Quast v. Fid. Mut. Life Ins. Co.

• Decision Date: 29 April 1919
• Citation: 123 N.E. 494,226 N.Y. 270
• Parties: QUAST v. FIDELITY MUT. LIFE INS. CO.
• Court: New York Court of Appeals Court of Appeals

226 N.Y. 270

123 N.E. 494

QUAST

v.FIDELITY MUT. LIFE INS. CO.

Court of Appeals of New York.

April 29, 1919.

Appeal from Supreme Court, Appellate Division, Fourth Department.

Action by William A. Quast against the Fidelity Mutual Life Insurance Company. From judgment of the Appellate Division (178 App. Div. 908,164 N. Y. Supp. 1110), affirming judgment of the trial term for plaintiff, defendant appeals. Affirmed.

Wilbur E. Houpt, of Buffalo, for appellant.

Charles M. Harrington, of Buffalo, for respondent.

CRANE, J.

This is an action upon an insurance policy to recover the guaranteed cash value, together with the profits apportioned thereto.

William A. Quast, a resident of Buffalo, N. Y., in December of 1893 was insured for $2,000 by the Fidelity Mutual Life Association of Philadelphia. The annual premium was $32.16, which was paid by the insured for 12 successive years, the last payment being made December 25, 1904.

The company, in 1905, had changed from a mutual life association to a regular stock company, taking the name of the Fidelity Mutual Life Insurance Company, and thereafter instead of writing insurance on the assessment plan proceeded to write all new policies on the legal reserve basis. Being desirous of exchanging the old policies outstanding for those of the new form of insurance which it was issuing, the defendant sent out an agent, one Masten Newton, to call upon the policy holders and effect a substitution where possible. The advantage or reasons for the change need not here be considered.

Newton called upon the plaintiff at his then place of business in Buffalo, and requested him to surrender his old policy and take out a new policy on the 20-payment life plan. The application which the insured signed at Newton's request read as follows:

‘Application.

‘I, William A. Quast, do hereby apply to the Fidelity Mutual Life Insurance Company, of Philadelphia, Pa., for an insurance on my life for $2,000 on the 20 Pay G. A. plan, the premium, as stated in the policy, to be payable annually. I was born on the 8 day of December, 1865, and desire policy to be issued as of age 29. Premiums to be fully paid in 10 years from this date. Make policy payable to Della A. Quast, related to me as wife. I select the 10 year accumulation period, and I hereby agree on behalf of myself, and of any person who shall have or claim any interest in the policy issued under this application, that in the matter of distribution of surplus or profits, or the apportionment of dividends the principles and methods which may be adopted by the company for such distribution or apportionment, and its determination of the amount equitably belonging to any policy which may be issued under this application, shall be and hereby are ratified and accepted.

‘In consideration of the issuance of the policy herein applied for, I hereby surrender to said company all right, title and interest in and to policy or certificate No. 45635, issued to me under the title of the Fidelity Mutual Life Association.

‘Dated at Buffalo, N. Y., May 27, 1905.

‘William A. Quast, Applicant,

‘Address: 65 Watson St., Buffalo, N. Y.

‘Witness: M. Newton.’

The premium for the new policy was $72.68, payable annually for 10 years, the policy becoming a fully paid up policy on May 27, 1915.

The agreement, as understood by the plaintiff and as called for by the application and the policy, was, in substance, that the plaintiff should surrender his old policy upon which he had paid for 12 years and that the defendant would give him a 20-payment life policy to become a fully paid up policy by the annual payment of $72.68 for 10 years. The first 10 years of the 20-payment life policy were to be paid for by the surrender of the old policy.

The new policy, when issued, recited the contract in these particulars as follows:

‘This insurance is granted as of date May 27, 1895, in consideration of the application herefor, which is made a part hereof, and of the surrender and cancellation of policy No. 45635, issued by the Fidelity Mutual Life Association, now the Fidelity Mutual Life Insurance Company, and of the payment in advance of seventy-two and 68/100 dollars, and of the payment of a like amount on or before the 27th day of May in every year thereafter, until premiums for twenty years have been duly paid, or until the prior death of the insured.

‘The premium paying period on this policy ends on the twenty-seventh day of May, 1915.’

