Fitzsimmons v. American Union Life Ins. Co.

• Decision Date: 30 October 1939
• Citation: 133 S.W.2d 680,234 Mo.App. 878
• Parties: MARY FITZSIMMONS, APPELLANT, v. AMERICAN UNION LIFE INSURANCE COMPANY, RESPONDENT
• Court: Kansas Court of Appeals

133 S.W.2d 680

234 Mo.App. 878

MARY FITZSIMMONS, APPELLANT, v. AMERICAN UNION LIFE INSURANCE COMPANY, RESPONDENT

Court of Appeals of Missouri, Kansas City

October 30, 1939

Appeal from Buchanan Circuit Court.--Hon. Emmett J. Crouse, Judge.

Judgment reversed and cause remanded.

Harry A. Hall and Wm. R. Ross for appellant.

(1) The court erred in holding that the defendant insurance company could deduct the note indebtedness from the cash values of the policies when they were continued as extended term insurance, and in refusing plaintiff's requested declarations of law Nos. 3, 4 and 5 to the effect that such deduction could not be made under the law and the terms of the notes and policies. 1 Cooley Briefs on Ins., p. 3821; Wideicombe v. Penn Mut. Ins. Co., 241 S.W. 437; Stark v. John Hancock Ins. Co., 159 S.W. 758; Francis v. Prudential Ins. Co., 90 A. 205; Bozeman's Adm'rs v. Prudential Ins. Co. (Ky.), 113 S.W. 836; New York Life v. Van Meter Adm'r. (Ky.), 121 S.W. 438; New York Life v Smith, 35 So. 1004; McEachern v. New York Life, 82 S.E. 820; Smith v. Mutual Life, 72 S.W. 935; Richardson v. Ashby, 33 S.W. 806; Tennent v Union Central Life, 112 S.W. 754. (2) The court erred in holding that upon lapse of the policies the company could cancel them and satisfy the note indebtedness from the policy cash values. (3) The court erred in holding that the insurance was not in force as extended term insurance when the insured died and in refusing plaintiff's requested declarations of law Nos. 2, 5, 7 and 8 to the effect that under the law the policies were in force at that time as extended term insurance. Gootch v. Metropolitan Ins. Co., 61 S.W.2d 704; Stark v. John Hancock Ins. Co., 159 S.W. 758; Lacy v. Amer. Central Ins. Co., 115 S.W.2d 193; Payne v. Minnesota Life Ins. Co., 121 S.W. 695; LaForce v. Ins. Co., 43 Mo.App. 518.

Brown, Douglas & Brown and A. L. Guitar for respondent.

(1) The basis of computing reserve, surrender and loan values provided in the policies, in the amounts stated therein, are more favorable than the basis of computation provided in Section 5741, Revised Statutes of Missouri for 1929, and appellant is entitled to that basis in computing extended insurance when default occurred in the payment of premiums. Gooch v. Met. Life Ins. Co., 333 Mo. 191; 61 S.W.2d 704; Lacy v. American Central Life Ins. Co. (Mo. App.), 115 S.W.2d 193; Payne v. Minnesota Life Ins. Co., Mo., 121 S.W. 695. (2) Appellant, plaintiff below, has the burden of proving that under the policy provisions a sufficient surplus was available when default was made in non-payment of premiums, to purchase extended insurance for a period extending at least to, or beyond, the date of the death of the insured. Braun v. Mo. State Life Ins. Co. (Mo. App.), 226 S.W. 48; Eyler v. Prudential Ins. Co. (Mo. App.), 89 S.W.2d 150. (3) Under the policy provisions and the operation of the non-forfeiture statutes, respondent was entitled (wholly aside from its rights because of the assignment and pledge of the policies) to deduct the loans from the policy values at the time of default, and to use the surplus only to purchase extended insurance. (a) The statute so provides. R. S. of Mo., 1929, sec. 5741. (b) The policy expressly permits deduction of indebtedness in any settlement, and settlement of rights on default in payment of premiums is such a settlement. People v. Green (N. Y.), 5 Daly 194; Abe v. Block (Tex. Civ. App.), 135 S.W. 1078; City of Long View v. Capps (Tex. Civ. App.), 123 S.W. 160; Beall v. Hudson County Water Co., 185 F. 179. (4) The notes which assigned the policies as security for their payment authorize the respondent to apply cash values in payment of the debt at dates prior to the default in payment of premiums. This contractural right is enforceable, aside from and independent of the insurance policy itself. Head v. New York Life Ins. Co. (Mo.), 227 S.W. 429; Head v. New York Life Ins. Co., 224 U.S. 166; 58 L.Ed. 1266; Tennent v. Union Central Life Ins. Co., 133 Mo.App. 345, 112 S.W. 754. (5) The assignee or pledgee of a policy of life insurance has the unqualified right to demand application of cash values to the payment of a matured debt for which the policy is security. Cornell v. Mut. Life Ins. Co. of N. Y., 179 Mo.App. 420, 165 S.W. 858; Bush v. Block, 193 Mo.App. 704, 187 S.W. 153; Mo. State Life Ins. Co. v. Cal. State Bk., 202 Mo.App. 347, 216 S.W. 785; Industrial Land & Investment Co. v. Mo. State Life Ins. Co. (Mo. App.), 3 S.W.2d 1048; Cockrill v. Southwestern Life Ins. Co. (Tex. Civ. App.), 103 S.W.2d 399; Bank of Idana v. Ill. Life Ins. Co. (Kan.), 9 P.2d 629; Morrow v. Commonwealth Life Ins. Co. (Fla.), 159 So. 525; John Hancock Life Ins. Co. v. Kegan, 22 F.Supp. 326; Knapp v. John Hancock Mut. Life Ins. Co., 214 Mo.App. 151, 259 S.W. 862.

