Opinion
12555
January 3, 1929.
Before RICE, J., Sumter, Fall Term, 1926. Affirmed.
Action by D.L. Ayers against the Business Men's Insurance Company. Judgment for defendant and plaintiff appeals.
The testimony of plaintiff, directed to be reported, was as follows:
D.L. Ayers, plaintiff, testified as follows:
"I live in Sumter. Lillian Mims was my sister. I run a blacksmith shop. (Policy No. D-305630, issued by the defendant on life of Lillian Mims, offered in evidence.) The premiums were paid on this policy. Mr. M.H. White was agent for the defendant insurance company, and took application for the policy. Mr. White came to see me at my shop and asked me to take out some insurance. I was carrying insurance with him on my children and my adopted child, my sister's child, and he asked me to take out some insurance on the child's mother. I told him his mother was in Orangeburg, and he said that it did not make any difference. I told him she was not in good health, and that was the reason I adopted the baby. He said, `Is she in bed?' I said, `No, but she is in bad health.' He said it did not make any difference, he could insure her anyhow. I said how could he do it, and he said without any examination he could write it up on one of those small policies, and he wrote it up in my shop. Mr. White filled out the proof of death. I do not know whether line number 12 was filled out in the proof of death or not, at the time it was signed. I do not remember when I told Mr. White my sister was affected by this disease, but it was after she was carried to the hospital. I don't know when my sister was first affected by the disease of which she died. I do not know whether it was before the policy was written or not, but it must have been, but I didn't know it. When I signed this proof of death, this over on the back side was not filled out. I did not know anything about these policies of life insurance, and I relied on what Mr. White told me, because I did not know. I never did read the policy over.
Cross Examination"Mr. White signed Lillian Mims' name to the application. The whole application is in Mr. White's handwriting. That is the application on which the policy was issued. I had insurance on my children and my adopted son, and I was the beneficiary in these policies. I was the beneficiary in the policy on my nephew's life, who lived with me. Lillian Mims had not been afflicted with epileptic fits that I know if. She didn't live with me; I never saw her have fits. I did not visit my sister very regularly. I have been living away from home about twenty years, and would see her sometimes once a year, and sometimes not once a year. I never did see my sister with a fit, and did not know about it and never heard about it. I knew she had been sick and was in bad health, and had been from a child. Nobody ever told me my sister had fits; they did not tell me what she had. We lived together until she was about eighteen, and she didn't have any spells during that time. She was in bad health but did not have fits. I did not send money to support her, and did not have any interest in insuring her life, and would not have done it if it had not been for Mr. White. My sister had to give up her children on account of her health. Mr. White asked me to let him insure her. I have carried insurance a good while. I did not sign the application. Mr. White signed it. I have insurance with the Woodmen of the World, and have a sick benefit for myself. I have a policy on my nephew's life in this company. I did not know what was in the policy, and all three of my children have policies in this company. I can read. I never approached Mr. White at all. He came to me about it. I told Mr. White I did not care to write her up. I told him my sister was sick, that she was in bad health, and he still wanted to write the policy. I knew she was in bad health at the time he wrote the application, and told him so. I did not know the company did not insure one in bad health. I took Mr. White's word for it. Mr. White never told me that he could insure a person in bad health and the first time I heard about my sister being in the asylum was after the application was made out. I have four children of my own. I told him I had adopted my sister's child because my sister's health was bad and she was not able to take care of her children, and that was the time he asked me about insuring my sister. He worried me a good while before he got this insurance."
Messrs. Harby, Nash Hodges for appellant, cite: Knowledge of agent acquired within scope of agency imputed to principal: 79 S.C. 529. Fraud on part of agent of insurance company as to company, will not avoid policy: 88 S.C. 31; 133 S.E., 218.
