French v. Columbia Life & Trust Co.

Mr. Justice Harris delivered the opinion of the court. While neither, party contends that the notes given in 1913 are invalidated in their entirety by Section 4632, L. O. L., yet, before discussing the arguments advanced by the litigants, it will be necessary to determine whether the notes are affected by that statute, which reads thus: — 419 — “No life insurance company or any of its representatives doing business in this state shall make or permit any distinction or discrimination in favor of individuals between insurants of the same class and equal expectation of life in the amount of payment of premiums or rates charged for any of its policies of life or endowment insurance, or in the dividends or other benefits payable thereon, or in any other of the terms and conditions of the contracts it makes; nor shall any such company or any representative thereof make any contract of insurance, or agreement as to such contract, other than as plainly expressed in the policy issued thereon; nor shall any such company or representative pay or allow, or offer to pay or allow, as inducement to insurance, any rebate of premiums payable on the policy, or any special favor or advantage in the dividends or other benefits to accrue thereon, or any valuable consideration or inducement not specified in the policy contract of insurance. Every officer or agent of any such corporation who shall violate any of the provisions of this section shall be deemed guilty of a misdemeanor and shall be fined in any sum not exceeding $500 or imprisoned in the county jail not exceeding six months or both at the discretion of the court, with revocation of his license to do business in this state.” It is plain that the primary object of the quoted legislation is to prevent discrimination, and indeed convincing evidence of that purpose is found in the statute as passed by the legislature and as codified in Lord’s Oregon Laws, for the original act is entitled an act to amend Section 3722,. B. & 0. Code, and “to define life insurance companies, to declare what companies are subject to this act, to provide for valuation of policies and to prevent discrimination and prescribe penalties for the same * * ”; and, furthermore, the quoted section is headed, not only in the Code, but in the original act as well," by the words: “ To Prevent Discrimination.” — 420 — It is conceded that both policies would have lapsed if the insured had not executed the two notes in 1913; and therefore, if the plaintiff can recover at all, that right exists only because the notes were executed. Elizabeth French must stand upon the notes or fall with them. One note stipulates that the March policy shall “lapse and become of no further force or effect” on July 15, 1913, if James M. French fails to pay, on or before that date, the full amount of the note; and the other note provides for the termination of the May policy if the insured fails to pay the full amount of such note on July 24, 1913. If the stipulations for the termination of the policies appearing in the notes violate Section 4632, L. O. L., then the instruments are invalidated in their entirety, especially when it appears on the face of the writings that those stipulations are of the very essence of the instruments. If the statute bans the stipulation for the lapsing of the policy because the stipulation is not attached to and made a part of the policy itself, then the whole note becomes lifeless, and the plaintiff cannot recover. Although a situation might arise where the court would enforce a contract made in violation of a statute, as was done in Rideout v. Mars, 99 Miss. 199 (54 South. 801, Ann. Cas. 1913D, 770, 35 L. R. A. (N. S.) 485), still, under the circumstances presented here, there is no force in the argument that the court should gleanse the note by removing the impurities with the judicial knife, and then vouch for the success of the operation by declaring that life remains in the mutilated remnant. If the words, “nor shall any such company or any representative thereof make any contract of insurance, or agreement as to such contract, other than as plainly expressed in the policy issued thereon,” found in the statute, apply to one of the principal pro — 421 — visions of the notes, then it must follow that the notes in controversy are wholly vitiated: Guaranty Trust Co. v. Dinwiddie, 79 Or. 653 (156 Pac. 279); Fidelity Mut. Life Ins. Co. v. Price, 117 Ky. 25 (77 S. W. 384). Section 4632, L. O. L., is almost a literal exemplification of Section 656, Kentucky Statutes of 1899, and it is therefore fair to assume that the Kentucky statute, or one just like it, served as the model for our statute. In Fidelity Mut. Life Ins. Co. v. Price, 117 Ky. 25 (77 S. W. 384), the company, on April 22, 1896, issued a policy on the life of George T. Price in consideration of $217.80 and the annual payment of a like sum. Not being able to pay a renewal premium, the insured executed his note, on April 22,1900, which was made payable on August 22, 1900. Price was not able to pay the full amount of the note, and before it matured he paid the company $50 and gave a new note for the balance' of the premium, payable November 20, 1900. The note provided that if it was not paid at maturity, the policy “for which it is given shall be null and void, without notice to the maker thereof, and without any act on the part of the company, and shall remain so until restored by its terms.” The insured failed to pay the note and died on December 10, 1900. The beneficiary sought to recover on the policy. The court held that by receiving the note the company simply agreed to postpone