Stamen v. Metropolitan Life Ins. Co.

Decision Date26 July 1956
Docket NumberNo. A--334,A--334
PartiesJoseph STAMEN, Plaintiff-Respondent, v. METROPOLITAN LIFE INSURANCE COMPANY, etc., Defendant-Appellant. . Appellate Division
CourtNew Jersey Superior Court — Appellate Division

Nicholas Conover English, for appellant (McCarter, English & Studer, Newark, attorneys).

Harry Schaffer, Newark, for respondent (Louis M. Drazin, Red Bank, attorney).

Before Judges GOLDMANN, BURTON and SULLIVAN.

The opinion of the court was delivered by

GOLDMANN, S.J.A.D.

Plaintiff brought this action to recover monthly disability benefits allegedly due him under a life insurance policy issued by defendant company. Defendant counterclaimed for reformation of the policy so as to eliminate the provisions for such payments, on the ground of mutual mistake or, alternatively, mistake on its part and fraud on plaintiff's. Disability was conceded. The pretrial order provided that since the issues arising under the counterclaim sounded in equity, they should be tried and determined by the court sitting without a jury. Such a trial was held and resulted in a judgment dismissing the counterclaim and awarding plaintiff recovery of disability benefits less a sum representing the deficiency in total premiums, with interest thereon, properly due defendant.

The history of the policy in suit merits detailing. On February 28, 1930 plaintiff made written application to defendant for a $5,000 '10-year renewable term' life insurance policy. The company decided that he was not eligible for such insurance, and instead issued policy No. 6 262 287A, dated March 10, 1930, under its 'endowment at age 85' plan. Thereafter plaintiff, on March 28, executed an application amendment changing the requested plan of insurance to 'Endowment at Age 85,' in order to make the policy as issued conform with the written application. Neither the original application nor the application amendment, copies of which were annexed to and made part of the original policy, contained any request for disability benefits--either waiver of premiums or payment of monthly income in the event of total and permanent disability--and no premium for any kind of disability coverage was charged. Plaintiff accepted delivery of the policy on or about March 28, 1930 and thereafter retained it.

Five years later, on February 20, 1935, plaintiff applied to defendant to change his policy from 'Endowment Age 85' to 'Endowment Age 85 Disability Provision Waiver of Premium only, the rewritten policy to bear original date,' and surrendered the policy for appropriate action. Defendant acted favorably upon the written request. The annual premium was increased by $3.60, from $93.20 to $96.80, and a rider on Form 1088, providing only for waiver of premiums in the event of total and permanent disability, was attached to the policy. Plaintiff thereupon on March 30, 1935 signed an application amendment, a copy of which was attached to and made part of the policy, requesting the indicated change in insurance plan. The policy, with Form 1088 attached, was delivered to and retained by him.

Plaintiff initiated yet another change on March 7, 1941, when he signed an application, a copy of which is attached to and made part of the policy, to change the plan from 'Endowment at Age 85 with Disability Waiver' to 'Whole Life with Disability Waiver, the rewritten policy to bear original date.' At that time he surrendered his policy for reissue in accordance with the request. A clerk in the Change Division of defendant's home office calculated the revised annual premium at $86.50 (the premium on the main policy was reduced from $93.20 to $83.20 and the premium for disability waiver of premiums from $3.60 to $3.30), and gave written instructions for a rider on Form 1088 to be attached to the rewritten policy. The application and other papers were then sent to the Policy Division for preparation of a new policy under the requested whole life plan. A clerk there crossed out the instructions for a Form 1088 rider by substituting '988' for '1088.' His action was not in accordance with the company practice nor with plaintiff's application.

The request for a change of plan necessitated the preparation of a new policy on a form appropriate for the whole life plan. Consequently, the reissued policy was a different instrument, the original policy subsequently being destroyed by defendant after being retained some three years, in accordance with its routine practice. The new policy had the same number as the original and, as requested by plaintiff, bore the original date of issue, March 10, 1930. Attached was a rider on Form 988, which provided for not only waiver of premiums but also monthly income in the event of total and permanent disability. It should be noted that defendant had discontinued selling insurance under Form 988 in November 1931. The inclusion of the form was clearly a mistake on the part of defendant's employees. The rewritten policy was in due course delivered to plaintiff who accepted it and has since retained it. In accordance with its practice, defendant kept no carbon copy of either the policy as originally issued in 1930 or of the reissued policy prepared in 1941.

It is undisputed that plaintiff never paid the premium chargeable for monthly income in addition to waiver of premiums in the event of total and permanent disability. Defendant's records show that the premium charged for the disability rider between 1935 and 1941 was $3.60, and after the policy was reissued in May 1941, $3.30. The correct premiums would have been $16.30 and $16.10, respectively, during those two periods. Nor is it disputed that it was not until November 18, 1953 that plaintiff first notified defendant that the rewritten policy delivered to him in May 1941 contained a rider providing for monthly income payments in the event of total and permanent disability.

