Head v. New York Life Ins. Co.

• Decision Date: 31 December 1920
• Docket Number: No. 21477.,21477.
• Citation: 227 S.W. 429
• Parties: HEAD et al. v. YORK LIFE INS. CO.
• Court: Missouri Supreme Court

227 S.W. 429

HEAD et al. v. YORK LIFE INS. CO.

No. 21477.

Supreme Court of Missouri, in Banc.

December 31, 1920.

Appeal from Circuit Court, Jackson County; Thos. J. Seehorn, Judge.

Action by Richard G. Head, Jr., by B. F. Deatherage, his next friend, and Richard G. Head in person, against the New York Life Insurance Company. From the judgment plaintiffs appeal. Affirmed.

Harding, Deatherage, Murphy & Stinson, of Kansas City, for appellants.

Lathrop, Morrow, Fox & Moore, of Kansas City, for respondent.

JAMES T. BLAIR, J.

Richard G. Head, a citizen of New Mexico, while temporarily in Kansas City, Mo., applied for and received from respondent, under date of April 3, 1894, two $10,000, 20 years accumulation period policies of insurance on his life, both payable, in case of his death within 20 years, to his minor son, Richard G. Head, Jr. The details of the application, delivery, receipt, payment of first premium, etc., as well as those of the transfer of one policy to Mary E. Head, and the subsequent securing of a loan on the policy payable to Mary E. Head, are stated in the opinion on' the former appeal. Head v. Insurance Co., 241 Mo. 403, 420, 147 S. W. 827. A loan was also applied for and secured on the policy payable to Richard G. Head, Jr., in a like sum and upon a similar loan agreement. On the former appeal it was held by this court (1) that the effect of our law was to —

"write into every insurance contract made by a foreign insurance company so licensed in this state all of the provisions of the statutes of this state appurtenant to the making of such contract, and which define and measure the reciprocal rights and duties of the parties thereto. These statutes are declaratory of the public policy of this state, and inhibit the doing of the business of insurance in this state by any corporation contrary to their regulations, by_ annulling all the stipulations which offend the provisions of the statutes."

The court then stated that the first inquiry was, "Where was the contract expressed by this policy wader This query was answered (241 Mo. loc. cit. 413-415, 147 S. W. 830, 831) by a holding that the policy —

"was in all respects a Missouri contract, and must be construed by the laws of this state unless the residence of the assured in New Mexico precludes him from the benefit of the law of the state in which his contract was executed."

Upon the question thus broached, it was " held that —

"it was the purpose of the Legislature by these restrictions" (statutes previously discussed) "to prevent the making of contracts in this state in violation of its laws and to the injury of the general public"; that "the laws of a state are made for the benefit and protection of all persons whether citizens, inhabitants, transients, visitors, or sojourners, who are properly within its borders, unless otherwise declared."

It was held that the object of the statute was to compel fair and equitable contracts; that the power of the state to impose the assailed restrictions was settled; that to exempt from their operation contracts made in the state, under a license here, with a citizen of another state, would produce the result that "much of the business of a licensed insurance company would be conducted in this state in utter defiance of the very statutory restrictions imposed as a condition of its entrance"; that this construction would permit the use of the "situs secured in this state for the purpose of making contracts in accordance with its laws, for the wrongful purpose of making contracts in violation of its laws." The court ruled the statutes were intended to govern all policy contracts consummated in Missouri, and the fact that Head was not a citizen of Missouri when the contract was consummated did not preclude the application of the Missouri statutes to his policies. Next, it was held that the company's contention with respect to the loan agreement, whereby it was "agreed that the policy in question should be governed and controlled by the laws of the state of New York," that such loan agreement constituted a new and valid contract, which precluded the present beneficiary from any other redress under the policy in suit than she would be entitled to if it had been settled in accordance with the laws of New York, could not be sustained. The court said:

"It is not an open question in this state that all subsidiary contracts made by the parties to an insurance contract are within the contemplation and purview of the original contract, and are not to be treated as independent agreements. This being so, they are inefficacious to alter, change, or modify the rights and obligations as they existed under the original contract of insurance."

