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No. 12541
IN THE SUPREME COURT OF THE STATE OF MONTANA
19 74

EDNA M . LENTZ , ADMINISTRATRIX
OF THE ESTATE OF KARL 0. LENTZ, Deceased,
and EDNA M. LENTZ ,

Plaintiffs and Respondents,
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
Defendant and Appellant.
Appeal from: District Court of the Sixteenth Judicial District, Honorable Alfred B. Coate, Judge presiding. Counsel of Record : For Appellant : Gene Hunt ley argued, Baker, Montana For Respondent: Denzil R. Young argued, Baker, Montana
Submitted: February 25, 1974 Decided: APR -3 19E Filed : APR -3 19%:
Mr. Chief Justice James T. Harrison delivered the Opinion of the Court. This is an action by plaintiff, Edna M. Lentz, wife and administratrix of the estate of Karl 0.Lentz, seeking recovery on a credit life insurance policy. The district court of Fallon County, sitting without a jury, entered findings of fact, con- clusions of law and judgment in favor of plaintiff. From this judgment defendant, the Prudential Insurance Company of America, appeals. On July 1, 1967, Karl 0. Lentz, deceased, of Baker, Montana, purchased an automobile from Ryan Oldsmobile in Billings, Montana. The purchase was by installment contract. As part of the contract Lentz purchased credit life insurance from the de- fendant. As a condition of coverage, Lentz was required to declare "that to the best of my knowledge and belief I am now in good health". The premium was paid on the contract of insurance. Lentz died on August 16, 1967. At the time of the purchase Lentz was 73 years old. Lentz experienced various medical problems. By stipulation, reports of Dr. John Hurly of Billings, Montana, were admitted into evidence in the trial. These reports show that in September -October and December of 1966, Lentz was treated by Dr. Hurly for ulcers. Sur-gery was declined on both occasions because of poor renal (kidney) function. The reports indicate that Lentz was quite comfortable on medication and that his blood pressure was quite satisfactory at that time and that " * * * He (Lentz) was aware because of the deferment of surgery on two occasions that his health was not good at these times. Nonetheless there was no immediate threat of death once the bleeding ulcer was recognized and treated." Dr. Robert Weeks, Baker, Montana, testified that he saw Lentz on May 16, 1967, and prescribed some medicine to lower Lentz's blood pressure. Dr. Weeks, considering Lentz as being in serious
condition of health, was asked if he told Lentz the seriousness of his condition. He answered: "No, on the contrary he acted so frightened that I reassured the man rather than discussing anything about the shortness of life or a short life span. I considered this a necessary part of the treatment because being scared elevates the
blood pressure and basically this was his prob- lem, it produced the anurism (sic)." Dr. Weeks stated that he tried to remain optimistic as
to reassure Lentz and testified: "Reassuring him that he would wake up in the morn- ing, that type of thing, you know, he was really quite frightened, on several visits. On this
visit, 5-16-67, I think it was the one he was most frightened on." Dr. Weeks hospitalized Lentz on May 20, 1967, for his
high blood pressure, back pains, abdominal aneurism and because
"his kidneys weren't doing their full work." He was discharged from the hospital on May 24, 1967, and on May 29, 1967, Lentz was again hospitalized for back pains. He was released on June 4, 1967. Dr. Weeks saw Lentz again on June 7, 1967, and in ref- erence to this visit stated:
"On that occasion his blood pressure was 130 over 90, which is a small miracle. The poison that his kidney was supposed to filter out had improved so he was in better shape than at any time since I started seeing him on 5-16-67, so he was less axotemic on that day".
Dr. Weeks testified that he had shown Lentz numbers and figures to indicate to him that he was improving and that he had probably said something to Lentz to the effect "that this is the best he has ever been." Dr. Weeks saw Lentz again on June 16, 1967, when his blood pressure was up and again on July 3, 1967, when Lentz's blood pressure was quite high. Dr. Weeks testified that he "continued to assume a reassuring manner at all times" with Lentz. Lentz was seen several times thereafter by Dr. Weeks, up to the time of his death on August 16, 1967. Death was attrib- uted to an abdominal aortic aneurism.
Plaintiff testified that her husband was not feeling good in the spring of 1967, that he had gas on the stomach and that he had to quit smoking. Plaintiff, however, stated that her husband was in good health and seemed to be 10 or 15 years younger than he actually was and that they had planned to go to California to be with their son's children. Lentz bought the new car for the trip and purchased new clothing as well. In response to being asked about Mr. Lentz's spirits at the time of the purchase of the car, plaintiff answered, "He felt real good, because of his terrific health he was real happy. "
Defendant presents four issues for our determination. Two
of the issues, which we shall consolidate and consider initially,
concern a question of agency and the district court's findings with
respect to representations made by the salesman at Ryan Oldsmobile
to deceased. Defendant's remaining issues are summarized as follows:

(1) Whether there was a misrepresentation as to a material
fact under section 40-3713, R.C.M. 1947; (2) whether the life in-
surance policy was rescinded.

The district court in its findings of fact found that " * * * the salesman at Ryan Oldsmobile advised deceased that it would be necessary to purchase a Creditors Life Insurance Policy from the defendant." The district court also found:
" * * * as deceased did not desire to purchase said insurance but was advised by the automobile seller's agent that such insurance would have to be purchased."
Defendant argues that there is no basis in the evidence
for the district court to have made such findings. While from our
review of the transcript we find no evidence that it was a necessity
that deceased purchase the insurance, we clearly find in the testi-
mony by the plaintiff evidence that the salesman at Ryan Oldsmobile
recpested and suggested that deceased take the insurance. The

salesman indicated to deceased that purchasing the insurance was customary and something which was always done on a contract. Deceased then purchased the insurance.
In addition, the district court found "That the automobile seller's agent was not an agent of the deceased, but was defendant's agent." Defendant states no objection to this finding except that it was not necessary and confusing.
It is this Court's view that all of the above-quoted find-ings of the district court were proper, necessary and supported by the evidence. The salesman was certainly the agent of defendant, and the evidence shows that the salesman urged deceased to enter into the contract. We do note, however, that because of the fore- going issues defendant was not in any way estopped from contending that there was a misrepresentation made by the deceased.
As to the next question presented, defendant specifically takes issue with the district court's finding No. VIII, which states: "That deceased's representation of good health, although untrue in fact, was made in good faith without any intent to mislead the defendant or to induce the defendant to issue the insurance policy, as deceased did not desire to purchase said insur-
ance but was advised by the automobile seller's
agent that such insurance would have to be purchased."
Section 40-3713, R.C.M. 1947, provides:
"All statements and descriptions in any application

