Barutio v. New York Life Ins. Co.

• Decision Date: 08 February 1944
• Citation: 177 S.W.2d 685,237 Mo.App. 854
• Parties: Constantine Barutio, Appellant, v. New York Life Insurance Company, a Corporation, Respondent
• Court: Missouri Court of Appeals

177 S.W.2d 685

237 Mo.App. 854

Constantine Barutio, Appellant, v. New York Life Insurance Company, a Corporation, Respondent

Court of Appeals of Missouri, St. Louis District

February 8, 1944

Appeal from the Circuit Court of the City of St. Louis; Hon. Robert L. Aronson, Judge.

Affirmed.

Raymond J. Lahey for appellant.

(1) In equity, the policy should be declared in force because the insurer, as a condition to its continuance, demanded that the insured accept and pay an excessive loan indebtedness. Johnson v. Hartford Life Ins. Co., 166 Mo.App. 261, 148 S.W 631, aff. 271 Mo. 562, 197 S.W. 132, certiorari dismissed 39 S.Ct. 366, 249 U.S. 490, 63 L.Ed. 722; Wayland v. Western Life Indemnity Co., 166 Mo.App 221, 148 S.W. 626; King v. Hartford Life & Annuity Co., 133 Mo.App. 612, 114 S.W. 63; Newman v. John Hancock Mut. Life Ins. Co., 216 Mo.App. 180, 257 S.W 190, 7 S.W.2d 1015; Spencer v. Security Ben. Ass'n (Mo. App.), 297 S.W. 989; 37 C. J., p. 485, sec. 2118. (2) The exaction of interest upon interest was in repudiation of the policy loan agreement. Murray v. Prudential Ins. Co. (Pa.), 18 A.2d 820; Roeser v. National Life Ins. Co., 115 Pa. S.Ct. 409, 414, 175 A. 887; Stauffer v. Northwestern Mut. Life Ins. Co., 184 Wash. 431, 51 P.2d 390; Goodwin v. Northwestern Mut. Life Ins. Co., 196 Wash. 391, 83 P.2d 231; Tremper v. Northwestern Life Ins. Co. (Wash.), 119 P.2d 107; Vaughn v. Graham, 234 Mo.App. 781, 121 S.W.2d 222, 226-227; Pullis v. Somerville, 218 Mo. 624, 117 S.W. 736. (3) The method of computation of interest upon interest was in violation of Missouri law restricting the compounding of interest to but once a year. Sec. 3232, R. S. Mo. 1939.

Jones, Hocker, Gladney & Grand and James C. Jones, Jr., for respondent.

F. H. Pease of counsel.

(1) The policy lapsed for the nonpayment of the quarterly premium due June 3, 1939. Robb v. Met. Life Ins. Co. (Mo.), 174 S.W.2d 832. (2) Appellant was not entitled to a reinstatement of the policy because he did not comply with the requirements of the policy in order to secure its reinstatement. (3) There was no excessive or illegal interest charged by respondent on the advances made to insured under the policy prior to its lapse. (a) There is no compounding of interest when a previous loan or advance with accrued simple interest thereon is paid out of the proceeds of a subsequent loan or advance. Meinholtz v. Lampert (Mo. App.), 101 S.W.2d 503; Walker v. Dunham, 135 Mo.App. 396, 409, 115 S.W. 1086; Wigton v. Elliot (Colo.), 111 P. 713, 714; Elisberg v. Simpson, 173 N.Y.S. 128, 130; Household Finance Corp. v. Goldring, 33 N.Y.S. (2d) 514; Musser v. Murphy (Idaho), 286 P. 618; Mills v. Equitable Life Assurance Society, 28 N.Y.S. (2d) 1013, leave to appeal denied 38 N.E.2d 390; Bryan v. New York Life Ins. Co., 28 N.Y.S. (2d) 1015; New York Life Ins. Co. v. Arnold (Ark.), 158 S.W.2d 470, 471. (b) Whether an insurer is entitled to compound interest on policy loans or advances is immaterial when the insured pays compound interest, or consents to, or acquiesces in, the compounding of interest, on such loans or advances. Baker v. Equitable Life Assurance Society (N. Y.), 41 N.E.2d 471. (c) As both the policy and the premium lien notes executed by insured expressly provided for the payment of compound interest on the policy loans or advances made to the insured, the compounding of interest on such loans or advances would have been valid. Nathan Wiley's Principles & Practice of Life Insurance (5th Ed.), p. 12; New York Life Ins. Co. v. Statham, 93 U.S. 24, 30, 23 L.Ed. 789; Bean v. Minnesota Mutual Life Ins. Co., 151 Minn. 41, 185 N.W. 946, 947; New York Life Ins. Co. v. Board of Assessors, 158 F. 462; Gray v. Aetna Life Ins. Co. (Tenn.), 156 S.W.2d 391; Ropiequet v. Aetna Life Ins. Co., 309 Ill.App. 346, 33 N.E.2d 228.

OPINION

Sutton, C.