OPINION

SHAIN, P. J.

This is an action on two life insurance policies issued on the life of Roy Fitzsimmons, deceased. Mary Fitzsimmons, the beneficiary in both policies, brings this suit against the American Union Life Insurance Company.

Plaintiff's suit is in two counts: The first count declares upon a policy for $ 2000 issued by defendant on May 20, 1915; and the second count declares upon a policy for $ 3000 issued by defendant on July 22, 1915.

Due proof of death stands admitted and the controversy involves construction of provisions and conditions in said policies as follows:

"Any indebtedness to the Company, including any balance of the current year's premium remaining unpaid, will be deducted in any settlement of this policy.

NON-FORFEITURE PROVISIONS.

"After payment of premiums for three or more full years the following options shall be effective:

"PAID-UP AND EXTENDED INSURANCE--Upon written request for either non-participating paid-up or extended term insurance, at any time prior to, or within sixty days after default in payment of premium, the company will, after such default, either continue this policy for a reduced amount of non-participating paid-up insurance in accordance with the accompanying table, or extend and continue in force the full amount of this policy as non-participating term insurance in accordance with the accompanying table.

"CASH SURRENDER VALUE--Any time within sixty days after default in payment of any premium the Company will, upon request, with a full and valid surrender of the policy and all claims thereunder, pay a cash surrender value in accordance with the accompanying table, less any existing indebtedness to the company on acount of this policy.

"LOANS--If this policy be not then extended as term insurance the Company will advance, on proper assignment of this policy and on the sole security thereof, at a rate of interest not exceeding six per centum per annum, subject to the laws of the State in which the insured resides at time of issuance of this policy a sum equal to, or, at the option of the insured, less than the amount stated in the accompanying table.

(Table appears here)

"GENERAL PROVISIONS AND PRIVILEGES.

"6. Any indebtendess to the Company, including loans and interest accumulations, and any balance of the year's premium remaining unpaid, will be deducted in any settlement under this policy."

On policy No. 714 for $ 2000, declared upon in count No. 1, the last premium was paid on June 21, 1927, for the policy year ending May 20, 1928.

On policy No. 816 for $ 3000, declared upon in count No. 2, the last premium was paid on August 13, 1927, for the policy year ending July 22, 1928.

The facts shown by the record, as to policy No. 714 for $ 2000, are that "on or about the twelfth anniversary of policy No. 714, May 20, 1927, the insured borrowed $ 696 from the defendant, and assigned and pledged policy No. 714 to the defendant according to the terms of a collateral security note executed by the insured and the appellant as beneficiary in that policy, dated May 20, 1927, according to the terms of which the makers of the note promised to pay the loan on or before May 20, 1928 (the thirteenth anniversary of policy No. 714). Said note contained the following provision:

"Which amount with interest thereon from maturity at the rate of six per cent per annum, shall, unless sooner paid, be deducted by the company, in the event of my death or surrender of policy No. 716, from the amount payable on said policy, and shall be a lien and charge thereon; and said policy is hereby assigned to said St. Joseph Life Insurance Company as collateral security for the payment of the above named sum.'"

The facts shown by the record as to policy No. 816 for $ 3000 are that "on or before July 22, 1927, the twelfth anniversary of policy No. 816, the insured borrower of the respondent $ 1,045.28, and assigned and pledged policy No. 816 to the respondent as security for the repayment of that sum, in accordance with the provisions of a collateral security form of note identical in form with the note above described in connection with policy No. 714, signed by the insured and appellant as beneficiary of policy No. 816, in which they promised to pay the sum of $ 1,045.28, on or before July 22, 1928, the thirteenth anniversary of policy No. 816." The same provision appearing in the first note appears in the second.

It appears that the insured left the State of Missouri in 1927 and never returned. His death occurred October 13, 1932. After death of insured, the plaintiff herein notified the company and made demand for payment on the policies. The defendant declined to make payment upon the stated grounds that the policies had lapsed and expired in accordance with the contractual transaction between the parties prior to death of insured.

There is a letter in evidence that was sent to and admittedly received by plaintiff under date of ...