New York Life Ins. Co. v. Rees

• Decision Date: 19 May 1927
• Docket Number: No. 7052.,7052.
• Parties: NEW YORK LIFE INS. CO. v. REES.
• Court: U.S. Court of Appeals — Eighth Circuit

19 F.2d 781 (1926)

NEW YORK LIFE INS. CO. v. REES.

No. 7052.

Circuit Court of Appeals, Eighth Circuit.

August 21, 1926.

On Petition for Rehearing, May 19, 1927.

Frank H. Sullivan and James C. Jones, Jr., both of St. Louis, Mo. (James C. Jones, Lon O. Hocker, and Eugene H. Angert, all of St. Louis, Mo., on the brief), for plaintiff in error.

Chauncey H. Clarke, of St. Louis, Mo., for defendant in error.

Before SANBORN, Circuit Judge, and MUNGER and JOHNSON, District Judges.

WALTER H. SANBORN, Circuit Judge.

On February 4, 1916, the New York Life Insurance Company, by its policy of that date, insured the life of Charles A. Rees for the benefit of his wife, Ellen M. Rees, in the sum of $4,000. Mr. Rees died on October 31, 1922. About March 4, 1917, Mr. Rees was indebted to the Guaranty State Bank of Muskogee, Okl., to the amount of about $3,150, evidenced by his promissory notes, with Natt T. Wagner as surety thereon. At that time Mr. and Mrs. Rees made an absolute written assignment of the policy "and all dividend, benefit and advantage to be had or derived therefrom, subject to the conditions of the said policy and the rules and regulations of the company" to the bank, and delivered that assignment and policy to it. The policy provided that its owner was entitled on application to receive from the insurance company its cash surrender value. About January 12, 1922, that value was $769.76. The bank applied to the insurance company for this surrender value, presented and delivered to the company the policy and the written assignment of it by Mr. and Mrs. Rees to the bank, and the company paid to the bank that $769.76 and took the policy and the assignment.

After the death of Mr. Rees, Mrs. Rees, the plaintiff, brought this action against the insurance company for the $4,000 specified in the policy. The company answered that it was not liable because the plaintiff and her husband had assigned the policy to the bank, the bank had applied for and received the surrender value of the policy and had delivered up to it the assignment and the policy pursuant to its terms. Mrs. Rees replied, first, that the bank had no corporate authority to buy or sell the insurance policy and, second, that, although the written assignment of the policy to the bank was by its terms absolute, the real transaction between Mr. and Mrs. Rees and the bank, made at the time of the assignment, was a mere pledge of the policy by them to the bank to secure the indebtedness of Mr. Rees to it for about $3,150, and that the lien of the pledge had never been foreclosed by demand of payment, public notice, or proposed sale, public or private, as required by sections 4123, 8200, 8201, 8204, 8205, and 8210, of Bunn's Compiled Statutes of Oklahoma, so that the bank had never become the owner of the policy but remained a mere pledgee, without right to sell or surrender it. Upon these pleadings the case was tried to a jury, which returned a verdict for Mrs. Rees.

The court submitted to the jury the question whether the assignment from Mr. and Mrs. Rees to the bank was an absolute assignment of the policy to it or a pledge of the policy to secure the payment of the debt of Mr. Rees to the bank and charged them that, if it was an absolute assignment to the bank, then it carried with it every right the assured had in or under the policy, including the right to surrender it and to take the surrender value therefor, and that their verdict should be for the defendant; but that, if they believed and found that the bank held it merely as security for the payment of the debt due to the bank by Mr. Rees, then the defendant, the insurance company, took no better title than the bank, and they ought to find a verdict for the plaintiff. As under this charge the jury found for the plaintiff, they must have found that the transaction between Mr. and Mrs. Rees and the bank was not an absolute assignment or sale of the policy, but was a mere pledge thereof to secure the debt of Mr. Rees.

