Ap soon as appellant received information indi- whom she could deliver it; that appellant, Colorado from consumption with which he had not requested its return or furnished had been afflicted since November, 1918. As her with postage for its return; but that the same had been kept by her as evidence of what had actually taken place, and also alleged the facts concerning the provisions of the policy relating to its incontestability and the expiration of the two-year period as alleged in the second paragraph of answer. The fourth paragraph denied the allegation of the second paragraph of answer relative to giving her notice of the claim on the part of appellant that the statements and answers of the insured in his application were false, and alleged that appellant did not within a reasonable time after learning of the facts notify her of its intention to rescind. The fifth paragraph set out the incontestable clause of the policy, alleged facts sufficient to show that the policy was executed in Illinois, and that according to the laws of that state proceedings must be instituted in court for contesting the validity of a policy containing an incontestable clause like the one in the instant case, within the stipulated period and after the election to rescind. Then follows a quotation from the opinion of the Supreme Court of Illinois in Ramsey V. Old Colony Life Ins. Co., 297 Ill. 592, 131 N. E. 108, which is alleged to be the law of Illinois, and which is to the effect that where the policy provides it should be incontestable after a certain number of years, fraud in procuring it could not be set up as a defense after the lapse of that period; that if the insurer did not within such period ascertain the facts and did not cancel or rescind the contract, it could not thereafter do so upon any ground then in existence, and if the in-plaint being thereafter stricken out. No acsurer did not within that time contest the policy by proceedings in court to which the insurer and the insured, or his representatives or beneficiaries, were parties, it could not do so afterwards. It alleged the expi-surance was executed there was in force in ration of the two-year period during which the policy was contestable and that appellant took no legal action to contest the policy until it filed its answer January 24, 1922. The facts were found specially and are in substance as follows: The insured resided in Illinois when he made the application for the insurance policy. Everything done in connection with the making of the application, the delivery of the policy, and the payment of premiums took place in Illinois; a copy of the application and policy being set in full. The insured in his application made certain statements and answered certain interrogatories material to the issuance of the policy. Such statements and answers were false and known by the insured when made to be false. The insured at that time was seriously diseased with tuberculosis of the lungs and with nephritis, from which diseases he died October 10, 1920. On November 3, 1920, appellee filed proofs of death showing the insured had died at the Printers' Home in tion to contest the policy for fraud was commenced by appellant within the period of limitation fixed by the laws of Illinois. The court also found that when this policy of in Illinois a statute requiring each life insurance policy issued or delivered in that state to contain a provision that the same should be incontestable after two years from its date except for nonpayment of premiums and except for other things not here involved. Upon these facts the court stated as a conclusion of law that appellee was entitled to recover the amount of the policy and rendered judgment accordingly. The errors assigned are that the court erred in striking the cross-complaint from file, in its conclusions of law, and in overruling appellant's motion for a new trial. [1, 2] The correctness of the action of the court in striking out the cross-complaint does not depend upon the sufficiency of that pleading to state a cause of action against the defendant named therein. tion can only be raised and presented by a demurrer for want of facts. However, if the facts alleged in the pleadings cannot, by amendment, be made germane to the com That ques plaint, it is not error to strike it out. cago, etc., R. Co. v. Dunnahoo, 63 Ind. 237, 112 N. E. 552. (145 N.E.) Chi- | trolling, but will be given such consideration [3] Appellant had an adequate remedy at law to the action on the policy. As was said in Phoenix Mutual Life Ins. Co. v. Bailey, 13 Wall. 616, 20 L. Ed. 501: In Ebner v. Ohio State Life Ins. Co., 69 Ind. App. 32, 121 N. E. 315, the insurance company elected to rescind and tendered the premiums within the contestable period, and before the expiration of that period filed its "Where a party, if his theory of the contro- complaint alleging it was the intention of the versy is correct, has a good defense at law to defendant, the administrator of the insured's 'a purely legal demand,' he should be left to estate, to delay action on the policy until that means of defense, as he has no occasion after the expiration of the contestable period to resort to a court of equity for relief, un- for the purpose of depriving the insurance less he is prepared to allege and prove some company of its defense by appealing