Travelers' Ins. Co. v. Lazenby

• Decision Date: 02 April 1918
• Docket Number: 3 Div. 277
• Parties: TRAVELERS' INS. CO. v. LAZENBY.
• Court: Alabama Court of Appeals

80 So. 25

16 Ala.App. 549

TRAVELERS' INS. CO. v. LAZENBY.

3 Div. 277

Court of Appeals of Alabama

April 2, 1918

Appeal from Circuit Court, Butler County; A.E. Gamble, Judge.

Action by George S. Lazenby against the Travelers' Insurance Company. From a judgment for plaintiff, defendant appeals. Affirmed, and rehearing denied.

Certiorari denied by Supreme Court, 80 So. 29.

Rushton Williams & Crenshaw, of Montgomery, for appellant.

Powell & Hamilton, of Greenville, for appellee.

SAMFORD J.

It must be understood at the outset that this opinion deals with a policy of insurance upon which the insured has paid all the premiums and complied with all the conditions of the policy thereby becoming fully executed on his part, and that nothing remained to be done on the part of the company, except to pay to the beneficiary a sum certain, upon the death of the insured, coupled with the obligation to increase the cash value of the policy at each succeeding anniversary thereof.

In this case, the insured, on March 26, 1900, obtained from the defendant a life policy, which, in consideration of the payment of 15 full annual premiums of $25 each, insured the life of the insured for the term of his life, in the sum of $1,000, the policy carrying other conditions and options not necessary here to mention, except that upon the payment of the 15 full annual premiums the policy became paid up. Each of the premiums were paid when due, and, all of them having been paid, the contract became a "paid-up policy" for $1,000, payable on the death of the insured, and was a valuable security, such as any other obligation calling for certain payment by a solvent institution; the title being in the insured, subject to the rights of the beneficiary. With the consent of the beneficiary, it could be sold outright assigned, or pledged as security for debt. With the policy in this condition, the insured borrowed from the defendant on the 24th day of April, 1914, $298 to be due March 26, 1915 and deposited with the defendant the policy as a pledge to secure the repayment of the principal; the interest having been paid in advance. The pledge agreement was in writing, signed by all the parties in interest, and among other things contained the following:

"That, if default shall be made in the payment of the principal of this loan, or of the interest thereon, or of any premium on the contract of insurance pledged herewith, for thirty-one (31) days after such principal, interest or premium, respectively, shall become payable, then:

"(a) If the contract shall so provide, the amount of the insurance, less the indebtedness of the party of the second part for principal, interest or premium, or any of them, as the case may be, will be automatically continued for the term that the excess of the cash value, over such indebtedness, will purchase at the attained age of the insured at the single premium rate and according to the American table of experience of mortality, at the rate of three and one-half per cent. (3 1/2%) per annum, or

"(b) If the contract shall not contain a provision as set forth in clause (a), the company shall pay to the party of the second part, upon execution and delivery of a surrender deed upon the company's form, the excess, if any, of the cash value of the contract pledged (over such indebtedness), and upon any such default the provisions in such contract of insurance for the payment of the principal sum at death or for extended term and paid-up insurance values shall be null and void."

No notice of the due date of the loan was sent to the insured.

There was a failure to repay the loan when due, and a failure to pay the interest in advance for another term of one year, and the matter rested here until May 5, 1915, when the secretary of the defendant company wrote insured as follows:

"We regret to note nonpayment of interest under your loan due March 26, 1915, and as there was no excess of the cash value of the contract pledged over such indebtedness, the provisions of your contract for the payment of the principal sum at death or for extended term and paid up insurance have, in accordance with the terms of your loan deed, been null and void since date of such default. Upon evidence of insurability acceptable to the company and payment of the amount required therefor, we shall be glad to restore your insurance, and full advice as to the detailed steps in this respect will be given you by our representatives."

