Obartuch v. Security Mut. Life Ins. Co.

• Decision Date: 14 August 1940
• Docket Number: No. 7059.,7059.
• Citation: 114 F.2d 873
• Parties: OBARTUCH v. SECURITY MUT. LIFE INS. CO.
• Court: U.S. Court of Appeals — Seventh Circuit

114 F.2d 873 (1940)

OBARTUCH v. SECURITY MUT. LIFE INS. CO.

No. 7059.

Circuit Court of Appeals, Seventh Circuit.

April 12, 1940.

Rehearing Denied August 14, 1940.

Charles S. Deneen, Roy Massena, and Donald N. Schaffer, all of Chicago, Ill., for appellant.

Dwight S. Bobb and William L. Bourland, both of Chicago, Ill. (Bobb, Spoerri, Bourland & Harris and Thomas J. Barnett, all of Chicago, Ill., of counsel), for appellee.

Before EVANS, MAJOR, and TREANOR, Circuit Judges.

MAJOR, Circuit Judge.

This is an appeal from a judgment in favor of the defendant, entered April 14, 1939, in an action to recover upon two policies of life insurance, one dated July 18, 1931, and the other July 27, 1931, each in the sum of $10,000, issued upon the life of Frank Obartuch, and in each of which Julia Obartuch, plaintiff and wife of the insured, was named as beneficiary. The complaint was in the usual form with the policies set forth haec verba, including the incontestable clause.¹ The prayer for a summary judgment was supported by the affidavit of the plaintiff in accordance with the Illinois Practice Act, Ill.Rev.Stat.1939, c. 110, § 125 et seq.

The defendant's answer admitted the execution and issuance of the policies, the death of Frank Obartuch, the payment of all premiums due on said policies and, that said policies had been in full force and effect for more than two years; but denied that the sum demanded was due or that the plaintiff was entitled to any payment from defendant except $4,855.60, the amount of premiums paid, for the reasons, (1) the application therefor was void as (a) either Frank Obartuch did not sign or authorize anyone to sign said application, or (b) Frank Obartuch did not knowingly sign said application, and (2) some person unknown to the defendant was fraudulently substituted for Frank Obartuch at the medical examination. The answer further alleged that the defendant, on March 14, 1935, notified the plaintiff of its election to rescind said policies on account of fraud, and tendered the amount of the premiums paid thereon to Michael and Henry Obartuch, sons of the alleged insured, who had paid said premiums, which tender was refused.

The cause was tried by the court without a jury and plaintiff's motions for a summary judgment, first on the pleadings, second, at the conclusion of the plaintiff's case, and again at the conclusion of all the evidence, were denied. The court also refused to adopt a conclusion of law submitted by the plaintiff to the effect that the defense of fraud, including that of substitution of another person for the insured on the medical examination, was barred by the incontestable clause of the policies under the law of Illinois.

The court entered findings of fact and conclusions of law submitted by the defendant. The substance of such findings was:

1. That the policies in suit were issued upon the life of some person other than Frank Obartuch, which other person submitted to a medical examination by Dr. Rubens;

2. That if Frank Obartuch signed the insurance application and answers to questions of the medical examiner and amendments thereto, he did so, not knowing the contents of said documents or with the intention of obtaining insurance from the defendant;

3. That the policies were obtained by the plaintiff and her sons, without the knowledge or consent of Frank Obartuch, by the substitution with their knowledge of a person other than Frank Obartuch at the medical examination.

The substance of the court's conclusions of law was:

1. That it is contrary to public policy for any person to obtain life insurance by substituting an individual other than the named insured for medical examination, and a policy secured by such substitution is void;

2. That the incontestable clause in the policies in suit does not preclude the defense that the person examined by the defendant's medical examiner was not Frank Obartuch, but someone else who impersonated said Frank Obartuch.

3. That said policies did not constitute a valid contract with Frank Obartuch and, if valid at all, were contracts upon the life of the person examined by the defendant's medical examiner.

4. That there was never any valid contract of life insurance upon the life of Frank Obartuch because he never knowingly signed any application therefor or authorized any other person to sign an application for him.

