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

• Decision Date: 02 May 1911
• Docket Number: 2,079.
• Citation: 187 F. 499
• Parties: KOPETOVSKE et al. v. MUTUAL LIFE INS. CO. OF NEW YORK.
• Court: U.S. Court of Appeals — Sixth Circuit

187 F. 499

KOPETOVSKE et al. v. MUTUAL LIFE INS. CO. OF NEW YORK.

No. 2,079.

United States Court of Appeals, Sixth Circuit.

May 2, 1911

The plaintiffs seek a reversal on the ground that the trial court erred in directing a verdict for the defendant. On October 4 1898, the defendant issued to Rosenthal two policies for $2,000 and $3,000, respectively, each payable to his executors, administrators, and assigns. Both were thereafter assigned to his nephew, Aaron Berger. Subsequently Rosenthal and Berger assigned them to the Citizens' Bank & Trust Company of Chattanooga, Tenn., as collateral security for the payment of a loan of some $1,800 and interest. On Rosenthal's death, about July 1, 1905, defendant furnished to Berger blanks for proofs of death. Its agent's acknowledgment of their receipt in a completed form 'with blank receipts signed by Aaron Berger, the assignee,' followed later, with the statement that they had been sent to the New York office, and that a check in payment of the policies would be delivered as soon as received. Payment having been refused, Berger, the bank and the insured's administrator, who is Berger's son-in-law, filed a bill in equity in the state court alleging that Rosenthal had, with the defendant's assent duly assigned the policies and all his interest in and rights thereunder to Berger, and prayed a recovery on the policies for the use and benefit of the bank to the extent of the indebtedness to it, and for the use of Berger as to the residue. The parties having agreed, after the removal of the case, that the bill filed in the state court should be treated as a declaration at law, the defendant pleaded that it did not contract, promise, agree, or undertake, and does not owe the plaintiffs, as they in their declaration alleged and interposed the further defense that Berger's relationship to Rosenthal was no closer than that of nephew; that neither he nor the bank, at the time the policies were assigned, had an insurable interest in his life; that Berger for his own benefit incited Rosenthal, whose part in the transaction was alleged to be merely colorable and to conceal Berger as the real actor, to apply for and procure the policies, that they are gambling or wager policies which were taken out by Berger and whose premiums were paid by him, and that their subsequent assignment was in furtherance of an unlawful agreement and purpose, contrary to public policy, and with a fraudulent intent to evade the law governing gambling or wager insurance. Each of the policies makes the application a part of the contract, and recites that the company will decline to notice any assignment of it until the original assignment, or a duplicate or certified copy thereof, shall be filed in the defendant's home office, and that the company will not assume any responsibility for the validity of an assignment. The application states that Rosenthal was born in Russia, was at its date single, aged 44, and a retail salesman, and then had a living sister aged 80, and three brothers aged 50, 57, and 60, respectively. The date of his arrival in this country is not shown, but he was preceded by Berger and employed counsel in 1896 or 1897, who represented him until his death. During the whole of that time he was continuously associated in business with and lived in the same house with Berger, who was a married man, and constituted a part of the latter's family. Excepting Berger, he has no relative in the part of the country in which they resided. Berger operated first a grocery and later a feed store under the name of the Chattanooga Produce Company. A witness testified that Rosenthal clerked in those stores. He later said he did not know whether he was a partner or not, or who owned the business, but the two ran the business and acted together. Rosenthal left no estate and after his death the store was recognized as the property of Berger. He had insured his life in different companies to the amount of $20,000, of which amount $15,000 were in Berger's favor. As he could not write the English language, his name was affixed to the application for the policies involved in this case by another, and to that for a $10,000 policy by Berger. In each instance the signature was witnessed. When the plaintiffs rested in chief, the defendant moved for a directed verdict 'primarily upon the ground that an insurable interest is not shown in favor of the alleged assignee, and also that this suit is brought exclusively for the benefit of the two alleged assignees, the bank and Berger, and no assignment is proven. ' The motion was sustained, and the plaintiffs now seek a reversal.

J. B. Sizer and Robert Pritchard, for plaintiffs in error.

W. B. Miller (James McKeen, of counsel), for defendant in error.

Before SEVERENS and KNAPPEN, Circuit Judges, and SATER, District judge.

SATER District Judge (after stating the facts as above).

The question for decision is: Did the court err in sustaining the motion for a directed verdict?

The only question raised by the motion and decided by the court was, whether, under the pleadings and proof, either Berger or the bank is entitled to a recovery. The letter of defendant's agent acknowledging the receipt of the proofs of death recognized Berger as the assignee of the policies. The case was tried on the theory that he was such. There is no evidence that he was a creditor of Rosenthal, or that the assignment was made to protect him as such. The court found that Berger, as a nephew of Rosenthal, was not within the degree of relationship that creates an insurable interest, and that, in view of Crotty v. Mut. Life Ins. Co., 144 U.S. 621, 12 Sup.Ct. 749, 36 L.Ed. 566, the burden was upon him to show at least by prima facie testimony both an insurable interest and its extent. The motion was sustained because the court was of the opinion that as to both of those points there was no evidence to go to the jury.

The policies were assignable choses in action, provided their assignment was not forbidden by settled rules of public policy. Russell v. Grigsby, 168 F. 577, 94 C.C.A. 61; N.Y. Mut. Life Ins. Co. v. Armstrong, 117 U.S. 591, 6 Sup.Ct. 877, 29 L.Ed. 997. At the threshold, then, we are met with the query: May there be a valid assignment of a policy to one who is not a creditor, and who is no more nearly related to the insured than was Berger to his uncle, and if so, under what circumstances? In the solution of the question this court may exercise an independent judgment, for in Russell v. Grigsby, involving a policy whose terms relating to its assignment were kindred to those of the policies issued to Rosenthal, this court held that the question of whether the contract of assignment, from considerations of public policy, was valid or not, was not dependent upon local statute or usage, but upon general law, in the determination of which a federal court is under obligation to exercise an independent judgment. We naturally, therefore, seek for our guide the deliverances of the Supreme Court as to what constitutes an insurable interest. That court, whose utterances on that subject have not always been understood, has consistently spoken to the subject in Conn. Mut. Life Ins. Co. v. Schaefer, 94 U.S. 457, 24 L.Ed. 251, AEtna Life Ins. Co. v. France, 94 U.S. 561, 24 L.Ed. 287, Warnock v. Davis, 104 U.S. 775, 26 L.Ed. 924, and N.Y. Mut. Life Ins. Co. v. Armstrong, 117 U.S. 591, 6 Sup.Ct. 877, 29 L.Ed. 997, but as diligent counsel have discovered no case parallel to the one at bar, and draw different conclusions from the above cases, such review of them will be made as may be deemed necessary to deduce the rule which they announce.

The case of Conn. Mut. Life Ins. Co. v. Schaefer, 94 U.S. 457, 24 L.Ed. 251, arose on a policy issued on the joint lives of the husband and wife and made payable to the survivor on the death of either. Following the subsequent divorcement of the parties, the wife paid the premiums. Both remarried. On the death of her former husband, the survivor sued for and recovered the proceeds of the policy. Mere wager policies-- policies in which the insured has no interest whatever in the matter insured, but only an interest in its loss or destruction-- were condemned as void. But on the point of the alleged cessation of the wife's insurable interest by reason of the divorce of the parties, Mr. Justice Bradley, speaking for the court as to what constitutes such an interest in the life of another, said:

'But precisely what interest is necessary, in order to take a policy out of the category of mere wager, has been the subject of much discussion. In marine and fire insurance the difficulty is not so great, because there insurance is considered as strictly an indemnity. But in life insurance the loss can seldom be measured by pecuniary values. Still, an interest of some sort in the insured life must exist. A man cannot take out insurance on the life of a total stranger, nor on that of one who is not so connected with him as to make the continuance of the life a matter of some real interest to him. It is well settled that a man has an insurable interest in his own life, and in that of his wife and children; a woman in the life of her husband; and a creditor in the life of his debtor. Indeed, it may be said generally that any reasonable expectation of pecuniary benefit or advantage from the continued life of another creates an insurable interest in such life, and there is no doubt that a man may effect an insurance on his own life for the benefit of a relative or friend; or two or more persons, on their joint lives, for the benefit of the survivor or survivors. The old tontines were based substantially on this principle, and their validity has never been called in question. The essential

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