Opinion
No. 35543.
March 13, 1944. Suggestion of Error Overruled, April 10, 1944.
1. ANNUITIES.
Policies which provided for monthly payments to insured to begin at fixed date and continued through insured's life were "annuity" and not "life" policies, notwithstanding provision that payments would continue after insured's death to another designated by insured until a sufficient number of payments had been made to equal premiums paid by insured, and, hence, forms of the policies were not required by statute to be approved by State Insurance Commissioner before they were issued (Code 1942, secs. 5633, 5686).
2. ANNUITIES.
Annuity policies, though not life policies, were such as a life insurance company was authorized to issue, and therefore were subject to provisions of statute regulating business of life insurance companies, and not to requirements of Blue Sky Law (Code 1942, sec. 5360 et seq., sec. 5630).
APPEAL from the chancery court of Hinds county, HON. V.J. STRICKER, Chancellor.
L.F. Easterling and Earle N. Floyd, both of Jackson, for appellant.
The contracts or policies were sold under misrepresentations of fact, and also were fraudulent, inequitable, and unconscionable per se.
The supervision of insurance has been the long established public policy of this state, and under its police power it lawfully regulates insurance and provides the kind of contracts which may be made.
State v. Alley, 96 Miss. 720, 51 So. 467; General Accident, Fire Life Assurance Co. v. Walker, 99 Miss. 404, 55 So. 51.
The annuity contracts were sold to her in violation of the mandatory provisions of the statutes regulating the sale of insurance, more particularly Section 5176 of the Code of 1930, which provides that all contracts of insurance must be first filed with, and submitted to the approval of, the State Insurance Commissioner for acceptance, rejection or modification, before sold in the state, and that the said annuity policies or contracts were not so submitted or approved before the sale thereof to appellant.
State ex rel. Gully v. Mutual Life Ins. Co., 189 Miss. 830, 196 So. 796; Universal Life Ins. Co. v. State ex rel., 155 Miss. 358, 121 So. 849; Code of 1930, Secs. 5131, 5301.
It has long been decided in this state, and nowhere in any other state decided to the contrary under like statutes, that contracts issued in contravention of the mandatory provisions of statutes such as these afford the right of recovery against the offending parties. The theory of the cases under decision seems to be that the recovery is not based on contract, but on an implied assumpsit arising by virtue of the violation of these remedial statutes enacted under the police power of the state, affording protection to the public, and to protect against imposition and fraud the public in a matter affecting their economic welfare.
Bohn v. Lowry, 77 Miss. 424, 27 So. 604; Dixie Rubber Co. v. Catoe et al., 145 Miss. 342, 110 So. 670; Edward v. Ioor, 205 Mich. 617, 172 N.W. 620; Code of 1930, Secs. 5170, 5197.
It is immaterial that the statute does not expressly state the rights of the purchaser under these contracts, if, as stated by this court in Bohn v. Lowry, supra, and of the overwhelming weight and number of decisions throughout this country, it is sufficient to sustain recovery or rescission wherever the contract was issued in contravention of a prohibitive statute, irrespective of whether the prohibition carried a criminal penalty or not.
Daniels v. Craiglow et al. (Kan.), 292 P. 771; Boss v. Silent Drama Syndicate et al. (Calif.), 255 P. 225; Karamanou v. Green Co., Inc., 124 A. 373; Bond v. Coe, 263 P. 924; Lewis v. Bricker, 209 N.W. 832; MacDonald v. Reich Lievre, Inc., 281 P. 106; Moe v. Coe (Or.), 263 P. 925; Noll v. Woods (Mich.), 203 N.W. 848; Pennicard v. Coe (Or.), 263 P. 920; Pollak v. Staunton (Calif.), 293 P. 26; Thompson v. Cain, 198 N.W. 249; Tatterson et al. v. Kehrlein et al., 263 P. 290; Walker v. Harbor Realty Development Corporation et al., 3 P.2d 557.
The answer of the appellees in the court below admits appellant's allegations that the soliciting agent represented to her that the annuity contracts in question were safe and legal investments, and this on its face, in view of the aforesaid statutes, was a misrepresentation of law and fact.
The complaining party is especially protected by the law where the agreement is not illegal per se but is merely prohibited, and the prohibition was intended.
17 C.J.S. 666, 667, 668, 669, Contracts; 6 R.C.L. 701, 702, Contracts.
A subsequent payment of a tax or license fee does not validate contracts made before such payment, except where the statute provides that it will have that effect if made within a given time; nor does the repeal of a statutory prohibition in validating such contracts render such contracts valid.
Newell Contracting Co. v. State Highway Commission, 195 Miss. 395, 15 So.2d 700; Commercial Union Assurance Co. v. Preston (Tex.), 282 S.W. 563, 45 A.L.R. 1016; 37 C.J. 259, 261, Licenses.
The said annuity policies or contracts, if not so subject to the mandatory provisions of the aforesaid insurance statutes, were securities within the purview of Sections 4178, et seq., of the Code of 1930, commonly designated as the "Blue Sky Law." Under the provisions of the said "Blue Sky Law" it became and was the duty of the insurance company and its agents to file with the Secretary of State certain statements or prospectuses and give an acceptable bond to secure a permit to sell the said securities within the state. This was not done.
Dixie Rubber Co. v. Catoe et al., supra.
The right to contract is subject to the police power of the state.
Smith v. Penn Mutual Life Ins. Co. (Ala.), 14 So.2d 690.
Wells, Wells, Lipscomb Newman, of Jackson, for appellees.
The annuity contracts were not sold to the appellant through misrepresentations of the agent and they are not fraudulent, inequitable, and unconscionable per se.
Appellant is charged with notice of the contents of the annuities.
New York Life Ins. Co. v. O'Dom, 100 Miss. 219, 56 So. 379; Germania Life Ins. Co. v. Bouldin, 100 Miss. 660, 56 So. 609; Home Mutual Fire Ins. Co. v. Pittman, 111 Miss. 420, 71 So. 739; National Union Fire Ins. Co. v. Provine, 148 Miss. 659, 114 So. 730; Maryland Casualty Co. v. Adams, 159 Miss. 88, 131 So. 544; Springfield Fire Marine Ins. Co. v. Nix, 162 Miss. 669, 138 So. 598.
Compare Sec. 5172, Code of 1930.
Section 5176, Code of 1930, while providing that "a policy of life insurance shall not be issued until the form has been approved and filed by the Insurance Commissioner," contains no requirement whatsoever that an "annuity contract" may not be issued until the form thereof has been approved and filed by the Commissioner.
Code of 1906, Sec. 2677; Code of 1930, Sec. 5176.
An annuity contract is definitely not "a policy of life insurance" within contemplation of Section 5176.
New York Life Ins. Co. v. Majet, 173 Miss. 870, 161 So. 156; Hall v. Metropolitan Life Ins. Co., 146 Or. 32, 28 P.2d 875; Wellman v. Board of Commissioners of Jewell County et al., 122 Kan. 229, 252 P. 193; People v. Knapp, 184 N.Y. Supp. 345, affirmed 231 N.Y. 630, 132 N.E. 916; People v. Security Life Ins. Annuity Co., 78 N.Y. 114, 34 Am. Rep. 522; Commonwealth v. Metropolitan Life Ins. Co., 254 Pa. 510, 98 A. 1072; Carroll v. Equitable Life Assur. Society of the United States, 9 F. Supp. 223; Daniel et al. v. Life Ins. Co. of Virginia, 102 S.W.2d 256; Rishel v. Pacific Mutual Life Ins. Co., 78 F.2d 881; Old Colony Trust Co. v. Commissioner of Internal Revenue, 37 B.T.A. 435; North Dakota v. The Equitable Life Assurance Society, 68 N.D. 641, 282 N.W. 411; Old Colony Trust Co. v. Commissioner of Internal Revenue, 102 F.2d 380; Code of 1906, Sec. 2563; Hemingway's Annotated Code of 1917, Sec. 5028; Code of 1930, Secs. 5131, 5144, 5159, 5170, 5172, 5212; Code of 1930, Sec. 5274, Subdivision 7.
Even if it be assumed, for the sake of the argument, that Section 5176 does require that the form of an annuity contract be approved and filed by the Insurance Commissioner, failure to comply with this requirement has no effect whatsoever on the validity of the contract but merely subjects the issuing company to the risk of a revocation of its license, in the discretion of the Insurance Commissioner.
Rishel v. The Pacific Mutual Life Ins. Co. of California, supra; Pan American Life Ins. Co. v. Peebles (Ala.), 199 So. 883; Rinn v. New York Life Ins. Co., 89 F.2d 924; Metropolitan Life Ins. Co. v. Conway, 252 N.Y. 449, 169 N.E. 642; Southern Casualty Co. v. Hughes, 33 Ariz. 206, 263 P. 584; Graf v. Employees' Liability Assur. Corporation, 190 Iowa 445, 180 N.W. 297; Walters v. Western Automobile Ins. Co., 116 Kan. 404, 226 P. 746; Code of 1930, Secs. 5174, 5175, 5176, 5196, 5197, 5198, 5199, 5200, 5203, 5213.
The violation of an insurance statute does not render a policy void where the statute does not so provide.
Meridian Life Ins. Co. v. Dean, 182 Ala. 127, 62 So. 90; Roane v. Union Pacific Life Ins. Co., 67 Or. 264, 135 P. 892; Thorne v. Aetna Life Ins. Co., 155 Minn. 271, 193 N.W. 463; 32 C.J. 1108, Insurance, Sec. 199; Couch on Insurance, Secs. 72a, 151.
On June 23, 1943, the exact form of the contract sued on was filed with the Insurance Commissioner and approved by him as being in all respects a lawful contract. This fully satisfied the purpose for which Section 5176 was enacted and validated all such contracts then outstanding, even if it were assumed that they were invalid prior to that time.
Appellant contends that if this court should hold that the annuity contract involved herein is not "a policy of life insurance" within contemplation of Section 5176 of the Code of 1930, then the contract comes within the purview of our so-called "Blue Sky Law." Sections 4178, et seq., Code of 1930, and law amendatory thereof. We respectfully submit that this is a complete non sequitur. Whether an annuity contract is "a policy of life insurance" or not is wholly aside the mark. Regardless of what it is, it is one of the various types of contract issued by life insurance companies and is dealt with in the Code chapter on insurance. All matters pertaining to the business of insurance, or to business done by insurance companies, are placed under the jurisdiction of the Insurance Department, or the Insurance Commissioner. The administration of the Blue Sky Law is placed under the jurisdiction of the Secretary of State.
National Surety Co. v. Board of Sup'rs of Holmes County, 120 Miss. 706, 83 So. 8; Rinn v. New York Life Ins. Co., supra; Code of 1930, Ch. 100, Art. 2; Code of 1930, Ch. 127.
Argued orally by Earle N. Floyd and L.F. Easterling, for appellant, and by Hubert Lipscomb, for appellee.
In May 1941, the appellant purchased two annuity policies from the appellee, paying a single premium for each. These policies are duplicates except as to the annuity to be paid. One of them recites that:
"The Penn Mutual Life Insurance Company
"Agrees to pay the Annuitant $25.71 on June 1, 1941, if the Annuitant be then living and a monthly annuity of Thirty Four no/100 — Dollars during the lifetime of the Annuitant, commencing on the First day of July, 1941, if the Annuitant be then living, and terminating with the last annuity payment preceding the death of the Annuitant. The Company further agrees that if the total annuity payments payable as above provided shall be less than the amount of the Single Premium, the annuity payments shall, upon receipt of due proof of the death of the Annuitant, be continued to the beneficiary until the total annuity payments made to the Annuitant and to the Beneficiaries shall equal the amount of the Single Premium the last payment to be the difference between the total preceding payments and the single Premium."
On July 22nd, the appellant exhibited a bill of complaint against the appellee by which she seeks to cancel these policies and obtain a refund to her of the money paid by her therefor, with interest thereon, together with reasonable attorneys' fees. The grounds on which the bill predicates the appellant's right to this recovery are: (1) fraudulent misrepresentations of fact on which the appellant purchased the policies; (2) these policies are life insurance policies and the forms thereof were not submitted to and approved by the State Insurance Commissioner before they were issued and delivered to the appellant as required by 4 Miss. Code 1942, Section 5686; and (3) if these policies should be held not to be life insurance policies, then the requirements of the Blue Sky Law, Section 4178 et seq., Code 1930, now Section 5360 et seq., 4 Miss. Code 1942, were not complied with by the appellee before they were issued. The appellee's answer to the bill of complaint denied the allegations of fraud therein, but admitted that the form of the policies had not been filed with and approved by the State Insurance Commissioner before they were issued to the appellant, and that the requirements of the Blue Sky Law were not complied with by the appellee in issuing the policies. The answer then alleges that these annnuity policies are not life insurance policies, and, therefore, not within the provisions of 4 Miss. Code 1942, Section 5686, and that they are not subject to the provisions of the Blue Sky Law. A motion of the appellant, under 2 Miss. Code 1942, Section 1300, to strike out the appellee's answer as "insufficient in law" was overruled by the court below, and this appeal was granted. Section 5686 of 4 Miss. Code of 1942, provides: "That a policy of life insurance shall not be issued or delivered in this state until the form has been approved and filed by the insurance commissioner."
