Steinbach v. Prudential Ins. Co. of America

• Decision Date: 18 November 1902
• Citation: 65 N.E. 281,172 N.Y. 471
• Parties: STEINBACH v. PRUDENTIAL INS. CO. OF AMERICA.
• Court: New York Court of Appeals Court of Appeals

172 N.Y. 471

65 N.E. 281

STEINBACH

v.PRUDENTIAL INS. CO. OF AMERICA.

Court of Appeals of New York.

Nov. 18, 1902.

Appeal from supreme court, appellate division, First department.

Action by Caroline Steinbach against the Prudential Insurance Company of America. From a judgment of the appellate division (70 N. Y. Supp. 809) affirming a judgment in favor of plaintiff, defendant appeals. Reversed.

This action was brought to reform a policy of life insurance as to the name of the beneficiary, and to recover upon it as reformed. Omitting the formal parts, the allegations of the complaint were that, ‘prior to the 19th of October, 1896, one Max Fehrman was indebted to the plaintiff (whose name was then Caroline Lampp, she having since married her husband William Steinbach) in divers sums of money which he was unable to pay. Said Fehrman was then insured by the defendant under policies of insurance upon his life for various amounts, the premiums upon which said policies were being then paid by the plaintiff, and constituted a part of the sum then due and owing by the said Fehrman to the plaintiff, all which was known to the defendant. And thereupon, and for the purpose of securing to the plaintiff the payment of the moneys or a part thereof, then due and owing to her from said Max Fehrman, the defendant agreed with the plaintiff, in consideration of the premises, and of the payment by the plaintiff of the weekly premiums hereinafter mentioned, to issue a further policy of insurance upon the life of said Fehrman, for the benefit of the plaintiff, in the sum of two hundred and seventy dollars, and to make said policy payable to the plaintiff upon the death of said Fehrman. Thereafter, on or about the 19th day of October, 1896, in pursuance of said agreement so made between the plaintiff and defendant, the plaintiff paid the defendant the sum of twenty-five cents, the amount of the first weekly premium above referred to, and the defendant thereupon, in pursuance of said agreement, duly made and executed its policy of insurance, in writing, and delivered said policy to the plaintiff. The said policy of insurance was dated the 19th day of October, 1896, and declared that in consideration of the application in said policy mentioned, and of the weekly premiums therein stated, namely, the sum of twenty-five cents per week during the life of said Max Fehrman, the defendant promised to pay to the executors, administrators, or assigns of the person named as the insured in said policy, to wit, the said Max Fehrman, the sum of one hundred thirty-five dollars, within twenty-four hours after acceptance by it of satisfactory proof of the death of said Max Fehrman during the continuance of said policy, provided said Fehrman should die after the expiration of six months and within one year from the date of said policy, and the sum of two hundred and seventy dollars provided said Fehrman should die after the expiration of one year from said date. Upon the delivery of said policy of insurance to the plaintiff, the defendant, by its agent, stated to the plaintiff that the same was issued by the defendant in pursuance of the said agreement, and in conformity therewith, and that by the terms of said policy the defendant did insure the life of said Max Fehrman, and did agree upon his death to pay the amount of said insurance to the plaintiff, upon her paying the premiums called for by the said policy, namely, twenty-five cents per week, and complying with the other conditions thereof; and said defendant did so state and represent to this plaintiff for the purpose of inducing this plaintiff to pay the said premiums, and made such representations intending that the plaintiff should rely thereon, and, relying thereon, should pay the said premiums accordingly. The plaintiff is a Swede, and has a very imperfect knowledge of the English language as spoken, and an especially imperfect knowledge thereof as written, and did not know, until informed thereof by her counsel after the death of Fehrman, hereinafter mentioned, that said policy of insurance was not payable to her by its terms. On the contrary, the plaintiff believed the said statements made by the defendant as aforesaid, and relied upon the same, and, so believing and relying, paid the said first premium and all subsequent premiums upon said policy of insurance up to the date of the death of said Fehrman hereinafter set forth; and plaintiff believed, when she received said policy and paid the first of said premiums and all other premiums, that the same was payable to her, and that she would be entitled to receive the money that should become payable thereunder upon the death of said Fehrman. The said statements and representations were false and untrue. The said policy was not payable to this plaintiff as represented by the defendant, nor did the same conform to the said agreement, but instead was payable to the executors, administrators, and assigns of the said Fehrman, and gave this plaintiff no interest whatever in any moneys that might become due thereunder, and no rights whatever in respect to said money. The words in said policy, ‘unto the executors, administrators or assigns of the person named as the insured in this policy,’ whereby the same was made payable to the executors, administrators, and assigns of said Fehrman, were inserted therein instead of the words ‘unto Caroline Lampp, her executors, administrators, or assigns,’ or similar words making the same payable to the plaintiff, either by mistake of the defendant or its draftsman, or else they were so inserted, and the statements and representations were made, in pursuance of an intent by the defendant to defraud the plaintiff. And the said policy of insurance was accepted in said form by the plaintiff by mistake, and upon the supposition and in the belief that the same was payable to her.'

