MacIntyre v. Cotton States Life Insurance

Bleckley, Chief Justice. According to the terms .of the policy, the company insured the life of MacIntyre in January, 1870, for $10,000, payable at the expiration of fifteen years, or at his death in the event of his dying before that period expired. The consideration of the contract was “ an annual premium of $786.60, to be paid on the 24th of January in each and every year for fifteen years next succeeding the date of this policy or during its continuance ; which annual premium is to be paid in the manner following : An annual loan of $368, and a cash annual premium of $368.60, to be paid on the 24th day of January.” Erom the sum insured were to be deducted “the balance of the year’s premium on this policy, if any, and also all the notes or credits for premiums thereon, and other indebtedness of the insured to this company.” Amongst the conditions set out in the instrument was one declaring that “if the premiums due on this policy shall not be paid at the time above mentioned, and the interest on one note or credit for premiums on this policy paid annually in advance to this company or its authorized agents, .... this policy shall terminate and become void and of no effect.” "What is the proper construction of the policy on the question whether the loans bore interest whilst the policy was running to maturity? Did the interest required to be paid in advance upon one loan only include — 492 — all the interest that was to accrue upon all the loans ? Or did each loan bear, in addition to this paid up interest, lawful interest for eacb year save one tbat elapsed after tbe loan was made ? We bave quoted from tbe document tbe sole expression touching interest which it contained; and were tbat expression tbe only clue to tbe meaning of tbe policy, there might be some difficulty in arriving at tbe conclusion tbat more interest accrued than was requiredto be paid in advance. But as tbe policy made tbe whole premium for eacb year due in January, tbe whole would bave been payable then in cash b td it not been stipulated tbat nearly half of each should be payable in a loan. No time was expressed for tbe loan to become due ; but as it was a substitute for cash, it seems to us tbat it ought to be considered due for tbe purpose of bearing interest at tbe time it was made. No doubt it was intended to run on without payment until tbe policy matured, but to make it the equivalent of cash, it would bave to be treated as an investment of tbat much money producing an income, which income, as no other measure was adopted, could be measured only by the. lawful rate of interest, seven per cent, per annum. Tbe contract, on tbis question as well as on every other, ought to be construed with reference to tbe nature of tbe business in which tbe insurance company was engaged. Its business was to accumulate money, not only for .the benefit of its stockholders, but for tbe redemption of its policies. There can be no presumption tbat it, or those who dealt with it, contemplated tbe lending of its assets gratuitously, or for merely friendly accommodation without interest. How could such an institution afford to leave half of its premiums in tbe bands of its patrons, unemployed and unproductive? Or bow could it afford to accept a single year’s interest — 493 — paid in advance, as compensation for the use of loans spreading over various periods from fifteen years to one year respectively ? It seems to us that such a system of business cannot rationally be supposed to have been adopted, or to have been in the contemplation of either of the parties to this contract. All writings are to receive a reasonable construction, with reference to the nature of the business or subject-matter to which they relate. It would be unreasonable even to the verge of absurdity to hold that a business corporation, such as a bank or an insurance company, intended to loan its funds for years upon years in the regular course of its business transactions without interest .or income as compensation to it for the use of them by the borrower. Moreover, under the charter of this company, (acts of 1868, p. 47,) each of the- insured was entitled to participate in the profits, by sharing in dividends. The chief, if not the only, capital employed in producing dividends in behalf of the policy-holders, we may assume, was money taken in as premiums from the .insured on their respective policies. If .Some of the insured .paid the whole of their premiums in cash, .and some .paid only half, themselves borrowing from the company the other half, there would be great inequality in allowing dividends to both these glasses on .equal termsand the charter contains nothing warranting unequal terms, either with reference to furnishing money with which to produce profits, or in the distribution of dividends. "We cannot escape the conviction that as the whole annual premium upon the policy now in .question became due in January of each year ,the contract really meant that the company .was to pave for it as .a whole, either the cash, so fs to use th.e .same itself, or the equivalent of cash, .if the insured retained the, money for his own use nuder the .name of loans. .This equiva — 494 — len.ce could be arrived at by computing legal interest on the loans, and in no other Avay. Our conclusion is, that the court beloAv construed the policy rightly, and that unpaid interest on the various loans, as Avell as their principal, was to he deducted from the ten thousand dollars on final settlement after maturity of the policy. While the general rule, no doubt, is, that interest will not accrue without contract, express or implied, until after default in making payment, yet the usual instances of implied contract for interest enumerated in the books are not exhaustive; but the implication “ extends to every case in which the circumstances indicate a manifest intention on the part of the creditor to claim interest, and on the part of the debtor to accede to such a claim.” 2 Story on Cont. §1485. 2. The next question is, whether anything appears in the extrinsic evidence which ought to vary or modify the construction of the policy, based upon its terms, at which we have arrived. The extrinsic evidence consists, in part, of a printed circular or prospectus issued by the company, and used by its agent in procuring the application for insurance which was made by MacIntyre, and in pursuance of which the policy issued. Without passing upon the question respecting the use of the prospectus to add to, contradict or vary the policy in its legal effect, (as to which see Mutual B. L. Ins. Co. vs. Ruse, 8 Ga. 534; Bliss on Life Ins., §§382-3,) we will consider briefly the terms of the prospectus bearing upon the matter of interest on loans, and see whether they are inconsistent with the policy itself, interpreted as we have construed it. Three relevant expressions occur in the prospectus, the first in these words : “ The loan plan is as safe and profitable to the company, and as beneficial to the policy-holders, as the all cash plan because the loans bear interest and are — 495 — perfectly safe.” The second is in these words : “We require interest on one loan paid annually in advance ;• all other interest paid by dividends.” The third, which follows immediately after the second, is in these words: “When the annual premium amounts to $50 or more, a loan, if desired, will be given for half of the amount (more or less the fraction of a dollar); but on all such loans seven per cent, interest must be paid every year in advance. A failure to pay the interest in all cases forfeits the policy.” The last of these clauses, if standing alone, would plainly import not only that the loans bore interest every year, but that all the interest had to be paid in advance; and while the latter requirement is checked by the immediately preceding clause, as well as by the policy, there is nothing in either of the preceding clauses to negative the implication- that interest would run during the whole period the loans were outstanding. The first clause states expressly, “the loans bear interest” ; and the second, after saying that the interest of one loan must be paid annually in advance, adds: “ all' other interest paid by dividends.” ■ What other interest could be referred to in this clause save legal interest upon the loans from their date to the maturity of the policy, with one annual payment made in advance on each deducted ? It is manifest, therefore; that the scheme indicated by the prospectus as to the accrual of interest upon loans is the same precisely as that involved by fair implication in the terms of the policy. The other extrinsic evidence on the subject is the parol testimony set out in the report, and it likewise plainly shows that throughout the negotiations, both parties contemplated that there would be continuously accruing interest upon the loans, the only possible misunderstanding being as to whether that interest, or any of it, would have to be paid by the insured otherwise — 496 — than by the application of his share of the contemplated dividends. We may add that nothing to the contrary is intimated or indicated upon the face of the statements furnished annually by the company to the insured by way of call for payment of the cash part of the premium, together with the advance annual payment of interest on one loan according to the terms of the policy. The object of the statement was simply to show each year how much cash was then due from the insured, and for what it was due. There was no occasion to set out accrued interest which would not be payable until the maturity of the policy, and no attempt to show how the account stood between the parties, further than the account for unpaid cash then or shortly to become due and payable. Any inference- tending to negative the right of the company to the interest now in controversy, founded on the absence of any such interest from the statement, would be wholly illogical and unwarranted. 3. Having seen that whether we look inside or outside of the policy, or both inside and outside, interest on loans accrued and continued to accrue until the policy matured, the question remains to be considered whether or not the company, in its contract with the insured, warranted or guaranteed that the dividends would or should be sufficient to discharge all the interest not included in the advance payments expressly provided for by the terms of the policy. Several considerations bearing upon this question are to be noticed. In the first place, there is no authority in the charter empowering the company, or authorizing its officers or agents, to make such warranty. Secondly, nothing of the kind appears in the policy, the writing solemnly executed for the purpose of manifesting the contract between the parties, and the undertakings and obligations of the — 497 — company assumed as parts of that contract. A stipu-. lation so important as this cannot be supposed to have been left out of the -writing, unless done by mistake, and no mistake is alleged and no application made to reform or correct the policy in this particular or any other. Under these circumstances, if such an undertaking on the part of the company was in the contemplation of the parties whilst the negotiations were in progress, as the parol evidence might seem to indicate, it must be assumed now, after the lapse of more than fifteen years; that when the contract was finally closed and its terms reduced to writing, this feature of the preceding negotiations was deliberately abandoned, and constituted no part of the terms of the contract as finally closed. Thirdly, the clause in the prospectus quoted above, saying, “We require interest on one loan paid annually in advance; all other interest paid by dividends,” even had it been inserted in the policy, would not .necessarily import such a warranty or guaranty as is now in question. The more reasonable construction of it would be that such interest might be paid in dividends, and would be so paid if the dividends proved adequate. This would leave the amount of the dividends to the risk of the party who was to be benefited by them, namely, the insured. The charter made them his property, declaring that “ nine tenths of the net-profits thus accruing should he placed to the credit of the mutual policy-holders, who shall participate in the mutual profits of the company in proportion to the amount of premium paid respectively, and which may be applied, as desired by the policy-holder, to the reduction of premium, increase of policy, or drawn by him or her in cash, as provided for in the by-laws.” Why should the company undertake to guarantee to — 498 — any policy-holder that his share of the dividends should he sufficient in amount to keep down unpaid interest on his loans ? How could the company give such a guaranty to one policy-holder and not to all? And how to any or all, consistently with business principles or with legal and moral duty, in the conduct of an institution whose declared dividends had to be limited to “net-profits”? (Charter, article 5, §8.) Surely the company had no power or means to produce net-profits up to any arbitrary or conventional amount; and unless it had such power or means, how could it stipulate with any policy-holder that his due share in the dividends should be so much or enough to pay any part of his debt to the company, whether principal or interest ? The true meaning of the prospectus, in the clause which we are considering, is and was, that dividends should, so to speak, be a legal tender for all interest except that required to be paid in advance. This no doubt is the meaning which the company attached to it, and which, as we think, those accepting policies issued by the company, should have attached to it. Any other construction would be toó literal and narrow for either of the parties or a court to adopt and act upon. Contemplated from a business or legal standpoint, we are unable to discover the slightest reason why the interest which was to accrue upon the loans was to be measured by the dividends rather than by the legal rate of interest prescribed by the law of the State. It appears from the record that dividends to the amount of $567.80 accrued to the plaintiff during the period for which he was insured; and for this sum the company gave him due credit, and the same was deducted on the trial below from the amount of interest with which he was chargeable. To this extent the interest was “paid by dividends,” and the only reason — 499 — why all the interest was not so paid was, that there were no more dividends, as far as the evidence shows, to he thus applied. 4. Touching the alternative prayer in the declaration for a rescission of the contract on the ground of fraud, we shall be very brief. The fraud complained of is, in substance, that the company’s agent represented that the business of the company was of such extent that its profits were sufficient to protect the policyholders against liability for the loans and all interest thereon, and that the business would be carried into new fields and still further extended. No specific fact as to what the business amounted to appears to have been represented by the agent. He gave no figures, and so far as appears was asked for none, either as to past or prospective business. If the plaintiff had intended to make these statements — the agent’s representations — the basis of his action, in contracting with the company, due care on his part would have required that he should have inquired into details and ascertained how much business the company was doing, what its net-profits amounted to, and what assurance the agent had that there would be an increase of business, etc., etc. If this care was exercised, and reports or statements emanating from the company were exhibited, read and relied upon, it should be shown what these reports or statements contained, and in what respect they were untrue. After the plaintiff had stood upon the contract as delivered to him in writing, for fifteen years or more, in which writing none of these representations appeared, it is certainly too late for him to call upon a court to rescind the contract in his behalf, more especially where he has not yet made for himself any absolute election to rescind it, but has founded his suit in part upon the contract as good and — 500 — valid, and only claims a rescission in the event that his construction of it is not correct. He certainly had the means of discovering, long before the fifteen years elapsed, whether the company was really doing the business which the agent represented it was doing, and whether the extension and increase of which the agent spoke had been realized. So far as appears, he made no inquiry upon the subject, and entered into no investigation until after the company had carried the risk for the full term, and had thus fully and completely performed its undei'taking so far as risk of life was concerned. In view of all the facts in the record, we think the charge of the court upon this branch of the case — namely, that there could be no i’escission unless the jury could discover some way of restoring the parties to their original situation, — was as favorable to the plaintifl as the law would warrant. Had application been made in due time for rescission, the case would have been a weak one, inasmuch as a large part of the agent’s representations must have been matter of opinion only, and inasmuch as the residue consisted of generalities, with no specification as to details and particular facts; but the application being only in the alternative, and coming at so late a day, it is still weaker, and so much out of time and manner, that it appears to us to merit little or no consideration. In Cotton States Life Ins. Co. vs. Carter, 65 Ga. 228, there were no such obstacles to a rescission as those which the present case presents. We have thus dealt with the topics appertaining to the controversy which were discussed in argument, and we think our treatment of them has been sufficiently comprehensive to take in the substance of all the material points and questions presented by the motion for a new trial. Without dealing with each of these sepa — 501 — rately, we consider them all as virtually disposed of by what we have ruled. The court committed no error in refusing a new trial. Judgment affirmed.