The first complaint of the insurance company of the trial in this case is that the court charged the jury that, if the transaction was a pledge and Mr. Rees did not tell the owner of the pledge or its agent to take the surrender value of the policy, the duty was imposed upon it (the owner) to make demand of Mr. Rees of the payment of the debt secured and to give notice to him, if he could be found, of a proposed sale of the property pledged in accordance with the provisions of the statutes of Oklahoma, and that, in the absence of such demand and notice and compliance with the statutes, the bank never acquired the ownership of the pledged property or the right to surrender the policy. Counsel cite many authorities in support of the general rule that a pledgee of an insurance policy may under various circumstances and laws rightfully take the surrender value of and surrender the pledged policy. The court below, however, was of the opinion that, notwithstanding the law and the rules governing under other circumstances and under various statutes the rights of pledgor and pledgee, the rights of the parties in this case must be governed and enforced in accordance with the statutes of the state of Oklahoma. Those statutes provided:

"The sale by a pledgee of property pledged must be made by public auction." Section 8204.

"A pledgee cannot sell any evidence of debt pledged to him, except the obligations of governments, states or corporations." Section 8205.

"A pledgee must give actual notice to the pledgor of the time and place at which the property pledged will be sold, at such reasonable time before the sale as will enable the pledgor to attend." Section 8201.

And section 4123 provided that: "No bank shall employ its moneys, directly or indirectly, in trade or commerce, by buying or selling goods, chattels, wares or merchandise: * * * Provided, that it may sell any personal property which may come into its possession as collateral security for any debt or obligation due it, upon posting a notice in five public places in the county wherein the property is to be sold, at least ten days before the time therein specified for such sale, and which said notice shall contain the name of the bank and the name of the pledgor, the date of the pledge, the nature of the default and the amount claimed to be due thereon at the date of the notice; a description of the pledged property to be sold and the time and place of sale."

At the time the pledge was made, and at the time the contract of surrender of the policy was made, Mr. and Mrs. Rees were citizens and residents of Oklahoma, the Guaranty State Bank was a corporation of the state of Oklahoma, and the defendant, the insurance company, was a corporation of the state of New York. The contract or pledge was an Oklahoma contract; it was made in Oklahoma, and all the parties to it were citizens of Oklahoma. The contract of surrender was also an Oklahoma contract; it was made by a written request in January, 1922, by the Guaranty Bank for the surrender value of the policy which was granted by the insurance company; and the contract was closed in Oklahoma by the delivery of the insurance company's check for the surrender value of the policy by its agent in Oklahoma to the Guaranty Bank and the latter's acceptance thereof and its delivery of the policy to that agent in the state of Oklahoma. The test of the place of a contract is the place at which the last act was done essential to the meeting of the minds of the parties. Clark v. Belt, 223 F. 573, 577, 138 C. C. A. 1; Northwestern Mut. Life Ins. Co. v. McCue, 223 U. S. 234, 247, 32 S. Ct. 220, 56 L. Ed. 419, 38 L. R. A. (N. S.) 57. The last act in this case was done in the state of Oklahoma.

As these contracts were made in the state of Oklahoma, the statutes of Oklahoma relating to such pledges were as much parts of these two agreements as if they had been written into them (Armour Packing Co. v. United States, 153 F. 1, 19, 82 C. C. A. 135, 14 L. R. A. N. S. 400); and there was no error in the charge of the court that the failure of the owners of the pledge to comply with the statutes of Oklahoma as to demand, notice, and sale, left the right of the bank that of a mere pledgee without ownership or right to convey or surrender the policy without first demanding payment of the debt and making sale of the property at public auction after the notices provided by the statutes.

The next contention of counsel for the insurance company is that the plaintiff as against it is estopped by the absolute assignment of the policy, which she and her husband signed and delivered to the bank and in reliance upon which it paid the surrender value of the policy, from claiming or defending on the ground that the assignment was a mere pledge and that the court erred in its charge that the insurance company had no better title than the bank. The general rule of law that the owner of property who clothes another with the apparent title or power of disposition of it whereby a third party is induced to purchase or deal with it to his injury is estopped as against the latter from denying that the apparent was not the true title is familiar and indisputable. Indispensable elements of such an estoppel are (1) intentional or careless misrepresentation of known and material facts inconsistent with the subsequent claim of the party who invokes the misrepresentation; (2) ignorance of the truth and absence of equal means of knowledge of the party who claims the estoppel; (3) action by the latter, induced by the misrepresentation; and (4) injury to the latter if the truth be permitted to be proved.

It may be that, if the defendant had pleaded as a defense to this action (1) that the plaintiff and her husband intentionally or carelessly by their assignment of the policy misrepresented the pledge they made to secure Mr. Rees' debt to be an absolute assignment of the policy; (2) that the insurance company was ignorant of that...