This is a suit to cancel two life insurance policies issued to Grover C. Rose: One for $3,000, dated July 25,1919; and the other for $2,000, dated August 14, 1919. Annie P. Rose, the wife of the insured, was named beneficiary in both policies. The bill was filed December 26,1922, and alleged that Rose, in applying for the policies, made materially false statements and representations, upon which the insurance company relied in issuing the policies; that after learning of the misrepresentations the company, on April 14, 1921, “rescinded and canceled the policies,” and tendered to Rose the premiums theretofore paid, with interest thereon from the dates of payment, notifying him of its reasons for the cancellation. The prayer was for a cancellation, a discharge from all liability, and the enforced delivery to the insurance company of the policies. In a motion to dismiss the bill defendants relied upon a clause in each of - the policies as follows : “This policy shall be incontestable after two years from its date of issue, except for nonpayment of premiums.”
It seems to be conceded that this clause is not only a time limitation on defenses that could be made to a suit brought on the policies, but a like limitation on affirmative action looking to their cancellation. The question is whether the notice of rescission by the insurance company and the tender of premiums theretofore paid terminated the policy, or, if not, was a contest within the meaning of this clause, or at least such action as made the clause inoperative as a bar to an action to annul the policies, brought more than two years after they were issued.,
Misrepresentations material to a risk do not render a policy void, but merely voidable at the election of the insurance company. The plaintiff does not claim that there is any provision in these policies giving to it the right to rescind them without the consent of the insured, but insists that an insurance company, by denouncing a policy as fraudulently procured and offering to return the premiums theretofore paid, may terminate or rescind it, and that as a result of its notice and tender of April 14th a rescission of these policies was effected as of that date. *281In support of this contention counsel cite Bigelow on Frauds, p. 73, and Williston on Contracts, § 1370, to the effect that if the defrauded vendor or purchaser of personalty, upon tender of restoration of the status quo, can regain possession of his goods “peaceably without the aid of a court,” or by entering “the wrongdoer’s property, if not forbidden,” he may do so, and thereby revest himself with title; he may also, of course, bring replevin. The older cases upon which these pronouncements are based do not, we think, justify the broad application that plaintiff has given them. In Wheelden v. Lowell, 50 Me. 499, the defendant, having been defrauded in the exchange of a horse for a note, after tender of the note entered plaintiff’s premises “peaceably and without being forbidden,” and took the horse, thereby, as the court held, re-vesting himself with the title. There was in that ease a practical rescission, a retaking of possession. Parrish v. Thurston, 87 Ind. 437, Brower v. Goodyer, 88 Ind. 572, and Doane v. Lockwood, 115 Ill. 490, 4 N. E. 500, were actions in replevin. In discussing the effect of an election to rescind and a tender of the property received in the last-mentioned case, the court stated plaintiff’s position perhaps as favorably as it can be stated, as follows: “It is as though no sale of the property had been made, and in that event the original taking, will be regarded as a tortious taking without the consent of the vendor, and the title at once becomes reinvested in him, as though it had never been divested.” Aside from viewing this language in the light of the fact that the defrauded party had repossessed himself of the property, it is to be considered in connection with the later ease of Powell v. Mutual Life Insurance Co., 313 Ill. 161, 144 N. E. 825, 36 A. L. R. 1239, where the same court rightly held, we think, that a contract of insurance eould not be rescinded at the election of the insurer, upon its mere declaration of fraud on the part of the insured, saying: “Mere notice of rescission for fraud settles nothing. * * * Charging fraud and serving notiee of rescission cannot, of itself, be a rescission for fraud. It still remains to be proven whether or not fraud in fact exists.. By notiee 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.” See, also, Humpston v. Mutual Life Assurance Co., 148 Tenn. 439, 256 S. W. 438, 31 A. L. R. 78.
