
    Augustina Ulman, Respondent, v. Equitable Life Assurance Society of New York and Ira Ulman, Defendants, Impleaded with Max H. Newman, as Receiver of the Property of Ira Ulman, Appellant.
    First Department,
    March 13, 1914.
    Insurance — suit for reformation of policy — constructive fraud resulting from mistake by insurance agent in drafting policy — Statute of Limitations — laches.
    Where a wife represents to an insurance agent that she wishes to procure a policy upon the life of her husband for her sole benefit, and thereafter she receives the policy and pays the premiums from her separate estate, and it was the intention of both the wife and husband that she should have the sole benefit of the policy, she is entitled to a reformation thereof so as to eliminate a clause making the policy payable to her husband in case he survives the endowment period on the ground of constructive fraud resulting from the insurance agent’s disobedience of plaintiff’s directions.
    The fact that plaintiff failed for over ten years to discover the error in the policy is not of itself sufficient to bar her right to relief. The Statute of Limitations would not begin to run until the discovery of the fraud.
    Appeal by the defendant, Max H. Newman, as receiver, etc., from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 20th day of December, 1912, upon the decision of the court after a trial at the New York Special Term.
    The judgment reformed an insurance policy on the life of defendant Ira Ulman, who is the husband of the plaintiff.
    
      
      Charles J. Belfer, for the appellant.
    
      Abraham P. Wilkes, for the respondent.
   Hotchkiss, J.:

The policy is a $5,000 twenty-year endowment, dated March 29, 1901; in case of death it is payable to plaintiff, and in case of Ira’s surviving until 1921 it is payable to him. The judgment appealed from eliminates from the policy the phrases giving Ira an interest therein. The appellant’s receivership dates from June, 1911. The action was begun February 26, 1912. The insurance company answered, denying knowledge of the facts on which the claim of reformation was based, and alleged that it was indifferent in the premises. The substance of the court’s findings was as follows: The parties were married in May, 1892. In March, 1901, Rosenberg, an insurance agent, urged plaintiff to have her husband’s life insured; thereupon plaintiff consented and Ira gave his consent on the understanding that the policy was to be plaintiff’s sole property, and that she was to pay all the premiums. Plaintiff then instructed Rosenberg to obtain a policy of the general type in question. Rosenberg secured from the insurance company an application blank, which he filled out and which Ira signed without reading, and thereupon the policy was issued and handed to Rosenberg, who delivered it to plaintiff, who retained possession of it until possession was surrendered to appellant on his demand. Plaintiff did not examine the policy and was ignorant of its language until such demand. Plaintiff, from her separate estate, paid all the premiums, aggregating $2,816.55. It was at no time plaintiff’s intention to give to Ira, nor was it his intention to acquire any rights or privileges with respect to the policy, and it was the design and purpose of both that plaintiff should have the sole benefit of its surrender value and endowment features as well as the benefit flowing to her as beneficiary in case of death.

I think the findings of fact are supported by the evidence. Having regard for all the circumstances of the parties, my conclusion is that the policy was taken out wholly for the wife’s benefit, with intent to give her the proceeds whether her husband lived or died.

