Bryant v. Mutual Ben. Life Ins. Co.

• Decision Date: 11 May 1901
• Citation: 109 F. 748
• Parties: BRYANT v. MUTUAL BEN. LIFE INS. CO.
• Court: U.S. District Court — Middle District of Tennessee

109 F. 748

BRYANT v. MUTUAL BEN. LIFE INS. CO.

United States Circuit Court, M.D. Tennessee.

May 11, 1901

W. D Howser and A. R. Gohlson, for plaintiff.

Wm. L Granbery, for defendant.

CLARK District Judge.

This case involves the liability of the defendant insurance company under a policy for $12,000, issued upon the life of Henry H. Bryant, payable to his wife, Mary L. Bryant. The case has been submitted to the court without the intervention of a jury, principally upon an agreed statement of facts. The plaintiff is the wife of the insured, Henry H. Bryant, and is a citizen of the state of Tennessee. The defendant is an insurance company organized on the mutual plan under the laws of the state of New Jersey. The policy in suit was issued April 18, 1894. The annual premium agreed to be paid was $584.40. Among other things, the policy provided 'that in case the said premium shall not be paid on or before the several days hereinbefore mentioned for the payment thereof at the office of the company in the city of Newark, or to agents when they produce receipts signed by the president or treasurer, then, and in every such case, this policy shall cease and determine, subject to the provisions of the company's nonforfeiture system as indorsed hereon, with accompanying table. ' The nonforfeiture provisions of the policy read as follows:

'When after two full annual premiums shall have been paid on this policy, it shall cease or become void solely by the nonpayment of any premium when due, its entire net reserve by the American Experience Mortality, and interest at four per cent. yearly, less any indebtedness to the company on this policy, shall be applied by the company as single premium at the company's rates published and in force at this date, either: First, to the purchase of nonparticipating term insurance for the full amount insured by this policy; or, second, upon the written application by the owner of this policy, and the surrender thereof to the company at Newark within three months from such nonpayment of premium, to the purchase of a nonparticipating paid-up policy, payable at the time this policy would be payable if continued in force. Both kinds of insurance aforesaid will be subject to the same conditions, except as to payment of premiums, as those of this policy. No part, however, of such term insurance shall be due or payable unless satisfactory proofs of death be furnished to the company within one year after death; and, if death shall occur within three years after such nonpayment of premium, and during such term of insurance, there shall be deducted from the amount payable the sum of all the premiums that would have become due on this policy if it had continued in force.'

In accordance with the rules of the company permitting it, Henry H. Bryant only paid 80 per cent. of the first premium, and borrowed upon the policy the remaining 20 per cent. When the premium due April 18, 1895, matured, Mr. Bryant again paid 80 per cent. in cash, and borrowed the 20 per cent. from the company, less the dividend allowed for that year, amounting to $107.16. Just prior to the maturity of the premium due April 18, 1896, application was made to the company for an additional loan upon the policy, equal to the maturing premium, which would increase the premium loan upon the policy to $615.03, after crediting it with the dividend allowed on the policy for that year. In order to loan so large an amount upon the policy, it was necessary that the nonforfeiture provisions should be modified; and accordingly, upon the request and application of Henry H. Bryant and wife, the nonforfeiture provisions above quoted were canceled, and the following substituted therefor in the policy:

'When, after two full annual premiums shall have been paid on this policy, it shall cease or become void solely by the nonpayment of any premium when due, its entire net reserve by the American Experience Mortality, and interest at four per cent. yearly (provided there be no loan on the policy), shall be applied by the company as a single premium at the company's rates published and in force at this date, either: First, to the purchase of nonparticipating term insurance for the full amount insured by this policy; or, second, upon the written application by the owner of this policy, and the surrender thereof to the company at Newark within three months from such nonpayment of premium, to the purchase of a nonparticipating paid-up policy payable at the time this policy would be payable if continued in force. Both kinds of insurance aforesaid will be subject to the same conditions, except as to payment of premiums, as those of this policy. Third. If preferred, the company will, on surrender of the policy, fully receipted, within the said three months, pay as a cash surrender value its entire net reserve by the American Experience Mortality, and interest at four and one-half per cent. yearly, less a surrender charge equal to one per cent. of the sum insured by the policy. If there be any loan on the policy, such indebtedness shall be paid off out of the cash surrender value, and the remainder paid in cash by the company; or a value will be allowed by the company in the form of extended or paid-up insurance as above provided, the amount to be applied to the purchase of such insurance being correspondingly reduced in the ratio fo the indebtedness to the full cash surrender value.'