This is an action in equity to compel defendant to reinstate a policy of life insurance in the sum of two thousand dollars, issued to plaintiff by defendant, on December 3, 1929, and which lapsed for nonpayment of quarterly premium due on June 3, 1939.

The trial resulted in a judgment for defendant, and plaintiff appeals.

The policy was issued in consideration of the payment in advance of a premium of $ 70.34, which continued the policy in force to December 3, 1930, and the payment of a like sum on December 3, 1930, and every twelve months thereafter during the insured's lifetime.

The policy provides that the payment of the premium shall not maintain the policy in force beyond the date when the next payment becomes due except as to the benefits provided for after default in premium payment.

On January 19, 1932, pursuant to the privilege accorded by the policy, the insured elected to pay the premiums on the policy quarterly in the sum of $ 18.64 on the 3rd day of December, March, June, and September.

All the premiums due under the policy were paid up to and including the quarterly premium due March 3, 1939. The quarterly premium of $ 18.64 due June 3, 1939, was not paid either on or prior to that date, or within the thirty days of grace allowed by the policy for the payment of premiums.

Upon the failure of plaintiff to pay the quarterly premium due June 3, 1939, within the required time, the insured, under the terms of the policy, became automatically entitled, under the nonforfeiture benefits of the policy, to extended insurance for the face amount of the policy, less the outstanding indebtedness thereunder, for such period of time as the cash value of the policy on June 3, 1939, less the outstanding indebtedness, would purchase as a net single premium at the insured's attained age.

The cash value of the policy on June 3, 1939, amounted to $ 310. The indebtedness outstanding against the policy, on June 3, 1939, amounted according to defendant's claim to $ 290.84, but amounted according to plaintiff's claim to $ 290.30, a difference of 54 cents.

Deducting the indebtedness of $ 290.84 from the cash value left a balance of $ 19.16, and deducting the indebtedness of $ 290.84 from the face amount of the policy left a balance of $ 1709.16. Defendant, however, allows plaintiff a difference, between the face amount of the policy and the indebtedness, of $ 1710. The balance of the cash value, $ 19.16, remaining after the deduction of the indebtedness of $ 290.84 was sufficient to continue the policy in force as extended insurance in the sum of $ 1710 from June 3, 1939, to May 6, 1940.

On the assumption, however, that the actual indebtedness against the policy on June 3, 1939, was $ 290.30, or 54 cents less than that claimed by defendant, then the additional sum of 54 cents would have continued the policy in force in the sum of $ 1710 as extended insurance for an additional period of about ten days or until about May 16, 1940.

The policy provides as follows:

"After three full years' premiums have been paid and before default in the payment of premium, the Company, upon receipt of this Policy and a Loan Agreement satisfactory to the Company, will advance to the insured on the sole security of this policy any amount which, with interest, shall be within the limit of the Cash Surrender Value of this Policy. Interest on the loan will be at the rate of six per cent per annum payable annually on the anniversary of the Policy. Any existing indebtedness to the Company on this Policy, including accrued interest thereon, will be deducted from the amount of said loan. If interest is not paid when due it shall be added to the principal."

There were ten loans or advances made on the policy. For each loan or advance made, plaintiff gave defendant what is called a premium lien note. The first note was made on April 3, 1932, for $ 54.52 for the amount of a loan or advance to pay balance of annual premium due December 3, 1931. The second was made on October 4, 1935, for $ 127.62 for loan or advance to pay annual premium due September 3, 1935, amounting to $ 70.34, and to pay the previous note of $ 54.52 with interest accrued on the previous note from December 3, 1934, to October 4, 1935, amounting to $ 2.76. The third was made on April 3, 1937, for $ 148.81 for loan or advance to pay premium due March 3, 1937, amounting to $ 18.64, and to pay previous note of $ 127.62 with interest accrued on the previous note from December 3, 1936, to April 3, 1937, amounting to $ 2.55. The other notes were made on October 4, 1937, January 3, 1938, April 3, 1938, July 4, 1938, October 4, 1938, January 3, 1939, and March 3, 1939. Each of these notes was given for a loan or advance by the company to pay a quarterly premium due and the amount of the previous note with accrued interest. Plaintiff made no objection at the time of any of these transactions to the inclusion of accrued interest in the notes given. The amount due on June 3, 1939, on the note given on March 3, 1939, with interest accrued from March 3, 1939, to June 3, 1939, was $ 290.84.

In each of said notes plaintiff agreed as follows:

"To pay said company on the next anniversary of said policy, interest on said sum at the rate of six per cent per annum from this date to said anniversary, and annually thereafter on each anniversary of said policy. If interest is not paid on the date when due, it shall be added to the principal and bear interest at the same rate.

"Said indebtedness shall become due and payable if there is default in the payment of any premium on said policy, in which event the sum so due and payable with interest, shall, without demand or notice of any kind, every demand and notice being hereby waived, be deducted in the manner provided in said policy, and thereupon said indebtedness shall be deemed fully paid and satisfied."

Plaintiff contends that his indebtedness of $ 290.84 as...