National Council of Knights & Ladies of Security v. Garber

Tayloe, C. Plaintiff, a fraternal beneficiary society, brought this action to have a beneficiary certificate, which it had issued to defendant, adjudged canceled and annulled. After making findings of fact and conclusions of law, the trial court directed that the certificate be adjudged to be null and void, on condition that plaintiff repay to defendant the moneys paid to plaintiff as assessments upon such certificate. Plaintiff moved for a new trial and appealed from an order denying this motion. The only question presented for decision is whethér the facts found by the court justified the court in requiring plaintiff to return the assessments paid by defendant. Under a contract of insurance, the premiums or assessments paid by the insured constitute the consideration on his part for the obligations assumed by the insurer, and the risk of incurring liability assumed by the insurer constitutes the consideration on his part for the premiums received by him. The case of Taylor v. Grand Lodge A. O. U. W. 96 Minn. 441, 105 N. W. 408, 3 L.R.A.(N.S.), 114, sets forth the general rules which determine in what cases and under wdiat circumstances the insured is entitled to a return of the premiums paid by him, and also contains an exhaustive review of the authorities which establish such rules. It is sufficient for our present purpose to say that the insured is entitled to a return of the premiums or assessments paid by him only in case the contract never became valid or binding for some reason other than the intentional fraud of the insured. If the contract was valid at its inception and went into effect, by reason whereof the insurer ran the risk of incurring liability thereunder, but was subsequently annulled, the insurer is entitled to retain the premiums for the period [18] during which the contract was in force. If the contract was void at its inception and for that reason never went into effect, the insurer ran no risk of incurring liability thereunder, and is not entitled to retain the premiums, unless intentional fraud on the part of the insured is what rendered the contract void. If intentional fraud on the part of the insured rendered the contract void, the insured is not entitled to a return of the premiums under any circumstances; but if the contract is rendered void ab initio by reason of the fact that a warranty which formed a part thereof is not true, and the insurer brings an action to have the contract declared void and annulled upon that ground, and in such action the insured establishes that he made the warranty in good faith without intent to deceive or mislead, the court may require a return of the premiums as a condition to the entry of a judgment declaring the contract canceled and annulled. Metropolitan Life Ins. Co. v. Freedman, 32 L.R.A. (N.S.) 298, and cases cited in note attached thereto [159 Mich. 114, 123 N. W. 547.] In the instant ease the court found that all the allegations of the complaint were true except those contained in the fifth subdivision thereof, and that those contained in such fifth subdivision were not true. It appears from these findings that defendant became a member of the society and received the certificate in question in 1906, and that he was duly and legally expelled from the society and his certificate thereby annulled on April 22, 1910, also that he never paid or tendered any assessments or premiums after such expulsion. The ground upon which defendant was expelled is not disclosed either by the pleadings or the findings. So far as shown by the findings, defendant’s contract of insurance was not annulled or terminated until April 22, 1910, and it necessarily follows that plaintiff is entitled to retain the premiums or assessments, theretofore paid, as consideration for running the risk of incurring liability while the contract was in force. The complaint alleged, as an independent ground for the cancelation of the contract, that defendant fraudulently misrepresented his age in his application for membership. All the allegations in respect to the falsity of such representations are contained in the fifth subdivision of the complaint, and the court expressly found that the allegations contained in this subdivision were not true. The court also found that the [19] statements made by defendant were made in good faith without intent to defraud, but nowhere found that such statements were untrue. Consequently the record shows that the contract was annulled because defendant had been lawfully expelled from the society, and not because he had made false statements as to his age. Notwithstanding this fact, it appears from the memorandum of the trial judge that he was of the impression that he had made a finding to the effect that these statements were false, and it further appears from his memorandum that he based his direction for a return of the assessments upon the supposition that the falsity of these statements is what annulled the contract. The case is controlled, however, by the findings of fact, not by the memorandum, and the conclusion of law that defendant is entitled to a return of the assessments is wholly without foundation in the findings of fact. Order reversed.