Aetna Life Ins. Co. of Hartford, Conn. v. Martin

• Decision Date: 12 February 1940
• Docket Number: No. 11491.,11491.
• Citation: 108 F.2d 824
• Parties: ÆTNA LIFE INS. CO. OF HARTFORD, CONN., v. MARTIN et al.
• Court: U.S. Court of Appeals — Eighth Circuit

108 F.2d 824 (1940)

ÆTNA LIFE INS. CO. OF HARTFORD, CONN., v. MARTIN et al.

No. 11491.

Circuit Court of Appeals, Eighth Circuit.

January 18, 1940.

Rehearing Denied February 12, 1940.

S. Lasker Ehrman, of Little Rock, Ark., (Grover T. Owens and E. L. McHaney, Jr., both of Little Rock, Ark., on the brief), for appellant.

G. W. Hendricks, of Little Rock, Ark., (J. B. Milham, of Benton, Ark., and C. T. Cotham, of Hot Springs, Ark., on the brief), for appellees.

Before STONE, GARDNER, and SANBORN, Circuit Judges.

GARDNER, Circuit Judge.

This is an appeal by the plaintiff from a judgment dismissing its action brought under the Declaratory Judgment Act, Jud. Code § 274d, 28 U.S.C.A. § 400, to determine obligations under a contract of insurance. The parties will be referred to as they were designated below. As the case was disposed of on a motion to dismiss, the facts are taken from the pleadings.

Plaintiff is an insurance corporation organized under the laws of Connecticut. On February 4, 1926, it issued a policy of life insurance on the life of defendant A. V. Martin, in which it agreed to pay the other defendants, named as beneficiaries, upon his death, the sum of $25,000. The policy also contained provision that if before default in the payment of premium, the insured became totally and permanently disabled by bodily injuries or disease, before he attained the age of sixty, the company would waive payment of premiums falling due after such disability and would pay the insured an income of $250 per month, and if the disability should occur after he attained the age of sixty, all premiums falling due during such total and permanent disability were waived. The policy also contained provision that if it should appear to the company that the insured had recovered from a disability so as to be able to perform any work or conduct any business for compensation or profit, disability benefits should cease. A continuance of disability for a period of ninety days raised a presumption of permanency.

At the time of the issuance of the policy, the insured was fifty-five years of age, and in his application gave his date of birth as June 5, 1871. He therefore became sixty years of age on June 5, 1931. He continued to pay premiums on the policy until February 4, 1935, when the time of payment was extended to April 4, 1935. The premium was not paid, however, and the policy lapsed on that date for non-payment of premium. Prior to the lapse of the policy, insured had borrowed from the company a sum, which, with interest, was sufficient to exhaust the cash or loan value of the policy, and when the policy lapsed there was no sum available in the hands of the company to carry the policy in force, or for the purpose of extending term insurance under the terms of the policy.

On June 16, 1935, the insured forwarded to the company a preliminary notice of a claimed permanent and total disability, which stated that he had become totally and permanently disabled about January 1, 1930, and demanded payment of $250 per month from June 6, 1934. The notice also demanded return of all premiums paid for the years 1930, 1931, 1932, 1933 and 1934. The company declined the claim, and on March 25, 1935, the insured commenced an action in the Circuit Court of Saline County, Arkansas, for $2,000 disability benefits and $8,588.75 for premiums paid. The company served notice of intention to remove the action to the federal court, whereupon the insured amended his complaint by reducing the amount of his prayer and seeking to recover only the sum of $2,000 as monthly benefits under the policy from June, 6, 1934, the date of the filing of the complaint. The action was tried, and the jury returned a verdict reading as follows: "We, the following jurors, find for the plaintiff the sum of $500.00. (Signed by ten jurors)" From the judgment entered on this verdict, the company appealed to the Supreme Court of Arkansas, and on June 15, 1936, that court affirmed the judgment of the lower court. Ætna Life Ins. Co. v. Martin, 192 Ark. 860, 96 S.W.2d 327.

In the present suit, it is alleged that: "The plaintiff here now contends that the verdict of the jury in the cause in the Saline Circuit Court which was affirmed by the Supreme Court of Arkansas was a direct finding that the insured, A. V. Martin, recovered from his disability within two months after the plaintiff here became liable to him for disability benefits. That the jury allowed him to recover only two months benefits, whereas he was praying for benefits for a period of eight months, and that the only reasonable interpretation which can be given to the jury's verdict is that he had completely recovered prior to the date upon which his policy lapsed for the non-payment of premium as above set forth. The insured, A. V. Martin, now contends that he has not recovered from his alleged disability, and that the verdict of the jury in the Saline Circuit Court is not binding upon him as to his recovery from such alleged disability, and is demanding from this plaintiff alleged disability benefits which he claims are due to him by this plaintiff since the date of the filing of said suit in the Saline Circuit Court. That the insured, A. V. Martin, and the other defendants, further contend that said policy of insurance is still in force and effect, and that the plaintiff here will be liable to the other defendants, the beneficiaries named in said policy, in the sum of $25,000.00, upon the death of said A. V. Martin."

Plaintiff invokes the principle of res judicata and alleges that a controversy exists between it and the defendants as to the existence or non-existence of total and permanent disability subsequent to August 6, 1934, and as to the present status of the policy.

The motion to dismiss is quite an elaborate one, but its principal contentions are: (1) That there is no controversy shown to exist; (2) that the state court judgment is res judicata; and (3) that a pending prior action in the state court deprives the federal court of the right to proceed.

We think there is no merit to the contention that no controversy is shown to exist. The rights and obligations under the insurance contract now presently urged by the defendants are denied by the plaintiff, and this, under the authorities, is "a real and substantial controversy." Ætna Life Ins. Co. v. Haworth, 300 U.S. 227, 57 S.Ct. 461, 81 L.Ed. 617, 108 A.L.R. 1000; Ætna Life Ins. Co. v. Williams, 8 Cir., 88 F.2d 929; Columbian Natl. Life Ins. Co. v. Foulke, 8 Cir., 89 F.2d 261; Western Casualty & Surety Co. v. Beverforden, 8 Cir., 93 F.2d 166; United States Fidelity & Guaranty Co. v. Pierson, 8 Cir., 97 F.2d 560; New York Life Ins. Co. v. Roe, 8 Cir., 102 F.2d. 28, 123 A.L.R. 279.

It has been held that a real and substantial controversy over the effect of a judgment presents a ground for relief under the Declaratory Judgment Act. Board of Com'rs., for Buras Levee v. Cockrell, 5 Cir., 91 F.2d 412. Here the plaintiff and defendants have a real controversy as to the legal effect of the judgment rendered in the state court action. Plaintiff in this action contends that the verdict and judgment in the state court action established that the insured became disabled before his sixtieth birthday; that his disability continued until June 6, 1934 and for a period of two months thereafter. The verdict for $500 covered exactly two months' disability benefits, so that the jury necessarily disallowed any benefits for the other six months of alleged disability for which benefits were claimed. It is argued that the jury must of necessity have found that the insured...