Opinion ID: 1122303
Heading Depth: 1
Heading Rank: 3

Heading: Were plaintiffs' policies voidable for fraud?

Text: The basis of the claim of fraud was that the policies were invalid because of illegality and lack of mutuality so that the plaintiffs did not get what they had bargained and paid for. What we have said above renders it unnecessary to further discuss that issue. The foregoing disposes of the main questions presented by this appeal. However, the question remains whether the defendant tendered the correct amount as refund for the illegal aspect of the transaction. Although agreeing that the plaintiffs should recover the sum allocable to the illegal portions of the agreement, defendants seek to retain for themselves the entire premiums received except for the net sum that Mutual was required to pay over to Finance under the Trust Agreement. This is no more fair nor equitable than it would be to permit the defendant company to retain only the bare costs of term insurance for the coverage given plaintiffs and to require the return of the rest of the amount collected to plaintiffs. It is conceded by all concerned that of the premiums collected, particularly the initial premiums, a high percentage goes to what are called acquisition costs, including payment of salesmen's commissions, establishment and maintenance of office procedure, salaries of personnel and the fixed expenses in carrying on the business. These costs were as much chargeable pro rata to the advantage of Finance Company and that aspect of the business as they were to the sale and handling of the insurance feature of the policy. Yet the defendant has charged the entire cost to the insurance, or legal aspect of the transaction. It is willing to return only the net cost to it of the Finance Company or illegal part of the arrangement. In fairness to Mutual, it should undoubtedly be allowed to charge against these premiums more than the basic cost of term insurance for the coverage given. But it should also be required to return to the plaintiffs whatever portion of the premiums received as are properly allocable to the acquisition and other costs of the trust agreement part of the transaction. We are aware that this may present some difficulties, but the plaintiffs should not be denied recovery simply because the amount they are entitled to is difficult to determine. This is particularly so when defendant company was at fault in initiating and selling the illegal trust agreement. It, therefore, appears necessary to remand this case to the district court for further proceedings and determination of the correct amount to be refunded to plaintiffs. Such is the order. The parties to bear their own costs. McDONOUGH, C.J., and WADE and WORTHEN, JJ., concur. HENRIOD, J., does not participate herein.