Ostroff v. New York Life Ins. Co.

• Decision Date: 21 July 1939
• Docket Number: No. 9024.,9024.
• Citation: 104 F.2d 986
• Parties: OSTROFF et al. v. NEW YORK LIFE INS. CO.
• Court: U.S. Court of Appeals — Ninth Circuit

104 F.2d 986 (1939)

OSTROFF et al. v. NEW YORK LIFE INS. CO.

No. 9024.

Circuit Court of Appeals, Ninth Circuit.

June 13, 1939.

Petition for Rehearing Denied July 21, 1939.

As Amended on Denial of Rehearing July 21, 1939.

Halverson & Halverson and George Halverson, all of Los Angeles, Cal., for appellants.

Meserve, Mumper & Hughes, of Los Angeles, Cal. (E. Avery Crary, of Los Angeles, Cal., of counsel), for appellee.

Before WILBUR, DENMAN, and HEALY, Circuit Judges.

DENMAN, Circuit Judge.

This is an appeal by Ostroff, insured under a policy of the appellee insurance company, insuring both life and permanent total disability, from a declaratory judgment of the district court in a suit brought by insured against the company.

The insurance company had attempted to rescind the policy as to its disability provisions, and the issues tendered by the prayer for declaratory judgment are: "* * * with respect to the right or power of the defendant to rescind said policy of insurance in the premises so far as disability is concerned, and whether said policy is incontestable after two years from date thereof, except for payment of premiums or whether the premiums specified therein are waived on said policy during the continuance of said total disability, and whether defendant is required to pay said monthly disability payment from and after the 19th day of July, 1936, during the continuance of said disability." The insurance company's answer prayed only for a declaratory judgment on its right to rescind. So far as performance of the contract is involved, the suit concerns both the payment of premiums and the payment of benefits.

The district court held the insurance contract, though made in California, should be construed under the law of the State of New York. It held that under that law the fraud of the insured in his application for the policy, if proved, permitted the company, more than two years after the delivery of the policy, to cancel the disability insurance of the policy despite its incontestability clause reading:

"Incontestability. — This Policy shall be incontestable after two years from its date of issue except for non-payment of premium and except as to provisions and conditions relating to Disability and Double Indemnity Benefits."

The district court held that the place of performance of the agreements of the policy is the State of New York and that, since the policy was made in California and the California law requires the contract to be construed according to the law of the state of performance, the New York law controlled.

Section 1646 of the California Civil Code provides: "A contract is to be interpreted according to the law and usage of the place where it is to be performed; or, if it does not indicate a place of performance, according to the law and usage of the place where it is made."

The court below held that the terms of the contract required both the premiums and the benefits of the policy to be payable in New York and that, since these are the major incidents of performance, the contract was to be performed in New York and should be interpreted according to its laws.

We do not agree that the premiums are agreed to be paid solely in New York. The policy provides: "Payment of Premiums. All premiums are payable on or before their due date at the Home Office of the Company or to an authorized agent of the Company, but only in exchange for the Company's official premium receipt signed by the President, a Vice-President, a Second Vice-President, a Secretary or the Treasurer of the Company, and countersigned by the person receiving the premium. No person has any authority to collect a premium unless he then holds said official premium receipt. * * *". (Emphasis supplied)

At the hearing here, this court suggested it was considering the propriety of taking judicial notice that the great life insurance companies, like the New York Life Insurance Company, had "accredited agents" in many of the states and it was inconceivable for the vast amount of appellee's business conducted in the State of California that there were no authorized agents for the receipt of premiums in that state. The company then admitted that it had such agents in California at the time the policy was issued and that such policies as Ostroff's were serviced there with respect to premium collections, and that the premiums were paid in California. We treat the pleadings as showing such to be the fact.

The case differs essentially from Head v. New York Life Ins. Co., 10 Cir., 43 F. 2d 517, 519, where a similar premium payment clause was involved, and the policy was construed according to the New York law, but it was not shown in what state the policy was issued and it "affirmatively appeared" that the premiums and benefits were payable in New York. Such also is the case of Monahan v. New York Life Ins. Co., D.C., 26 F.Supp. 859, 861, where it appears only that the premiums were payable in New York. Here it affirmatively appears they were payable and paid in California.

In the case of Flittner v. Equitable Life Assur. Soc., 30 Cal.App. 209, 157 P. 630, in which was involved a policy having a similar premium payment provision, there is a dictum, recognized as such and criticized in the later case of Eaton v. Thieme, 15 Cal.App.2d 458, 466, 59 P.2d 638, that though the parties contemplated the premiums were to be paid in California, nevertheless the performance of such payments was provided to be in New York. With this we do not agree. The policy in the Flittner case, similar to that here considered, provided they were payable at the home office "or to any agent or agency cashier of the society". 30 Cal.App. 209, 157 P. 631. Since the phrase "payable * * * to any agent" is uncertain as to the place where the agent may accept the premiums, it is an elementary rule of the law of contracts, declared in section 1647 of the California Civil Code, that it may be made certain by parol, as it was in the Flittner case (and here by the statement of the insurance company) which had printed the policy form. The policies in both cases constitute agreements to be performed in part in...