952 F.2d 1 (1st Cir. 1991), 91-1306, Bezanson v. Metropolitan Ins. and Annuity Co.

Docket Nº:91-1306, 91-1357.
Citation:952 F.2d 1
Party Name:Dennis G. BEZANSON, Trustee for Medomak Canning Company, Inc., Plaintiff, Appellee, v. METROPOLITAN INSURANCE AND ANNUITY COMPANY, Defendant, Appellant. Dennis G. BEZANSON, Trustee for Medomak Canning Company, Inc., Plaintiff, Appellant, v. METROPOLITAN INSURANCE, et al., Defendants, Appellees.
Case Date:December 13, 1991
Court:United States Courts of Appeals, Court of Appeals for the First Circuit
 
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952 F.2d 1 (1st Cir. 1991)

Dennis G. BEZANSON, Trustee for Medomak Canning Company,

Inc., Plaintiff, Appellee,

v.

METROPOLITAN INSURANCE AND ANNUITY COMPANY, Defendant, Appellant.

Dennis G. BEZANSON, Trustee for Medomak Canning Company,

Inc., Plaintiff, Appellant,

v.

METROPOLITAN INSURANCE, et al., Defendants, Appellees.

Nos. 91-1306, 91-1357.

United States Court of Appeals, First Circuit

December 13, 1991

        Heard Sept. 6, 1991.

        Rehearing and Rehearing En Banc Denied Jan. 7, 1992.

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        Alvin Pasternak with whom Sherry Laird and William J. Toppeta were on brief, for defendant, appellant.

        R. Terrance Duddy with whom U. Charles Remmel, II and Kelly, Remmel & Zimmerman were on brief, for plaintiff, appellee.

        Before CAMPBELL, Circuit Judge, BAILEY ALDRICH, Senior Circuit Judge, and SELYA, Circuit Judge.

        BAILEY ALDRICH, Senior Circuit Judge.

        This is an action by plaintiff Dennis G. Bezanson, trustee in bankruptcy (Chapter 7) of Medomak Canning Co., Inc., on a policy of insurance issued by defendant Metropolitan Insurance and Annuity Co. on the life of Medomak's late president, Bernard J. Lewis. Medomak is the named owner and beneficiary. Lewis died on May 27, 1989. Possibly because of the amount involved ($500,000), with some substantial questions both sides include a number of contentions that can only be thought of as far out. First the facts.

        No semi-annual premium had been paid since plaintiff had been appointed Medomak's trustee in April, 1986. However, under the policy terms an interest-bearing "accumulated fund," or "surrender value," would maintain the policy by a fractional premium deduction on the fifth of each

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month until the fund was exhausted. Because the interest earned by the fund was variable, the exact exhaustion date could not be predicted in advance. Consequently the policy provided that when exhaustion did occur the policyowner was to be given notice of lapse, and 61 days grace to make a payment, during which time the policy would continue in force automatically. The policy lapsed for an insufficient fund on November 5, 1988. Defendant sent the 61 day notice to Medomak's Post Office box named in the policy, and not to plaintiff trustee--who failed to visit the box and therefore did not receive it. Plaintiff did not pay the premium, and, by its terms, the policy finally terminated on January 5, 1989.

        After Lewis died on May 27, 1989 defendant rejected plaintiff's claim for the policy proceeds and plaintiff brought suit. The court held that to mail the lapse notice to the Medomak box, addressed to Lewis, rather than to Medomak Canning Corp., was proper, but that the notice, or a copy, should have been sent to plaintiff at his office address. In default of this it held the time to pay the premium was extended indefinitely, and entered judgment for plaintiff. Defendant appeals. We reverse.

