Dakota Life Insurance v. Morgan

P'OLLEY, J. This action was brought for the recovery of $20,000 that had been paid by plaintiff to defendant Morgan on a life insurance policy issued by plaintiff, a life insurance company, to one Jesse Kezena during his lifetime. The policy .was issued in June, 1920, and was for $10,000; but contained a double indemnity -clause in case of death by accident. The policy was issued upon a written application made by the insured which, among other things, contained the statement that the insured was a “JJ-breed Indian.” During the month of November, 1920, the insured was killed by the accidental discharge of a shotgun. Proof of the death and the cause thereof was made to the plaintiff company, whereupon plaintiff immediately forwarded the full sum of $20,000 to- defendant Morgan as administrator of the estate of the said insured in payment of the said policy. Shortly thereafter plaintiff learned that the insured was not a quarter-breed Indian but was, in fact, a full-blood, or nearly full-blood, Indian. .Thereupon plaintiff) claiming to have relied upon the statement in the application that the insured was only a quarter-breed Indian, and that.had- it known that the insured was more than a quarter-breed Indian it would not have issued said policy, demanded a return of the money so paid upon the policy. This was refused, and plaintiff commenced this action to compel a return thereof. Plain [365] tiff had judgment, and from such judgment and order denying a new trial defendants appeal. The first question to be determined is one of practice. In its complaint plaintiff alleged that it was contrary to its rules to insure or accept as risks Indians of the full blood or the half blood or Indians of more than quarter blood, and that had it known at the time of the issuance of the policy that the applicant was more than a quarter-blood Indian it would not have issued said policy; that at the time of the issuance of said' policy, plaintiff believed and relied upon said statement that the applicant was only a quarter-blood Indian and that said statement and the belief in the truth thereof was the inducement that induced plaintiff to issue said policy; that the said statement was false and fraudulent, and worked a fraud upon the plaintiff, and that because of such fraud plaintiff was entitled to have said policy canceled and the money paid on account thereof, less the premium that had been paid by the insured returned. Plaintiff noted the case for trial as an issue of fact for the court, while defendants noted it as a jury case. At the trial a jury was impaneled and the evidence introduced. At the close of the evidence the court decided that the pase was an equity case and that findings of fact and conclusions of law should be made; but special findings w'ere submitted to the jury. The jury found for the defendant on the special findings and also returned a general verdict in favor of the defendants. Plaintiff thereupon moved the court to disregard the special and general verdicts of the jury and to make and enter findings of fact and conclusions of law and to enter judgment thereon for the plaintiff notwithstanding said verdicts. This motion was granted, and defendant assigns error. Defendants contend that this is simply an action for money had and received, and that no question of equity or any matter to take the case to the equity side of .the court is involved. It is true that so far as the final relief is concerned plaintiff is merely asking for a return óf the money it had paid on the policy involved. But whether it is entitled to such relief depends upon! whether the policy was issued in the first instance, and the money paid thereafter, under the mistaken belief that the insured was only a quarter-breed Indian. With the policy in force and the proof of death of the insured unquestioned, the plaintiff is entitled [366] to no relief whatever; therefore it is necessary that plaintiff in some other manner dispose of the policy. This could only be done by a rescission or cancellation of the policy. Under the well-recognized rule, this can only be done by an appeal to the equity side of the court. This question was settled, finally, we think, in Byrne v. Keachie, 29 S. D. 476, 137 N. W. 343, and further discussion of the matter would profit no one. Under the pleadings, the case was properly a court case as designated by plaintiff in its note of issue, and the trial court followed the proper practice. • The only other question to be considered relates to the effect of the statement in the application that the insured was a quarter-breed Indian. It is claimed by plaintiff that in making this statement the insured fraudulently and intentionally represented himself to plaintiff to' be only one-quarter Indian; that- said representation wias taken as true and was believed and relied upon by plaintiff, and was the inducement to plaintiff to' issue said policy; ’but that nevertheless the said statement was false and was known by the said insured to.be false; that said statement was material to the risk; and that said policy would not have been issued if it had appeared in said application, or had plaintiff known, that applicant was more than a quarter-breed Indian. Upon this issue the trial court found as a fact that— “The insured at the time of making said application was not a % -breed Indian, and the said statement was not true, in that the said insured was more than a quarter-blood Indian.” This finding of fact is supported by the overwhelming weight of the evidence, if indeed it is not wholly undisputed. But the findings do not go far enough. The policy contains the following provision, which is also a part of the 'Statute itself (section 9335, Code 1919): “All statements made by the insured shall in the absence of fraud be deemed representations and riot warranties and no such, statement shall avoid this policy unless it is contained in a written application and a copy of such application shall' be indorsed upon or attached to this policy when issued.” The last clause of this section is ambiguous, and could be construed to mean that any untrue representation should vitiate the policy. But in view of the distinction that is made between [367] representations and warranties in the first part of the paragraph, we do not believe the Legislature intended that it .should be so construed. The difference between representations and warranties in this form of policy is that, if a warranty is false, it vitiates the policy, whether material or immaterial, while a representation, to avoid the policy, must be material to the risk. There is no finding that the false statement contained in the application was fraudulently made. If such statement was false and material to’ the risk, then it constituted a fraud on the insurer, such as is contemplated by the above-quoted paragraph of section 9335. But in order to constitute fraud or to avoid the policy, such statement must be both false and material, and in the absence of a finding on these points the judgment is not supported by the findings of fact. The trial court should also have found, approximately at least, the degree of Indian blood of the insured, and whether such fact was material to the risk. It is contended by appellant that by paying the policy after the death of the insured occurred plaintiff waived the right to rescind, and cites many authorities in support of such proposition. But a waiver can never be based upon acts that are induced by fraud, or that are performed under a mistaken belief of or in ignorance of the facts. Von Woert v. M. W. A., 29 N. D. 441, 151 N. W. 224; Fire Insurance Co. v. Pagenkoff, 213 Mich. 157, 182 N. W. 18. Plaintiff acted with reasonable promptness after learning the facts upon which it based its right to rescind. The cause will be remanded to the trial court, with directions to make findings on each of "the points above indicated, and for the purpose of aiding the court in making findings, either or both parties may furnish such further evidence as they may deem necessary. • The judgment appealed from is reversed.