to the special circumstances to show that he may suf-incontestable clause, and asking for the canfer irreparable injury if he is denied a pre-cellation of the policy. After the expiration ventive remedy." of the contestable period, the defendant filed a demurrer to the complaint, and also filed a cross-complaint asking judgment on the policy. The demurrer to the complaint having been sustained, the plaintiff filed an answer to the cross-complaint, predicated on the facts that were the basis of its election to rescind, as had been alleged in the complaint. In Cable v. United States Life Ins. Co., 191 U. S. 288, 24 S. Ct. 74, 48 L. Ed. 188, after action had been commenced in a state court on a policy of insurance, the insurance company brought suit in the United States Circuit Court for cancellation of the policy on the ground of fraud. A demurrer for want of equity was sustained, and on appeal from the Circuit Court of Appeals overrul- The case was disposed of on a special finding the circuit court, the decree of the Cir- ing of facts, which showed the existence of cuit Court of Appeals was reversed and the such facts as rendered the policy voidable at cause remanded to the Circuit Court with di- the election of the insurer and that proper rection to dismiss the bill. It was there steps had been taken to avoid it. The adminheld that an indequate remedy at law in the istrator contended that the insurer could not state court could not be successfully urged to after the death of the insured contest the sustain the equitable jurisdiction of the fed-policy except by a defense to an action on eral court of a suit to cancel an insurance the policy, and where the insured died withpolicy for fraud, when the insurance company might have removed the action brought on the policy in the state court to a federal court where the fraud could have been set up as a defense. Appellant in the instant case had an adequate remedy at law. Its cross-complaint could not by amendment have been made germane to the complaint. There was no error in striking it from file. Appellant next contends that it rescinded the contract of insurance within the contestable period and had the right to set up the rescission as a defense, even though such defense was not set up within the contestable period. Appellee, on the other hand, contends that the rescission cannot avail appellant as a defense, because appellant failed to take affirmative action in court, within the contestable period, either as plaintiff or defendant, to avoid the policy. [4] While the court found facts sufficient to show that the policy in question was an Illinois contract and that the statute of Illinois required the policy to contain a provision that it should be incontestable after the expiration of two years from its date of issue, it failed to make any finding as to the law of Illinois, as decided by the Supreme Court of that state construing that statute or deciding the question now before us. This being true, the decisions of the Supreme and Appellate Courts of Illinois cited by appellant and appellee are not con in the contestable period, the insurer could not thereafter begin a contest of the policy at all, unless the representative or beneficiary within the contestable period brought an action to enforce the policy, in which case the insurer could within that period, but not thereafter, commence a contest by defending against such action. In support of this contention, it was insisted that the rescission of the policy and the bringing of the action to cancel it was not sufficient for the reason that after the death of the insured, the insurer could not proceed in equity, because it, in such case, had an adequate remedy by defending an action at law on the policy, and that no sufficient steps to cancel the policy had been taken until the filing of the answer to the cross-complaint, which was after the expiration of the contestable period, and therefore prohibited by the policy. In disposing of this contention the court, at page 50 (121 N. E. 320), said: "It is universally held, however, that recourse to equity may be had where the remedy at law is inadequate and does not afford the complaining party the relief to which he is entitled. Thus, in case of an insurance policy where the loss has occurred, none of the authorities deny, and many of them recognize that of the existence of which the remedy at law there may be special circumstances by reason by defending a suit brought on the policy is inadequate, and that as a consequence equity will assume jurisdiction. We conclude that under proper circumstances an insurance company, after the loss has occurred, may proceed by affirmative action to avoid the policy, provided it takes proper steps to that end within the period named in the incontestability clause. Trust Co. v. Ins. Co., supra [173 N. C. 558], reviews the decided cases to the effect that by 'affirmative action,' as used in such connection, is meant the bringing of a proper action within such period." And after applying the facts as they were found in that case to the record, the court said: "We conclude that it sufficiently appears that within the year appellee proceeded by affirmative action to contest the policy, and that such contest was continued thereafter without inter ruption until its final conclusion in the trial court. It