McCue v. Northwestern Mut. Life Ins. Co.

• Decision Date: 05 November 1908
• Docket Number: 739.
• Parties: McCUE et al. v. NORTHWESTERN MUT. LIFE INS. CO. et al.
• Court: U.S. Court of Appeals — Fourth Circuit

167 F. 435

McCUE et al. v. NORTHWESTERN MUT. LIFE INS. CO. et al.

No. 739.

United States Court of Appeals, Fourth Circuit.

November 5, 1908

On March 15, 1904, the Northwestern Mutual Life Insurance Company issued to James McCue, of Charlottesville, a 10-year renewal life policy for $15,000, based upon an application made by him therefor on February 25th preceding. The policy provided that in event of death payment would be made to such beneficiary or beneficiaries as might thereafter be nominated, provided that, if no beneficiary survived the insured, then the payment should be made to his executors administrators, or assigns. The application designated 'my estate' as the person for whose benefit the insurance was desired. The policy provided that no liability should arise on the part of the company until the first premium should be actually paid. By arrangement made by McCue with Carroll and Fitzgerald, local agents soliciting the insurance, instead of actually paying the first premium he executed to them his note for $427.50, payable in 6 months which sum was to cover premiums for 18 months from the date of the policy, or until September 15, 1905. Carroll and Fitzgerald sent this note with one of their own as collateral to Cary, the company's state agent, who remitted the $427.50 in cash to the company in due course of business. On September 7th following, eight days before this note of his became due, McCue was arrested and lodged in jail charged with the murder of his wife. While so in jail under such charge, on September 15th, when said note became due, he paid it to Cary, the company's state agent. He was subsequently tried and convicted upon the murder charge, and on February 10, 1905, was executed.

This suit was brought by foreign attachment in equity by the infant heirs at law against the company, the People's National Bank of Charlottesville, as garnishee, and the executors of said decedent. Subsequently, by stipulation of counsel, the facts were agreed, all questions as to whether the cause should be considered a law or equitable one, as to the right to trial by jury, or as to whether parties were misjoined, were waived, and the whole matter was submitted to the court, who found for the defendant, and thereupon both writ of error and appeal was taken to this court. Here the sole assignment of error relied on is that 'the court erred in its verdict and judgment under the law and the facts in the case. ' It is admitted that the defendant insurance company is a strictly mutual one, incorporated by special act of the Legislature of Wisconsin; that its charter gave it 'the power to insure the lives of its respective members, and to make all and every insurance appertaining to or connected with life risks, and to grant and purchase annuities. ' Membership in the company was to be effected by taking out insurance, and 'persons who shall hereafter insure with the said corporation, and also their heirs executors, administrators and assigns, continuing to be insured in said corporation as hereinafter provided, shall thereby become members thereof during the period they shall remain insured by such corporation and no longer. ' Trustees and officers of the company are required to be selected from such membership. Dividends are required to be distributed to such membership from the profits secured by the company.

Daniel Harmon and G. B. Sinclair (Harmon & Walsh and Walker &amp Sinclair, on the brief), for plaintiffs in error.

Wm. H White and Wm. H. White, Jr., for defendants in error.

Before PRITCHARD, Circuit Judge, and WADDILL and DAYTON, District judges.

DAYTON, District Judge (after stating the facts as above).

We cannot refrain from expressing our admiration for the learning, research, and ability displayed by counsel on both sides, in both oral arguments and in the briefs filed by them. It is not our purpose to discuss in detail all the points raised. To do so would consume too much time and space. On behalf of the defendant company it is insisted that 'there can be no recovery on a life insurance policy where the insured is legally executed, the policy being silent on the subject. ' First. Because death on the gallows was not one of the risks against which decedent was insured. Second. Even if it had been a risk specially contracted for, a recovery under such circumstances would be contrary to public policy. On the other hand, it is contended: First. That this company, incorporated by special statute of Wisconsin, was expressly given the right 'to insure the lives of its respective members and to make all and every insurance appertaining to or connected with life risks,' and, having this power, admitted McCue into membership, thereby giving him a vested interest in the corporation, and bound itself to pay the policy 'upon receipt and approval of proofs of the fact and cause of his death,' without any condition against such death occurring by the mandate of the law. Second. That the obligation of this contract is controlled by the law of Wisconsin, that public policy affecting ordinary business transactions between citizens is determined by state laws, and the special statute of that state has settled the question of public policy adverse to the general rule relied on by the company. Third. That, if this were not so, the peculiar facts and conditions arising in this case take it outside of the application of this rule of public policy. In reply, it is insisted that this insurance policy in this court must be construed under the rules of general commercial law, and not under local state statutes.

We need have little trouble in disposing of the first ground of defense, to the effect that death by the mandate of the law was not one of the risks insured against by decedent's policy. It is well understood that the insurance companies generally have adopted a policy of incorporating into their policies exceptions to risks not desired to be undertaken by them. For instance, in this policy in controversy the company required McCue to agree that if he should 'pass south of the Tropic of Cancer, or be previously engaged in blasting, mining, or submarine operations, or in the production of highly inflammable or explosive substances, or in electrical employment where the voltage is over six hundred, or in switching or coupling or uncoupling cars, or be employed in any capacity on the trains of a railroad, except as passenger or sleeping car conductor, mail agent, express messenger or baggage-master, or in ocean navigation, or shall enter or be engaged in any military or naval service (except in time of peace) without the written consent of said company, or shall within one year from the date of said policy, whether sane or insane, die by my (his) own hand,' then the policy should be null and void. When it is remembered that this company was expressly authorized by its charter to 'insure the lives of its respective members and to make all and every insurance appertaining to or connected with life risks'; that no exception for death by mandate of the law was incorporated among these many other exceptions; that the company's general state agent allowed the decedent, after commission of the crime and when in custody to answer therefor, to pay the note executed by him for the 18 months' premium due-- we are not prepared to hold that this risk was not one contemplated by the company when it executed this contract.

The case therefore resolves itself, in practical effect, to a solution of the question whether the contract, by reason of the manner of the death, was made absolutely void through considerations of public policy. And here we are involved in very great doubt and perplexity by reason of the conflict that exists in the decisions of many of the state courts themselves, and between those of many of these state courts and of the federal courts as to what constitutes the public policy touching cases of this kind and others involving similar principles.

Counsel for the company in support of their position confidently rely upon these four cases: Amicable Society v. Boland, 4 Bligh (N.S.) 194; Burt v. Union Central Ins. Co., 187 U.S. 362, 23 Sup.Ct. 139, 47 L.Ed. 216; Ritter v. Mutual Life Ins. Co., 169 U.S. 139, 18 Sup.Ct. 300, 42 L.Ed. 693; Collins v. Met. Life Ins. Co., 27 Pa.Super.Ct. 353.

The Boland Case was decided by the House of Lords in England in 1830. There, Fauntleroy, insured, was guilty of forgery, then a capital offense, declared bankrupt, and his insurance policy with other effects was assigned to Boland and others as trustees. He was tried upon the forgery charge, convicted, and hung. His assignees sought to recover upon his insurance policy. The lower court gave judgment, but the House of Lords reversed it, and held that to allow recovery would be against public policy. It is insisted by counsel for appellants that this decision was determined largely by reason of the law of attainder then in force in England, but that since the abolition of this law with its attendant forfeiture of goods and corruption of blood, by 33 Victoria, in 1870, the principle of public policy set forth in this Boland Case has been greatly modified, if not reversed, by the Maybrick Case (Cleaver v. Mutual, etc., Life Association, 1 Q.B.D. 147), where it was held that although Mrs. Maybrick, who had poisoned her husband and been convicted, could not directly take the proceeds of her wrong, yet if, by a reasonable construction of the contract resulting in the avoidance of forfeiture, even if such construction resulted in establishing a trust fund for the benefit, in part, of Mrs. ********, yet this could furnish no defense to the insurance company. In this case the Master of Rolls, all the other judges concurring, says:

'When peop

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