Brown v. New York Life Ins. Co.
| Decision Date | 08 February 1938 |
| Docket Number | No. 2642.,2642. |
| Citation | 22 F. Supp. 82 |
| Court | U.S. District Court — District of South Carolina |
| Parties | BROWN v. NEW YORK LIFE INS. CO. et al. |
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Butler B. Hare and Robert H. Hare, both of Saluda, S. C., and Mays & Featherstone, of Greenwood, S. C., for plaintiff.
Thomas, Lumpkin & Cain and H. Bland Hammond, Jr., all of Columbia, S. C., for defendant New York Life Ins. Co.
This is an action by the plaintiff against the defendant New York Life Insurance Company for damages claimed to have resulted in an alleged breach of three insurance contracts issued upon the life of Robert N. Brown. Because he claimed some interest, J. J. Wheeler, Agent, was made a party defendant so that he might set up any rights he might have; but it is alleged by plaintiff that whatever interest he had, it was not superior to that claimed by her in the complaint. He did not appear or answer and is in default.
The evidence in the case about which there is little dispute is substantially as follows: The defendant insurance company in July, 1919, issued two contracts of insurance insuring the life of Robert N. Brown, one for $2,000, and the other for $5,000; and in October, 1921, issued another policy insuring his life for $10,000. On November 28, 1921, Brown assigned or pledged his $10,000 contract of insurance to the Farmers Bank of Saluda, and on the 23d day of March, 1922, he pledged or assigned his other two policies to the Bank of Saluda. These assignments were in writing, and in the following form:
At the time these assignments were executed and delivered, Brown was indebted to each bank in large amounts. The consideration named in the assignments is "For Value Received." The only testimony as to the real consideration was that for the plaintiff that the assignments were collateral and made to secure Brown's indebtedness to the banks. There is no evidence that the banks paid Brown any amount directly or indirectly for the assignments, nor was his indebtedness to the banks reduced thereby.
The two banks while holding the assignments, subsequently on June 30, 1927, merged into one corporation which was thereafter known as the Farmers Bank of Saluda, and under this corporate name it came into possession and ownership of the assignments of the three policies.
The insurance company received all premiums on the policies as they became due until the fall of 1931. Most of the premiums were paid by the banks, and, according to plaintiff's witnesses, charged to Brown's account at the bank, but, according to one witness for defendant, to expense because, he said, it was useless to charge them to Brown. Some fraction of the premiums was paid by earned dividends, for the insured elected to have the dividends applied toward payment of the premiums. After merger the bank applied to have these dividends paid to the bank alone.
The insurance company at first contended in its letters to the bank that ordinarily banks are not allowed to buy and sell life insurance policies, and that where a bank is acquiring an interest under a policy it is generally a collateral interest, and if a policy is assigned as collateral security the title of the assignee is not absolute even though the assignment may be absolute on its face, and that the assignee of a policy held by him as collateral is bound to hold the policy as collateral and is prohibited by law from doing anything whatever with the policy except to hold it as collateral in accordance with the terms and purpose of the assignment, and if the policies were assigned to them as collateral security, then, of course, it would be required to deal jointly with the bank and the insured in making any dividend payments, and suggested in one of the letters "if the insured desires to vest in the assignee the right to surrender these policies for the cash surrender value at any time when the same becomes available, or to sell these policies at public or private sale without notice to him, he should then assign these policies in favor of the Farmers Bank of Saluda, S. C. on the enclosed forms in accordance with the notice printed thereon, then return the same to us for record." These forms were never executed.
The bank contended that the assignments were absolute.
Finally, however, the insurance company decided that "in view of the statements made by the bank" that it would "pay to the bank alone dividends as they become due," and it appears that they were thereafter so paid without the knowledge or consent of the insured.
Later, in June, 1931, the insurance company allowed the bank to exercise the loan value provisions of the policies and made loans to the bank without the knowledge or consent of the insured. The amounts received from these loans were applied to Brown's indebtedness to the bank. There was a default in the payment of the premiums on the policies in September, 1931.
The Farmers Bank of Saluda, subsequent to securing the policy loans from the insurance company in October, 1931, became insolvent, and its assets, including the notes of Robert N. Brown, and the three assignments of the insurance policies, passed into the hands of a receiver. The receiver sued Brown and reduced his indebtedness to judgment which was rendered on December 13, 1932, for the sum of $14,777.25, without foreclosure or otherwise changing the status of the assignments of the insurance policies. Thereafter, the interest of the bank in the judgment, and the assignments of the policies, along with other assets of the closed bank, were sold to J. J. Wheeler, Agent.
Brown died intestate August 13, 1934, and his widow, the plaintiff Mrs. Sallie Brown, was thereafter appointed and qualified as administratrix of his estate. Mrs. Brown as administratrix made demand upon the insurance company for payment of such sum as might be due to her under the policies. The company denied liability on the ground that upon default in payment of premiums in 1931, the company, under the automatic provisions of the policies, used the accumulated values, less the outstanding policy loans, to purchase extended insurance, and that the term of the extension on each policy had expired before the death of the insured. The company on May 15, 1933, undertook to terminate and cancel the insurance contracts on this ground. But for the policy loans made by the insurance company to the bank the term of the extension on each policy would have kept it in force for the full amounts far beyond the date of the insured's death.
The insurance policies are payable to executors, administrators, and assigns of the insured, and other pertinent provisions are as follows:
At the conclusion of the evidence the defendant New York Life Insurance Company made a motion to direct the jury to find a verdict for the defendant insurance company. By agreement of the parties, I reserved my decision on this motion until after the case had been submitted to the jury and the verdict of the jury was taken subject to my ultimate ruling upon the question reserved. Reservation of decision, under this practice, carries with it authority to make such final disposition of the case as might be made essential by the ruling under the reservation, and I now have authority to enter judgment for the defendant insurance company although the jury has returned a verdict for the plaintiff for amounts totaling the sum of $17,000 actual damages. Baltimore & Carolina Line, Inc. v. Redman, 295 U.S. 654, 55 S. Ct. 890, 79 L.Ed. 1636.
The insurance company first contends in its motion for directed verdict that the assignments were absolute and transferred unto the bank the entire title to the insurance contracts.
Ordinarily, in the absence of restrictions to the contrary, a valid life insurance policy payable to insured's executors, administrators, or assigns, is an assignable chose in action, providing the assignment is not forbidden by public policy. Grigsby v. Russell, 222 U.S. 149, 56 L.Ed. 133, 32 S.Ct. 58, 36 L.R.A.,N.S., 642, Ann.Cas. 1913B, 863.
The rule in South Carolina is that a policy of life insurance valid in its inception may be assigned to one having no insurable interest in the life insured, with the consent of the insured, and the insurer, if the assignment is bona fide and not a device to evade the law against wager policies. Crosswell v. Association, 51 S.C. 103, 28 S.E. 200; Hack v. Metz, 173 S.C. 413, 176 S.E. 314, 95 A.L.R. 196. And that it, like any other chose in action, may be even transferred by parol, unless some unwaivered provision in the policy forbids it. Barron v. Williams, 58 S.C. 280, 36 S.E. 561, 79 Am.St.Rep. 840.
The assignments in this case, while containing no express authority to exercise the loan values, are absolute in form, subject only to the terms of...
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