A principal who ratifies the unauthorized act of an agent is chargeable with the latter's knowledge of material facts, and must repudiate the act in toto, if at all. Where a life insurance policy is void by reason of false representations of material facts, made without design on the part of the applicant and with full knowledge of the company's agent, the policy-holder may, upon discovery of the fraud, rescind the contract and recover the premiums paid, less the value of insurance enjoyed. In such case the policy-holder is not bound to accept a paid up policy, nor consent to a reinstatement of the original insurance, after a proper exercise of the right of rescission.
WALLACE, J.
Both the plaintiff and the defendants were deceived by the fraudulent conduct of the defendants' agent. By his fraud, the plaintiff, an ignorant person who was unable to read or write, was induced to procure the policies of insurance upon the life of her husband without his knowledge, which were void by the express terms of one of the company's by-laws to which the contracts were made subject. For some time she continued to pay the premiums as they became due upon the policies, believing them to be good. By the same means, the defendants were also induced to enter into contracts which their by-laws expressly prohibited, and which but for the wrongful act their agent they would not have made. Although the defendants did not authorize or know of the fraud of their agent in procuring the contracts of insurance, yet they cannot claim and enjoy the benefits they have received under them without making themselves parties to the fraud, and without being chargeable with its legal consequences.
There being no fraud imputed to the plaintiff, the defendants were chargeable with their agent's knowledge of the situation and were bound by his acts. The policies issued through his instrumentality were valid and subsisting contracts as against the company and in favor of the assured, who innocently relied upon the agent's representations. But the plaintiff was not bound to continue the contracts after she learned of the fraudulent means by which they were procured, and thus subject herself to the risks of an expensive and uncertain lawsuit in regard to them. She had the right, upon the discovery of the fraud, to rescind the contracts. Concord Bank v. Gregg, 14 N.H. 331; Presby v. Parker, 56 N.H. 409; McDonald v. Insurance Co., 68 N.H. 4; N. Y. Life Insurance Co. v. Fletcher, 117 U.S. 519. By demanding of the defendants the return of the money paid when she learned of the fraud, and by bringing suit for its recovery, she seasonably rescinded the contracts and thereby became entitled to recover the amount of premiums she had paid, less the value of the insurance enjoyed by her during the existence of the contracts, with interest from the time of the rescission. She is entitled to the equitable value of the policies. McDonald v. Insurance Co., supra.
The plaintiff was not obliged to accept the defendants' offer give her a paid-up policy for a part of the amount of the original policies and less than the amount of the premiums paid, as this was in effect an attempt on the part of the defendants to substitute a different contract from the one which the parties. had made. Neither was she obliged to accept the defendants' offer to reinstate the insurance, made after she had properly exercised her right of rescinding the contracts and brought suit to recover the premiums paid by her.
The delivery of the policies into court by the plaintiff was seasonably made. Concord Bank v. Gregg, supra; Presby v. Parker, supra; Wiswall v. Harriman, 62 N.H. 671.
Case discharged.
YOUNG J., did not sit: the others concurred.