Greeff v. Equitable Life Assur. Soc. of United States

• Decision Date: 03 October 1899
• Citation: 160 N.Y. 19,54 N.E. 712
• Parties: GREEFF v. EQUITABLE LIFE ASSUR. SOC. OF UNITED STATES.
• Court: New York Court of Appeals Court of Appeals

160 N.Y. 19

54 N.E. 712

GREEFF

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

Court of Appeals of New York.

Oct. 3, 1899.

Appeal from supreme court, appellate division, Second department.

Suit by Emil Greeff against the Equitable Life Assurance Society of the United States. An interlocutory judgment entered upon a decision of the trial court, which sustained a demurrer to the complaint, having been reversed by the appellate division of the supreme court, Second department (57 N. Y. Supp. 871), the defendant appeals. Reversed.

William B. Hornblower and Charles B. Alexander, for appellant.

Dickinson W. Richards, for respondent.

MARTIN, J.

The question of the sufficiency of the plaintiff's complaint has been certified to this court by the appellate division, and presents the only question to be determined upon this appeal. The importance of this case requires a careful and studious consideration of that question, and of the principles involved in its determination. Its importance arises, not so much from the amount at issue in this particular case, although it is large, as from the principles to be established by its decision. The determination of the principles involved will not only affect existing contracts amounting to many million dollars, but may disturb the methods and basis upon which vast business transactions have hitherto been conducted, and create confusion and disorder in a system under which an important branch of business has been transacted for at least a half century.

The defendant was organized in 1859 under an act of the legislature providing for the incorporating of life insurance companies, passed June 24, 1853, with a capital stock of $100,000, upon which, under its charter, its holders might receive not to exceed 7 per cent. per annum, and the earnings and receipts of the company, over the dividends, losses, and expenses, were to be accumulated by it. Its corporate powers were vested in a board of directors, who were authorized to select from among their number a president and vice president, and to appoint a secretary and such other officers as they might deem requisite. They were given power to enact by-laws, rules, and regulations for the government of the officers and agents of the company and for the management of its affairs, to determine the rates of premiums, the amount to be insured upon any one life, and the terms of such insurance. The charter also provided that the insurance business of the company should be conducted on the mutual plan, and that all premiums should be payable in cash. In case a policy holder should omit to pay any premium due from him, or should violate any other condition of the policy, the board of directors might forfeit his policy, and apply all previous paymentsto the benefit of the company. It also provided: ‘The officers of the company, within sixty days from the expiration of the first five years, from December 31, 1859, and within the first sixty days of every subsequent period of five years, shall cause a balance to be struck of the affairs of the company, which shall exhibit its assets and liabilities, both present and contingent, and also the net surplus, after deducting a sufficient amount to cover all outstanding risks and other obligations. Each policy holder shall be credited with an equitable share of the said surplus. Such equitable share, after being ascertained, shall be applied to the purchase of an additional amount of insurance (payable at death or with the policy itself), expressing the reversionary value of such equitable share, at such interest as the directors may designate, or, if any policy holder so direct, such equitable share of surplus shall be applied to the purchase of an annuity, at such rate of interest as the directors shall designate, to be applied in the reduction of his or her future premiums. In case of death, the amount standing to the credit of the party insured, at the last preceding striking of balance as aforesaid, shall be paid over to the person entitled to receive the same; and the proportion of surplus equitably belonging to him or her, at the next subsequent striking of balance, shall also be paid, when the same shall have been ascertained and declared.’ In 1868, by chapter 118 of the Laws of that year, a statute was enacted which provided that any domestic insurance corporation which, by its charter or articles of association, is restricted to making a dividend only once in two or more years, may hereafter, notwithstanding anything to the contrary in such charter or articles, make and pay over dividends annually, or at longer intervals, in the manner and proportions, and among the parties, provided for in such charter or articles. Chapter 100 of the Laws of 1872 provided that ‘it shall be lawful for any life insurance company organized under the laws of this state, to ascertain at any given time, and from time to time, the proportion of surplus accruing to each policy from the date of the last to the date of the next succeeding premium payment, and to distribute the proportion found to be equitable either in cash, in reduction of premium, or in reversionary insurance, payable with the policy, and upon the same conditions as therein expressed at the next succeeding date of such payment; anything in the charter of any such company to the contrary notwithstanding.’

