Court Opinion

ID: 3893589
Source: CourtListenerOpinion
Date Created: 2016-07-06 09:24:38.418724+00
Date Added: 2024-06-11T07:42:15.258413
License: Public Domain

OPINION ON PETITION FOR WRIT OF ERROR.
This case is again before us on petition for writ of error filed by the Life  Casualty Insurance Company to review the decision of the Chancellor awarding to Henry Mitchell the premiums, $928.80, paid by said defendant, Henry Mitchell, to said Insurance Company on the policy for $10,000 on the life of Frank Mitchell that was decreed cancelled for fraud.
The case was disposed of by us on appeal at the last term in a written opinion by Special Judge Norman Farrell, filed on December 19, 1930, in which we held that the policy was obtained by intentional fraud and affirmed the decree of the Chancellor in sustaining the bill for rescission of the policy for fraud, as is fully set out in our original opinion. *Page 419 
In that opinion we overruled the assignment of said Insurance Company as to the Chancellor's decree awarding the premiums to Henry Mitchell, for the reason that appellants had prayed and obtained a special appeal and said Insurance Company had not appealed therefore it could not assign errors.
Now, said Insurance Company has filed a petition for writ of error to again review the question, and it has assigned only one error, and that is, that the Chancellor erred in awarding to Henry Mitchell the premiums, $928.80, paid by it into the registry of the court, as it insists that its tender and payment into court was a conditional tender, to be paid to the party entitled thereto as decreed by the court, and that as the said policy was rescinded and cancelled for intentional fraud the Insurance Company is entitled to retain the fund, citing Jones 
Abbott v. Insurance Company, 90 Tenn. 604, 18 S.W. 260; Moore v. Insurance Company, 5 Higgins, 299; 32 C.J., 1237.
The original bill was filed by the Insurance Company against Henry Mitchell and the administrators of the deceased, Grover Howard, named in the policy as Frank Mitchell, for rescission of the policy for fraud, but nothing was alleged in the bill about the tender of the premiums paid to said Insurance Company, but shortly thereafter the following order was entered amending the bill:
    "June 9, 1927, Amendments to Original Bill, filed, as follows:
    "The complainant amends the original bill in this cause, before answer or other defense made, as follows:
    "At the end of paragraph five, and just before the prayer of the bill, insert the following language:
    "`Complainant is advised and avers that as a condition precedent to the relief sought in this bill, it is not required to return to the defendant Henry Mitchell, or any of the defendants, the premiums paid on this policy. Complainant herewith tenders into court, however, the amount of said premiums, being two annual premiums at the rate of $464.40 each, or a total of $928.80, in order that the court may determine the rights of the parties in the premises, and award said amount to whatever party is entitled thereto, this tender being without prejudice to complainant's insistence that it is entitled to retain said premiums under the facts of this case.'"
The Chancellor, after decreeing a rescission and cancellation of the policy for fraud, proceeded to dispose of the premiums paid into court as follows:
    "It is further ordered, adjudged and decreed that the premiums heretofore paid into court by complainant Insurance Company on said policy of insurance be and the same, are, adjudged and decreed to the defendant Henry Mitchell, and *Page 420 
the Clerk  Master after deducting the cost accruing in this cause against Henry Mitchell will pay the remainder of said premium to the defendant Henry Mitchell's counsel of record in said cause, upon which sum on their motion a lien is given for the payment of their reasonable solicitor's fees."
We are of the opinion that the petition for writ of error was properly granted. Different parties to a suit who are separately aggrieved by a judgment, order, or decree, are entitled to separately appeal therefrom or to sue out separate writs of error. 3 C.J., pp. 622, 1006, 1008, 1010, secs. 476, 954, 961 and 964; Bozeman v. Naff, 155 Tenn. 121, 290 S.W. 980.
But we are also of the opinion that the Chancellor was correct in awarding the premiums paid into court to Henry Mitchell, as the proof shows that he had signed the note of the deceased and had to pay the premiums.
