Mutual Life Insurance Company of New York v. Allen

• Decision Date: 24 October 1884
• Citation: 138 Mass. 24
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: Mutual Life Insurance Company of New York v. George Allen & another

138 Mass. 24

Mutual Life Insurance Company of New York v. George Allen & another

Supreme Judicial Court of Massachusetts

October 24, 1884

Argued March 21, 1884.

Suffolk.

Bill of interpleader, filed October 22, 1881, by a corporation organized under the laws of the State of New York, against George Allen and Catherine Fellows, to determine which of the defendants was entitled to the proceeds of a policy of insurance, issued by the plaintiff on July 25, 1855, upon the life of Israel Fellows, in the sum of $ 2000. The bill alleged the following facts:

By the terms of the policy it was issued "for the sole use of Catherine Fellows," and the plaintiff promised and agreed "to and with the said assured, her executors administrators, and assigns, well and truly to pay, or cause to be paid, the said sum insured to the said assured, her executors, administrators, or assigns, for her sole use within sixty days after due notice and proof of the death of the said Israel Fellows. And, in case of the death of the said Catherine Fellows before the decease of the said I. Fellows, the amount of the said insurance shall be payable after her death to her children, for their use, or to their guardian, if under age, within sixty days after due notice and proof of the death of the said I. Fellows, as aforesaid." The policy also contained this clause: "N. B. If assigned, notice to be given to this company." ^[*]

On January 1, 1881, Israel Fellows, Catherine Fellows, and their two children, who were then of age, by two instruments in writing under their hands and seals, duly executed and delivered in this Commonwealth, assigned and transferred the policy of insurance to the defendant Allen, together with all their respective claims and demands under the same. ^[**]

On March 7, 1881, Israel Fellows died, leaving his widow, Catherine Fellows, surviving him. Proof of his death was duly made. His widow made a demand upon the plaintiff for the payment of the policy, and brought an action upon the policy in the Supreme Court in New York.

In August, 1881, Allen also brought an action on the policy in this Commonwealth, in the name of Catherine Fellows, for his own benefit.

The answer of Allen admitted the allegations of the bill; and averred that Allen bought the policy for a good and valuable consideration.

The answer of Mrs. Fellows admitted the allegations of the bill; and averred that the assignment was invalid under the laws of the State of New York, and that Allen had no insurable interest in the life of Israel Fellows.

The case was heard by Holmes, J., who reported it for the consideration of the full court, in substance as follows:

The plaintiff paid the money into court. The policy was delivered by the plaintiff in this Commonwealth. At that time, and when the assignment was made, the law of New York was as set forth in the Laws of 1840, c. 80, ^[+] and in the cases of Eadie v. Slimmon, 26 N.Y. 1, and Barry v. Equitable Assur. Society, 59 N.Y. 587.

"The amount of premium annually paid upon the policy did not exceed $ 300. There was some evidence that the defendant Fellows did not expect that her assignment, although absolute in form, was to be used, except as security for a loan of $ 1000 to her husband; but there was no evidence which satisfied me that there was any restriction upon his power to deliver it as an absolute transfer; and I found that the policy was assigned in Massachusetts to the defendant Allen by the defendant Fellows (both being then residents of Massachusetts), in consideration of $ 1000 paid to her husband by said Allen, and the discharge of certain notes held by said Allen amounting to $ 470.79. If the transfer was valid in manner and form as agreed, Allen ceased from that moment to have an insurable interest in the life of said Fellows as a creditor, and he had no other."

The judge ruled that, so far as the present question was concerned, the transfer was governed by the law of Massachusetts, and that, by the law of Massachusetts, it was not void for want of an insurable interest in the transferee; and found for Allen.

Such decree was to be entered as justice and equity required.

Decree for the defendant Allen.

J. F. Colby, for Allen.

W. S. Slocum, (W. F. Slocum with him,) for Mrs. Fellows.

Devens & Colburn, JJ., absent. W. Allen, J.

