Supreme Council Catholic Knights & Ladies of America v. Beggs

Mr. Presiding Justice Adams delivered the opinion of the court. The evidence offered by the appellant, which was excluded by'the court, tended strongly to prove the defense of appellant that Catherine Beggs, in her application for membership, willfully and falsely misstated her age to be forty-eight years, when in fact her age was much in excess of forty-eight years. It is not contended by appellees’ counsel that the excluded evidence did not tend to prove appellant’s defense, as set up in its pleas. The contention is that no such defense is admissible at law. Counsel say in their printed agreement: “ The sole and only issue in the case, below and here, is, was the appellant’s defense properly interposed at law, or was its only remedy in equity. This was the only question then, and is the only question now.” What the issues in a cause are is solely determinable by reference to the pleadings in the cause, and no such issue as stated by appellees’ counsel is raised by the pleadings. If the defense set up in appellant’s pleadings could not be availed of in a court of law, appellees’ counsel should have demurred; but they replied issuably, traversing the pleas, thereby impliedly admitting that the matters averred in them constitute a good defense to the action. Appellees’ counsel further say : “ If such an application was made by Catherine Beggs it was in the nature of a proposition for the contract, an inducement to issue the same, or as a memorandum of previous negotiations between the parties concerning the contract, anil was, therefore, collateral to the contract itself, and could not be proven in an action at law. And the trial court sustained the objection, holding that the beneficiaries took the contract free and clear of any conditions not expressed in the contract itself, and that if the contract was obtained by fraud or misrepresentation, other than in the execution of the instrument itself, the only remedy was in a court of equity.” The proposition of appellees’ counsel is, in substance, that if one obtains a certificate of membership in a benefit society, contrary to its constitution and by-laws, by means of willful false statements in regard to a material matter, this can not be set up as a defense to an action at law on the certificate, unless the application containing the alleged false statements is, by reference or otherwise, made a part of the certificate. We are inclined to think that appellees’ counsel have failed to distinguish between warranties, which form a part of a contract of insurance or beneficiary certificate, and representations made by the applicant for insurance, or certificate of membership, as the case may be. In Commonwealth Ins. Co. v. Monninger, 18 Ind. 352, cited by appellees’ counsel, the insurance company relied on certain statements in the application for insurance as warranties, which application was not made a part of the policy by reference or otherwise. The court held that the statements were not warranties, and say: “ Yiewdng the conditions and application with reference to the law of insurance, we are of opinion the statements made should be regarded as representations; the technical sense of which,.in that respect, as distinguished from warranty, is well defined to be, ‘a verbal or written statement, made by the assured to'the underwriter before the subscription of the policy, as to the existence of some fact, or state of facts, tending to induce the underwriter more readily to assume the risk, by diminishing the estimate he would otherwise form offit.’ Arn. on Ins. 489. It is a part of the preliminary proceedings which propose the contract; and a warranty is a part of the contract, as it has been completed. Ang. on F. & L. Ins. 178. A want of truth in the representation is- fatal, or not, to the insurance, as it happens to be material or immaterial to the risk undertaken. (Id.)” . The definition of representations given by the Indiana court is substantially the same as that given by other courts. 1 Bacon on Benefit Societies (2d Ed.), Sec. 206. The court in the case cited further say: “ If the facts, as disclosed in the evidence, showed, as indicated by the findings of the jury, that the untrue statements made by the plaintiff did not induce the defendant to take the risk, and the defendant was not deceived as to the same, then they were not material in determining the question whether said risk should be taken by the defendant, or the estimate of defendant in reference thereto.” This language impliedly indicates the opinion of the court, that if the evidence and the findings of the jury had been that the untrue statements induced the defendant to take the risk, and deceived the defendant, then they were material and a good defense. In Ruse v. Mut. Benefit L. Ins. Co., 23 N. Y. 516, the question was whether a prospectus distributed by the company was a part of the contract of insurance, and the court held that it was not, and did not bind the company. But the court, in its opinion, (Ib. 520), say : “ A representation to the assured, if false, avoids the policy.” Citizens’ Ins. Co. v. Hoffman, 128 Ind. 370, merely holds that statements in the application not incorporated in or referred to by the policy are not deemed warranties, and cites with approval the definition of representation, as distinguished from warranty, in Ins. Co. v. Monninger, supra. Bliss on Life Insurance, an author relied on by appellees’ counsel, says (3d Ed., Sec. 40): “ A representation, however, need only be substantially complied with, and in particulars material to the risk; though if the misrepresentation is fraudulent, it will avoid the contract even where it relates to a matter not material to the risk; that is to say, if the representation is made with intent to deceive, or is shown to have been false