Massachusetts Mut. Life Ins. Co. v. Jones, 3006.

• Decision Date: 21 October 1930
• Docket Number: No. 3006.,3006.
• Citation: 44 F.2d 540
• Parties: MASSACHUSETTS MUT. LIFE INS. CO. v. JONES.
• Court: U.S. Court of Appeals — Fourth Circuit

44 F.2d 540 (1930)

MASSACHUSETTS MUT. LIFE INS. CO. v. JONES.

No. 3006.

Circuit Court of Appeals, Fourth Circuit.

October 21, 1930.

J. M. Woods, of Charleston, W. Va. (Price, Smith & Spillman, of Charleston, W. Va., on the brief), for appellant.

W. W. Goldsmith, of Beckley, W. Va. (Ashton File and File, Goldsmith & Scherer, all of Beckley, W. Va., on the brief), for appellee.

Before PARKER, Circuit Judge, and GRONER and ERNEST F. COCHRAN, District Judges.

GRONER, District Judge.

This is an action at law on a policy of insurance for $5,000 issued by the appellant — defendant below — on the life of James L. Jones, the husband of Jean Jones, the appellee — plaintiff below. The District Court, on stipulation waiving a jury, gave judgment, without opinion, against the insurance company. For brevity, we will speak of the parties as the beneficiary, the company, and the insured.

In December, 1923, insured made application to the company for a twenty payment life policy for $5,000, naming his wife as beneficiary. The policy was issued on the 30th of December, 1923, and contained the standard options, and also provided two classes of loans; i. e., cash, equal to the amount of the net cash surrender value, and the so-called "automatic premium loan." Insured, in his written application for the policy, selected the latter, and, under the nonforfeiture provisions of the policy, selected "extended term insurance." On the 30th of December, 1923, when the policy was delivered to him, he paid the premium of $168.50, and this was all the out-of-pocket money he ever paid on account of the policy. Shortly after the expiration of the first year, but within the thirty-one days' grace allowed under the policy, he notified the company of his inability to pay the second premium, but inquired, if he should ever be able to pay it, what steps he should take to that end. The company replied that, the cash value of the policy being sufficient for the purpose, it would lend him the money to pay the second year's premium, and had him execute a premium loan note for the amount advanced. When the third premium fell due, Jones owed the company the amount of the second premium, less the dividend declared December 30, 1925, plus interest. He again stated he had no money with which to pay the premium, and the company again informed him there was sufficient value to his policy on which to base an additional loan for enough to pay the premium for that year, and sent him a premium note and agreement for his signature. Insured did not sign or return the note, and paid nothing either in reduction of his former debt or on account of the premium then due, whereupon the company, on the last day of the grace period, applied so much of the cash or loan value of the policy as was necessary to the payment of the third year's premium, and forwarded to insured its receipt therefor. On December 30, 1926, the fourth annual premium became due, and on January 31, 1927, the last day of grace, remained unpaid. Whereupon the company, having determined the then precise cash value of the policy, and having ascertained that the net amount available in cash or for loans was less than the annual or semiannual premium, made a further loan of a sufficient amount to continue the policy for a quarter of a year, and again forwarded to insured its receipt, and notified him that the policy would be continued at face, less the amount of the loans, only to the end of the quarter, viz., to March 30, 1927, and for thirty-one days thereafter. Prior to March 30th insured was again notified that a second quarterly premium would then be due, but again made no reply, nor did he pay the premium. On the last named date insured's indebtedness to the company, principal and interest, amounted to $324.80, and the cash value of the policy to $340.88. The difference was $16.08, which was not sufficient to pay another quarterly premium, and this amount the company, under the nonforfeiture provision, applied to the purchase of extended insurance, and notified insured of what it had done, and of the expiration date of the extended insurance, which was August 23, 1927. Insured died April 14, 1928.

The grounds upon which the beneficiary claimed the right to recover were: First, that when, on the expiration of the grace period in January, 1927, it was ascertained that the cash value of the policy, less the indebtedness, was not sufficient to support a loan for enough to pay an annual premium, the company, in the absence of a written request from insured, instead of applying the amount available to the payment of a quarterly premium and, at the expiration of the quarter, the balance to extended insurance, should have applied the whole amount to the purchase of extended insurance, and she says that, if this had been done, it would have extended the life of the policy to a period beyond January, 1928, and the dividend, which in that case would have accrued on account...