Rohrschneider v. Knickerbocker Life Insurance

Majority

p. 216

Hulda Rohrschneider, Appellant, v. The Knickerbocker Life Insurance Company, Respondent.

Headnote

Defendant, in order to induce people to insure with it, caused advertisements to be published and pamphlets to be issued, stating, ir. substance, that it insured at half the cost in other companies, as one-half of the premiums could be paid in premium notes, and its dividends always had, and would pay the notes. The dividends, as defendant’s managers well knew, never had paid the premium notes, and generally would fall much short of doing so. Plaintiff read some of the advertisements, and received one of the pamphlets from an agent of defendant; and, relying on these and other representations, took an endowment policy for $500, payable at her death, or at the end of five years if she should be then living. During the five years she paid one-half the premiums in cash and gave her notes for the other half; at the end of each year, the note of the previous year was included in the new note. But one small dividend was made during the five years. At the end of the five years she demanded the $500, but defendant would only pay the difference between that sum and the amount of the last note. Held, that an action for fraud was maintainable, as there was a false representation of a specific fact material to the transaction; and that plaintiff was not estopped, by allowing the contract to run to maturity, from asserting the fraud, as there were no means of discovering it prior to that time.

It seems, that the measure of recovery in such an action would be, at least, the cash paid upon the policy, with interest from time of payment.

(Argued April 8, 1878; re-argument ordered, and case submitted, January 28, 1879;

decided February 18, 1879.)

Appeal from judgment of the General Term of the Supreme Court, in the second judicial department, affirming a judgment in favor of defendant, entered upon an order nonsuiting plaintiff on trial.

The action ivas brought to recover damages for alleged fraud.

The facts appear sufficiently in the opinion.

Henry Wehle, for appellant.

Plaintiff had a cause of action, resulting from fraud and false representations, and was entitled to damages, independent of the question whether she had rescinded the contract or not. (Kerr on Fraud or Mistake, 110, 330; Bliss on Life Insurance, 462; Haight v.

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Hoyt, 19 N. Y., 472 ; Lisnar v. Canady, 53 id., 298; Minturn v. Main, 7 id., 220; Hubbard v. Briggs, 31 id., 518; Moore v. Rand, 60 id., 208; Gardiner, J., in Whitney v. Allaire, 1 id., 311; White v. Merritt, 7 id., 356; Cohl v. Hatfield, 46 id., 535; Lindsley v. Ferguson, 49 id., 625; Northrop v. Hill, 57 id., 354; Hammond v. Pennock, 61 id., 155; King v. Fitch, 2 Abb. Ct. of App., 508; Nichols v. Mickels, 23 id., 264; Baker v. Spencer, 47 id., 562; Allerton v. Allerton, 50 id., 670.) Plaintiff has rescinded the contract by returning the policy, which was all she received, on discovering the fraud ; she did all that was in her power. (People v. Stephens, 71 id., 553; Hammond v. Pennock, 61 id., 153; Masson v. Bovet, 1 Den., 69 ; Kerr on Law of Fraud, 330; White v. Merritt, 7 N. Y., 352 ; Whitney v. Allaire, 1 id., 305.)

Samuel Hand, for respondent.

Plaintiff by retaining the policy and acting under it was bound to abide by its terms. (Kirkland v. Dinsmore, 2 Hun, 50 ; Am. Law Reg., Nov., 1865, p. 10; Breese v. U. S. Telegraph Co., 48 N. Y., 132 ; Chapman v. Rose, 56 id., 137 ; Phillip v. Gallant 3 N. Y. Sup. Ct. [T. & C.], 618; Empire State Life Ins. Co. v. Beckwith, 5 Hun, 122 .) The contract having completely matured, before plaintiff attempted to rescind, a rescission could not take place. (Franklin v. Miller, 4 Ade. & Ell., 599; Hunt v. Silk, 5 East, 449; Wheaton v. Baker, 14 Barb., 594 ; Cobb v. Hatfield, 46 N. Y., 533 ; Bedell v. Bedell, 3 Hun, 580 ; 2 Parsons on Contracts, 191; Ely v. Mumford, 47 Barb., 632 ; Baker v. Robbins, 2 Den., 130 ; Fisher v. Conant, 3 E. D. Smith, 199; Wheaton v. Baker, 14 Barb., 594 .)

