Mechs.' Nat. Bank v. Comins

• Decision Date: 10 January 1903
• Parties: MECHANICS' NAT. BANK v. COMINS et al.
• Court: New Hampshire Supreme Court

55 A. 191

72 N.H. 12

MECHANICS' NAT. BANK

v. COMINS et al.

Supreme Court of New Hampshire. Merrimack.

Jan. 10, 1903.

Transferred from Superior Court; Peaslee, Judge.

Bill in equity by the Mechanics' National Bank against Edward P. Comins and the Connecticut Mutual Life Insurance Company, praying that the company be ordered to pay to the plaintiffs the proceeds of a policy of insurance on the life of George T. Comins, father of Edward, and that the latter be restrained from setting up a claim to the same. The company in its answer admitted liability on the policy to some person, and paid the money into court Edward alleged that the fund belonged to him. Trial by the court, and a decree that the fund be paid to the plaintiffs. Defendant excepted. Exceptions overruled. Prior to May 11, 1892, the George T. Comins Company (of which Edward was treasurer, George was manager, and in which both were stockholders) was indebted to the plaintiffs upon promissory notes for $26,160.74. On that day Edward assigned to the plaintiffs a policy taken out in the Connecticut Mutual Life Insurance Company by George upon his own life in the sum of $10,000, payable to Edward if he survived his father. George joined in the assignment. The policy was assigned as security for the indebtedness upon the notes above mentioned, and the plaintiffs had no insurable interest in George's life, other than that to be found from the facts herein reported. Neither George nor Edward was personally indebted to the plaintiffs. George died August 1, 1898, and there was then due upon the policy $1,426.45. The policy contained the following provision: "No assignment of this policy shall be valid unless made in writing and a duplicate or certified copy thereof be filed at the office of said company, and any claim against this company, arising under this policy, made by an assignee or creditor, shall be subject to satisfactory proof of interest in the life of the insured, in due form, and to any breach of the conditions of this contract by any of the parties hereto, whether such breach exist prior or subsequent to any such assignment; and such proof of interest shall be a condition precedent to any right of action on this contract by or on behalf of such assignee; and this company shall in no case be responsible for the validity of any assignment." December 1, 1892, the notes being overdue, the Comins Company gave the plaintiffs five new notes for the same aggregate amount, payable at different times, and the old notes were surrendered. This transaction was not a payment of the old obligations, but a substitution therefor of the new ones. Edward signed the new notes as treasurer, and at the time of the transaction he entered on the Comins Company's journal a list of the old and new notes, together with the following memorandum: "Certain small notes of different dates consolidated by making larger notes of one date. Aggregate the same." In 1893 the premium upon the policy in suit was paid by a check of the Comins Company, and an entry that the policy was held by the bank was made by Edward upon the counterfoil. Edward made no demand for the policy when the new notes were given, nor until after George's death. Subject to exception, the court found that Edward was a party to the transaction of December 1, 1892. In November, 1894, the Comins Company owed the plaintiffs about $92,000, including the overdue sum of $26,160.74. Having obtained title to all the property of the Comins Company by foreclosure and assignment, the plaintiffs transferred the same to the Beecher's Falls Company, and received therefor $92,000 of stock in that corporation. Edward contended that this transfer was made with the understanding that it satisfied the debt of the Comins Company to the plaintiffs, and that the policy held as collateral security was released by the transaction; while the plaintiffs claimed that the stock was taken with the understanding that the earnings of the Beecher's Falls Company should be applied in reduction of the indebtedness of the Comins Company. The plaintiffs' cashier testified that the bank had received nothing from the Beecher's Falls Company, and, while it did not appear that the notes of the Comins Company would not ultimately be paid in full from the profits of the Beecher's Falls Company, there was no evidence tending to show a reasonable likelihood of such result. The court found that the contention of the plaintiffs as to the purpose of the transfer was true. As part of the process of transferring title to the Beecher's Falls Company, the plaintiffs foreclosed two mortgages—one to secure notes for $20.100.74, and the other to secure notes for $51,208.89. These facts, and the amount of the proceeds of each sale ($5,000 and $18,000), were shown by the record. The plaintiffs' cashier testified generally concerning this transaction, and read the following entry made by him upon the wrapper containing the former notes: "Proceeds of sale of machinery, foreclosure under mortgage, $5,000, Nov. 5, 1894, to be endorsed on the within notes." He also read the following entry made on the wrapper containing the other notes: "Proceeds of sale of lumber and machinery at Beecher's Falls, Vt, at foreclosure under mortgage dated Aug. 2, 1893. Proceeds of sale, $18,000, to be endorsed on the within notes. Sale Dec. 18, 1894." Both entries were read subject to exception. The defendant Comins also excepted to the court's refusal to order a decree in his favor and to that entered for the plaintiffs.

Streeter & Hollis, for plaintiffs.

George M. Fletcher and Sargent, Niles & Morrill, for defendant.

REMICK, J. The fundamental contention of the defendant is that the assignment was against public policy and void, because the plaintiffs, to whom it was made, had no insurable interest in the life of George T. Comins, the subject of the policy assigned.

It is indeed firmly established that insurance procured by one person upon the life of another, the former having no insurable interest in the latter, is void as a wager contract, against public policy, which condemns gambling speculations upon human life. And the defendant contends that a policy can no more be assigned than originally issued to a person having no insurable interest. To this contention the plaintiffs reply: (1) That they had an insurable interest in the life of George T. Comins at the date of the assignment by reason of being a heavy creditor of the George T. Comins Company, of which George T. Comins was the manager; (2) that, the policy having been originally issued to George T. Comins under such circumstances as to constitute it a good and valid contract of insurance as against the world, its subsequent assignment to them in the regular course of business was valid, whether they had an insurable interest in the life of George or not.

1. Did the plaintiffs have an insurable interest? "It is not easy to define with precision what will in all cases constitute an insurable interest, so as to take the contract out of the class of wager policies. * * * But in all cases there must be a reasonable ground, founded upon the relations of the parties to each other, either pecuniary or of blood or affinity, to expect some benefit or advantage from the continuance of the life of the assured." Warnock v. Davis, 104 U. 6 775, 779, 20 L. Ed. 924; Adams' Adm'r v. Reed (Ky.) 38 S. W. 420, 421, 35 L. R. A. 692. "It may be said, generally, that any reasonable expectation of pecuniary benefit or advantage from the continued life of another creates an insurable interest in such life." Connecticut, etc.; Ins. Co. v. Schaefer, 94 U. S. 457, 460, 24 L. Ed. 251. "It is not necessary * * * that the one for whose benefit the life of another is insured should be a creditor of that other. It is enough that, in the ordinary course of events, loss and disadvantage will naturally and probably arise, to the party in whose favor the policy is written, from the death of the person whose life is insured." Hoyt v. Insurance Co., 3 Bosw. 440, 440; Kentucky Ins. Co. v. Hamilton, 63 Fed. 93, 11 C. C. A. 42. "The interest need not be such as to constitute the basis of any direct claim in favor of the plaintiff upon the party whose life is insured; it is sufficient if an indirect advantage may result to the plaintiff from his life." Trenton, etc., Ins. Co. v. Johnson, 24 N. J. Law, 570, 586. The tendency of the American decisions "is to hold that, wherever there is any well-founded expectation of or claim to any advantage to be derived from the continuance of a life, there is an insurable interest in the life, though there may be no claim upon the person whose life is insured that can be recognized in law or in equity." Bliss, Life Ins. §§ 21-31; May, Ins. §§ 102-111. "A person has an insurable interest in the life of another when there is a reasonable probability that he will gain by the hitter's remaining alive, or lose by his death." 3 Kent (14th Ed.) 500, note. The result of a recent review of the American cases is thus stated: "An insurable interest which will take an insurance policy out of the class of wager policies is such an interest arising from ties of blood or other relations as will justify a reasonable expectation of advantage or benefit from a continuance of the life of the assured. This rule, it would appear, does not dispense entirely with a pecuniary interest, but merely permits that Interest to consist of a mere expectation of pecuniary benefit, as distinguished from the requirement of the other rule, that the interest must amount to a claim recognizable or enforceable in law." 54 L. R. A. 234. In short, "the essential thing is that the policy shall be obtained in good faith, and not for the purpose of speculating upon the hazards of a life." Connecticut, etc., Ins. Co. v. Schaefer, 94 U. S. 457, 460, 24 L. Ed. 251; Kentucky Ins. Co. v. Hamilton, 63 Fed. 93, 101, 11 C. C. A. 42; Loomis v. Insurance Co., 6 Gray, 396....