Abroms v. New York Life Insurance

This is an appeal from two judgments dismissing an action for reformation of an insurance policy after a demurrer had been sustained to appellant’s complaint without leave to amend.

A single premium policy was purchased from respondent by appellant and his wife, Rose Abroms, on June 20, 1932, providing for the payment to Rose of a life annuity of $79.10 per month “commencing on the anniversary of this Policy upon which the Annuitant’s age at nearest birthday is 60 years; but, at any time prior to the commencement of such Annuity payments, the Annuitant may, provided the Policy is then in force, elect in writing to receive in lieu thereof either:

“ (1) A Life Annuity, as shown in Schedule I hereof, or

“(2) A Refund Annuity as shown in Schedule II hereof.

“The Company further agrees to pay to Abraham Abroms, husband of the Annuitant, Beneficiary, in the event of the receipt of due proof of the death of the Annuitant, a Death Benefit as shown in Schedule III hereof, if such death shall occur prior to the due date of the first Annuity payment hereunder; or, if a Refund Annuity has been elected and such death shall occur on or after the due date of the first Annuity payment, the Company agrees to pay to said Beneficiary the Annuity payments, if any, becoming due after the death of Annuitant, as set forth in the provision hereof entitled ‘Annuity Payments.’

‘ ‘ The Company, upon surrender of this Policy on the anniversary elected for commencement of Annuity payments hereunder, will issue a Certificate in lieu thereof setting forth the rights and benefits as stated herein.

“This contract is made in consideration of the application therefor and of the payment in advance of the single premium of $10,000.00 representing Ten Premium-Units of $1,000 each . . . This Policy takes effect as of the First day of July Nineteen Hundred and Thirty-two. ...”

On July 1, 1939, Annuity Certificate No. 82 810 was issued by the Company, reading in part as follows:

“Retirement Annuity Policy No. 82 810, having been is

sued by the New York Life Insurance Company on the life of Rose Abroms, the Annuitant, and said Policy having been surrendered to said Company,

“And Dividends on Deposit, in the amount of Two Hundred Thirty-one Dollars and Thirty-six Cents ($231.36) having been applied in accordance with the written request of said Annuitant and the provisions of said Policy to increase the amount of the Annuity payments to the amount hereinafter set forth,

“And this Certificate having been issued in exchange for and in full settlement of said Policy,

“Said Company, in accordance with the request of said Annuitant and the provisions of said Policy, shall pay to said Annuitant, if living, a Life Annuity of Eighty Dollars and Sixty-two Cents ($80.62) payable monthly at the Home Office of said Company in the City and State of New York, as follows:

‘1 The First Annuity payment of Eighty Dollars and Sixty-two Cents shall be made as of the First day of July, in the year Nineteen Hundred and Thirty-nine, and a like amount shall be paid monthly thereafter during the lifetime of said Annuitant. Said Annuity payments shall terminate with the last monthly payment due prior to the death of said Annuitant.”

It is alleged in the complaint herein that on July 1, 1939 (the anniversary of the policy on which the age of annuitant Rose Abroms at her nearest birthday was 60 years) said annuitant and her husband, Abraham Abroms, the appellant herein, “went to the office of defendant in the City of Los Angeles, County of Los Angeles, State of California, for the purpose of surrendering the aforementioned policy and receiving in lieu thereof a Certificate as described in said policy and which would provide for a refund annuity as shown in Schedule II of said policy whereunder the annuity payments would be payable to Rose Abroms as annuitant until her death, and upon her death there would be payable to the plaintiff as beneficiary the annuity payments becoming due after the death of Rose Abroms as set forth in the provision of said policy entitled ‘Annuity Payments’; that the plaintiff and his said wife then and there informed the defendant and its agents and servants that they were desirous of surrendering the aforementioned policy for a Certificate providing for such refund annuity;

On May 16, 1941, the annuitant Rose Abroms died and “shortly after the death of said Rose Abroms, the defendant notified arid informed the plaintiff that the Certificate which had been issued to them was in truth and in fact a life annuity Certificate rather than a refund annuity Certificate and

Demand for reformation of the certificate by appellant and refusal by the respondent to either reform or pay appellant any sum or sums of money are also alleged.

To this complaint respondent corporation interposed a general and special demurrer in support of which was submitted a memorandum of points and authorities to the effect (a) No one can maintain an action to reform a deed or other contract unless he has some title or interest therein; (b) Where the policy reserves to the .insured the right to change the beneficiary, the interest of the beneficiary prior to the death of insured is a mere expectancy subject to revocation.

Said demurrer was argued and submitted on December 5, 1941, and on December 15, 1941, was sustained by the court without leave to amend; whereupon appellant moved the court for leave to file his first amended complaint, the original of which was attached to the notice of motion. Said motion was heard and denied by the court on December 31 and on January 5 and January 6, 1942, judgments dismissing said action were entered.

The first amended complaint in addition to the facts alleged in the original complaint averred that Eose and Abe Abroms were married in the year 1905 and continuously from that date until the death of Eose on May 16,1941, said parties were husband and wife and lived together as such; that on July 7, 1941, appellant was appointed administrator of the estate of Eose Abroms, deceased, and that “Abe Abroms is suing herein both in his individual capacity in his own right, and as the duly appointed, qualified and acting administrator of the estate of Eose Abroms . . . deceased. . . .

“That the aforementioned policy number 82810 was at the time of its surrender and at the time of the issuance by the defendant of the aforementioned Certificate, the community property of the plaintiff, Abe Abroms, and his wife, Eose Abroms, and the plaintiff, Abe Abroms, had a community interest therein; that the plaintiff ... at no time consented or agreed to the issuance by the defendant of the Certificate

The questions for determination by this court appear to be: (1) Has appellant such an interest in the annuity certificate as to entitle him to maintain the present action? (2) Does the complaint sufficiently state a cause of action for reformation ?

The gist of the instant action is the fraud of respondent corporation in issuing the wrong type of certificate which erroneously failed to name appellant, thus eliminating therefrom a statement of the benefits conferred upon him under the original policy in which he was the named beneficiary. Attention is here called to the statement in the original policy: “The Company, upon surrender of this Policy on the anniversary elected for commencement of Annuity payments hereunder, will issue a Certificate in lieu thereof setting forth the rights and benefits as stated herein.” (Italics added.) Had respondent conformed to said provision and the alleged request of appellant and his wife, and had issued the refund annuity certificate, as requested, appellant would then have had a vested interest in the proceeds of the policy and unquestionably would have been the real party in interest in an action to recover the same.

In Cantlay v. Olds & Stoller Inter-Exchange, 119 Cal. App. 605 [ 7 P. (2d) 395 ], parties who were not designated as the named assureds in an automobile liability policy, but who alleged they were intended to have been insured under the policy, brought an action to reform it so as to show them as being insured and for enforcement of the policy as reformed. In affirming the judgment in favor of plaintiffs, the court said (p. 617) : “In the instant ease, although the policy of insurance is between the Eastman Company as the insured and the Insurance Company as the insurer, the allegations of the complaint set forth a beneficial interest therein, in favor of the plaintiffs and they are therefore entitled to maintain this action.”

The equitable action for reformation is preserved by sections 3399 to 3402, inclusive, of the Civil Code:

Section 3399, supra: “When, through fraud or a mutual mistake of the parties, or a mistake of one party, which the other at the time knew or suspected, a written contract does not truly express the intention of the parties, it may be revised, on the application of a party aggrieved, so as to express that intention, so far as it can be done without prejudice to rights acquired by third persons, in good faith and for value.”

Section 3400, supra: “For the purpose of revising a contract, it must be presumed that all parties thereto intended to make an equitable and conscientious agreement.”

Section 3401, supra: “In revising a written instrument, the court may inquire what the instrument was intended to mean, and what were intended to be its legal consequences, and is not confined to the inquiry what the language of the instrument was intended to be.”

Section 3402, supra: “A contract may be first revised and then specifically enforced.”

From what has been said, it is obvious that appellant is a “party aggrieved” under section 3399, supra, especially where the demanded reformation is for the purpose of show

Respondent urges that appellant has not alleged facts excusing the alleged failure of himself and his wife to read the Annuity Certificate. Upon this subject, the following excerpt is quoted from the opinion in the case of California Trust Co. v. Cohn, 214 Cal. 619 , 627 [ 7 P. (2d) 297 ] : “We are inclined to the view, therefore, that where the failure to familiarize one’s self with the contents of a written, contract prior to its execution is traceable solely to carelessness or negligence, reformation as a rule should be denied; but that where such failure, and perhaps negligence, is induced, as alleged and admitted by the demurrer in this case, by the false representations and fraud of the other party to the contract that its provisions are different from those set out, the courts, even in the absence of a fiduciary or confidential relationship between the parties, should reform and in most cases have reformed, the instrument so as to cause it to speak the true agreement of the parties.” (Citing authorities.) (See, also, S. E. Slade Lbr. Co. v. National Surety Co., 128 Cal. App. 419 , 425 [ 17 P. (2d) 775 ].)

An action to reform a contract is in equity, and in order to state a case therein, it is incumbent upon the pleader to show by direct averment that “by reason of fraud practiced by one of the parties, or of the mutual mistake of the parties or of a mistake of one of them, which the other at the time knew or suspected, there were omitted from the instrument certain material terms and conditions. In other words, that the language of the writing failed, for some reason, to express the intention of the parties.” (Pascoe v. Morrison, 219 Cal. 54 , 56 [ 25 P. (2d) 9 ].)

In Johnson v. Sun Realty Co., 138 Cal. App. 296 , 301 [ 32 P. (2d) 393 ], wherein a demurrer to the complaint was sustained without leave to amend, it was held: “The complaint [in an action for reformation] is sufficient if it shows, by direct averment, that by reason of fraud practiced by one of the parties, the executed agreement is not the actual agreement. (P ascoe v. Morrison, 219 Cal. 54 [ 25 P. (2d) 9 ].) This it does, for it is alleged that respondent falsely represented that the executed agreement was the one agreed upon, that appellant relied upon such misrepresentation and was induced thereby to sign, (Cross v. Bouck, 175 Cal. 253 [ 165 Pac. 702 ].)”

Since the effect of a demurrer is to admit all of the allegations of the complaint which are well pleaded, it must be assumed on appeal from the judgment that all the facts are as alleged. (21 Cal. Jur. 96; Penziner v. West American Finance Co., 133 Cal. App. 578 [ 24 P. (2d) 501 ].)

A consideration of the allegations of the complaint having the above rule in mind has persuaded this court that the complaint herein states a cause of action for reformation; that respondent’s demurrer thereto should have been overruled, and that appellant should have been permitted to file his first amended complaint.

For the' reasons stated, the judgments of dismissal are reversed, with directions to the trial court to overrule the demurrer and to permit appellant to file his first amended complaint, if he still desires to do so.

Doran, J., and White, J., concurred.

Respondent’s petition for a hearing by the Supreme Court was denied October 1, 1942. Shenk, J., and Edmonds, J., did not participate therein.