follows that under the circumstances here the incontestability clause did not bar appellee from making its defense." In Indiana National Life Ins. Co. v. McGinnis, 180 Ind. 9, 101 N. E. 289, the policy, dated December 9, 1907, was for $5,000; $3,000 being payable to the appellee, who was the mother of the insured. and $2,000 payable to his wife. It contained a provision that if the premiums were duly paid it should be incontestable after one year from the date of issue. The insured died January 16, 1909. Suit was commenced on the policy in June, 1909. The defendant answered fraud in procuring the policy of insurance; that the contract of insurance had been canceled by written agreement made November 30, 1908, in consideration of which the insurer repaid the insured the amount of premiums paid with interest; and that there was a failure to pay premium due December 8, 1908. Demurrers were sustained to all answers except the one pleading failure to pay the premium. The question there decided, in so far as it relates to the effect of an incontestable clause, was stated by the court as follows: Does the incontestable clause preclude the company from asserting, as a defense to its liability, the charge of false and fraudulent answers of the insured, the warranties in the contract, the mutual cancellation of the policy by the insured and the insurer without the knowledge of the beneficiary, for a cash consideration paid by the company to the insured, where the answer asserting such defense is filed more than one year after the execution, delivery, and acceptance of the contract. And the court, after calling attention to the fact that the action on the policy had been commenced after the expiration of the contestable period, said the holding of the courts generally is that every defense to a policy of insurance embraced within the term of the incontestable clause was completely lost to the insurer if it failed to make the defense or take affirmative action within the time limited by the policy. And after referring to the fact that the limitation in the contract within which the policy could be contested was an inducement held out by the company to augment the sale of its contract, said: "The incontestable clause is construed by us to be binding upon the appellant and to mean just what it says, that 'after one year from the date of issue, this policy shall be incontestable if the premiums have been duly paid.'" In Pacific Mut. Life Ins. Co. v. Alsop, 191 Ind. 638, 134 N. E. 290, the notice of rescission was not given until after the expiration of the contestable period. The question as to what would have been the effect of a rescission made before the expiration of the contestable period, if set up as a defense to an action commenced after the expiration of the contestable period, is not discussed. The Supreme Court of Illinois, in the recent case of Powell v. Mutual Life Ins. Co., 313 Ill. 161, 144 N. E. 825, passed upon the question now under consideration, and after citing and reviewing a great many cases, including Ebner v. Ohio State Life Ins. Co., supra, Indiana National Life Ins. Co. v. McGinnis, supra, and Ramsey v. Old Colony Life Ins. Co., 297 Ill. 592, 131 N. E. 108, said: "These cases hold, in effect, that an unaccepted offer for rescission or an attempt to rescind within the period named in the incontestable clause is insufficient, and that it is necessary that the insurer during such period rescind by affirmative action before a proper tribunal It will be seen from an examination of the or by defense to a suit brought on the policy. authorities cited, that by the great weight of authority in this country, to contest a policy for fraud it is essential that the insurer proceed, by way of defense, to a suit brought upon the policy or by independent action to cancel the same, and that notice of rescission, with tendering back premiums and interest, is not a contest within the meaning of the clause. Nor is this an unreasonable or unjust rule. An insurance contract differs from contracts of other kinds, in that the time of performance by the insurer is uncertain, while it is necessary for the insured to continue in the performance of his obligations throughout the uncertain period of his life. It is therefore highly desirable, from the standpoint of both the insurer and the insured, if the question of fraud be raised by the insurer, that it be settled within a reasonable time. An attempt at rescission raises an issue of fact, and all consideration tends to the conclusion that it should within a reasonable time be settled. The notice of rescission served by the insured demonstrates that it wishes to terminate all transactions with the insured. It can therefore be but desirable to it that questions arising out of the notice of rescission should not await an indefinite number of years for adjustment. It is certainly to the best interest of the insured that an early settlement of the issue of fact be had for at least two reasons: First, after notice of rescission the insured to all practical purposes stands in a position similar to one whose application for insurance has been rejected, and it is well known that as practical matter he encounters difficulty in securing another (145 N.E.) followed by the Appellate Court of Illinois in Liebsker v. New York Life Ins. Co. (decided in June, 