Lewis v. New York Life Ins Co.

• Decision Date: 03 October 1910
• Docket Number: 22-1910.
• Citation: 181 F. 433
• Parties: LEWIS v. NEW YORK LIFE INS. CO.
• Court: U.S. Court of Appeals — Third Circuit

181 F. 433

LEWIS v. NEW YORK LIFE INS. CO.

No. 22-1910.

United States Court of Appeals, Third Circuit.

October 3, 1910

Reynolds D. Brown, for plaintiff in error.

Arthur G. Dickson, for defendant in error.

Before LANNING, Circuit Judge, and BRADFORD and ARCHBALD, District judges.

ARCHBALD District Judge.

The plaintiff was insured in the defendant company for $30,800 on the ordinary life 20-year standard accumulation plan, by a policy bearing date July 12, 1904, and containing a provision for a cash loan, the right to which, as he claims, he was not permitted to enjoy. And the company, according to this having broken their contract, this action was brought to recover the damages. The clause of the policy which was relied on is as follows:

'The insured may obtain cash loans on the sole security of this policy, on written request, at any time after it has been in force two full years, if premiums are duly paid to the anniversary of the insurance next succeeding the date after the loan may be obtained. The insured shall pledge this policy and its accumulations as collateral security for such loans, in accordance with the terms contained in the company's then existing form of policy loan agreement. The amount of loan available at any time is stated in the table on the second page, and includes loans then unpaid. Interest will be at the rate of five (5) per cent. per annum, payable in advance to the next anniversary, and annually in advance on that date and thereafter.'

By the table which is there referred to, the insured, after four years, was entitled to borrow $1,940; and in part availing himself of this, on March 18, 1908, the plaintiff had secured $1,300, which was all that he required at the time, but was $640 less than he was privileged to borrow. A year later however, the last of May, 1909, not being satisfied with the policy because of the deferred dividend arrangement, he made up his mind to change; but, there being no provision in the policy for a cash surrender value, he decided to realize on it, by borrowing up to the limit and then letting the policy lapse, and he accordingly applied to the company through the agency at Philadelphia for a further loan upon it. The representatives of the company, to whom he applied, being made aware of his purpose, endeavored to dissuade him, and suggested without success that he take a new form of policy, with regard to which there were some negotiations. The policy, on account of the existing loan, being in the possession of the company in New York, the additional amount to which he was entitled was not known to him, and in the course of his interviews with the Philadelphia agents he was advised that, on July 12, 1909, after the payment of his next premium, amounting to $960, he would be entitled to a loan of $2,556, or $1,256 more than he then had; it being stated to him that until then the policy had no further loanable value. Having obtained a copy of the policy, however, he discovered that this was not so, and that he had been entitled all along to $1,940, or $640 more than he had received, and he thereupon made a demand by letter, July 7, for this further accommodation. But on July 9, two days later, having obtained no reply, and there being but three days until the next premium was due, he began this action. At the trial the plaintiff, upon this showing, was allowed a verdict of $640, the difference between the loan which he had and $1,940, the amount which he had a right to. Not content with this, however, he claimed the full amount of the premiums paid, on the basis that there was a breach of the policy, which justified a rescission and authorized a recovery of everything that had been paid under it. And, this being denied him, the case is brought here for consideration.

The plaintiff in his statement of claim declares for damages for a breach of the agreement to loan him the amount he was entitled to, which affirms the contract, and not for the premiums paid, which repudiates it; the one cause of action being distinctly different from the other. American Life Ins. Co. v. Shultz, 82 Pa. 46. This appears by the ad damnum clause, where in conclusion it is declared:

'Wherefore the plaintiff claims damages from the defendant in the sum of $6,000, at which sum the plaintiff estimates the damages which he has suffered by reason of the willful failure and refusal on the part of the defendant company to comply with the terms of the policy aforesaid.'

It is true that, leading up to this, after setting out the facts substantially as they are given above, it is averred that, receiving no further reply from the company to his written request for a loan on July 7, he notified them on July 9, through his counsel, that he treated their refusal to make the loan as a breach of the entire contract, and that he was not willing in consequence to continue paying the premiums, which, so far as it goes, may seem to be a repudiation of the policy. But it is also further averred that, as he believes, it was the sole purpose of the company, in declining the loan and prolonging negotiations, to induce him to renew the policy, by paying the premium to come due July 12, which negatives any intent on the part of the company to abrogate the policy, or no longer be bound by it, and, on the contrary, expressly affirms their desire to keep on with it, in confirmation of which it is stated that the plaintiff was assured by the representatives of the company, at Philadelphia, that, upon payment of the next annual premium, he would be entitled to a loan of $2,556, or $1,256 more than he then had; the only difference between the parties thus being that he claimed the right to $640 more at once, before the next premium was due, and that the company did not immediately fall in with this. And the damages claimed, on the strength of these averments, being those sustained by the refusal of the company to make the additional loan, whatever might otherwise have been made out of the facts stated, the action cannot be regarded as proceeding for anything outside of that. These damages consisted in the difference between the loan which the plaintiff had obtained, and the loan which, by the terms of the policy, he was entitled to, which the company, in disregard of their agreement, refused to allow him, amounting to $640, the judgment which he recovered. And, having thus got all that he declared for, there was no error in holding him down to it.

But not to decide the case on a question of pleading, and assuming that the liability of the company for the premiums paid based on a rescission of the policy, was open for determination, the plaintiff shows no cause of action beyond that which was allowed him. The right to rescind and recover the premiums paid was not justified by the refusal of the company to loan the additional amount named in the policy. The right to rescind is an extreme right, and it is not every breach of contract that warrants its exercise. It exists, however, where the contract is entire, and either in time or manner of performance is broken by either party from the outstart. Norrington v. Wright, 115 U.S. 188, 6 Sup.Ct. 12, 29 L.Ed. 366; Bowes v. Shand, L.R. 2 App.Cases, 455; Pope v. Porter, 102 N.Y. 366, 7 N.E. 304. But where the contract, if divisible, or even if indivisible, is made up of several distinct and similar acts, to be separately and successively performed, the right to rescind, according to some of the authorities, depends...