No assignment of the policy was alleged or proved. Fehrman died on the 19th of September, 1897, and the usual proof of death was promptly served on the defendant. The relief demanded was that the name of the plaintiff be substituted in the place of the beneficiaries named in the policy, and that she have judgment upon the policy as thus reformed. The answer is substantially a general denial. No attempt was made by the defendant to raise the objection that there was a defect of parties defendant by demurrer or answer, but upon the trial, at the close of the evidence, its counsel moved to dismiss the complaint on the ground, among others, ‘that there is a defect of parties defendant here; the instrument that is sought to be reformed is payable to Max Fehrman or his executors, administrators, or assigns, and neither of those parties nor the next of kin are parties to the action.’ The motion was denied and the defendant excepted. The trial court found the facts substantially as alleged in the complaint, directed a reformation of the policy as therein demanded, and awarded judgment to the plaintiff thereon for the amount claimed. After affirmance by the appellate division, two of the justices dissenting, the defendant came here.

Haight, O'Brien, and Martin, JJ., dissenting.William Ogden Campbell, for appellant.

Walter Large, for respondent.

VANN, J. (after stating the facts).

By the judgments below, the names of the beneficiaries in a policy of life insurance were stricken out, and the name of a stranger substituted as sole beneficiary, without making the former parties to the action or giving them an opportunity to be heard. This has been done upon the ground that the insurance company, which is the sole defendant, waived the objection that there was a defect of parties defendant by not taking it either by demurrer or answer as provided by section 499 of the Code of Civil Procedure. That section, however, must be read in connection with section 452, which provides that ‘the court may determine the controversy, as between the parties before it, where it can do so without prejudice to the rights of others, or by saving their rights; but where a complete determination of the controversy cannot be had without the presence of other parties, the court must direct them to be brought in.’ The apparent inconsistency between these sections was the subject of controversy before the courts for a long time, but we think it was dispelled by the judgment in Osterhoudt v. Board, 98 N. Y. 239, 243. That was an action by taxpayers to vacate audits of town accounts for illegality and fraud, and to restrain the levy of a tax for their payment. The persons in whose favor the audits were made were not parties to the action, and, while the defendants omitted to raise the objection by demurrer or answer, they raised it upon the trial, where it was overruled. In reversing the judgment rendered in favor of the taxpayers, we said: ‘Construing sections 452 and 499 together, their meaning is that a defendant, by omitting to take the objection that there is a defect of parties by demurrer or answer, waives on his part any objection to the granting of relief on that ground; but when the granting of relief against him would prejudice the rights of others, and their rights cannot be saved by the judgment, and the controversy cannot be completely determined without their presence, the court must direct them to be made parties before proceeding to judgment. When a defendant is sued alone upon a joint contract, if he omits to set up a nonjoinder of his co-contractor by ...