Smith v. Provident Sav. Life Assur. Soc. of New York

• Decision Date: 05 February 1895
• Docket Number: 213.
• Parties: SMITH v. PROVIDENT SAV. LIFE ASSUR. SOC. OF NEW YORK.
• Court: U.S. Court of Appeals — Sixth Circuit

65 F. 765

SMITH v. PROVIDENT SAV. LIFE ASSUR. SOC. OF NEW YORK.

No. 213.

United States Court of Appeals, Sixth Circuit.

February 5, 1895

This is a writ of error to review a judgment for the defendant in an action on a policy of life insurance. The policy was for $15,000, and purported to have been issued by the Provident Savings Life Assurance Society of New York in favor of Adelaide M. Smith on the life of her husband, Adolphus C Smith. The sole defense of the insurance company was that the policy never took effect as a binding contract. The application was made and the policy was dated December 15 1891. The insured died December 30th of the same year. The application was taken at Cleveland by R. E. Spink, general agent of the company for Northern Ohio, and was forwarded to the company's offices at New York, where it was approved and a policy and premium receipt returned to Spink. Smith who had been made a subagent of the company by Spink in August preceding, called at Spink's office for his policy. Spink delivered it and the premium receipt to him, and, after a conversation, Smith went out with the policy. Smith did not pay the premium, but kept the policy and died a week later. The sole issues in the case are: First, whether Spink's authority was such, in view of the terms of the policy, his instructions, and his practice under them, known to the company, as to enable him to make a binding delivery of the policy without actually receiving the premium; and, second, whether, conceding his authority, he actually made such a delivery.

Among other stipulations of the policy were these:

'This policy does not go into effect until the first premiums had been actually paid during the lifetime and good health of the within named insured. All premiums are due at the office of the society in the city of New York. For the convenience of policy holders they may be paid to an authorized agent of the society, but only in exchange for a receipt signed by the president and secretary and countersigned by such agent. Failure to pay any premium or semiannual or quarterly installment thereof when due will thereupon terminate this policy.

'No agent is or will be authorized to make, alter, or discharge this contract, or to waive any forfeiture thereof, or to extend this insurance, or to grant permits, or to receive for premiums anything except cash.'

The contract of agency between Spink and the company provided among other things as follows:

'That he will, and does hereby, become responsible for all moneys collected on behalf of the society by and passing through the hands of persons employed by him under this agreement, and for all policies and premium receipts intrusted by him to such persons.

'That he will furnish to and maintain with the society a sufficient and satisfactory bond in the sum of . . . dollars for the faithful performance of all duties pertaining to . . . agency, and for the prompt payment of all moneys received by . . . or subordinate agents or brokers.

'That the society shall at all times have a first lien upon the commission or compensation accruing under this agreement, as security for all debts or liabilities of said party of the second part to the society accruing at any time during the continuance of this agreement.

'It is further mutually understood and agreed by the parties hereto that said party of the second part is not authorized to make, alter, or discharge contracts for the society, waive forfeitures, allow credits, grant permits, guaranty dividends, write receipts for premiums, or make any indorsement whatsoever on the policies of the society.'

It is further in evidence that Spink delivered to Smith a manual for agents, issued by the company to its general agents, in which occurred the following directions:

'All premiums are payable at the office of the society in New York, but may be paid to the agent on presentation of a policy signed by the president and secretary, or of a renewal receipt signed by the president or secretary.

'You will receive no premium unless you have been furnished with a policy or receipt so signed, or with a binding receipt for advance payment of a first premium, as payment made to an agent without such evidence of his authority is not valid.

'The agent must in all cases countersign receipts when money is received.'

And then on the same page, under the same head, but in a different section (section 5), occurs the following:

'Agents crediting or remitting premiums not actually received do so at their own risk, and must look to the policy holder for reimbursement. The society does not ask or desire you to take this risk.'

In the same manual it was provided that 'policies not taken or paid for within sixty days from the date of issue, and renewal receipts not taken and paid for within thirty days from the day on which they fall due, must be promptly returned to the home office. ' Evidence was given of the practice of Spink to deliver the policies to the accepted applicants some time before the amounts due for the first premiums were received by him. After this evidence was admitted, it was excluded on the ground that plaintiff had failed to show that the company had any knowledge of the practice. To show that the company was familiar with this practice on Spink's part, monthly reports made by him to the company, were introduced in evidence. The monthly reports were made on a form which contained a column for the names of the applicants, one for the amount of the policy, one for the date when the premium was due,-- which was the date of the application and the policy,-- and one for date of actual payment. The reports for several months previous to the application of Smith showed that policies applied for in the beginning of the month or later were generally paid for a day or two before the time when the agent was required to forward his monthly report. Because these reports did not show when the policies were delivered, it was held by the court below that they had no tendency to prove that the company was informed of Spink's practice to deliver policies in advance of payment, and they were excluded.

The following question was asked of a witness for the plaintiff: 'Q. What is the custom of all life insurance companies, including the defendant, or what was it in 1891 and prior thereto, of permitting their general agents to deliver a policy of insurance to the assured, and extend to him a short credit for the payment of the first premium? ' To which question the defendant objected, which objection was sustained. To this ruling the plaintiff excepted, and offered to prove by the answer to the question that it was the custom of all companies, and that they did permit their general agents, to extend a short credit to the assured for the payment of the first premium.

There was very little dispute as to what occurred at the interview between Spink and Smith when the latter received the policy. Smith went to Spink's office, and inquired of him whether the policy had come. Spink's bookkeeper, who had charge of the policies, got the policy, and handed it to Spink, and Spink handed it to Smith. Smith opened and examined it. While he was doing so, Spink turned to his desk, calculated the amount due from Smith after crediting him with his commission, and handed it to Smith with the remark, 'That will be the amount of your check. ' To this Smith replied, 'Yes, that is right.' Smith then complained that Spink had not obtained the exact form of policy he wished. Spink replied that it was the form mentioned in Smith's application; that he had tried to get the other form, but that he supposed the company were not willing to issue it for so large a policy. 'Well,' said Smith, 'I don't like it all the same. ' About that time Spink was called to the telephone, and remained away about 10 minutes. When he returned, Smith had gone with the policy, and they never met again. Spink did not send or write to Smith for the policy, nor did he send to him for the premium. His explanation of his not doing so was that he expected him every day, because he usually came in every morning. Smith died about a week or 10 days after this interview.

It further appeared in evidence by another witness that Smith was in the office every day between August and December 15th, and at least once between the time he received the policy and his death, but that he did not see Spink. The policy and receipt were found in Smith's safe-deposit box after his death, with another policy for $5,000 in the same company, taken out by him in 1887.

Spink the general agent, was called by the plaintiff in the opening of the case to prove the contract between himself as general agent and Smith as subagent, and to prove the delivery to Smith of the manual for agents above referred to, and the fact that the appointment of Smith as subagent had been communicated by him (Spink) to the company. Spink was called as a witness for the defendant to testify generally in the case, and especially with reference to the circumstances under which Smith obtained possession of the policy and the receipt. In rebuttal, after having laid the proper foundation with Spink, the defendant called two witnesses to prove that Spink had said to them, after Smith's death, when they called upon him in the interest of Mrs. Smith, the plaintiff: 'I delivered the policy to Mr. Smith, and also the premium receipt. ' 'I expected that he would pay for it or make settlement for it. ' 'I expected him to send me a check. ' This evidence, which was given without the hearing of the jury, was not allowed to be submitted to them by the court on the ground that, having called Spink to prove part of her case, it was incompetent for the plaintiff to...