within the knowledge of the assured, it makes no difference whether it is as to a material circumstance.” Kerr on Frauds, cited by appellees’ counsel, p. 44, says: “ Courts of equity and courts of law have, in general, a concurrent jurisdiction to suppress and relieve against fraud,” and the text is fully sustained by decisions of the Supreme Court of this state. In Whitney v. Roberts, 22 Ill. 381, 384, the court quote with approval the following from Chitty on Contracts : “ Fraud avoids a contract a~b initio, both at law and in equity, whether the object be to deceive the public, or third persons, or one party endeavors thereby to cheat the other. For the law will not sanction dishonest views and practices by enabling an individual to acquire, through the medium of his deception, any right or interest.” In Jamison v. Beaubien, 3 Scam. 113, the court say : “ Fraud, it is said, vitiates all acts, as between the parties to it; nor can there be a doubt that fraud is cognizable in a court of law, as well as equity. It is an admitted principle that a court of law has concurrent jurisdiction with a court of equity in cases of fraud.” See, also, Kirkpatrick v. Clark, 132 Ill. 342, 249-50, citing with approval Jamison v. Beaubien, supra, 3 Blackstone’s Com., Cooley’s Ed., Sec. 430, parag. 3, and Bouvier’s Law Dictionary, Fraud, parag. 9. But the extraordinary position is assumed that because the application is not, by reference in the certificate, or otherwise, made a part of the certificate, the application can not be nut in evidence to show that the alleged false and fraudulent statements were made. Stated in the abstract, the contention is that if a party to a written contract seeks the benefit of it by an action at law to enforce it, no evidence extrinsic to the contract is admissible that he, the plaintiff, by fraud and deceit, induced the defendant to enter into the contract. This would practically oust the law courts of jurisdiction to inquire whether written contracts were induced and obtained by fraud, because the fraud rarely, if ever, appears on the face of the instrument. Appellees contend that, if the issuing of the certificate was induced by false and fraudulent statements, as alleged in appellant’s pleas, appellant must seek relief in equity by bill to have the certificate of membership set aside. Were appellant so to do, there can be no doubt that the equity court would admit in evidence and consider the application. But, as has been shown, courts of law and courts of equity have concurrent jurisdiction in cases of fraud, and the rules of evidence are the same in both courts. There is a material distinction between cases in which the defense is a breach of warranty by the assured, and cases in which the defense is that the contract was induced by the false and fraudulent representations of the assured. In the former class of cases the warranty must, in order to make the defense available, be a part of the contract, because the defense is that the assured has broken his contract of warranty (Commonwealth Ins. Co. v. Monninger, supra), while in the latter class of cases the defense is not that the assured has broken his contract, but that he, by false and fraudulent statements, induced the insurer to enter into the contract. Instances are not rare in which it has been held by courts of law that fraud may be proved dehors the instrument relied upon by a party: Jamison v. Beaubien, supra, was ejectment by Beaubien, and he relied on a certificate of purchase and sale by pre-emption. The defendant offered, in the trial court, to prove that the certificate was obtained by fraud and collusion between Beaubien and "the land-officers who granted the certificate. The trial court excluded the evidence, but the Supreme Court held this error, saying : “ The evidence offered went directly to the validity of the certificate of pre-emption purchase. If it had its inception in fraud, it was certainly competent for the defendant to show the fact; and if the officers granting it were parties to the fraudulent act, it was no doubt void, and might be impeached in an inquiry in which the pre-emptor was a party.” See, also, Whitney v. Roberts, supra. Greenleaf, discussing the rule excluding parol contemporaneous evidence, writes: “ It is in the next place to be noted that the rule is not infringed by the admission of parol evidence showing that the instrument is altogether void, or that it never had any legal existence or binding force, either by reason of fraud, or for want of execution and delivery, or for the illegality of the subject-matter. * * * Fraud, practiced by the party seeking the remedy, upon him against whom it is sought, and in that which is the subject-matter of the action or claim, is universally held fatal to his title.” 1 Greenleaf on Ev., 13th Ed., Sec. 284. . * * * “As a written instrument in general derives its authenticity from the aid of external evidence, it may in like manner be defeated. Thus a written instrument may be impeached by extrinsic evidence, on the ground of fraud, even in the case of a record.” 2 Starkie on Ev., 7th Am. Ed., Sec. 765. “ The fraud may be proved by parol evidence or any circumstances, however contrary to 'the apparent facts or statements in the written instrument.” 2 Saunders on Pl. & Pr., 5th Am. Ed., Sec. 66. We do not regard Papke v. Hammond Co., 192 Ill. 631, relied on by appellees’ counsel, as applicable to such cases as the present one. The constitution of appellant is a part of the contract. Niblack on Benefit Societies, Sec. 136. The evidence offered by the appellant tended to prove appellant’s defense, and the court erred in sustaining the general objections to the offered evidence and excluding the evidence, and in instructing the jury to find the issues for the appellees. Therefore the judgment will be reversed and the cause remanded.