Case Name: New York Life Insurance Company v. Frank H. Kimball
Court: Vermont Supreme Court
Jurisdiction: Vermont
Decision Date: 1919-01-25
Citations: 93 Vt. 147
Docket Number: 
Parties: New York Life Insurance Company v. Frank H. Kimball.
Judges: Present: Watson, C. J., Haselton, Powees, Taylob, and Miles, JJ.
Reporter: Vermont Reports
Volume: 93
Pages: 147–161

Head Matter:
New York Life Insurance Company v. Frank H. Kimball.
January Term, 1918.
Present: Watson, C. J., Haselton, Powees, Taylob, and Miles, JJ.
Opinion filed January 25, 1919.
Life Insurance — Failure to Pay Premium — Indorsement Continuing Policy Not a Contract — Equity—Reformation of Instruments — Mutual Mistake — Mistake Warranting Relief — Opinions—Law of the Case.
The insured failed to pay the premium due on a life insurance policy and also failed to avail himself of the option in the policy providing for its continuance on the happening of such contingency. Thereupon the company computed the amount due upon the policy and the time it was to continue in force, and made an indorsement on the policy continuing it for a certain amount for a specific period. Held, that the policy was the only contract between the company and the insured; that the indorsement was not a contract, but an act of the company in no- way participated in by the insured.
The company made á mistake in computing the term of the continuance of the policy. The insured did not know of the mistake during his lifetime and did not even believe that a mistake had been made, and the company did not discover it until after his death. Held, that the mistake was not mutual, but unilateral, and that equity would not reform the indorsement.
The law of a case cannot be determined from a brief quotation of portions of the opinion separate from its facts, especially where the law upon the subject has many exceptions.
Equity will lend its aid to correct (1) mistakes where the mistake is mutual, (2) where only one of the parties is under mistake due to the fraud, deceit, or imposition of the other, (3) where only one of the parties is under mistake not due to the fraud of either party, and (4) where only one of the parties is under mistake through no fault of the other, but solely through his own negligence.
Where the mistake is mutual, or where the mistake of one party is due to the fraud, deceit, or imposition of the other, equity will unhesitatingly afford relief, either in reforming or cancelling the mistaken agreement.
Where the mistake of one party is the result of his own negligence or inattention, equity will refuse its aid except under very strong and extraordinary circumstances showing imbecility or something that would make it a great wrong to enforce the agreement.
Appeal in Chancery. Bill to reform or cancel an indorsement npon a policy of insurance upon tbe life of Charles B. Kimball, in which the defendant is beneficiary. Heard on demurrer to the bill at the September Term, 1917, Chittenden County, Fish, Chancellor. Decree, sustaining the demurrer adjudging the bill insufficient, and dismissing it with costs. Plaintiff appealed.
The policy in question was written on February 5, 1908,' on the ordinary life plan, for the sum of $1,500, payable to the defendant as beneficiary upon the death of the insured.
The policy required the payment in advance of a semiannual premium of $28.72 on the 5th days of August and February in each year. November 11, 1910, the insured borrowed from the plaintiff the sum of $64 on the pledge of said policy as collateral security, and deposited the policy with the plaintiff as such pledge. The insured paid the semiannual premium due under said policy up to and including February 5, 1912, but failed to pay the semiannual premium due on August 5, 1912, or to pay the interest on said loan. The policy thereupon lapsed, and the insured became entitled to extended paid-up insurance, which, calculated upon the basis, upon the terms, and by the methods provided in said policy, was $1,451 for two years and three hundred and forty-two days, from August 5, 1912, and expired on July 13, 1915.
In August, 1913, the plaintiff undertook to calculate said .extended insurance benefit and indorsed said policy for what it supposed and intended to be such benefit, and. on August 6, 1913, mailed the policy to the insured, and thereafter the policy remained in the possession of the insured or the defendant. By mistake the policy bore the indorsement of extended insurance stated in the opinion. The insured died on January 15, 1916.
