#### KELLY v. CONNECTICUT MUT. LIFE INS. CO.

(Supreme Court, Appellate Division, Third Department.

March 2, 1898.)

.1. Equity—Mistake op Law—Insurance.

Where an executor accepted, payment to the estate of a policy payable to to the testator’s legal representatives, released the company, and distributed the proceeds among creditors, with knowledge that a former policy had been issued payable to himself individually, he was precluded from a recovery on such policy, though he did not know at the time that the former policy was in existence, the mistake being as to his legal rights, which depended solely ,on whether the policy had been legally issued, and the beneficiary legally changed, and not on its continued physical existence.

S. Same—Restoration of Benefits.

Where an executor accepts payment on a life policy due the estate, and distributes it to creditors, he cannot recover on a former policy, payable to himself individually, for which the other had been substituted, without restoring the amount received under the policy last issued.

■8. Constructive Notice—What Constitutes.

Testator’s son understood for many years that his father’s life insurance was payable to him. As executor, he inventoried the policy, which was payable to the estate, and recited that the original had been surrendered for a change in benefit. The company’s agent told the son that there had never been another policy issued, but he was offered full access to their books. He accepted payment as executor, and released the company. *Edü,*that he was chargeable with notice that the former policy had been issued for his benefit, and still existed in law.

Appeal from trial term, Albany county.

Action by Joseph Kelly against the Connecticut Mutual Life Insurance Company. From a judgment entered on a verdict for plaintiff, and from an order denying a new trial, defendant appeals. Keversed. *140In January, 1883, Shubal Kelly, father of the plaintiff, applied to the defendant for a policy of insurance, which was issued to him in the sum ■ of $5,000, to be paid upon his death to the plaintiff. Shuhal Kelly paid the premiums upon that" policy until the month of February, 1874, 'when the policy was surrendered, and another 'issued in its place for the same amount, hut payable upon the death of Shubal Kelly to his legal representatives. Shubal Kelly paid the premiums upon this policy also, until his death in April, 1890. He left a will, in which his widow, the plaintiff, and a brother-in-law of the plaintiff, one Maeliesney, -were named as executors. The will was admitted to probate, letters testamentary were issued, and all three of such persons qualified as executors. An inventory of the assets of Shubal Kelly was made May 10, 1890, and sworn to by the plaintiff, as one of the executors, and in such inventory was-included the policy of insurance before referred to. The executors made proofs of the death of Shuhal Kelly, which they filed with the defendant, and thereafter the defendant paid the amount due upon such policy by a check or draft made payable to the order of such executors, each one being separately named in the check. The same was thereafter indorsed by the plaintiff and each of the other executors, and the money received thereon. Said executors, including the plaintiff, executed a release to the defendant, in which they acknowledge the full payment and satisfaction of such policy of insurance. The money so received was paid out in the due course of administration of such estate, and a decree of'the .surrogate was entered November 9, 1893, passing and allowing the accounts of said executors, and in such accounts the amount received upon . such policy of insurance was accounted for as part of the -assets of the estate, and was paid to the creditors of Shuhal Kelly. The estate appears to have been insolvent, there not being sufficient assets to pay the creditors in full, leaving nothing for the heirs and next of kin of the deceased. In February, 1800, the plaintiff commenced this action to recover upon the original policy of insurance taken out by. Shubal Kelly for the benefit of the plaintiff. The-defendant, in defense, .among other things, set forth the substitution of one policy for the other, and the change of the beneficial interest, and the payment thereof to the plaintiff and the other executors of Shubal Kelly, deceased, and their release and satisfaction of such policy. Upon the trial the plaintiff asserted that at the time of receiving the payment, as executor of his father’s* estate, of the amount due upon the last policy of insurance, he was in ignorance of the fact that a prior policy had been taken out. The jury entered a verdict against the defendant, and from the judgment entered upon- such verdict, and from an order denying a motion for a new trial, this appeal is taken. Further facts will be stated In the opinion.

Argued before PARKER, P. J., and LARDON, HERRICK, PUTNAM, and MERWIN, JJ.

Mead, Hatt & Palmer (Samuel S. Hatt, of counsel), for appellant,

P. O. Dugan (J. Newton Fiero, of counsel), for respondent.

HERRICK, J.

