Urwan v. Northwestern National Life Insurance

Cassoday, C. J. 1. The plaintiff’s written application for insurance was made and signed by him February 5, 1903, and was in the usual form, with answers to questions by the medical examiner and the answers of the medical examiner, with this indorsement upon the margin in red ink: “It is agreed that the company is responsible for no representations not contained in its ratebook and printed matter.” The plaintiff’s written application for appointment as one of the defendant’s “board of special agents, limited to 400 full, or proportionate number of half members, under its special .agent’s contract for Wisconsin,” was made at the same time .■and was dated on the same day as the application for the ■policy; and it was therein stated, in effect, that the plaintiff understood that he should not be required to take out a policy because of his application or the issuance to him of such agency contract, and that his compensation was to be for serv■Ices actually rendered. That application was witnessed by the defendant’s local agent, “P. J. Bryan” — the same person to whom the plaintiff’ paid the $159.55, and who “wit-messed and recommended” the plaintiff’s application for the policy. The policy and special agent’s contract áre both ¡signed by the president and secretary of the defendant, and iboth dated February 11, 1903, being six' days after the plaintiff had signed such applications. Such policy and written contract were received by the plaintiff by mail from the defendant February 14, 1903, accompanied by a letter from the defendant’s president stating “in explanation” that such contract was “entirely independent of” the plaintiff’s policy; that he would “be required to perform the duties set forth — 355 — 'in. the special contract;” and that be was “thereby advised” that it was “a rule of the company that, should a special agent holding special contract permit his policy to terminate by reason of nonpayment of premium,” it should “be deemed that he” had “ceased to give the company the benefit of his influence and good will,” and had “forfeited all rights under said contract,” and then, by way of postscript, added “that, in order to avail oneself of the privileges of the special contract, the agent must also continue payment of the premium for the full term provided by his policy.” The answer alleges and the defendant claims that the $159.55 here sought to be recovered back was paid by the plaintiff to the defendant exclusively as the first year’s premium on the policy, and that that was a transaction’ entirely separate and independent of the plaintiff’s application to be appointed as one of the defendant’s board of special agents, mentioned, and which appointment was to be made without consideration. But in order to make such appointment effectual the plaintiff was bound by the terms of the contract to continue the payment of the premium for tire full term of the policy, and he was induced to pay the first year’s premium on the policy in order to secure the special agent’s contract as well as the policy. In other words, the two contracts thus applied for, though separate in form, were both agreed upon at the same time as one transaction, and must be considered together for the purpose of determining the character of the transaction and the intention of the parties. Herbst v. Lowe, 65 Wis. 316, 320, 26 N. W. 751, and cases there cited; Stapleton v.6 Brannan, 102 Wis. 26, 28, 78 N. W. 181, and cases there cited. The trial court properly so considered them. 2. It is claimed that the false and fraudulent representations alleged in the complaint and found by the trial court are not sustained by the evidence. This claim is based upon the theory that such representations were all alleged and found to have been made at the time the plaintiff signed such — 356 — applications and paid such premium, February 5, 1903, and related to the things which were to be contained in the contract which it was then agreed that the defendant should subsequently prepare and execute, and which the defendant did not execute until six days thereafter, and which the plaintiff did not receive until nine days thereafter. In other words, and in consideration of such applications so signed by plaintiff and the money so paid by the plaintiff, the defendant, through its local agent, “represented and guarantied to the plaintiff,” to use the language of thq complaint, that such contract, when so executed, would contain the things so “represented and guarantied to the plaintiff.” This was nothing more than an agreement or promise as to what the contract, when subsequently prepared and executed, should contain. The breach of such an agreement or promise did not constitute a cause of action in tort for false and fraudulent representations. “It is well settled that such representations are not actionable unless they were not only relied upon by the vendor, but related to some present or past state of facts; that the mere failure to perform a promise or to make good subsequent conditions which had been assured is insufficient tO' maintain an action for deceit.” Field v. Siegel, 99 Wis. 605, 609, 75 N. W. 397, and cases there cited. See Warner v. Benjamin, 89 Wis. 290, 296, 62 N. W. 179; Louis F. Fromer & Co. v. Stanley, 95 Wis. 56, 64, 69 N. W. 820; Patterson v. Wright, 64 Wis. 289, 25 N. W. 10. In drawing the complaint in the case at bar the pleader seemingly did not have in mind the broad distinction between a false representation as to a present or past state of facts, as the basis of an action in tort, and a representation or promise as to future conditions and things subsequently to be performed or furnished or supplied. But the complaint, when carefully analyzed, must be construed as indicated. This is apparent when it is observed that the false representations357 are therein alleged to have been made February 5, 1903, and that tbeir falsity was discovered when the plaintiff received the policy and contract by mail, February 14, 