McRae v. Warmack

• Decision Date: 27 February 1911
• Citation: 135 S.W. 807,98 Ark. 52
• Parties: MCRAE v. WARMACK
• Court: Arkansas Supreme Court

135 S.W. 807

98 Ark. 52

MCRAE v. WARMACK

Supreme Court of Arkansas

February 27, 1911

Appeal from Nevada Circuit Court; Jacob M. Carter, Judge; reversed.

Judgment reversed and cause remanded.

Thomas C. McRae, W. V. Tompkins and D. L. McRae, for appellant.

1. An uncle has no insurable interest in the life of a nephew. 116 S.W. 1; 25 Cyc. 705. A verbal contract entered into between an uncle and nephew that the latter should apply for a policy of life insurance, and upon the issuance thereof assign the same to the uncle, which contract was afterwards, on delivery of the policy, reduced to writing and signed by the parties is invalid; and the assignment of the policy is void. 3 L. R A. (N. S.) 934; Id. 946; 158 N.Y. 24; 44 L. R. A 417; 15 Wall. 643; 104 U.S.775; 122 Ky. 402, S. C. 21 Am. & Eng. Ann. Cas. 685; 97 Va. 74, s. c. 45 L. R. A. 245; 104 U.S.779; 77 Ark. 60; 84 S.W. 1164; 112 Pa. 446; 18 L. R. A. (N. S.) 114; 131 F. 728, s. c. 65 C. C. A. 589; 125 Ga. 206; 122 Ky. 402.

2. Where a policy is valid in its inception, and the policy is pledged to the assignment for the payment of a debt, the assignee might recover; but this suit is not for that purpose, and it would have availed appellee nothing to have made such claim because he could not establish a right to the amount of his debt except by showing his illegal and void contract. 47 Ark. 378.

Hamby & Haynie, for appellee.

As to whether a contract in any given case is a wagering contract depends upon the facts and circumstances of that particular case, and the decision usually turns upon the good or bad faith of the parties making the contract. The facts in this case present every element of good faith. It presents a case of one man, without means to pay premiums, who desired insurance on his life for the protection of his family, and his uncle, friend, creditor and business associate, who agreed to assist him in procuring the insurance by paying the first two annual premiums on two policies, one of which was assigned to him, doubtless for his own protection while carrying the policy for the benefit of the nephew's family. The transaction was legitimate. 138 Mass. 24; 67 Wis. 75; 58 Am. Rep. 848; 11 R. I. 439; 23 Am. Rep. 496; 94 U.S.457; 25 L. R. A. 630; 69 U.S.735; 95 Ark. 529.

OPINION

FRAUENTHAL, J.

This was an action instituted by L. M. Warmack, the plaintiff below, to recover the proceeds of the collection of an insurance policy issued on the life of Dozier L. Boswell, by reason of an alleged assignment thereof by said Boswell to him. Upon the death of said Boswell the company issuing the policy agreed to make payment thereof, but, the administrator of said Boswell and the plaintiff both claiming to be entitled to the payment, the company threatened to institute an action of interpleader, whereupon the parties agreed that payment of the policy might be made by it to the administrator without affecting any right that plaintiff might have thereto. The plaintiff then presented to the administrator his duly verified claim against the estate for $ 2,500, the amount of said policy, and instituted this suit for the recovery thereof against said administrator, The sole defenses made by the administrator against a recovery by plaintiff were, (1) that the assignment of the policy by Boswell to plaintiff was invalid because it was in the nature of wagering contract, and (2) that plaintiff had surrendered to Boswell prior to his death the policy and all his interest therein. Upon the trial of the case the court held that the assignment of the policy to plaintiff was not in the nature of a wagering contract but was valid, and submitted to the jury the sole question as to whether or not plaintiff had surrendered the policy and his interest therein to Boswell prior to his death. The jury answered said question in the negative, and thereupon the court rendered judgment in favor of plaintiff for the full amount of $ 2,500.

The testimony relative to the issuance and assignment of the policy is practically undisputed, and presents the following case:

In May, 1907, D. L. Boswell and plaintiff entered into a verbal contract whereby it was agreed that said Boswell should apply to the insurance company for two policies of $ 2,500 each upon his life, and that plaintiff should pay the two first premiums thereon and take an assignment of the policies with an understanding that one of the policies should be payable to plaintiff and the other to the estate of Boswell upon his death. In pursuance of the agreement application for the policies was made, and upon the receipt thereof the verbal agreement was reduced to writing and is as follows

"Bodcaw, Ark., July 2, 1907.

"This writing witnesses that Dozier L. Boswell, who has this day accepted from the State Mutual Life Insurance Company, of Rome, Ga., two policies of insurance, Nos 18811 and 18812, of $ 2,500 each on his life for his estate, does hereby assign unto Lawrence M. Warmack the above named and numbered policies. It also is agreed that Lawrence M. Warmack shall pay the first and second premiums on the above named and numbered policies. It is further agreed that Dozier L. Boswell may release from this assignment policy Number 18811 after two years by assuming the payments of the annual premiums on both of the above named and numbered policies. It is also agreed that, should Dozier L. Boswell fail to pay the third or any subsequent annual premium, policy No. 18811 reverts back to Lawrence M. Warmack. It is also agreed that, should the death of Dozier L. Boswell occur during the first two years after that time while the policies are being sustained by the insured, then $ 2,500 of the insurance or policy No. 18811 will be payable to the estate of the insured only.

(Signed) "D. L. Boswell,

"L. M. Warmack."

The policies were on the receipt thereof turned over by Boswell to plaintiff under the above written contract, and plaintiff paid the first two premiums on both policies, amounting to $ 262. Before the third premiums matured Boswell died. Shortly before his death the plaintiff turned over the policies to Boswell in order, as he claimed, that Boswell might show them to his wife, and they remained in his possession until his death. It appears that plaintiff was the uncle of Boswell, but in no way dependent upon him; and upon the trial of the issue as to whether or not he had surrendered the policies to Boswell there was some testimony indicating that Boswell was indebted to him, but the testimony as to the nature and extent of the indebtedness was not fully developed; it was only introduced for the purpose of showing whether or not the plaintiff had surrendered the policies and released all his interest therein when he turned same over to Boswell.

It is urged by counsel for defendant that plaintiff had no insurable interest in the life of Boswell, and that the contract for the assignment of the policies to him was a mere wager by which he was directly interested, not in his life, but in his early death, and on this account such assignment was against public policy and invalid. The principle upon which life insurance is based is that one who has a reasonable expectation of benefits and advantages growing out of the continuance of the life of the assured has such an interest in his life that he may insure the same. But where one is not thus interested in the life of the assured, but by insuring such life is rather interested in his early death, the contract of insurance is a mere wager, and against a sound public policy. Such contracts, it has been thought, would, if upheld, result in a mere traffic in human life, and would lend a great incentive to one thus disinterested in the life but interested in the death of the assured to shorten that life. It is therefore well settled that the issue of a policy to one who has no insurable interest in the life of the insured but who pays the premiums for the chance of collecting the policy is invalid because it is a wagering contract and against a sound public policy. Cammack v. Lewis, 82 U.S. 643, 15 Wall. 643, 21 L.Ed. 244; Connecticut Mut. L. Ins. Co. v. Schaefer, 94 U.S. 457, 24 L.Ed. 251; Warnock v. Davis, 104 U.S. 775, 26 L.Ed. 924; Gilbert v. Moose, 104 Pa. 74; Corson's Appeal, 113 Pa. 438, 6 A. 213; Deal v. Hainley, 135 Mo.App. 507, 116 S.W. 1; Bromley v. Washington L. Ins. Co., 122 Ky. 402, 92 S.W. 17; Gordon v. Ware Nat. Bank, 65 C.C.A. 580; Metropolitan Life Ins. Co. v. Elison, 72 Kan. 199, 3 L. R. A. (N. S.) 934, 83 P. 410, and note; Ruse v. Mutual Benefit Life Ins. Co., 23 N.Y. 516; 1 Cooley's Briefs on Law of Ins. 246. And for the same reason it has been held by the great weight of authority that the assignment of a policy of insurance to one having no insurable interest in the life of the insured, though issued to one having such insurable interest, will be ineffective and invalid if such assignment was made in pursuance of an agreement made at the time of the issuance of the policy. Connecticut Mutual Life Ins. Co. v. Schaefer, 94 U.S. 457, 24 L.Ed. 251; Warnock v. Davis, supra; Gordon v. Ware Nat. Bank, supra. See also cases cited in 1 Cooley's Briefs on Law of Insurance, 273.

In the case of Warnock v. Davis, 104 U.S. 775, 26 L.Ed. 924, it is said: "The assignment of a policy to a party not having an insurable interest is as objectionable as the taking out of a policy in his name. * * * If there be any sound reason for holding a policy invalid when taken out by a party who has no interest in the life of the assured, it is difficult to see why that reason is not as cogent and operative against a party taking an assignment of a policy upon the life of a person in which he has no interest. The same ground which invalidates the one should invalidate the other."...