New York Life Ins. Co. v. Ware

• Decision Date: 03 December 1934
• Docket Number: 31402
• Citation: 171 Miss. 341,157 So. 894,157 So. 359
• Court: Mississippi Supreme Court
• Parties: NEW YORK LIFE INS. CO. v. WARE

157 So. 359

157 So. 894, 171 Miss. 341

NEW YORK LIFE INS. CO. v. WARE

No. 31402

Supreme Court of Mississippi

December 3, 1934

Division B

November 5, 1934

APPEAL from the circuit court of Harrison county HON. W. A. WHITE Judge.

Suit by Mrs. Fannie D. Ware against the New York Life Insurance Company. From a judgment of the circuit court affirming a judgment of the county court for plaintiff, defendant appeals. Reversed, and cause dismissed.

On suggestion of error. Suggestion of error overruled.

Reversed and dismissed. Suggestion of error overruled.

Leathers & Greaves, of Gulfport, for appellant.

The relief granted must be in accordance with the pleadings and the proof.

Tomlin v. Combs, 21 So. 782; 33 C. J., pp. 1141-1142.

Where the right is reserved in the policy to change the beneficiary, the beneficiary has no vested right until the death of the insured, and the insured may by specifically changing the beneficiary do so, or it may be changed by hypothetically pledging the policy as security for loan, or by assignment.

Williams v. Penn Mutual, 133 So. 649; Bank of Belzoni v Hodges, 132 Miss. 238, 96 So. 97; 6 Cooley's Briefs on Law of Insurance, p. 424.

There are several decisions of our Supreme Court holding that a forfeiture clause is valid providing for a forfeiture of the policy upon default in payment of premiums. We have made a very careful search of the authorities on the question of whether or not such a contract, or agreement, is void--as that contained in the policy and loan agreement involved in the case at bar-- and we submit that the following citations and opinions represent the indisputable weight of authority on this question.

14 R. C. L., sec. 151, p. 979; New York Life Ins. Co. v. Currie, 115 Ky. 100; Mutual Life Ins. Co. v. Twyman, 122 Ky. 513; Knickerbocker Life Ins. Co. v. Harlan, 56 Miss. 516; St. Louis Mutual Ins. Co. v. Grigsby, 4 Bigelow on Insurance 633.

A stipulation or agreement where the borrower or assured expressly agrees that a paid-up life policy may be cancelled upon failure of the assured to re-pay a loan and interest, is not illegal or inequitable.

14 R. C. L. 979; Stevens et al. v. Mutual Life Ins. Co., 18 A. L. R. 1141, 227 N.Y. 524, 125 N.E. 682; Clare v. Mutual Life Ins. Co., 201 N.Y. 492, 35 L. R. A. (N. S.) 1123, 94 N.E. 1075; Sherman v. Mutual Life Ins. Co., 53 Wash. 523, 102 P. 419; Hartford Life Ins. Co. v. Benson, 187 S.W. 351; Ruane v. Manhatten Life Ins. Co., 194 Mo.App. 214, 186 S.W. 1188; Frese v. Mutual Life Ins. Co., 11 Cal.App. 387, 105 P. 365; 37 C. J. 521; Fidelity Mutual Life Ins. Co. v. Oliver, 71 So. 302; Penn Mutual Life Ins. Co. v. Bancroft, 207 Ala. 617, 93 So. 566; Reserve Loan Life Ins. Co. v. Brammer, 83 Ind.App. 584, 146 N.E. 876; Eagle v. New York Life Ins. Co., 48 Ind.App. 284, 91 N.E. 814; Salvidge v. Mutual Life Ins. Co., 195 Iowa 156, 191 N.W. 862; Salig v. U. S. Life Ins. Co., 236 Pa. 460, 84 A. 826; Davis v. Equitable Life Ins. Co., 275 S.W. 353, 54 A. L. R. 1071; Palmer v. Mutual Life Ins. Co., 114 Minn. 1, 130 N.W. 250; Hoffman v. N. Y. Life Ins. Co., 230 Ill.App. 533; Travelers' Insurance Co. v. Lazenby, 16 Ala.App. 549, 80 So. 25; Jones v. New York Life Ins. Co., 32 Okla. 339, 122 P. 702; Rye v. New York Life Ins. Co., 88 Neb. 707; New Amsterdam Casualty Co. v. Perryman, 140 So. 342; Brotherhood of Railroad Trainmen v. Bridges, 144 So. 554.

Forfeitures are not per se unlawful, and if a contract in unmistakable terms provides for a forfeiture, is otherwise free from legal infirmity and the act secured against is of the essence of the contract--the principal thing-- neither a court of equity nor a court of law will relieve against the forfeiture.

10 R. C. L. 331, sec. 78.

Ford, White & Morse, of Gulfport, for appellee.

