Brief for the Respondents in Opposition — New York Life Insurance Co. v. Calhoun

No. 482

nenns ;

VUATLOS £1

IN THE

SUPREME COURT OF THE UNITED STATES,

OCTOBER TERM, 1940,

NEW YORK LIFE INSURANCE 4

COMPANY, a New York Corporation,

Petitioner,

VS. >

BEULAH C. CALHOUN,

Respondent. |

BRIEF OF RESPONDENT OPPOSING PETITION

FOR A WRIT OF CERTIORARI.

JOHN W. CALHOUN and

WILLIAM R. GENTRY,

Counsel for Respondent.

Sr. Louis Law Printing Co., 415 North Highth Street. CE ntral 4477.

INDEX.

Page

NN 6 eh ins ret ees ess Lies han doce ao by wen 1

Brief opposing granting of writ...................6. 3

NL A NE Ne cow oid oie ksbkaee snes 3

PN oe Gal ee ee 3

a ae cae H)

(b) No dispute of law as to which lawyers might

entertain reasonable difference of opinion on

the eve of trial of either the equity case or the

DN I oo A er he o's ELAS Make obs 6

Cases Cited.

Block v. Fidelity & Guaranty Co., 316 Mo. 278, 305, 290

| SE tne er orien One 9,13

Connecticut Life Ins. Co. v. Union Tr. Co., 112 U. S.

BE Sed das ces hele ec knees Chass as biwa rene Meanreua 7

Curtis v. Indemnity Co. of America, 327 Mo. 350, 37

ee NE ND hh Gi o's exe d v5.0 BAG 4 Fu Rae manna eS 9,13

Day v. Equitable Life Assur. Society of U. S., 83 Fed.

aL ch cau da noth 5 Meee Ne bk cane 7

DeValpine v. New York Life Insurance Co., 105 S. W.

eh ke ss hes reee ed seve ens 8

Krie Railroad Co. v. Tompkins, 304 U. S. 64.......... 6

Exchange Bank v. Turner, 321 Mo. 1104, 14 S. W. (2d)

NE Onda rites te wine b ase aeee coc 13

Fay v. Ins. Co., 268 Mo. 373, 390, 187 S. W. 861....... 9

Grand Lodge v. Massachusetts Bond & Ins. Co., 324

Se Ws CY TUN 5 bs uke cd aae dacs ateces 7

Keller v. Home Life Ins. Co., 198 Mo. 400, 95 S. W. 903 13

Kirk v. Metropolitan Life Ins. Co., 336 Mo. 768, 81

I i esa gescn yi edacansiacs 6

I BAY eS

Ok NMR EN aE a

il

Mathews v. Modern Woodmen, 236 Mo. 326, 1. ¢. 342,

139 S. W. 151, 1. ©. 155... 2... scene eee ere ereccoers 7

Northwestern Life Ins. Co. v. Banning, 63 Fed. (2d)

Se ua dv uence bon pasar near vs 6 Ra teRyes® ees 7

Renshaw v. Mo. State Fire and Marine Ins. Co., 103

Mo, 505, 15 S. W. 945....-- eee eeeeeeeeeecrrrseeee 7

State ex rel. Gott v. Fidelity & Deposit Co., 317 Mo.

1078, 1095, 298 S. W. 88.....---sseeecrtseeeeseste 9

State ex rel. Ins. Co. v. Trimble, 322 Mo. 1236, 18 S. W.

$A) BR, WS co sicher si menenieer tees =. Soee2*> 9

State ex rel. v. Allen, 310 Mo. 378, 276 S. W. 877...... 7

State ex rel. v. Purl, 228 Mo. 1, 1. c. 22-24,128S.W.96 7

Williams v. Ins. Co., 189 Mo. 70, 87 S. W. 499.....-.- 13

ats NES eae ae ee eee

ROSE AAR LRS AGS Sd ICR he AREAL ER hats ape, a

Stl DAT a OST N AMOS TO LEAR ACTIE ELD SME

IN THE

SUPREME COURT OF THE UNITED STATES,

OCTOBER TERM, 1940.

NEW YORK LIFE INSURANCE 7

COMPANY, a New York Corporation,

Petitioner,

vs. ;

BEULAH C. CALHOUN,

Respondent. J

BRIEF OF RESPONDENT OPPOSING PETITION

FOR A WRIT OF CERTIORARI.

