Hughes v. Mutual Life Ins. Co. of New York

• Decision Date: 03 February 1950
• Docket Number: No. 12202.,12202.
• Citation: Hughes v. Mutual Life Ins. Co. of New York, 180 F.2d 542 (9th Cir. 1950)
• Parties: HUGHES v. MUTUAL LIFE INS. CO. OF NEW YORK.
• Court: U.S. Court of Appeals — Ninth Circuit

180 F.2d 542 (1950)

HUGHES v. MUTUAL LIFE INS. CO. OF NEW YORK.

No. 12202.

United States Court of Appeals Ninth Circuit.

February 3, 1950.

Laney & Laney, Grant Laney and Lynn M. Laney, Phoenix, Ariz., for appellant.

Evans, Hull, Kitchel & Jenckes, Norman S. Hull, Phoenix, Ariz., for appellee.

Before GOODRICH and POPE, Circuit Judges, and HALL, District Judge.

POPE, Circuit Judge.

In 1923 the appellee insurance company issued to the appellant Hughes a policy of life insurance which provided for waiver of premiums, and for payment to him of monthly sums in the event that he became "totally and permanently disabled by bodily injury or disease, so that he is, and will be, permanently, continuously and wholly prevented thereby from performing any work for compensation, gain or profit, and from following any gainful occupation. * * *"

In 1932, and again in 1935, Hughes received serious injuries to his spine. Following the second injury, when his back was broken, he developed chronic multiple hypertrophic arthritis, which his doctor testified was continuing to get progressively worse. From 1935 to 1942 the company waived his premiums and paid him the monthly income stipulated in the policy, and then discontinued the payments and the premium waivers claiming that Hughes was not totally and permanently disabled within the meaning of the policy. Thereafter Hughes paid the premiums under protest, and then brought this action in the Superior Court of Arizona, where Hughes resided, to recover the accumulated monthly income payments alleged to be past due, and for a return of the premiums paid under protest. The insurance company, a New York corporation, removed the case to the court below on the ground of the diversity of citizenship of the parties.

Upon the trial the court granted defendant's motion for a directed verdict, made at the close of plaintiff's evidence, and entered judgment for the defendant insurance company, from which this appeal is taken. The single specification of error relates to the court's action in taking the case from the jury.

The dispute between the parties centers about the fact that while Hughes, a farmer, suffered great physical disability which prevented him from working in the fields, or doing ordinary physical work about his farm, he continued to manage the farm through a foreman, directing its operation, keeping the books and records, and personally writing checks for the payment of the bills and expenses.

From the evidence the jury would have been justified in finding that Hughes, whose only occupation had been that of farmer, was since 1935 wholly unable to be about upon his land, or personally to do any of the farm work. Any physical work on his part caused extreme pain, and often put him in bed. The doctor testified that any such exertion aggravated his condition and hence he had directed his patient to refrain from physical activity because of its harmful effect.

Before his injuries in 1932 and 1935 Hughes had done all of the farm work himself with the aid of one hired man. He operated the farm machinery, did the irrigating, the milking, the haying, the plowing, and other similar tasks. After the onset of the arthritis, he was unable to walk out in the fields to direct the hired hands, or to do any of the milking or the field work. He could not get into the fields to inspect the crops or to determine when work of various kinds ought to be done. It was testified that in order to supervise the ranch properly it is necessary to be able to get about in that manner, but that Hughes was unable to do so. On one occasion he undertook to run the tractor long enough to show an employee how it operated, and the exertion put him in bed. After describing Hughes' physical condition his physician testified as follows: "Q. Then, Doctor, if we define total disability as such disability that renders a patient permanently unable to perform substantial and material acts of his occupation, or any other occupation in the usual and customary manner, I will ask you whether in your opinion this patient is totally disabled? A. Yes, I'd say that he is permanently disabled, completely disabled under that definition."