        Before the three principal questions, we consider lesser ones that are readily disposable. Those raised by defendant are,

        a) That plaintiff lacks standing to sue. On a mishmash of arguments, apparently based on the fact that plaintiff had attempted to surrender the policy, and that at one time it had been assigned as security for a loan, and with appeals to equity, defendant would overlook the fact that plaintiff, as trustee, had title to the policy. In re O'Neill Enterprises, 547 F.2d 812, 815 (4th Cir.1977); In re Cooperativa Cafeteros De Puerto Rico, 37 B.R. 952, 955 (D.P.R.1984). Defendant exhibits no embarrassment that it offers no suggestion as to who has standing to sue if plaintiff does not.

        b) That there are no consequences of failing to give a notice of lapse. Concededly, the policy states no consequences. What they may be is a question we will come to, but we are surprised that Home Office counsel would argue there are none, leaving defendant's promise a meaningless gratuity, indeed, as so interpreted, a misleading one.

        c) That an owner has a burden of showing he would have paid the premium had he received the notice. This, too, cannot be true as a general proposition. Whether there may be special considerations here, we will come to.

        Defendant is not alone in reaching for straws. According to plaintiff,

        d) Defendant sent the lapse notice to the wrong address in order to avoid a continuance of the policy. Insurance companies exist on policies, not lapses. Plaintiff points to the fact that defendant knew Lewis had a form of cancer, apparently arrested. However, defendant knew this when it wrote the policy. Plaintiff was closer to Lewis than was defendant, and, rather than seek to continue, he was trying to surrender it. Indeed, if defendant was apprehensive about his health, Lewis, to whom the notice was addressed, would be the one best aware if it was failing.

        e) From as early as September, 1987 defendant "began treating Bezanson as the Policyowner." Clearly it did the opposite. Rather than recognize plaintiff as owner, when he sought to surrender the policy defendant refused, sending him a form that showed the owner to be Medomak Canning Company, P.O. Box 4566, Portland, Maine 04112, with a letter stating that "it must be signed by the owner of the policy." An attorney who had been a bankruptcy trustee "several thousand" (sic) times should have realized that defendant was not regarding him as the owner. This indication was given, see post, three times.

        f) It was insufficient to address the lapse notice to Lewis, rather than to Medomak Canning Corp. Plaintiff's criticizing the court's finding seems particularly ingenuous since he did not go to the Medomak box, or take steps relating to any mail addressed thereto, and, therefore, would not have received mail, however addressed,

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unless through the courtesy of Lewis, who retained access. 1

        To turn to the facts in more detail, on October 7, 1987, on his personal letterhead as Attorney at Law, plaintiff wrote defendant's local sales representative, Cummings, enclosing a certificate of his appointment as acting Trustee of Medomak's bankruptcy estate and requesting information about the policy "owned by the above-referenced Debtor." Unmindful that Cummings, as a layman, might not read this to say the title to the policy was now in plaintiff, as distinguished from the "above-referenced Debtor," plaintiff did nothing to elucidate. Not surprisingly, when Cummings obtained an information sheet from the Home Office (headed with Medomak's P.O. Box 4566) he sent it to plaintiff, at plaintiff's address, with "the necessary papers in regards to assignment," a clear indication, as we have said, of a belief that, until assigned, plaintiff was not the owner. Cummings' letter stated that the accumulated fund would probably become insufficient by November, 1988, though possibly as early as July; the exact date to depend on the variable interest factor. This was confirmed by a formal, more detailed sheet, sent by defendant in January, 1988. Following receipt, on January 25, 1988 plaintiff sent Cummings, on a company form, a request for the surrender value, together with another certificate of his appointment, with a request that the check be made payable to him. This resulted in two letters from defendant's Home Office. The first requested further identification of the policy, and the second, under date of March 3, recited that the policy had been identified, and that the surrender request required "written consent from the Medomak Canning and the Canal Bank and Trust Company or an appropriate Court order." Plaintiff made no reply. On his deposition he was asked,

Q. What steps, if any, did you take in response to that?

A. Well, first, my response was I couldn't understand why they wouldn't just surrender the cash value, and second of all, upon reading that they required the written consent of Medomak Canning, they already had that.... I am Medomak Canning. The trustee is Medomak Canning as a matter of law, and I signed the surrender in exactly that form.

Q. Did you ever write Metropolitan saying--giving your position on why the things they were asking were not necessary?

A. No, I didn't.

Q. Did you ever seek any sort of a written consent from Key Bank [successor to Canal Bank] with respect to the release of any rights under the collateral assignment?

A. No, because I didn't deem it was necessary.

        On May 31...

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