STATEMENT.

(a) The history of the litigation as to suits brought and

trials, judgments, appeals and affirmances of judgments and

the respective dates on which those things occurred is cor-

rectly set forth in petitioner’s ‘‘Summary Statement of the

Matter Involved.’’

yt ——

ageet

_ USES SSS

— ose esieteMn eR RE : ‘ :

RIT BNET RIE pe TEE ST Ss

g Se

¥ . . pS IASON ERLE OE ILE TE eH ;

reece mary Se ee ee ee aed

ae

a Rds

However, the question submitted to, and decided by, the

Court of Appeals in the law case was not whether there

was vexatious refusal to pay ‘‘as a matter of law’’ (as

stated in paragraph 2 on page 3 of petitioner’s ‘‘Summary

Statement of the Matter Involved’’), but it was whether

there was sufficient evidence tending to show such vexa-

tious refusal to entitle the plaintiff in the law case to have

that issue submitted to the jury under proper instructions,

and whether the case had been fairly tried.

(b) 1. The said decision of the Court of Appeals on a

question of local law is in no wise in conflict with the ap-

plicable local decisions of the Supreme Court of Missouri,

but is in perfect harmony therewith.

9. The facts shown were such as made it the duty of the

trial court in the law case to submit to the jury, by proper

instructions, the question of vexatious refusal, not to give

a peremptory instruction to find for or against either party

on that issue.

3. The Court of Appeals properly held in the law case

that, under the Missouri decisions, the issue was one to be

decided by a jury, and not one to be ruled by the Court as

a matter of law. There is no conflict between that ruling

by the Court of Appeals and any controlling decision of the

Supreme Court of Missouri.

BRIEF OPPOSING GRANTING OF WRIT.

1.

The opinions of the Court of Appeals are properly iden-

tified and cited by petitioner.

II.

The right of this Court to grant a writ of certiorari in

any case pending in any Court of Appeals of the United

States is clear under Section 240 (a) of the Judicial Code;

but it is purely discretionary, not obligatory; the wording

is ‘‘may grant’’—not ‘‘must grant.’’

Til.

STATEMENT OF THE CASE.

We agree that no further statement than that already

given by petitioner, as supplemented by respondent’s state-

ment, is necessary.

IV.

The holding of the Court of Appeals that plaintiff had

made a submissible case on the question of ‘‘vexatious

delay’’ was correct and in accordance with the decisions of

the Supreme Court of Missouri on that subject.

V.

ARGUMENT.

The sole question in the law case was as stated by peti-

tioner under this point, and Missouri law is binding on the

courts of the United States, the Court of Appeals was

bound by it, and this Court is bound by it. The applicable

on spies peste eects Tan ietasyaen ee pune: JES LILES

PREP LNE RG ILEL SR MALY ILO EGE LILLE: AE BRE RGR RIES IE RRR PU TEER ICI

ae

Missouri statute is correctly copied on page 7 of petitioner’s

petition and brief.

