Connecticut Mut. Life Ins. Co. v. Dunscomb

• Decision Date: 26 May 1902
• Citation: 69 S.W. 345,108 Tenn. 724
• Parties: CONNECTICUT MUT. LIFE INS. CO. v. DUNSCOMB et al.
• Court: Tennessee Supreme Court

69 S.W. 345

108 Tenn. 724

CONNECTICUT MUT. LIFE INS. CO. v. DUNSCOMB et al.

Supreme Court of Tennessee.

May 26, 1902

Appeal from chancery court, Shelby county; F. H. Heiskell, Judge.

Bill of interpleader by the Connecticut Mutual Life Insurance Company against J. S. Dunscomb, administrator, and others. From the decree, certain defendants appeal. Affirmed.

Hudson Cary and R. P. Cary, for appellants.

Francis Fentress, for appellee.

WILKES J.

The De Soto Bank of Memphis was on March 16, 1881, an incorporated bank under the laws of the state of Tennessee. Its charter expired by limitation on March 20, 1883, but under our statute it continued to exist for five years, or until March 20, 1888, for the purpose of settling its business, disposing of its property, and dividing its capital stock; and on the 20th of March, 1888, it became extinct. On March 5, 1870, Ben K. Pullen applied to complainant for insurance on his life and, in accordance with the application, complainant on March 8, 1870, issued its policy No. 101,367, for $5,000, payable "to the order of the De Soto Bank of Memphis, Tennessee to the amount of the insured's indebtedness to said bank the balance, if any, to his legal representatives." On February 28, 1881, the De Soto Bank was the holder of the following notes made by Ben K. Pullen:

One dated March 7, 1874, for .................. $241 83

One dated March 8, 1875, for .................. 153 39

One dated March 8, 1876, for .................. 150 74

One dated March 8, 1877, for .................. 148 04

One dated March 8, 1878, for .................. 148 04

One dated March 8, 1879, for .................. 139 67

-------

Making a total, exclusive of interest, of .. $982 71

On said date (February 28, 1881) the De Soto Bank, in writing surrendered said policy No. 101,367 to complainant, and in this surrender Pullen joined. The consideration for the surrender was the issuance of paid-up policy No. 161,122, for $1,627, payable "to the De Soto Bank of Memphis, Tenn., to the amount of the insured's indebtedness to said bank; balance, if any, payable to the insured's legal representatives." Pullen died July 15, 1900. At the time of the legal death of the bank, its stock was owned by four individuals, as follows: By James Elder, $50,000; by W. H. Wood, $50,000; by Jno. B. Leech, $70,000; by S. H. Dunscomb, $65,000. The wills and letters of administration show that all these parties died prior to 1900. Their legal representatives on December 19, 1900, filed a bill in the Shelby chancery court seeking to enforce the collection from complainant therein of said paid-up policy No. 161,122. On January 3, 1901, complainant filed this bill, as one of interpleader, and enjoined the prosecution of the first suit. To this bill the rival claimants of the fund made answer, and the chancellor, upon the hearing, decreed in favor of the bank's stockholders or their representatives. The heirs of Ben K. Pullen and the administrator bring the case here by appeal, and assign errors.

