Dungan v. Mutual Ben. Life Ins. Co.

• Decision Date: 08 May 1877
• Citation: 46 Md. 469
• Parties: KATE P. DUNGAN, Administratrix of ELIZABETH P. DUNGAN v. THE MUTUAL BENEFIT LIFE INSURANCE COMPANY OF NEWARK, NEW JERSEY.
• Court: Maryland Court of Appeals

46 Md. 469

KATE P. DUNGAN, Administratrix of ELIZABETH P. DUNGAN v. THE MUTUAL BENEFIT LIFE INSURANCE COMPANY OF NEWARK, NEW JERSEY.

Court of Appeals of Maryland

May 8, 1877

APPEAL from the Circuit Court of Baltimore City.

The case is stated in the opinion of the Court.

The cause was argued before STEWART, GRASON, MILLER, ALVEY and ROBINSON, J.

Arthur Geo. Brown and Frederick W. Brune for the appellant.

There never was a legal foreclosure of the equity of redemption in the mortgaged property, nor such a sale as divested the mortgagor of her right to redeem. 1 Code, Art. 64 sections 1, 5, 6, 7, 8, 9, 10, 11, 12, 13; Schouler's Pers. Prop., 554, 5, 6, 7, 8; Clark vs. Levering, 1 Md. Ch., 178, 9; Sheckell vs. Hopkins, 2 Md. Ch., 89; Dougherty vs. McColgan, 6 G. & J., 275; Pratt vs. Vanwyck's Ex'rs, 6 G. & J., 495; Farrell vs. Bean, 10 Md., 217; Walker vs. Stone, 20 Md., 195; Korns vs. Shaffer, 27 Md., 83; Hinkley vs. Wheelwright, 29 Md., 341; Baugher vs Merryman, 32 Md., 185, 189; Conway vs Alexander, 7 Cranch, 218; Nesbitt vs. Berridge, 32 Beaven, 282, 289; Same Case on Appeal, 4 DeGex, Jones & Smith, 45, 48, 49; Bird vs. Davis, 1 McCarter, (N. J.,) 474, 5; Wilson vs. Brannon, 27 Cal., 258; Freeman vs. Freeman, 2 C. E. Green, (N. J.,) 45, 47, 48; Van Brunt vs. Wakalee, 11 Mich., 177, 181; Franders vs. Chamberlain, 24 Mich., 305; Stoddard vs. Dennison, 7 Abb. Pr. Rep., (N. S.,) 309; Hinman vs. Judson, 13 Barb., 629; Terrell vs. Allison, 21 Wall., 289, 292, 293.

The false statements made by Webb to Henry Dungan, in June, 1863, at the office of the company, in the line of its business, when Henry called to pay the premiums on his father's policy, and subsequently to Lipscomb, the company was responsible for. Ins. Co. vs. Wilkinson, 13 Wall., 222, 234, 5, 6; Ins. Co. vs. Mahone, 21 Wall., 152, 156.

To permit appellee to rely now (as it does in its answer) upon the fact that after June, 1862, the Dungans did not themselves pay the premiums, but that they were paid by Webb in their name, would be allowing appellee to take advantage of its own wrong.

It is to be remarked that, although Webb, when examined, denied some of the facts testified to by Henry Dungan, he denied none of Lipscomb's testimony, nor even referred to it.

This is equivalent to an admission by Webb of its truthfulness.

Lipscomb testifies that Webb, in September, 1863, assured him that the policy was dead and surrendered to the company.

That statement was absolutely false.

But, in fact, the premiums due June 17th, 1863, 1864, and 1865 were regularly paid to appellee as required by the contract contained in the policy, and on September 20th, 1865, the president of appellee wrote to Holmes, "Mr. Francis D. Dungan is insured in this company."

At that time the policy was a valid, subsisting contract, and the premium had been fully paid, which was, according to the terms of the contract, to keep it alive (for the benefit of all parties interested) until June 17 th, 1866.

Appellee itself proves that Webb intended to keep on paying the premiums until Francis Dungan's death, for his own selfish purposes it is true, but legally and really for the benefit of the Dungans as well, who, by proper proceedings, and by tendering what was due, could have set up their equity of redemption.

The president of appellee himself, and Webb, both testify that Grover, the president, persuaded Webb not to keep up the policy, but to surrender it to the company. Grover using as an argument with Webb, to induce him to surrender the policy, the fact that if Francis Dungan died while the policy was still in force, his family would get the insurance money, less what Webb had paid for premiums to keep it alive.

Thus, by a conspiracy between the appellee and its agent in Baltimore, they tried to deprive the Dungans of the insurance money, and appellant in this action seeks only to put herself in the exact position where she would have been but for appellee. Such dealings are contrary to public policy and as against appellant, void. She cannot be prejudiced by them.

Quite irrespective of the prospective value which the policy had, looking to the time of Francis Dungan's death, the actual cash value of the policy in November, 1865, when Webb "surrendered" it to the appellee, was very considerable.

The sum then due to Webb under his mortgage was about $754.61.

