Williams v. Continental Life & Acc. Co., 12604

• Citation: 593 P.2d 708,100 Idaho 71
• Decision Date: 17 April 1979
• Docket Number: No. 12604,12604
• Parties: Yvonne Jean WILLIAMS, Plaintiff-Respondent, v. CONTINENTAL LIFE & ACCIDENT COMPANY, an Idaho Corporation, Defendant-Appellant.
• Court: Idaho Supreme Court

Page 708

593 P.2d 708

100 Idaho 71

Yvonne Jean WILLIAMS, Plaintiff-Respondent, v. CONTINENTAL LIFE & ACCIDENT COMPANY, an Idaho Corporation, Defendant-Appellant.

No. 12604.

Supreme Court of Idaho.

April 17, 1979.

Edith Miller Klein of Langroise, Sullivan & Smylie, Boise, for defendant-appellant.

Harold L. Ryan of Ryan & Sweet, Weiser, for plaintiff-respondent.

McFADDEN, Justice.

The facts of this case were stipulated to prior to trial and are summarized as follows. Plaintiff-respondent Yvonne Jean Williams is the surviving wife of Lee Williams, also known as Lee L. Williams, who died in a tractor accident on July 22, 1974. Under the probate decree respondent was made responsible for all the community debts.

On January 9, 1973, Lee L. Williams incurred an indebtedness to the Idaho First National Bank, Weiser Branch, in the principal sum of $21,000. In connection therewith, appellant Continental Life, through its agent Idaho First National Bank, issued a certificate of credit life insurance on Williams' life in the amount of $10,000. On December 10, 1973, Lee Williams incurred a second indebtedness to the bank, this time in the amount of $6,000, and was issued a second certificate of credit insurance also in the amount of $6,000. On January 7, 1974, Lee Williams incurred a third indebtedness to the bank, also for $6,000, and was issued a third certificate of credit life insurance in the amount of $4,000. The record before us contains copies of those three certificates, but does not contain the actual applications made by the decedent. All three certificates were issued by the same Continental Life agent, Mr. Jess Walker, who was the bank manager. He was also the agent who presented proof of loss on all three policies to appellant shortly after Williams' death.

On October 29, 1974, some two and a half months after the agent submitted the claims, respondent's attorney made written demand upon appellant for payment of all three policies. Appellant thereafter paid the first policy, issued to Lee L. Williams for $10,000, but refused to pay the other two policies. Appellant asserted that it had no knowledge that Lee L. Williams and Lee Williams were one and the same individual. As a result, appellant insisted that the two unpaid policies were issued in violation of I.C. § 41-2005(4), providing a $10,000 limitation on any one debtor, and that the policies were therefore void. The premiums were refunded to respondent, who then commenced this action to recover the $10,000 due on the two unpaid policies.

On these stipulated facts the district court rendered its judgment for respondent on the policies plus $2,500 for attorney fees. The court concluded that the agent's personal knowledge of the decedent's identity and his face to face dealings with the decedent were imputed to and binding upon appellant. The court ruled that appellant was estopped to deny liability on the policies.

Appellant has raised ten issues on appeal, which may be reduced to two issues for purposes of this opinion. The first issue is whether the agent's personal dealings with the decedent and his personal knowledge that Lee L. Williams and Lee Williams were on the same person is binding on appellant. The parties stipulated prior to trial that: "Until claim was made by the plaintiff (respondent), defendant (appellate) did not know that Lee L. Williams and Lee Williams were the same person, and that the restriction on amount contained in said section 41-2005, Idaho Code, had been exceeded." Appellant contends that this stipulation is binding on respondent to the effect that appellant's lack of knowledge of essential facts precludes respondent's recovery on an estoppel theory.

The district court rejected appellant's contentions on this issue. The court concluded that the stipulation was limited to appellant's Actual knowledge, as compared with its Imputed knowledge arising from the principal-agent relationship. The district court stated in its memorandum decision that: "The actions and knowledge of defendant's (appellant's) agent are imputed to defendant (appellant) even though defendant (appellant) itself had no actual knowledge thereof." There is no error here. As this court said in Sulik v. Central Valley Farms, Inc., 95 Idaho 826, 838, 521 P.2d 144, 146 (1974):

The general rule that notice to the agent is notice to the principle is well established. Harding v. Home Investment etc. Co. 49 Idaho 64, 286 P. 920 (1930); Restatement Agency 2d (1958), § 268 at p. 582 et seq.; In re Estate of Milliman, 101 Ariz. 54, 415 P.2d 877 (1966). See also Claris v. Oregon Short Line R.R. Co., 56 Idaho 169, 51 P.2d 217 (1936), cert. denied, 297 U.S. 714, 56 S.Ct. 590, 80 L.Ed. 1000. Likewise, knowledge of the agent acquired during the course of the agency relationship, and while the agent is not acting in an interest adverse to that of the principal, is imputed to the principal. Restatement Agency 2d, Supra, § 272 at P. 591, § 381 at P. 182; Seavey, Law of Agency, 1964 § 97 at p. 174; Imperial Finance Corp. v. Finance Factors, Ltd., 53 Haw. 203, 490 P.2d 662 (1971); Supreme Petroleum, Inc. v. Briggs, 199 Kan. 669, 433 P.2d 373 (1968).

See also Industrial Indemnity Co. v. United States F. & G. Co., 93 Idaho 59, 454 P.2d 956 (1969); Mabee v. Continental Cas. Co., 37 Idaho 667, 219 P. 598 (1923); Carroll v. Hartford Fire Ins. Co., 28 Idaho 466, 154 P. 985 (1916).

The second issue is whether the policies issued in violation of the statutory dollar limitation can be enforced.

I.C. § 41-2005(4) at the time these policies were issued provided that

The amount of insurance on the life of any debtor shall at no time exceed the amount owed by him to the creditor, or ten thousand dollars ($10,000), whichever is less, except that in case of long term agricultural real estate mortgages or agricultural short term crop production loans, the amount of insurance on the life of the debtor shall at no time exceed the amount owed by him to the creditor or twenty-five thousand dollars ($25,000), whichever is less.

Appellant maintains that the two policies issued in excess of $10,000 violate the statute, and are therefore illegal and void, regardless of the hardship occasioned by such a result. The statute itself, however, is silent as to the consequences for its breach. Moreover, the legislature in 1974 amended I.C. § 41-2005(4) to increase the limitation from $10,000 to $25,000 for all debtors and the amended statute is likewise silent as to consequence for its breach. We therefore must look to familiar rules of the common law of contracts for resolution of this case.

The general rule is that a contract prohibited by law is illegal and unenforceable. Whitney v. Continental Life and Accident Co., 89 Idaho 96, 403 P.2d 573 (1965); Hancock v. Elkington...