The holdings of the Missouri Supreme Court on the ques-

tion as to whether there is a bona fide conflict of fact or a

question of law about which lawyers might well differ up to

the time of trial all refer to the trial before the jury in a

law case, not to a trial in an equity case preliminary to a

law case, as in this litigation; for the jury trial is the first

one wherein that question could arise. It could not have

arisen in the equity case, for that had for its sole purpose

the cancellation of the insurance policy. That case re-

sulted in the trial court in defeat of the insurance company,

and the trial judge who tried the equity case found as a

fact that insured never had had any hemorrhage before he

made application for the insurance policy in question; and

all the evidence, including that offered by the insurance

company itself, so showed. While a physician who had

treated insured had testified in a deposition before the trial

of the equity case that the insured had had a hemorrhage

some months before the date of the application for the

policy, he testified at the trial of the equity case that he

had been mistaken in his testimony in the deposition con-

cerning the date of the first hemorrhage, which insured

had, and he testified at the trial of the equity case that he

had refreshed his memory since he had given his deposi-

tion by consulting a record which he had not examined be-

fore his deposition was taken, and he had found that the

date given by him in his deposition as the date of the first

hemorrhage was an error, and that the first hemorrhage

occurred at a date approximately three months after the

application for insurance was made (Rec. Hq. 63-68). All

the evidence on the subject showed that no hemorrhage had

occurred before the policy was issued or the application

was made. The medical testimony offered by the insur-

ance company itself showed that the condition which was

LER LAL niet J

zt

ne

solely responsible for the death of insured was known as

aneurysmal varices, one of the parts of the blood vessel

involved in such condition in the lower third of insured’s

esophagus having broken open and caused a fatal hemor-

rhage on December 1, 1935, approximately one year and ten

months after insured applied for the policy. All of the

medical testimony showed that the insured could not pos-

sibly have known of the existence of the aneurysmal

varices of the esophagus at the time when he made appli-

cation for the policy.

(a) No conflict of fact.

In view of the foregoing, there was no conflict of fact at

the trial of the equity case. Every particle of the evidence

was against the insurance company, including that offered

by it as well as that offered by the widow.

The foregoing answers the contention about ‘‘conflict of

fact,’’ even at the trial of the equity case. There was no

conflict even then.

All of said facts were known to the insurance company

from the date of the trial of the equity case (September 24,

1936, Ree. Eq. p. 28), approximately ten months before the

District Court decided against the insurance company in

the equity case, and over a year before the trial of the law

case before a jury. All that time petitioner knew that it

had no evidence to sustain its allegations of fraudulent

misrepresentations by insured in his application for the

policy. Whatever it may have believed before the trial

of the equity suit in September, 1936, it learned then that

it had no proof of a single fact to sustain its allegations of

fraud. We repeat, only at the trial of the law case could

the question of vexatious refusal to pay be involved; hence

the ‘time of trial’’ referred to relates to the jury trial, and

for over a year before that trial the petitioner knew there

could be no conflict in the facts at such trial. Therefore,

' ' RSS RNR AR TH BREEN LAE ES RD

OLE LOLOL I

bs

+

scree tact

SNE EI PS 0d FIT NR A BO aa Ein RA PV AE ENE SAPP EN EO RL ILS A LEA ITE

petitioner cannot claim that it had reasonable ground to

believe when it went into the jury trial that there would be

a conflict of fact at such trial.

No Dispute of Law as to Which Lawyers Might Entertain

Reasonable Difference of Opinion on the Eve

of Trial of Either the Equity Case

or the Jury Case.

(b) The case of Kirk v. Metropolian Life Ins. Co., 336

Mo. 768, 81 S. W. (2) 333, so strongly urged by petitioner as

an authority in its favor from beginning to end in this liti-

gation, was never an authority in its favor in this case, for

the reason that the Kirk case involved right of recovery

on a policy of insurance which contained what is known as

the ‘‘Sound Health Provision,’’ whereby it was provided

that the policy should not be effective until delivered while

the insured was alive ‘‘and in sound bodily health.’’ No

less than eight times in its opinion the Supreme Court of

Missouri mentioned that clause. It held that it was neces-

sary, under that provision, for insured ‘‘to be, not merely

believe herself to be, in sound bodily health,’’ and since it

was learned later that she had incipient tuberculosis when

the policy was delivered, and died of tuberculosis, there

could be no recovery under the policy.

The policy here involved had no such provision any-

where in it. (The policy is set forth in full in the record

in the equity case, pages 29 to 33.) That one fact has

always distinguished this case from the Kirk case.

The equity case was tried in the District Court and de-

cided by it before this Court decided the case of Erie Rail-

road Co. v. Tompkins, 304 U. S. 64.

If the trial court, in deciding the equity case, failed to

see the distinction between the case at bar and the Kirk

case, being misled by counsel for petitioner’s continual

arguing about that case, that made no difference, for the

i

S

i

}

&

g

2

E

i

¥

a

4

é

|

pets

trial court reached the right conclusion, namely, the policy

should not be canceled. The Court of Appeals reached the

same conclusion, for the reason that through carelessness or

ignorance petitioner wrote its question in the application

for the policy so that an ambiguity existed, and that am-

biguity was resolved against petitioner and in favor of in-

sured and his widow, and it being so resolved, it was held

there was no misrepresentation made, either fraudulently

or innocently, by insured when he answered that question.