1924), where an attempt was made to distinguish the Ramsey Case. In view of the decision of the Supreme Court of that state in Powell v. Mutual Life Ins. Co., supra, the Liebsker Case cannot be considered as authoritative. [5] Feierman v. Eureka Life Ins. Co., 279 Pa. 507, 124 A. 171, cited by appellant, is not in point. No attempt had been made in that case to resind or cancel the policy durThe statement ing the contestable period. All of the court on that subject is obiter. the court decided there was that the defense of fraud could not be set as a defense after the expiration of the contestable period. We hold that appellant could not, under the facts in this case, defend on the ground policy; second, he must, because of this unsettled issue, continue throughout his life to tender premiums, and in all things offer to do and perform his part of the contract, but with the feeling that after his death his loved ones have but acquired a lawsuit. Mere notice of rescission for fraud settles nothing. Actual rescission is permitted for fraud without the consent of the other party to a contract where such fraud is shown, but the right to rescind does not exist unless such fraud is proven. Charging fraud and serving notice of rescission cannot, of itself, be a rescission for fraud. It still remains to be proven whether or not fraud in fact exists. By notice of rescission for fraud the insurer raises an issue of fact and whether the policy is still good or is canceled depends upon the decision of that issue. The law recognizes but two ways of settling issues of fact. They are by stipulation, admission, or agreement, and by proof adduced before a legal body competent to find the fact. The nature of the contract requires that an issue of this character be that it had rescinded the contract of insursummarily settled and that it be not permitted to pend throughout the life of the insured. It seems clear that if the insurer would contest the validity of the policy where rescission is not agreed to by the insured it should do so in the only way that is recognized in law; i. e., by a proceeding in which proof may be adduced and a finding had in the manner recognized in law as competent to make a binding determination of the issue. Nor is there in this any hardship. The contract is usually solicited by the insurer. It is always written by it. It has at its command more or less extensive means of determining whether the representations made by the insured are true or false, and it is by the contract given two years in which to find out the fraud, if any exists, and, where it raises within that time an issue of fraud, it is but just that it be required to institute the necessary proceedings to settle that issue." In Thistle v. Equitable Life Assur. (Tenn.) 261 S. W. 667, the contestable period was one Two year and expired September 7, 1922. days later suit was commenced on the policy. On October 16, 1922, the defendant filed a cross-complaint asking a cancellation of the policy. The defendant in that case, as in this, took affirmative action within the contestable period to rescind by giving notice in writing of its intention to rescind and by tendering back the premium paid. No action was taken in court within the contestable period to have the policy canceled. It was there held that the act of the insurance company in giving the notice of rescission and tendering the premiums constituted a breach for renunciation, but did not constitute a rescission. After citing American Trust Co. v. Insurance Co., 173 N. C. 558, 92 S. E. 706, in support of that holding the court said: "The remedy of the defendant was to insti tute an action for cancellation within a year, and if it did not do so the policy was in force at the expiration of the year." The contrary was held in Mutual Life Ins. Co. v. Rose (D. C.) 294 F. 122. This case was ance within the contestable period, and that if appellant had been desirous of contesting the validity of such policy it should have done so by taking proper action in court within the contestable period. This being true, the court did not err in its conclusion of law in favor of appellee. [6] The court found that appellee's "determination to contest" the policy on the ground of fraud was not commenced within the period of limitation fixed by the law of the state of Illinois. Appellant says (1) this was not and cannot be regarded as a finding of a fact, and (2) if it be held to be the finding of a fact, it is not sustained by the evidence. The court found that at the time the policy was issued, the statute of Illinois required that each policy issued or delivered in that state should contain a provision stating that the policy should be incontestable after two years from its date, except for reasons not involved in the instant case. Appellant says this statute is a statute of limitation which affects the remedy only, and that the evidence shows it was amended after the policy was issued, that is, on July 2, 1921 (Laws Ill. 1921, p. 482) so as to provide that a policy issued and delivered in that state should be "incontestable after it shall have been in force during the lifetime of insured, for two years from its date." The provision of the law as found by the court had been written in and made a part of the contract. It was a material part of the contract and could not be affected or