Union Life Ins. Co. of Indiana v. Riggs

• Citation: 123 F. 312
• Decision Date: 05 June 1903
• Docket Number: 262-266.
• Parties: UNION LIFE INS. CO. OF INDIANA v. RIGGS et al. FIDELITY MUT. LIFE INS. CO. v. SAME. HARTFORD LIFE INS. CO. v. SAME. AMERICAN CENT. CENT. LIFE INS. CO. v. SAME. NORTH-WESTERN NAT. LIFE INS. CO. v. SAME,
• Court: U.S. District Court — Western District of Missouri

123 F. 312

UNION LIFE INS. CO. OF INDIANA v. RIGGS et al. FIDELITY MUT. LIFE INS. CO. v. SAME. HARTFORD LIFE INS. CO. v. SAME. AMERICAN CENT. CENT. LIFE INS. CO. v. SAME. NORTH-WESTERN NAT. LIFE INS. CO. v. SAME,

Nos. 262-266.

United States Circuit Court, W.D. Missouri, Saint Joseph Division.

June 5, 1903

William A. Kerr and Brown & Dolman, for complainants.

Kendall B. Randolph, W. H. Haynes, R. A. Hewitt, J. T. Blair, and W M. Fitch, for defendants.

PHILIPS District Judge.

The above-named complainants filed separate bills of complaint against the respective defendants. As they present practically the same questions of fact and law, they will be considered in one opinion.

They are suits in equity to have surrendered and canceled separate policies of insurance issued by the respective companies upon the life of Eber B. Roloson, who died February 28, 1903 leaving a will designating the defendants Paul Riggs and Eugene De Hart as executors. The complainants are nonresident corporations, and the defendants are resident citizens of De Kalb county, in this district. The bills, in substance charge that the said Eber B. Roloson for some time prior to his application for insurance on his life in the respective companies was afflicted with certain maladies and incurable diseases, from some of which he died; that he formed a conspiracy, in connection with the defendants, to defraud the insurance companies to taking out on his life policies of insurance which aggregated about $47,500, by falsely representing his condition of health, and to that end he willfully made false statements in his applications for insurance representing his physical constitution and health that in answer to certain questions to which he was required to make answer on his examination before such policies were issued, he made false statements and assurances respecting his antecedent and present physical condition and disorders; and that in pursuance of said conspiracy he procured the local agent of the insurance companies to have him examined by local physicians, who were either in the conspiracy or were imposed upon as to the identity of the subject, who made false certificates respecting such examinations; and that all these parties purposely concealed from the insurance companies the fact that at the time of said applications the said Eber B. Roloson was sick with certain dangerous and fatal diseases, from which he afterwards died; that the assured and his co-conspirators purposely concealed from the insurance companies the fact that he had obtained, and was obtaining, such a large amount of insurance on his life. The bill alleges that all of said false statements, assurances, and representations were material in the making of said contracts of insurance, which was well known to the applicant, and that the insurance companies relief upon the truth of said statements when the policies of insurance were issued, and that they would not otherwise have issued the same. It alleges that at the time of taking out said policies of insurance the said Eber B. Roloson was wholly insolvent, and that the premiums stipulated to be paid on all of said policies, amounting annually to the sum of $2,000, with the assistance of the defendant Howard J. Roloson, his brother, were borrowed to pay said installments; that, in pursuance of the understanding between the parties in procuring said insurance, the said Eber B. Roloson, while in a dying condition, made his last will and testament, appointing the defendants Paul Riggs and Eugene De Hart executors thereof, with the understanding that they were to be assisted by the said Howard J. Roloson, who, by private arrangement between him and the deceased, was to be paid $2,000 for his services in and about procuring said policies. The said policies were made payable to the estate of the said Eber B. Roloson, and his daughter was made the principal beneficiary. The said will was admitted to probate in said De Kalb county of the 4th day of March, 1903. The bill alleges that the facts respecting the fraudulent obtaining of said policies were not discovered until after the death of the assured; that the estate of said testator is wholly insolvent, aside from its interest in these policies of insurance; and the defendants L. E. Lee, Howard J. Roloson, and J. M. Osborn are made parties defendant for the reason that they were co-conspirators with the deceased, and as such are liable for the costs of these suits, which the complainants could not otherwise obtain. The bill alleges that in some jurisdictions where suits might be instituted for recovery under the policies of insurance it is provided by local statute that should the insurance companies avail themselves of their right, under the Constitution and laws of the United States, to remove said suits into the federal court, they would forfeit their right to do business in the state, and that they fear such action may be taken by the defendants as to expose them to this disadvantage. There are other allegations made in the bills which are not deemed essential to be set out in passing upon the controlling questions raised on this hearing. The bills pray for the surrender and cancellation of the policies, and that the defendant executors be enjoined from undertaking to collect the same by suits at law, or from assigning and transferring the policies, etc. Tender of the premiums received was duly made.

