Robinson v. Security Life & Annuity Co.

AlleN, J. We will at the outset eliminate from the discussion the evidence as to the agreement with the agent of the defendant, and will assume that this agreement is merged in the written policy, under the authority of Floars v. Insurance Co., 144 N. C., 237. Conceding this much, and treating everything as true which the evidence reasonably tends to prove, which is the established rule in passing upon judgments of nonsuit, it appears that the defendant issued its policy to the plaintiff in 1902, stating the annual premium to be .$154.11; that the by-laws of the defendant gave the plaintiff the right, at his election, to change the’ premium from an annual to a quarterly premium; that after the policy was issued the defendant drew a draft on the plaintiff for the annual premium, and he said he wished to pay his premiums quarterly; that thereafter the defendant drew on the plaintiff quarterly for ten years for a quarterly premium of $38.53, which the plaintiff paid; that after the expiration of ten years the defendant demanded that the plaintiff pay a quarterly premium of $40.84, which he 'refused to do; that the policy was thereupon canceled; that the plaintiff knew he was paying a reduced premium,, but did not know that this was illegal, if it was so. The reasonable inferences from these facts, and inferences which the jury had the right to draw, are that after the policy was issued the plaintiff and defendant agreed to change it, acting under the authority of the by-laws of the defendant, and that for ten years the contract of insurance in existence was one -to pay a quarterly premium of $38.53, and not an annual premium of $154.11. — 420 — If this- was the contract, whether legal or illegal, the plaintiff had. the right to refuse to enter into a new contract at an increased premium, and no fault can be attributed to him in doing so. This brings us to the consideration of the two questions chiefly debated in the oral arguments and the printed briefs: 1. Is the contract, which the evidence of the j)laintifE tends to éstablish, legal? 2. If illegal, can the plaintiff maintain his action to recover the premiums paid under it, when the defendant, relying upon the plea of illegality, refuses to perform the-contract? The defendant contends that the contract, as interpreted, is an unjust discrimination in favor of the plaintiff, and forbidden, by Revisal, sec. 4775, which reads as follows: “No life insurance company, doing business in this State shall make any distinction or discrimination in favor of individuals, between insurants of the same class and equal expectation of life in the amount of payment of premiums or rates charged for policies of life or endowment insurance, or in the dividends or other benefits payable thereon, or in any of the terms and conditions of the contracts it makes; nor shall any such company or any agent thereof make any contract of insurance or agreement as to such contract other than as plainly expressed in the policy issued thereon; nor shall any such company or agent pay or allow as inducement to insurance any rebate of premium payable on the policy, or any special favor or advantage in the dividends or other benefit to accrue thereon, or any valuable consideration or inducement whatever not specified in the policy contract of insurance.” This section of the Revisal is in all material respects like section 4773a, which was considered at this term in Blount v. Fraternal Association, ante, 167, and should receive the same construction. The statute does not invalidate the contract of insurance or the agreement of the parties, a.nd it purports to operate upon the insurance companies alone. It says, “No life insurance company shall make any distinction or discrimination,” and fails to denounce as illegal a — 421 — contract of insurance which, gives a lower rate to the insured than to others, and it is manifest that at least one of the purposes of the statute was for the benefit of the stronger insurance companies, by declaring that in soliciting insurance all companies should be on an equal footing, and that none should offer inducements below the published rates. Mr. Vance, in his treatise on insurance, speaking of statutes imposing conditions upon insurance companies to do business, and regulating their contracts, says (pp. 86 and 87) : “When, however, the statutes imposing conditions upon doing business by the foreign insurer merely prohibit the making of the contract without compliance with their terms, the question as to the rights of the parties becomes of much greater difficulty. In accordance with the general rule that a contract that is prohibited is illegal, and therefore void, it would follow that neither one of the parties would take any rights under the contract, or could enforce the agreement against the other. • Yet to apply this general doctrine to a contract made under such circumstances as usually attend the making of a contract of insurance would work great hardship and be manifestly unjust. The party insured cannot, without great difficulty, discover whether the insurer has complied with all the statutory requirements or not; and while it is true that the statutes imposing these conditions upon the insurer are public acts, and therefore presumed to be known to all, yet it would be unreasonable to require that every person to whom a corporate insurer offers a contract of insurance should make an exhaustive investigation in order to discover whether his cocontraetor has been fully qualified to make the agreement that is proposed, which .is a question of fact. It would seem that the insured has a right to presume that the insurer has complied with all the