Messrs. Epps Levy, for respondent, cite: Agent not presumed to have communicated to his principal professional confidence received in representing third person: 33 S.C. 473. Knowledge obtained by agent engaged in perpetrating a fraud upon his principal not imputed to principal: 129 S.C. 531; 40 S.C. 151; 39 Am. Rep., 331; 50 S.C. 259. Cases distinguished: 88 S.C. 31; 79 S.C. 529; 135 S.C. 89. Concealment of material facts fatal to contract: Harper's Law, 235.
January 3, 1929. The opinion of the Court was delivered by
The subject of this action was a life insurance policy in the amount of $250, issued by the defendant on the life of Mrs. Lillian Mims, a sister of the plaintiff, who was the named beneficiary.
In the trial in the Court of Common Pleas for Sumter County, the presiding Judge, Hon. H.F. Rice, directed a verdict for the defendant upon two grounds: (1) That there was collusive fraud on the part of the agent of the company and the beneficiary in the issuance of the policy; and (2) that the policy was void under its own terms, because at the time of the application and issuing of the policy the insured was not in sound health.
In this appeal by the plaintiff from the directed verdict against him, the contention is made that the agent's knowledge of the ill health of the insured estops the company from asserting the forfeiture; and therefore the case should have been submitted to the jury for determination.
In presenting their position, appellant's counsel rely upon the authority of Rearden v. Insurance Co., 79 S.C. 529, 60 S.E., 1106; Huestess v. Insurance Co., 88 S.C. 31, 70 S.E., 403; and Rogers v. Insurance Co., 135 S.C. 89, 133 S.E., 215, 45 A.L.R., 1172. The main principle stated in the cited cases has been so long recognized by this Court that it is no longer open to question. That general principle, as announced in one of the syllabi of the Huestess case, is this: "A principal is bound by the act of his agent even where he is actuated by a fraudulent intent, if he is acting within the scope of his employment."
But it is recognized in the Huestess case that the company should not be bound by the agent's knowledge when the insured, or the person acting for the insured, participated in the fraud. The majority opinion of the Court on this point seems to be in full accord with the opinion of Mr. Justice Woods (who dissented on other grounds), where the rule, together with the exception that seems applicable to the present case, is concisely stated as follows: "The rule has been laid down in this State that an insurance company cannot set up forfeiture on account of facts known by the agent of the company to be existing at the time of making the contracts. Pelzer Mfg. Co. v. Sun Fire Office, 36 S.C. 213, 15 S.E., 562; Pearlstine v. Phoenix Ins. Co., 74 S.C. 246, 54 S.E., 372; Fludd v. Equitable Society, 75 S.C. 329, 55 S.E., 762; Rearden v. State M.L. Ins. Co., 79 S.C. 526, 60 S.E., 1106. The exception to this rule is that the principal will not be bound by the knowledge of the agent if the agent is acting in fraud of his principal and is aided in his corrupt design by the intentional fraud of the party applying for insurance. Knobelock v. Germania Savings Bank, 50 S.C. 259, 27 S.E., 962; State v. Talley, 77 S.C. 99, 57 S.E., 618, 11 L.R.A. (N.S.), 938n [122 Am. St. Rep. 559]." (Italics ours.)
We do not find anything in the Rearden and Rogers cases which conflicts with the exception to the rule laid down in the Huestess case, which we have italicized above.
It appears from the evidence that the beneficiary, tempted by the suggestion of the agent that a small policy on his sister's life could be written up without examination, stood by while the agent filled in false answers and forged the name of Mrs. Mims to the application. Coupled with the forged application was the fraudulent certificate of the agent that he had personally seen and questioned the applicant and recommended the risk. The plaintiff's own testimony, showing that the issuance of the policy was procured in this manner, stamps the scheme of taking out the insurance as fraudulent from its very inception. And his testimony also showed that he knew what the agent was doing and aided therein. As soon as the company found out how it had been imposed upon, it offered to return the premiums received by it.
Let the testimony of the plaintiff be reported.
The judgment of this Court is that the judgment of the lower Court be, and the same is hereby, affirmed.
MR. CHIEF JUSTICE WATTS, and MESSRS. JUSTICES COTHRAN, STABLER and CARTER, concur.