LENTZ v PRUDENTIAL INS CO
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No. 12541 I N THE SUPREME C U T O THE STATE O MONTANA OR F F 1974 . EDNA M LENTZ , ADMINISTRATRIX O T E ESTATE O K R 0. LENTZ, Deceased, F H F AL and EDNA M. LENTZ , P l a i n t i f f s and Respondents, THE PRUDENTIAL INSURANCE C M A Y O PN O AMERICA, F Defendant and A p p e l l a n t . Appeal from: D i s t r i c t Court of t h e S i x t e e n t h J u d i c i a l D i s t r i c t , Honorable A l f r e d B. Coate, Judge p r e s i d i n g . Counsel of Record : For A p p e l l a n t : Gene Hunt l e y a r g u e d , Baker, Montana For Respondent: D e n z i l R. Young argued, Baker, Montana Submitted: Decided: Filed : - APR 3 19%: February 25, 1974 APR - 3 1E 9 Mr. Chief Justice James T. Harrison delivered the Opinion of the Court. This is an action by plaintiff, Edna M. Lentz, wife and administratrix of the estate of Karl 0. Lentz, seeking recovery on a credit life insurance policy. The district court of Fallon County, sitting without a jury, entered findings of fact, conclusions of law and judgment in favor of plaintiff. From this judgment defendant, the Prudential Insurance Company of America, appeals. On July 1, 1967, Karl 0 . Lentz, deceased, of Baker, Montana, purchased an automobile from Ryan Oldsmobile in Billings, Montana. The purchase was by installment contract. As part of the contract Lentz purchased credit life insurance from the defendant. As a condition of coverage, Lentz was required to declare "that to the best of my knowledge and belief I am now in good health". The premium was paid on the contract of insurance. Lentz died on August 16, 1967. At the time of the purchase Lentz was 73 years old. experienced various medical problems. Lentz By stipulation, reports of Dr. John Hurly of Billings, Montana, were admitted into evidence in the trial. These reports show that in September -October and December of 1966, Lentz was treated by Dr. Hurly for ulcers. Sur- gery was declined on both occasions because of poor renal (kidney) function. The reports indicate that Lentz was quite comfortable on medication and that his blood pressure was quite satisfactory at that time and that " * * * He (Lentz) was aware because of the deferment of surgery on two occasions that his health was not good at these times. Nonetheless there was no immediate threat of death once the bleeding ulcer was recognized and treated." Dr. Robert Weeks, Baker, Montana, testified that he saw Lentz on May 16, 1967, and prescribed some medicine to lower Lentz's blood pressure. Dr. Weeks, considering Lentz as being in serious c o n d i t i o n o f h e a l t h , was asked i f h e t o l d Lentz t h e s e r i o u s n e s s of h i s c o n d i t i o n . H e answered: "No, on t h e c o n t r a r y he a c t e d so f r i g h t e n e d t h a t I r e a s s u r e d t h e man r a t h e r t h a n d i s c u s s i n g a n y t h i n g a b o u t t h e s h o r t n e s s of l i f e o r a s h o r t I c o n s i d e r e d t h i s a n e c e s s a r y p a r t of l i f e span. t h e t r e a t m e n t because b e i n g s c a r e d e l e v a t e s t h e blood p r e s s u r e and b a s i c a l l y t h i s was h i s problem, it produced t h e a n u r i s m ( s i c ) . " Dr. Weeks s t a t e d t h a t he t r i e d t o remain o p t i m i s t i c a s t o r e a s s u r e Lentz and t e s t i f i e d : "Reassuring him t h a t he would wake up i n t h e morni n g , t h a t t y p e of t h i n g , you know, he was r e a l l y q u i t e f r i g h t e n e d , on s e v e r a l v i s i t s . On t h i s v i s i t , 5-16-67, I t h i n k it was t h e one he was most f r i g h t e n e d o n . " Dr. Weeks h o s p i t a l i z e d Lentz on May 20, 1967, f o r h i s h i g h blood p r e s s u r e , back p a i n s , abdominal a n e u r i s m and b e c a u s e " h i s k i d n e y s w e r e n ' t d o i n g t h e i r f u l l work." H e was d i s c h a r g e d from t h e h o s p i t a l on May 2 4 , 1967, and on May 29, 1967, Lentz was a g a i n h o s p i t a l i z e d f o r back p a i n s . 