That holding was in accord with all Missouri decisions

on the subject, as well as decisions of the United States

courts and courts of many other jurisdictions.

VAR ENE MOS TRLEREEIY

Mathews v. Modern Woodmen, 236 Mo. 326, 1. ¢. 342,

i

139 S. W. 151, 1. ¢. 155;

Renshaw v. Mo. State Fire and Marine Ins. Co., 103 :

Mo. 505, 15 S. W. 945;

Connecticut Life Ins. Co. v. Union Tr. Co., 112 U. S.

250; |

Day v. Equitable Life Assur. Society of U. S., 83

Fed. (2d) 147;

Northwestern Life Ins. Co. v. Banning, 63 Fed. (2d)

736.

It has always been the law of Missouri that, absent the

“sound health provision’? (not involved here), misrepre-

sentations will not avoid a policy unless the applicant knew

they were false or was charged with such knowledze.

State ex rel. v. Allen, 310 Mo. 378, 276 S. W. 877;

Grand Lodge v. Massachusetts Bond & Ins. Co., 324

Mo. 938, 25 S. W. (2d) 783;

State ex rel. v. Purl, 228 Mo. 1, 1. o. 22-24, 128

S. W. 96.

Under the law, as correctly declared by the Court of Ap-

peals, inasmuch as there was an ambiguity in the wording

of the question in the application concerning disease of the

blood vessels, in that the insured was asked, ‘“‘Have you

RIE IEG ARIS TI PITRE REY CF IEE YS GORE, SETS VE EDM

ever suffered from any disease of the blood vessels?’’ and

since all the way through the case it had been alleged

that he had suffered from such disease of the blood ves-

sels, and inasmuch as the medical evidence offered by the

insurance company itself showed he had not experienced

any suffering on account of such disease of the blood

vessels, even if Dr. Seabold had, at the trial of the equity

case, testified, as he had in his deposition, that the first

hemorrhage occurred before the application for the policy

was made, that would not have furnished any testimony

that was beneficial to the insurance company in support of

its allegation that the insured had suffered from a disease

of the blood vessels.

But not only did Dr. Seabold testify at the trial that he

had been mistaken in his deposition in fixing the date of

the first hemorrhage as November, 1933, which was before

the application was made for insurance in January, 1934,

and that upon reflection and refreshing his memory he

found the first hemorrhage occurred three months after the

date of the applivation, but there was testimony of three

witnesses from the household of the insured which made it

“ perfectly clear that there had been no hemorrhage before

the date of the filing of the application.

As to the Kirk ease, let us call the Court’s attention to

the fact that the case of DeValpine v. New York Life Insur-

ance Co., 105 8S. W. (2d) 977, was decided by the St. Louis

Court of Appeals on June 1, 1937. In that decision the St.

Louis Court of Appeals discussed fully the holding in the

Kirk case and demonstrated that it was based entirely upon

the sound health provision in the policy therein involved.

The same counsel who represent the petitioner and have

represented it throughout this litigation represented it also

in the DeValpine case. If the decision of the St. Louis

Court of Appeals was contrary to the decision in the Kirk

ease by which it was bound then, this same insurance com-

pany could have applied to the Supreme Court of Missouri

eh REE AHI BNO IEA EDEN LL NED SSL IEE DEED RAGES 2 |

— . ‘ ;

a A

*

ies,

and obtained a writ of certiorari to reverse the judgment

of the St. Louis Court of Appeals because of conflict be-

tween its holding and that of the Supreme Court in the 3

Kirk case. But no such thing was done. It does not look z

like good faith on the part of the insurance company there- k

after to insist that the decision in the Kirk ease did not t

mean what the St. Louis Court of Appeals said it meant.

So there was no ‘‘conflict of law.’’

The Missouri law as declared by the Supreme Court of &

that state permits the jury in such a case as that here in- i

volved to arrive at the conclusion that there was vexatious i

refusal to pay by a survey of all the facts and circumstances

of the case.

Curtis v. Indemnity Co. of America, 327 Mo. 350, 37

S. W. (2d) 616;

State ex rel. Gott v. Fidelity & Deposit Co., 317 Mo.

