Patten v. Mutual Ben. Life Ins. Co.
| Decision Date | 06 December 1939 |
| Docket Number | 14975. |
| Parties | PATTEN v. MUTUAL BEN. LIFE INS. CO. |
| Court | South Carolina Supreme Court |
The decree of judge Oxner, a report of which is directed follows:
This action was brought against the defendant to recover the proceeds alleged to be due under a policy of insurance issued by it on the life of William C. Brown on June 26, 1901, in the face amount of Two Thousand Dollars ($2,000). The policy was issued in consideration of the payment of an annual premium on January 1st in each year, for twenty years, at the expiration of which time no further premiums would be payable. The insured, Mr. Brown, died on November 10, 1937 and the plaintiff claims the proceeds as the assignee of the policy. When this case came on for trial at the spring, 1938, term of Court, counsel for the respective parties stipulated to the undisputed facts, waived a jury trial, and submitted the questions of fact and law to me for determination. The pivotal point for decision is whether or not the company is bound by the terms of an assignment of which it had no notice until after it had permitted the insured to withdraw the full cash value of the policy. The provisions of the policy pertinent to this allegation read as follows:
The policy, by the recurrent payment of premiums, became paid up on January 1, 1921. The insured, on January 1, 1908, had borrowed Two Hundred, Forty-Six and 30/100 Dollars ($246.30) upon the sole security of the policy and in evidence executed and delivered to the company a certificate of loan providing among other things, as follows: "If the interest shall not be paid when due, it shall be added to the principal of the loan, and if owing to the nonpayment of interest the principal of the loan shall ever equal or exceed the then Cash Surrender Value of the Policy, the Policy shall thereupon become null and void after one month's notice shall have been mailed to the last known address of the Insured and Assignee, if any."
Between January 1, 1915, and January 1, 1921, the insured received other advances in aid of premium payments upon the sole security of the policy aggregating One Hundred, Seventy-Nine and 22/100 Dollars ($179.22), which advances or loans were evidenced by certificates of loan containing the same provisions as above quoted, but in addition thereto provided "Said indebtedness, together with any increase in the indebtedness to the Company on said Policy for any purpose whatsoever, is a first lien thereon."
When the policy became paid up on January 1, 1921, there was an indebtedness outstanding against the same in the amount of Four Hundred Twenty-Five and 52/100 Dollars ($425.52). After this date the insured would be required to pay the amount of the interest accrued on said loan on each anniversary at the rate of six (6) per centum per annum, as well as interest on any additional sum which might be borrowed. On February 11 1922, the insured submitted to the defendant an affidavit wherein he represented that neither the whole nor a part, nor any interest in the policy involved in the suit has ever been bargained, sold, assigned, loaned, exchanged, or given away, either orally or in writing, and that no other person has or holds any legal or equitable claim or lien, trust, or charge on said policy. He further declared that the said policy was on an unnamed date lost or destroyed and that he has no knowledge of the date on which the policy was lost or the circumstances attendant thereto; that he has caused due search and diligent inquiry to be made and cannot find the same. This affidavit was made for the purpose of securing a copy of the policy and in reliance thereon the company issued to the insured a copy thereof. Thereafter, on March 8, 1922, the insured received a cash loan of Five Hundred, Forty-five Dollars ($545) upon the sole security of the policy and in evidence thereof executed and delivered a certificate of loan of like tenor to the ones hereinabove referred to. At the time this loan was made the duplicate policy was produced and the company entered the loan thereon and also noted the cash loan which had been made in 1908. With this loan the indebtedness under the policy was increased to Nine Hundred, Seventy and 52/100 Dollars ($970.52). The interest becoming due on said indebtedness was settled with the aid of dividends up to and including interest due January 1, 1926. Beginning January 1, 1927, no further cash payments were made to the Company on account of interest. From and including January 1, 1927, the dividends allocated to the policy were credited to the payment of the interest and the balance of the sum remaining due was added to the