In determining whether the plaintiff’s acts in inventorying the policy of insurance as part of the assets of his father’séstate,, and in receiving the moneys due upon such policy, and in executing a release thereof to the defendant, and in distributing the proceeds of such policy among the creditors of the estate, were dune with sufficient knowledge of the facts as to preclude him from again applying to the company for the insurance upon his father’s life, a brief examination of the evidence in the case will be necessary. There are some undisputed facts in the case. Shubal Kelly personally paid the premiums for the insurance upon his life. He paid the-premiums upon only one policy. The policy originally taken out by him, payable to the plaintiff, was surrendered to the company in 1874, and a new one issued. The plaintiff’s- denial of his knowledge of the existence of the first policy, and of his ignorance of any change, at *141the time he received the money from the insurance company, is epitomized in this extract from his evidence:

> “I positively did not know there was another policy in existence until 1895,— until discovered by me and Mr. Downs. Q. That was in ’i)ti? A. That was ’96.”

It becomes important, then, to see whether this statement was true. If appears from other parts of his testimony that he had some knowledge of the existence of the prior policy, as indicated by this extract from his testimony:

> “Q. You say that you understood from members of your family that this policy of life insurance—life insurance of your father—was by a policy made payable to you? A. Yes, sir; I understood that from my stepmother and my •sister. We had talked of it in the family. I could not tell how long 1 had . understood that the insurance was payable to me; quite a number of years, but I couldn’t just tell. My best recollection is, X should think likely as long as ten or fifteen years.”

The plaintiff’s co-executor and brother-in-law, Machesney, testified that prior to the death of Shubal Kelly, and while he was sick, the plaintiff had a conversation with him as follows:

> “He asked me if I knew his father had a life Insurance. I said, ‘Yes.’ He asked me if I lmew it was made payable to him. I said, ‘No, I did not know it.’ He said, ‘Yes, it was payable to him.’ I said, ‘The time to discuss that matter was later.’ ”

Machesney says that shortly after the death of Shubal Kelly the plaintiff in another conversation stated that the policy was payable to him. This would seem to indicate a knowledge upon the part of the plaintiff of the existence at some time of a policy taken out by bis father for his benefit. Another witness sworn upon the trial was a man named Simmons, who testified to a conversation with the plaintiff in the spring or summer of 1891, in which he informed Simmons of the receipt of $5,000, and of his signing for the same, which he said he did not think he should have done; that there had been a policy which had been changed from.the original policy, and a new one had been taken out,- payable to his father; that he had heard that the original policy had been made payable to him, and the other one was made payable to the estate; and said that he knew that there had been a change when he had received the money as executor. Neither the testimony given by Machesney nor Simmons was contradicted by the plaintiff upon the trial. There is other evidence in the case that seems to me still more conclusive that the plaintiff was apprised of the true condition of the facts. On the margin of the first page of this last policy are written the following words: “Original of same No. & Amt., dated January 28, 1803, surrendered for change in benefit.”