4, 1967. Dr. H e was r e l e a s e d on J u n e Weeks saw Lentz a g a i n on J u n e 7 , 1967, and i n r e f - erence t o t h i s v i s i t stated: "On t h a t o c c a s i o n h i s blood p r e s s u r e was 130 o v e r 90, which i s a s m a l l m i r a c l e . The p o i s o n t h a t h i s k i d n e y was supposed t o f i l t e r o u t had improved s o h e was i n b e t t e r shape t h a n a t any t i m e s i n c e I s t a r t e d s e e i n g him on 5-16-67, s o h e was less axotemic on t h a t d a y " . Dr. Weeks t e s t i f i e d t h a t he had shown Lentz numbers and f i g u r e s t o i n d i c a t e t o him t h a t he was improving and t h a t he had p r o b a b l y s a i d something t o Lentz t o t h e e f f e c t " t h a t t h i s i s t h e b e s t he h a s e v e r b e e n . " D r . Weeks saw Lentz a g a i n on J u n e 1 6 , 1967, when h i s blood p r e s s u r e w a s up and a g a i n on J u l y 3 , 1967, when L e n t z ' s blood p r e s s u r e was q u i t e h i g h . Dr. Weeks t e s t i f i e d t h a t h e " c o n t i n u e d t o assume a r e a s s u r i n g manner a t a l l t i m e s " with Lentz. Lentz was s e e n s e v e r a l t i m e s t h e r e a f t e r by D r . Weeks, up t o t h e t i m e of h i s d e a t h on August 1 6 , 1967. u t e d t o a n abdominal a o r t i c a n e u r i s m . Death was a t t r i b - Plaintiff testified that her husband was not feeling good in the spring of 1967, that he had gas on the stomach and that he had to quit smoking. Plaintiff, however, stated that her husband was in good health and seemed to be 10 or 15 years younger than he actually was and that they had planned to go to California to be with their son's children. Lentz bought the new car for the trip and purchased new clothing as well. In response to being asked about Mr. Lentz's spirits at the time of the purchase of the car, plaintiff answered, "He felt real good, because of his terrific health he was real happy. " Defendant presents four issues for our determination. Two of the issues, which we shall consolidate and consider initially, concern a question of agency and the district court's findings with respect to representations made by the salesman at Ryan Oldsmobile to deceased. Defendant's remaining issues are summarized as follows: (1) Whether there was a misrepresentation as to a material fact under section 40-3713, R.C.M. 1947; (2) whether the life insurance policy was rescinded. The district court in its findings of fact found that " * * * the salesman at Ryan Oldsmobile advised deceased that it would be necessary to purchase a Creditors Life Insurance Policy from the defendant." The district court also found: " * * * as deceased did not desire to purchase said insurance but was advised by the automobile seller's agent that such insurance would have to be purchased." Defendant argues that there is no basis in the evidence for the district court to have made such findings. While from our review of the transcript we find no evidence that it was a necessity that deceased purchase the insurance, we clearly find in the testimony by the plaintiff evidence that the salesman at Ryan Oldsmobile recpested and suggested that deceased take the insurance. The s a l e s m a n i n d i c a t e d t o d e c e a s e d t h a t p u r c h a s i n g t h e i n s u r a n c e was customary and something which was a l w a y s done on a c o n t r a c t . Deceased t h e n p u r c h a s e d t h e i n s u r a n c e . I n a d d i t i o n , t h e d i s t r i c t c o u r t found "That t h e a u t o m o b i l e s e l l e r ' s a g e n t was n o t a n a g e n t of t h e d e c e a s e d , b u t was d e f e n d a n t ' s agent." Defendant s t a t e s no o b j e c t i o n t o t h i s f i n d i n g e x c e p t t h a t i t