The sum paid November 28th, 1865, by appellee to Webb, as its actual value in cash at that time, clear of Dungan's premium notes, and of all claims of the com-

pany, was ....................	$1,248 51
Deduct ................	754 61
	---------
The difference ....	$493 90

represents the profit of Webb, and gives some criterion for estimating the value of the equity of redemption, quite clear of and in addition to the more valuable right to keep the policy alive until Francis Dungan's death.

For the equity of redemption nothing was paid. See Baugher vs. Merryman, 32 Md., 193, 194.

The transfer or "surrender" of the policy from Webb to appellee was not in any proper or legal sense a sale to a bona fide purchaser. It was a mere transfer of the mortgagee's claim to a party having full knowledge of the condition of the title.

It was not made after due demand and notice for the purpose of foreclosure--or of surrender--which, in this case, would have been equivalent to a foreclosure, as nothing was due, as between the insurer and the assured, at the time of the transfer.

It was a purchase by one who was in effect a trustee (as appellee in fact admits itself to have been), at a forced sale from its cestui que trust, to its advantage and her disadvantage. Mason vs. Martin, 4 Md., 135; Pairo vs. Vickery, 37 Md., 468, 484, 5.

It was also contrary to public policy and good morals.

Appellant, on the above point, relies on the authorities previously cited and also on Md. Fire Ins. Co. vs. Dalrymple, 25 Md., 265, 6, 7; Balto. Mar. Ins. Co. vs. Same, Ibid, p. 302; Korns vs. Shaffer, 27 Md., 83; Keighler vs. Savage Manf. Co., 12 Md., 416-17; Hoffman Steam Coal Co. vs. Cumberland, &c., Co., 16 Md., 506-9; Cumberland, &c., Co. vs. Sherman, 20 Md., 127; Same vs. Parish, 42 Md., 598, 606, 607, 613, 614.

Appellee took the policy with full knowledge of the Dungans' title and claim to the equity of redemption, and of their desire and efforts to redeem it; and, having accepted the alleged surrender "with its eyes open, and having full knowledge, must be considered as standing in Webb's shoes;" (Opinion of Judge PINKNEY.) Central Bank vs. Copeland, 18 Md., 305, 317; Timms vs. Shannon, 19 Md., 297, 314; Green vs. Early, 39 Md., 223, 230; Johnston vs. Ph nix Ins. Co., 39 Md., 233, 240, 242; Walker vs. Stone, 20 Md., 195, 197, 202.

Indeed, the forfeiture was attempted and carried out at the express instance and solicitation of the appellee, as has been already shown.

It is true that Grover, in his cross-examination, hypocritically pretends that he persuaded Webb to surrender the policy, because "it would not be right" to keep it alive until Dungan's death.

Why it would not have been right is not apparent, and Grover fails, when specially interrogated, to throw any light on that subject.

Although so tender upon that point, Grover seems to have no qualms of conscience about making, by this nefarious transaction, a handsome profit for his company and its agent Webb; paying over to him the premiums which had been paid on the policy since 1852, and getting rid (as he hoped) of all responsibility under the contract of insurance.

In fact appellee made itself trustee for Mrs. Dungan, and assignee of the mortgage.

As mortgagee, Webb had no interest in the policy, beyond his debt and the premiums paid by him, with interest; ( Burridge vs. Row, 1 Y. & Coll. New Rep., 183, 191; same case on appeal, 13 L. J., ch. 176; Bunyon on Life Ins., foot p. 95, marg.;) and the assignment having been made without the concurrence of the mortgagor, the appellee, as assignee, took "the mortgage and the debt secured by it, upon the same terms and subject to the like equities and defences that it was subject to in the hands of the assignor. The mortgagor cannot be prejudiced by the assignment." Cumberland Coal Co. vs. Parish, 42 Md., 614; Whitridge vs. Barry, 42 Md., 151.

Webb, therefore, had held the policy for the benefit of himself and Mrs. Dungan in their respective capacities and rights of mortgagee and mortgagor; and if, during that time, Francis Dungan had died, there can be no doubt that it would have been not only the right, but the duty of Webb to recover the insurance money for the benefit of the mortgagor as well as for himself.

Appellee, by assignment from Webb, stepped into his shoes, and in view of the facts and the authorities cited, thereby was subjected to and assumed all the duties which Webb had owed to the mortgagor of the policy, as the necessary consequence of its acquisition of his rights as mortgagee.

And the relation of mortgagor and mortgagee was not destroyed, by the so-called "surrender" in November, 1865; which being fraudulent and inoperative to destroy the policy, as decided by the Court below, and already shown, while it extinguished the rights of Webb, did not affect those of the other parties.

Appellee by its letter of December 12th, 1865, refused to have anything further to do with the matter, but, as an extra precaution, Henry Dungan went to Newark in May, 1866, before the next annual premium fell due, to pay all that appellee had demanded and falsely alleged to be due.

This, appellee refused to take.

Appellant was, therefore, relieved from the duty of making any further payments or tenders, and indeed deprived of all opportunity to make them.

The reply...