On the 1st day of July, 1882, the plaintiff entered into a written contract of insurance with the defendant, whereby it, in consideration of the statements contained in the plaintiff's application and the payment of the premium mentioned therein, promised to pay to the plaintiff or his representatives, on May 2, 1897, or upon his death, if it occurred before then, the sum of $20,000. Among the provisions and requirements indorsed upon, and made a part of, the policy, and relying upon which it was issued and received, was the following: ‘This policy, during its continuance, shall be entitled to participate in the distribution of the surplus of this society, by way of increase to the amount insured, according to such principles and methods as may from time to time be adopted by this society for such distribution, which principles and methods are hereby ratified and accepted by and for every person who shall have or claim any interest under this contract; but the society may at any time before a forfeiture, upon request of the person holding the absolute legal title to this policy, substitute a cash payment, to be fixed by said society, in lieu of the said increase to the amount insured, to be used in reduction of subsequent premiums.’

All the conditions of the policy were kept and performed by the plaintiff on his part. The defendant annually, within 60 days from the 31st day of December in each year, from 1882 to 1896, both inclusive, caused a balance to be struck of the affairs of the society, exhibiting its assets and liabilities, both present and contingent, and also the net surplus, after deducting a sufficient amount to cover all outstanding risks and other obligations. Such net surplus ascertained and declared by the defendant in each of the several years was, for the year 1882, $8,078,495, and in each subsequent year a larger amount, until 1896, when the amount was $43,277,179. During the years mentioned the defendant distributed to the plaintiff, in reversionary insurance, payable with the policy and on the conditions therein expressed, as the plaintiff's proportion of surplus accruing from the date of the last to the date of the next succeeding payment, amounts varying from $243 to $328, making a total of $3,932. The several divisions of surplus distributed to the plaintiff were from sums received in excess of the several amounts mentioned as the balance of the surplus for each year, so that each distribution of surplus has been from profits accruing during the year, without diminishing the surplus on hand at the end of the preceding year, and the plaintiff has received no portion of the net surplus of $43,277,179 ascertained and declared by the defendant as the amount on hand December 31, 1896.

According to the principles and methods adopted by the defendant for distribution of surplus, there was distributed to the plaintiff, in the year 1895, $328, as his proportion of a distribution of surplus amounting to $2,002,954.23, and the proportion due the plaintiff of the $43,277,179, net surplus ascertained on December 31, 1896, according to the same principles and methods, which were the principles and methods in force during the life of the plaintiff's policy, is $7,087.38, in addition to the amount of surplus actually awarded of $3,932, making a total of $11,019.38 of surplus, and $20,000 of principal. On June 23, 1897, the defendant paid to the plaintiff the sum of $23,932 and certain interest thereon, and an agreement was then and there made between them that such payment should not prejudice the right of the plaintiff to claim that he is entitled, under his policy, to a further and greater sum by way of surplus or profits; and there still remains due from the defendant to the plaintiff, under and by virtue of said policy, the aforesaid sum of $7,087.38, and interest thereon from the 2d day of May, 1897, no part of which has been paid, although payment thereof was duly demanded prior to the commencement of this action.

The foregoing are all the material averments of the complaint, and include the provisions of the policy, the charter, and the various statutes, so far as they apply to the policy in suit or are referred to in the complaint.

This examination discloses that, after alleging the incorporation of the defendant, the provisions of its charter, the statutes relating to the subject, the issuing of the policy, its provisions, the plaintiff's performance of all its conditions, and after eliminating the conclusions and inferences of the pleader, there remain in the complaint the allegations as to the surplus for...