The gist of plaintiff’s contention is that, notwithstanding the refusal of the insured to rescind, the equivalent of a denial of fraud, the effect of the notice and tender was not only to terminate, but to rescind the policies as of that date, upon the later finding of fraud by a court, if there should be such a finding. This is but" another way of saying that the adjudication would relate back to and become effective as of the date of the notiee. The logic of that point of view, we think, is that the latter contingency is the efficient and determining factor, and unless and until it is brought about there can be no rescission. The supposed defense of rescission or cancellation by mutual agreement, and the eounterplea of fraud in avoidance of a claim of settlement for personal injury in an action to recover damages, do not, in our opinion, present analogous questions. The defense of'rescission by mutual agreement would, of course, be good, as would a defense founded on a judgment canceling the policy, in either of which cases there would have been action instantly and finally canceling or rescinding the old agreement. Such defenses have no relation to an incontestable clause; they are always open, if there has been in fact a cancellation or rescission — not action that might or might not justify a judicial rescission. Whether fraud could be relied upon by the insured after the lapse of a time limitation in a policy as a counter defense to a claim of cancellation by mutual agreement is a question not presented, and, if presented in the supposed case, would not concern itself directly with the policy but with an agreement canceling it. The question that we are considering is whether the notiee was a rescission, or was merely an election on the part of the plaintiff to avail itself of its right of rescission. If it was a rescission, a finality, this action is maintainable; if it was not, then its effect under the limitation clauses must be considered. It is to be remembered, however, that there is a marked difference between the right or election to rescind and rescission itself. The right may exist and never be exercised. It can be exercised so as to accomplish rescission without the volition of the other party only through the channels of a judicial tribunal, where upon the judgment of rescission there is the coerced consent of the opposing party.
In the other class of eases cited fraud is usually pleaded in avoidance of the affirmative defense of settlement, and the question is tried out, just as a plea of fraud to a suit *282on an insurance policy is tried. The plaintiff in that case usually sets up the settlement in his petition, claims that it was fraudulently procured, and tenders back what he received; but that, as the courts hold, does not terminate the contract of settlement. It is but the performance of a condition upon which he may ask for a rescission or an avoidance of the affirmative defense of settlement. Something else must happen; there must be a finding of the fact of fraud; if that is not done, the settlement stands; if it is done, the contract will not be enforced or permitted to stand in the way of the prosecution of a meritorious claim. There is in such case no rescission at all until and unless a competent tribunal adjudges it. Notice of repudiation of or election not to be bound by a voidable contract, with an offer to place the other party in statu quo ante, is ordinarily required as a condition precedent to the maintenance of a judicial proceeding for annulment. Such action does not and cannot of itself terminate a contract finally against the consent of the other party.
This brings us to a consideration of whether the notice and tender was a contest within the meaning of the clauses in question. On that point plaintiffs’ position is supported by but two authorities, one of which is Insurance Company v. McIntyre (D. C.) 285 F. 570, wherein it was said that a contest “could be effectually inaugurated by a denial of liability in any form.” The judgment in that ease, however, was subsequently reversed in (C. C. A.) 294 F. 886, where it was held, following the Pickering Case (C. C. A.) 293 F. 496, that a declaration no longer to be bound under the policy, accompanied by a tender of the premiums paid, was not a contest, within the meaning of a clause like the one involved in this case. The other case is the Hurni Packing Case (C. C. A.) 280 F. 18, where a claim was made on the insurance company after the death of the insured, and it was stated in the opinion that a refusal to pay the claim, such as was made by the insurance company in its letter, was a sufficient act of contest. The opposing view was not discussed at length, and the judgment' was affirmed by the Supreme Court on the ground that more than two years had elapsed before the act of contest occurred. That court did not refer in its opinion to the point we are considering, and perhaps it was not called on to do so, as presumably the case was argued, as decided, on the other point; it being assumed that the denial of liability was an act of contest. The weight of authority is to the effect that contest, within the meaning of clauses of this kind, means some affirmative or def endsive action taken in court. Northwestern Mutual Life Insurance Co. v. Pickering (C. C. A.) 293 F. 496; Jefferson Standard Life Insurance Co. v. McIntyre (C. C. A.) 294 F. 886; Chun Ngit Ngan v. Prudential Insurance Co. (C. C. A.) 9 F.(2d) 340; Powell v. Mutual Life Insurance Co., 313 Ill. 161, 144 N. E. 825, 36 A. L. R. 1239. It has also been held that an equitable proceeding to cancel a policy after the death of the insured is justified, on the ground that, unless permitted, the insurer would lose, under such a clause, its right to contest the policy. Jefferson Standard Life Insurance Co. v. Keeton (C. C. A.) 292 F. 53; Lincoln National Life Insurance Co. v. Peake (D. C.) 10 F.(2d) 366; Jones v. Relianee Life Insurance Co. (C. C. A.) 11 F. (2d) 69. These holdings proceed upon the theory that by contest is meant action taken in a tribunal having the right and power to determine the validity of the policy. We think they are right, in view of which discussion of the other questions is not necessary.
Judgment reversed.