New England Mutual Life Insurance v. Swain

Boyd, J., delivered the opinion of the Court. Oh June 1st, 1903, Isaac O. Swain sued the Insurance Company for an alleged fraud of its agent, by means of divers false and fraudulent representations, whereby he was induced to take out a policy of insurance on his life for an annual premium of $429. The declaration contains' three counts, in the first of which it is alleged that the plaintiff paid the premium with a promissory note, dated August 2nd, 1897, payable to the order of the defendant six months after date; that on September 5th, he received the policy and duiing the month of August the agent fraudulently and wrongfully demanded of the plaintiff an additional sum of $429, as and for an additional premium, falsely and fraudulently representing to the plaintiff that it was then due and demandable and that he had been sent by the defendant to collect it. It then alleges that he, in ignorance that it was not then due and demandable, paid the additional sum of $429 and the agent transmitted it to the defendant.

The second count makes the same allegations, excepting it does not refer to the payment of the second premium. The third sufficiently resembles the first to make it unnecessary to refer further to it. Each of the counts concludes with the averment that by reason of the ignorance and inexperience of the plaintiff and of the false and fraudulent representations of the agent, and the concealment of the fraud by him, the plaintiff was not aware of the fraud and did not discover and could not by reasonable diligence have known or ⁵⁶⁸ discovered the fraud until some time in July, 1902. The defendant filed the plea of the Statute of Limitations; one denying that the plaintiff, by reason of his ignorance inexperience, etc., was not aware of the alleged frauds, etc., until July, 1902, another alleging that he was aware of the alleged fraud three years before the institution of the suit, and general issue pleas.

By some apparent inadvertence, the defendant plead that it did not commit the wrongs alleged, that it never promised and that it was never indebted, but no point seems to have been raised about that and issues were finally joined on all the pleas. The trial below resulted in a verdict for the plaintiff in the sum of $600.95,being the amount of one annual premium and interest. A judgment being entered on that verdict, this appeal was taken. Two bills of exception embrace rulings on the admissibility of evidence, and the third includes the prayers — two of which were offered by the plaintiff, which were granted, and seven were offered by the defendant, the sixth and seventh of which were granted and the others rejected.

The plaintiff is a farmer living in the mountains of Allegany County about ten miles from Hancock. He testified that one, Eichelberger, an agent of the Insurance Company, came to his house in July, 1897, and wanted him to take out a ten thousand dollar policy of life insurance; that he said that it was a good investment and would pay six per cent on the money paid in and he would get $15,000 cash at the end of twenty years, or $20,000 in paid up insurance; that Eichelberger wrote up the application for a ten thousand dollar policy and he signed it and gave his note for the premium, dated August 2nd, 1897, for $429, payable in six months, to the order of the defendant company; that when it became due he paid it to John R. Lashley, who had purchased it, and then burned it up. The next day Dr. Steigers examined him and a day or two afterwards Eichelberger returned, when he said the company demanded another payment of $429, and he gave him $366. 50, in cash, and five shares of bank stock, valued at $62.50. He said he did not get a receipt from Eichel ⁵⁶⁹ berger for the note or the last payment, but later he got from the company a receipt which was offered in evidence.

That was countersigned by F. A. Savage, general agent, August 7th, 1897, and was a printed form used by the company. It states the amount of the annual premium, has blanks for amount of notes given on account of a first premium, has date at top of “August 1st, 1897,” and states “Received of. Isaac O. Swain, cash, $429.” He said he supposed he got the receipt about the 8th of August, and he received the policy by mail about the sixth of September. He testified that he put the policy in a drawer, that he did not read it; that he could not read it; that he could read very little, and could not understand it; can write his name, but cannot read anything to understand it.

He received a notice towards the end of the year of another premum being due and finally after some correspondence with Mr. Savage he returned the ten thousand dollar policy to him and took one for a thousand dollars, which he permitted to lapse at the end of the year. The plaintiff called Mr. Savage, the general agent, who testified that Eichelberger was the agent of the company in this transaction; that he was furnished with a rate book, blank applications, and blank printed notes for premiums; that when an application is signed by an applicant and the medical examiner the agent sends it to him and he forwards it to Boston; that the instruction to agents was not to take a note for full amount — applicant must pay at least twenty-five per cent— but there is nothing on the notes to show that. He also said that the premium receipt was always issued with the policy; that they are countersigned by him as general agent and “sent out in blank in some instances with the policy to the agent and our agent delivered that receipt to the applicant with the policy and does it the day he got the money, and the date over the counter signature is filled in by the agent. The date is not in my handwriting and I expect Eichelberger dated it the date he received the money.” 1.

The question was asked Mr. Savage “What commission did Eichelberger get on first premium?” That was objected ⁵⁷⁰ to and the objection being overruled that ruling is presented by the first bill of exceptions. It is said that the object was to show an inducement on the part of the agent to procure insurance, as reflecting upon the question whether he made these alleged fraudulent representations. As the reply of the witness was that the agent received fifty per cent of the first premium, it might in a case of this kind reflect to some extent upon the probabilities of the agent making these statements. It is true that one man might not be influenced by the prospect of securing for himself a large amount, while another would yield to temptation fora smaller sum, but in case of alleged fraud great latitude is allowed and it would be proper to prove that the agent had a personal interest in issuing the policy.