At the time in question his farm ownership covered 412 acres; 185 acres he leased to a lettuce company; the balance was in grain and alfalfa which was fed to a dairy herd of 55 or 60 milking cows, with additional head of young stock. This was accomplished through the employment of a foreman, who generally, as Hughes put it, "goes right along and runs the ranch just the same as if I wasn't there." Hughes also employed a man to milk the cows and handle the dairy. At this time, also, a considerable portion of the farm work was done by others under contract. This was true of the hay cutting, the baling, hay hauling, plowing, disking and sub-soiling. These were operations which Hughes did himself, with his own equipment, prior to his disability. Nevertheless, the farm operations during the six years here in question were more profitable than those in the period before his injuries. He explained this as being due to the greatly increased prices of farm products during the later years.

Hughes lived on the ranch. Although he had once attended a normal school as a young man, then intending to become a teacher, he had never had a teacher's certificate or done any teaching, but his principal occupation had been that of farming. Notwithstanding his physical disabilities, he did most of the book work connected with the ranch operations, made the bank deposits, wrote the checks, and made the entries in the books of account. He arranged for the cutting of the hay which was done by contract, he purchased parcels of land, executed purchase-money mortgages, negotiated and signed leases with the lettuce company which worked part of the land. He sold hay and grain produced on the ranch, negotiating the sales himself. He paid the irrigation water assessments, occasionally borrowed money from the bank, for which he executed notes, and purchased machinery and supplies for the ranch.

Hughes also had some other interests and activities during this period. He was administrator of an estate. He testified that the attorney for the estate did substantially all of the work required during the administration. He was a member, and at the time of the trial president, of the local school board. He performed all the duties of a board member, attending most of its meetings, many of which were held at his home on account of his difficulty in getting out. For sixteen years he was a member of the governing board of his Water Users Association. He was chairman of the board for a number of years. In 1942 he made a trip to Washington, D. C. to represent the board on business growing out of a controversy between the board and the government. He spent several days in Washington, but became ill on the way home and stopped in Kansas City for two weeks where he was sick in bed.

The position of the insurance company, upon which it prevailed in the lower court, is that upon the case as made by the plaintiff, Hughes was not prevented from managing his farm, that he did in fact perform a substantial amount of work, of a managerial and executive character, that therefore he was not prevented "from performing any work for compensation, gain or profit" or "from following any gainful occupation".

Appellant Hughes contends that since he was unable to perform any of the physical activities commonly connected with farming, it must be said that a jury might well find that he was unable to perform the substantial and material acts necessary to the prosecution of a business or occupation in the usual or customary way, and that therefore the evidence presented a question of fact which should have been submitted to the jury.

Both parties cite numerous cases in support of their respective positions. The record contains no specific evidence as to where the policy was delivered. It appears to have been signed on behalf of the company by its president and secretary, presumably at the home office in New York. The application for it, which is attached to the policy, provides: "* * * The proposed policy shall not take effect unless and until the first premium shall have been paid during my continuance in good health, nor unless also the policy shall have been delivered to and received by me during my continuance in good health. * * *" At the time the policy was issued Hughes was a resident of Arizona. The Arizona law then provided that "No foreign company shall make, write, place or cause to be made, written or placed in this state any insurance policy or contract unless through its duly authorized agents, residents of this state * * *" Laws 1915, ch. 58, sec. 2, Arizona Code, 1939, sec. 61-332. We think it may be inferred that the policy was delivered to Hughes in Arizona by an agent resident in that State, and hence that it is an Arizona contract, and its construction to be determined under the laws of that state. Ruhlin v. New York Life Ins. Co., 3 Cir., 106 F.2d 921; Mutual Life Co. v. Johnson, 293 U.S. 335, 55 S.Ct. 154, 79 L.Ed. 398. There is also indorsed on the margin of the policy a clause made mandatory by the law of Arizona, which indicates that it was contemplated that the policy was to be governed by the law of that state. Both parties agree that it is the law of Arizona which must determine the issue between them.

An examination of the statutes and decisions of Arizona yields no solution here. Although problems similar to that here presented have been dealt with in a great number of decisions in many states,¹ there appears to be no Arizona decision in point.² We are therefore called upon to determine, as best we may, what the Supreme Court of Arizona would hold if confronted with the controversy now presented to us.

The cases which deal with the meaning of disability clauses substantially the same as that contained in the policy...