The first and second assignments of error are based upon the assumption that the chancellor held the notes executed by Pullen were not barred by the statute of limitations, or that they could not be presumed to be paid, from the lapse of time. The decree of the chancellor does not recite or show that it is based upon any theory of this kind, but is based upon a different idea, but which, to some extent, involves the questions in these assignments. The questions really adjudged by the chancellor are that the bill was properly filed as a bill of interpleader, and that the representatives of the stockholders of the expired bank were entitled to the proceeds of the insurance policy. As to the first of these propositions, there is and can be no serious controversy, and the last proposition is raised by the third and fourth assignments of error. Incidentally, however, we must notice the matters presented on the first two assignments. It is proper to note in the outset that this is not a suit on the notes of Pullen, to enforce their collection. The defense of the statute of limitations, and presumption as to payment as to them, is not, therefore, raised, and cannot be, in this suit, as a defense to them, and the notes are only important so far as they bear upon the question of the right of the bank or its representatives to the proceeds of the policy. It will be conceded at once that the insurance company could not interpose any defense of the statute of limitations, or presumption of payment, to a suit upon its policy. The right of action against it on the policy did not accrue until the death of Pullen, in 1900. The policy is payable to the bank direct, to the extent of Pullen's indebtedness to it; and the bank had, therefore, an insurable interest in Pullen's life when the policy was taken out, and afterwards,--in any event, while the debts were subsisting. The record leaves the matter in some doubt as to the terms upon which the bank held this policy; that is, whether as an absolute payment of Pullen's indebtedness, or as collateral security for the same. On March 30, 1900, J. S. Dunscomb wrote to Ben K. Pullen, saying: "I find amongst my father's papers a memorandum of a policy he has on your life. I would like to know the full history of it." On April 27th Pullen answered that he had given the De Soto Bank a policy on his life as a sort of indemnity against loss in case of his death, and he further states that in the course of time his inability to pay premiums had doubtless caused it to lapse. Now, in either event the bank could, other things being out of the way, recover upon the policy, as it had an insurable interest, to the extent of its debt, in Pullen's life. In the case of Rawls v. Insurance Co., 27 N.Y. 282, 84 Am. Dec. 280, Rawls had procured a policy for $5,000 on the life of Fish, payable to Rawls himself. Among other defenses, the company pleaded that Rawls had no insurable interest in the life of Fish, and that any debt due from Fish to Rawls had long since been barred by the statute. It was shown that Rawls had a valid debt when the policy was issued, and the court held: "Regarding the policy in this case as substantially a contract of indemnity against the loss of the plaintiff's debt, and that, as an interest was required to support its inception, a continuance of that interest is essential to its perpetuity, there was no pretense that the debt, or any part of it, had been paid. All that the case showed was that the statute of limitations had apparently run against the demand of the plaintiff at the death of Fish. But suppose the statute had attached; the interest of the plaintiff, as a creditor, in the continuation of the life of his debtor, had not ceased entirely. The debt was not extinguished as in a case of payment. It might be renewed by a new promise, and, indeed, without such promise, and be enforced by action, unless the defense of the statute was directly interposed. It is not a legal presumption that when the statute of limitations has once run the debtor will refuse to revive the debt by a new promise, or interpose the defense of the statute in an action to recover it." A leading case upon the question is Dalby v. Assurance Co., 80 E. C. L. 364, where it is held that, "where a policy effected by a creditor on the life of his debtor is valid at the time it is entered into, the circumstance of the interest of the assured in such life ceasing before the death does not invalidate it." This case is cited approvingly in Olmsted v. Keyes, 85 N.Y. 598. In Curtiss v. Insurance Co., 90 Cal. 249, 27 P. 211, 25 Am. St. Rep. 114, it was contended that the claim of the creditor was barred by the statute of limitations at the time of the death of the debtor, and that therefore the creditor had no insurable interest, and could not recover. The court held: "A debt, even though not legally collectible, by reason of the bar of the statute, gives an insurable interest." "The fact that the debtor may be armed with a legal defense against the creditor does not destroy the insurable interest of the latter in the life of the former. The debtor may be an infant, and yet the fact that the plea of infancy might be interposed would not make the life policy in favor of his creditors void. If the debt be barred by the statute of limitations it nevertheless constitutes an insurable interest." Insurance Co. v. Hennessy, 39 C. C. A. 632, 99 F. 64. The same rule is stated with equal clearness in 1 May, Ins. (3d Ed.) § 108.

But if we treat the policy as only a collateral security, and not the absolute property of the bank, what are the rights of the parties? "Whenever collateral security is given for a debt, the collateral will continue as a security until the debt is satisfied, unless both parties to the original contract agree to its surrender, or the pledgee in some other way discharges or releases...