant.

F. E. Gill, for appellee.

Before SANBORN and THAYER, Circuit Judges, and PHILIPS, District Judge.

SANBORN Circuit Judge, after stating the facts as above, .

In form, this is a suit in equity to reform written contracts. In fact, it is a bald attempt to supersede written agreements with the parol negotiations which preceded and induced them. It is contended that the insurance company agreed in the preliminary negotiations that it would issue policies which would insure the life of the deceased for 13 months, in consideration of the payment of the first annual premiums, and that, either by mutual mistake or by the fraud of the company, policies were issued which insured his life for only 12 months and 17 days, in consideration of those premiums. A contract may be reformed in equity where a preliminary parol agreement is made, which fails of embodiment in the subsequent written contract through the fraud of one, or the mistake of both, of the parties to it. But the oral agreement and the fraud or the mutual mistake must be clearly proved before any such relief can be granted. The chief difficulty with this case is that neither the oral agreement nor the fraud nor the mutual mistake are established by the evidence. It is an indispensable requisite of a binding agreement that it should have a good or a valuable consideration. If the insurance company agreed with the deceased when he signed his applications that it would issue policies which would insure his life for 13 months, in consideration of the payment of the first annual premiums, there was no consideration for that agreement, because McMaster neither paid nor agreed to pay anything for this preliminary promise. He merely signed applications for policies, and, until he received them and paid his premiums upon them, he was at perfect liberty to reject the insurance and to refuse the policies. Before these policies were delivered, on December 26, 1893, no suit could have been maintained against him for the premiums, or for a specific performance of any agreement to take any insurance or to accept any policies, because he had never made any such agreement, and had never promised to pay any premiums. Nor could he have maintained an action against the insurance company upon its agreement to issue policies that should give him insurance for 13 months, because that agreement was without consideration and void. There were, as is customary in life insurance cases, negotiations, but no contract, and no intention to contract, otherwise than by policies made and delivered upon the simultaneous payment of the premiums; and the agreement upon which the appellee counts was nothing more than a representation or promise, without consideration, as to what would happen in the future. Society v. McElroy, 49 U.S.App. 548, 28 C.C.A. 365, and 83 F. 631, 638; Kendall's Adm'r v. Insurance Co., 10 U.S.App. 256, 263, 2 C.C.A. 459, 461, and 51 F. 689, 691; Heiman v. Insurance Co., 17 Minn. 153, 157 (Gil. 127); Markey v. Insurance Co., 103 Mass. 78; Hoyt v. Insurance Co., 98 Mass, 539, 543; Markey v. Insurance Co., 118 Mass. 178, 194; 1 May, Ins. (3d Ed.) Sec. 56.

Nor is there any proof of fraud in this record. The fraud upon which reliance is placed here is pleaded as the basis of an estoppel. The claim is that the insurance company is estopped from denying that the actual contracts were the oral agreement for insurance for 13 months from December 26, 1893 and that the written contracts should be so reformed as to have this legal effect, because the solicitor promised that such would be the agreements. But a willful intent to deceive, or such gross negligence as is tantamount thereto, is an essential element of such an estoppel. There must be either some moral turpitude or some breach of duty. Bank v. Farwell, 19 U.S.App. 256, 262, 267, 7 C.C.A. 391, 394, 396, and 58 F. 633, 636, 639; Henshaw v. Bissell, 18 Wall. 255, 271. The deceit of its victim and consequent damage are essential elements of actionable fraud. If the acts of this insurance company did not deceive the insured, or if he was not induced thereby to change his position to his damage, no fraud which will warrant relief, was perpetrated upon him. Before any cause of action for a reformation or avoidance of these policies can be maintained on the ground of fraud, convincing proof must be furnished that by some trick, artifice, or deceit of the company, the insured was induced to accept his policies, and to pay his first premiums, in the belief that they insured his life for 13 months from December 26, 1893. But he received the policies on that day, and he...