Manhattan Life Ins. Co. v. Wright

• Citation: 126 F. 82
• Decision Date: 23 November 1903
• Docket Number: 1,875.
• Parties: MANHATTAN LIFE INS. CO. OF NEW YORK v. WRIGHT.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

126 F. 82

MANHATTAN LIFE INS. CO. OF NEW YORK v. WRIGHT.

No. 1,875.

United States Court of Appeals, Eighth Circuit.

November 23, 1903

Syllabus by the Court

A court of equity has jurisdiction of a suit to redeem property from a mortgage after default in the payment of the mortgage debt and the mortgagor has no adequate remedy at law.

The time of payment of a premium for insurance is, in the nature of the agreement, of the essence of the contract. A stipulation in the policy, in a note for the premium, or in any other instrument which evidences the contract of insurance or a part of it, that the insurance shall be void if the premium is not paid on the agreed day, is conscionable, valid, and enforceable.

Time is not ordinarily of the essence of a contract to repay money borrowed. An agreement to forfeit or to lose money or property much in excess of interest during the delay on account of a failure to repay a loan on the stipulated day is a contract for a penalty for a failure to pay money, and is void, because compensation is the basic rule for the measure of damages, and interest during the delay gives full compensation.

The finding and decree of a court of equity are presumptively right, and they should not be disturbed or modified by an appellate court unless an an obvious error has intervened in the application of the law or some grave mistake has been made in the consideration of the facts.

The test of abandonment of one's rights is the existence or nonexistence of the intent to abandon them. The presumption is that the owner intends to preserve them. Acts indicating abandonment are not necessarily sufficient to establish it but are generally only material as they tend to prove the intent to abandon.

The practical interpretation given to their contracts by the parties to them while they are engaged in their performance and before any controversy has arisen concerning them, is one of the best indications of their true intent, and courts that adopt and enforce such a construction are not likely to commit serious error.

This is an appeal from a decree to the effect that the complainant below, the appellee here, Kate R. Wright, is entitled to redeem an insurance policy for $5,000 from a mortgage to the appellant, the defendant below, the Manhattan Life Insurance Company, and to recover from the latter $4,239.43, the difference between the face of the policy and the amount of two notes made by the defendant. This decree is based upon this state of facts: On December 6, 1897, the plaintiff held a policy for $5,000 on the life of her husband, Thomas W. Wright, which had been issued by the defendant on November 27, 1889. The annual premium upon this policy was $250. Nine of these premiums had been paid, and there was a contract in the policy to the effect that, in case it should at any time lapse or be forfeited for the nonpayment of any premium under the circumstances of this case, the company would pay as many tenths of $5,000 as there had been annual premiums paid. As nine annual premiums had been paid, this was a contract for a paid policy of $4,500 if the last premium for $250 was not paid. In this state of the case Thomas W. Wright borrowed $350 of the defendant, and for the purpose of securing its repayment he gave to the company a promissory note payable to its order, signed by himself and by the complainant, his wife, the beneficiary in the policy, whereby they promised to pay to the company $350 and interest on November 27, 1898, and assigned their insurance policy to it as collateral security for the payment of this loan. They delivered this note and the policy to the company and received the $350, less the interest upon it for one year, which was thus paid in advance. On November 27, 1898, the last premium of $250 owing upon this policy became due. Wright did not have the money to pay it, and he applied to the company for a loan of $250 to enable him to do so. The defendant granted his application, loaned him the $250 for the purpose of enabling him to pay the premium, and at the same time loaned him $21.50 to enable him to pay the interest in advance for another year on the note for $350. Wright and the complainant gave to the company their promissory note for $271.50 for this loan, by which they promised to pay it on May 27, 1899, 'two hundred seventy-one and 50/100 dollars being premium due this day on policy No. 66263 with interest,' and agreed that 'if this note is not paid when due the said policy is void and the Manhattan Life Insurance Company is hereby expressly released from any liability, claim or demand upon or by reason of the said policy or by reason of the law of any state with reference to the surrender for cash or paid up insurance, except that this policy may then (within two months) be duly surrendered to said company for such sum as may be the custom of the company at that time to pay for the cash purchase of similar policies, less the amount of this note with interest. ' Upon the receipt of this note the company gave to Wright a receipt for $271.50 premium, on the back of which were these words and figures:

"Note given on account of premium ..	$_____.
"Cash premium ......................	$250.
"Interest in advance ...............	21.50
	-------
	$271.50

'Not valid unless countersigned by cashier at Home Office.

'H. D. Farley, Cashier.' On May 22, 1899, Wright requested the appellant to renew the note. On May 25, 1899, the company declined to do so, but offered to accept $200 in cash and a new note for $171.50. On June 2, 1899, Wright declined this offer, but wrote that he did not want to hazard his policy, and that in 60 days he would either pay the note in full or pay $100. On June 7, 1899, the company offered to accept $50 in cash and two notes, one for $100 due July 27, 1899, and the other for $121.50 due September 27, 1899. On June 19, 1899, Wright wrote to the company that he would send the $50 and the notes on July 1, 1899. On June 28, 1899, the appellant wrote to him that as it had heard nothing from him it presumed he did not care to revive and continue his policy, which had lapsed on May 27, 1899. The company retained the policy, and took no action to foreclose the mortgage upon it. Neither Wright nor the appellee ever surrendered or released it to the defendant. Neither of the two notes was paid, and on February 25, 1900, Wright died. The beneficiary, Kate R. Wright, presented the proper proofs of death, and exhibited a bill in equity to which a demurrer was interposed and overruled and an answer made. The case was then tried upon the merits, and the foregoing facts were disclosed. Thereupon the company contended, among other things, that the complainant was entitled to no relief (1) because the circuit court sitting in equity had no jurisdiction of the suit for the reason that the complainant had an adequate remedy at law; (2) because the policy of insurance and the rights of the complainant thereunder had been lost under the stipulations in the note of November 27, 1898, to that effect, on account of the failure to pay that note when it fell due; and (3) because the policy and the rights of the insured and of the complainant had been abandoned by their silence and inactivity between June 19, 1899, and the death of Wright, on February 25, 1900. The court below was unable to sustain these contentions, and rendered a decree for the complainant for the face of the policy and interest, less the amount of the notes and interest.

O. B. Willcox (H. G. Lunt, F. E. Brooks, Artemas H. Holmes, E. L. Rapallo, and H. W. Kennedy, on the brief), for appellant.

Alfred W. Arrington (F. R. McAliney, on the brief), for appellee.

Before SANBORN and VAN DEVANTER, Circuit Judges, and HOOK, District Judge.

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

Prior to December 6, 1897, the complainant, Kate R. Wright, was the beneficiary in a policy of insurance of $5,000 upon which nine annual premiums had been paid, whereby, the terms of the contract, she was entitled to a paid-up policy for $4,500. She made her note whereby she promised to pay $350 to the defendant on November 27, 1898, and she, together with her husband, the insured, assigned her policy and her rights thereunder to the company as collateral security for the payment of this note. This assignment contained a condition that, if the principal sum and the interest specified in the note should be fully paid before any default, the assignment should become null and void. In November, 1899, default was made in the payment of the principal sum. The written assignment of the policy as collateral security for the payment of this note was a mortgage of it. Jones on Chattel Mortgages, Secs. 4, 5; Wright v. Ross, 36 Cal. 414; Piper v. Hilliard, 52 N.H. 209.

After default in the payment of the amount due upon the note the complainant had no adequate remedy at law. The title to the policy and to the rights she once held thereunder had vested in the defendant under the mortgage she had given to it. One of the purposes of the bill in this case was to redeem from this mortgage, which had never been foreclosed. Upon familiar principles a court of equity has ample jurisdiction to entertain a suit for this purpose, and after it had obtained jurisdiction for one purpose it had ample power to grant adequate relief to any of the parties to the suit. After the default in the payment of the debt secured by the mortgage, the complainant had no adequate remedy at law, and the objection that a court of equity had no jurisdiction of this suit cannot prevail, because one of the main purposes of the proceeding was to redeem from the defaulted mortgage to the defendant.

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