Penn Mut. Life Ins. Co. v. Crane

• Decision Date: 09 January 1883
• Citation: 134 Mass. 56
• Parties: Penn Mutual Life Insurance Company v. Ellery B. Crane
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

134 Mass. 56

Penn Mutual Life Insurance Company v. Ellery B. Crane

Supreme Court of Massachusetts

January 9, 1883

Argued October 5, 1882

Worcester.

Exceptions overruled.

J Hopkins, for the plaintiff.

W. S B. Hopkins & D. Manning, Jr., for the defendant.

Devens, J. C. Allen, Colburn & Holmes, JJ., absent.

OPINION

Devens, J.

This is an action to recover the amount of a promissory note made by the defendant, and payable to the order of the plaintiff. The answer sets up two defences: First, that the delivery of the note was conditional only; and that it was to be returned in case the local board of directors for the management of the affairs of this company should not be organized, which local board was to be composed of twenty members of the company residing in the county of Worcester, insured in the plaintiff company in the sum of $ 10,000 each, and including certain persons named. Second, that false representations, among others that Edward P. Pevey, Emerson P. Knight and Charles B. Pratt would become and had agreed to become members of the local board of directors, were fraudulently and falsely made to the defendant by the plaintiff's agent to induce him to become a member of this board; that he was induced to give his note and accept a policy of insurance in the company under the promise that his note should be returned in case said local board should not be organized. The answer further avers, that when the representations that Pevey, Knight and Pratt had been secured as members of the local board, or had agreed to become such, were discovered by him to have been fraudulently made, he thereupon offered to give up the policy issued to him, and demanded the return of his note, which had been obtained from him by such false and fraudulent representations.

Upon giving the note in suit, on November 20, the defendant had received from the plaintiff a receipt of the same date for the payment of the premium for a policy to be issued by the plaintiff; and it was added, "This payment will be returned by the undersigned if the policy should not be issued or local board of directors organized by the company." At some time thereafter, apparently upon November 23, the defendant received a policy, and gave an acknowledgment of a loan from the company of $ 115.54, being a part of the premium, and declared to be a lien upon his policy. Afterwards, on December 12, 1880, according to the testimony on behalf of the plaintiff, the defendant signed an agreement preparatory to the organization of the proposed "local board."

Upon the offer of the evidence on behalf of the defendant, after the plaintiff had proved the note, the presiding justice, against the exception of the plaintiff, ruled that representations made to the defendant that certain persons known to him had agreed to become members of the local board of directors, and had already been secured as such, were such material representations as, if fraudulently made, and relied on by the defendant as an inducement to the making of the note, would constitute a defence under so much of the answer as contained an allegation of fraud; and admitted evidence to show this. This was correct. As the scheme proposed to the defendant was, that, having himself taken a policy of insurance in the plaintiff company, he should be associated with others in a local board of directors who were to have charge of the plaintiff's investments in Worcester county, and to be interested in the business of the company to a certain extent, it was certainly important for the defendant to ascertain who were to be associated with him in this enterprise. Knowledge upon this subject might make the entire difference with him whether he would embark in it by giving his note and taking out his policy. If it were fraudulently represented that certain persons had agreed to compose a part of this board, with whom for any reason, whether personal acquaintance, a high opinion of their character, credit or capacity, he was willing to be associated, and he had consented to such association, it would be unjust that he should, by such an agreement, be compelled to associate himself with other and different persons. If induced to give his note upon such fraudulent representation, as a portion of his contribution to the enterprise itself, or to the company with which it was connected, it would afford him a good ground of defence thereto while in the hands of him who had thus obtained it.

The contention of the plaintiff is, that this ruling took from the jury the right to say whether a material fraud had been committed on the part of the plaintiff, by limiting its decision simply to the inquiry whether these representations had been falsely and fraudulently made, so that the defendant had been induced thereby to give the note in suit. But it was not for the jury to determine what was the responsibility incurred by the plaintiff, if its representations were fraudulent and false, nor what was their bearing upon the contract. The construction of an oral as well as of a written contract is for the court, which is to determine, when there is no question as to its terms, what is its legal effect upon the duties and liabilities of the parties. Its interpretation and construction involve the determination of the rights and liabilities which it creates. Short v. Woodward, 13 Gray 86. Pratt v. Langdon, 12 Allen 544. Globe Works v. Wright, 106 Mass. 207.

The plaintiff contends, on the authority of Lindenau v Desborough, 8 B. & C. 586, and Huguenin v. Rayley, 6 Taunt. 186, that the question whether the fraud was material or otherwise was a question of fact for the jury. This is a misapplication of these and kindred cases in the law of insurance, where it has been held that whether facts concealed or misrepresented increased the risk assumed by the insurer was to be determined by the jury. In such cases, it is always determined by the court, upon consideration of the contract, what is the character of the...