1078, 1095, 298 S. W. 83;

Block v. Fidelity & Guaranty Co., 316 Mo. 278, 305,

290 S. W. 429;

State ex rel. Ins. Co. v. Trimble, 322 Mo. 1236, 18

S. W. (2d) 21, 22;

Fay v. Ins. Co., 268 Mo. 373, 390, 187 S. W. 861.

So surveying the case, the jury could find the following

facts tending clearly to show that the insurance company

was not acting in good faith in failing to make prompt

payment of the loss under its policy, but was deliberately

obstructing the plaintiff in her attempts to collect what was

justly due her:

1. The insurance company did not even acknowledge re-

ceipt of proofs of death sent to it in behalf of the widow.

2. It did not make a fair investigation of the facts before

filing the equity suit, but rushed into court and instituted

that suit when it still had twenty days for further investi-

gation before the policy would become incontestible. It

- p Wiper tear en .

TER NIE Od EE TTT STANT OTE SN Se AY SIR

SLEYTR RAIA Be ittaan Le Ad ra Soe «

FPN AAR

en, | eee

failed to interview the widow or any witness whom she

might name from whom it could learn the facts which

might verify or contradict some information which it

claimed to have tending to show that the insured suffered

a hemorrhage before he applied for the policy. It could

easily have learned then that the physician who so in-

formed the insurance company was mistaken as to the date

of the first hemorrhage.

3. In the original petition, filed in the District Court by

the insurance company in the equity suit (Ree. Eq. pp.

121-124), it charged that insured fraudulently concealed

certain diseases which it alleged contributed to cause his

death, and all the way through that petition and the

amended petition it alleged that the existence of those dis-

eases was known to Mr. Calhoun and fraudulently con-

cealed from the insurance company for the purpose of de-

frauding the insurance company. The diseases listed in-

cluded diseases of the stomach, intestines and kidneys,

although the investigation file, which was right before

counsel for the insurance company when he drew that peti-

tion, showed that the post mortem had revealed no such

diseases. Nevertheless, it was alleged that said diseases

contributed to cause Calhoun’s death.

4. After the first petition was filed, and before the

amended petition was prepared and filed, the deposition of

the insured’s attending physician was taken by the insur-

ance company. He testified very positively that insured

had none of the diseases mentioned in the original petition

at the time of his death, and that such slight ailments as

he had previously had did not in any wise contribute to

cause his death. But in its amended petition the insurance

company again set forth the entire list of diseases on which

it had first relied, added one or two ailments thereto and

alleged that all those things contributed to cause the death

ee ED

of the insured. Nowhere in either the original or the

amended petition was it alleged before trial of the equity

case that the insured had aneurysmal varices in his esopha-

gus and fraudulently concealed the same from the peti-

tioner, although the insurance company had positive knowl-

edge that its allegations concerning all diseases except the

aneurysmal varices (if that could be called a disease) were

entirely untrue.

Not until the case had been tried in the District Court

| did the defendant ask the Court’s leave to amend its

amended petition by setting up the existence of the anen-

rysmal varices as something which the insured fraudulently

concealed and which caused his death.

PEPSI ORE PEPE AELONG LEE AN RRNA BPE S -—

REE ER Tye

5. At the trial of the equity case in September, 1936 peti-

tioner learned that it had no proof whatever of any fraud

on the part of the insured in concealing any condition or

disease which in any wise contributed to cause his death;

yet it put the widow to the expense of having a brief

printed and sending a lawyer to St. Paul to argue the case

on appeal to the United States Cireuit Court of Appeals,

which appeal it had taken without any reasonable ground

to believe that it could reverse the decision of the lower

court, having been shown in that court that it had no evi-

dence whatever to justify cancellation of the policy.

6. On that appeal the brief of counsel for the widow

showed so clearly that the policy should not be canceled

that petitioner’s counsel filed no reply brief, yet it went on

with the appeal and argued the case vigorously. By such

appeal the widow was obstructed in her attempt to col-

lect the money due her from July 1, 1937, when the Dis-

trict Court decided the equity suit to July 13, 1938, when its

judgment was affirmed by the Court of Appeals. The opin-

ion of that Court was handed down on July 13, 1938, and

held that under proper construction of the application for

insurance (which was ambiguous as above stated) there

was no misrepresentation, either intentional or uninten-

tional. The opinion of that Court was so unanswerable

that the petitioner filed no motion for a rehearing, never-

theless it still vexatiously refused to pay from July 13th

until October 6th, when it made an oral offer to settle the

case by payment of the principal sum and interest at 6 per

cent without damages or attorneys’ fees.