principal of the loan as required by the terms of the loan certificates. This mode of settlement was followed each successive year to and including January 1, 1931. The total indebtedness was thus increased to Eleven Hundred, Sixty-Nine and 87/100 Dollars ($1,169.87) as of January 1, 1931. On August 3, 1931, a payment of Nineteen and 74/100 Dollars ($19.74) on account of principal was made, which reduced the indebtedness to Eleven Hundred, Fifty and 13/100 Dollars ($1,150.13) which was the amount outstanding on January 1, 1932, before settlement of the interest then due. The interest falling due January 1, 1932, was not paid in cash and after crediting the dividend there remained a balance of Forty-Six and 96/100 Dollars ($46.96), which upon not being paid was added to the principal of the loan, increasing the indebtedness to Eleven Hundred, Ninety-Seven and 09/100 Dollars ($1,197.09). On November 8, 1932, a payment of Three and 79/100 Dollars ($3.79) was made on account of principal which reduced the indebtedness outstanding on January 1, 1933, to Eleven Hundred, Ninety-Three and 30/100 Dollars ($1,193.30). On that date interest accrued in the amount of Seventy-one and 79/100 Dollars ($71.79) and the dividend available was Seventeen and 54/100 Dollars ($17.54), leaving a balance due of Fifty-Four and 25/100 Dollars ($54.25). The full cash surrender value of the policy as of January 1, 1933, was Twelve Hundred, Forty-Two and 36/100 Dollars ($1,242.36), and if the amount of the interest due was added to the outstanding loan the total indebtedness would be increased to Twelve Hundred, Forty-Seven and 55/100 Dollars ($1,247.55), which amount would be in excess of the cash value of the policy. As such interest could not be settled out of the value remaining in the policy, the insurance was not continued in force for one year. On February 18, 1933, in accordance with the provisions of the loan certificates, the insured was notified by registered mail that the policy could not be so continued unless a payment of Fifty-Four and 82/100 Dollars ($54.82) was made, and notice was given that unless this sum be paid on or before March 20, 1933, the policy would become null and void and marked off the company's books in consideration of the cancellation of the outstanding indebtedness. Such sum was not paid by the insured or by anyone in his behalf at any time.
According to the record, by an instrument in writing, dated December 10, 1910, the insured, William C. Brown, assigned, among others, the policy involved herein to the plaintiff, J. H. Patten, and at the same time delivered possession thereof to him. This instrument was not written on a company form, and, among other things, recites: "Now in order to better secure the payment of said note, in the event of my death before the note is finally paid in full according to the terms of said note, I hereby assign the following life insurance policies to and direct the payment of said policies, (in the event of my death as above stated), to J. H. Patten, his heirs or assigns, as his or their interest may appear-- less any debt which may be against any of these policies in the way of loans or the like." It is conceded that notice of this assignment, either oral or written, was first given to the company on May 19, 1925. The loans advanced to the insured which ultimately brought about the termination of the insurance were all granted before this date. On March 11, 1933, the company addressed a letter similar to the one sent Mr. Brown, referred to above, to the plaintiff advising him that unless the sum of Fifty-Four and 82/100 Dollars ($54.82) was paid by June 11, 1933, the policy would become null and void and marked off the company's books. This letter was also sent by registered mail. No payment was received on or before June 11, 1933, and on June 12, 1933, the policy was marked off the company's books because the total indebtedness, with accrued interest from January 1, 1932, added, was in excess of the cash surrender value of the policy. No question is raised as to the amount of the indebtedness or the calculations made by the company in respect thereto. Neither is there any contest as to the timeliness or regularity of the respective notices.
The plaintiff in his oral argument before the Court and in his written brief, poses the issues involved herein as follows:
First. Could the insurer under the terms of the policy make a valid loan to the insured on the security of the policy, after an assignment of the policy without notice to the insurer and without "receipt of the policy", which loan would be binding on the assignee?
Second. Could the insurer, under the terms of...
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