The insured paid the premiums as called for until the maturity of the policy on the 27th day of May, 1915, when he elected to take, in accordance with its provisions, the paid-up cash value, together with the profits. The defendant then for the first time informed him that he had signed a certificate of loan wherein he had agreed to pay $536, and 6 per cent. thereon for the first 10 years of the 20-payment life policy, and that he was only entitled to the balance of the cash surrender value and the profits after the deduction of this amount. The balance of $622.93 the defendant offered to pay.

Claiming that he never signed any loan certificate or made any such contract, the plaintiff brought this action upon his policy.

By its answer the defendant, after certain denials and admissions, set forth as a defense the facts in substance as already stated, and further alleged that the plaintiff had borrowed from it, by a certificate of loan signed by him, the sum of $536, to pay for the first 10 years of the new policy, which was to be deducted from any sum due upon the policy, and the defendant alleged it was ready to pay the plaintiff this balance if he would accept the same.

Under these pleadings the trial proceeded upon the sole issue of whether or not the plaintiff had signed the certificate of loan. The plaintiff denied that his name appearing upon the paper had been signed by him, while the witness Masten Newton testified that the plaintiff signed it in his presence. Both sides called experts in handwriting, those for the plaintiff claiming the signature to be a forgery, and those for the defendant stating it to be genuine. The judge charged the jury as follows:

‘If you shall find that the plaintiff did not sign this certificate it will be your duty to return a verdict for the plaintiff for the full amount of $1,480.53, with interest from May 27, 1915. If you shall find that he did sign the certificate it will be your duty to bring in a verdict for $622.93, without interest.’

The jury found for the plaintiff.

After a unanimous affirmance by the Appellate Division (178 App. Div. 908,164 N. Y. Supp. 1110), only one question of law is raised on appeal to this court, which arises from the refusal of requests to charge. They are these:

‘I ask the court to charge that plaintiff's contention to the effect that the defendant agreed to issue a policy, or the policy in suit, on the surrender of the old assessment policy, and thereupon and on the payment of 10 annual premiums of $72.68 by plaintiff the defendant did issue the policy in suit under such consideration only; that the defendant then violated the law controlling the case and did discriminate in favor of individuals, between insurants of the same class in the amount of premiums paid or rates charged for policies in the same class.’

‘I ask the court to charge the jury that if the defendant did discriminate in favor of individuals between insurants of the same class in the amount of premiums paid or rates charged for policies of the same class that then the policy in suit is illegal and the plaintiff cannot recover in this action.’

The point regarding these requests is this: It appeared from the testimony of one of the defendant's witnesses that about 3,000 of the old life policy holders had surrendered their policies for new policies and in each instance had either paid cash for the insurance which was dated back or else had signed a loan certificate authorizing a deduction for such insurance to be made from the amount paid upon the policy. If the plaintiff did neither of these things, but simply surrendered his old policy for a new one which became fully paid in 10 years, he received a benefit or favor not accorded to others in his class. They not only surrendered their policies, but paid for the first years of the 20-payment life, while he surrendered his policy and paid nothing for these first 10 years except what he had already paid upon the old policy. This, it is claimed by the defendant, is a violation of the Pennsylvania or New York statute against discrimination hereafter referred to and rendered the policy or insurance contract void.

[1] At the very outset it will be noted that the defendant has failed to plead the new matter constituting the illegality. It knew before the action was commenced that the plaintiff denied the certificate of loan. By its answer it merely alleged that he had signed the certificate of loan and went to trial upon this issue. The alleged illegality did not appear upon the face of the complaint, nor in the application or insurance policy. It rested entirely upon facts within the defendant's knowledge, i. e., the surrender of old policies by 3,000 other applicants and the payment by them of cash or the giving of loan certificates for back dated insurance. These matters constituting discrimination and illegality should have been pleaded, and such defense cannot now be raised under the issues as framed.

[2] The general denial in the answer in an action on a contract puts in issue simply all matters which the plaintiff was bound to prove to make out his cause of action; in order to avail himself of facts not appearing upon the face of the contract to establish its invalidity or illegality, the defendant must plead them. Milbank v. Jones, 127 N. Y. 370, 28 N. E. 31,24 Am. St. Rep. 454;Codd v. Rathbone, 19 N. Y. 37;Morford v. Davis, 28 N. Y. 481;Kansas City School District v. Sheidley, 138 Mo. 672, 40 S. W. 656,37 L. R. A. 406, 60 Am. St. Rep. 576.

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