7. The insurance company’s excuse at the trial of the

jury case for not paying, or offering to pay, the loss be-

tween July 13, 1938, and October 6, 1938, was that it was in-

vestigating a rumor that Etta Carey, a colored maid in the

Calhoun home, had told somebody that she had testified

falsely at the trial of the equity case and had been paid by

insured’s widow for so doing (Rec. Law pp. 17-181). The

rumor proved to be groundless. This was no excuse for

further delay, because (a) even if the witness had testified

falsely at said trial proof of that fact would not have

helped the insurance company, since there was no false

representation, either intentionally or innocently made, in

view of the ambiguity in the question in the application;

and (b) in the summer of 1938 it was entirely too late for

the insurer to offer any evidence to defeat the claim, for

the policy had long since become incontestible. See policy

(Rec. Eq. p. 39, incontestible after two years. It was is-

sued January 30, 1934, page 29).

8. Thereafter nothing was done by the insurance com-

pany until October 19, 1938, when it filed an answer ad-

mitting liability for the full amount of the principal sum

of the policy and interest to date at 6 per cent. The case

stood in that condition until the trial, on November 15,

1938. So it appears conclusively that when the defendant

started into the trial before a jury it not only had no de-

BPS NERVE R ELM SLR Rates OL Nana ea PERERA MOAT Meh, HALE RL DEBIT ORIENT Ve clit TINT Wid BO ELE Pe A

peas AAAS aye Shae a,

a, ae

fense of any kind to the policy, but admitted in its answer

that it was liable for the full amount thereof.

1

;

¢

Eat omnes Se

A general survey of all the foregoing facts certainly fur-

nished a basis for the jury’s finding of vexatious refusal to

pay. The Missouri Supreme Court’s decisions fully justi-

fied the opinion of the Court of Appeals in this ease, hold-

ing that such question was one for the jury to determine.

Tn the case of Exchange Bank v. Turner, 321 Mo. 1104, 14

S. W. (2d) 425, 1. ¢. 433, the Supreme Court of Missouri

said:

‘Complaint is made also on the ground that the facts

did not warrant the assessment for vexatious delay

under Section 6337, R. S. Mo. 1919. It is true, as ap-

pellants says, that insurance companies, acting in good

faith, may contest either issues of fact or law without

subjecting themselves to the penalty of the statute; and

there are some issues of law in this case about which

lawyers might reasonably differ. Aufrichtig v. Colum-

bian Nat. Life Ins. Co., 298 Mo. 1, 15, 249 S. W. 912;

State ex rel. Gott v. Fid. Dep. Co., 317 Mo. 1078, 1095,

298 S. W. 83,91. But the mere presence of a law ques-

tion in the record will not of itself exculpate the de-

fendant from a charge of willful obstruction if there

is evidence that its attitude was vexatious and recal-

citrant. Non-Royalty Shoe Co. v. Phoenix Assur. Co.,

277 Mo. 399, 423, 210 S. W. 37, 43; Fay v. Aetna Life

Ins. Co., 268 Mo. 373, 388, 187 8. W. 861, 865; Young v.

Penn. Fire Ins. Co., 269 Mo. 1, 21, 187 S. W. 856, 861.’’

See, also:

Curtis v. Indemnity Co. of America, 37 8. W. (2d)

616, 327 Mo. 350;

Block v. U.S. F. & G. Co., 290 S. W. 429, 316 Mo. 478;

Keller v. Home Life Ins. Co., 198 Mo. 400, 95 S. W.

902;

Williams v. Ins. Co., 189 Mo. 70, 87 S. W. 499.

a PREMISE Sa EN PSS RT REARRANGE NEL FLOR SE MS RES OB gat

a, |

It follows that the opinion of the Court of Appeals, on

account of which the writ is sought by petitioner herein,

is not in conflict with the rule of law established by the

highest court of Missouri, and, therefore, the writ should

be denied.

Respectfully submitted,

JOHN W. CALHOUN and

WILLIAM R. GENTRY,

Attorneys for Respondent.