After the death of Shubal Kelly, and before the making of the inventory, the plaintiff and Machesney went to the office of a lawyer in Albany, and plaintiff asked the lawyer if the insurance policy did not belong to him. The policy was sent for, and brought to the office. The lawyer read it, read the words on the margin that I have just quoted, and then said: “Joe, this belongs to the estate. This cuts yon off;” and stated further that the beneficiary had been changed and that it belonged to the estate, and cut him off. The *142evidence as to what took place at this interview is also uncontradicted. From all this it would appear that he knew of a prior policy of insurance for his benefit, despite his positive assertion to the contrary. The plaintiff claims, however, that he was misled by the-company. He states that he, in company with his brother-in-law, Mr. Machesney, went to the office of the defendant company, to see-about the payment of the life insurance policy. He says that his brother-in-law had the policy with him, and states that he then found out it was payable to the legal representatives of his father; that he there saw a Mr. Mallory and an old gentleman, and asked Mr. Mallory and the old gentleman if there was any other policy; that “they said, ‘No,’ nor never had been.” Plaintiff states that he thinks-this interview was in June. Mallory positively denies that any such conversation ever took place. Machesney says that he was there with the plaintiff on the 9th day of June; that it was the time they went to get the draft cashed that they had received from the company in payment of the policy; and he testifies that he never heard any such inquiries made by the plaintiff or answered by Mr. Mallory, either then or at any other time. Assuming that Mallory was an agent of the company, whose declarations would be binding upon it, which is disputed, it will be observed from the plaintiff’s statement, and Machesney’s corroboration of it, as to the time when-the interview took place, that it took place after the consultation over the policy in the lawyer’s office that I have before referred to, when this writing on the margin was read, and the plaintiff was advised that the beneficiary had been changed, and that he was cut off; after the policy had been inventoried as one of the assets of the estate; and also that the policy itself bore upon its face the written evidence and declaration, known to the plaintiff for several weeks, that there had been another policy for the same amount, which had'' been changed for the one then in existence and in possession of the executors, of whom the plaintiff was one. In the face of this written evidence, being the declaration of the defendant itself, and in the-possession of the plaintiff, it is impossible to say that the plaintiff did not have knowledge that a former policy had been issued upon the-life of his father. The only way to reconcile his statement that “I positively did not know that there was another policy in existence - until 1895, until discovered by me and Mr. Downs,” with his other testimony, and his knowledge of the written statement on the policy that it was in place of a prior policy, and that the beneficiary had: been changed, is that he did not have knowledge of the physical existence at that time of the former policy, because he must have known-that at one time, at least, there had been a former policy in existence. Whether it still physically existed, or whether it had been destroyed' at the time it was surrendered, and the second policy issued, is a matter of no consequence. The plaintiff’s rights would be the same ■ whether the paper upon which the former policy was written was still in existence or whether it had been destroyed. Those rights depend upon the fact as to whether such a policy had ever been issued, and whether the beneficiary had been legally changed or not. If, with ■ knowledge of the facts, he received the money, and released the com- ■ *143pany, it is unnecessary to cite authorities to show that he is estopped from asserting any personal right to the insurance upon his father’s life, and from asking the company to again pay it to him. His receipt of the money with knowledge of the facts constitutes a ratification of his father’s act in changing the policy. If, however, it be assumed that he received the money by mistake, it was at the most a mistake as to his legal rights. A mistake as to one’s legal rights, where the party has knowledge of the facts, affords no ground for relief. Hanks v. Drake, 49 Barb. 186, overruled upon another point in Markham v. Jaudon, 41 N. Y. 243. A knowledge of the facts alone is sufficient for a ratification. It is not necessary that there should be a knowledge of the legal effect of those facts. Hyatt v. Clark, 118 N. Y. 563-567, 23 N. E. 891. The facts being known, a mistake as to rights constitutes a mistake of law, and “a mere mistake of law, stripped of all other circumstances, constitutes no ground for relief.” Snell v. Insurance Co., 98 U. S. 85-92; Hunt v. Rousmaniere’s Adm’rs, 1 Pet. 1-15; Bank v. Daniel, 37 U. S. 32-55. Here there is no claim of fraud upon the part of the defendant. It gave written information of the transaction upon the policy itself.

In Crosier v. Acer, 7 Paige, 337, the court said:

> ‘‘If this court can relieve against a mistake of law in any case where the defendant has been guilty of no fraud or unfair practice, which is at least very doubtful, it must be in a case in which the defendant has in reality lost nothing whatever by the mistake, and where the parties can be restored to the same position, substantially, in which they were at the time the mistake happened.”