It is true there is no finding of fraud in fact or of mutual mistake on the part of plaintiff and the insurance company. Nor do I think this was necessary. The court found that Rosenberg was the agent of the insurance company and not of the plaintiff. This finding, although vigorously assailed, I think was justified. Rosenberg was evidently a solicitor of insurance, and as such was under a statutory duty to procure a certificate of authority. (Laws of 1889, chap. 282, § 2.) He was the medium and the sole medium through which the company’s proposal to insure and the plaintiff’s “ application ” for insurance ripened into the contract evidenced by the policy. But the point is not of determinative importance. The case may be made to rest on the doctrine of constructive fraud, resulting from Rosenberg’s disobedience of plaintiff’s directions to apply for a policy the benefits of which would run wholly to plaintiff, who paid the consideration therefor. To entitle plaintiff to relief it makes little difference whose agent Rosenberg was. If, as the court found, he was defendant’s agent, it was constructive fraud for the company to draft the contract in form different from plaintiff’s instructions. (Hay v. Star Fire Ins. Co., 77 N. Y. 235; Phœnix Fire Ins. Co. v. Gurnee, 1 Paige, 278; Weed v. Schenectady Ins. Co., 7 Lans. 452; Goldsmith v. Union Mutual Life Ins. Co., 18 Abb. N. C. 325.) If Rosenberg was plaintiff’s agent the result of his disobedience worked a similar fraud, because, by error and without her consent, plaintiff’s property was diverted to a stranger who paid nothing and has no rights in the premises. If the case were one presenting equities in either the insurance company or plaintiff’s husband the situation would be different, but here no rights are urged in opposition to plaintiff, save such as are set up in her husband’s behalf, and he has none. For him, under such circumstances, to be decreed to be the beneficiary of what was agreed should be plaintiff’s and for which she alone has paid, but the legal title to which was, by the error of another, put in his name, would be a fraud indeed. In Gillespie v. Moon (2 Johns. Ch. 585, 599) one of the earliest cases in this State on the subject of reformation, Chancellor Kent on the authority of English cases said: “Defects in mortgages, contrary to the intention of the parties, have also been made good against subsequent judgment creditors, who came in under the party, who was bound in conscience to correct the mistake.” (See, also, Gouverneur v. Titus, 6 Paige, 347.) Actual fraud is not necessary, and where, as here, there has been a mistake by one, and where the other party to the contract, being himself indifferent as to who should be the beneficiary of his obligation, has so drawn his promise as to cause it to run in favor of a stranger whom the other party never intended to be benefited and who on no conceivable ground has any interest in the promise and who is “boundin conscience to correct the mistake,” I think his refusal or failure so to do presents a case of constructive fraud clearly within the principles on which jurisdiction to reform is based. But from another point of view, the case is clearly brought within the well-established rules for the reformation of written instruments. It has been found as a fact that Ira, plaintiff’s husband, intended that the insurance should be wholly for plaintiff’s benefit. The application was signed by Ira. In thus signing an application in the form supplied by Rosenberg and in securing a policy different from that agreed, the policy, as between Ira and plaintiff, was the result of mutual mistake, or mistake on plaintiff’s part and constructive fraud on the part of Ira. In principle, the case is similar to Haack v. Weicken (118 N. Y. 67). Unless the action is defeated by the Statute of Limitations, the fact that plaintiff failed for over ten years to discover the error in the provisions of the policy, is not of itself sufficient to bar her right to relief. (Treadwell v. Clark, 190 N. Y. 51; First Nat. Bank of Chittenango v. Morgan, 73 id. 593; Andrews v. Gillespie, 47 id. 487.) In Welles v. Yates (44 N. Y. 525) reformation of a deed was decreed after a delay of nineteen years. In Gillespie v. Moon (2 Johns. Ch. 585) the mistake was not discovered for fourteen years. In Hay v. Star Fire Ins. Co. (supra); Bidwell v. Astor Mutual Ins. Co. (16 N. Y. 263), and Anderson v. Metropolitan Life Ins. Co. (18 Wkly. Dig. 192) there was a delay of eight years; and in Goldsmith v. Union Mutual Life Ins. Co. (supra) the delay was ten years. In Avery v. Equitable Life Assurance Soc. (117 N. Y. 451) a delay of fifteen years was held to deprive plaintiff of the right to equitable relief, but the circumstances were such as to clearly distinguish the case from the present. The principles governing laches as grounds for "denying equitable relief in cases like the present have been so recently examined by the Court of Appeals that no further discussion of this point is necessary. (See Groesbeck v. Morgan, 206 N. Y. 385, 389; Pollitz v. Wabash R. R. Co., 207 id. 113, 130.)

The respondent concedes that if the Statute of Limitations applies in favor of her husband, the defendant has succeeded to his right to plead it as a defense. Assuming the law to be such, I do not think the statute has run. The policy has not yet matured and nothing has become payable under it, nor has the husband ever asserted any right to or interest in the policy adverse to plaintiff. Under such circumstances the statute never began to run, or at least did not begin until this defendant set up a claim to the policy. (De Forest v. Walters, 153 N. Y. 229, 240; Greenly v. Shelmidine, 83 App. Div. 559, 564.) Furthermore, inasmuch as the ground for the relief invoked rests on fraud the statute would not begin to run until the fraud was discovered. (Gallup v. Bernd, 17 N. Y. St. Repr. 194; 49 Hun, 605; 56 id. 643; affd., 132 N. Y. 370.)

The judgment should be affirmed, with costs.

Ingraham, P. J., McLaughlin, Laughlin and Dowling, JJ., concurred.

Judgment affirmed, with costs.  