1903. And so the learned trial judge states in his written opinion that the plaintiff’s “case does not rest upon an alleged guaranty and its breach, but upon the false representation as to the terms of the written contract that the defendant was to give him. . . . He merely falsely represented to the plaintiff the terms of the written contract that the company would make with him as an inducement to his taking the policy of insur-. anee.” We are constrained to hold that the complaint, when properly construed, did not allege that the representations made constituted a cause of action for deceit, and the findings of the court are in line with the allegations of the complaint. But it does not follow that the plaintiff has ho cause of action for rescinding the contract and recovering back the money paid. On the contrary, and according to the findings of the court, the proposed written contract which the defendant prepared and executed and sent to the plaintiff differed essentially from the one which the defendant had orally agreed to give to the plaintiff, and which had constituted the inducement for him to sign the two applications and pay the $159.55. This being so, it is claimed that the plaintiff had the lawful right to reject the written contract and policy and demand back his money, as he did. Woodle v. Whitney, 23 Wis. 55; Rounsavell v. Pease, 45 Wis. 506; School District v. Hayne, 46 Wis. 511, 1 N. W. 170; Sherwood v. Merritt, 83 Wis. 233, 53 N. W. 512; Parry Mfg. Co. v. Tobin, 106 Wis. 286, 289, 82 N. W. 154. The proposition of law stated is elementary. 24 Am. & Eng. Ency. of Law ( 2d ed.) 643. The only question is whether such right of action is barred by reason of the statute about to be cited, as claimed by the defendant. 3. On the part of the plaintiff it is contended that, had the — 358 — policy of insurance and tbe special agent’s contract been accepted by tbe plaintiff, tbey would bave been absolutely void, under tbe statute which declares that: “No life insurance company doing business in this state shall make or permit any distinction or discrimination in favor of individuals between insurants of tbe same class and equal expectation of life in tbe amount or payment of premiums or rates charged for life or endowment policies, or in tbe dividends or other benefits payable thereon or in any other of tbe terms and conditions of tbe contract it makes; nor shall any such company or any agent thereof make any contract or agreement as to such contract other than as plainly expressed in the policy issued pursuant thereto, nor pay or allow, or offer to pay or allow, as an inducement to insurance, any rebate of premium payable on the policy, or any special favor or advantage in the dividends or other benefits to accrue thereon, or any valuable consideration or inducement whatever not specified in the policy.” Sec. 1955o, Stats. 1898. The manifest purpose of this section of the statute was to prohibit any distinction or discrimination in favor of insur-ants of the same class and equal expectation of life, and to prohibit the making of any contract or agreement as to such insurance not expressed in the policy, and to prohibit any rebate of premium payable on the policy as an inducement to insurance, or any special favor or advantage not specified in the policy. Such provisions are followed by a requirement that the commissioner of insurance shall revoke the license of any company or person violating the section. A similar statute in Maine was construed in that state “to require life insurance companies to give equal terms to those persons whom it insures that are of the same class, and to stipulate the terms of insurance in their policies, and to accord to none any other.” State v. Schwarzschild, 83 Me. 261, 22 Atl. 164. So, up.der a similar statute in Michigan, it was held in that state that an action could not “be maintained by the company on a note given for the premium on” a policy issued by the company in violation of such statute. — 359 — State Life Ins. Co. v. Strong, 127 Mich. 346, 86 N. W. 825. In that case as in this, counsel for the company contended that the contract for the¡ “insurance was separate and distinct from the advisory representative contract,” hut the court held “that they were both a part of one transaction, and within the prohibition of the statute.” hollowing that decision, it was subsequently held in that state that such statute was “violated where an insurance company contracts to pay one of its officers a stated percentage of its premium receipts, with the understanding thát the same shall be apportioned among certain persons, to he known as a hoard of reference/ as an inducement to their becoming policy-holders in the company.” Citizens’ Life Ins. Co. v. Comm’r of Ins. 128 Mich. 86, 87 N. W. 126. So, in a later case in that state, the local insurance agent, in violation of such statute, had induced the defendant to take the insurance by giving him the benefit of the agent’s commission of one half the premium — talcing the note in suit for the balance, — and in an action by such agent on such premium note, the amount of which the agent had himself paid to the company, it was held that the note was void for want of consideration by reason of the illegality of the insurance contract. And it was further held that it was the duty of the court to take notice of such illegality without its being pleaded in defense of the action on the note. Heffron v. Daly, 133 Mich. 613, 95 N. W. 714. It is well settled that a contract made in violation of a valid statute is void, although it does not therein expressly so declare. 