Haydel v. Mutual Reserve Fund Life Ass'n

• Decision Date: 05 November 1900
• Docket Number: 1,408.
• Citation: 104 F. 718
• Parties: HAYDEL v. MUTUAL RESERVE FUND LIFE ASS'N.
• Court: U.S. Court of Appeals — Eighth Circuit

104 F. 718

HAYDEL v. MUTUAL RESERVE FUND LIFE ASS'N.

No. 1,408.

United States Court of Appeals, Eighth Circuit.

November 5, 1900

E. T Farish, for plaintiff in error.

James C. Jones (William C. Jones, George Burnham, Jr., and Sewell T. Tying, on the brief), for defendant in error.

In this case Mary E. Haydel, the plaintiff in error and the plaintiff below, sued the Mutual Reserve Fund Life Association, the defendant in error, to recover the amount alleged to be due on two policies of insurance issued by the defendant company on the life of her deceased husband, F. L. Haydel, one of which was extended August 2, 1884, in the sum of $10,000, and the other on September 15, 1884, in the sum of $5,000. Both policies were issued on what is termed the 'assessment plan,' and remained in force until March 3, 1898. On January 12, 1898, an assessment, known as 'Mortuary Call No. 96,' was levied on the first of the above-mentioned policies in the sum of $141.90, which sum, by the terms of the assessment, was payable February 1, 1898, but might be paid on or before March 3, 1898. On January 28, 1898, a similar assessment, also designated 'Mortuary Call No 96,' was levied on the second of the above policies in the sum of $70.95, which sum was likewise made payable, by the terms of the assessment, on or before March 3, 1898. F L. Haydel, the plaintiff's husband, although duly notified of these assessments, declined to pay them, and died on March 6, 1898, leaving them wholly unpaid. Under a provision contained in the policies the failure to pay these assessments, if they were legally levied, rendered the policies void, and the defendant company relied on this provision as a defense thereto. The plaintiff pleaded that these assessments known as 'Mortuary Call No. 96' were unlawfully levied, and that the policies had not become forfeited when her husband died. The reasons that were assigned and are principally relied upon to support this contention are as follows: First. It was said that the defendant company was incorporated under the laws of New York to do business solely on the 'co-operative or assessment plan,' and that after its organization, and after the issuance of the policies in suit, it began to issue a class of policies known as 'five-year combination option policies,' which were not authorized by its charter, not being issued on the co-operative and assessment plan; that it amalgamated this business with its authorized business by levying assessments on all its members to pay losses incurred under its unauthorized policies, and that mortuary call No. 96 was levied in part for that purpose. Second. It was urged, in substance, that by a table or rate of assessment indorsed on the policies in suit it was stipulated that the rate of assessment should not exceed $3.50 for each $1,000 of insurance, making each assessment in the aggregate on the $10,000 policy $35, and that assessments at that rate were paid until 1895, when the rate was unlawfully raised by levying an assessment every two months to the amount of $82.80 on the $10,000 policy; that the assessment was again raised in 1898 by requiring a payment of $141.90 on February 1, 1898, on the $10,000 policy, and that this latter assessment was unlawful. Furthermore, it was contended that an agreement existed between the insurer and the insured to the effect that the reserve fund of the defendant company 'above $100,000 and in excess of sums represented by outstanding bonds should be applied to the payment of claims in excess of the American table of mortality, and when any claim by death was due to make up any deficiency that might then exist in the death fund'; and that this agreement was not kept by the defendant company when mortuary call No. 96 was levied, by virtue of which fact the call was also illegal. It was also urged that by the terms of the policies the rate of assessment thereon, to correspond with the actual mortality experience of the company, could be changed only at the expiration of periods of five years after the issuance of the policies,-- that is to say, in 1889, 1894, and 1899,-- but that instead thereof the defendant increased the assessment at the beginning of the year 1898 by levying mortuary call No. 96 to the amount of $141.90 on the $10,000 policy, and that such increase rendered the assessment void, it not having been raised at the end of the quinquennial period. It was finally claimed that by acts in pais the defendant company had waived the right to exact payment of assessments on the precise day of maturity. These were, in substance, the principal grounds relied upon in the trial court to avoid a forfeiture of the policies for nonpayment of the assessments due on March 3, 1898. They were each overruled and a direction was given to the jury that under the evidence adduced by the plaintiff there could be no recovery. (C.C.) 98 F. 200. The plaintiff below has brought the case to this court for review.