The contested issues upon which the plaintiff relies for a reversal are set forth in her reply brief as follows:

1. The defendant's sole defense, the alleged substitution at the medical examination of some person other than Frank Obartuch, who made and signed the application for the policies in suit, was precluded by the incontestable clause.

2. The finding that there was a substitution at the medical examination is clearly erroneous as a matter of law, for the reason that, excluding the incompetent testimony of the defendant's medical examiner, it conclusively appears that Frank Obartuch was examined for the policies issued by the defendant.

Thus, questions of law only are raised on this appeal and there seems no occasion at this point to relate even a synopsis of the testimony.

Under the first contested issue, it is the position of the plaintiff that the defendant, by statements made by its counsel at and prior to the commencement of the trial, waived all defenses alleged in its answer except the issue of substitution at the medical examination, while defendant contends to the contrary. With this contention as a basis, it is argued by the plaintiff that Finding No. 2 is erroneous as a matter of law as not being based upon an issue in the case and, that Conclusion of Law No. 4 is erroneous for the same reason. In other words, it is contended that the question as to whether the insured knowingly signed the application was not an issue before the court and, that any finding or conclusion in this respect was erroneous. Having thus eliminated the issue of signing, it is argued that the finding and conclusion of the court that some person other than the insured was submitted for the medical examination does not constitute a defense by reason of the incontestable clause of the policies. It is also argued that the finding and conclusion with reference to substitution was erroneous because of the admission of incompetent testimony.

It is defendant's contention that it waived none of the issues tendered by its answer and, that in any event, the finding and conclusion with reference to signing was proper if there was no issue before the court but that of substitution or impersonation.

We set forth in a footnote some of the colloquy between counsel and the court which plaintiff relies upon as confining the issue to that of substitution.²

From the statements thus made, it is somewhat confusing exactly as to the issue which was intended to be relied upon. We think, however, taken as a whole, that it is rather plain that the defendant did not intend to dispute that the genuine signature of Obartuch appeared on the application, but that he signed without knowledge of its contents. If there were any doubt in plaintiff's mind concerning the issue of signature, it must have been dispelled when, during the examination of plaintiff's first witness, the following colloquy occurred:

"Mr. Pearson: Now, I would like to ask you further, counsel: In the statement at one time you intimated there was not any question about what Mr. Obartuch signed these various papers. Is there any question about that?

"Mr. Bourland: I have never stated that. I have always said it was either a forgery or else he did not know what he was signing."

We therefore conclude that the issue as to signing was not waived by the defendant, but if we should be mistaken as to this, we still think findings and conclusions as to such issue were pertinent to the issue of substitution. As the trial court said, in referring to the finding and conclusion with reference to the issue of signing: "They are part of that, that makes up the substitution."

It is stated in 64 C.J., Sec. 1104, page 1257: "* * * Also, it is proper to find facts which, although outside of the issues framed, are but logical conclusions from other facts found which are directly in issue. * * *"

Assuming that all defenses were waived except that of substitution for the medical examination, as contended by plaintiff, we are of the opinion that the finding and conclusion to the effect that Obartuch, if he signed the application, did not know its contents, were relevant to such issue. It would seem too plain to admit of dispute that if Obartuch did not sign the application or did not knowingly sign it, that the person who submitted himself for medical examination was some other person. We can think of no logical reason why a person who had not made application for insurance would submit himself for examination. The issues which plaintiff seeks to separate are so interwoven and so closely related that we are of the opinion that proof of either is material in the establishment of the other.

What we have said thus far comes near to disposing of the first contested issue, adversely to the plaintiff. The reason for the effort made to limit the issue to that of substitution and thereby preclude the defendant from relying upon any finding except that of substitution is discernable from a reading of the authorities relied upon by the defendant to remove the bar erected by the incontestable clause.³ By thus confining the issue, it is sought to escape the rationale of these authorities. We apprehend that plaintiff would concede that if Obartuch signed the application without knowledge of its contents, that is, had no intention of applying for insurance, and that some person other than he was substituted for the medical examination, (facts found by the court) that such clause would no longer be effective.

In the Maslin case, the court held that the defense of impersonation was not barred by the...