Defendant suggests, 'not as a ground for reversal, but for securing englightenment for the Bar and for the trial bench as to the proper policy to be followed in administering R.R. 4:41--3,' that at the pretrial conference the Law Division judge should have on his own motion transferred the action to the Chancery Division. The issues, it is said, were then sufficiently narrowed, so that the only litigated ones remaining were those involving the counterclaim for reformation; and that although the action had thus become 'a 100% Simon-pure equity case' the court declined to transfer on its own motion when invited to do so. Defendant claims that the disadvantages resulting were, first, unnecessary expense and delay occasioned by waiting for the case to be reached for trial and, second, prejudice to its rights because it was 'deprived of trial before a judge who was a specialist in equity matters.'

The suggestion that we render an advisory opinion on R.R. 4:41--3 is completely without merit in view of (1) defendant's admission that the court's action was correct and not a ground for reversal under R.R. 4:40--2 and 4:41--3; (2) its express stipulation, set out in the pretrial order, that the matter be heard by the court without a jury; and (3) the fact that the question has been fully settled. The Supreme Court and this court have both held that Art. VI, § III, pars. 3 and 4 of the 1947 Constitution provide generally for the expeditious handling of all matters in controversy at one time and place, and require, where possible, complete determination of a controversy by the court which first properly obtains jurisdiction over the subject matter. O'Neill v. Vreeland, 6 N.J. 158, 77 A.2d 899 (1951); Tumarkin v. Friedman, 17 N.J.Super. 20, 85 A.2d 304 (App.Div.1951), certification denied 9 N.J. 287, 88 A.2d 39 (1952); Garrou v. Teaneck Tryon Co., 11 N.J. 294, 94 A.2d 332, 35 A.L.R.2d 1125 (1953); Asbestos Fibres, Inc., v. Martin Laboratories, Inc., 12 N.J. 233, 96 A.2d 395 (1953); In re Opper's Estate, 29 N.J.Super. 520, 103 A.2d 19 (App.Div.1954).

Equity will grant reformation of an insurance policy where there is mutual mistake or where a mistake on the part of one party is accompanied by fraud or other unconscionable conduct of the other party. Heake v. Atlantic Casualty Ins. Co., 15 N.J. 475, 481, 105 A.2d 526 (1954); Volker v. Connecticut Fire Ins. Co., 22 N.J.Super. 314, 321, 91 A.2d 883 (App.Div. 1952); Koch v. Commonwealth Ins. Co. of New York, 87 N.J.Eq. 90, 93--94, 99 A. 920 (Ch.1917), affirmed o.b., 88 N.J.Eq. 344, 102 A. 1053 (E. & A.1917).

Our courts have long held that a party seeking reformation must establish his right to relief by proof that is clear and convincing. Among the many cases we may note Graham v. Berryman, 19 N.J.Eq. 29 (Ch.1868), reversed sub nom. Berryman v. Graham, 21 N.J.Eq. 370, (E. & A.1869); Rowley v. Flannelly, 30 N.J.Eq. 612 (Ch.1879); First National Bank of Town of Union v. Fessler, 84 N.J.Eq. 166, 92 A. 914 (E. & A.1915); By-Fi Building & Loan Association v. New York Casualty Co., 116 N.J.Eq. 265, 173 A. 90 (Ch.1934); Ehnes v. Monroe Loan Society, 120 N.J.Eq 599, 187 A. 180 (E. & A.1936); Laytham v. Mann, 120 N.J.Eq. 563, 188 A. 242 (Ch.1936); Asbestos Fibres, Inc., v. Martin Laboratories, Inc., above; Millhurst Milling & Drying Co. v. Automobile Ins. Co., 31 N.J.Super 424, 107 A.2d 46 (App.Div.1954). And see 2 Restatement of the Law of Contracts, § 511, p. 981.

R.R. 1:5--4(b) and 2:5 authorize an appellate court, on a review of any civil cause involving issues of fact not determined by the verdict of a jury, to make new or amended findings of fact, due regard being given to the opportunity of the trial court to judge of the credibility of the witnesses. The exercise of such power when the interests of justice require it is demonstrated in such cases as Sun Dial Corp. v. Rideout, 25 N.J.Super. 591, 96 A.2d 788 (Ch.Div.1953), reversed 29 N.J.Super. 361, 102 A.2d 90 (App.Div.1954), affirmed 16 N.J. 252, 108 A.2d 442 (1954); Pratico v. Rhodes, 32 N.J.Super. 178...

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