Title: LENTZ v PRUDENTIAL INS CO
Citation: N/A
Docket Number: 12541
State: Montana
Issuer: Montana Supreme Court
Date: April 3, 1974

No. 12541 I N THE S U P R E M E C O U R T O F THE STATE O F MONTANA 19 74 EDNA M . L E N T Z , ADMINISTRATRIX O F T H E ESTATE O F K A R L 0. LENTZ, Deceased, and EDNA M. L E N T Z , P l a i n t i f f s and Respondents, THE PRUDENTIAL INSURANCE C O M P A N Y O F AMERICA, Defendant and Appellant. Appeal from: D i s t r i c t Court of the Sixteenth J u d i c i a l D i s t r i c t , Honorable Alfred B. Coate, Judge presiding. Counsel of Record : For Appellant : Gene Hunt ley argued, Baker, Montana For Respondent: Denzil R. Young argued, Baker, Montana Submitted: February 25, 1974 Decided: APR - 3 1 9 E Filed : APR - 3 1 9 % : Mr. Chief Justice James T. Harrison delivered the Opinion of the Court. This is an action by plaintiff, Edna M. Lentz, wife and administratrix of the estate of Karl 0 . Lentz, seeking recovery on a credit life insurance policy. The district court of Fallon County, sitting without a jury, entered findings of fact, con- clusions of law and judgment in favor of plaintiff. From this judgment defendant, the Prudential Insurance Company of America, appeals. On July 1, 1967, Karl 0 . Lentz, deceased, of Baker, Montana, purchased an automobile from Ryan Oldsmobile in Billings, Montana. The purchase was by installment contract. As part of the contract Lentz purchased credit life insurance from the de- fendant. As a condition of coverage, Lentz was required to declare "that to the best of my knowledge and belief I am now in good health". The premium was paid on the contract of insurance. Lentz died on August 16, 1967. At the time of the purchase Lentz was 73 years old. Lentz experienced various medical problems. By stipulation, reports of Dr. John Hurly of Billings, Montana, were admitted into evidence in the trial. These reports show that in September -October and December of 1966, Lentz was treated by Dr. Hurly for ulcers. Sur- gery was declined on both occasions because of poor renal (kidney) function. The reports indicate that Lentz was quite comfortable on medication and that his blood pressure was quite satisfactory at that time and that " * * * He (Lentz) was aware because of the deferment of surgery on two occasions that his health was not good at these times. Nonetheless there was no immediate threat of death once the bleeding ulcer was recognized and treated." Dr. Robert Weeks, Baker, Montana, testified that he saw Lentz on May 16, 1967, and prescribed some medicine to lower Lentz's blood pressure. Dr. Weeks, considering Lentz as being in serious condition of h e a l t h , was asked i f he t o l d Lentz t h e seriousness of h i s condition. H e answered: "No, on t h e c o n t r a r y he acted so frightened t h a t I reassured t h e man r a t h e r than discussing anything about t h e shortness of l i f e o r a s h o r t l i f e span. I considered t h i s a necessary p a r t of t h e treatment because being scared e l e v a t e s t h e blood pressure and b a s i c a l l y t h i s was h i s prob- lem, it produced t h e anurism ( s i c ) . " D r . Weeks s t a t e d t h a t he t r i e d t o remain o p t i m i s t i c as t o r e a s s u r e Lentz and t e s t i f i e d : "Reassuring him t h a t he would wake up i n t h e morn- i n g , t h a t type of t h i n g , you know, he was r e a l l y q u i t e frightened, on s e v e r a l v i s i t s . O n t h i s v i s i t , 5-16-67, I t h i n k it was t h e one he was most frightened on." D r . Weeks h o s p i t a l i z e d Lentz on May 20, 1967, f o r h i s high blood pressure, back pains, abdominal aneurism and because " h i s kidneys weren't doing t h e i r f u l l work." H e was discharged from t h e h o s p i t a l on May 2 4 , 1967, and on May 29, 1967, Lentz was again h o s p i t a l i z e d f o r back pains. H e was r e l e a s e d on June 4 , 1967. D r . Weeks saw Lentz again on June 7, 1967, and i n r e f - erence t o t h i s v i s i t s t a t e d : "On t h a t occasion h i s blood pressure was 130 over 90, which is a small miracle. The poison t h a t h i s kidney was supposed t o f i l t e r o u t had improved so he was i n b e t t e r shape than a t any time s i n c e