The court further held that the sufficiency of a tender made by the company was to be determined upon the basis of the amount due under the Missouri law, and that the facts did not show any waiver of the policy holder's rights. The judgment in the Richard Head, Jr., Case was affirmed for the same reasons.

The causes were taken to the Supreme Court of the United States, and the judgments of this court were reversed. N. Y. Life Ins. Co. v. Head, 234 U. S. 149, 166, 34 Sup. Ct. 879, 883, 58 L. Ed. 1259, 1266. The statement of facts in the opinion of the Supreme Court of the United States includes the facts stated in the former opinion of this court, but goes somewhat more into detail with respect to the loan agreements. It was pointed out that the loan whereby Mary E. Head secured $2,270 on the policy in which she was named a beneficiary was requested by a letter written from Las Vegas, N. M., to New York, and accompanied by the policy and an executed loan agreement in the form usually required by the company, and which conformed to the requirements of the New York law; that

"the loan bore 5 per cent. interest, and the agreement provided that it should be payable at the home office in New York, and that if any premium on the policy or any interest on the loan were not paid when due `settlement of said loan and of any other indebtedness on said policy shall be made by continuing said policy, without further notice, as paid-up insurance of reduced amount, in accordance with section 88, chapter 690, of the Laws of 1802 of the State of New York;'" and that "there was default in April, 1905, in the payment of the interest on the loan and the premium on the policy, and pursuant to the terms of the loan agreement and the law of New York the policy was settled, the sum remaining from the accumulated surplus after paying the loan and the past-due premium being applied to the purchase of paid-up insurance, and the policy was, at the request of Head and his daughter, sent to them in New Mexico in May, 1905, and was in the possession of the daughter when Head died, in April, 1906."

The court succinctly stated the grounds relied on by plaintiff for relief to be:

"That although it was true that if the face of the policy was adhered to and the terms of the loan agreement were considered and the law of New York applied the settlement of the policy would be binding, it was not so binding, but, on the contrary, was void because at the time the policy was written there were statutes in force in the state of Missouri which made it the duty of the company to retain from the accumulated surplus a given percentage thereof; and, in case it was necessary to save forfeiture, to apply the sum of such retained percentage to the payment of premium on temporary insurance as far as it would go; and if this duty had been discharged when the failure to pay took place the sum of the retained percentage would have been adequate to extend the insurance to such a period as would have caused the full amount of the policy to be a valid and existing risk at the death of Head."

With respect to this ground of recovery it was then said:

"Resting thus upon the Missouri statutes, of course the fundamental assumption upon which the right to recover was based was the controlling operation and effect of the Missouri law upon the policy, upon the terms of the loan agreement, and upon the law of the state of New York which would otherwise govern, as New York was the place where the loan agreement was made and the adjustment of the policy took place."

The statutes referred to were the nonforfeiture laws of Missouri. The court then stated that the defense—

"in its ultimate aspect, but asserted the validity of the settlement made in New York under the loan agreement, denied the applicability of the statutes of Missouri to that settlement, and expressly insisted that such statutes could not be applied to the situation without violating" designated provisions of the federal Constitution.

It was then pointed out that the Supreme Court of this state, on appeal, had—

"expressly held that the policy of insurance was a Missouri contract, controlled by the Missouri law, and that by the operation and effect of that law the loan agreement made in the state of New York, and the settlement affected in that state in accordance with that agreement, conformably to the laws of New York, was controlled by Missouri statute and was void;" that "the rights under the contract clause of the Constitution of the United States and the Fourteenth Amendment, which * * * were asserted below, formed the basis of the assignments of error."

The opinion proceeds:

"As the conflicting contentions concerning these constitutional questions advanced to refute on the one hand, and to sustain on the other, the reasons which led the court below to its conclusion, involve the whole case, to briefly state at the outset the propositions upheld below will concentrate the issues and serve to give bold relief to the questions which require to be decided."

Thereupon the court stated that it had been held by this court (1) that the policy was a Missouri contract, despite the express stipulation therein that it was to be treated as a New York contract; (2...