The plaintiff made said mistake in calculating said extended insurance, in that its clerk at its home office, in computing said extended insurance, gave said policy credit for 1913 dividends amounting to $15.95 based upon the payment of the 1912 premium on said policy, whereas said dividends were only declared by the plaintiff on all the policies of the class to ■vvhich said policy belonged 'if the 1912 premium was paid, which premium on this policy was not paid.
The plaintiff did not discover its mistake in its calculation of said insurance, and in said indorsement until about July 29, 1916, and after it received proofs of the insured’s death. Plaintiff then rechecked its figures according to its custom, and thereupon discovered said error and informed the defendant thereof.
Theo. E. HopMns for the plaintiff.
E. C. Mower and Chas. H. Dcvrling for the defendant.

Opinion:
Miles, J.
This is a bill in chancery to reform or cancel an indorsement upon a policy of insurance upon the life of Charles B. Kimball, in which the defendant is beneficiary. Upon failure to pay the premium as the same fell due and to avail himself of certain options provided for the insured in ease of failure to pay the premium, the policy, in substance, provided that the insured should have insurance for the face amount of the policy plus any outstanding dividend additions and less any indebtedness to the company thereon, said policy to continue in force from the date of default in the payment of the premium, for such time as the cash surrender value will purchase as a net single premium at the attained age of the insured, according to the American Table of Mortality, at the rate of three per centum per annum.
The insured failed to pay the premium falling due August 5, 1912, and. also failed to avail himself of the options in the policy, whereby he became, under the terms of the policy, entitled to only its continuance and amount under the terms stated above.
On August 4, 1913, the plaintiff, by the clerk of its actuary, having computed the amount due on the policy and the time it was to continue in force, indorsed upon the policy as follows: "In accordance with the terms of the loan agreement of the second day of November, 1910, and on account of default in the payment of August 5, 1912, premium and loan interest, this policy is continued for the reduced amount of $1,479 for a term of three years 274 days from August 5, 1912, to May 6, 1916. New York, August 4, 1913."
The indorsement was duly executed by the 'plaintiff, and is the one which the plaintiff seeks to have reformed or cancelled because, as alleged in the bill, there was a mistake in the computation of the amount due on the policy and the time of its coñtinuance from the date of default in payment of the premium. The plaintiff treats this indorsement as a contract; but to this we do not agree. It was not a contract, but a mere act of the plaintiff, in no way participated in by the insured. The policy which was the only contract between the plaintiff and the insured, provided, in the contingency that happened, for an extended insurance in an unascertained amount for an unascertained term. The bill alleges want of knowledge or information ' as to the elements entering into - the computation necessary to ascertain these matters. It is fairly inferable from the facts alleged that the computation required highly technical knowledge possessed only by the plaintiff's actuary department, and that it must be based upon data wholly within the plaintiff's control. The subject-matter was such that the insured could not have, nor possibly be expected to have, any knowledge of the elements entering into the computation. Viewing the indorsement in its true light as the sole act of the plaintiff, much of the difficulty disappears. While it is not alleged in terms that it was the plaintiff's duty to compute the extended term and indorse the result on the policy, it fairly appears that such was the fact.
While both parties supposed that the indorsement extended the policy for the agreed term, the mistake which defeated this purpose was not a mistake in the indorsement; for that was in accordance with the computation. The mistake was back of the indorsement and was in a matter necessarily intrusted to the plaintiff alone. The root of the trouble complained of was a mistake manifestly unilateral, and not mutual. The supposition that the indorsement extended the policy for the correct term does not make the mistake in this case mutual; for the bill fails to show that the insured at any time during his life knew or had reason to know that any mistake had been made in the computation of the amount due on the policy, or the length of time it had to run. Indeed the bill negatives any inference to that effect. Fife & Child v. Cate, 85 Vt. 418, 82 Atl. 741, is full authority for holding that the allegation of want of knowledge makes the mistake unilateral. To give mutuality to a mistake in the sense referred to, the mistake must be reciprocal and common to both parties to the contract or written instrument. 10 R. C. L. 300, par. 44; Page v. Higgins, 150 Mass. 27, 22 N. E. 63; 5 L. R. A. 152, and note. In Page v. Higgins it is said: "The phrase 'mutual mistake', as used in equity, means a mistake common to all the parties to a written contract or instrument, and it usually relates to a mistake concerning the contents or the legal effect of the .contract or instrument." See the long list of authorities cited in support of this statement. To make a mistake mutual it must result from an act of both parties which neither intended (Hearne v. N. E. Mutual Marine Ins. Co., 87 U. S. [20 Wall.] 488, 22 L. ed. 395), and the minds of the parties must have met in the consummation of the mistaken contract, and the mistake must have been shared in by both parties. Saloman v. Ins. Co., 215 N. Y. App. Div. 214, 109 N. E. 121, L. R. A. 1917 C, 106, cited by the plaintiff; Pomroy's Eq., Vol. 4, sec. 1376; Hearne v. N. E. Mutual Marine Ins. Co., supra.