9 Cyc. 475, 476, and numerous cases there cited. So “a statute prohibiting the making of contracts, except in a certain manner, ipso facto makes them void, if made in any other way.” Id.; Ætna Ins. Co. v. Harvey, 11 Wis. 394; Melchoir v. McCarty, 31 Wis. 252; Citizens’ Bank v. Jones, 117 Wis. 446, 452, 453, 94 N. W. 329, and cases there cited; Miller v. Post, 1 Allen, 434; Sawyer v. Smith, 109 Mass. 220; Copeland v. Boston Dairy — 360 — Co. 184 Mass. 207, 68 N. E. 218; Bank of U. S. v. Owens, 2 Pet. 627; Foley v. Speir, 100 N. Y. 552, 3 N. E. 477; Buckley v. Humason, 50 Minn. 195, 52 N. W. 385. It is obvious that the insurance contract applied for by the plaintiff, and upon which he paid the first premium of the twenty annual instalments, and which the defendant at the time of such payment agreed, to execute and send to the plaintiff, was contrary to the statute, and hence void. This is virtually conceded by counsel for the defendant. But it is claimed that, while either party could successfully resist the enforcement of such a contract, neither could recover upon a cause of action based upon or traceable through such illegal contract. This is on the theory that the parties are in pari delicto, and the law leaves them where it finds them. Numerous adjudications of this court are cited by counsel in support of the proposition. There is no intention here of departing from the established rule in such cases. But there are exceptions to the rule. Thus Lord Mansfield, O. T., mentions “two sorts of prohibitions enacted by positive law, in respect of contracts.” Thg first is “to protect weak and necessitous men from being overreached, defrauded, or oppressed. There the rule . . . does not hold, and an action will lie, because, where the defendant imposes upon the plaintiff, it is not par delictum.” The other “sort of prohibitions is founded upon general reasons of policy and public expedience. There both parties offending are equally guilty.” Clarke v. Shee, 1 Cowp. 197. The exception thus stated has been expressly sanctioned by this court in some of the cases cited by counsel for the defendant. Melchoir v. McCarty, 31 Wis. 252, 255; Clarke v. Lincoln L. Co. 59 Wis. 655, 661, 18 N. W. 492. In the case last cited, Mr. Justice Taylor, speaking for the court, mentions that exception and another in the following language: “The cases ... in which the court has held that money paid upon a void contract may be recovered back by the payor — 361 — are cases either where the contract itself is not prohibited by law, bnt is declared to be void because not made or evidenced in the manner prescribed by (aw, or where the contract is declared void by law as to one party in order to protect the other against injustice and oppression.” Counsel for the defendant concedes that in enacting the statute in question “the intention of the legislature undoubtedly was to protect policy-holders in general against any distinction or-discrimination.” The penalty prescribed by the statute in question is to revoke the license of “any company, officer, agent, subagent, broker or solicitor” who “has violated any provision” of the section. The statute inflicts no penalty or forfeiture upon the insurants so sought to be protected. Such protection, in the language of the English court quoted, was “to protect” such policy-holders “from being overreached, defrauded, or oppressed.” Besides, the contract of insurance was not fully executed. On the contrary, it was not only executory in form, but the terms, which were to be in writing, were not yet completely agreed upon. The mere fact that the plaintiff had signed, such applications and paid such first instalment did not preclude him from the right of inspecting the written contract and policy when re-, ceived. Upon such inspection he had the legal right to accept or reject the same, of course subject to any conditions the law imposed. It was not complete without acceptance, expressed or implied. The plaintiff having promptly rejected the written contract as not being the one contracted for, the only remaining question is whether he can recover back the money so paid. It is said in a very recent English treatise that an action “may be maintained to recover back money received under a special contract which has been abandoned or rescinded, or the performance of which has been prevented by the wrongful act of the party who has received the money.” Addison, Contracts (10th ed.) 433. And again, “So long as an illegal contract continues executory,” — 362 — the law “implies from the person who has received money in furtherance of the execution of the contract a promise to refund it, in favor of the party who paid the money and who repudiates the illegal transaction, and an action upon this implied promise may he maintained against a person who-has received money upon an illegal insurance or wager at any time before the happening of the event which is to, decide the-adventure.” Id. Among the cases cited in support of the statement are the following: Tenant v. Elliott, 1 Bos. & Pul. 3; Farmer v. Russell, 1 Bos. & Pul. 296; Tappenden v. Randall, 2 Bos. & Pul. 467, 470, 471; Smith v. Bickmore, 4 Taunt. 474; Palyart v. Leckie, 6 1. & S. 290; Hastelow v. Jackson, 8 B. & C. 221; Varney v. Hickman, 57 E. C. L. 271; Clarke v. Shee, supra. See, also, White v. Franklin Bank, 22 Pick. 181. Thus it was held in New York at an early day that, “where money is advanced upon a contract which is malum prohibitum merely, it may he recovered back by an action proceeding upon a disaffirmance of the contract.” Utica Ins. Co. v. Kip, 8 Cow. 20. So it has been held that “while an illegal contract is still executory either party may rescind the contract and recover any property he may have put up, but, if the contract has been executed, nothing paid or delivered can be recovered.” Bernard v. Taylor, 23 Oreg. 416, 31 Pac. 968. To the same effect, Spring Co., v. Knowlton, 103 U. S. 49. In the case at bar the plaintiff does not seek the aid or affirmance of the illegal contract, but a dis-affirmance of it, and to place the parties where they were before they attempted to make the contract. We find nothing in the decisions of this court to the contrary. See Kiewert v. Rindskopf, 46 Wis. 481, 486, 1 N. W. 163; Wells v. McGeoch, 71 Wis. 196, 235, 236, 35 N. W. 769. We conclude that the action can be maintained. By the Court. — The judgment of the circuit court is affirmed.