Kelly v. Sec. Mut. Life Ins. Co.

• Decision Date: 02 October 1906
• Citation: 186 N.Y. 16,78 N.E. 584
• Parties: KELLY v. SECURITY MUT. LIFE INS. CO.
• Court: New York Court of Appeals Court of Appeals

186 N.Y. 16

78 N.E. 584

KELLY

v.SECURITY MUT. LIFE INS. CO.

Court of Appeals of New York.

Oct. 2, 1906.

Appeal from Supreme Court, Appellate Division, Third Department.

Action by William Kelly against the Security Mutual Life Insurance Company. From a judgment in favor of plaintiff, affirmed by the Appellate Division (94 N. Y. Supp. 601), defendant appeals. Reversed, and new trial granted.

The complaint contains two counts, in the first of which the plaintiff alleged, in substance, that in August, 1889, the defendant, a domestic corporation duly authorized, issued to him its policy of insurance for $1,000, payable on his death to his wife, the policy being referred to as part of the complaint; that the plaintiff performed his part of the contract, but the defendant wrongfully declared said policy forfeited, and refused to continue it in force; that the beneficiary transferred her rights thereunder to him and that the policy was worth to him $1,000, in which amount he alleged he had sustained damages. The second count was upon a like policy payable to the children of the plaintiff, who transferred their rights to him before the commencement of the action. Judgment was demanded for the sum of $2,000, with costs. Each policy was a certificate of the defendant admitting the plaintiff to membership, subject to certain specified conditions, including the prompt payment of quarterly dues on the days named. Upon his death his wife in one case and his children in the other, became entitled to payment from the reserve fund of the sum of $1,000. The failure to pay dues rendered the contract void and forfeited all payments made thereon, with an unimportant exception. The answer alleged as an affirmative defense that the policies became null and void on the 2d of May, 1903, because the defendant failed to pay the premiums which fell due on that day as required by the contracts. The question sent to the jury was whether the defendant by its course of dealing with the plaintiff had waived strict performance as to the payment of dues on the law day. They were instructed if they found a waiver to bring in a verdict in favor of the plaintiff for the present value of the policies, including interest. The jury found a general verdict for the plaintiff for $1,289.78. The judgment entered thereon was unanimously affirmed by the Appellate Division, and the defendant appealed to this court.

Edward T. Bartlett, J., dissenting.

Celora E. Martin, for appellant.

S. Mack Smith, for respondent.

VANN, J. (after stating the facts).

Before any evidence was taken at the trial the defendant moved to dismiss the complaint upon the ground that it did not state facts sufficient to constitute a cause of action, but the motion was denied and the defendant excepted. This ruling survives unanimous affirmance by the Appellate Division, and is open to review by this court Jones v. Reilly, 174 N. Y. 104, 66 N. E. 649;Sanders v. Saxton, 182 N. Y. 477, 478,75 N. E. 529,1 L. R. A. (N. S.) 727. The defendant was not required to present the question by demurrer or answer, but could raise it by motion made at the trial. Weeks v. O'Brien, 141 N. Y. 199, 203,36 N. E. 185; Code Civ. Proc. § 499.

