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

• Decision Date: 14 May 1901
• Citation: 109 F. 56
• Parties: KELLEY v. MUTUAL LIFE INS. CO. OF NEW YORK.
• Court: U.S. District Court — Southern District of Iowa

109 F. 56

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

United States Circuit Court, S.D. Iowa, Central Division.

May 14, 1901

Milton Remley and W. O. McElroy, for plaintiff.

W. E Odell, for defendant.

McPHERSON District Judge.

By written stipulation a jury was waived, and the case was tried to the court on an agreed statement of facts. The action is one at law upon two life insurance policies issued by defendant on the life of Edward Kelley, the one for $2,500 in May, 1893, and the other in December, 1893, for $5,000. Edward Kelley died by his own hand while insane, in February 1895, less than two years from the date of the older policy.

1. I will first consider the policy for $2,500. It is a tersely written policy, in large type and script, and could not possibly be misunderstood by even the most ignorant nonprofessional man, but for the first sentence thereof. The policy recites: 'In consideration of the application for this policy, which is hereby made a part of this contract ' Then follows an absolute promise to pay plaintiff herein the sum of $2,500 upon receipt of satisfactory proofs of death of Edward Kelley, subject to the provisions on the back of the policy, and subject to one condition, viz. the payment of all annual premiums when due. The company makes but one defense, that of suicide of the insured, while insane, within two years from the date of the policy. The beneficiary named in the policy is plaintiff herein, wife of the insured. The provisions on the back of the policy have no bearing on the case at bar, unless it be the one which provides that the policy is not contestable after two years. The entire defense consists in the recital of the policy that the consideration thereof is the application, and which is made a part of the policy as above recited, and a clause of the application to which I will presently refer. The application is like those usually annexed to policies. It has a great many recitals pertaining to the insured, his habits, his health, his past life, his ailments, and so forth and so on, as well as those pertaining to his relatives, their ailments, age, and cause of death. Every one of the statements in the application are conceded to have been truthfully made. But in the application pasted to the policy was a recital as follows: 'I also warrant and agree that I will not die by my own act, whether sane or insane, during the period of two years. ' That the true consideration of a contract can be shown by parol, and the expressed consideration contradicted, is denied by no one; or, as in this case, the true consideration can be shown by reference to the contract in its entirety. And the recital in the policy, that it was issued in consideration of the application, cannot be true. If there were no other consideration, the policy would be a mere naked promise to pay, both in substance and in form, which no court could enforce. The premiums paid and to be paid were the consideration.

But it is urged that the application is annexed as part of the contract. And herein arises the difficulty in this case.

2. Kelley and wife resided at the date of the application and the issuance of the policy in Iowa. The medical examination was in Iowa. The application was made in Iowa. Kelley until his death resided in Iowa, and Mrs. Kelley is still a resident of Iowa. Therefore, regardless of all things recited, the policy is an Iowa contract, and all Iowa laws upon the subject then in force entered into and formed part of the contract. Society v. Clements, 140 U.S. 226, 11 Sup.Ct. 822, 35 L.Ed. 497. One of those laws was the statute of April 17, 1890. That statute, among other things, provides, 'nor shall any company make any contract, other than is plainly expressed in the policy issued thereon. ' Both by the general rules of construction, and by those rules of the Iowa statutes for the construction of statutes, words must be given the usual and generally accepted meaning. Section 48, Par. 2, Code Iowa. We all know what the word 'policy' means, and we know that it does not mean the 'application.' If that clause of the statute stood alone, the suicide clause in the application would be in contravention of the Iowa statute, and would be void, because it is not 'expressed in the policy issued thereon. ' The title of the act in question is in conformity to the Iowa constitution, and is 'An act to prevent discrimination in life insurance. ' Acts 23d Gen. Assem. c. 33. There are several specific recitals of the statute prohibiting discriminations in insurance. They are all followed by a section fixing a penalty for its violation. We have an older statute providing that, if the application is relied on as a defense, it must be annexed to the policy. That statute is still in force, unless repealed by implication, which is never looked upon with favor. It is also a rule that, when particular words of a statute or other writings are followed by general words, such general words in their meaning are controlled by the particular things recited. For these reasons I do not believe the statute in question is of any avail to plaintiff. The statute is against discrimination. Many things are condemned as acts of discrimination. But it is not claimed in the case at bar that the company was guilty of any discrimination. And I conclude that the general language of the statute above quoted can only be construed as referring to discriminations.

3. Another contention of plaintiff is without merit. Her counsel contend that under the Iowa laws, as suit could not have been brought until a time more than two years after the date of the policy, the policy is incontestable. It is not only difficult to comprehend the point, but when it is comprehended it is seen to be too technical to warrant discussion.

4. If the premiums were paid, the company agreed to pay Mrs. Kelley the amount of the policy after the death of the insured. The insured agreed 'that I will not die by my own act * * * while insane. ' He did die by suicide in February, 1895, while insane. To what extent he was insane the evidence does not show. He may have known right from wrong. He left a letter announcing his purpose, and giving some directions about his funeral and his insurance. He may have been driven to suicide by an irresistible and uncontrollable impulse. I am warranted in holding the latter. If this be so, then when Kelley agreed to not suicide while insane he was agreeing to that which was impossible to observe. He knew this when he so agreed, and the company knew it equally well. It was an impossible contract; impossible to observe, and an impossibility known by both parties when they so agreed. A text writer says: 'A mutual undertaking between parties to do what both know to be impossible is vain and idle, lacking the elements of contract. ' And I refer generally to chapter 20, Bish. Cont. (1887 Ed.), for a discussion of this subject. It will not do to say the consequences could have been avoided by contract. The answer is that which has the form of a contract is nothing but words, and these words are 'vain and 'idle.' This is not a case where both parties, or even one of the parties, at the time the contract was entered into, had reason to believe the contract could be carried out. In such a case the rule is that the obligor is bound, even though it afterwards becomes impossible for him to observe the agreement. In such a case the obligor must provide against such a contingency. But here we have mere words thrown together in the form of a contract, impossible to observe, and so known to be by both the company and the insured, when the policy was issued. The company received the cash premium when the policy was issued, and a premium in like amount in 1894. Both these premiums the company retains. It has not paid them back, nor has it offered to pay them back. This is grossly inequitable, and should not be allowed.

5. But in allowing the plaintiff to recover I have greater confidence in another proposition, to which I have given much time. Whether sane or insane, I think the case turns on the question whether the conditions or covenants are dependent or independent. Aside from what I have said in paragraph 4 hereof, if the covenants are dependent, then the company has a defense in the fact that the insured suicided when insane. But, if the covenants are independent, the plaintiff is entitled to a recovery. Formerly, contracts were quite generally construed as making the covenants independent; but now, in cases of doubt, they are construed as having dependent covenants. But, after all, the contract must be considered in its entirety, and such construction given as will be fair and reasonable. For some of the cases throwing light upon this question of covenants, see Hyde v Booraem, 16 Pet. 169, 177, 10 L.Ed. 925; Bank v. Hagner, 1 Pet. 455, 465, 7 L.Ed. 219; ...