Toucey v. New York Life Ins. Co.
Decision Date | 16 March 1939 |
Docket Number | No. 11228.,11228. |
Citation | 122 ALR 1415,102 F.2d 16 |
Parties | TOUCEY v. NEW YORK LIFE INS. CO. |
Court | U.S. Court of Appeals — Eighth Circuit |
Cornelius Roach, of Kansas City, Mo., for appellant.
Richard S. Righter and Horace F. Blackwell, Jr., both of Kansas City, Mo. (Louis H. Cooke, of New York City, and Lathrop, Crane, Reynolds, Sawyer & Mersereau, of Kansas City, Mo., on the brief), for appellee.
Before SANBORN, WOODROUGH, and THOMAS, Circuit Judges.
In 1924 the New York Life Insurance Company issued a policy on the life of Samuel R. Toucey, then aged 45, providing that in consideration of the specified premiums the company would pay $50,000 in case of death and that in case of total and presumably permanent disability occurring before the age of sixty years, further payment of premiums would be waived and $500 a month would be paid during the continuance of total disability. In 1934 the company, in compliance with written application by Mr. Toucey, reduced the policy from the face amount of $50,000 to the face amount of $25,000, with corresponding reductions in all of the other benefits of the policy and also in the amount of premiums. In 1935 the policy thus reduced was lapsed on the books of the company for failure to pay the premium due October 2, 1934.
On October 26th, 1935, Mr. Toucey brought a suit in equity against the insurance company in the federal district court to have the reduction of the policy declared null and void and for a decree reinstating the original policy and adjudging it to be in full force and effect. He alleged in his bill that in April, 1933, as the result of an operation for stomach ulcers he became totally and permanently disabled within the meaning of the policy and that he gave notice thereof in writing to the company and was entitled under the policy provisions to receive $500 per month and to have the payment of premiums waived.
But he alleged "that he did not know his rights under his policy and the coverage thereof" and in July, 1934, before he had reached the age of sixty years and while the premiums on the policy were fully paid up, he called upon the company "to advise him as to the coverage of the policy." That the insurance company, although it well knew of his then existing total disability and his right to the monthly payments and waiver of further premiums, fraudulently and intentionally failed to advise him of his rights under the policy and fraudulently induced him to accept the said reduction of his policy, and also fraudulently induced him to thereafter make a premium payment upon the reduced policy. He alleged that in September of 1935 he was advised by a medical examiner that his policy covered disability benefits for disease and he promptly made demand upon the company for reinstatement of his original policy and for payment of benefits in accordance therewith. He prayed the court to reinstate the original policy and to award recovery for the disability benefits provided therein.
The insurance company having joined issues on the bill, a trial was had extending over several days and the court found upon the evidence that Mr. Toucey was not and had not been disabled within the disability provisions of his policy. In deciding the case, the court said:
The court also found that the insurance company had not in any manner or by any means concealed the fact that the policy contained the provision for indemnity against total and permanent disability from Mr. Toucey, but, on the contrary, the company advised him that it contained such provision, and "upon the facts and circumstances shown" Mr. Toucey was conclusively presumed to know the provisions of his policy. The court also found generally that Mr. Toucey was not entitled to the relief prayed for and dismissed the bill with prejudice at plaintiff's costs.
Thereafter Mr. Toucey made an assignment of the policy and his claims thereunder to one James Shay, a resident of the District of Columbia, who instituted an action at law as assignee against the insurance company upon the original policy in the state court in Missouri. In that action, after reciting the issuance of the original policy to Mr. Toucey and the terms thereof, omitting all reference to the reduction that had been made, it was alleged that while the policy was in full force and in April, 1933, before Mr. Toucey had reached the age of sixty years, Mr. Toucey became totally and permanently disabled; that he had performed all the conditions of the policy on his part to be performed and judgment was demanded for accumulated disability installments aggregating $28,000, together with attorney's fees, interest, penalty and costs.
The insurance company, with leave of court, thereupon filed its supplemental bill in Mr. Toucey's equity suit in the federal court, reciting the proceedings which had been had and alleging that the pretended assignment of the policy was without consideration and was a mere sham and pretext to fraudulently avoid the federal jurisdiction and that Mr. Toucey was the real party concerned. The company prayed avoidance of the assignment and for temporary and permanent injunction against the making of any other assignments or the prosecution of the law action or any other proceedings to recover on the Toucey policy. An interlocutory injunction as prayed having been issued upon the verified supplemental bill, Mr. Toucey moved to dismiss the supplemental bill and also moved to dissolve the injunctional order. Both motions having been denied by the district court, Mr. Toucey (who alone was served) has prosecuted this appeal to reverse the order denying his motion to dissolve the injunction.
In this court he has contended:
(1) That jurisdiction of the federal equity court in the equity suit which he brought against the insurance company, was grounded upon the fraud of the insurance company and that the claim he made in that suit for recovery upon the disability provisions of his original policy presented merely a dependent legal issue; that when the court decided against him upon the issue of the fraud it lost jurisdiction to proceed further or to make determination upon the alleged dependent legal issue.
(2) That the district court was prohibited by Section 265, Jud.Code, U.S.C. Tit. 28, Sec. 379, 28 U.S.C.A. § 379, to stay the law action in the state court.
I. It is well settled that "where a bill states a case entitling the complainant to equitable relief, if the proof fails to establish the averments of the bill in that respect, the court is without jurisdiction to proceed further and determine rights that are cognizable in a court of law." 21 C.J. 142. It is also the rule Dowell v. Mitchell, 105 U.S. 430, loc. cit. 432, 26 L.Ed. 1142.
The illustration of the rule is where it is made to appear in an equity suit brought to foreclose a mortgage or other lien that there is in fact no valid lien enforceable in equity. In such cases, the equity court may not proceed to adjudicate a claim of legal liability upon a promissory note or upon a purely legal obligation unrelated to equitable liens. In such cases, the legal controversy presented is dependent and distinct. Mitchell v. Dowell, supra; Linden Inv....
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