Authorities upon this point need not be multiplied, for the plaintiff, citing many authorities, defines it as defined above, and seeks relief on the ground of mutual mistake, but claims that this case falls within the rule laid down in those cases. The plaintiff overlooks the allegation in its bill that the insured was totally ignorant of the mistake, or it would not rely upon the authorities which it cites; for they rest upon the rule, such as touch upon it, that a mistake by one party, coupled with ignorance of the other party, does not constitute a mutual mistake. See also 23 Harvard Law Review, beginning on page 608, and particularly page 612, where it is stated: "A mistake by one party, coupled with ignorance thereof by the other party, does not constitute a mutual mistake. ' '
On page 613 of the same volume it is said: "A mistake by one party, and a belief by the other party, that there has been a mistake, make a pair of different mistakes, and not a mutual error." To the same effect are Steinmeyer v. Schroeppel, 226 Ill. 9, 80 N. E. 564, 10 L. R. A. (N. S.) 114, 117 Am. St. Rep. 224, and Grant Marble Co. v. Abbott, 142 Wis. 279, 124 N. W. 264.
In the case at bar the insured knew nothing about the mistake, as we have already seen, and though he may have believed that a mistake had happened, which the case does not show, under the authorities above cited, the mistake relied upon by the plaintiff would not be a mutual mistake. Much less would the indorsement as made be a mutual mistake, even if treated as a contract, the case showing, as it does, that the insured knew nothing of the alleged mistake, and the exceptions not showing that the insured even believed that a mistake had been made in connection with the indorsement.
This case should be carefully distinguished from one where a party, at the request of the other, does an act in which both are interested, and in doing it made a mistake to the injury of the other party; for in such case the party doing the act is acting for both, and the mistake is that of both and is mutual, the same as where a scrivener, acting for both parties, makes a mistake, the mistake, though made by the scrivener alone, is the mistake of the parties for whom he acts and is mutual. This case should also be distinguished from those cases where the mistake is that of one of the parties which has occurred from no fault of either party, but not through the inattention of the party seeking relief.
In the reports of our own State, as well as in the reports of other states, may be found opinions from which quotations can be made, as called to our attention in this case, in substance as follows: "The fact is that, where an instrument is drawn and executed, which professes or is intended to carry into execution an agreement, whether in writing or by parol, previously entered into, but which, by mistake of the draftsman, either as to fact or law, does not fulfill, or which violates the manifest intention of the parties to the agreement, equity will correct the mistake, so as to produce a conformity of the instrument to the agreement."
The quoted portions of such opinions, no doubt, state the Jaw of the case in which they appear, bnt it will be found upon the examination of those cases that the quoted portions of such cases are addressed to the particular facts of the case in which they are made, and were not intended to lay down a general rule of law upon the subject of equitable power in the reformation of written instruments. The law of a ease cannot be determined from a brief quotation of portions of the opinion separate from the facts of a case, especially where the law upon the subject has many exceptions, as in the subject now under consideration.
To correct and relieve against mistakes, where a party has not a plain and adequate remedy at law, is, and always has been one of the principal objects and most ordinary duties of courts of equity; but the instances in which equity may lend its aid to correct mistakes may be divided into four classes: First, where the mistake is mutual as to the facts upon which it is based, or as to the terms and stipulations embraced therein; second, where only one of the parties is under snch mistake, either of the facts or stipulations, and such mistake has been occasioned by the fraud, deceit, or imposition in any form of the other; third, where only one of the parties is under such mistake, and this has occurred from no fault of either party, but not through the negligence or inattention of the party seeking relief; and fourth, where only one party is under such mistake, and this has occurred from no fault of the other, but solely through the negligence and inattention of the party seeking relief. In the first two classes, equity will unhesitatingly afford relief, either in reforming or cancelling the mistaken agreement. In the third class equity will withhold its aid if the mistake is the result of negligence or inattention • and in the fourth class equity will refuse its aid, except under very, strong and extraordinary circumstances, showing imbecility or something that would make it a great wrong to enforce the agreement. Kennerty v. Etiwan Phosphate Co., 21 S. C. 226, 53 Am. Rep. 669.
This case does not fall under the first class, for we hold that the mistake was not mutual. The mistake not being mutual, equity will not reform the certificate indorsed on the policy. Williams v. Hamilton, 104 Ia. 423, 73 N. W. 1029, 65 Am. St. Rep. 475, and note; Crosby v. Andretvs, 61 Fla. 554, 55 South. 57, Ann. Cas. 1913 A, 420; Capital City Bank v. Hilson, 64 Fla. 206, 60 South. 189, Ann. Cas. 1914 B, 1211; Vallentyne v. Immigration Land Co., 95 Minn. 195, 103 N. W. 1028, 5 Ann. Cas 212; Grieve v. Grieve, 15 Wyo. 358, 89 Pac. 569, 9 L. R. A. (N. S.) 1211, 11 Ann. Cas. 1162; Chute v. Quincy, 156 Mass. 189, 30 N. E. 550.
This case does not come under the second class, for the bill does not allege nor .does anything in it tend to show that the insured was guilty of fraud, deceit, or imposition, and the plaintiff does not claim it. Equity will, therefore, not aid the plaintiff under this class.
The plaintiff does not by its bill bring itself within the right to relief under the third class; for a party fully competent to protect himself, under no disability, advised as to all the circumstances by which he may be saved in his rights, or in a situation where he might by due diligence be so advised, not overreached by fraud, concealment, or misrepresentations, nor the victim, of a mistake against which prudence might have guarded has no right to call upon the court to protect him. Kennerty v. Etiwan, supra. See note in Williams v. Hamilton, supra. This Court has fully settled the law in the respects above stated and laid down the rule that courts of equity do not relieve a party from the results of his own carelessness and negligence which are in no way-induced by the conduct of the other party. McDaniels v. Bank of Rutland et al., 29 Vt. 230, 70 Am Dec. 406; Hyde v. Hyde, 50 Vt. 301; Bishop v. Allen, 55 Vt. 423; Francis v. Parks, 55 Vt. 80; Durkee v. Durkee, 59 Vt. 70, 8 Atl. 490; Town of Ripton v. Mcquivey's Admr., 61 Vt. 76, 17 Atl. 44. In the case at bar the actuary's clerk made the certificate which the .court of chancery is asked to reform with full knowledge that the premium of August 5, 1912, had not been paid; for he states in the certificate which gives the result of his computation that that premium was defaulted. With that information before him he made the indorsement. This was not only negligence, but gross negligence, and to grant relief in such a case would open the door to a class of cases heretofore unheard of in a court of equity. No claim is made under the fourth class, and we give that no consideration.
The plaintiff's discussion of this case has been principally directed to the power of the court of chancery to reform a written instrument containing a mutual mistake, claiming that the indorsement in question gave to the insured too large a sum and extended the policy for too long a term, as a result of a mutual mistake; but the real question involved is whether the bill alleges facts showing such a mistake, and the holding of the majority that it does n,ot contain snch facts makes it necessary to sustain the decree below.
Decree affirmed, and cause remanded.