was n o t n e c e s s a r y and c o n f u s i n g . I t i s t h i s C o u r t ' s view t h a t a l l of t h e above-quoted f i n d - i n g s of t h e d i s t r i c t c o u r t were p r o p e r , n e c e s s a r y and s u p p o r t e d by t h e evidence. The salesman was c e r t a i n l y t h e a g e n t o f d e f e n d a n t , and t h e e v i d e n c e shows t h a t t h e salesman u r g e d d e c e a s e d t o e n t e r into the contract. W e do n o t e , however, t h a t b e c a u s e o f t h e f o r e - g o i n g i s s u e s d e f e n d a n t was n o t i n any way e s t o p p e d from c o n t e n d i n g t h a t t h e r e was a m i s r e p r e s e n t a t i o n made by t h e d e c e a s e d . A s t o t h e next question presented, defendant s p e c i f i c a l l y t a k e s i s s u e w i t h t h e d i s t r i c t c o u r t ' s f i n d i n g No. V I I I , which s t a t e s : "That d e c e a s e d ' s r e p r e s e n t a t i o n o f good h e a l t h , a l t h o u g h u n t r u e i n f a c t , was made i n good f a i t h w i t h o u t any i n t e n t t o m i s l e a d t h e d e f e n d a n t o r t o induce t h e defendant t o i s s u e t h e insurance p o l i c y , a s deceased d i d n o t d e s i r e t o purchase s a i d i n s u r a n c e b u t was a d v i s e d by t h e a u t o m o b i l e s e l l e r ' s a g e n t t h a t s u c h i n s u r a n c e would have t o be p u r c h a s e d . " S e c t i o n 40-3713, R.C.M. 1947, p r o v i d e s : " A l l s t a t e m e n t s and d e s c r i p t i o n s i n a n y a p p l i c a t i o n f o r an i n s u r a n c e p o l i c y o r a n n u i t y c o n t r a c t , o r i n n e g o t i a t i o n s t h e r e f o r , by o r i n b e h a l f of t h e i n s u r e d o r a n n u i t a n t , s h a l l be deemed t o be r e p r e s e n t a t i o n s and n o t w a r r a n t i e s . M i s r e p r e s e n t a t i o n s , o m i s s i o n s , concealment of f a c t s , and i n c o r r e c t s t a t e ments s h a l l n o t p r e v e n t a r e c o v e r y u n d e r t h e p o l i c y o r contract unless either: " (a) F r a u d u l e n t ; o r " ( b ) M a t e r i a l e i t h e r t o t h e a c c e p t a n c e of t h e r i s k , o r t o t h e h a z a r d assumed by t h e i n s u r e r ; o r " ( c ) The i n s u r e r i n good f a i t h would e i t h e r n o t have i s s u e d t h e p o l i c y o r c o n t r a c t , o r would n o t have i s s u e d a p o l i c y o r c o n t r a c t i n a s l a r g e a n amount, o r a t t h e same premium o r r a t e , o r would n o t have p r o v i d e d c o v e r a g e w i t h r e s p e c t t o t h e hazard r e s u l t i n g i n t h e l o s s , i f t h e t r u e f a c t s had been made known t o t h e i n s u r e r a s r e q u i r e d e i t h e r by t h e a p p l i c a t i o n f o r t h e p o l i c y o r c o n t r a c t o r otherwise." Defendant a r g u e s t h a t s e c t i o n 40-3713 p r e v e n t s a r e c o v e r y i f a m a t e r i a l m i s r e p r e s e n t a t i o n i s made whether o r n o t t h e m i s r e p r e s e n t a t i o n i s i n n o c e n t l y made. D e f e n d a n t ' s argument i s based upon t h e p r e m i s e t h a t d e c e a s e d r e p r e s e n t e d a f a c t t h a t he was i n good h e a l t h , and b e c a u s e i n f a c t , d e c e a s e d was n o t i n good h e a l t h , t h a t t h i s c o n s t i t u t e s a material misrepresentation preventing recovery. Deceased d e c l a r e d " t h a t t o t h e b e s t of m knowledge y and b e l i e f I am now i n good h e a l t h . " The a c t u a l r e p r e s e n t a t i o n was t h a t d e c e a s e d b e l i e v e d h i m s e l f t o be i n good h e a l t h , and t h e d i s t r i c t c o u r t found t h a t t h i s was i n good f a i t h . Although t h e f a c t s i n t h i s c a s e show t h a t d e c e a s e d was n o t i n good h e a l t h , t h e f a c t s a l s o show t h a t d e c e a s e d b e l i e v