I s t a r t e d seeing him on 5-16-67, so he was less axotemic on t h a t day". D r . Weeks t e s t i f i e d t h a t he had shown Lentz numbers and f i g u r e s t o i n d i c a t e t o him t h a t he was improving and t h a t he had probably s a i d something t o Lentz t o t h e e f f e c t " t h a t t h i s is t h e b e s t he has ever been." D r . Weeks saw Lentz again on June 16, 1967, when h i s blood pressure w a s up and again on J u l y 3 , 1967, when L e n t z ' s blood pressure was q u i t e high. D r . Weeks t e s t i f i e d t h a t he "continued t o assume a reassuring manner a t a l l times" with Lentz. Lentz was seen s e v e r a l t i m e s t h e r e a f t e r by D r . Weeks, up t o t h e t i m e of h i s death on August 16, 1967. Death was a t t r i b - uted t o an abdominal a o r t i c aneurism. Plaintiff testified that her husband was not feeling good in the spring of 1967, that he had gas on the stomach and that he had to quit smoking. Plaintiff, however, stated that her husband was in good health and seemed to be 10 or 15 years younger than he actually was and that they had planned to go to California to be with their son's children. Lentz bought the new car for the trip and purchased new clothing as well. In response to being asked about Mr. Lentz's spirits at the time of the purchase of the car, plaintiff answered, "He felt real good, because of his terrific health he was real happy. " Defendant presents four issues for our determination. Two of the issues, which we shall consolidate and consider initially, concern a question of agency and the district court's findings with respect to representations made by the salesman at Ryan Oldsmobile to deceased. Defendant's remaining issues are summarized as follows: (1) Whether there was a misrepresentation as to a material fact under section 40-3713, R.C.M. 1947; (2) whether the life in- surance policy was rescinded. The district court in its findings of fact found that " * * * the salesman at Ryan Oldsmobile advised deceased that it would be necessary to purchase a Creditors Life Insurance Policy from the defendant." The district court also found: " * * * as deceased did not desire to purchase said insurance but was advised by the automobile seller's agent that such insurance would have to be purchased." Defendant argues that there is no basis in the evidence for the district court to have made such findings. While from our review of the transcript we find no evidence that it was a necessity that deceased purchase the insurance, we clearly find in the testi- mony by the plaintiff evidence that the salesman at Ryan Oldsmobile recpested and suggested that deceased take the insurance. The salesman indicated t o deceased t h a t purchasing t h e insurance was customary and something which was always done on a c o n t r a c t . Deceased then purchased t h e insurance. I n addition, t h e d i s t r i c t c o u r t found "That t h e automobile seller's agent was not an agent of t h e deceased, but was defendant's agent." Defendant s t a t e s no objection t o t h i s finding except t h a t it was not necessary and confusing. It is t h i s Court's view t h a t a l l of t h e above-quoted find- ings of t h e d i s t r i c t c o u r t were proper, necessary and supported by t h e evidence. The salesman was c e r t a i n l y t h e agent of defendant, and t h e evidence shows t h a t t h e salesman urged deceased t o e n t e r i n t o t h e c o n t r a c t . W e do note, however, t h a t because of t h e fore- going i s s u e s defendant was n o t i n any way estopped from contending t h a t t h e r e was a misrepresentation made by t h e deceased. A s t o t h e next question presented, defendant s p e c i f i c a l l y t a k e s i s s u e with t h e d i s t r i c t c o u r t ' s finding No. V I I I , which s t a t e s : "That deceased's representation of good h e a l t h , although untrue i n f a c t , was made i n good f a i t h without any i n t e n t t o mislead t h e defendant o r t o induce t h e defendant t o i s s u e t h e insurance policy, a s deceased d i d not d e s i r e t o purchase s a i d insur- ance but was advised by t h e automobile s e l l e r ' s agent t h a t such insurance would have t o be purchased." Section 40-3713, R.C.M. 1947, provides: " A l l statements and d e s c r i p t i o n s i n any a p p l i c a t i o n f o r an insurance policy o r annuity c o n t r a c t , o r i n negotiations t h e r e f o r , by o r i n behalf of t h e insured o r annuitant, s h a l l be deemed t o be represen- t a t i o n s and not warranties. Misrepresentations, omissions, concealment of f a c t s , and i n c o r r e c t s t a t e - ments s h a l l not prevent a recovery under t h e p o l i c y o r c o n t r a c t unless e i t h e r : " (a) Fraudulent; o r " ( b ) Material e i t h e r t o t h e acceptance of t h e r i s k , o r t o t h e hazard assumed by t h e i n s u r e r ; o r " ( c ) The i n s u r e r i n good f a i t h would e i t h e r not have issued t h e policy o r c o n t r a c t , o r would n o t have issued a policy o r c o n t r a c t i n a s l a r g e an amount, o r a t t h e same premium o r r a t e , o r would not have provided coverage with r e s p e c t t o t h e hazard r e s u l t i n g i n t h e l o s s , i f t h e t r u e f a c t s had been made known t o t h e i n s u r e r a s r e - quired e i t h e r by t h e application f o r t h e policy o r c o n t r a c t o r otherwise." Defendant argues t h a t section 40-3713 prevents a recovery i f a m a t e r i a l misrepresentation i s made whether o r not t h e m i s - representation is innocently made. Defendant's argument i s based upon t h e premise t h a t deceased represented a f a c t t h a t he was i n good health, and because i n f a c t , deceased was not i n good health, t h a t t h i s c o n s t i t u t e s a material misrepresentation preventing recovery. Deceased declared " t h a t t o t h e b e s t of m y knowledge and b e l i e f I a m now i n good health." The a c t u a l representation was t h a t deceased believed himself t o be i n good h e a l t h , and t h e d i s t r i c t c o u r t found t h a t t h i s was i n good f a i t h . Although t h e f a c t s i n t h i s case show t h a t deceased was not i n good health, t h e f a c t s a l s o show t h a t deceased believed t h a t h i s health was good. Defendant a l s o contends t h a t t h e r e i s not s u f f i c i e n t evi- dence f o r t h e d i s t r i c t c o u r t t o have ruled t h a t deceased, i n good f a i t h , thought t h a t he was i n good health. The testimony of D r . Weeks i n d i c a t e s t h a t deceased was continually reassured t h a t h i s health was improving and t h a t de- ceased was encouraged a s t o t h e condition of h i s health. I n ad- d i t i o n , t h e testimony of p l a i n t i f f supports t h e f a c t t h a t deceased believed himself t o be i n good h e a l t h a t t h e time of t h e purchase of t h e automobile and t h e execution of t h e c o n t r a c t and c r e d i t l i f e insurance policy. Deceased represented t h a t he believed him- s e l f t o be i n good health, and t h e evidence s u f f i c i e n t l y supports h i s b e l i e f . I n Couch on Insurance 2d Section 35:150, it is s t a t e d : " * * * Accordingly, where t h e applicant f o r l i f e insurance c e r t i f i e s t h a t h i s h e a l t h is good according t o t h e best of h i s knowledge and b e l i e f , a recovery may be had, on t h e death of insured, i f it appears t h a t he had reason t o believe and d i d believe, t h a t a t t h e t i m e he was i n good health, although it subsequently develops t h a t t h i s was not i n f a c t h i s condition, f o r h i s statement was not unqualified, but only t o t h e e x t e n t of h i s knowledge and b e l i e f . * * *" A s t o the f i n a l i s s u e presented, defendant contends t h a t when t h e f u l l amount of t h e premium i s tendered back t o t h e e s t a t e of t h e deceased and t h e money is kept t h a t t h i s r e s u l t s i n a re- s c i s s i o n of t h e policy. The d i s t r i c t c o u r t found: "That defendant has refused t o pay t h e insurance b e n e f i t s provided f o r by t h e policy and has t r e a t e d t h e policy a s rescinded and has returned t h e amount of t h e premium t o t h e deceased's e s t a t e . " I n order f o r t h e r e t o be a r e s c i s s i o n of t h e insurance policy t h e requirements of both s