A contract by which an insurance company loaning money upon the security of a paid up policy issued by it, may, at its option, require a surrender of the policy for its cash value upon default in payment of the loan or interest thereon, is void.

New York Life Ins. Co. v. Curry, 115 Ky. 100, 61 L. R. A. 268; Mutual Life Ins. Co. v. Twyman, 122 Ky. 513; 61 L. R. A. 269-270.

OPINION

Ethridge, P. J.

Appellee, Mrs. Fannie D. Ware, was plaintiff in the court below and brought suit against the appellant on a twenty-year pay policy for two thousand dollars issued in 1900 upon the life of George L. Ware, husband of appellee. This policy had a loan value and a cash surrender value, and at the date the said George L. Ware obtained a loan on it, said policy had a loan value of one thousand four hundred twenty-four dollars. The policy had a provision that the insured might, at any time during the life of the policy, provided it has not been assigned, change the beneficiary by written notice to the company. Said policy had been in force twenty-four years when the loan was procured by George L. Ware. The application for the loan was not signed by Fannie D. Ware, the beneficiary in the policy, but the application for a change of beneficiary was made December 131th, prior to the application for the loan on January 9th, and by the change in beneficiary the policy was payable to the executor or administrator of George L. Ware; but immediately upon securing the loan the policy was changed back to Fannie D. Ware as beneficiary. Interest due on said loan was paid from January 9 to January 29, 1925, and on that date the annual interest at five per cent. of the amount of the loan was due and payable. This advance interest was not paid, and under the terms of the policy, the whole policy and loan became due and payable, and the loan was secured by a lien upon the policy.

On October 3, 1925, the Insurance Company wrote to George L. Ware the following letter:

"Mr. George L. Ware,

"1520 Hewes Ave.,

"Gulfport, Miss.

"Dear Sir:

"Re. Policy No. 3,021,567

"Pursuant to a loan agreement executed on the 9th day of January, 1925, a cash loan of one thousand four hundred twenty-four dollars was made upon the security of the value of this policy on the life of George L. Ware. The interest due on said policy on the 29th day of January, 1925, not having been paid, the principal of said indebtedness became due, and has been settled according to the terms of the policy and the loan agreement, and the policy has no further value.

"Yours truly, John C. McCall."

George L. Ware died on August 2, 1931, without having repaid the loan on the policy and the interest thereon, or without taking, so far as the record shows, any further action in reference thereto, after receipt of the letter notifying him that the policy had been applied to the payment of his debt, according to the terms of the policy and the loan agreement, and that it had no further value.

It will be noted from this letter to George L. Ware that the words "premium and" were struck out before the word "interest," all showing that the interest on the loan had not been paid, and that the policy was canceled. Of course, no premiums were due on the policy, as it had become a paid-up policy having been in existence twenty years.

Shortly prior to the death of George L. Ware, an attorney, knowing that Ware was desperately ill, undertook to inquire into the status of all insurance held by him, and said attorney wrote a letter to the Mobile branch office in reference to this policy, among others, and received the following letter from C. L. Sullivan, cashier: "We are in receipt of communication from our Home office advising us that the above numbered policy (on the life of George L. Ware) lapsed for nonpayment of premium due January 29, 1925. It was charged with a loan of one thousand four hundred twenty-four dollars and was settled in accordance with the terms of the policy and the loan agreement and is without further value."

It will be noted from this letter that he was advised that the policy had lapsed for nonpayment of premiums on January 29, 1925. This letter was admitted over objections.

Suit was brought in the county court, which rendered judgment in favor of the plaintiff, Fannie D. Ware, for the difference between one thousand four hundred twenty-four dollars and two thousand dollars, the face of the policy, to-wit, six hundred one dollars and ninety-two cents, from which judgment an appeal was prosecuted to the circuit court and was there affirmed, and from the last-named judgment this appeal is prosecuted.

It will be seen that George L. Ware, on January 9 1925, secured a loan for the full loan value of the policy, pledging the policy as security therefor, and was to pay interest on January 29, 1925, in advance, under the terms of the policy, and made default, whereupon the loan and interest all became due and payable. He was given indulgence from that date until October 3, 1925, when he was notified that the company had applied the policy to the payment of the debt, which debt was slightly in excess of the full value of the policy as of that date, and that said policy was canceled. He appears to have taken no action in reference to it for almost six years, when he died, without having paid or tendered anything. The full face value of the policy at death was two thousand dollars. No one could say how long it would be before he died, and before the policy became a matured obligation. Therefore, the only value the policy had at the time was the loan value and the cash surrender value, which were the same. It was error for the court to assume that, under the circumstances of this case, the policy continued in force. The policy having been changed as to the beneficiary, which change was available to the insured, and the change having been made on the application of the insured, it was not necessary for Fannie D. Ware to sign the application for a loan....