Appended thereto, and forming a part of, the new nonforfeiture provision, is a table giving in figures the cash surrender value and the loan value at the end of each year from the time the policy was issued. The loan value under the original nonforfeiture provisions was only one-half the 4 per cent. reserve. Under the new or modified nonforfeiture provisions the loan value was exactly equal to the 'cash surrender value.' At the end of the fifth policy year the loan value under the original nonforfeiture provisions was only $696, and under the new nonforfeiture provisions was $1,214.88. After the substitution of the nonforfeiture provisions, as above set out, the company loaned upon the policy the entire premium maturing April 18, 1896, which increased the loan on the policy to $615.03, after crediting all dividends allowed to that date, and Mr. Bryant executed therefor a certificate of loan, reading as follows:

'$615.03. Newark, N.J., April 18, 1896.

'This certifies that the Mutual Benefit Life Insurance Company has loaned on policy No. 202,500 six hundred and fifteen and 03/100 dollars, being a part of the premiums on said policy, which, with any additional loan, shall be payable annually, the amount of the existing loan to be indorsed hereon, and stated also on the renewal receipt. It is understood and agreed that, if interest shall not be paid when due, either in cash or by dividend, it shall be added to the principal of the loan, and that if, owing to the nonpayment of interest, the principal of the loan shall ever equal or exceed the then net reserve value of the policy, computed according to the American Experience Table of Mortality, and 4 per cent. interest, the policy shall thereupon become null, void, and be surrendered to the company in consideration of the cancellation of the loan.

'(Signed)

Henry H. Bryant.'

When the premium due April 18, 1897, matured, Mr. Bryant paid to the company in cash the sum of $236.44, and increased his premium loan to $885.05; and on April 18, 1898, Mr. Bryant paid on the premium then maturing the sum of $257.64 in cash, and increased his premium loan to $1,146.11. Each time the loan on the policy was increased, the amount of the increase was stated on the back of the certificate of loan. Dividends were allowed upon the policy each year, beginning April 18, 1895, and ending April 18, 1898, and amounting in the aggregate to $451.80. And, while the policy called for the payment of $2,922 in the aggregate for premiums maturing from April 18, 1894, to April 18, 1899, there was only paid the sum of $1,429.12, or an average of $285.82 per annum, the remainder of the premiums for those years being paid in dividends and loans upon the policy. On January 23, 1899, the board of directors of the defendant company passed the following resolution:

Resolved, that the sum of $1,959,880.93 be, and hereby is, appropriated to the payment of dividends for the year 1898-- 1899 to participating policies as the same shall be continued in force after their policy anniversaries by payment of renewal premium, or by their being paid-up policies. No dividend shall be payable to policies not continued in force after their anniversaries in 1899, except post mortem dividends, as heretofore.'

Prior to April 18, 1899, the date upon which the next annual premium matured, Henry H. Bryant was given notice of the maturity of the premium, which also stated that a dividend of $123 would be allowed, provided the premium then maturing was paid. On March 15, 1899, Mr. Bryant wrote to the company as follows:

'Mr. Amzi Dodd, Newark, N.J.: Please write me an exact statement of my indebtedness to your company after being credited with all dividends to date.

'Yours, respectfully,

Henry H. Bryant.'

And in reply received the following letter:

'March 18, 1899.

'Mr. Henry H. Bryant, 216 Main St., Clarksville, Tenn.: In reply to yours of the 15th inst. we would say that in case of your policy No. 202,500 premiums are paid up to April 18th prox., and the policy is subject to a premium loan indebtedness of $1,146.11, with interest from April 18th, 1898.

'Yours, truly,

B. J. Miller, Mathematician.'

And on April 15, 1899, he again wrote the company as follows:

'Mr B. J. Miller, Mathematician: I mail to you under separate cover my policy No. 202,500,...