e c t i o n 40-3713, supra, and section 13-905, R.C.M. 1947, must be met. McLane v. Farmers I n s . Exchange, 150 Mont. 116, 118, 432 P.2d 98. The d i s t r i c t c o u r t i n its conclusions of law c i t e d McLane f o r t h e proposition t h a t defendant could not rescind t h e insurance policy a f t e r l i a b i l i t y had attached. Upon examining our decision i n McLane w e note t h a t what w e held t h e r e i n w a s t h a t even a f t e r t h e accident, the insurance company " * * * had a r i g h t t o a reason- a b l e t i m e i n which t o i n v e s t i g a t e ( c i t i n g a u t h o r i t y ) and upon d i s - covering t h e f a c t s e n t i t l i n g him t o rescind he was required t o a c t promptly t o rescind." The insurance company i n McLane waived i t s r i g h t t o rescind by affirmative a c t s on i t s p a r t and by not meeting t h e requirement t h a t he promptly rescind. W e point out t h a t t h e d i s t r i c t c o u r t ' s conclusion i s not an absolute r u l e . While it i s t h i s Court's purpose t o make t h i s c l a r i f i c a t i o n , w e nevertheless hold t h a t i n t h e i n s t a n t case t h e r e has been no rescission. I n support of h i s argument defendant c i t e s 43 Am J u r 2d, Insurance, ! j 436, which s t a t e s : "The f a c t t h a t a f t e r t h e death of t h e insured a s u i t i n equity may not l i e t o rescind t h e insurance c o n t r a c t does not prevent t h e p a r t i e s from rescind- i n g by consent. After t h e death of t h e insured, t h e b e n e f i c i a r i e s of a l i f e insurance c o n t r a c t a r e t h e proper p a r t i e s t o give consent t o and agree upon a r e s c i s s i o n of t h e c o n t r a c t , and they a r e likewise t h e proper p a r t i e s t o accept premiums returned upon such a rescission. "Accordingly, a r e s c i s s i o n by consent of t h e p a r t i e s has been held t o be completed a s a matter of law where t h e beneficiary i n an insurance policy t h e reinstatement of which was obtained by t h e alleged fraud of t h e insured, a f t e r t h e death of t h e insured, accepted and f o r a month retained t h e premiums which were returned by t h e i n s u r e r on the ground of t h e alleged fraudulent misrepresentations by t h e insured of f a c t s material t o t h e r i s k s . "Moreover, t h e e f f e c t , a s a r e s c i s s i o n of a l i f e insurance policy by consent, of an acceptance by t h e beneficiary a f t e r the death of t h e insured, of a check f o r t h e amount of premiums paid, with i n t e r e s t thereon, tendered by an i n s u r e r claiming t h e policy t o be voidable by reason of misrepresentations by t h e insured, i s not a l t e r e d by t h e f a c t t h a t he has been wrongly advised by a t h i r d person t h a t he may accept t h e check without losing any r i g h t a g a i n s t t h e insurer." I n view of our discussion of defendant's preceding i s s u e and s t a t u t e s which have been c i t e d herein, t h e only means by which a r e s c i s s i o n could have been effected i n t h i s case was by t h e con- s e n t of t h e p a r t i e s . Although t h e d i s t r i c t c o u r t ' s finding states t h a t defendant t r e a t e d t h e policy a s rescinded and returned t h e premium t o t h e deceased's e s t a t e , t h i s Court f a i l s t o see where t h e r e is any evidence i n t h e record showing t h e r e q u i s i t e consent t o rescind. There a r e statements made by counsel i n t h e t r a n s c r i p t of t h e t r i a l a s t o what happened t o t h e premium, and t h e b r i e f s on appeal a r e r e p l e t e with statements by counsel a s t o what happened t o t h e premium. There i s a l e t t e r attached t o p l a i n t i f f ' s b r i e f , but which was not admitted i n t o evidence. There is, however, no proof i n t h e record t h a t t h e r e was consent by t h e p l a i n t i f f a s a d m i n i s t r a t r i x of t h e deceased's e s t a t e o r a s owner of t h e auto- mobile t o rescind t h e policy. Therefore, defendant's f i n a l i s s u e is without merit. For the foregoing reasons, the judgment of the district court is hereby affirmed. Chief .Justice , , . - * . We concur: