Shay v. New York Life Ins. Co.

• Citation: 192 S.W.2d 421
• Decision Date: 07 January 1946
• Docket Number: No. 39486.,39486.
• Parties: JAMES SHAY, Appellant, v. NEW YORK LIFE INSURANCE COMPANY, a Corporation.
• Court: United States State Supreme Court of Missouri

192 S.W.2d 421

JAMES SHAY, Appellant, v. NEW YORK LIFE INSURANCE COMPANY, a Corporation.

No. 39486.

Supreme Court of Missouri.

Division One, January 7, 1946.

Rehearing Denied, February 11, 1946.

Appeal from Jackson Circuit Court. — Hon. Albert A. Ridge, Judge.

AFFIRMED.

Cornelius Roach, D.L. Brenner and Theodore F. Houx, Jr., for appellant.

(1) When the United States District Court sitting as a court in equity decided against Mr. Toucey the equitable issue of fraud upon which its jurisdiction as a court of equity was grounded, that court lost jurisdiction to determine the dependent issue of disability. Barnett v. Smart, 158 Mo. 167, 59 S.W. 236; Dowell v. Mitchell, 105 U.S. 430, 26 L. Ed. 1142; American Falls Milling Co. v. Standard Brokerage & Distributing Co., 248 Fed. 487; Linden Inv. Co. v. Honstain Bros. Co., 211 Fed. 178; Palmer v. Marshall, 24 S.W. (2d) 229; Ebel v. Roller, 21 S.W. (2d) 214; Wimer v. Wagner, 20 S.W. (2d) 650; Wyoming Coal Sales Co. v. Smith-Pocabontas Coal Co., 105 W. Va. 610, 144 S.E. 410; Robinson v. Campbell, 192 N.W. 644; Koontz v. Houghton, 194 N.W. 1018; Minick v. Minick Drug Co., 163 So. 228; O'Donnell v. Henley, 158 N.E. 692; Soper v. Conly, 153 Atl. 586; Yellow Mfg. Acceptance Corp. v. American Taxicabs, 130 S.W. (2d) 601. (2) The issue of disability is a legal issue, 6 Couch, Cyc. of Ins. Law, sec. 1429; Meyer v. Knickerbocker Life Ins. Co., 73 N.Y. 516; Whitebread v. New York Life Ins. Co., 102 N.Y. 143; New York Life Ins. Co. v. Eggleston, 96 U.S. 572, 24 L. Ed. 841; Mutual Reserve v. Ferrenbach, 144 Fed. 342. (3) A determination of the legal issue of disability by a court of equity which had lost jurisdiction to determine that issue is not res adjudicata. 2 Freeman on Judgments, p. 1479; Barnett v. Smart, 158 Mo. l.c. 175; Cases cited under Point (1).

Lathrop, Crane, Sawyer, Woodson & Righter, Richard S. Righter and Rudolph Heitz for respondent.

(1) The federal district court had jurisdiction to determine the question whether Toucey was totally disabled and its decree is, therefore, res judicata of the case at bar. Toucey v. New York Life Ins. Co., 102 F. (2d) 16; Toucey v. New York Life Ins. Co., 314 U.S. 118; Sec. 265, Judicial Code; Viles v. Prudential Ins. Co. of America, 124 F. (2d) 78; Henderson v. United States Radiator Corp., 78 F. (2d) 674; Melvin v. Hoffman, 190 Mo. 464, 235 S.W. 107; Donnell v. Wright, 147 Mo. 639, 49 S.W. 874. (2) The judgment of a federal court sitting in equity dismissing a cause with prejudice is res judicata of the issues before the court. National Benefit Life Ins. Co. v. Shaw-Walker Co., 111 F. (2d) 497; Olsen v. Muskegon Piston Ring Co., 117 F. (2d) 163; Wilson Cypress Co. v. The Atlantic Coast Line R. Co., 109 F. (2d) 623; Clegg v. United States, 112 F. (2d) 886; Tillman v. Natl. City Bank of New York, 118 Fed. 631; United States v. California & Oregon Land Co., 192 U.S. 355. (3) A decree of the district court is entitled to full faith and credit in this court. Sec. 687, Title 28, U.S.C.A.; Toucey v. New York Life Ins. Co., 314 U.S. 118; Embry v. Palmer, 107 U.S. 3; Crescent City Live Stock Co. v. Butchers' Union Slaughter-House Co., 120 U.S. 141; Metcalf v. Watertown, 153 U.S. 671; Knights of Pythias v. Meyer, 265 U.S. 30; Dupasseur v. Rochereau, 21 Wall. 130; Hancock Natl. Bank v. Farnum, 176 U.S. 640, 20 S. Ct. 506; Dowell v. Applegate, 152 U.S. 327. (4) Where, as here, both parties were before the federal court, that court's determination of its own jurisdiction is final and conclusive and this court cannot and will not undertake to review that question and decide it otherwise. Baldwin v. Iowa State Traveling Men's Assn., 283 U.S. 522; Stoll v. Gottlieb, 305 U.S. 165; Hall v. Wilder Mfg. Co., 293 S.W. 760; Davis v. Davis, 305 U.S. 32; Chicago Life Ins. Co. v. Cherry, 244 U.S. 25; American Surety Co. v. Baldwin, 287 U.S. 156.

Samuel R. Toucey amicus curiae.

DALTON, C.

Action by an assignee to recover disability benefits alleged to be payable under the terms of an insurance policy. Motion for judgment on the pleadings was sustained and judgment was entered for defendant. Plaintiff has appealed.

The action was instituted December 28, 1937 to recover $28,000 alleged to be due and payable under the terms of an insurance policy by reason of the total and permanent disability of Samuel R. Toucey, the insured, to whom the policy was issued by respondent on April 29, 1924. Appellant further sought to recover interest, a 10% penalty and a reasonable attorney's fee for vexatious refusal to pay the amount alleged to be due.

On October 4, 1943, at the close of other litigation hereinafter mentioned, the respondent filed its answer and plea in bar. The answer, after a general denial, alleged that the policy sued on had, prior thereto, been surrendered by the insured to respondent; that a new and different policy had been issued to and accepted by the insured; that the new policy had been permitted to lapse for non-payment of premiums due; and that no proof of total and permanent disability had been made while either policy was in force. The plea in bar was based upon the final decree in certain prior litigation (between the insured and respondent) which respondent alleged was res adjudicata, of the rights of appellant and his assignor. Appellant, by his reply, conceded the existence of the alleged prior litigation and the decree therein, but sought to avoid the decree on the theory that the prior cause was in equity and, upon the determination of the equitable issue therein, the equity court had lost all jurisdiction to try the legal issue of disability. Appellant alleged that a finding on legal issues (here involved) was unnecessary to the determination of the cause after the equitable issues had been determined adversely to the insured. Respondent, thereupon, filed its motion for judgment on the pleadings on the theory that the admitted decree was res adjudicata and determined the issues of appellant's suit.

A more detailed statement of the pleadings, findings and judgment in the prior cause, as pleaded by respondent, is required, but no further statement is necessary with reference to the present action, except to say that it is an action at law for breach of an insurance contract, to-wit, insurance policy #8611895, issued by respondent to the insured and assigned to appellant. One of the essential issues of fact presented by the pleadings is whether or not "on or about the first day of April, 1933, and while said policy was in full force and effect, the said Samuel R. Toucey became wholly and presumably permanently disabled."

Respondent alleged the following facts. On October 26, 1935, the insured commenced an action in equity against respondent in the circuit court of Jackson County. The suit was removed to the United States District Court of the Western Division of the Western District of Missouri, where the cause was tried and finally determined. In the insured's petition in said suit, the insured alleged that respondent issued the policy herein sued on; that, by the policy respondent agreed to pay $50,000 in the event of the death of the insured and, in the event of total and permanent disability of the insured, before the age of sixty, to pay $500 per month during insured's life and to waive the payment of premiums on said policy during the period of such disability; that the insured, in April, 1933, became wholly and permanently disabled before the age of sixty years; that respondent fraudulently concealed the disability provisions of the policy from the insured; that respondent was thereby estopped to claim that due proof of loss was not made as provided in the policy; that respondent fraudulently induced the insured to make reductions in the policy, towit, from $50,000 to $25,000 death benefits and $500 to $250 monthly disability benefits; that respondent unlawfully cancelled the policy for failure to pay the premium due on October 2, 1934; that in September, 1935, the insured discovered the existence of the disability provisions and applied for reinstatement of the policy and the payment of disability benefits; and that on September 26, 1935, respondent refused to reinstate the policy and pay disability benefits thereunder.

The insured asked relief, as follows: (1) that the insured's original policy be reinstated and adjudged to be in full force and effect; (2) that the attempted reduction in benefits be declared null and void; (3) that premiums be declared waived; (4) that insured recover disability benefits for total and permanent disability from August 11, 1934; (5) that he recover premiums paid for the quarter beginning July 2, 1934, and (6) that he have other and further equitable relief.

After the insured's action was removed to the federal court, respondent answered, admitted the terms of the policy and its issuance, admitted that the premiums due were not paid and denied other allegations, particularly, that it unlawfully cancelled said policy; that it was guilty of fraud; that the insured "was wholly and presumably permanently disabled since April, 1933"; that the insured gave respondent notice at its home office of such alleged disability; or that the insured was "entitled to any disability benefits or any benefits whatever of any kind or character under said policy." Other allegations of respondent's answer, and the insured reply thereto in said action, need not be set out.

The said cause was tried to the court and a decree entered therein on November 21, 1936, that "plaintiff is not entitled to the relief prayed for in plaintiff's petition." The court's findings of fact and conclusions of law were made a part of the decree and plaintiff's bill was "dismissed with prejudice at plaintiff's cost."

The court's findings of fact and conclusions of law in said cause were, in part, as follows: "I may say that I intended to decide only such issues of law and issues of fact as do require decision in order...