Smith v. Penn Mut. Life Ins. Co.

• Decision Date: 20 May 1943
• Docket Number: 4 Div. 279.
• Citation: 14 So.2d 690,244 Ala. 610
• Parties: SMITH v. PENN MUT. LIFE INS. CO.
• Court: Alabama Supreme Court

14 So.2d 690

244 Ala. 610

SMITH v. PENN MUT. LIFE INS. CO.

4 Div. 279.

Supreme Court of Alabama

May 20, 1943

Rehearing Denied June 30, 1943.

Further Rehearing Denied Aug. 7, 1943.

D M. Powell, of Greenville, and R. B. Albritton, of Andalusia for appellant.

Ball & Ball, of Montgomery, for appellee.

BROWN Justice.

Action of assumpsit by appellant against appellee for a sum of money alleged to be due on a policy of life insurance issued to the plaintiff's intestate by the defendant on March 25th, 1901, insuring the life on which all his premiums had been paid,-in short a paid-up policy.

The pleas were the general issue, pleaded in short by consent, with leave to give in evidence matters of special defense as if properly pleaded.

The special defense relied on, which finds support in the evidence, is that the policy automatically lapsed, without notice, under the terms of a certificate of indebtedness, evidencing an indebtedness, on account of the nonpayment of interest, alleged to have become due, on March 25, 1938.

Paragraph "X" of the policy stipulates: "Loan Value. The Company will at any time, after three years' premiums have been paid in cash, while the Policy is in force by payment of premiums, lend thereon upon its satisfactory assignment as collateral security, the sum named in the table of values given below. No loans will be made for a less sum than Fifty Dollars, and only in Multiples of Five Dollars, and shall be diminished by any indebtedness outstanding against the policy." R. p. 8.

The policy issued on the written application of the insured Eugene Russell Smith, resident address Lowndesboro, Lowndes County, Alabama, on the 19th of March, 1901, and witnessed by Chas. W. Powell, Lowndesboro, Alabama. Said application was embodied in the policy as required by the statute in force at that date. Code 1896, § 2602. See Code 1940, T. 28, § 75.

The certificate of indebtedness, as appears on its face, was " Signed, sealed and delivered," in the presence of the subscribing witness R. W. Russell, by the insured "Eugene R. Smith," in Alabama, in pursuance of the provisions of said policy No. 181126, insuring the life of said Smith.

The evidence is without dispute that the defendant in lapsing the policy, in the absence of partial payments, added unpaid interest from year to year during the years 1935, 1936, 1937 and 1938, to the principal and calculated interest on the sum produced by such addition, in consequence of which, on March 25th, 1938, the loan exceeded the cash surrender value by $7.02.

Nevertheless the defendant did not rely on automatic cancellation as of March 25th, 1938, but two months later, as stated in its brief, " On May 16, 1938, the Company cancelled the policy and again, although neither the policy nor the loan certificate required notice of cancellation, the Company did on May 16, 1938, so notify Dr. Smith by letter (Transcript page 30). Mrs. Smith says he did not get this either, but that is also immaterial as no notice was actually required."

On the question as to whether or not the defendant, before foreclosing the pledge and forfeiting the collateral gave the insured notice, the evidence is in dispute. That on the part of the defendant tends to show that notice was given by letter sent through the United States Mail from Philadelphia to the said Eugene R. Smith, addressed to his place of residence in Alabama, postage prepaid, and that the envelope had a return address printed on the upper left hand corner of the envelope, the correct address of the sender, for its return if not delivered, and that such letters were never returned. The letter stated the indebtedness with interest exceeded the cash surrender value by something over seven dollars.

The evidence offered by plaintiff goes to show that such notices never reached the addressee.

The provision of the policy defining the loan and cash surrender value, showing that such value increases with age, is an essential part of the certificate of indebtedness based on such loan value and the two writings will be construed together as the contract between the parties. Montgomery Enterprises v. Empire Theater Co., 204 Ala. 566, 86 So. 880, 19 A.L.R. 987.

Under the provisions of our statute, "All contracts of insurance, the application for which is taken within the state, shall be deemed to have been made within this state, and subject to the laws thereof." Code 1940, T. 28, § 10. This was the law of Alabama when these writings were entered into between the parties. Code 1896, § 2606.

This statute does not offend the provisions of the Constitution of the United States, and cannot be overridden by provisions in the contract. State Life Ins. Co. v. Westcott, 166 Ala. 192, 52 So. 344; Travelers' Ins. Co. v. Whitman, 202 Ala. 388, 80 So. 470; Royal Ins. Co. v. All States Theatres, 242 Ala. 417, 421, 6 So.2d 494.