changed by subsequent legislation. The amendment of 1921 was only applicable to policies issued after its passage. It did not affect policies theretofore issued. that appellant did not rescind the contract of sonable time, that would make no difference, right to transact business in the state of Inin the result. Appellant, in addition there- diana, it avers that appellee's property, both to, should have taken affirmative action in real and personal, was duly assessed for taxcourt within the two-year period to have ation in Center township, Marion county, for the policy rescinded and canceled because the year 1919, and the valuation thereof of the alleged fraud. fixed. Thereafter the taxing officers of said township, county, and state, in pursuance of the pretended order of the, state board of tax commissioners, entered on August 23, 1919, increased said valuation of appellee's lands and lots 20 per cent., the improvements thereon 30 per cent., and its personal property 50 per cent. Appellee was thereupon charged upon the tax duplicate of the county and state with the sum of $2,486.32, as the first installment of taxes for the year 1919, Other reasons why the court erred in overruling the motion for a new trial are discussed, but they are not of controlling influence and would not lead to a reversal if all of them were decided in accordance with appellant's contention. The judgment is therefore affirmed. BOARD OF COM'RS OF MARION COUNTY of which sum $643.97 was for taxes based v. WESTERN ELECTRIC CO. (No. 11822.) (Appellate Court of Indiana. Nov. 13, 1924.) 1. Taxation 319(2)-County board of review presumed to have performed statutory duty. upon said increased valuation. At the time there was pending in the Marion superior court the case of Hendrickson v. Fesler et al., wherein an injunction was sought on behalf of the taxpayers of Center township against the collection of taxes based upon increases in assessments made under said order of August 23, 1919. Prior to May 4, 1920, appellee paid to the treasurer of Marion county $2,486.32, paying $643.97 under protest; the same being, as aforesaid, based upon the alleged invalid increase in assessment, and it was agreed that said amount so representing the increased assessments should be 2. Taxation 543(6)—Refund of taxes ad- credited upon the second installment of apmitted to be proportionate to those paid by pellee's taxes for 1919, payable in Novemothers held unwarranted in absence of show-ber, 1920, if that increase should finally be ing of substantial injury. County board of review is presumed to have performed its statutory duty, and fact that it applied same percentages as were employed by state board of tax commissioners in making horizontal increases in tax assess ments does not justify conclusion that it merely reaffirmed and readopted state board order. Taxpayer admitting by demurrer that its property was taxable, that assessments were not more than its true cash value, and were proportionate to other property, but seeking refund on ground of alleged invalidity, for want of notice of horizontal increase in assessments under Tuthill-Kiper Act, held not entitled to refund in absence of showing of substantial injury. held invalid. The superior court thereafter in the Hendrickson Case held that the order of the state board of tax commissioners, and the assessments made in pursuance thereof, was invalid and void, and enjoined the collection of taxes based thereon. There was no appeal in that case, and the judgment of the superior court is still in full force and effect. Appeal from Circuit Court, Marion County; Thereby the said $643.97 became a credit H. O. Chamberline, Judge. Action by the Western Electric Company against the Board of Commissioners of Mar1on Couty. Judgment for plaintiff, and defendant appeals. tions. Reversed, with instruc Superseding former opinion, 143 N. E. 370. Emsley W. Johnson, of Indianapolis, and Wm. A. Hough, of Greenfield, for appellant. Miller, Dailey & Thompson and Albert L. Rabb, all of Indianapolis, for appellee. NICHOLS, P. J. This appeal is from a disallowance by the board of commissioners of a claim for refund of taxes alleged to have been illegally assessed in 1919. The claim was presented to the board of commissioners. In addition to the formal statement of the claim and averments as to the corporate existence of appellee and its upon appellee's second installment of taxes as aforesaid. Thereafter the Legislature, in special session, adopted an act known as the Tuthill-Kiper Act (Acts Spec. Sess. 1920, p. 153), after which the state board of tax commissioners, the county board of review of Marion county, and the taxing officer of said county, purporting to act under the provi sions of said Tuthill-Kiper Act, took such action as in effect readopted and reaffirmed said pretended order of equalization of August 23, 1919. Such action is illegal and void for the reason that the Tuthill-Kiper Act is void, that no notice was given appellee or any taxpayer of said increases in assessments made under said act, and that said increases and assessments are unlawful and excessive. After such void action under said act, appellee was charged upon the tax duplicates of said county with $2,486.32, as its second installment of taxes for the year 1919. For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes |