Opinion
14933
August 4, 1939.
Before GREENE, J., Laurens, January, 1939. Reversed.
Action for fraudulent cancellation of life policy by Ben Walter Moore against the Standard Mutual Life Association of South Carolina. From an order overruling a demurrer to the complaint, the defendant appeals.
The paragraph of the complaint referred to in the opinion follows:
(5) That about a month or two subsequent to the delivery of the policy and subsequent to the collection of the aforesaid $17.45 by the defendant through its authorized agent, or agents, the home office of the defendant began notifying the plaintiff that certain premiums were due. The plaintiff upon contacting the authorized agent or agents of the defendant and inquiring why such notice should be coming when they knew that the premiums were already paid eight months in advance, was told by the agents or agent of the defendant to hold on to his receipt as the same would show that the policy was paid eight months in advance and that the same was credited to his account.
(6) That on or about the last week in February, 1938, the defendant sent the plaintiff another "Premium Notice" stating thereon that the sum of $8.55 was due for six months future premiums as of March 1, 1938, and $1.50 for one month's future premium as of March 1, 1938, but the latter was stricken out and the sum of $8.55 as representing the future six months' premiums was stamped paid as of January 19, 1938, the date of the policy.
(7) That on or about the latter part of August, 1938, the plaintiff mailed to the defendant a money order for the sum of $1.75 to be applied as a credit on the future premiums, but on September 2, 1938, the defendant returned the money to the plaintiff and advised the plaintiff that the aforesaid policy was cancelled and lapsed for non-payment of premiums due March 1, 1938.
(8) That the aforesaid policy has been willfully, wantonly and fraudulently cancelled by the defendant without just cause or excuse and with intent to cheat and defraud the plaintiff of his rights thereunder in the following particulars, to wit:
A. In that the defendant received the plaintiff's money at the time aforesaid, to wit: January 17, 1938, which was paid as advanced premiums for eight months on the said contract of insurance and then with intent to cheat, wrong and defraud the plaintiff out of his rights under the policy and the premiums paid, refused and failed to credit the same as premiums and then without just cause or excuse, cancelled the said policy.
B. In that the defendant, after receiving the plaintiff's money which was paid as future advance premiums for eight months from the date of the policy, to wit: January 17, 1938, refused to accept any further premiums which were tendered on the latter part of August, 1938, to wit: $1.75, being a monthly premium, well knowing that the policy was in full force and effect and that no just excuse or reason existed for such refusal, but was done with solely the intent to cheat, wrong and defraud the plaintiff of his rights under the policy and unjustly enrich itself from the plaintiff's premiums by canceling the same, alleging such cancellation to have been as of March 1, 1938.
C. In that the defendant received the plaintiff's money as of January 17, 1938, with the distinct understanding that the same would cover eight months' advance or future premiums and then with intent to cheat, wrong and defraud the plaintiff of his premiums and rights under the policy, converted the same to its own use and never gave the plaintiff any credit therefor as such payments.
D. In that the defendant without just cause or excuse canceled the plaintiff's policy as of March 1, 1938, when it well knew that it had received money from the plaintiff as eight months' advanced premiums on the said policy which it refused to return to the plaintiff and that the retention of the same was done for the sole purpose of cheating, wronging and defrauding the plaintiff out of the same.
E. In that the defendant used as part of its scheme to cheat, wrong and defraud the plaintiff out of his premiums and rights under the policy, false information which its agents imparted to the plaintiff, to wit: By the agents informing the plaintiff upon his inquiring why the notices of premiums due were being sent to him after he had already paid the same in advance, was told by the agents that the policy was in full force and effect and the premiums for eight months already paid in advance were duly credited, while as a matter of fact the defendant knew the same had never been credited to the plaintiff's account, but had been converted to its own use.
Mr. Edwin H. Cooper, for appellant, cites: Cancellation of policy: 182 S.C. 520; 189 S.E., 800; 63 S.C. 192; 41 S.E., 90; 144 S.C. 448; 142 S.E., 648; 176 S.C. 275; 180 S.E., 35; 173 S.C. 131; 175 S.E., 73.
Messrs. Huff Huff, for respondent, cite: Cancellation of policy: 166 S.C. 475; 167 S.C. 309.
August 4, 1939.
This action was commenced on September 17, 1938, and the appeal comes from an order overruling appellant's demurrer to respondent's complaint alleging the fraudulent cancellation of a contract of insurance issued by appellant to respondent. A summary of the allegations of the complaint is necessary for the determination of the one issue involved herein.
In consideration of the sum of $1.75 per month, the appellant, on or about January 19, 1938, made, executed and delivered to respondent a contract of life insurance, containing total and permanent disability benefits and provisions for an old age benefit, subject to certain conditions which are not pertinent to the question raised. Respondent's application was signed on or about January 17, 1938, at which time he paid to an agent of appellant the sum of $17.45, of which $7.50 represented payment of application and medical fee, and the balance as full payment in advance for eight monthly premiums commencing January 19, 1938. The acts and purposes, and the alleged tenor of the acts and purposes, of the appellant, are to be found in Paragraphs 5, 6, 7 and 8 of the complaint, which will be reported.
