Burton v. Life & Casualty Insurance

BrogdeN, J. (1) Can an illiterate insured, receiving certain written policies of insurance not covering his injury, recover benefits falsely and fraudulently represented to be contained in the policies, without reforming the contracts? *501 (2) Can such contracts be reformed by a mere showing of fraud and Avithout any allegation or issue warranting reformation and without a prayer for such relief ? Justice Holce, delivering the opinion in Flours v. Insurance Co., 144 N. C., 232, 56 S. E., 915, wrote: “It is also accepted doctrine that when the parties have bargained together touching a contract of insurance, and reached an agreement, and in carrying out, or in the effort to carry out, the agreement a formal written policy is delivered and accepted, the written policy, while it remains unaltered, will constitute the contract between the parties, and all prior parol agreements will be merged in the written instrument; nor will evidence be received of prior parol inducements and assurances to contradict or vary the written policy while it so stands as embodying the contract between the parties. Like other written contracts, it may be set aside or corrected from fraud or for mutual mistake; but, until this is done, the written policy is conclusively presumed to express the contract it purports to contain.” Hollingsworth v. Supreme Council, 175 N. C., 615, 96 S. E., 81; Graham v. Ins. Co., 176 N. C., 313, 97 S. E., 6; Elam v. Realty Co., 182 N. C., 599, 106 S. E., 632. In the Graham case, supra, the Court remarked: “The written policy accepted by plaintiff stands as embodying the contract, and the rights of the parties must be determined by its terms until the contract is reformed by the court.” In the case at bar the plaintiff does not ask that the policy be reformed so as to provide the specified benefit “for the loss, by any cause, of either eye,” etc. In other words, he sues for benefits provided in policies of insurance which limited the benefit to certain specific causes, and yet seeks to recover without reforming the policy the same benefits accruing by reason of accidental injury to his eye from any cause whatsoever. The question, then, is whether a contract of insurance can be reformed and enforced as reformed without appropriate allegation, issue, or prayer for relief. The identical question was considered by this Court in Britton v. Insurance Co., 165 N. C., 149, 80 S. E., 1072. The Court said: “But the reformation is subject to the same rules of law as applied to all other instruments in writing. It must be alleged and proven that the instrument sought to be corrected failed to express the real agreement or transaction because of mistake common to both parties, or because of mistake of one party and fraud or inequitable conduct of the other.” Pate v. Humber Co., 165 N. C., 184, 81 S. E., 132. Again in Mfg. Co. v. Cloer, 140 N. C., 128, 52 S. E., 305, the Court declared: “Defendants do not pray for a reformation of the deed as they should have done, but the court would award it if the allegations of the answer and the findings of a jury upon appropriate issues justified it.” *502 It is perhaps well to note that in the Cloer case there was allegation warranting reformation, bnt no issue was submitted to the jury upon that phase of the case. The same idea is expressed in Webb v. Borden, 145 N. C., 188, 58 S. E., 1083, in which the Court declared: “While, under The Code system of procedure, it is settled by many decisions of this Court that, in an action for the recovery of land, the plaintiff may, by proper averments, invoke the equitable power of the court to reform a deed in his chain of title, he must make the essential averments, so that the defendant may either admit or deny them, and an issue may be framed presenting the controversy in that respect.” Welch v. Ins. Co., 196 N. C., 546, 146 S. E., 216. The legal requirement of appropriate allegation, prayer, or issue as a basis for reformation doubtless rests upon the fact that a higher degree of proof is required to warrant such relief. It is accepted law in this jurisdiction that, in order to reform a written instrument, the proof must be clear, cogent, and convincing. Floars v. Ins. Co., 144 N. C., 232, 56 S. E., 915; Graham v. Ins. Co., 176 N. C., 313, 97 S. E., 6; Lloyd v. Speight, 195 N. C., 179, 141 S. E., 574. In the case of Newton v. Clark, 174 N. C., 393, 93 S. E., 951, Allen, J., writing for the Court, said: “There is neither allegation nor proof that the deed which the plaintiff asked to have reformed was not executed as it was intended to be, or that the clause of defeasance was omitted by reason of ignorance, mistake, fraud or undue advantage, and this, under our authorities, is fatal to the plaintiff’s action.” The principle was also tersely stated by Walker, J., in Ricks v. Brooks, 179 N. C., 204. The Court said: “In an action for reformation it must be alleged and shown, by evidence, clear, strong, and convincing, that the instrument sought to be corrected failed to express the true agreement of the parties, because of a mistake common to both parties, or because of the mistake of one party induced by the fraud or Inequitable conduct of the other party, and that by reason of ignorance, mistake, fraud, or undue advantage something material has been inserted, or omitted, contrary to such agreement and the intention of the parties.” It would seem to be apparent from the pertinent decisions of this Court that the case at bar was not instituted or tried upon the theory of a reformation of the contract of insurance which is the subject of the controversy. The plaintiff relies upon Sykes v. Ins. Co., 148 N. C., 13, 61 S. E., 610. In the statement of facts in that case the Court says: “This action was brought to recover the amount of premium paid by the male plaintiff to the defendant on certain insurance policies described in the pleadings.” That case was tried solely upon that theory. It is true that the opinion declared: “Plaintiff recovered according to the reformed con *503 tract, and therefore can only have four per cent interest on the premium.” And hence it is contended that the Sykes case is authority for the position that reformation may be decreed without allegation, prayer or issue, and without requiring the party seeking reformation to establish his rights by clear, strong, and convincing proof. This, of course, is an extreme interpretation, but if the decision is susceptible of such interpretation, a long line of decisions of this Court are to the contrary. Moreover, without attempting to distinguish the Sykes case, the pleadings in the case at bar present a cause of action for fraud and deceit. The case was tried upon that theory, and that was the only theory presented to the jury by the trial judge. Hence, as the record now stands, the charge was correct. No error.