Besse N. SWARTZBERG, Executrix of the Estate of Roy E. Swartzberg,
v.
RESERVE LIFE INSURANCE COMPANY.
No. 90.
Supreme Court of North Carolina.
March 16, 1960.*275 Uzzell & DuMont and William Vance Burrow, Asheville, for plaintiff, appellee.
Van Winkle, Walton, Buck & Wall and Herbert L. Hyde, Asheville, for defendant, appellant.
BOBBITT, Justice.
This is an action at law to recover benefits allegedly owing under the terms of an insurance policy. It is not a controversy without action, submitted upon an agreed statement of facts for the determination of a question in difference between the parties, as authorized by G.S. § 1-250. Dowling v. Southern R. Co., 194 N.C. 488, 140 S.E. 213; Briggs v. Asheville Developers, 191 N.C. 784, 133 S.E. 3.
Absent the stipulations, the action was for trial upon evidence pertinent to the issues raised by the pleadings. The crucial issues were raised by the allegations of defendant's further answer and defense and plaintiff's reply thereto. They were, in substance, as follows: (1) Did defendant issue its policy in reliance upon false statements made by Swartzberg in his application therefor, as alleged by defendant? (2) If so, is defendant's right to rescind the policy barred by estoppel or by waiver, as alleged by plaintiff? (3) Is defendant's right to rescind barred by the statute of limitations? In lieu of having these issues determined upon evidence by the court or a jury, the parties submitted the case for determination by the court on stipulated facts.
G.S. § 58-30 provides: "All statements or descriptions in any application for a policy of insurance, or in the policy itself, shall be deemed representations and not warranties, and a representation, unless material or fraudulent, will not prevent a recovery on the policy."
"Interpreting this statute, it is well settled that a material representation which is false will constitute sufficient ground upon which to avoid the policy." Tolbert v. Mutual Benefit Life Ins. Co., 236 N.C. 416, 419, 72 S.E.2d 915, 917, and cases cited. Under the stipulated facts, Swartzberg's false statements were material to the risk as a matter of law. Equitable Life Assur. Soc. of United States v. Ashby, 215 N.C. 280, 1 S.E.2d 830, and cases cited. Nothing else appearing, defendant was entitled to institute and maintain an action for rescission of the policy upon tender of the amount paid as premiums. George Washington Life Ins. Co. v. Box Co., 185 N.C. 543, 117 S.E. 785.
Defendant excepted to said additional finding of fact. True, unless so authorized by the stipulations under which the case was submitted, the court had no authority to make additional findings of fact. Edwards v. City of Raleigh, 240 N.C. 137, 81 S.E.2d 273; Ahoskie Production Credit Ass'n v. Whedbee, 251 N.C. 24, 110 *276 S.E.2d 795. However, for the reasons stated below, it is unnecessary to determine whether the stipulations under which the case was submitted are similar in any respect to the stipulations considered in Ahoskie Production Credit Ass'n v. Whedbee, supra.
Whether the doctors who treated Swartzberg would have divulged the falsity of said statements in the application is not determinative. Nor does decision depend upon whether defendant, by questioning these doctors or otherwise, could have discovered, within a reasonable time after January 2, 1952, that Swartzberg's said statements were false.
The conclusions of law to the effect that defendant had waived its right to rescind by its failure to ascertain within six months from January 2, 1952, that said statements were false, and by its acceptance of premiums, are erroneous. The legal principles applicable to waiver are fully discussed in Gouldin v. Inter-Ocean Ins. Co., 248 N.C. 161, 102 S.E.2d 846. As to equitable estoppel, see Peek v. Wachovia Bank & Trust Co., 242 N.C. 1, 86 S.E.2d 745.
In Gardner v. North State Mut. Life Ins. Co., 163 N.C. 367, 378, 79 S.E. 806, 810, 48 L.R.A.,N.S., 714, Walker, J., quotes with approval this statement from 29 A. & E. Enc. of Law, p. 1093: "There can be no waiver, unless the person against whom it is claimed had full knowledge of his rights and of facts which will enable him to take effectual action for their enforcement. No one can acquiesce in a wrong while ignorant that it has been committed, and that the effect of his action will be to confirm it." Defendant was under no duty, legal or equitable, to question the truth of the applicant's statements or, absent facts sufficient to put it on inquiry, to conduct an investigation to determine the truth or falsity thereof. Hardin v. Liverpool & London & Globe Ins. Co., 189 N.C. 423, 127 S.E. 353.
The burden of proof was on plaintiff to establish facts sufficient to constitute waiver or estoppel. Gouldin v. Inter-Ocean Ins. Co., supra; Peek v. Wachovia Bank & Trust Co., supra. She failed to do so.
When we come to consider the statute of limitations, the shoe is on the other foot. Here, as indicated below, the burden of proof was on defendant.
It is noted that defendant, having paid or tendered a total of $325.30, an amount equal to the premiums paid by Swartzberg, seeks to avoid the policy ab initio and in its entirety. Although called a further answer and defense, defendant's plea is in legal effect a cross action to rescind the policy.
