O'Connor v. Hartford Accident & Indemnity Co.

Burpee, J. The defendant claimed that the payment made by the Travelers Insurance Company to the plaintiff, in the circumstances surrounding the transaction, discharged the defendant from liability as surety in the bond substituted for the attachment in the plaintiff’s suit against Zavaritis, which is the basis of this action, and the condition of which is quoted in the foregoing statement of facts. This claim was overruled by the court below in its decisions upon the demurrer to the reply and to the rejoinder. In both memoranda of decision, the court applies the provisions of Chapter 331 of the Public Acts of 1919 to the facts and conditions disclosed by the pleadings, and its conclusions are controlled by this statute. It declares that the payment made by the Travelers Insurance Company was made “under and by virtue of the statute in question,” that “this fund, by force of the statute and not by any voluntary act on the part of Zavaritis, became the property of the plaintiff, to be applied toward the satisfaction of the judgment obtained by him,” and that therefore this payment “did not fulfil the terms of the bond given by the defendant company.” We think this conclusion was erroneous. It appears that the contract of insurance went into effect March 3d, 1919. Chapter 331 of the Public Acts of 1919 took effect July 1st, 1919. Public Acts of 1919, Chapter 225. Hence, if the Act must be construed as applicable to this contract, the question arises whether it falls under the prohibition of § 10, Article First, of the Constitution of the United *15 States, because it impairs the obligation of a preexisting contract, and is invalid to that extent. To impair the obligation of a contract is to weaken it, or lessen its value, or make it worse in any respect or in any degree. “The obligation of a contract includes everything within its obligatory scope.” Edwards v. Kearzey, 96 U. S. 595, 600. Any law which changes the intention and legal effect of the original parties, giving to one a greater and to the other a less interest or benefit in the contract, impairs its obligation. The extent of the change is immaterial. Any deviation from its terms by hastening or postponing the time of performance which it prescribes, or imposing conditions not included in the contract, or dispensing with the performance of those that are included, however small and unimportant they may appear to be in their effect, impairs the obligation of a contract. Green v. Biddle, 21 U. S. (8 Wheat.) 1, 84; Van Hoffman v. Quincy, 71 U. S. (4 Wall.) 535, 552; Woodruff v. State, 3 Ark. 285; Berdan v. Van Riper, 16 N. J. L. 7, 11. The legislature may regulate the remedy and the methods of procedure under a past as well as a future contract, but it cannot impose new restrictions upon the enforcement of a past contract, so as materially to lessen its value and benefit to either party. Green v. Biddle, 21 U. S. (8 Wheat.) 1; Tennessee v. Sneed, 96 U. S. 69; Crawford v. Branch Bank of Mobile, 48 U. S. (7 How.) 279, 282; 12 Corpus Juris, 1084, 1086. We think that it must be admitted that this statute, if it be applied to this contract of insurance, would impair its obligation in several particulars. One provision of the contract is that the policy of insurance may be canceled at any time by either party. The Act of 1919 declares in § 1: “No such contract of insurance shall be canceled or annulled by any agreement between the insurance company and the assured *16 after the said assured has become responsible for such loss or damage, and any such cancellation or annulment shall be void.” It is also a condition of the contract that no action shall lie against the insurance company to recover on any claim or for any loss until the amount of such claim or loss shall have been fixed or rendered certain by judgment or by agreement made with the consent of the company. The Act in question provides that “every insurance company which shall issue” a policy to any person insuring against loss on account of death by accident of any person, “for which loss . . . such person . . . is legally responsible shall, whenever a loss occurs under said policy, become absolutely liable, and the payment of said loss shall not depend upon the satisfaction by the assured of a final judgment against him,” etc. In these respects, at least, this legislation manifestly would take away or lessen valuable rights and benefits secured to one or both of the parties to the policy. . It would change its terms respecting the time of performance; it would dispense with old conditions and impose new; and it would make it a worse contract in some respects for one party, and in some for the other. Therefore, this Act, if it be construed as effective upon this pre-existing contract, would impair the obligation of the contract, and must therefore be held invalid respecting it. We think, however, that the language of the Act indicates plainly that it was not intended to and does not apply to any contract in existence when the Act took effect on July 1st, 1919. Its words are: “Every insurance company which shall issue a policy.” Certainly that expression does not include a policy already issued. And continuing, it says that the insurer “shall, whenever a loss occurs under said policy,” meaning a policy which any company “shall issue.” *17 Courts are anxious to sustain the constitutionality of a legislative Act whenever they can do so by any reasonable interpretation. In this case, we think a construction of this statute which limits its effects to policies issued after it went into effect on July 1st, 1919, is the only construction that is reasonable. Hartford v. Poindexter, 84 Conn. 121, 135, 79 Atl. 79. Statutes are always to be presumed to be intended to operate prospectively. They should never be construed as having a retrospective effect unless their terms show clearly a legislative intention that they should so operate. Humphrey v. Gerard, 83 Conn. 346, 352, 77 Atl. 65; 36 Cyc. 1205. The court below was mistaken when it said that this action was brought under § 2 of this Act of 1919. This plaintiff is not seeking to enforce any right which Zavaritis had against the Travelers Insurance Company under the insurance policy, and to which the plaintiff claimed to have been subrogated by this statute. This is a suit against another insurance company, not a party to the insurance policy, to enforce rights which belong to the plaintiff, not by reason of the policy nor by virtue of any statute, but under the bond substituted for the attachment, which was set up and annexed to the complaint as the basis of the action, and the condition of which is quoted in the above statement of facts. An essential allegation in the complaint is that Zavaritis had broken the obligation of this bond by refusing to make payment toward the satisfaction of the judgment