Everson v. Equitable Life Assur Soc of the United States

• Decision Date: 10 January 1896
• Docket Number: 6.
• Citation: 71 F. 570
• Parties: EVERSON v. EQUITABLE LIFE ASSUR. SOC. OF THE UNITED STATES.
• Court: U.S. Court of Appeals — Third Circuit

71 F. 570

EVERSON v. EQUITABLE LIFE ASSUR. SOC. OF THE UNITED STATES.

No. 6.

United States Court of Appeals, Third Circuit.

January 10, 1896

Remarks upon the opinion of the court below:

'The learned judge recites the provisions upon the back of the policy, constituting the tontine contract, as follows '(1) That this policy is issued under the semi-tontine plan, the particulars of which are as follows: (2) That the tontine dividend period for this policy shall be completed on the 28th day of May, 1894. (3) That no dividends shall be allowed or paid upon this policy unless the person whose life is hereby assured shall survive the completion of its tontine dividend period as aforesaid, and unless this policy shall then be in force. (4) That all surplus or profits derived from such policies in the semi-tontine plan as shall not be in force at the date of their completion of their respective tontine dividend periods shall be apportioned equitably among such policies as shall complete their tontine dividend period. (5) That upon the completion of the tontine dividend period, on May 28, 1894, provided this policy shall not have been terminated previously by lapse or death, said T. Bissell Everson shall have the option either-- First, to withdraw in cash this policy's entire share of the assets, i.e. the accumulated reserve, which shall be $1,231.10, and in addition thereto the surplus apportioned by this society to this policy; secondly,' etc. The court then says (and this is really the ground of the decision): 'That by this contract of insurance the relation created between the parties was that of debtor and creditor is firmly established by numerous authorities.'

'Upon this we observe that the provisions quoted create no contract of insurance, and are entirely separate and distinct from the insurance contract shown upon the fact of the policy, yet it is upon these provisions that plaintiff's right in this litigation exclusively rests. It is obvious that these provisions create the tontine, and relate solely and exclusively to the disposition of moneys accumulated out of the annual payments made by a large number of persons in carrying 'such policies on the semi-tontine plan,' after the insurance for which such payments were made has ceased and the insurance contract ended. They relate to the ultimate disposition of overpayments made for insurance and left in the hands of defendants through a period of years. They have nothing to do with the insurance, and only become available after the insurance is at an end. Mr. Everson terminated his insurance on May 28, 1894, and now stands upon the tontine contract expressed in these 'provisions' for the disposition of the overpayments he, together with all others in his class, have made during the last 10 years, in carrying their insurance, and which, throughout the said period, they have left in the hands of the defendant to be accumulated and divided as provided. We may admit that the insurance contract upon the face of the policy creates only the relation of debtor and creditor. By it Mr. Everson owes the company annually $272.50, and upon his death it owes his representatives $10,000. But that contract was terminated by its terms May 28, 1894, and since then exists for no purpose. During the running of it, however, the defendant was permitted, by agreement of plaintiff, to retain in its hands his 'surplus,' or the moneys that he had paid in excess of the cost of his insurance, which is justly his and, except for his agreement, would have been returned to him annually. He also agreed with defendant and all other holders of such policies, and they with him, that if he died or lapsed during the period, still his surplus should remain with defendant until the end of the period, and be divided among all who have made similar agreements, and who have lived and paid through the period specified. This suit is to ascertain what has become of the plaintiff's surplus or overpayments he has made, which he has left with defendant for 10 years, and the increment thereof by interest earnings and forfeitures of others who have died or failed to pay through.

'Surely this does not involve only the relation of debtor and creditor, but also the duty of the defendant in the accumulation of a fund, and its equitable apportionment thereof at the end of the accumulating period. As was said by Judge Wallace, in Fuller v. Knapp, 24 F. 100 'Upon the case made they were entitled to a portion of the fund, the amount of which necessarily involves an inquiry as to the number and amount of the policies of the class of 1874, the dividends (surplus) which accrued upon them, the number that have been forfeited or have lapsed by retirement or death, the time when they lapsed or became forfeited, and of the interest due upon the investment of the dividends. In the management of this fund the company acts as the agent, in a limited sense, of the policy holders, and owes them the duty of keeping a correct account of the fund. * * * Whether, if discovery were not sought, the bill would be maintainable, it is not necessary to decide. It is sufficient that, being one for discovery as well as for relief, it falls within the class recognized by the authorities as cognizable in equity.' It would seem to be obvious that when Mr. Everson, under the terms of an express agreement made with defendant and with all others making similar agreements with defendant, permitted his surplus payments made to defendant, in carrying his life insurance, to remain with defendant, instead of taking them out annually, as he otherwise would have done, and the defendant, and other holders of such policies agreed that these retained dividends or surplus should be augmented from certain specified sources through a period of years, and then divided equitably among the survivors of the persons permitting them to be so retained, the defendant did, as Judge Wallace held, assume an agency in respect to the management and distribution of the funds so accumulated, and that in respect of such agency it must be held to a duty of accounting. To illustrate: Suppose 100 persons holding shares of stock in a bank make an agreement between themselves and the bank that no one of them would, through a period of 20...