Pacific Mut. Life Ins. Co. of California v. Hartman
| Decision Date | 06 April 1935 |
| Docket Number | No. 1017.,1017. |
| Citation | 10 F. Supp. 425 |
| Court | U.S. District Court — Northern District of Oklahoma |
| Parties | PACIFIC MUT. LIFE INS. CO. OF CALIFORNIA v. HARTMAN. |
Embry, Johnson, Crowe & Tolbert, of Oklahoma City, Okl., for plaintiff.
Conner & Winters, of Tulsa, Okl., for defendant.
This action was instituted for the cancellation of three policies of insurance for disability from bodily injury or from sickness, the recovery of the sums theretofore allegedly mistakenly paid the respondent, the restraining of respondent from commencing or proceeding in any further action against complainant upon the policies, and for enjoining the respondent from asserting any claims against the complainant on account of the policies of insurance.
On the day following the date of service of subpœna upon the respondent in this suit, he instituted an action in the district court of Tulsa county, Okl., against complainant herein, seeking the recovery of $750 alleged to be due under the policies on account of his total disability. Upon application of complainant, a restraining order has been issued, directed to the respondent, restraining him from proceeding with the action in the state court. A response was filed in the application for restraining order, in which respondent alleges that he had assured complainant that no action would be brought for recovery under the policies until it had been determined that complainant and respondent were unable to amicably adjust the controversy, and seeks to set up thereby that there is no danger of multiplicity of actions, and further that the matters and things described in complainant's bill will be determined in the action pending in the state court, and that complainant has an adequate remedy at law. Respondent has interposed a motion for the transfer of this cause to the law docket, and the case comes on for a consideration of that motion.
The bill of complaint alleges that on June 5, 1928, complainant issued to respondent a certain policy of insurance providing for the payment of $125 per month against disability from bodily injury or through accidental means, or disability resulting from sickness during the period when such disability was continuous and resulted in necessary and total loss of all business time, excepting the first three months. It further alleged that respondent agreed in the written application, as part of the consideration of the policy, that the falsity of any statement in the application, materially affecting either the accepting of the risk or the hazard assumed thereunder, or if made with intent to deceive, should bar his right to recover under the policy. The policy of insurance contained a similar provision. The bill alleges that prior to the signing of the application and the issuance of the policy, the insured had had serious and dangerous impairment of his health, in that he had suffered from epilepsy of the grand and petit idiopathic type, and that complainant did not know of such impairment until shortly prior to December 17, 1934, at which time it notified respondent of its intention to rescind the contract, and tendered to the respondent all premiums theretofore paid, together with 6 per cent. interest thereon. The bill further states that respondent made claim for benefits, claiming to be suffering from epilepsy, and that complainant, before discovering the falsity of the answers in his application, had paid the respondent, because of such disability under the policy, the sum of $4,191.65, for which it prayed recovery with interest thereon. The bill further charged that respondent falsely answered certain questions in the application, and that the answers were untrue, false, and fraudulent, and that such false answers and statements materially affected the acceptance of the risk and the hazard assumed by complainant, and that if complainant had known of the falsity of such answers at the time of such application, the policy would not have been issued. The bill seeks the rescission of the policies for these misrepresentations as being fraud in equity even though not knowingly or willfully false, or made with intent to deceive. The bill further charges that the representations and answers made by respondent in the application were false and were made with intent to deceive, having been knowingly made by respondent.
The second cause of action relates to another policy of insurance issued on January 31, 1929, providing for the payment of $75 per month for disability resulting in continuous necessary and total loss of all business time. The other allegations in the bill with respect to the second cause of action are practically identical with those relating to the first policy in the suit, and the relief sought is the same as in the first cause of action.
In the third cause of action, complainant seeks the cancellation of a third policy of insurance issued April 6, 1930, providing for the payment of monthly benefits of $50 per month for disability consisting of continuous necessary and total loss of all business time. The other allegations are the same as in the first and second causes of action, and cancellation of the policy is sought, as well as the recovery of benefits previously paid under the policy. Neither of the three policies of insurance contain incontestability clauses; none of the policies provide for death benefits, and there is no beneficiary named in any of the policies.
The question for determination is whether this suit should be transferred from the equity to the law side of the court. A consideration of the question involves more than merely determining whether complainant has an adequate remedy at law upon the policies of disability insurance; it involves a consideration of the jurisdiction of equity in cancellation suits. The applicable equity rules and statutory provisions are as follows:
Equity Rule 22 (28 USCA § 723), which provides: "If at any time it appear that a suit commenced in equity should have been brought as an action on the law side of the court, it shall be forthwith transferred to the law side and be there proceeded with, with only such alteration in the pleadings as shall be essential."
Equity Rule 23 (28 USCA § 723) is as follows: "If in a suit in equity a matter ordinarily determinable at law arises, such matters shall be determined in that suit according to the principles applicable, without sending the case or question to the law side of the court."
Section 274a of the Judicial Code (28 US CA § 397) provides:
If this suit is properly on the equity side of the court, Equity Rule 22 and the cited provisions of the Judicial Code have no application herein. Equity Rule 23 is applicable if the suit is a proper one for a court of equity, in that complainant may seek the recovery of the sums paid out by it under the policies, without sending the case to the law side of the court. The cited provisions lend no aid in determining whether the case should be transferred to the law side of the court; they merely make provision for a case after that question is determined.
This very question has had the attention of a District Court in Pennsylvania, and it was held that the motion to transfer to the law side of the court should be dismissed. The reason upon which the court dismissed the motion is that the defendant asked that an entirely different cause of action be set up and the parties to the bill in equity be reversed. See Massachusetts Mutual Life Insurance Co. v. Hess (D. C.) 57 F.(2d) 884. It is obvious that that court proceeded upon the theory that the purpose of the motion was to permit the respondent in the equity suit to assert his claims under the policy on the law side of the court, and that the complainant therein, the insurer, should defend against the claims at law and assert its defenses thereto. Such proceedings would be an entire change in the cause of action sued upon. However, in the instant case, complainant seeks the recovery of sums it paid to the respondent before discovering the alleged falsity in the answers in the application, upon which the policies were issued; but this should not render the cited case inapplicable, because it is incidental to the primary relief of cancellation, and conditioned upon it. In the instant case, an action at law was instituted in the state court to recover $750 alleged to have been due under the policies on account of total disability of the respondent, and this action was instituted as heretofore pointed out on the day following the service of subpœna issued out of this court upon the respondent. The cited case strongly supports the contention of complainant that the motion to transfer should be dismissed.
A consideration of the applicable principles of law compels me to conclude that the motion to transfer the case to the law side of the court should be overruled. The primary object of this suit is to cancel the three insurance policies described in the bill. The success or failure in this effort largely determines complainant's right to the other relief sought, to wit, the recovery of the money paid by...
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