requirements of law. Accordingly, it is held by the great weight of authority that when' the insured attempts to enforce such a contract, made in good faith, against the unlicensed insurer, the latter will be estopped to escape liability under the contract by pleading his own infraction of law. The same principle of estoppel, however, does not apply when the insurer is endeavoring to enforce some right under the contract against the insured. — 422 — Tbe .plaintiff, not baying legally qualified bimself to mate tbe' contract under wbicb be sues, bas no standing in law or equity wben be attempts to enforce it.” Our case is stronger than tbe one covered by tbe quotation, . as there is no statute wbicb prohibits tbe contract made by tbe plaintiff. We might, therefore, rest our decision on tbe legality of the contract, but it is not necessary to do so. Tbe contract is not immoral, and if illegal, it is so by reason of the provisions of tbe statute (Revisal, sec. 4775), and tbe action is not to enforce tbe contract, but to recover money received by tbe defendant under itj and after a refusal to perform. Tbe citation "from Yance marks tbe difference in tbe relations of tbe parties to the contract under these circumstances, and demonstrates that they are not in equal fault. It is there said “that the insured bas tbe right to assume that tbe insurer bas complied with all the requirements of tbe law,” and that “the latter will be estopped to escape liability under tbe contract by pleading bis own infraction of law,” and that tbe insured may maintain an action upon tbe contract wben tbe insurer cannot. Tbis principle is clearly recognized in several recent decisions in our Court, and notably in Herring v. Lumber Co., 159 N. C., 382, wbicb in its essential features is almost identical with tbe one before us. In that case tbe plaintiff and certain other neighboring landowners agreed to sell their timber to tbe defendant in consideration of tbe payment of a stipulated sum and tbe building of a standard-gauge railway from Delway to Wallace, and tbe contract provided for tbe payment of a penalty upon failure to build tbe railway. Tbe plaintiff conveyed bis timber, and, wben tbe defendant refused to build tbe railway, sued for tbe penalty, and one of tbe defenses set up was that tbe contract for building tbe railway was illegal and forbidden by Revisal, sec. 2598. Tbe Court, in considering tbe contention of tbe defendant as to. tbe illegality of tbe contract, says: “We need not decide whether or not tbis is a correct position, as we are of tbe opinion with tbe plaintiff upon another view of the matter. — 423 — It appears in tbe case that the pláintiff and his neighbors, who joined with him in the agreement to sell their timber to the Wallace Manufacturing Company, one of the defendants, were influenced in fixing the price of the same by the stipulation of the said company to construct this road, and that they sold the timber at much less than its reasonable worth because of this agreement, believing that if the road was built and put into operation, the benefit or advantage they would derive therefrom would compensate them for the loss of the difference between the price charged by them for the timber and the real value thereof. This being so, it would seem to be very unjust and inequitable that the defendants should. repudiate their agreement and rely on its invalidity for the purpose of evading the payment of a reasonable price for the timber; in other words, that they should be allowed to keep the amount of the difference between the price paid for the timber and its true value, and, at the same time, refuse to execute their part of the contract to build the road, even upon the ground that it is malum prohibitum. If the stipulation to construct the road is invalid, the plaintiff, if particeps criminis, is not in pari delicto. He can recover the amount of his loss without declaring upon the alleged illegal stipulation, and relief can be given without enforcing this part of the contract.- In such a case the action, it may be said, is not based on the agreement alleged. to be illegal or invalid, but on the promise created by law to repay money of the plaintiff improperly obtained. 9 Cyc, p. 547.” Many authorities are cited in support of this position, and among others, Morville v. Am. Trust Society, 123 Mass., 129, in which the language used is so apposite to the facts in this record that we reproduce it: “The money of the plaintiff was taken and. is still held by the defendant under an agreement which, it is contended, it had no power to make, and which, if it had power to make, it has wholly failed on its part to perform. It was money of the plaintiff, now in the possession of the defendant, which in equity and good conscience it ought now to pay over, and which may be recovered in an action for money had and received. The illegality is not that which arises when the contract is in violation of public policy or of sound morals, — 424 — and under wbicb tbe law will give no aid to either party. Tbe plaintiff himself is chargeable with no illegal act, and the corporation is the only one at fault in exceeding its corporate powers by making the express contract. The plaintiff is not seeking to enforce that contract, but only to recover his own money and prevent the defendant from unjustly retaining the benefit of its own illegal act. He is doing nothing which must be regarded as’a necessary affirmance of an illegal act.” We are, therefore, of opinion that if the contract is illegal, which is at least doubtful, that the plaintiff, not being in pari delicto with the defendant, can maintain his action, and that there was error in granting the motion to nonsuit. Reversed.