Peters v. Equitable Life Assur. Society of the U.S.

• Decision Date: 07 January 1909
• Parties: PETERS v. EQUITABLE LIFE ASSUR. SOCIETY OF THE UNITED STATES.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

200 Mass. 579

86 N.E. 885

PETERS v. EQUITABLE LIFE ASSUR. SOCIETY OF THE UNITED STATES.

Supreme Judicial Court of Massachusetts, Suffolk.

January 7, 1909

COUNSEL

Gaston, Snow & Saltonstall, for plaintiff.

Brandeis Dunbar & Nutter (George R. Nutter and J. Butler Studley, of counsel), for defendant.

OPINION

SHELDON J.

Material parts of the agreement which the defendant, by its policy of insurance, made with the plaintiff, were in substance that on the expiration of the tontine dividend period all surplus of profits derived from similar policies which should not then be in force should be apportioned equitably among such policies as should complete their tontine dividend periods, and that thereupon the plaintiff should have the option 'to withdraw in cash [his] policy's entire share of the assets, i. e., the accumulated reserve, and in addition thereto the surplus apportioned' by the defendant to his policy, or to use his share wholly or in part in payment for future insurance. The plaintiff's policy has completed this dividend period; but he avers that the defendant has not equitably apportioned the surplus due to him under the terms of the policy, that it has not furnished him a sufficient account or any account, or produced any such account, that it has not dealt honestly with the dividends retained by it, that it has misappropriated and wasted said dividends, and has failed to manage the tontine fund or its accumulations or the general business of the company honestly, carefully or prudently. And by an amendment to the bill he has charged certain specific acts and kinds of mismanagement and of wrongful, dishonest and fraudulent conduct which he avers have been committed by the defendant and its directors in the management and investment of its funds. There is no averment in the bill that the plaintiff has exercised his option as to the disposition of the share of the assets that has been or should have been allotted to his policy. He asks that the defendant be ordered to furnish him with an account; that the amount to which he is fairly entitled may be ascertained, and that such amount be paid to him; and that the damages sustained by him be assessed and ordered to be paid to him.

Some of the general questions raised by the defendant's demurrer to this bill have been already considered in Pierce v Equitable Life Assurance Society, 145 Mass. 56, 12 N.E. 858, 1 Am. St. Rep. 433, and in the decision made upon the defendant's objections to the right of this court to entertain this case reported in 196 Mass. 143, 81 N.E. 964. It is true, as was said in the Pierce Case, ubi supra, that the relation between the defendant and the plaintiff is not that of trustee and cestui que trust, but that of debtor and creditor. This rule is now well settled in the courts. See, besides the decisions referred to in the Pierce Case, 145 Mass. at page 59, 12 N.E. at page 864 (1 Am. St. Rep. 433); Peters v. Equitable Assur. Co., 196 Mass. 143, 148, 149, 81 N.E. 964; Uhlmann v. New York Ins. Co., 109 N.Y. 421, 17 N.E. 363, 4 Am. St. Rep. 482; Brown v. Equitable Assurance Society (C. C.) 142 F. 835; Everson v. Equitable Assurance Society (C. C.) 68 F. 258. But under the allegations of this bill the plaintiff is entitled to know before exercising the option given to him what is the amount of his policy's share of the assets, including the accumulated income and the surplus apportioned by the defendant to his policy, especially in view of the defendant's express agreement that all surplus of profits from policies like his 'shall be apportioned equitably' among the policies which shall complete their dividend periods. Pierce v. Equitable Assurance Society, 145 Mass. 56, 12 N.E. 858, 1 Am. St. Rep. 433. He cannot wisely exercise his option until he shall have received this information. Upon the averments of the bill, under Rev. Laws, c. 159, § 3, cl. 6, the plaintiff has a right to come into equity, and to have such an accounting, unless some of the defendant's specific objections to the maintenance of the bill can be sustained.

The defendant's contention is that irrespective of the allegations of fraud this bill will not lie for an accounting; that in the absence of fraud the plaintiff is bound by the apportionment of the surplus made by the defendant; and that the bill does not contain such allegations of fraud or irregularity as to justify a court of equity in reviewing the apportionment made by the defendant.

1. In reference to the first contention of the defendant we need not consider whether we should now follow all of the reasoning in Pierce v. Equitable Assurance Society, or rather should adopt the defendant's contention that the plaintiff's only right to compel an accounting from the defendant is incidental to the enforcement of some legal claim against it, and that until the exercise of his option as to what he will require from the defendant he has no such legal claim; that there is not shown to be at present any obligation on the part of the defendant to render an account to the plaintiff either by reason of the relationship between them or because of any provision in the policy or the language of any statute. Brown v. Equitable Assurance Society (C. C.) 142 F. 835, 842; Everson v Equitable Assurance Society (C. C.) 68 F. 258, and 71 F. 570, 18 C. C. A. 251; Hunton v. Equitable Assurance Society (C. C.) 45 F. 661; Greeff v. Equitable Assurance Society, 160 N.Y. 19, 54 N.E. 712, 46 L. R. A. 288, 73 Am. St. Rep. 659, much of the reasoning in which may be applied to this case, although the stipulations of the policy there considered were not the same as are now before us. There is very much force in what was said by Peckham, J., in Uhlmann v. New York Ins. Co., 109 N.Y. 421, 434, 17 N.E. 363, 367, 4 Am. St. Rep. 482, as to the consequences that would follow if every policy holder of a class like this had the right to call the defendant to account 'and to cause it to give in the trial of the action a detailed account of every transaction (proved by reference to or the production of its books and the oaths of its officers) which took place from the commencement to the termination of the tontine period in regard to those matters material to be known upon the question of an equitable apportionment of the fund. There would be no necessity for an allegation, much less even the slightest prima facie proof of wrongdoing or that there had been any mistake made by the company in the apportionment made by it. But the mere fact that an individual was the owner of one of those policies in force at the termination of the tontine period would give him a right of action and a right to demand this proof from the defendant. * * * That this should be permitted without an allegation, even on information and belief, that any fraud, mistake of impropriety in the accounts or in the manner of their statement had been made by the officers or agents of the company would seem to be intolerable.' This was said however in a case in which the plaintiff had abandoned all...