Before CALDWELL, SANBORN, and THAYER, Circuit Judges.

THAYER Circuit Judge, after stating the case as above, .

It may be conceded at the outset that, if the assessment on the policies which was due on or before March 3, 1898, was unlawfully levied, the policies remained in force on March 6 1898, when the plaintiff's husband died; and, taking this proposition for granted, we shall proceed to consider whether the assessment in question was, for any reason, illegal. The first point to be determined is whether the issuance by the defendant company 'of the five-year combination option policies,' so termed, rendered the assessment due on March 3, 1898, unlawful. The principal objection urged to the validity of the latter class of policies is that they were endowment policies, and in this behalf counsel for the plaintiff in error asserts that they were endowment policies because 'the company undertook to pay or make return of a specified sum of money at the termination of certain designated periods during the lifetime of the assured. ' An inspection of one of these policies, which has been inserted in the record, discloses the fact that by the terms of the policy, as expressed on its face, the insured is required to pay a stated sum at stated periods, instead of paying an uncertain sum, which is fixed on each occasion by the executive committee of the company; and in this respect this class of policies does differ from the company's ordinary policy. A critical examination of the conditions appended to the policy discloses, however, that out of the premiums thus agreed to be paid the company is authorized to deduct 'the amount included therein for dues, for expenses, and other expenses chargeable against moneys received from mortuary calls as provided in the constitution and by-laws, medical fees, and amounts paid for the surrender and cancellation of policies,' and that, 'after paying the death and disability claims through the death fund,' it is required to add the remainder 'to the reserve or emergency fund. ' This class of policies also contain provisions to the following effect: That there shall 'be due to the association for premiums the amount mentioned on (the fact thereof), or such multiple or ratio thereof as its executive committee may determine' that, should said policies continue in force, 'the actuary of the association will annually after the eleventh year while the same is in force determine and credit thereto the equitable proportion to which this policy is entitled * * * from its direct contribution to the reserve or emergency fund for the tenth respective year prior to said credit, which amount so determined and credited may be used towards payment of future premiums'; that, after such policies have been in force for the full term of five years, 'if the member notify the association, in writing, at least six months before the expiration of any policy year, that he desires to surrender this policy, and receive therefor its cash surrender value, the actuary of the association will determine the amount remaining in the reserve or emergency fund * * * directly contributed thereto by said member, and the association will, upon surrender and cancellation of this policy while in force, pay to said member in cash at the end five years fifty per cent., at the end of six years fifty-five per cent. (with an additional five per cent. for each added year of continuous membership not exceeding one hundred per cent.), of the net amount so determined'; and that after such contracts have been in force for the full term of five years, and during their continuance, 'the member, by giving at least thirty days' notice in writing to the association, may have the amount to which he would have been entitled as a cash surrender value under (the preceding) provision applied to extend the obligation to pay the principal sum in event of death for such period as said value will meet the dues for expenses fixed by the board of directors, and the full tabular cost as per American Experience Table of Mortality at attained age, at the expiration of which period said obligation shall cease and determine.' While these provisions are somewhat involved, and to a certain extent difficult of comprehension, still we think it is clear that the policies in question which contain the same are not endowment policies; and we are also of opinion that they are not so far variant from ordinary policies issued on the co-operative or assessment plan as to warrant a ruling that the defendant company exceeded its power in issuing them. They lack some of the essential features of endowment policies. While the premium at first reserved is a definite sum, yet by further provisions the executive committee of the company can require the holders of such policies to pay a greater or less sum...