e d t h a t h i s h e a l t h was good. Defendant a l s o c o n t e n d s t h a t t h e r e i s n o t s u f f i c i e n t e v i d e n c e f o r t h e d i s t r i c t c o u r t t o have r u l e d t h a t d e c e a s e d , i n good f a i t h , t h o u g h t t h a t he was i n good h e a l t h . The t e s t i m o n y o f D r . Weeks i n d i c a t e s t h a t d e c e a s e d was c o n t i n u a l l y r e a s s u r e d t h a t h i s h e a l t h was improving and t h a t d e c e a s e d was encouraged a s t o t h e c o n d i t i o n of h i s h e a l t h . I n ad- d i t i o n , t h e t e s t i m o n y of p l a i n t i f f s u p p o r t s t h e f a c t t h a t d e c e a s e d b e l i e v e d h i m s e l f t o be i n good h e a l t h a t t h e t i m e of t h e p u r c h a s e of t h e a u t o m o b i l e and t h e e x e c u t i o n of t h e c o n t r a c t and c r e d i t l i f e insurance policy. Deceased r e p r e s e n t e d t h a t h e b e l i e v e d him- s e l f t o be i n good h e a l t h , and t h e e v i d e n c e s u f f i c i e n t l y s u p p o r t s his belief. I n Couch on I n s u r a n c e 2d S e c t i o n 35:150, it i s s t a t e d : " * * * A c c o r d i n g l y , where t h e a p p l i c a n t f o r l i f e i n s u r a n c e c e r t i f i e s t h a t h i s h e a l t h i s good a c c o r d i n g t o t h e b e s t of h i s knowledge and b e l i e f , a r e c o v e r y may be had, on t h e d e a t h of i n s u r e d , i f it a p p e a r s t h a t he had r e a s o n t o b e l i e v e and d i d b e l i e v e , t h a t a t t h e t i m e he was i n good h e a l t h , a l t h o u g h it s u b s e q u e n t l y d e v e l o p s t h a t t h i s was n o t i n f a c t h i s c o n d i t i o n , f o r h i s s t a t e m e n t was n o t u n q u a l i f i e d , b u t o n l y t o t h e e x t e n t of h i s knowledge and b e l i e f . * * *" A s t o t h e f i n a l i s s u e presented, defendant contends t h a t when t h e f u l l amount of t h e premium i s t e n d e r e d back t o t h e e s t a t e of t h e d e c e a s e d and t h e money i s k e p t t h a t t h i s r e s u l t s i n a r e s c i s s i o n of t h e p o l i c y . The d i s t r i c t c o u r t found: "That d e f e n d a n t h a s r e f u s e d t o pay t h e i n s u r a n c e b e n e f i t s p r o v i d e d f o r by t h e p o l i c y and h a s t r e a t e d t h e p o l i c y a s r e s c i n d e d and h a s r e t u r n e d t h e amount of t h e premium t o t h e d e c e a s e d ' s e s t a t e . " I n o r d e r f o r t h e r e t o be a r e s c i s s i o n o f t h e i n s u r a n c e p o l i c y t h e r e q u i r e m e n t s of b o t h s e c t i o n 40-3713, 13-905, R.C.M. 1947, must be met. s u p r a , and s e c t i o n McLane v . Farmers I n s . Exchange, 150 Mont. 116, 118, 432 P.2d 9 8 . The d i s t r i c t c o u r t i n i t s c o n c l u s i o n s of law c i t e d McLane f o r t h e proposition t h a t defendant could not rescind t h e insurance p o l i c y a f t e r l i a b i l i t y had a t t a c h e d . Upon examining o u r d e c i s i o n i n McLane w e n o t e t h a t what w e h e l d t h e r e i n w a s t h a t even a f t e r t h e a c c i d e n t , t h e i n s u r a n c e company " * * * had a r i g h t t o a r e a s o n - a b l e t i m e i n which t o i n v e s t i g a t e ( c i t i n g a u t h o r i t y ) and upon d i s c o v e r i n g t h e f a c t s e n t i t l i n g him t o r e s c i n d he was r e q u i r e d t o a c t promptly t o r e s c i n d . " The i n s u r a n c e company i n McLane waived i t s r i g h t t o r e s c i n d by a f f i r m a t i v e a c t s on i t s p a r t and by n o t m e e t i n g t h e r e q u i r e m e n t t h a t he promptly r e s c i n d . W e point out t h a t t h e d i s t r i c t c o u r t ' s conclusion i s not an absolute rule. While i t i s t h i s C o u r t ' s p u r p o s e t o make t h i s c l a r i f i c a t i o n , w e n e v e r