OPINION

W. Allen, J.

The contract of insurance was made and was to be performed in this State, and the money due upon it has been paid into court here; and the contract of assignment was made in this State between parties domiciled here. The validity and effect of the assignment, and the capacity of the parties to it, must be governed by the laws of this State. The only question which requires discussion is, whether, by that law, the assignment is void for want of interest of the assignee in the life insured.

The policy, in consideration of an annual premium to be paid by Mrs. Fellows, assured the life of her husband for her sole use, and for her children if she should not survive her husband. The promise was to the assured, her executors, administrators, and assigns. The policy contained no reference to an assignment except the following: "N. B. If assigned, notice to be given to this company." The policy was issued in 1855. In 1881, an assignment in the words following, signed by Mrs. Fellows, her husband and children (who were all of age), was indorsed upon the policy: "I hereby assign, transfer, and set over unto George Allen, of Boston, all my right, title, and interest in and to the within policy of life insurance, and all right that may at any time be coming to me thereon."

A more formal instrument of assignment, with a power of attorney to receive "all sums of money that may at any time hereafter be or become due and payable to us, or either of us, by the terms of said policy," was also executed by the same parties. The policy and assignments were delivered to the defendant Allen, and notice thereof given to the plaintiff. The consideration of the assignment was the payment of a sum of money by the assignee, and the discharge of certain notes held by him against Mr. Fellows. It is to be assumed, on the report, that the transaction was not, in the intention of the parties, a wagering contract, but an honest and bona fide sale of the equitable interest in the policy. The defendant Allen had no insurable interest in the life of Mr. Fellows except as his creditor, and that interest ceased when he ceased to be a creditor by accepting the assignment in satisfaction of his debt, so that he is in the position of a bona fide assignee of the policy for valuable consideration without interest in the life insured, and the question between him and the assignor is which has the equitable interest in the policy.

The policy is a common form of what is called life insurance, and is a contract by which the insurer, in consideration of an annual payment to be made by the assured, promises to pay to her a certain sum upon the death of the person whose life is insured. To prevent this from being void, as a mere wager upon the continuance of a life in which the parties have no interest except that created by the wager itself, it is necessary that the assured should have some pecuniary interest in the continuance of the life insured. It is not a contract of indemnity for actual loss, but a promise to pay a certain sum on the happening of a future event from which loss or detriment may ensue, and if made in good faith for the purpose of providing against a possible loss, and not as a cloak for a wager, is sustained by any interest existing at the time the contract is made. See Loomis v. Eagle Ins. Co. 6 Gray 396, and Forbes v. American Ins. Co. 15 Gray 249. Mrs. Fellows had an insurable interest in the life of her husband, and the policy to her was a valid contract to pay the sum insured to her upon the event of his death. This contract was a chose in action assignable by her. Palmer v. Merrill, 6 Cush. 282.

The policy was not negotiable, and her assignment could not, in this State, pass the legal, but only the equitable, interest in the contract. The assignment was a contract between her and her assignee, to which the insurer was not a party. It purported to give to the assignee only the equitable interest of the assignor in the contract, -- the right to recover in the name of the assignor the sum which should become due to her under the contract.

The direction in the policy, that notice of an assignment of it should be given to the insurer, had no effect upon the character of the assignment, however its operation might have been limited had notice not been given. The assent of the insurer to the assignment would not make a new contract of insurance Its only effect would be to enable the assignee to enforce in his own name, instead of the name of the assignor, the rights she held under the contract. McCluskey v. Providence Washington Ins. Co. 126 Mass. 306.

This distinction between the assignment of the interest of the insured in a policy, which is a contract between the assignor and the assignee only, and the transfer or renewal to a third person of a policy, which is a contract to which the insurer is a party, is illustrated in the case of fire insurance. That is strictly a personal contract of indemnity to the assured, and he, or his assigns in his name, can recover only an indemnity for actual loss to him. If he has no interest in the property insured at the time of the loss, he can recover nothing, and if he parts with his interest before a loss, he becomes incapacitated to recover upon the policy, and it ceases to insure anything and becomes void. Wilson v. Hill, 3 Metc. 66. It follows that, where a purchaser of insured property would have the benefit...