Are these annuity policies life insurance policies? The only authority cited by counsel for appellant in support of their contention that they are life insurance policies is the case of State ex rel. Gully v. Mutual Life Insurance Company, 189 Miss. 830, 196 So. 796, 198 So. 763, which, they say, holds that policies of this character are life insurance policies. In this counsel are mistaken. The question there before the court was whether the words "premium receipts" in a statute imposing an annual tax on life insurance companies on "the gross amount of (their) premium receipts in this state," Laws 1935, Ex. Sess., c. 20, Sec. 108, included the money paid such companies for annuity contracts issued by them, or as the appellee there claimed, included only the money received by them for life insurance policies. The court held that the meaning of these words was not so restricted but included receipts for annuity policies, the issuance of which was life insurance business under Section 5170, Code 1930. An examination of the dissenting opinion there rendered, the briefs of counsel therein, and the cases cited in the majority opinion there rendered will make this clear.
A contract of life insurance, usually termed a life insurance policy, is defined by Section 5131, Code of 1930, now Section 5633, Code of 1942, as follows: "A contract of insurance is an agreement by which one party for a consideration promises to pay money or its equivalent, or to do some act of value to the assured, upon the destruction, loss or injury of something in which the assured or other party has an interest, as an indemnity therefor." This is in accord with the common-law definition of life insurance policies. The monthly payments here promised to the appellant are not to begin "upon the destruction, loss or injury of something in which the assured or other party has an interest, as an indemnity therefor," but, on the contrary, are to begin at a fixed date and continue through the life of the appellant. The manifest purpose of this contract is to provide an income for the assured as long as she lives. Such contracts are annuity, and not life insurance, policies. New York Life Ins. Co. v. Majet, 173 Miss. 870, 161 So. 156; 101 A.L.R. 894; 3 C.J.S., Annuities, Sec. 1, p. 1375. This has been the invariable holding of the courts when called on to answer this question.
The provision of the contract which makes it possible for this annuity not to cease with the death of the appellant but to continue to another for a limited time thereafter, does not interfere with or change its primary purpose to provide a life income for the appellant. That provision of the policy is incidental to its main purpose, may never come into operation, and is simply to insure the payment by the appellee either to the appellant or to one designated by her, of a sufficient number of monthly payments to equal in the aggregate the premium paid by the appellant for the policy.
These annuity policies, though not life insurance policies, are such as a life insurance company is authorized to issue and therefore are subject to the provisions of our statute regulating the business of life insurance companies, 4 Miss. Code 1942, Sections 5630, and not to the requirements, in this connection, of the Blue Sky Law.
Affirmed and remanded.
SPECIALLY CONCURRING OPINION.
The policy involved provides a monthly annuity for the insured during her lifetime, and at her death, if the aggregate of the annuities is less than the premium paid, the difference is payable to beneficiaries named in the policy. That made it a combination life and annuity policy, as held in the Gully case, 189 Miss. 830, 196 So. 796, 198 So. 763. To the same effect is the holding of our court in New York Life Ins. Co. v. Majet, 173 Miss. 870, 161 So. 156, 101 A.L.R. 894. In other words, it was two policies in one. Life insurance is defined in Bouvier's Law Dictionary, Rawle's Third Rev., vol. 1, pages 1619 and 1620, as follows:
"The insurance of the life of a person is a contract by which the insurer, in consideration of a certain premium, either in a gross sum or periodical payments, undertakes to pay the person for whose benefit the insurance is made, a stipulated sum, or annuity equivalent, upon the death of the person whose life is insured, whenever this shall happen, if the insurance be for the whole life, or in case this shall happen within a certain period, if the insurance be for a limited time."
In "A Treatise on the Law of Life and Accident Insurance," by Frederick H. Bacon, vol. 1, (4th Ed.), Sec. 207, there is this caption, "Endowment Insurance is Life Insurance." In that and following sections this subject is discussed.
It is a matter of common knowledge that it is not at all unusual for a life insurance company to write combination life and annuity policies.
It will be observed that the statute, Sec. 5630, 4 Code 1942 (Sec. 5128, Code 1930), fixes its own penalty for its violation. It provides for the revocation of the license of the insurance company to do business in the state. It contains no provision, either in direct language or by reasonable inference, that life insurance policies issued in violation of the statute shall be held void. The rule is probably universal in this country that where a statute prohibits a certain thing being done, and fixes its own penalty for its violation, the courts cannot by construction add any other or additional penalty. Where the statute itself provides no penalty, but the doing of the thing prohibited is made a crime by other laws of the state, of course, the thing done is void. That is not true here, however; the criminal laws of the state were not violated. Young v. State Life Ins. Co., 91 Miss. 710, 45 So. 706; Sullivan v. Ammons, 95 Miss. 196, 48 So. 244; Huddleston v. McMillan Bros., 112 Miss. 168, 72 So. 892, are directly in point.
It follows from these views that the appellant is not entitled to recover because, so far as she is concerned, the contract is valid. The public alone is interested in seeing that the statute is complied with.