Union Central Life Ins. Co. v. Woods

• Decision Date: 12 December 1894
• Docket Number: 1,016
• Parties: UNION CENTRAL LIFE INS. CO. v. WOODS
• Court: Indiana Appellate Court

39 N.E. 205

11 Ind.App. 353

UNION CENTRAL LIFE INS. CO. v. WOODS

No. 1,016

Court of Appeals of Indiana

December 12, 1894

11 Ind.App. 335. At 353.

Original Opinion of April 20, 1894, Reported at: 11 Ind.App. 335.

Petition overruled.

REINHARD J. DAVIS, C. J., dissents.

OPINION

ON PETITION FOR A REHEARING.

REINHARD J.

In their brief upon the petition for a rehearing, counsel for appellant say:

"The answers of appellant to the appellee's complaint show:--

"1. The issuing of the policy in suit, a partial payment of the premium necessary to carry it in force and the execution of notes payable in installments for the balance of the year's premium.

"2. That the policy in suit lapsed for the nonpayment of premiums, the decedent failing to pay the notes given for the deferred payments of the first year's premium.

"3. That after the policy in suit had been forfeited, the appellee and her husband procured a loan of $ 2,300, the appellant believing, as it had the right to believe, that if Isaac Woods lived he would keep up his insurance and pay his debts, and if he died that the insurance money would pay the debt, the appellant having the right to deduct the indebtedness from the policy out of this loan of $ 2,300; the answers show the premiums in arrears on the policy in suit were paid and the forfeiture waived and new life put in the policy.

"This is a fair statement of the issues raised upon the question of the construction of the policy, 'all other indebtedness being first deducted,' etc. The provision last above quoted is not meaningless; it is not ambiguous, and we think clearly means that the indebtedness owing, growing out of or connected with the policy in suit, is to be first deducted before the appellee has any right of recovery."

Granting that the above is a fair statement of what was involved in the transaction between the parties in connection with the contract of insurance, the conclusion that the contract authorized a deduction of the amount of the loan does not follow. It is true that some insurance companies loan money, but it does not, therefore, follow that when any insurance company issues a policy in which it is provided that out of the proceeds of the policy all other indebtedness, except that specifically mentioned, shall be deducted, that the parties contemplated a loan by the insurance company to the insured, and that this was one of the items to be deducted. The parties must be held to have contemplated only what was fairly within the scope of their present negotiations. Could it be justly maintained that if the company had, subsequently to the issuing of the policy, sold the insured a farm or a house and lot that such an item of indebtedness was contemplated by the parties? Possibly such an item might be properly deducted if the transaction were confined to the original contracting parties-- the company and the insured. But when a third party, who has a right or interest in the policy, which vested before the indebtedness accrued, comes in and asserts a claim to the insurance money, can it be held that she took the policy subject to a burden that was not fairly within the contemplation of the parties to the contract when it was made? We think not.

But it is urged that the policy had been forfeited, that new life was given it only by virtue of the loan, and that if this had not been made, the appellee would not have had any policy at all. This may be conceded. And yet the making of the loan did not create a new contract of insurance between the parties. It only revived what rights either party or all parties had after the original contract had been entered into. The loan did not impress the original contract with any new features whatever, any more than if the policy had been revived without the making of the loan, but by the simple payment and acceptance of the premium. It will not do to say that the effect of our ruling will be to "destroy the rights of many people and lay down a dangerous principle of law," as counsel urge in their brief. It is an easy matter for an insurance company, when it issues a policy, to insert a provision that any money loaned the insured shall be deducted from the proceeds of the policy. If the contract is between the company and the insured alone, the former can also secure itself in any loan it may make in future by an assignment of the policy. It is always a safe rule to hold the parties to their contract, interpreted in the light of the surrounding circumstances and the position of the parties. The danger lies in courts suffering themselves, out of mere consideration that a hardship might be entailed upon a party in a particular case, to give constructions to contracts unwarranted by the terms thereof, and not within the scope of the manifest intention of the parties. It is useless to attempt to invoke the legal principle here that where a married woman receives a benefit from her contract she can not accept such benefit and reject the burden of the contract, or disavow it entirely. The appellee did not procure any loan from the appellant. The fact that she signed the notes given for the loan does not prove that she obtained the money, nor indeed does it make her liable thereon, if, as in the present case, she was only surety for her husband. All the transactions connected with the loan occurred after the making of the original contract of insurance, and her vested interest in the same could not be defeated by the fact that her husband subsequently obtained a loan from the company for which he attempted to pledge the policy.

It is now insisted that we were in error in assuming that the money realized from the sale of the real estate was applied to the extinguishment of the premium notes then due from the insured in preference to the payment of the loan; and counsel state that there is nothing in the pleadings to warrant such a conclusion. Counsel for appellant, in their original briefs discussed the alleged errors of the rulings of the court upon the several paragraphs of the answer together, and did not direct our attention to the sufficiency of the several paragraphs in detail. In one of the...