Chastang v. Mutual Life Ins. Co. of N.Y.

• Decision Date: 07 March 1946
• Citation: 65 N.E.2d 873,77 Ohio App. 433
• Parties: CHASTANG v. MUTUAL LIFE INS. CO. OF NEW YORK.
• Court: Ohio Court of Appeals

65 N.E.2d 873

77 Ohio App. 433

CHASTANG v. MUTUAL LIFE INS. CO. OF NEW YORK.

Court of Appeals of Ohio, Second District, Franklin.

March 7, 1946

See also, Ohio App., 65 N.E.2d 878.

Manuel Koslen and Charles J. Chastang, both of Columbus, and Wm. S. Schwartz, of Cincinnati, for plaintiff-appellant.

Louis W. Dawson, of New York City, Wm. Marshall Bullitt, of Louisville, Ky., and Arnold, Wright, Purpus & Harlor, of Columbus, for defendant-appellee.

WISEMAN Judge.

This is an appeal on law from the judgment of the Common Pleas Court of Franklin County, wherein the plaintiff-appellant instituted an action for declaratory judgment which had for its purpose the determination of his rights and status as a policy-holder in the Mutual Life Insurance Company of New York, defendant-appellee.

For the purpose of brevity, the plaintiff-appellant, Charles J Chastang, will be referred to as 'plaintiff' or 'Chastang', and the defendant-appellee, The Mutual Life Insurance Company of New York, will be referred to as 'defendant company'.

The plaintiff brought the action on his own behalf and on behalf of all others similarly situated.

The record shows that by agreement of the parties, the cause was submitted to the trial court as a class action, upon the pleadings, interrogatories, answers thereto, stipulations and exhibits. The trial court rendered two separate opinions and also a separate findings of fact and conclusions of law.

It was stipulated and agreed that Chastang, who at all times was a resident of the State of Ohio, on January 19, 1929, in Cincinnati, Ohio, had issued to him by the defendant company a $5,000 policy of insurance on his life, said policy being designated as a 'Limited Payment Life Policy with Double Indemnity for Death by Accident and Increasing Total and Permanent Disability Benefits' and being policy No. 4,097,734; that Chastang kept said policy in full force and effect; that the defendant company is a corporation organized and existing under and by virtue of the laws of the State of New York, and licensed to do business as a foreign insurance company in the State of Ohio. It was further stipulated and agreed that the policy was issued pursuant to an application made in writing by Chastang upon a form presented to him by the agent of the defendant company for the above-described insurance, and that at the time the application was made Chastang paid said agent in cash the first semiannual premium in the amount of $66, of which $2.80 was the premium for the Double Indemnity Benefit, and $7.95 the premium for the Disability Benefits.

The record discloses, and the trial court so found, that for seven years after the policy was issued to Chastang the defendant company paid to him the same dividend (in dollars and cents) per $1,000 face amount of life insurance specified in Chastang's policy as it paid to other policyholders of the same age, same expectation of life, and who held exactly similar policies to that held by Chastang but which did not contain any provision for disability benefits; that beginning in 1937 and continuously through 1942, the defendant company annually paid to Chastang a smaller dividend (in dollars and cents) on his policy than it paid to other policyholders of the same age, same expectation of life, and who held exactly similar policies to that held by Chastang but which did not contain any provision for disability benefits. The record shows that the dividends (per $1,000 face amount of insurance) which the defendant company paid during the calendar years 1930 to 1942, both inclusive, (1) on Chastang's Policy No. 4,097,734 with disability benefits, and (2) on a corresponding policy without disability benefits, were as follows:

Dividends paid on Dividends which would have

Policy No. 4,097,734 been paid on correspond-

with ing policy issued without

Disability Benefits Disability Benefits

Calendar Year (per $1,000) (per $1,000)

---------------------------------------------------------------

1930 $6.74 $6.74

1931 6.82 6.82

1932 6,60 6.60

1933 5.47 5.47

1934 5.37 5.37

1935 5.42 5.42

1936 5.14 5.14

1937 3.34 5.98

1938 3.01 5.65

1939 1.61 4.25

1940 2.57 5.21

1941 .45 4.54

1942 .45 4.63

The defendant company changed its dividend payment policy in 1937 due to the fact that the defendant company and all other insurance companies for a number of years prior to 1937 found that losses suffered for disability benefits were far in excess of the anticipated losses. The insurance companies set about to rectify the situation by reducing the dividend payment on life insurance policies which contained disability benefits. The defendant company made this change in 1937 so that thereafter the dividends paid on a life insurance policy which contained disability benefits were less than the dividends paid on a life insurance policy which contained no disability benefits provision.