"The statute is not directory only, or subject to be set aside by the company with the consent of the assured; but it is mandatory, and controls the nature and terms of the contract into which the company may induce the assured to enter." Equitable Life Assur. Society v. Clements, 140 U.S. 226, 233, 11 S.Ct. 822, 825, 35 L.Ed. 497; Penn Mutual Life Ins. Co. v. Mechanics' Savings Bank & Trust Co., 6 Cir., 72 F. 413, 418, 19 C.C.A. 286, 38 L.R. A. 33.

Moreover the defendant, although a foreign corporation, qualified to transact its insurance business in Alabama, was for this purpose a resident of Alabama. Barrow Steamship Co. v. Kane, 170 U.S. 100, 18 S.Ct. 526, 42 L.Ed. 964; Dunlap Pneumatic Tyre Co. v. Actien-Gesellschaft, etc. [1902] 1 K.B. 342; Royal Ins. Co. v. All States Theatres, supra.

The majority opinion in New York Life Ins. Co. v. Dodge, 246 U.S. 357, 38 S.Ct. 337, 62 L.Ed. 772, Ann.Cas.1918E, 593, based on the concept that the right to contract was a part of the liberty secured by the Constitution of the United States, and not subject to regulation or control of the police power of the state, sustained the contract in that case against a Missouri statute, on the ground that the contract, according to its provisions, was made in and governed by the laws of New York. This concept of liberty was repudiated in our case which, following the drift of modern civilization, held that the right to contract is subject to the police power of the state; State v. Polakow's Realty Experts, 243 Ala. 441, 10 So.2d 461; Royal Ins. Co., Ltd., v. All States Theatres, Inc., 242 Ala. 417, 6 So.2d 494.

In the Dodge case, supra, a strong and more logical opinion by Mr. Justice Brandeis, concurred in by Justices Day, Pitney and Clarke, held that the contract was made in Missouri and governed by the laws of that state, notwithstanding the provisions in the contract to the contrary.

In Hoopeston Canning Co. et al. v. Pink, 63 S.Ct. 602, 605, 87 L.Ed. ---, decided March 1, 1943, by the Supreme Court of the United States, the principles of the dissenting opinion in the Dodge case are in effect approved. It was there said:

"* * * To insure the protection of state interests it is now recognized that a state may not be required to enforce in its own courts the terms of an insurance policy normally subject to the law of another state where such enforcement will conflict with the public policy of the state of the forum. Griffin v. McCoach, 313 U.S. 498, 61 S.Ct. 1023, 85 L.Ed. 1481, 134 A.L.R. 1462.

"* * * Nothing in the Constitution requires a state to nullify its own protective standards because an enterprise regulated has its headquarters elsewhere. The power New York may exercise to regulate domestic insurance associations may be applied to foreign associations which New York permits to conduct the same kind of business. The appellants can not, 'by spreading their business and activities over other states * * * set at naught the public policy' of New York. Great Atlantic & Pacific Tea Co. v. Grosjean, 301 U.S. 412, 427, 57 S.Ct. 772, 778, 81 L.Ed. 1193, 112 A.L.R. 293. Where as here the state has full power to prescribe the forms of contract, the terms of protection of the insured, and the type of reserve funds needed, 'the mere fact that state action may have repercussions beyond state lines is of no judicial significance.' Osborn v. Ozlin, supra, 310 U.S. [53], at page 62, 60 S.Ct. [758] at page 761, 84 L.Ed. 1074. Neither New York nor Illinois loses the power to protect the interests of its citizens because these associations carry on activities in both places. Alaska Packers Association v. Industrial Accident Commission, supra [294 U.S. 532, 542, 55 S.Ct. 518, 79 L.Ed. 1044] * * *."-[Brackets supplied.]

And in Royal Insurance Co., Ltd., v. All States Theatres, Inc., supra, 242 Ala. 421, 6 So.2d 497, it was observed: "In Bankers' Fire & Marine Ins. Co. v. Sloss, 229 Ala. 26, 155 So. 371, it is declared on the authority of State Life Ins. Co. v. Westcott, 166 Ala. 192, 52 So. 344, 345, supra, and many other decisions there cited, that the business of insurance is recognized generally as affected with a general or public interest, and is within the police power of the state to reasonably safeguard and protect, and that this right is exercised as indicated in the Westcott case, supra, and by the statutes in question." That is to say, the statute [Code 1940, T. 28, § 10] "is mandatory, and controls the nature and terms of the contract into which the company may induce the assured to enter." 166 Ala. 196, 52 So. 345. [Italics supplied.]

In the instant case, as we have shown, the certificate of indebtedness shows on its face that it was executed and delivered in the presence of the subscribing witness to Smith's signature, in Alabama. 29 Am. Juris. 75, § 38. There is no fixed date for the maturity of the debt nor when the...