On the presentation of these bills to the court a temporary restraining order was issued, with leave to the defendants to appear before the court at chambers on the 25th day of May, 1903, to show cause, if any, why the restraining order should not be continued in force; on which day the defendants appeared by their respective counsel, and, while not presenting a formal demurrer to the bills, they raised the question, which was fully argued by counsel on both sides, as to whether this court could take jurisdiction in equity over this controversy. The court, therefore, has given full consideration to, and proceeds to express its opinion upon, this issue.

In arriving at my conclusion I eliminate the averment of the bill respecting the possibility of the executors instituting suits on the policies in some jurisdiction where unfriendly legislation of the state visits the exercise of the right of removal by the nonresident insurance companies from the state to the federal court by a revocation of its license to do business in the state. It does not occur to me how the executors could institute such suits in another jurisdiction, even if they desired. It is the general rule of administration law that an executor appointed by a court of probate of one state has no standing in the courts of another state to maintain an action therein as such executor. Where there are assets located in the foreign state sought to be recovered, it becomes necessary to have an ancillary administration under the probate laws of the situs of the asset to be reduced to possession, to be administered therein, subject to the rights of the local creditors, if any. How such ancillary administration could be obtained in Illinois, for instance, when the only purpose would be to sue the insurance companies in that state, is not apparent, when the executors can as well institute and maintain such action in the state of their domicile.

I also eliminate from consideration the allegation of the bill respecting the possibility of the transfer of the policies to a nonresident party. The executors holding the policies in trust for the purpose of collection and administration, under the supervision of the probate court, could not sell or assign them. Under the scheme of the administration laws of Missouri, it is the duty of the executors to collect the assets of the estate, and they are only authorized to sell, under order of the probate court, when the claims shall be reported as uncollectible because of the debtor's insolvency.

I have long understood that it inheres in courts of equity jurisdiction to maintain suits for the cancellation and nullification of contracts, in form, obtained by fraud, deceit, or duress. This is unquestionably the doctrine of the English courts. Lord Eldon, in Bromley v. Holland, Coop. 9, speaking of this jurisdiction, says:

'There is an ancient jurisdiction in this court to order bills, policies of insurance, and annuity deeds to be delivered up, and it is a wholesome jurisdiction, to order void instruments to be delivered up, upon which vexatious demands might afterward be set up.'

The British Equitable Assur. Co. v. Great Western Railway Co., 20 Law t. 422, presented the case of the procurement of a policy of life insurance by fraud similar to that practiced in this case. The bill was brought, also as in the case at bar, after the death of the assured. Lord Justice Giffard said:

'I was surprised, I must say, to hear the question of jurisdiction argued in this case. If there is any one thing clearer than another, it is that in such a case as this this court has jurisdiction.' The policy in that case had been assigned before suit brought, but the court took jurisdiction to decree its cancellation. Lord Justice Selwyn concludes his opinion in these words:

'Under these circumstances, therefore, I think it quite clear that the policy is a void policy, and one which the office was entitled to file a bill to have canceled and delivered up; and, considering the very serious consequences to insurance companies of disputing upon any other than very clear ground, in this case, as I have formed a very clear opinion that in my judgment they were fully justified in resisting this claim, that there was no foundation for this appeal, and that it must be dismissed, with costs.'

Chancellor...