Heaberlin v. Jefferson Standard Life Ins. Co.
| Decision Date | 17 October 1933 |
| Docket Number | 484. |
| Citation | 171 S.E. 419,114 W.Va. 198 |
| Parties | HEABERLIN et al. v. JEFFERSON STANDARD LIFE INS. CO. et al. |
| Court | West Virginia Supreme Court |
Submitted October 11, 1933.
Syllabus by the Court.
Where lending insurance company requires borrower to obtain life policy from company and assign policy as security for loan insurance premium does not constitute interest and does not render loan usurious where only legal interest is charged for loan and insurance premium does not exceed ordinary premium charged for similar policies.
1. Where an insurance company, as a condition for a loan requires the borrower to insure his life, with such company and assign the policy of insurance as security for the loan and to pay the premiums during the continuance of the loan, such premiums will not be considered as interest on such loan, nor will the loan be rendered usurious by reason of such requirements, where the rate of interest charged for the loan does not exceed the legal rate, and where the premiums charged for the insurance do not exceed the premiums charged to other persons f or similar policies who do not obtain loans.
2. A case in which the allegations of the bill are insufficient to support a claim of usury.
Case certified from Circuit Court, Raleigh County.
Suit by C. L. Heaberlin and others against the Jefferson Standard Life Insurance Company and others. A demurrer to the bill was overruled and the ruling certified for review.
Ruling reversed and demurrer sustained.
Ben H. Ashworth and David G. Lilly, Jr., both of Beckley, for plaintiffs.
McGinnis, Ashworth & Mann, of Beckley, and Brown, Jackson & Knight, of Charleston, for defendants.
This suit was brought in Raleigh county for the purpose of enjoining a sale under a certain deed of trust, and of purging the loan secured thereby of usury. A temporary restraining order was awarded, and, upon a hearing on a demurrer to the bill, the chancellor overruled the demurrer and certified his ruling here.
The bill alleges in substance that defendant Jefferson Standard Life Insurance Company, a foreign corporation, had qualified to do business in this state; that on November 24, 1926, plaintiffs C. L. Heaberlin and Elizabeth Heaberlin, owners of an apartment house in the city of Beckley, applied to defendant for a $35,000 loan; that they were granted a loan of $27,500, payable in one lump sum, ten years after date, with interest at 6 per centum, payable semiannually; that the indebtedness was evidenced by a note payable at the company's home office in North Carolina; that the note was secured by a deed of trust on the apartment property; that before the defendant would make the loan, and in order to acquire an unlawful and usurious rate of interest, it required C. L. Heaberlin to take out a ten-year endowment policy on his life in the amount of the loan, the same being payable on the exact date of the maturity of the note; that the apartment house was, at the time of the loan, and still is, ample security for the amount of the loan; that while the deed of trust did not specify that the endowment policy should be taken with defendant company, C. L. Heaberlin was required, in fact, to take it out with the company for the purpose of acquiring usurious interest; that the annual premiums of $2,587.20 on said insurance were promptly met until some time in 1931, at which time upon request defendant permitted the surrender of said policy, and applied a portion of cash surrender value to the principal loan; that in lieu thereof plaintiff was required to take out a life insurance policy; that plaintiffs became and were unable to make the several payments alleged to become due on the -- day of November, 1932; that the plaintiffs are entitled to have all payments made by them, or either of them, as premiums upon said endowment insurance policy and said life insurance policy, and the interest paid by them on said note, applied as partial payment on said loan as of the date of making such payments by deducting from each payment, when made, the lawful rate of interest then due on said loan, or the unpaid portion thereof, and the remainder of said payments applied as payment on the principal of said debt, as of the date that said debt becomes due and payable; that the plaintiffs have paid defendant a sum in excess of $22,000 and that defendant still claims $18,000 due; that defendant has in its possession, and assigned to it, the cash surrender value in said policies in a sum exceeding $2,500 and refused to apply said amount to payments alleged to be due in November, 1932; and that, if all payments made had been properly credited, plaintiffs were not in default in the payment under the terms of the trust deed. In addition to an injunction, the bill prayed for a discovery as to the various payments made to defendant company, for an accounting between the parties, that the loan be purged of its usury, and for general relief.
Before dealing with the sufficiency of the bill, we must determine whether or not a requirement that a borrower carry insurance upon his life, and assign the policy to the lender in addition to the security provided by deed of trust, constitutes usury and renders the loan illegal to the extent of the premiums paid upon the policy.
At the outset we are met with two lines of decisions. One holds that such a requirement, as a condition precedent, does not constitute usury, at least where the policy is actually issued at the same rate and on the same conditions as policies issued to nonborrowers. Union Cen. L. Ins. Co. v. Morrow, 16 Ohio C. C. 351, 8 Ohio C. D. 419, affirmed without opinion in 61 Ohio St. 661, 57 N.E. 1133; Union Central L. Ins. Co. v. Hilliard, 63 Ohio St. 478, 59 N.E. 230, 53 L. R. A. 462, 81 Am. St. Rep. 644, reversing 16 Ohio C. C. 434; John Hancock Mut. L. Ins. Co. v. Nichols, 55 How. Prac. (N. Y.) 393; Homeopathic Mut. L. Ins. Co. v. Crane, 25 N. J. Eq. 418; Washington L. Ins. Co. v. Paterson Silk Mfg. Co., 25 N. J. Eq. 160; Lane v. Washington L. Ins. Co., 46 N. J. Eq. 318, 19 A. 618, affirming 46 N. J. Eq. 316, 19 A. 617; Downes v. Green, 12 Mees. & W. 481, 152 Eng. Reprint 1287; Edenburgh Life Assur. Co. v. Graham, 19 U. C. Q. B. 581. The other, that such a requirement renders the transaction usurious. Moore v. Union Mut. L. Ins. Co., Fed. Cas. No. 9,777; Missouri Valley L. Ins. Co. v. Kittle (C. C.) 2 F. 113; National L. Ins. Co. v. Harvey (C. C.) 7 F. 805; Brower v. Life Ins. Co. (C. C.) 86 F. 748; Clague v. Creditors, 2 La. 114, 20 Am. Dec. 300; Roberts v. Life Ins. Co., 118 N.C. 429, 24 S.E. 780; Miller v. L. Ins. Co., 118 N.C. 612, 24 S.E. 484, 54 Am. St. Rep. 741; Carter v. Life Ins. Co. of Virginia, 122 N.C. 338, 30 S.E. 341.
In the first Ohio case cited it was held that though the loan and the insurance constituted one transaction in a certain sense yet, as the company would have been liable on the policy if the insured had died immediately after the policy was issued, the subject-matter of the contract was divisible, and the transaction was not usurious. In the later case, where the borrower was required to take out a policy on the life of a grandson, the court held that the policy was not an unusual one, and since the customary rates of premiums and terms were imposed, the requirement that the...
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