Here there is no pretense that the defendant can.be restored to the same position it was in prior to the payment of the policy. If the plaintiff intended to repudiate the last policy, he should have returned what had been received upon it. To retain the money received upon it is incompatible with its repudiation. Cobb v. Hatfield, 46 N. Y. 533-537; Hammond v. Pennock, 61 N. Y. 145; Baird v. Mayor, etc., 96 N. Y. 567-599. It is true that those were cases where the transactions repudiated were fraudulent ones, and here there is no claim of fraud upon the part of the defendant; but the principle is the same. The law will not require less in repudiating a transaction arising out of a mere mistake than it will one arising out of a fraud. If there is justice in requiring the fruits of a transaction tinctured with fraud to be restored, or offered to be restored, to the guilty person, before the transaction can be repudiated, so there is in requiring the restoration or offer thereof to a party who is innocent of any fraud. The law is not more tender of the fraudulent person than of the innocent and honest. The rule is not changed by the fact that the party claiming to have been injured has disposed of the fruits of the transaction, so that he cannot return them. But, if we assume that the plaintiff did not have full knowledge of all the facts, that he did not actually know that the first policy was taken out for his benefit, and that, therefore, he received the money on the last policy in ignorance and by mistake, still I think he had sufficient knowledge to put him upon injuiry, and he is chargeable with the knowledge that such inquiry would have afforded. The fact in regard to which the mistake is made must not only be unknown, but must be one which could not, by reasonable dill*144gence, have been ascertained. Railway Co. v. Johnston, 84 Hun, 83, 32 N. Y. Supp. 49. So, also, it has been held that, where money has •been paid with, full knowledge of all the facts or circumstances upon which it is demanded, or with the means of such knowledge, it cannot Tbe recovered hack upon the ground that the party supposed he was bound in law to pay it, when in truth he was not. Clarke v. Butcher, ■9 Cow. 674-681. So, too, courts have refused to set aside judgments •because of facts afterwards discovered which would have been a defense to the actions in which the judgments were rendered, where such facts “might, by the exercise of reasonable diligence, have been ascertained ■before the rendition of such judgment.” Stilwell v. Carpenter, 59 N. Y. 414; Mayor, etc., of City of New York v. Brady, 115 N. Y. 599, 22 N. E. 237. So as to a purchaser of real estate, it has been held that:

> “If the facts within the knowledge of the purchaser are of such a nature as, in reason, to put him upon inquiry and to excite the suspicion of an ordinarily prudent person, and he fails to make some investigation, he will be chargeable with that knowledge which a reasonable inquiry as suggested by the facts would 'have revealed.” Anderson v. Blood, 152 N. Y. 285, 46 N. E. 493.

Many other cases might he cited to the same effect. While none •of these cases are like the one now before us, yet it seems to-me that the principle is applicable; particularly as it appears to be impossible to place the defendant in the same position that it was before payment was made to the plaintiff as executor, and "where, if the plaintiff succeeds, it will result in compelling the defendant to pay double insurance upon one life, upon one policy, and for one premium. The plaintiff, as we ha-ve seen, had for a number of years been informed that Ms father had taken out a policy of insurance for his benefit. It was common knowledge in the family,—talked over with them by Mm. Upon Ms father’s death it appeared that the policy of insurance was for the benefit of the estate, and not for the benefit of the plaintiff, •and there was recorded upon its face the fact that the original policy had been surrendered, and the beneficiary changed. These known, •conceded facts, assuming that of themselves they are not sufficient to constitute that full knowledge, action upon which will constitute1 a ratification, are at least abundantly sufficient notice to have put him upon inquiry to find out all the details that could be ascertained. The plaintiff upon the trial seems to have realized this, and attempted to meet the burden resting upon him by the testimony he gave in regard to Ms interview with Mallory, i have already discussed the evidence as to that interview, and I have only to add to it that the inquiry that he claims he made of Mallory was, in effect, answered by the writing upon the margin of the face of the policy then in his possession, and the answer that he claims Mallory gave Mm was negatived by the same writing. When, in 1896, he called at the office of the company he seems to have had no difficulty in obtaining access to the books, and gaining all the information necessary to enable Mm to institute this action,—evidence in itself that there was no obstacle to Ms obtaining full information at any time. Upon the evidence in this -case it seems to me, therefore, that he had sufficient knowledge of the facts to be conclusive upon him, and at least sufficient notice to make it Ms duty, under the circumstances, to make inquiries if he desired *145further information before acting. While it is the rule that a person desiring to repudiate a transaction entered into by mistake should act promptly after discovering the mistake, he should also be required to show reasonable diligence in ascertaining the facts. Here there has been no endeavor upon the part of the defendant.to withhold any of the facts. It placed upon the policy a statement which, to say 'the least of it, is not only notice, hut an invitation to further inquiry. Yet the plaintiff, according to liis own account, made no further attempt to investigate the matter until the fall of 1895, and did not commence his action until 1896, nearly six years after he received the money upon the last policy, after the money so received had been distributed among Ms father’s creditors, and after his accounts as executor had been passed upon by the surrogate. This delay, while perhaps not an absolute bar to the plaintiff’s claim, is yet a matter that the court cannot help considering in passing upon the merits of this action.

For these reasons, the order denying the motion for a new trial should be reversed, and a new trial granted, costs to abide the event. All concur.