t h e l e s s hold t h a t i n t h e i n s t a n t c a s e t h e r e h a s been no r e s c i s s i o n . I n s u p p o r t of h i s argument d e f e n d a n t c i t e s 43 Am J u r 2d, Insurance, ! j 436, which s t a t e s : "The f a c t t h a t a f t e r t h e d e a t h of t h e i n s u r e d a s u i t i n e q u i t y may n o t l i e t o r e s c i n d t h e i n s u r a n c e c o n t r a c t d o e s n o t p r e v e n t t h e p a r t i e s from r e s c i n d i n g by c o n s e n t . A f t e r t h e d e a t h o f t h e i n s u r e d , t h e b e n e f i c i a r i e s of a l i f e i n s u r a n c e c o n t r a c t a r e t h e p r o p e r p a r t i e s t o g i v e c o n s e n t t o and a g r e e upon a r e s c i s s i o n of t h e c o n t r a c t , and t h e y a r e l i k e w i s e t h e p r o p e r p a r t i e s t o a c c e p t premiums r e t u r n e d upon such a r e s c i s s i o n . " A c c o r d i n g l y , a r e s c i s s i o n by c o n s e n t of t h e p a r t i e s h a s been h e l d t o be completed a s a m a t t e r o f law where t h e b e n e f i c i a r y i n a n i n s u r a n c e p o l i c y t h e r e i n s t a t e m e n t of which was o b t a i n e d by t h e a l l e g e d f r a u d of t h e i n s u r e d , a f t e r t h e d e a t h of t h e i n s u r e d , a c c e p t e d and f o r a month r e t a i n e d t h e premiums which were r e t u r n e d by t h e i n s u r e r on t h e ground o f t h e a l l e g e d f r a u d u l e n t m i s r e p r e s e n t a t i o n s by t h e insured of f a c t s m a t e r i a l t o t h e r i s k s . "Moreover, t h e e f f e c t , a s a r e s c i s s i o n of a l i f e i n s u r a n c e p o l i c y by c o n s e n t , o f a n a c c e p t a n c e by t h e b e n e f i c i a r y a f t e r t h e d e a t h of t h e i n s u r e d , of a check f o r t h e amount of premiums p a i d , w i t h i n t e r e s t t h e r e o n , t e n d e r e d by a n i n s u r e r c l a i m i n g t h e p o l i c y t o be v o i d a b l e by r e a s o n o f m i s r e p r e s e n t a t i o n s by t h e i n s u r e d , i s n o t a l t e r e d by t h e f a c t t h a t h e h a s been wrongly a d v i s e d by a t h i r d p e r s o n t h a t he may a c c e p t t h e check w i t h o u t l o s i n g any r i g h t a g a i n s t t h e i n s u r e r . " I n view of o u r d i s c u s s i o n of d e f e n d a n t ' s p r e c e d i n g i s s u e and s t a t u t e s which have been c i t e d h e r e i n , t h e o n l y means by which a r e s c i s s i o n c o u l d have been e f f e c t e d i n t h i s c a s e was by t h e cons e n t of t h e p a r t i e s . Although t h e d i s t r i c t c o u r t ' s f i n d i n g s t a t e s t h a t d e f e n d a n t t r e a t e d t h e p o l i c y a s r e s c i n d e d and r e t u r n e d t h e premium t o t h e d e c e a s e d ' s e s t a t e , t h i s Court f a i l s t o see where t h e r e i s any e v i d e n c e i n t h e r e c o r d showing t h e r e q u i s i t e c o n s e n t t o rescind. There a r e s t a t e m e n t s made by c o u n s e l i n t h e t r a n s c r i p t o f t h e t r i a l a s t o what happened t o t h e premium, and t h e b r i e f s on a p p e a l a r e r e p l e t e w i t h s t a t e m e n t s by c o u n s e l a s t o what happened t o t h e premium. There i s a l e t t e r a t t a c h e d t o p l a i n t i f f ' s b r i e f , b u t which was n o t a d m i t t e d i n t o e v i d e n c e . There i s , however, no proof i n t h e r e c o r d t h a t t h e r e was c o n s e n t by t h e p l a i n t i f f a s a d m i n i s t r a t r i x of t h e d e c e a s e d ' s e s t a t e o r a s owner o f t h e a u t o mobile t o r e s c i n d t h e p o l i c y . i s without merit. Therefore, defendant's f i n a l i s s u e For the foregoing reasons, the judgment of the district court is hereby affirmed. Chief .Justice ,. - * , . We concur:
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