It is true that a party guilty of wilful fraud in procuring a policy cannot, after the fraud has been discovered and the policy avoided, maintain an action for the return of the premiums paid by him. Aetna Life Insurance Co. v. Paul, 10 Ill. App. 431; Hoyt v. Gilman, 8 Mass. 336; Friesmuth v. Agawam Mutual Fire Insurance Co., 10 Cush., 588; Fay v. Prudential Insurance Co., 80 App. Div., 350, 80 N.Y. Supp., 683; Himely v. S.C. Insurance Co., 1 Mill. Const., 154, 12 Am. Dec., 623; Elliott v. Knights of Modern Maccabees, 46 Wash. 320, 13 L.R.A. (N.S.), 856, 89 Pac., 926; Jones  Abbott v. Insurance Company, supra; Moore v. Insurance Company, supra; 32 C.J., 1237; 16 Am.  Eng. Ency. of Law (2 Ed.), 954.
But an insurance company seeking to rescind an insurance policy for fraud must tender the premiums and pay them into court, and is not entitled to have them refunded to it when the policy is ordered canceled.
In a suit in equity for rescission for fraud the injured party must make an offer to restore what he has received in return for what he was defrauded into parting with. 3 Williston on Contracts, secs. 1529, and 1530; 9 C.J., 1207; Hill v. Harriman,95 Tenn. 300, 32 S.W. 202.
    "An insurance company seeking to rescind or set aside its policy, on the ground of fraud, false representations, or breach of warranty, must restore or offer to restore to the insured the whole of the premium which he has paid for the policy, or any note given for such premium, and this must be done with reasonable promptness after discovery of the facts relied on for relief, and without it there can be no effective rescission. An exception may be found in the case where the company has sustained actual provable damages in consequence of the fraud practiced upon it. Here, being entitled to offset such damages *Page 421 
against the premium received, it will be entitled to rescind, as against a suit in equity to compel a reinstatement of the policy, without restoring the entire premium." 2 Black on Rescission (1 Ed.), sec. 483; 5 Cooley's Briefs on Insurance (2 Ed.), 4725; Metropolitan Life Insurance Co. v. Freedman, Extr.,  159 Mich. 114, 123 N.E. 547, 32 L.R.A. (N.S.), 298; Central Life Insurance Company v. Rosenstein,  46 Ind. App. 537, 88 N.E. 97; Iowa Life Insurance Company v. Haughton (Ind. App.), 85 N.E. 127, 494; Schoneman v. Western Horse  Cattle Insurance Co.,  16 Neb. 404, 20 N.W. 284; Delavigne v. United Insurance Co., 1 Johns. Cas., 310; National Counsel, etc., v. Garber, 154 N.W. 512, 131 Minn. 16.
    "While it is true that where the policy is obtained by means of fraudulent misrepresentations, the premiums cannot be recovered back by the insured (see 2 May on Insurance (4 Ed.), sec. 567, and cases cited), we think a different rule obtains where the company seeks to avoid the contract on the ground of fraud. In that event, the complainant must recognize the maxim that he who seeks equity must do equity. It would, indeed, be strange if the complainant could say: `This contract was obtained from me by fraud. Therefore it is void, — void, except as to the provision therein contained that, in the event of fraud, the premiums paid should be retained by the company. As to that provision, it is valid.' No authorities need be cited to show the untenable character of such a claim. At the time the bill was filed, the complainant itself recognized this fact, and it cannot now be heard to urge the contrary. The complainant should have recovered costs in the court below." Metropolitan Life Insurance Co. v. Freedman,  159 Mich. 114, 123 N.W. 547, 32 L.R.A. (N.S.), 303; McEwen v. N.Y. Life Insurance Co., 187 Cal. 144, 201 Pac., 577.
The theory of rescission is that he who seeks equity must do equity, and he cannot have rescission without restoring the status quo. 2 Lawrence on Equity Jurisprudence, secs. 756-7.
It results that the assignment of error must be overruled and the decree of the Chancellor affirmed. The cause will be remanded to the Chancery Court of Lincoln County with direction that the fund be paid to Henry Mitchell as directed by the Chancellor's decree. The cost incident to the writ of error is adjudged against the Insurance Company and the surety on its bond.
               OPINION ON PETITION FOR REHEARING.
This case is again before the court on a petition for a rehearing, in which it is insisted that the repayment of the premiums paid was not necessary for a rescission and cancellation of the policy. We *Page 422 
examined the authorities cited in the petition before we wrote the original opinion, and are content with our former holding. The same paragraph of authority cited, goes on to say:
    "The general rule seems to be that an insurance company, suing to cancel a policy for fraud, must restore or tender the premiums received as a condition of relief." 5 Cooley's Briefs on Insurance (2 Ed.), 4725.
The petition is denied.
Faw, P.J., and DeWitt, J., concur.