Court Opinion

ID: 6695276
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:48:33.440167+00
Date Added: 2024-06-11T16:01:12.801126
License: Public Domain

Hoke, J.,
after stating the case: The statute applicable to the question presented (Revisal, sec. 4775) provides as follows:
*102“4775. Discrimination between insurants forbidden. No life insurance company doing business in this State shall make any distinction or discrimination in favor of individuals between insurants of the same class and equal expectation of life in the amount of payment of premiums or rates charged for policies of life or endowment insurance, or in the dividends or other benefits payable thereon, or in any of the terms and conditions of the contract it makes; nor shall any such company or any agent .thereof make any contract of insurance or agreement as to such contract other than as plainly expressed in the policy issued thereon; nor shall any such company or agent pay or allow as 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 contract of insurance.”
In Annuity Co. v. Costner, 149 N. C., 293, the Court held that when a policy had been issued in connection with a contract of this character and retained by the beneficiary for a year, an-action by the company on the notes executed for the annual premiums could be sustained, and this on the ground that, on the facts there appearing, the, policy and the contract, which it was claimed conferred illegal benefits, were severable, and that defendant, having received the benefits of the policy as an executed consideration, could be made to pay the stipulated price.
■ In this case the policy has been surrendered and cancelled and the surrender value received by the plaintiff, and the action is brought on the collateral agreement itself, seeking to recover damages for its breach, as of an executory contract; and we are clearly of opinion that, considered'in reference to this claimant and persons in like relation and circumstance, the agreement in question is in direct contravention of the statute, and that no recovery'upon it can be had. The express provision and obvious purpose and policy of the statute are to prevent discrimination among policy holders of like class and expectancy, and, in aid and furtherance of this desirable purpose, to secure publicity by requiring that all the stipulations of the contract and. all agreements between the insurant and the company in reference thereto shall be plainly expressed in the policy; and, in our view, the contract in question here is violative of both these requirements. It creates a select body of its policy holders, not to exceed three hundred in number, and agrees to confer upon them a property right in a fund of. the company, by means of which practically the annual premiums are to be reduced, and to such an extent that in five or six years, as the.complaint states, the policy would *103be fully self-sustaining, thereby withdrawing a portion of the company’s assets for the benefit of this favored few, and tending to render it less able to furnish the general body of its policy holders with this desirable form of protection at the lowest cost consistent with good business prudence. It is an undoubted and distinct “special favor” and advantage to arise in behalf of this preferred class who are policy holders in the company for a given amount. For the other stipulation that the member shall send to the company annually, at its request, the names of ten people, residents of his county, whom he deems insurable, is so clearly colorable that it does not require serious consideration. Again, the agreement declared on is one that, in this instance, was made in reference to plaintiff’s contract of insurance. The plaintiff alleges that it was the sole inducement for taking out the policy, and, this being true, the law requires that it should appear in the policy itself and not otherwise. On both grounds, therefore, the contract or agreement declared on is forbidden by the statute, and recovery on it should not be allowed. Edwards v. Goldsboro, 141 N. C., 60; Warden v. Plummer, 49 N. C., 524; Sharp v. Farmer, 20 N. C., 122; 9 Cyc., 480, 481.
The same view as to similar statutes has prevailed in other jurisdictions. Ins. Co. v. Commissioner, 125 Mich., 85 State Life v. Strong, 127 Mich., 346; Cole v. State (Miss.), 45 Southern, p. 11. And the Attorneys-General of several States have officially advised against their validity.
We were referred by counsel to the case of Urwan v. North Western Nat. Life, 125 Wis., 349, in support of plaintiff’s right to recover, but the authority does not'sustain the position. In that case the plaintiff applied for a policy of insurance for five thousand dollars on the twenty-year payment plan and was to become a member of a board of special agents of the company, and paid $159.55 as a tentative premium on the policy for which he had applied. In an action brought to recover this premium plaintiff introduced evidence tending to show that the contract, and policy sent plaintiff were entirely different from the agreement he had made, and that the agent of defendant had been guilty of false and fraudulent representations in inducing plaintiff to apply for the policy and pay the money; tha-t plaintiff, on discovering the discrepancy, immediately offered to return both the contract and policy, etc. Eecovery was sustained, and, in part, on the ground that, though the contract may have been forbidden by the statute, plaintiff, having repudiated same while the illegal portion was entirely executory, could recover the amount he had advanced.
*104To the extent stated, the position is recognized in Edwards v. Goldsboro, supra, and not only finds support in tbe Wisconsin case cited, but in other decisions of authority (Spring Co. v. Knowlton, 103 U. S., 49; Stacy v. Foss, 19 Me., 335), and may be taken as established, at least where the pmrti.es are not in pari delicto or public policy does not forbid that recovery should bo enforced. Webb v. Fulchire, 25 N. C., 485; Clark on Contracts, p. 338; 15 A. & E. (2d Ed.), 10()7. But in our case there has been no repudiation of the agreement nor any money withheld by defendant by reason of it, the premiums paid having been accounted for to plaintiff in the surrender value of the policy; and the action is in direct recognition of an illegal executory contract, and demands damages for its nonperformance.
Again, it is urged that the statute, as expressed, only forbids the company and its agents from making the contract in question, and, having been passed for the protection of policy holders, an insurant seeking to recover on such a contract is not considered as in pari delicto, and for that reason should be allowed to recover. There are various recognized exceptions to the principle which finds expression in the maxim, in pari delicto, etc. They will be found very well digested in Clark on Contracts, p. 336 et seq., and well-considered decisions support and apply the principle and its modifications as there stated. Tate v. Building Assn., 97 Va., 74; Lawn v. Pacific Mutual, 131 Wis., 555. One of the exceptions referred to is to the effect that “parties are not to be regarded as being in pari delicto where the agreement is merely malum prohibitum, and the law which makes it illegal was intended for the protection of the party asking relief”; and an instance not infrequent occurs in legislation on insurance where a statute forbids- the issuance of a policy without a license, or establishes some other formal requirement, and the prohibitive features are addressed to the company or its agents, and the loenalty, if any, only imposed upon them. In such case, if a company, without having taken out license, issues a policy, receives the premium, and a loss occurs, the statute will not prevent a recovery.
In the case suggested there is an executed consideration, and, the law having been passed for the general protection of policy holders, the exception is allowed to prevail. But no such position can obtain when the action is to enforce a contract entirely executory, and the same is directly forbidden by the law, and a recovery would be subversive of the very public policy which the statute was designed and intended to uphold. True, the statute, in terms, is only addressed to the companies and their agents, and is enacted for the protection of policy holders; but this is *105for the general body of policy holders who would suffer by the enforcement of such agreements, and not for- those who have entered into the forbidden agreement and are seeking to profit by its' terms. In such case the litigants are in pari delicto, and any and all recovery is denied. Edwards v. Goldsboro, supra; York v. Merritt, 77 N. C., 214; King v. Winants, 71 N. C., 469; Pres. Ministers’ Fund v. Thomas, 126 Wis., 281.
The contract declared on comes directly under condemnation of the principles expressed and sustained in these decisions, and the judgment overruling defendant’s demurrer must be reversed.
Judgment reversed.