Meyerson v. New Idea Hosiery Co.

• Decision Date: 25 November 1927
• Docket Number: 6 Div. 902
• Citation: 217 Ala. 153,115 So. 94
• Parties: MEYERSON v. NEW IDEA HOSIERY CO.
• Court: Alabama Supreme Court

115 So. 94

217 Ala. 153

MEYERSON v. NEW IDEA HOSIERY CO.

6 Div. 902

Supreme Court of Alabama

November 25, 1927

Rehearing Denied Jan. 12, 1928

Appeal from Circuit Court, Jefferson County; Joe C. Hail, Judge.

Action by Etta Meyerson, individually and as executrix of the estate of Simon Meyerson, deceased, against the New Idea Hosiery Company. From a judgment for defendant, plaintiff appeals. Affirmed.

A. Leo Oberdorfer, of Birmingham, for appellant.

Nesbit & Sadler and Grady W. Patterson, all of Birmingham, for appellee.

BROWN J.

This appeal is prosecuted by the plaintiff from a judgment in favor of the defendant, rendered on the verdict of the jury directed by the circuit court through the affirmative charge for defendant. The case as tried and disposed of on the merits, was presented under counts 1 and 2 of the complaint the defendant's plea of the general issue and special plea 6 asserting that, in the policy or certificate of insurance issued by the Metropolitan Life Insurance Company and delivered by the defendant to Simon Meyerson, insuring his life, and naming the plaintiff, the wife of said Meyerson as the beneficiary, the insured reserved the right to change the beneficiary, and the plaintiff's interest in the policy or certificate was such that she could not maintain the action.

The counts of the complaint were ex contractu, and are predicated upon the breach of a contract between Meyerson and the defendant, in which the defendant engaged and undertook to pay the premiums accruing under the insurance contract to the insurer, as a part of Meyerson's compensation as an employee of the defendant, so long as he remained in defendant's employ; and they each allege, in substance that said Meyerson remained in defendant's employ until his death, without exercising the right to change the beneficiary in said policy or certificate.

The breach alleged is that, although said Meyerson complied with all the conditions of the contract with defendant, it breached the same by failing to pay the premiums as it had engaged to do, and allowed such policy to lapse, to plaintiff's damage in the sum claimed.

The facts stated in defendant's special plea 6, aside from mere legal conclusions, were proven without dispute, and, if it asserted a good defense, it would follow as a necessary result that the court properly directed the verdict.

The case, as related to the defense asserted by this special plea, is that of a contract entered into between two parties, resting upon a valid consideration, for the direct, although not the immediate, benefit of a third person, and a breach thereof resulting in damages to the party for whose benefit the contract was made. Upon the making of such contracts, the law operating upon the acts of the parties creates the essential privity between the promisor and the third person necessary to a binding, legal obligation. Fite v. Pearson et al., 215 Ala. 521, 111 So. 15; Alabama City G. & A. Ry. Co. v. Kyle, 204 Ala. 597, 87 So. 191; Dean v. Walker, 107 Ill. 540, 47 Am.Rep. 467; Smith v. Pfluger, 126 Wis. 253, 105 N.W. 476, 2 L.R.A. (N.S.) 783, 110 Am.St.Rep. 911, Wald's Pollock on Contracts (1906 Ed.) 241.

Viewing the question presented merely in the light of the facts averred in the special plea, plaintiff's interest in the insurance contract was not a vested right as against the right of the insured to change the beneficiary, yet, pending the contingency essential to perfect her right to collect the insurance under the policy--the death of the assured--she had a substantial interest in the policy under which she could invoke judicial action to prevent a change of beneficiaries without the binding assent of the assured. Slaughter v. Grand Lodge, 192 Ala. 301, 68 So. 367; Grand Lodge et al. v. Frank, 133 Mich. 232, 94 N.W. 731.

But, when we view this question in the light of the pleaded facts and the averments of the complaint showing that the insured died without exercising his reserved right to change the beneficiary, and that the breach of the independent contract between the defendant and the insured, made for the benefit of the plaintiff resulted in damages to her, it is clear that the defense asserted by special plea 6 was not available to the defendant.

The case of Royal Neighbors of America v. Fortenberry, 214 Ala. 387, 107 So. 846, cited by appellee to justify a denial of plaintiff's right to recover, is easily differentiated from the case in hand. There the contract of insurance was never effected; the policy issued by the insurance company naming the plaintiff as beneficiary was not delivered. The action was against the insurance company "for failure to promptly issue or negligence in the due issue of the policy or certificate pursuant to the application." Under these circumstances it was held that the right of action was in the personal representative of the applicant, and not in the person who was designated in the application as beneficiary. Under the facts of that case, there being no contractual relations between the insurer and the designated beneficiary, the issuance and delivery of the policy during the life of the assured were facts essential to the quickening into existence of any right of such beneficiary in the insurance contract. 37 C.J. 385, § 49; Royal Neighbors of America v. Fortenberry, supra. Therefore the holding in that case, and cases of like import, cannot be considered apt authorities for denying the plaintiff's right of action here. We are of opinion, therefore, that the demurrers to plea 6 were well taken, and that the court committed error in overruling them.

Whether this error resulted in injury and should work a reversal of the judgment depends upon the question to be now considered. As before stated, the alleged consideration of the contract, the breach of which is the foundation of the plaintiff's case, is that the defendant agreed to pay the premiums accruing on the policy of insurance as a part of the insured's compensation for his services as defendant's employee, so long as he remained in defendant's service. It is conceded that he was an employee, engaged in selling the defendant's products; that he received his compensation in commissions on such sales as he made; and that this relation was created before the insurance was effected, and continued without interruption until his death.

It further appears without dispute that the defendant, on or about December 21, 1922, voluntarily, and, so far as appears, without the knowledge of its employees, applied to the insurance company for group term insurance on the lives of its employees, renewable by the employer from year to year, under the terms of the application and the policy issued thereon, and the payment of the premiums thereon by the employer.

The policy carried the following provisions:

"The company will issue to the employer for delivery to each employee insured hereunder an individual certificate showing the insurance protection to which such employee is entitled, the beneficiary to whom payable, together with a statement that, in case of the termination of the employment with the employer, for any cause whatsoever, such employee shall be entitled to have issued to him by the company, without further evidence of insurability, and upon application to the company within thirty-one days after such termination of employment and upon payment of the premium then applicable to the class of risk to which he belongs and to the form and amount of the policy at his attained age (nearest birthday), a policy of life insurance in any of the forms customarily issued by the company, except term insurance, in an amount equal to the amount of his protection under this policy at the time of termination. Upon termination of active employment, the insurance of any discontinued employee under this policy automatically and immediately terminates, and the company shall be

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