Phoenix Mut. Life Ins. Co. v. Conway

• Decision Date: 12 June 1962
• Citation: 11 N.Y.2d 367,229 N.Y.S.2d 740,183 N.E.2d 754
• Parties: , 183 N.E.2d 754 PHOENIX MUTUAL LIFE INSURANCE COMPANY, Respondent, v. John W. CONWAY et al., Appellants.
• Court: New York Court of Appeals Court of Appeals

Page 740

229 N.Y.S.2d 740

11 N.Y.2d 367, 183 N.E.2d 754

PHOENIX MUTUAL LIFE INSURANCE COMPANY, Respondent, v. John W. CONWAY et al., Appellants.

Court of Appeals of New York.

June 12, 1962.

Arnold A. Levin, New York City, for appellants.

Thomas C. Platt, Jr., Frank A. Fritz, Lee Sylvester and Joseph Carrieri, New York City, for respondent.

FULD, Judge.

In October, 1959, Mrs. Lillian Conway made a written application to the plaintiff, Phoenix Mutual Life Insurance Company, for a $25,000 life insurance policy on her life and thereafter (on October 16) the insurance company issued such a policy. The insured died some nine months later, in July of 1960. Assertedly discovering that she had fraudulently misrepresented certain facts in her application, the plaintiff on September 15, 1960 notified the defendants, the beneficiaries named in the policy, that it 'rescinded' the policy and tendered its check for the premiums paid.

The policy contained a clause providing that it was to be 'incontestable after it has been in force for a period of two years from its date of issue'.

Thus, when the rescission letter (of September, 1960, was written 11 of the 24 months allowed to contest the policy had already passed. The insurance company did nothing for six months. Then, in March of 1961, it notified its attorney to institute an action for rescission. He drafted the complaint, seeking rescission on the ground of fraud and misrepresentation tried for a month to effect service on the defendants and finally had them served on April 25, 1961. Thus, seven months had passed since the insurer had notified the defendants that it was treating the policy as void and more than 18 months had elapsed since the policy was issued.

The defendants filed an answer in which, in addition to denying the allegations of the complaint, they interposed a counterclaim requesting that the court 'adjudge and declare' the policy in question 'a good, valid and subsisting policy'; that the court 'adjudge and declare' that the plaintiff 'is indebted' to the defendants for $25,000; and that the defendants have judgment dismissing the complaint. To this counterclaim, the plaintiff filed a reply. Therefore, the defendants moved (1) for a separate trial of the issues of fact raised by the counterclaim and the reply and (2) for a stay of the trial of plaintiff's action until the determination by the jury of such issues. The plaintiff opposed the application. The court at Special Term granted the motion, ruling that since the defendants 'are suing on the contract * * * they have a right to a trial by jury'. The Appellate Division, however, by a divided court, reversed the resulting order and granted leave to appeal upon a certified question which we read as posing a question of law, namely, whether the Appellate Division abused its discretion. (See Kaufman v. Baker, 9 N.Y.2d 771, 215 N.Y.S.2d 76, 174 N.E.2d 748.)

Since the plaintiff brought an action in equity for rescission, an action unquestionably triable by a court without a jury, the defendants do not become entitled as a matter of law, constitutionally or otherwise, to a trial by jury. (See, e. g., Mackellar v. Rogers, 109 N.Y. 468, 17 N.E. 350; Manhattan Life Ins. Co. v. Hammerstein Opera Co., 184 App.Div. 440, 442, 171 N.Y.S. 678, 679.) Accordingly, the decision of the Appellate Division does not raise any constitutional issue and we proceed to consider whether that court abused its discretion. It is vested with the same power and discretion as the court at Special Term possesses, and it is not necessary, in order to justify the reversal, to demonstrate that Special Term abused its discretion. In other words, as we wrote in O'Connor v. Papertsian, 309 N.Y. 465, 471-472, 131 N.E.2d 883, 886, 56 A.L.R.2d 206, it matters not that the granting of an order 'would lie within the discretion of the trial court, for '(m)atters of discretion are reviewable by the Appellate Division. Since that court is a branch of the Supreme Court, whenever discretion is vested in 'the supreme court' it may be exercised by the Appellate Division by way of a review of the action of Trial or Special Term, even though there has been no abuse of discretion by the lower branch of the court.' 9 Carmody-Wait on New York Practice, § 137, p. 573, cases footnoted; Hogan v. Franken, 221 App.Div. 164, 223 N.Y.S. 1.'

In the case before u...