The case made by the complaint was not in equity to relieve from forfeiture and reinstate the policy, but pruely at law to recover damages for the breach of its contract by the defendant. The only promise made by the defendant in the contract was to pay a sum of money on the death of the plaintiff, but no breach of that promise was alleged. The plaintiff is still living, and nothing is yet due upon the contract, according to its terms. What breach was alleged? The only allegation on that subject is that the defendant wrongfully declared the contract ‘void and forfeited,’ denied that the plaintiff had ‘any rights thereunder,’ and refused ‘to continuesaid policy in force.’ How or why, when, to whom or by whom the defendant declared the contract forfeited, or denied the plaintiff's rights thereunder, or refused to continue it in force, is not stated. There is no allegation of a refusal to receive premiums, or give receipts therefor, or that the defendant had never recognized its contract, or that it had not retracted its repudiation, or that it was in such a position that it could not retract. The pleader was satisfied with the conclusion that he set forth. This was not a breach of the contract, because the time for performance by the defendant had not arrived. An attempt to repudiate such a contract does not make it due. If the maker of a promissory note, given for borrowed money and due one year after date, notifies the holder the next day that he repudiates it and will not pay it, can the holder sue at once? Can a mortgagor make his mortgage due before the law day by repudiating it in advance? The rule that renunciation of a continuous executory contract by one party before the day of performance gives the other party the right to sue at once for damages, is usually applied only to contracts of a special character, even in the jurisdictions where it obtains at all. It is not generally applied to contracts for the payment of money at a future time and in some states the principle is not recognized in any way whatever. Daniels v. Newton, 114 Mass. 530, 19 Am. Rep. 384; Stanford v. McGill, 6 N. D. 536, 72 N. W. 938,38 L. R. A. 760;Carstens v. McDonald, 38 Neb. 858, 57 N. W. 757;King v. Waterman, 55 Neb. 324, 75 N. W. 830. In other states and in the Federal courts the principle is adopted but applied with caution. Roehm v. Horst, 178 U. S. 1, 17, 18, 20 Sup. Ct. 780, 44 L. Ed. 953;Schmidt v. Schnell, 7 Ohio Dec. 657;Brown v. Odill, 104 Tenn. 250, 56 S. W. 840,52 L. R. A. 660;Roebling's Sons v. Fence Co., 130 Ill. 660, 22 N. E. 518;Unexcelled Fire Works Co. v. Polites, 130 Pa. 536, 18 Atl. 1058,17 Am. St. Rep. 788. In this state it seems to be limited to contracts to marry (Burtis v. Thompson, 42 N. Y. 246, 1 Am. Rep. 516); for personal services (Howard v. Daly, 61 N. Y. 362, 19 Am. Rep. 285) and for the manufacture or sale of goods (Windmuller v. Pope, 107 N. Y. 674, 14 N. E. 436;Nichols v. Scranton Steel Co., 137 N. Y. 471, 33 N. E. 561). At least we have not extended it to mutual life insurance policies, perhaps for the reason that the question of fact opened to unscrupulous persons by such extension might undermine the solvency of the company and inflict gross injustice upon the other policy holders.

The plaintiff alleges a breach only by anticipation. We held directly against his contention in a recent case which we regard as controlling. Langan v. Supreme Council Am. L. of H., 174 N. Y. 266, 66 N. E. 932. That was an action at law founded upon a certificate of insurance, whereby the defendant promised, upon the death of the plaintiff, to pay his wife a sum not exceeding $5,000. The plaintiff alleged performance until the ‘defendant by its wrongful act broke the said contract, and declared the same void.’ He further alleged that the defendant had ‘failed to carry out the conditions of the contract by declaring that it will not perform the contract or pay the insurance agreed to be paid, and that, upon his death, the beneficiary will not then be entitled’ to the sum specified, ‘and that by reason of the breach of the aforesaid contract by defendant, plaintiff has sustained damages in the sum of $5,000.’ A judgment for $1,505.96, ‘the present value of the policy,’ was affirmed by the Appellate Division, but reversed by this court, upon the ground that ‘there was no breach of contract * * * which justified an action for damages; that the action of the plaintiff’ in tendering performance ‘preserved the contract of insurance as it was; that he was not, thereupon, compelled to a course of inaction, but might resort to a court of equity, * * * and compel the defendant to live up to its contract.’ The principle of that case controls this. Both actions were at law to recover damages for the breach of the same kind of a contract and in the same way. As we held that an action at law would not lie in that case because there was no breach, and that the remedy of the plaintiff was in equity, we are compelled to hold the same way in this case. The plaintiff had no right to sue for damages before the time for performance by the defendant had arrived. He had sustained no damages, for the policy was still in force, and if it refused to recognize its obligation thereunder he could compel recognition by a judgment exactly adapted to the situation.

The judgment below should be reversed, and a new trial granted, with costs to abide event.

EDWARD T. BARTLETT, J. (dissenting).

A motion was made, at the opening of the trial, to dismiss the complaint upon the ground that it did not state facts sufficient to constitute a cause of action, which was denied and exception taken. The defendant's contention is that the plaintiff alleges no present breach of the contract of insurance; that if he had any remedy it was an action in equity to compel performance and not at law for damages; that the decision of this court in Langan v. Supreme Council Am. L. of H., 174 N. Y. 266, 66 N. E. 932, is a controlling authority against the form of action adopted by the plaintiff.

The plaintiff in the third paragraph of his first cause of action alleges due and complete performance of the contract on his part, and pleads as follows in the fourth paragraph of the same cause of action: ‘Plaintiff further alleges that notwithstanding the faithful performance of the contract upon his part, this defendant wrongfully, unlawfully and illegally and in violation of said contract and the rights of this plaintiff, by and through its officers and agents, have declared the said policy of insurance lapsed and forfeited, together with all payments thereon and dividends declared and earned, and deny that plaintiff has any rights thereunder, and refuse to continue said policy in force.’ It seems very clear that,...