People's Savings Bank v. Raines

Kirby, J. Appellant insists that the court erred in refusing to direct a verdict in its favor. This appeal involves the construction of § 7960, C. & M. Digest, which provides: “Section 7960. No note hereafter given for premiums on insurance in this State shall ¡be negotiable until the policy for which said note was given as payment for premium thereon shall have been issued and delivered to the maker of said note, and all note's so given shall state for what purpose the noté was given; provided that, if a policy shall be issued in the form applied for, and the maker of any such note shall refuse to take same, when same shall be presented to him for acceptance, then and in that case such note shall be negotiable. Nothing in this act shall be construed to in any way invalidate such notes as between the payee and payor, and such notes, when they become negotiable, shall be in all respects as other negotiable papers. Any person violating the provisions of this act shall be deemed guilty of a misdemeanor, and upon conviction shall be fined in any sum not less than $50 and not more than $200. ’ ’ Act March 29, 1913, p. 1070. Appellant insists that, since the statute does not declare void a note given for the premium on an insurance policy, that art action thereupon by a bona fide holder of such note, acquired in due course of business, would not be subject to any defenses by the maker under the terms of the statute. It is true this court has uniformly held that usurious notes are void in the hands of an innocent purchaser in due course of business, and also that there can be no innocent purchaser of negotiable paper in due course of business given in payment for any patented machine, in violation of the statute, because such notes are declared void, the ones for usury under article 19, § 13, of the Constitution, repeated as § 7362 of C. & M. Digest, and the other under § 7956, C. & M. Digest. German Bank v. DeShon, 41 Ark. 341. See also Woods v. Carl, 75 Ark. 328, 87 S. W. 621, 5 Ann. Cas. 423; Tilson v. Gatling, 60 Ark. 114, 29 S. W. 35; Ozan Lbr. Co. v. Union County Bank, 207 U. S. 254, 28 S. Ct. 89, 52 L. ed. 195; Jonesboro Trust Co. v. Nutt, 118 Ark. 368, 176 S. W. 322. The said statute does not declare notes given for premiums for insurance void, but that “no note hereafter given for premiums # * * shall be negotiable until the policy for which said note was given as payment for premium thereon shall have been issued and delivered to the maker of said note, and all notes so given shall state for what purpose the note was given.” If the note is not negotiable unless made in the form prescribed and under the conditions designated in the statute, then there could be, of course, no bona fide holder of such note in due course, within the meaning of our statutes and decisions on commercial paper — the Uniform Negotiable Instruments Law; ¡but this statute provides that such note shall be negotiable after the policy shall have been issued and delivered to the maker of the note, and “that, if a policy shall be issued in the form applied for,” and refused when presented to the insured for acceptance, “such note shall be negotiable”; and further, “such notes, when they become negotiable, shall be in all respects as other negotiable papers.” Nothing in the act is to be construed to in any way invalidate such notes as between the payee and payor; the purpose of the statute evidently ’being to prevent irresponsible insurance companies and their agents from realizing on the obligation given by applicants for insurance before delivery of the policies and -without giving them the protection contracted for. It is also true that the statute does not denounce a penalty against the purchaser of any such note, and, since it does not declare such notes void and does declare that they shall be negotiable under the circumstances designated, they could, of course, fbe acquired by innocent holders in due course after they became negotiable. ' The undisputed testimony shows that this policy for the premium upon which the note sued on was given was issued and delivered by the insurance company to the maker of the note; that he kept it in his possession, without refusing to accept it, for nearly three months after it was delivered, and then turned it over to the agent who had solicited his insurance upon his statement that he had quit the company and wanted to make a settlement with it. Such being- the case, he cannot claim that the policy was not issued and delivered to him. It was the duty of the insured to examine the policy in a reasonable time after its delivery to him — that is, in such a time as he could have done so — and to reject it, if it was not what he contracted for, and, if he failed to do this, he will be deemed to have accepted it, and cannot avoid liability for payment of the premium note. Remmel v. Griffin, 81 Ark. 269, 99 S. W. 70; Smith v. Smith, 86 Ark. 284, 110 S. W. 1038; Gray v. Stone, 102 Ark. 146, 143 S. W. 114; Carrigan v. Nichols, 148 Ark. 336, 230 S. W. 9. Here the insured admitted having kept the policy after its delivery to him, about the first of February, until some time in April, when he turned it over, upon his request, to him who had been the agent of the insurance company when it was issued and delivered, upon his statement that he had quit the insurance company and wanted to make a settlement with it, and his agreement that the premium note would be returned within a few days. This constituted an unreasonable delay in the attempted rejection of the policy (Carrigan v. Nichols, supra), and the insured must be held to have accepted it, and that the policy for which the premium, note was given was issued and delivered within the meaning of the statute, removing all restrictions as to the negotiability of the note. The bank, having become the innocent purchaser for value of the note, which was negotiable after the policy was delivered to the maker, in due course and before its maturity, took it free from any defects therein or any defenses thereto that had heretofore existed in favor of the maker. These facts having been shown by the undisputed testimony, the court erred in not directing a verdict in appellant’s favor, and the judgment is accordingly reversed, and judgment will be entered here for the amount of the note. It is so ordered.