Sommer v. New England Mutual Life Insurance

Opinion by William W. Porter, J., Jacob H. Sommer signed a paper in this form: “ The New England Mutual Life Insurance Company. “ Philadelphia, January 21, 1878. “ For value received, I hereby assign all my right, title and interest in policy No. 59934, issued by the New England Mutual Life Insurance Company, of Boston, Mass., to Andrew Sommer as collateral security, for the amount of his demands subsisting against me at my decease, as creditor, surplus, if any, for the benefit of my estate. “ Jacob H. Sommer.” The company indorsed on the assignment this: “ Assented to, to take effect subject to the rights of all parties interested.” Andrew Sommer is dead.. This suit is brought by the executor of his will against the insurance company to compel payment of certain surplus funds already paid by the company to Jacob H. Sommer who is still living. The question is : Were the payments rightly made to Sommer (the insured) or did the right to [503] them pass to Sommer (the assignee of the polio]7) under the assignment above quoted ? It does not appear that the payments in any way impaired or detracted from the face value of the policy. They represented increment or earnings accruing from time to time. The court below seems finally to have reached the conclusion that the payments were wrongfully made to the insured. The opinion filed seems to be wholly grounded upon the assumption or assertion that the first clause of the assignment carried all property rights in the policy which might arise, to the assignee. This construction cannot be sustained. The assignment is not absolute. The policy is to be held as “ collateral security.” It is not collateral to any existing debt of the insured. It is not collateral so long as he lives, to any indebtedness he may in future create. The right of the assignee is to hold the policy until the death of the insured. Then, if the insured shall die in debt to the assignee, the latter may assert the right to deal with the policy as a security for the “ amount of his demands then subsisting.” He may then first deal with the policy or its proceeds as a collateral to, or as taken in discharge of, the debt (if any) which shall exist at the death of the insured. While the insured lives no other right passes to the assignee than to hold the policy to cover a debt which may or may not ever be created. The existence of a debt during the life of the insured did not have the effect of making the policy a collateral for such debt. It requires the happening of two conditions to vest in the assignee a right to deal with the policy beyond its mere retention. First, the death of the insured; second, a subsisting debt by the insured to the assignee, at the decease of the insured. If this be the extent of the assignee’s right, none can exist in him to demand the increment or earnings of the policy, accruing while the insured still lives and while the fact that he will die in debt is unascertainable. To permit the assignee to take the money would be to approve his application of it either to his own use or to a debt (living the insured) which the policy was not assigned to secure or to permit him to presently take it for possible future application to a debt which may never exist within the terms of the assignment. Judgment is reversed and judgment, under the terms of the case stated, is now entered for the defendant.