for an insurance policy or annuity contract, or in negotiations therefor, by or in behalf of the insured or annuitant, shall be deemed to be represen- tations and not warranties. Misrepresentations, omissions, concealment of facts, and incorrect state-ments shall not prevent a recovery under the policy or contract unless either:
" (a) Fraudulent; or
"(b) Material either to the acceptance of the risk, or to the hazard assumed by the insurer; or "(c) The insurer in good faith would either not
have issued the policy or contract, or would not have issued a policy or contract in as large an amount, or at the same premium or rate, or would not have provided coverage with respect to
the hazard resulting in the loss, if the true
facts had been made known to the insurer as re-
quired either by the application for the policy
or contract or otherwise."
Defendant argues that section 40-3713 prevents a recovery if a material misrepresentation is made whether or not the mis-representation is innocently made. Defendant's argument is based upon the premise that deceased represented a fact that he was in good health, and because in fact, deceased was not in good health, that this constitutes a material misrepresentation preventing recovery. Deceased declared "that to the best of my knowledge and belief I am now in good health." The actual representation was that deceased believed himself to be in good health, and the district court found that this was in good faith.
Although the facts in this case show that deceased was not in good health, the facts also show that deceased believed that his health was good.
Defendant also contends that there is not sufficient evi- dence for the district court to have ruled that deceased, in good faith, thought that he was in good health.
The testimony of Dr. Weeks indicates that deceased was continually reassured that his health was improving and that de- ceased was encouraged as to the condition of his health. In ad- dition, the testimony of plaintiff supports the fact that deceased believed himself to be in good health at the time of the purchase of the automobile and the execution of the contract and credit life insurance policy. Deceased represented that he believed him- self to be in good health, and the evidence sufficiently supports his belief.
In Couch on Insurance 2d Section 35:150, it is stated: " * * * Accordingly, where the applicant for life insurance certifies that his health is good according
to the best of his knowledge and belief, a recovery may be had, on the death of insured, if it appears that he had reason to believe and did believe, that at the time he was in good health, although it subsequently develops that this was not in fact his condition, for his statement was not unqualified, but only to the extent of his knowledge and belief. * * *"
As to the final issue presented, defendant contends that when the full amount of the premium is tendered back to the estate of the deceased and the money is kept that this results in a re-scission of the policy. The district court found:
"That defendant has refused to pay the insurance benefits provided for by the policy and has treated the policy as rescinded and has returned the amount of the premium to the deceased's estate."
In order for there to be a rescission of the insurance policy the requirements of both section 40-3713, supra, and section 13-905, R.C.M. 1947, must be met. McLane v. Farmers Ins. Exchange, 150 Mont. 116, 118, 432 P.2d 98.
The district court in its conclusions of law cited McLane for the proposition that defendant could not rescind the insurance policy after liability had attached. Upon examining our decision in McLane we note that what we held therein was that even after the accident, the insurance company " * * * had a right to a reason-able time in which to investigate (citing authority) and upon dis- covering the facts entitling him to rescind he was required to act promptly to rescind." The insurance company in McLane waived its right to rescind by affirmative acts on its part and by not meeting the requirement that he promptly rescind.
We point out that the district court's conclusion is not an absolute rule. While it is this Court's purpose to make this clarification, we nevertheless hold that in the instant case there has been no rescission.
In support of his argument defendant cites 43 Am Jur 2d, Insurance, !j 436, which states: "The fact that after the death of the insured a
suit in equity may not lie to rescind the insurance
contract does not prevent the parties from rescind-
ing by consent. After the death of the insured, the
beneficiaries of a life insurance contract are the
proper parties to give consent to and agree upon a
rescission of the contract, and they are likewise
the proper parties to accept premiums returned upon such a rescission.
"Accordingly, a rescission by consent of the parties
has been held to be completed as a matter of law
where the beneficiary in an insurance policy the
reinstatement of which was obtained by the alleged
fraud of the insured, after the death of the insured,
accepted and for a month retained the premiums
which were returned by the insurer on the ground of
the alleged fraudulent misrepresentations by the
insured of facts material to the risks.
"Moreover, the effect, as a rescission of a life
insurance policy by consent, of an acceptance by
the beneficiary after the death of the insured, of
a check for the amount of premiums paid, with interest
thereon, tendered by an insurer claiming the policy
to be voidable by reason of misrepresentations by the
insured, is not altered by the fact that he has been
wrongly advised by a third person that he may accept
the check without losing any right against the insurer."
In view of our discussion of defendant's preceding issue
and statutes which have been cited herein, the only means by which
a rescission could have been effected in this case was by the con-
sent of the parties. Although the district court's finding states
that defendant treated the policy as rescinded and returned the
premium to the deceased's estate, this Court fails to see where
there is any evidence in the record showing the requisite consent
to rescind.
There are statements made by counsel in the transcript of
the trial as to what happened to the premium, and the briefs on
appeal are replete with statements by counsel as to what happened
to the premium. There is a letter attached to plaintiff's brief,
but which was not admitted into evidence. There is, however, no
proof in the record that there was consent by the plaintiff as
administratrix of the deceased's estate or as owner of the auto-
mobile to rescind the policy. Therefore, defendant's final issue
is without merit.
For the foregoing reasons, the judgment of the district
court is hereby affirmed.

Chief .Justice

,,. -*.
We concur:

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