Leonhard v. Provident Sav. Life Assur. Soc.

• Decision Date: 15 April 1904
• Docket Number: 1,983.
• Citation: 130 F. 287
• Parties: LEONHARD v. PROVIDENT SAVINGS LIFE ASSUR. SOC.
• Court: U.S. Court of Appeals — Eighth Circuit

130 F. 287

LEONHARD v. PROVIDENT SAVINGS LIFE ASSUR. SOC.

No. 1,983.

United States Court of Appeals, Eighth Circuit.

April 15, 1904

In 1885 Conrad A. Leonhard secured from the Provident Savings Life Assurance Society a policy of insurance upon his life for the benefit of his wife, Josephine Leonhard, in the sum of $5,000. In 1895, without her knowledge, he surrendered the policy, and secured from the society another one, for the same amount, but upon a different plan. In 1902 the second policy was exchanged for a third, with the full concurrence of the wife, who joined her husband in consummating the transaction. Shortly thereafter the insured died. The third policy was for the sum of $5,000, less $1,554.35, the amount of an exchange note given upon an adjustment of the premium rate, and which, according to its terms, was to be deducted from any sum payable upon the policy. The second and third policies were also for the benefit of the wife. Mrs. Leonhard brought suit to recover the full amount of the first policy and certain alleged accretions, tendering the third for cancellation. The proofs showed that when Conrad A. Leonhard obtained the first policy, in 1885, his wife's name was signed to the application by him as her representative. From the time the policy was issued to the time of its surrender to the society, the insured retained possession thereof, and paid all of the premiums. The application for the second policy recited that upon completion of the transaction the first policy should be deemed to be canceled and void, and it was signed in the same way as the application of 1885; the insured representing himself as the agent of his wife. Mrs Leonhard was ignorant of this change of policies, and did not learn of it until after his death. The second policy remained in her husband's possession and he paid the premiums until it was, in turn, canceled, in 1902, and the third one secured in its place. Mrs. Leonhard took part in the transaction resulting in the issue of the third policy. She signed the application, which recited that it was in exchange for the prior policy, the number of which was given. She also signed a statement which contained a recital that the policy to be canceled and a receipt pertaining thereto were at that time lost or mislaid. She was fully and fairly advised of everything connected with the transactions, and participated in the discussion of the reasons for the exchange of policies, and the benefits to inure therefrom to her husband as the insured, and to herself, as the beneficiary. In fact she was advised of everything pertaining to the situation excepting that it does not appear that she knew that the second policy was a substitute for the first. She did know, however, that at no time did her husband have more than one policy of the Provident Society upon his life for her benefit. By its terms the first policy was subject to lapse and forfeiture upon default in the payment of any quarterly premium. The quarterly premiums were variable in amount, and the insured, who paid them, did not know of the exact amount thereof until he had received notice from the society, which it was its duty to give. By express provision the insured was designated as the proper person to receive notices of maturing premiums. The premiums were paid to the time of surrender in 1895, but none thereafter. The agents of the society acted in good faith, and were not aware of any lack of authority on the part of Leonhard to represent his wife in securing the first exchange and surrendering the original policy. The society denied liability upon the first policy, admitted liability upon the third, and paid into court the amount thereof, less the amount of the note. The Circuit Court upon final hearing dismissed the bill. Complainant appealed.

F. H. Sullivan, for appellant.

Eleneious Smith (William T. Gilbert and Dickson, Smith & Dickson, on the brief), for appellee.

Before SANBORN, THAYER, and HOOK, Circuit Judges.

HOOK Circuit Judge, after stating the case as above, .

It is contended by the appellant that she had a vested interest in the original policy; that her husband, whose life was insured thereby, had no power, without her consent, to surrender it or to agree to its cancellation (Bank v. Hume, 128 U.S. 195, 206 9 Sup.Ct. 41, 32 L.Ed. 370; Casualty Co. v. Kacer, 169 Mo. 301, 69 S.W. 370, 58 L.R.A. 436, 92 Am.St.Rep. 641); that authority to make a contract for another is not, alone, sufficient to authorize its cancellation; that power in her husband to surrender the policy for cancellation cannot be inferred from the fact that he procured it in the first instance, retained it in his possession, and paid the premiums thereon (Stillwell v. Insurance Co., 72 N.Y. 385; Whitehead v. Insurance Co., 102 N.Y. 143, 6 N.E. 267, 55 Am.Rep. 787).

These propositions may be admitted as being amply supported by authority, and, were there nothing else to be said, their controlling influence upon the case in hand would be plain. But the terms of the policy which appellant is seeking to restore made it subject to lapse or forfeiture upon default in the payment of any quarterly premium. No premiums were paid after 1895, and therefore, in the absence of some sufficient reason to the contrary, the vitality of the policy ceased, and it was no longer an existing obligation of the defendant. It is claimed by the appellant in this connection that as the failure to continue the payment of premiums was the natural result of the surrender and cancellation of the policy, and as the defendant participated in and was a party thereto, it is estopped from claiming a forfeiture. Whitehead v. Insurance Co., supra; Garner v. Insurance Co., 110 N.Y. 266, 18 N.E. 130, 1 L.R.A. 256. In the Whitehead Case a husband procured certain policies of insurance upon his life for the benefit of his wife, or, in case of her prior death, of their children. The policies were surrendered by him while they were still in force without the knowledge or consent of the assured, and the company paid to him the surrender value thereof. After they were surrendered, no notices of approaching maturity of premiums were given either to the insured or to the assured, and no premiums were paid. It was held that the surrender and the consequent default in premiums were ineffectual to deprive the assured of their rights. The decision, however, was expressly based upon the participation of the insurance company in conduct which was characterized as fraudulent. It knew that the insured was acting beyond his authority. The money consideration for the surrender was paid by the company to the insured, and not to those entitled thereto, and in that way, it was said, the silence of the insured was purchased, and the fact of the surrender effectually concealed from those whose interests were vitally affected. Referring to the acts of the insured, the court said:

'His conduct operated as a fraud upon the assured, and in that fraud the insurer participated, with full knowledge of the probable consequences. The company cannot depend upon a default to which its own wrongful act contributed, and but for which a lapse might not have occurred.'

This particular feature of the Whitehead Case was adverted to and emphasized in Frank v. Insurance Co., 102 N.Y. 278, 6 N.E. 667, 55 Am.Rep. 807, where it was said that the company participated in keeping the beneficiaries in ignorance of their rights.

In the Garner Case, supra, the conduct of the insurance company was open to the same criticism. There the insurance contract was made with the insured as trustee for his children, who were named; the application was signed by him as trustee. The company recognized and dealt with him in his trust character and capacity. For 15 years the premiums were paid upon the policy, and the assured had acquired a valuable right thereunder. Without their knowledge or consent, the insured by an agreement with the company, which knew he was violating his trust, surrendered the policy, and secured for the benefit of another party a substituted policy bearing the same number, for the same amount, calling for the same annual premium, and stating the same age of the insured, with a reference to the date of the first policy. The surrender value of the old policy was absorbed in the new one. A consideration to be paid by the assured in...