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: February 25, 1974
Decided: APR - 3 1E
9
Filed : -
APR 3 19%:
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, con-
clusions 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 de-
fendant. 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. Lentz
experienced various medical problems. 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
l i f e span. 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
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 prob-
lem, 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 morn-
i 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 . H e was r e l e a s e d on J u n e
4, 1967. Dr. 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. Death was a t t r i b -
u t e d t o a n abdominal a o r t i c a n e u r i s m .
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 in-
surance 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 testi-
mony 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, s u p r a , and s e c t i o n
13-905, R.C.M. 1947, must be met. 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 con-
s 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 . Therefore, defendant's f i n a l i s s u e
i s without merit.
For the foregoing reasons, the judgment of the district
court is hereby affirmed.
Chief .Justice
,. - *
, .
We concur: