UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT
August 14, 1940
SECURITY MUT. LIFE INS. CO.
On Petition for Rehearing.
The questions involved in this case have called for more than the usual amount of study and thought. On petition for rehearing, at the suggestion of the court, a second oral argument was had. This argument, as well as the briefs submitted by able counsel on both sides, has been given our careful consideration.
We have reached the conclusion that the only question which requires further discussion is that with reference to the admissibility of the testimony of Dr. Rubens. In addition to what we have said in the opinion concerning this testimony, it is pertinent ot point out that there was present at the home where, and at the time, the examination in question was made, a number of the relatives of Frank Obartuch, including his wife (beneficiary named in the policies). It is also material to note that the doctor testified in detail, without objection, as to a decription of the person examined. He also testified, without objection, that a photograph identified as that of Frank Obartuch was not that of the person examined by him.
He testified that the application was left with the person representing himself to be Frank Obartuch, and that he next saw the application on the following day at the office of the defendant company. For some reason not apparent, it appears that counsel for neither side was interested in ascertaining why the application was left with the person examined, or by whom it was presented to the doctor on the following day. The record is silent in this respect.
It is also pertinent to point out that neither side charges the doctor with fraud. In fact, plaintiff emphasizes the argument that no such charge is directed at the doctor. Under such circumstances, it must be assumed, we think, that the doctor acted in good faith.
Plaintiff, in attempting to escape the exception to the parol evidence rule, argues that no force or coercion was used which caused the doctor to leave the application with the man examined, or to sign the certificate on the following day. It is said that these acts on the part of the doctor were free and voluntary, and, therefore, no fraud was perpetrated upon him. With this argument we do not agree. Neither force nor coercion is essential in order to commitfraud. In fact, it is rarely committed in such a manner. It is usually the result of some character of deception or misrepresentation. Nor does the fact that his acts were free and voluntary, dispel fraud. They are consistent with it. While the record is silent as to what representations, if any, were made to the doctor before he signed the certificate, or by whom, we think it is a reasonable inference - in fact, irresistible - that someone interested in procuring the insurance delivered the applications to the defendant's office. It would seem almost as certain that the doctor certified to the signature of Frank Obartuch on account of the representation by some person, implied, if not expressed, that such signature was that of the same person examined by him the day before. Assuming that he was not a party to the conspiracy, then it must be concluded that he made the certificate as the result of a deception and misrepresentation practiced upon him. That this was a fraud, we think there can be no doubt, and this, irrespective of whether the doctor was careless or negligent in certifying to the signature. A victim of fraud could ordinarily escape its consequences by the exercise of a proper degree of care.
Even if the doctor were a party to the conspiracy, it would not help the plaintiff's side of the argument, as in that case he would be acting beyond the scope of his authority, and his principal would not be bound by his acts. Mutual Life Insurance Co. v. Hilton-Green, 241 U.S. 613.
Plaintiff places great stress upon the cases of New York Life Insurance Co. v. Stewart, 69 F.2d 957, and Metropolitan Life Insurance Co. v. Alterovitz, 214 Ind. 186. In fact, these cases are relied upon almost exclusively as authority for plaintiff's contention that the doctor's testimony is not an exception to the parol evidence rule. We think, however, they are clearly distinguishable. True, in both cases it was held that the agent of the insurance company could not give oral testimony on behalf of the plaintiff that the answers written in the application were, in reality, the answers of the agent rather than those of the applicant. It is argued by plaintiff that if an agent cannot testify on behalf of the plaintiff, he is likewise precluded from testifying on behalf of the defendant. This argument, however, overlooks the fact that the testimony in the cited cases was held inadmissible upon the grounds of estoppel. In each case the policy was delivered to the insured and remained in his possession until his death. In the Stewart case, it is said on page 958: " * * * The insured could not hold the policy delivered to him without becoming chargeable with knowledge of its contents, including the application, which was attached to the policy and expressly made a part of it. By accepting and retaining possession of the policy without objection, the insured adopted as his own the answers to questions contained in the attached application, whether those answers were or were not made, as they were stated to have been, by the insured prior to his signing that application. * * * "
In the Alterovitz case. the court, on page 203, said: "In the instant case the insured Alterovitz held the policy and application for more than eight months before he died; he was chargeable with their contents and must be held to have adopted as his own the answers contained in the application attached to the policy."
It is not difficult to see why plaintiffs' insured in those cases, who had knowledge of the false answers at the time they were written in the application by the agent, or could have acquired such knowledge by reading the policies after they were delivered, should subsequently be estopped from disputing such answers. It is another matter entirely, however, to apply this doctrine to the defendant in the instant case. Surely the doctrine of estoppel cannot preclude the defendant from asserting a fact of which it had no previous knowledge unless such knowledge can be imputed as a matter of law. Assuming that the doctor acted in good faith, as agreed, he had no actual knowledge of the fraud. Without such knowledge on the part of the agent, there was nothing to impute to the principal. Even if the doctor had knowledge of the fraud, it was not imputable to the insurer. In Mutual Life Insurance Co. v. Hilton-Green, 241 U.S. 613, the court considered a situation similar to the instant one. After recognizing the general rule which imputes an agent's knowledge to the principal, the court recognized an exception which, we think, must be applied here. On page 622, the court said: " * * * But this general rule does not apply when the third party knows there is no foundation for the ordinary presumption - when he is acquainted with circumstances plainly indicating that the agent will not advise his principal. * * * "
It must be remembered in this connection that the policies in suit, from the time of their issuance, were in the possession of those now seeking to recover. The plaintiff (beneficiary) was actually present at the time of the examination when the substitution was made. In this connection, it is argued by the plaintiff that the defendant is seeking to take advantage of its own wrong. We do not agree with this contention. We think it is the plaintiff who is seeking an advantage of the fraud and if the insurer is precluded from showing the circumstances by which the policies were procured, the plaintiff will succeed. The fact that the doctor's testimony is inconsistent with the certificate made in connection with the examination is immaterial. Such inconsistency goes to the weight or credibility of his testimony rather than to its admissibility. It thus appears to us that his certification was obtained by fraudulent menas, and that under the authorities cited in the opinion, the doctor was a competent witness.
It is also pertinent to point out that the testimony on behalf of the defendant disclosed that the description of Frank Obartuch varied greatly from thee description of the man examined as shown by the doctor's report of examination. Also, that the doctor testified, without objection, that a photograph shown to have been that of Frank Obartuch was not that of the person examined. There were many circumstances which corroborated the doctor in this respect. True, much of such testimony was disputed, but the weight and credit to be given it was a matter for the District Court.
A re-study of the record confirms our conclusion that the evidence supports the findings as made by the District Court, and that the findings support the judgment. The petition for rehearing is denied. It follows that the judgment was properly affirmed.
TREANOR, Circuit Judge (dissenting).
I believe that the petition for rehearing should be granted and judgment of the District Court reversed.
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