Upon the former hearing of this cause, an obscure but very material interlineation in the printed case was overlooked, and we were thus led into error. We have reconsidered the case, and, by reading the evidence as corrected by the interlineation, have reached a different conclusion.

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In 1867, and prior thereto, the defendant caused certain advertisements to be published in German newspapers, printed in the city of New York, and also caused German pamphlets to be published and circulated, for the purpose of inducing German speaking péople to insure with it. Among other things, it was represented in the advertisements and pamphlets that a person could get as much insurance in this-company as in any other with half the money ; and it was explained that this could be achieved in this way : one-half of the premiums could be paid in cash, and the other half in premium notes Avhich would never have to be paid, as the dividends of the company ahvays had and Avould pay such notes. The plaintiff claims that she read some of these advertisements, and that one of the pamphlets Aims given to her by an authorized agent of the defendant; and that in reliance upon these and other representations, she. took an endowment policy, dated February 11, 1867, from the defendant, insuring her life for $500, payable at her death, or at the end of fiv'e years, if she should then be living. During the five years, she paid in cash one-half of the stipulated premiums, and gave her notes for the other half. ”As we understand the evidence, at the end of each year the note of the prior year Avas included with the amount for that year, and the last note given by her Avas for $305. This awls given at the commencement of the fifth year, and was for the whole amount of the annual premiums not paid M cash, less a dividend of ten dollars, which had been applied. In addition to this note, she had paid in cash about $389. At the end of the five years, Avhen she went to the defendant to claim the $500 insured, it offered her only $195, the difference between the $500 and the amount of her note. She refused to take that sum, and then commenced this action, to recover damages for the fraud which she claimed had been practiced upon her.

The fraud was really undisputed. The managers of the defendant had made the false representations, and they knew them to be false, as the dividends of the company never had

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paid the notes thus given for the one-half of the annual premiums. But, on the contrary, such dividends had always fallen far short of making such payments ; and they must have known that they generally, if not always would fall short. There was, in fact, no foundation or excuse whatever for making the untrue representations." Upon this policy, the only dividend, during the whole five years, was ten dollars.

It is said, on behalf of the defendant, that the plaintiff did not rely upon these representations, and was not induced by them to take the policy. But there Avas sufficient evidence from Avhich the jury could have found that she did thus rely and Avas thus induced; and as she was nonsuited, this branch of her case must be assumed here to have been established.

It cannot be doubted that this Avas an actionable fraud. It.Avas not like the usual commendation of his oxvn Avhich one may make Avith impunity Avhcn engaged in trade or traffic. It was the representation of a specific fact quite material to the transaction.

But the plaintiff was defeated in the Supreme Court, on the ground that she had so far acted upon her contract xvith the defendant and ratified it that she Avas estopped, after the policy .had run to maturity, from' claiming anything on account of the fraud. We cannot agree to this. She did not discover the fraud, and So far as we can perceive, had no means of discovering it, during the five years. She was bound to give the notes, but Avas assured that the dividends Avould pay them. After she gave the notes, she had no occasion to look after them. She could rest upon the representations made to her. The defendant had the Avhole five years to make good the representations ; and the first timé she could expect to learn their falsity was when she went to demand the $500. When she made such demand, and learned that her note had not been paid by the dividends, she asserted the fraud. It is impossible, therefore, to perceive upon what theory it can be said that she Avaived or lost any right to assert this fraud against the defendant.

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She was, therefore, entitled to recover something in this action; and upon the facts .disclosed, the measure of her recovery Avould be, at least, the cash paid by her upon the policy, with interest from the time of the payments.

The judgment must, therefore, be reversed, and a netv trial granted, costs to abide event.

All concur.

Judgment reversed.