Plaintiff's plea of the statute of limitations was sufficient. McIntosh, North Carolina Practice and Procedure, § 142, and cases cited. Defendant's cause or right of action to rescind accrued on January 2, 1952, immediately after the issuance of the policy. "In general a cause or right of action accrues, so as to start the running of the statute of limitations, as soon as the right to institute and maintain a suit arises, * * *." 54 C.J.S. Limitations of Actions § 109; 34 Am.Jur., Limitation of Actions § 113; Aydlett v. Major & Loomis Co., 211 N.C. 548, 551, 191 S.E. 31; Peal v. Martin, 207 N.C. 106, 176 S.E. 282.
Obviously, defendant's alleged cause of action to rescind is barred by the three year statute of limitations if considered solely as an action for breach of contract. G.S. § 1-52(1). The view most favorable to defendant is that G.S. § 1-52 (9) applies, under which an action "(f)or relief on the ground of fraud or mistake" must be instituted within three years from the date the cause of action accrues, but in such case "the cause of action shall not be deemed to have accrued until the discovery by the aggrieved party of the facts constituting the fraud or mistake." "In the construction of this section, the words, `relief *277 on the ground of fraud,' are used in the broad sense, to apply to all actions, both legal and equitable, where fraud is an element, and to all forms of fraud, including deception, imposition, duress, and undue influence." McIntosh, North Carolina Practice and Procedure, § 183; Little v. Bank of Wadesboro, 187 N.C. 1, 121 S.E. 185; Muse v. Hathaway, 193 N.C. 227, 136 S.E. 633. Whether considered fraud "in the broad sense," or "mistake," we construe G.S. § 1-52(9) as applicable to an action to rescind an insurance policy on the ground of false material statements in the application therefor.
The burden was on defendant to show that it instituted its action to rescind within the period prescribed by statute. Shearin v. Lloyd, 246 N.C. 363, 367, 98 S.E.2d 508, and cases cited. To repel the bar of the statute of limitations, the burden was on defendant to show that it did not acquire knowledge of the falsity of the statements in Swartzberg's application and was not put on notice thereof until a time within the period of three years next preceding the filing of its cross action to rescind the policy. Hooker v. Worthington, 134 N.C. 283, 46 S.E. 726; Tuttle v. Tuttle, 146 N.C. 484, 59 S.E. 1008, 125 Am. St. Rep. 481; Sanderlin v. Cross, 172 N.C. 234, 90 S.E. 213; Taylor v. Edmunds, 176 N.C. 325, 97 S.E. 42; Latham v. Latham, 184 N.C. 55, 113 S.E. 623; Johnson v. Pilot Life Ins. Co., 217 N.C. 139, 7 S.E.2d 475, 128 A.L.R. 1375; Id., 219 N.C. 202, 13 S.E.2d 241; Vail v. Vail, 233 N.C. 109, 116, 63 S.E.2d 202. The North Carolina rule is in accord with the "almost unanimous concensus of judicial opinion." Annotation: 118 A.L.R. 1002, and supplemental decisions. Defendant failed to establish facts sufficient to repel the bar of the three-year statute of limitations.
To resolve crucial factual issues raised by the pleadings, it was necessary to determine when defendant acquired knowledge or notice of the falsity of the statements in Swartzberg's application. As to this, the stipulations are silent. As indicated, with reference to estoppel and waiver, the burden of proof was on plaintiff to show that defendant had paid claims or accepted premiums after it acquired such knowledge or notice; but to repel the bar of the three-year statute of limitations, the burden of proof was on defendant to show that it did not acquire such knowledge or notice until within a period of three years next preceding the filing of its cross action to rescind the policy.
Thus, the stipulations do not provide the answers to crucial factual issues raised by the pleadings. The question arises: When the stipulations are silent as to such facts, are the respective issues to be decided by the court adversely to the party upon whom rests the burden of proof? This was done in Brinson & Kramer v. Norfolk Southern R. Co., 169 N.C. 425, 86 S.E. 371. However, the question was not discussed; and the Brinson case has not been cited as authority on that point. The better view, in our opinion, is this: When a case is submitted for decision on stipulated facts, and no evidence is offered, the court should not proceed to determine the cause unless all facts essential to a determination of the crucial issues raised by the pleadings are included in the stipulations. Rather, in such case, the court should proceed to trial to determine upon evidence the crucial factual issues not covered by the stipulations. In the instant case, the court erred in failing to follow this procedure.
In City of New Bern v. White, 251 N.C. 65, 110 S.E.2d 446, and cases cited, the cause was remanded because the facts stipulated did not answer the crucial issues raised by the pleadings. While, as stated above, the case was not submitted as a controversy without action, yet when a case is submitted on stipulated facts there is equal reason to require that the stipulations contain "the facts upon which the controversy depends." G.S. § 1-250. "An agreed statement must contain every essential element without any omission, * * *." 83 C.J. S. Stipulations § 10f(9), p. 22.
*278 Accordingly, the judgment is vacated and the cause remanded to the end that there may be a determination, in the light of the principles of law stated herein, of the facts necessary to a determination of the issues relating to (1) waiver and estoppel and (2) the statute of limitations. This course seems particularly appropriate when, as here, it appears that the court's decision was based on a misapprehension as to the applicable principles of law.
Judgment vacated, cause remanded.