Matlack v. Mutual Life Insurance

Opinion by Mr. Justice Fell, We find nothing in the testimony in this case to sustain the conclusion that there was a conspiracy to deprive the plaintiff of the benefit of the insurance on her husband’s life, and nothing on which a finding of fraud can rest. All of the persons who in 1869 took part in the transaction now under investigation, except the plaintiff, are dead, and her knowledge of it is limited to the signing of a transfer of the policy. We are left mainly to inference in determining the intentions of the parties and the means employed to carry them out. The transaction in its inception was not an unusual one, and there is nothing in the manner in which it was subsequently carried out to give rise to a suspicion of unfair dealing or of intentional wrong. If we confine our view to the occurrences of April 18, 1869, when the plaintiff’s policy was surrendered and a new policy was issued to her husband and assigned by him to the bank, there is ground for the conclusion of the learned master. This however is only a partial view of the transaction, and a very imperfect one. We should start with the occurrences of February 16, when the assignment from her was procured. On that day the Seventh National Bank held the note of her husband, [385] George D. G. Matlack, for $1,278.83, dated January 28, 1869, at four months, and he induced her to assign to the bank as collateral a policy of insurance on his life for her benefit, issued by the Mutual Life Insurance Company of New York. The purpose of the assignment was evidently to secure his note held by the bank and to enable him to obtain additional loans. On February 19 the bank discounted for him a note for $500. The entry in his bank book shows that collateral was given with this note. What was done by him and the officers of the bank with reference to the assignment could not be shown, because of the death of all the parties. The policy had been delivered to him by the plaintiff on February 16, and it was afterward with his papers at the bank. The most reasonable supposition, and one entirely consistent "with the established facts, is that the bank discounted the last note under the belief that the assignment was valid, and returned the assigned policy to him when it was learned that it was ineffectual to transfer his wife’s interest. When the next quarterly premium on the policy fell due, April 18, 1869, it was not paid, and the policy lapsed. A new policy was issued, payable to the executors, administrators or assigns of Matlack, and this policy he assigned to the bank. The strongest assumption against the defendants which it is possible to draw from the testimony is that the premium due April 18 was left unpaid, with the design that the policy should lapse and a new policy which could be transferred should be issued. We cannot leap from this assumption to the conclusion that a moral wrong was contemplated and an undue advantage taken' without ignoring the real intent and purpose of the parties. The plaintiff had already divested herself as effectually as she could of all interest in the policy, and transferred it to the bank to aid her husband in his business affairs, and this arrangement did nothing more than carry out in another form the agreement that the bank was to have the policy as security, to which she had expressly assented by signing the transfer. It was apparently the means adopted after the insurance company had refused to recognize the transfer or it had been found invalid for purely legal reasons, to give effect to the intention of the parties. The bank got only what the plaintiff had agreed that it should have, and the insurance company acted with liberality in doing what it was not required to do, and what it could [386] have no other motive for doing than to protect the interests of the insured. In looking back at this transaction after twenty-four years it must be remembered that at the time Matlack was bankrupt. He was unable to pay his notes or to pay the premium on his policy, and neither the bank nor the insurance company had the slightest notice of the claim now set up, that the assignment was procured by means of threats and coercion. When however the plaintiff’s policy was forfeited for nonpayment of the quarterly payment due April 18, there was to the credit of the policy an amount of reversionary insurance, the cash value of which was more than sufficient to pay the premium then due. This reversionary interest had at her request or that of her husband been applied by the company to the payment of premiums for two years immediately preceding the forfeiture. Under the ruling of this court in Girard Life Ins. Co. v. Mutual Life Ins. Co., 97 Pa. 15, the insurance company could not under the circumstances forfeit the policy, and the forfeiture cannot now be sustained. The assignment, whether valid or not, was not used to divest her interest, and the forfeiture was ineffectual to do so. The second policy bore the same number and was for the same amount and at the same rate of premium as the first, and it was in part purchased by the use of the reversionary insurance that stood to the credit of the first policy. We agree with the learned master that this policy was a substitute for the first policy, and that having been received by the bank with knowledge of that fact it was impressed with a trust in favor of the plaintiff. Is the bank entitled to credit for the premiums paid? For twenty-four years it paid the premiums and preserved the policy. These premiums were paid in good faith, in reliance on its title, and without notice of the claim that the plaintiff now sets up, that the assignment was improperly procured. During the . whole of this time she knew that if the policy was still in force it was by reason of the payments made by the bank, and for six years before her husband’s death she knew exactly what had been done in relation to the policy, and why it had been done, and she remained silent. To permit her now to take the whole fund would be grossly inequitable. It is not the case of payment by a volunteer having no claim or color of interest, nor by one who used his money in an attempt to carry out a scheme [387] of fraud and should be denied repayment of the money so expended. It is the case of payments made in good faith under belief of ownership of the policy as collateral and for the joint benefit of the holder and the beneficiary. The equity of the bank is certainly as clear as was that of the holder of the policy in McCutcheon’s Appeal, 99 Pa. 138, who was held to be entitled to a return of the premiums paid by him. In Downey v. Hoffer, 110 Pa. 109, and Ruth v. Katterman, 112 Pa. 251, the holders of wagering policies were allowed to retain the amounts paid by them to keep the policies alive. We are of opinion that the learned master was correct in his first finding upon this subject, and that the decree recommended in his first report should be entered against both defendants, and that the costs should be borne equally by the plaintiff and the defendants. With this modification the decree is affirmed. And now, March 22, 1897, it is ordered, adjudged and decreed that the Seventh National Bank of Philadelphia do pay to Theodosia Matlack the sum of $5,036 with interest from March 15, 1893, less the sum of $1,574.58 with interest thereon averaged during the periods that this amount was paid by the said Seventh National Bank as premiums; and that the Mutual Life Insurance Company of New York pay to the said Theodosia Matlack a like sum, this decree to be marked satisfied upon the receipt by the plaintiff from either of the parties defendant of the sum herein named, the costs to be paid one half by the plaintiff and one half by the defendants.