Bach v. Western States Life Ins. Co.

• Decision Date: 06 July 1931
• Docket Number: No. 374.,374.
• Citation: 51 F.2d 191
• Parties: BACH v. WESTERN STATES LIFE INS. CO.
• Court: U.S. Court of Appeals — Tenth Circuit

51 F.2d 191 (1931)

BACH v. WESTERN STATES LIFE INS. CO.

No. 374.

Circuit Court of Appeals, Tenth Circuit.

July 6, 1931.

H. L. Mulliner, of Salt Lake City, Utah, for appellant.

Frank A. Johnson, of Salt Lake City, Utah (Charles C. Dey, A. L. Hoppaugh and Robert E. Mark, all of Salt Lake City, Utah, on the brief), for appellee.

Before LEWIS, PHILLIPS, and McDERMOTT, Circuit Judges.

McDERMOTT, Circuit Judge.

The plaintiff (appellant) was denied recovery on a $5,000 policy of insurance issued on May 10, 1915, on the life of her husband, who died on May 27, 1927. The defense was that the policy lapsed on July 2, 1925. The facts are agreed.

The policy is the ordinary "old-line" life policy, with reserve values. It provides:

"The consideration for this insurance and all benefits hereunder shall be the declarations, answers and agreements made in the application for this policy, which is made a part hereof, and the payment of One hundred and Eighty-two and 00/100 Dollars in advance before this contract shall take effect, as the premium for an insurance terminating on the Tenth day of May, 1916.

"In consideration of the said application and the payment to the Company of a like amount in the succeeding years, at the Home Office of the Company on or before the same days, or upon the presentation of a receipt for the said amounts signed by the Secretary of the Company and countersigned by an authorized agent of the Company, this contract shall be renewed and continued as an ordinary life policy, subject to all of the provisions herein.

"If any premium shall not be paid on or before the date when due, the liability of the Company hereunder shall be only as hereinbefore provided."

The policy includes a table of guaranteed reserve values which sets out the "Cash or Loan Value," the "Paid-up Insurance" and the "Automatic Term Insurance" at the end of each policy year commencing with the second. As to loans, the policy provides that the company will advance, on request and on the sole security of the policy, an amount up to the cash value of the policy; that such loan shall bear interest at five per cent. payable at the end of each policy year. It provides:

"Failure to repay any such advance or to pay interest shall not avoid this policy unless the total indebtedness hereon to the Company shall equal or exceed the cash value at the time of such failure, nor until one month after notice shall have been mailed by the Company to the last known address of the Insured or of the Assignee of record, if any, at the Home Office of the Company."

It further provides:

"If any indebtedness to the Company on account of this policy shall exist at the time the above values become available, such indebtedness shall reduce the amount of the said loan, cash or paid-up values, or shall shorten the extended insurance period, which values or period shall then be adjusted on the basis originally used in their calculation.

"Any indebtedness to the Company, including any balance of the premium for the insurance year remaining unpaid, will be deducted in any cash settlement of this policy or will reduce, proportionately, any other benefit thereunder."

While the policy gives the insured three options as to his reserve values, it provides that —

"If any premium shall not be paid on or before the date when due, the full amount of insurance hereunder will, without action upon the part of the Insured, automatically continue from said due date as term insurance, during the term, including the period of grace, specified in column three of the accompanying table."

At the end of the eighth policy year, the policy carried a cash value of $825 and an extended insurance for 7 years and 204 days (which extends beyond the date of the death of the insured). However, on June 9, 1922, the insured availed himself of the loan provisions of the policy and borrowed $601.80, and executed a loan agreement by which the insured agreed —

"To pay said Company interest on said loan at the rate of 5 per cent. per annum, payable in advance from this date to the next anniversary of said policy, and annually in advance on said anniversary and thereafter.

"To pledge, and do hereby pledge, the value of said policy as sole security for the payment of said loan and interest."

"That said loan shall become due and payable (a) Either if any premium on said policy or any interest on said loan is not paid on the date when due, in which event said pledge shall, without demand or notice of any kind, every demand and notice being hereby waived, be foreclosed by satisfying said loan in the manner provided in said policy."

The premium of $182, due May 10, 1923, was never paid, notwithstanding the company sent the insured eight notices of the delinquency. Neither did the insured pay any part of the principal or interest of the loan of $601.80. On June 11, 1923, the company charged the then due and unpaid loan of $601.80 against the reserve value of $825; the balance of $223.20 was applied to automatic term insurance which expired July 2, 1925, which was two years prior to the death of insured. If the company had the right to charge this note against the reserves on the policy, which was the sole security for the loan, the trial court was right. If it did not have such right, then plaintiff is entitled to recover.

The action of the company was in accord with the contract of the parties. The loan agreement provided that the loan should become payable if any premium, or...