Adams v. Mut. Life Ins. Co.

• Decision Date: 04 November 1921
• Docket Number: No. 10310.,10310.
• Citation: 76 Ind.App. 598,132 N.E. 688
• Parties: ADAMS v. MUTUAL LIFE INS. CO.
• Court: Indiana Appellate Court

76 Ind.App. 598

132 N.E. 688

ADAMS

v.MUTUAL LIFE INS. CO.

No. 10310.

Appellate Court of Indiana, Division No. 2.

Nov. 4, 1921.

Appeal from Circuit Court, Gibson County; Simon L. Vandeveer, Judge.

Action by Orinda H. Adams against the Mutual Life Insurance Company. Judgment for defendant, and from denial of motion for new trial plaintiff appeals. Affirmed.

Geo. K. Denton, of Evansville, W. Z. Bennett, of Booneville, and Sanford Trippet, of Princeton, for appellant.

Frederick L. Allen, of New York City, D. H. Ortmeyer, of Evansville, Embree & Embree, of Princeton, and Gavin & Gavin, of Indianapolis, for appellee.

NICHOLS, P. J.

Action by appellant against appellee on a policy of insurance on the life of her deceased husband. The policy was dated December 6, 1898, and by its terms appellee agreed to pay to appellant, on proof of death of her husband, $50,000, in 20 annual installments of $2,500 each. The husband died May 23, 1906. The questions here involved arise upon the issues formed by a general denial to the first and fifth paragraphs of answer. The first paragraph of answer alleges that the insured and beneficiary, appellant herein, borrowed $4,900, the full cash value of the policy on November 18, 1903, and assigned the policy as security for said loan, and that thereafter the insured failed to pay the premium due on December 6, 1904, and failed to pay the loan due on said date, and that on March 8, 1905, appellee foreclosed its lien on the policy by canceling the same and applying the cash value to the payment of the lien in accordance with the terms of the loan agreement.

The fifth paragraph of answer was the same as the first, except that it pleaded that the loan contract was made in the state of New York, and was governed by the law of that state as to its construction, alleged that said contract was valid, and that there had been a legal foreclosure of the lien on the policy under the law of that state. Appellantstates that the question involved on this appeal is as to whether or not the loan agreement was valid, and as to whether the lien on the policy had been legally foreclosed. The court adopted the construction of the contract contended for by appellee, holding the loan agreement valid and that the facts were sufficient to show a legal foreclosure of the lien. In accordance with the court's instructions the jury returned a verdict for the appellee, and the court rendered judgment accordingly in its favor. There was a motion for a new trial, which was overruled. This ruling of the court is the only error assigned.

The provision for loans, as contained in the policy, is as follows:

“After this policy shall have been in force three full years, the company, within sixty days, on written application and upon assignment of this policy as security, will, in conformity with its rules then in force, loan amounts within the limits of the cash surrender value, with interest in advance, at the rate of 5 per cent. per annum; provided: (1) That premiums be fully paid to the end of the policy year in which the loan falls due; (2) that in any settlement of this policy all outstanding indebtedness must be paid.”

The loan agreement was dated November 18, 1902, and by its terms the company agreed to loan to the insured and appellant $4,900, $2,284 of which was applied to the payment of the premium on the policy to December 6, 1904, $251.54 to the payment of the interest on the loan, less interest upon the premium advanced, and $2,364.46 was paid to the insured and appellant by the company's check. To secure the payment of this loan, which was due December 6, 1904, the insured and appellant assigned, transferred, and set over all their right, title, and interest in the policy here involved to the company as collateral security. It was then provided that-

“In the event of default in the payment of said loan on the date hereinbefore mentined, the company is hereby authorized, at its option, without notice and without demand for payment, to cancel said policy and apply the customary cash surrender consideration then allowed by the company for the surrender for cancellation of similar policies, namely, $4,900, to the payment of said loan with interest, the balance, if any, to be payable to the parties entitled thereto on demand. ***”

[1] Appellant contends that so much of the agreement as is last quoted above is invalid for the want of consideration, contending that the policy having stipulated the terms upon which appellant and her husband should be entitled to a loan, and that the said part of the agreement above set out being beyond the terms of the policy, they are wholly without consideration and therefore unenforceable. But appellee contends that appellant did not specially plead want of consideration for said part of said loan agreement, and that appellant having only pleaded a general denial to appellee's said second paragraph of answer, the questions which he now seeks to present cannot be presented under the general issue. An examination of the loan agreement as a whole clearly purports to furnish a consideration for each and every part thereof. It is the general rule, as stated in 4 Encyc. Plead. & Prac. p. 746, that in pleading a want of consideration, if the contract in suit imports a consideration, the want of consideration cannot be shown under a general denial, but must be pleaded; but that if, on the other hand, the contract in suit does not import a consideration, thereby making it necessary for the pleader to allege a consideration, want of consideration may be shown under the general denial. The same rule is stated in substantially the same language under section 613 of Watson's Revision of Works' Practice, vol. 1, § 613.

Appellant cites the case of Butler v. Edgerton, 15 Ind. 15, as sustaining her contention that want of consideration may be proven under the general issue, but in that case the court says:

“The complaint sets out specifically the consideration for which the instrument was given besides furnishing a copy of the instrument.”

We have here, then, a specific averment as to the consideration, and it may be conceded that with the pleading in such form the question of the want of consideration can be raised by a general denial. The rule that governs in this case is more fully stated in the case of Nixon v. Beard, 111 Ind. 137, 141, 12 N. E. 131, 132, where the court says:

“It is true that to make a want of consideration a defense to an action on an instrument in writing which imports a consideration, it must be specially pleaded, but that rule does not apply to cases like this, in which the consideration is properly and fully averred in the complaint.”

In Smith v. Flack, 95 Ind. 116, 121, the court stated the principle of law that must govern here as follows:

“A written instrument promising to pay money implies a consideration, and if...