It was relevant for another reason. The plaintiff was entitled to trace, if he could, the money paid by him into the hands of the company, for if he could have shown, for example, that the company had received both premiums from Eichelberger it certainly would have been admissible. The question objected to might very well have led up to such an inquiry. But at any rate we do not see how it could possibly have injured the appellant, for it would be more likely to help than hurt the company, before a jury, to prove that it only received $214.50 out of the $858.00 received by Eichelberger. 2.

The plaintiff, in order to sustain the issue made as to the Statute of Limitations, claims that he did not know that he had been defrauded until. Mr. Bridges called on him in 1902 to take out some insurance. He then told him that he had had insurance, showed him such papers as he still kept, and explained the matter to Mr. Bridges, who told him he had been defrauded. The plaintiff claims thdt was the first knowledge he had that Eichelberger had been guilty of fraud.

Mr. Bridges was called as a witness and started to give his interview with the plaintiff. The defendant’s counsel objected to that and it .was admitted subject to exception. He then gave the details of the interview, substantially as the plaintiff had. At the conclusion of the case the defendants moved “to strike out all the testimony of the ⁵⁷¹ witness Bridges with reference to the conversation between him and the plaintiff, because the same is irrelevant.” The Court overruled that motion, which ruling is contained in the second bill of exceptions.

Ordinarily of course a party cannot offer conversations between himself and another person (other than the opposite party to the cause), but in this instance the object of the testimony was to reflect upon the question, which was a material one under the pleadings, as to when the plaintiff became aware of what he now claims to be a fraud. As he had sworn that he did not know that he had been defrauded until Bridges told him, it was competent to proye by Bridges that he did have an interview with him on the subject, and what he had done. Some of the statements may not have been admissible, but the motion was to stirike out all of the testimony of Bridges with reference to the conversation between him and the plaintiff, which could not have been done if any part of it was admissible. The Court in passing on it stated in the presence of the jury the object of it, and with that statement we do not see how the defendant could have been injured.

It would be difficult to prove in any other way, than by calling the witness, the fact that he had explained to the plaintiff that he had been defrauded. As reflecting upon the time when the plaintiff became aware of the alleged fraud, it was competent to prove the date of the conversation, and in order to fix the date some reference had to be made to what was said. 3. The sixth prayer of the defendant, which was granted, in effect instructed the jury that the plaintiff could not recover the first premium paid — which we understand referred to the note. That was upon the theory that as the plaintiff had the insurance for a year that premium paid for what he had received the benefit of.

Its seventh prayer, which was also granted, stated a number of facts which it was necessary for the jury to find in order to render a verdict for the plaintiff, and concluded by requiring them to find “That the plaintiff instituted this suit within three years after he discovered the fraud of defendant’s agent, and within three years after he ⁵⁷² could have discovered said fraud by the use of usual or ordinary diligence on his part. ” Our statute provides that “In all actions where a party has a cause of action of which he has keen kept in ignorance by the fraud of the adverse party, the right to bring suit shall be deemed to have first accrued at the time at which such fraud shall or with usual or ordinary diligence might have been known or discovered.” Code of 1904, Art. 57, sec. 14 (sec. 13 of Code of 1888). The case of Wear v. Skinner, 46 Md. 257 , is the leading one in this State on the subject. Judge Robinson in delivering that opinion said it was well settled by Courts of equity that where a party has been injured by the fraud of another and such fraud is concealed, or is of such character as to conceal itself, whereby the injured party remains in ignorance of it without any fault or want of diligence on his part, the bar of the statute does not begin to run until the fraud is discovered, though there be no special circumstances or efforts on the part of the' party committing the fraud to conceal it from the knowledge of the other party.” The Court held that the Act of 1868 (now codified as above) “was passed for the purpose of enabling parties to set up the fraud of the defendant in a Court of law as well as in a Court of equity f and that the “Legislature meant that the nature and character of the fraud, which a party was thus allowed to plead, should be governed by the well-settled rules of law on the subject, as recognized by Courts of equity and Courts of law at the time when the Act was passed.” Accordingly it was held in that case that our statute did not mean that in all cases a party must commit a fraud distinct from, and independent oí the original fraud, for the purpose of keeping the injured party in ignorance of his cause of action, and “where one practices fraud to the injury of another, the subsequent concealment of it from the injured party is in itself a fraud, and if he is thereby kept in ignorance of his cause of action, he is kept in ignorance by the fraud of the adverse party.” The only other cases in this State on that statute are those of State v. Henderson, 54 Md. 332 , and Cummings v. Bannon, an unreported case referred to in 66 ⁵⁷³ Md. XIV (s. c. 8 Atl. Rep. 357 ).

In the former this Court held there was no evidence of fraud and no concealment, and in the latter the facts upon which the plaintiff relied to show a fraudulent concealment were shown to be known to him for more than three years before suit. Unless the contention of the appellant that if there was fraud it was that of the agent, and not of the defendant, be correct (and we will consider that later), it is manifest that the law' as announced by the Court in Wear v. Skinner , required the Court to reject the third and fourth prayers of the defendant, as they asked the Court to say there was no evidence of fraud by the defendant. The subsequent concealment of fraud practiced being itself a fraud, and the defendant having concealed or failed to