In 1942, the plaintiff instituted this action to have the court determine, declare, adjudge and decree the rights, duties obligations, status, and legal relations of the plaintiff and defendant company under the terms and provisions of the insurance contract, and under the provisions of Section 9403 of the General Code of Ohio; and further to have the court determine, declare, adjudge and decree that under the provisions of Section 9403, General Code, and under the terms of the life insurance contract issued to the plaintiff, and in accordance with the intent of the parties thereto, it is the legal and contractual duty and obligation of the defendant company to pay to the plaintiff and to others similarly situated for the years 1937, 1938, 1939, 1940, 1941 and 1942 the same dividend per each $1,000 face amount of life insurance in force as said defendant company paid during said years to individuals of plaintiff's same life insurance class, who had not purchased disability benefits insurance. While the plaintiff in his petition prayed for other relief, in substance, the gist of the plaintiff's action is as herein stated.

At once we are met with the contention that the court was without jurisdiction. The question as to whether the court has jurisdiction of the subject matter can be raised at any stage of the case. It is contended that the plaintiff seeks relief which would require the court to exercise visitorial powers over the defendant company, it being a foreign corporation. The principle of law involved is very well established and stated in Relief Ass'n v. Equitable Life Assurance Society, 140 Ohio St. 68, 42 N.E.2d 653, 654, as follows: 'Courts of Ohio are without jurisdiction to entertain an action agaist a foreign corporation where the result of granting the relief asked would be to interfere with the management of such corporation or the exercise by the board of directors of such corporation of a discretion vested in them by the laws of the state of creation or domicile of the corporation.' See also Ellis v. Mutual Life Ins. Co., 237 Ala. 492, 187 So. 434; 11 O.J. page 718.

Does the relief sought in the instant case require this court to exercise visitorial powers over the defendant company? We do not think so. The gist of plaintiff's action is to 'determine, declare, adjudge and decree the rights, duties, obligations, status and legal relations of plaintiff and all others similarly situated and defendant company under the terms and provisions of the insurance contracts * * * and under the provisions of Section 9403 of the General Code of Ohio.' The relief sought will not interfere with the internal management of the defendant company or in any manner disturb the Board of Directors in the exercise of a discretion vested in them by the laws of the State of New York. This court is asked to determine the rights of the plaintiff and all others similarly situated in light of the action of the defendant company, which can be done without interfering with the internal management of, or the exercise of visitorial powers over, said defendant company.

Plaintiff in his first, second, fourth, sixth and seventh assignments of errors contends in substance that the trial court committed prejudicial error in determining that Section 9403, General Code, did not apply, but that Section 9404, General Code, did apply, in determining the plaintiff's rights, and that the trial court committed prejudicial error in not requiring the defendant company to continue paying dividends according to its established custom and practice and in failing to hold that the agreement of life insurance and the agreement of disability benefits insurance are two separate and distinct agreements of insurance.

The one vital question for the court to determine, around which all other matters revolve, is whether the policy of insurance issued to Chastang consisted of two separate contracts, to wit, (1) for life insurance, and (2) for disability benefits each of which must be considered as an entire separate contract; or whether the disability benefits feature of the policy was an integral part of one life insurance policy, and the policy regarded as one entire contract. There are no reported cases in Ohio, consequently this case becomes one of first impression. In cases where this issue has been raised, the courts have uniformly held that the policy constituted one entire contract. Rhine v. New York Life, 1936, 248 A.D. 120, 289 N.Y.S. 117, affirmed 1936, 273 N.Y. 1, 6 N.E.2d 74, 108 A.L.R. 1197; Rubin v. Metropolitan Life, 1937, 251 A.D. 382, 296 N.Y.S. 908, affirmed 1938, 278 N.Y. 625, 16 N.E.2d 293; Barnett v. Metropolitan Life, 1939, 258 A.D. 241, 16 N.Y.S.2d 198, affirmed 1941, 285 N.Y. 627, 33 N.E.2d 554; Sullivan v. Penn Mutual Life, 7 Cir., 1938, 100 F.2d 560; Blackburn v. Home Life of New York,...