The appellant demurred to the complaint upon the ground of insufficiency of facts to constitute a cause of action, it appearing upon the face of the complaint that at the time of the commencement of the suit the policy was in full force and effect, and therefore, the appellant's notice to respondent of lapsation for non-payment of premiums was ineffectual and did not constitute cancellation, there being no basis for an action of fraud and deceit.
Appellant's demurrer was overruled, the trial Judge holding his decision was controlled by the cases of Wilkes et al. v. Carolina Life Insurance Company, 166 S.C. 475, 165 S.E., 188, as affirmed in McLoud v. Metropolitan Life Insurance Company, 167 S.C. 309, 166 S.E., 343.
The exceptions constitute but one question. Does respondent's complaint state a cause of action for fraudulent breach of contract and conversion of premiums paid?
This Court is of the opinion the cases of Herndon v. Continental Casualty Co., 144 S.C. 448, 142 S.E., 648; Bailey v. North Carolina Mutual Life Ins. Co., 173 S.C. 131, 175 S.E., 73, 74; Kelly v. Guaranty Fire Ins. Co., 176 S.C. 275, 180 S.E., 35, and Cunningham v. Independence Ins. Co., 182 S.C. 520, 189 S.E., 800, are controlling of the instant issue.
The ruling of this Court in the Bailey case, supra (cited, quoted and approved in the Cunningham case, supra), is so much in point that we set forth herein a portion of that opinion:
"The fact that the insured still had the policy in her possession, and the receipt of the company for the weekly premium paid on February 15, 1932, which kept the policy in force for one week thereafter, clearly established the fact that the policy was in full force on February 20th, the day on which the suit was instituted.
"The trial judge, therefore, was clearly right when he ruled to the effect, on the motion for a nonsuit, that, at the time of the institution of the suit, the policy was in force, the insured had all her rights thereunder, and that if she had died during that time the beneficiary would have been entitled to receive the death benefit. There being no cancellation of the policy, and no release on the part of the insured of any right she had under its terms, there could not, therefore, have been any damage to the insured on that account. Since there was no cancellation and no release, it follows, of course, there could not have been any fraudulent cancellation, or any release executed on account of the fraudulent conduct of the agent of the company. Accordingly, there was no evidence to sustain in any way the alleged cause of action for either actual or punitive damages, on account of the alleged cancellation of the policy, or the alleged obtaining of the release through fraudulent conduct and representations; and the nonsuit, so far as it affected those claims, was proper. See Herndon v. Continental Casualty Company, 144 S.C. 448, 142 S.E., 648." ( 173 S.C. 131, 175 S.E., 74.)
It is alleged in the complaint of respondent that the premiums on the policy had been paid for eight months in advance beginning January 19, 1938, which would keep the policy in full force and effect until September 19, 1938, excluding the grace period, for which payment the respondent held a receipt. The fact that appellant sent notices of premiums due between the dates of January 19, 1938, and September 19, 1938, and refused to accept in August, 1938, the sum of $1.75 sent by respondent as payment in advance of future premiums; also notifying respondent of lapsation of policy on March 1, 1938, did not affect the validity of the policy, for the contract could not be lapsed during the time for which the premiums had been paid.
Reference to the cases of Wilkes et al. v. Carolina Life Ins. Co., and McLoud v. Metropolitan Life Ins. Co., supra, upon which the order overruling the demurrer was predicated, and a comparison of these two cases and this issue will show the fundamental distinction.
This action was instituted on September 17, 1938, during the period of time for which the premiums had been paid and, consequently, while the policy was in full force and effect. In the Wilkes case the plaintiffs brought six actions on six different policies, the issues in all actions being the same, and the allegations of each complaint being substantially the same. The defendant demurred to the complaints upon practically the same grounds as in this case.
The opinion in that case states ( 166 S.C. 475, 165 S.E., 189):
"It is easily deducible that the complaint is intended to allege that the plaintiff contended that she had paid the premiums on this policy for November in advance, which contention the agent denied; that therefore he refused to accept the other premiums, and set about his purpose to have all the policies canceled.
* * *
"The complaint further alleges the design to lapse all of the policies by refusing to accept any more premiums and by making it impossible for plaintiff to pay them at the Chester district office.
"It is manifest that there is running throughout the complaint, as the cause of action, the underlying allegation that it was the purpose of defendant's agent to force a lapse of the policies, all of them, by refusing to collect or accept any more premiums. * * *."
The opinion in the McLoud case was predicated entirely upon the holding in the Wilkes case.
This decision does not, of course, preclude respondent from bringing such other cause of action as may have accrued since the commencement of this action.
It is the opinion of the Court that the demurrer of appellant should have been sustained. Therefore, the order overruling the demurrer is reversed.
MR. JUSTICE CARTER did not participate on account of illness.