On May 4, 1915, the defendant's agents at Montgomery wrote a letter to plaintiff in which they said: "It will be necessary that the inclosed application for reinstatement be executed and approved by the company before the interest can be accepted." Subsequent to that time, the application was signed and returned to the company by the plaintiff. On May 14th, defendant's agents notified plaintiff that the policy had been reinstated, and called on plaintiff for the amount due, to wit, $14.99, which amount was never paid. There were other letters from defendant's agents, endeavoring to induce insured to pay the $14.99; but under our view of the law it will not be necessary to set them out, further than may appear by allusion thereto in the course of this opinion. No demand was ever made for the repayment of the principal of the loan, nor was there execution and delivery of a surrender deed to the policy by the insured; but defendant continued in correspondence in an effort to collect the interest. It was also admitted by the defendant, and the policy shows, that at the next anniversary of the policy its guaranteed surrender value would be $307. With the negotiations in this condition the insured died and due proof was made of his death.

There are three assignments of error, which may be considered in (2) and (3), to wit: (2) The court erred in rendering judgment for the plaintiff. (3) The court erred in not rendering judgment for the defendant.

As we view it, the whole question in this case turns upon a proper consideration of paragraph (b) contained in the loan contract under date of April 20, 1914. If the forfeiture clause in the loan contract is valid it must be enforced according to its terms, and if enforced according to its terms under the facts in this case, the contract of insurance indemnity was void and at an end, after the lapse of 31 days from the due date of the loan, not because the policy had lapsed--policies like this cannot lapse--but because of the forfeiture provided for in the loan contract. If this is so, there was no contract of indemnity insurance at the time of the letter of May 5, 1915 written by defendant's superintendent. According to the terms of paragraph (b), the contract of insurance for the payment of the principal sum at death was nullified. It is not contended that defendant did anything while the contract was yet alive that even looked like an intention to waive any of the terms of the forfeiture clause. That being the case, the letter of May 5th was nothing more than a proposition, with a condition attached; i.e., to restore (revive, reinstate) the insurance contract theretofore existing, upon the furnishing by the insured of evidence of insurability acceptable to the company and by the payment by the insured of the past-due interest on the loan, to wit, $14.99. The agent at Montgomery notified the insured on May 4th that it would be necessary to sign an application for reinstatement before the $14.99 could be accepted. The application was signed and sent in and accepted, and insured was notified that "company has reinstated your policy." and a call was then made for payment. Under the proposition made, the payment could not be made until the application had been accepted. The insured did not pay, nor did he become obligated to pay, and therefore the contract of reinstatement was never completed, nor was anything said or done by the company that prevented the payment or misled the insured to his hurt. On the contrary, the company was constantly trying to get the insured to complete the contract. Sov. Camp W.O.W. v. Jones, 11 Ala.App. 433, 66 So. 834. If, therefore, the forfeiture clause in the loan contract was valid, then the court committed error in sustaining plaintiff's demurrers to defendant's second rejoinder to the effect that there was no consideration for the contract of reinstatement. If the contract was nullified, it did require a new consideration for a new contract. The cases cited by appellee in brief present an entirely different question from the one involved here. In Washburn, Adm'r, v. U.C. Life Ins. Co., 143 Ala. 485, 38 So. 1011, and Galliher v. State Mutual Life Ins. Co., 150 Ala. 543, 43 So. 833, 124 Am.St.Rep. 83, before the policy had lapsed and while the company was still bound, a note was accepted for the payment of the premium, and the insured had thereby become obligated to pay the amount, independent of the policy contract. In Travelers' Ins. Co. v. Brown, 138 Ala. 526, 35 So. 463, a check was remitted for the premium before the policy lapsed, and it was shown that this was in accordance with the course of dealing that had existed between the parties. In all of these cases there was an independent obligation to pay the premium before forfeiture; in this case there was no such obligation. Neither was there any agreement, declaration, or course of action on the part of the insurance company before the date of the claimed forfeiture other than is disclosed by the contract itself, which could have led the insured honestly to believe that by conforming thereto a forfeiture of the policy would not occur. Unless there had been such action, it would not prevent a forfeiture. Insurance Co. v. Eggleston, 96 U.S. 572, 24 L.Ed. 841. It therefore follows that on the facts...