against him. This allegation the defendant denied, and set up in defense that the Travelers Insurance Company had made the payment of a sufficient sum for and on behalf of Zavaritis toward the satisfaction of said judgment. This allegation the plaintiff denied in his reply, and coupled with his denial he sets out an *18 explanatory statement apparently intended to show that by this payment the company, “pursuant to” the policy of insurance, had “discharged its liability thereunder upon the judgment,” as would appear in Exhibit B. This statement added nothing to the denial. In fact it was. in part untrue, for there was nothing in the policy pursuant to which the insurance company was required to make any payment to the plaintiff; and it was in part immaterial, because the alleged discharge of the insurance company from liability under the judgment did not tend to establish the liability of the defendant under the bond in suit. But the defendant filed a demurrer, which the counsel and the court below seem to have considered as if it raised a question of the influence or effect of the Act of 1919 upon the transaction set out in the answer, and thereupon the court ruled that the payment by the insurance company was made “under and by virtue of the statute in question,” and that although the payment should be applied toward the satisfaction of the judgment, it did not completely satisfy the judgment, and therefore the principal in the bond had not been discharged. This conclusion does not dispose of the only issue raised by these pleadings. The decisive question was not whether the principal was released entirely by the payment of a part of the judgment, but whether the surety was released by the payment of a sum larger than the amount the bond held it responsible for, made by it for the principal toward the satisfaction of the judgment. But upon this conclusion, and substantially the same conclusion concerning the demurrer to the rejoinder, the court reached a decision in favor of the plaintiff. In this decision and the failure of the court to draw correct legal inferences from the facts admitted with the pleadings, there was error. *19 What was, then, the legal effect of the payment made by the Travelers Insurance Company upon the obligation of the defendant under the bond which is the basis of this action? That company had agreed to “indemnify the assured against loss by reason of the liability imposed upon him by law for damages” on account of death caused by his negligence in operating his automobile. This judgment against him, if not satisfied, would, by reason of the liability imposed by it, effect a loss. From that loss he could be protected, so far as the insurance policy was issued to protect him, by giving him the sum of money fixed by the policy as the limit of the company’s liability, to be by him paid to the plaintiff toward the satisfaction of the judgment, or to be retained by him to reimburse him for • a payment already made. If with his authority or acquiescence, the insurance company paid the money directly to the plaintiff, it must be paid and applied toward the satisfaction of his judgment. By either process, the payment must be for and in behalf of the assured. In no other way could his indemnity be secured, and indemnity was his right under the contract. The proceeds of the policy were his property, subject to its terms, from the day when the amount of the loss was fixed by the judgment; and thereafter he had the power to control their disposition, and any disposition must be made at least on his behalf and for his benefit. Even if the Act of 1919 were applicable to this contract, the right in this property to which this plaintiff would be subrogated would be only this right to receive and apply this money toward the satisfaction of this judgment, as the assured would have used it, and with the same effect. The fact that the Travelers Insurance Company, as an incident of its direct payment, undertook to secure its dis *20 charge from liability on account of the judgment, as appears in the release, Exhibit B,is of no importance. The payment was made none the less toward the satisfaction of the judgment, as the plaintiff himself admits in the last sentence of that exhibit. It also appears that the plaintiff concedes that Zavaritis, the principal in the bond substituted for the attachment, may hold the benefit of this payment, but he maintains that the surety in that bond may not. This discrimination would certainly work an injustice, for which we think there is no necessity or excuse in equity or law. Under the attachment the plaintiff might have held the money in the savings-bank to apply toward the payment of his judgment, but for no other purpose. The bond on which this suit was brought released MS’ hold on this money, and took its place. It changed the form but not the amount of the security to which the plaintiff might resort to satisfy his judgment. Its only purpose was to release this sum of money without risk to the plaintiff. The surety in the bond agreed merely that Zavaritis “shall pay . . . the actual value of the interest ... of Zavaritis in said attached property,” toward the satisfaction of any judgment. The effect of the words “Zavaritis shall pay” should not be restricted by any technical meaning. They do not mean that Zavaritis must do this act in person or with any specific property. It is sufficient if he caused any money belonging to him, and either in his possession or in his control, to be applied upon this judgment, or if any debtor or friend did such a thing for him. In any case, the obligee in the bond, the plaintiff in this action, would have received all he was entitled to claim under the terms of the condition in the bond; in every respect he would be as well off as he would be if the attachment on the money in the savings-bank had not been re *21 leased upon the substitution of this bond. And we may add that this would be equally true, even if we could approve the plaintiff’s claim that the proceeds of the insurance policy, “by virtue of the statute . . . became the property of the plaintiff”; because it would be the property of the defendant thus transferred to the plaintiff for the specific and exclusive purpose of paying his judgment in part. The answer alleged the payment of a much larger sum of money than the value of Zavaritis’ interest in the savings-bank deposit. Since this payment was admitted, the answer stated a complete defense. Hence the reply was open to attack by the demurrer, and the demurrer should have been sustained'. Such action would have made further pleadings unnecessary, and with the stipulated addition and effect of Exhibit 1 (the policy) and of Exhibit B, it should have been followed by a judgment for the defendant. There is error, and the cause is remanded for judgment for the defendant. In this opinion the other judges concurred.