the payment of the premium for four months, and that it would not exercise its rights of forfeiture for that period; and, when speaking of the statute which provides that no insurance company “shall make any contract of insurance or agreement as to such contract other than is plainly expressed in the policy issued thereon,” the court said: — 422 — “This clause evidently is not applicable to the facts of this case. It relates to .the time the policy was issued. If it had the effect, as contended by counsel, that the note was void and likewise its provisions, because it was not attached to the policy, the appellee could not get any benefit from the execution of the note. If it was void because it was not attached to the policy, its terms would not be binding on either party. The logic of counsel’s position would be that, as there was no valid agreement between the parties as to the extension of time for the payment of the premium, the policy was forfeited on the 20th of November, 1900, and the insured was never relieved from the forfeiture. If the contract was void, then the court would not uphold the part that was beneficial to the insured, to wit, the extension of time for the exercise of the right of forfeiture, and deny the company the right to insist upon the forfeiture upon the failure to perform that part of the contract which induced the company to extend the time for declaring the forfeiture.” The' doctrine was reaffirmed: New York Life Ins. Co. v. Meinken’s Admr. (Ky.), 81 S. W. 239; Citizens’ Ins. Co. of Missouri v. Henderson Elevator Co., 123 Ky. 478 (96 S. W. 601, 97 S. W. 810). The construction placed upon the Kentucky statute is especially significant when considered in the light of Provident Sav. Life Assur. Soc. v. Puryear’s Admr., 109 Ky. 381 (59 S. W. 15), where it was held that the statute means “that the entire contract of insurance is to be plainly expressed in the policy,” and that: < i ippg requirement that the whole contract as to life insurance should be set out in the policy was aimed, not only to prevent discriminations and rebates, but all the evils growing out of uncertainty in these contracts, and the imposition which otherwise might be practiced. * * The purpose of the legislature was that the assured might know from his policy what his contract was, and that contracts not contained in the — 423 — policy, or written upon the hack of it or attached to it, should not he considered, in order to avoid imposition by agents eager to earn commissions, and to avoid the litigation incident thereto after the death of the assured, when his tongue had been forever silenced, and any explanation he might have made could not be told.” N Assuming that our statute had its origin in the Kentucky legislation, then it follows that we also adopted the construction put upon that legislation by the courts of Kentucky, and, applying the judicial construction of that state, the notes are not prohibited by Section 4632, L. O. L., and, moreover, the giving of the notes did not contravene the expressed purpose of the statute, because the payments to be made by the insured were not reduced in amount or rates, and no discrimination was worked out by the notes. The execution of the renewal premium notes with the provision for the termination of the policies did not constitute an agreement to waive the right of forfeiture nor relieve the insured from the obligation to pay. The parties simply agreed to postpone the time for the payment of a single premium, and that during the extension period the insurer would not exercise its right of forfeiture. As was said in Occidental Life Ins. Co. v. Jacobson, 15 Ariz. 242 (137 Pac. 869): “Where a forfeiture for the nonpayment of premium notes is provided for, either in the policy or the note, and the facts do not show any subsequent agreement or conduct which amount to a waiver of such provision by the insurer, the giving of the note must be regarded as merely postponing the time for the payment, and not as a payment of the premium. ’ ’ Our statute is also similar to legislation enacted in the states of Massachusetts, New York, Mississippi and Texas: Section 68, c. 118, Rev. Laws Mass. 1902; — 424 — Section 89, c. 28, Consol. Laws New York 1909; Section 2600, Miss. Code 1906; Rideout v. Mars, 99 Miss. 199 (54 South. 801, Ann. Cas. 1913B, 770, 35 L. R. A. (N. S.) 485; Art. 4954, Rev. Stats. Tex. 1911. Referring to the Texas statute it was held in Amarillo Mut. Life Ins. Co. v. Brown (Tex. Civ. App.), 166 S. W. 658, 666: “We are not prone to believe that the provisions of the statutes were intended to prevent an extension of credit, where insurance companies thought it expedient to do so, in payment of premiums for such contracts. * * We are not inclined to think that these statutes contemplated a well-known method pursued by insurance companies was to be prohibited to them in the conduct of their business.” ■ Most of the adjudications coming to our notice, when speaking of the statute, either concede or expressly hold that the legislation was not designed to prevent the making of notes like the ones involved here. The expressed purpose of the statute itself, the judicial construction given to a statute which appears to have served as the model for our legislation, and the references of other courts to similar laws, all combine to support the conclusion that Section 4632, L. O. L., does not prohibit the notes given in 1913. The policies declare that “agents are not authorized to make, alter or discharge contracts, or to waive forfeitures, or to waive or postpone payment of premiums”; and it has been argued that this provision in the policies affects the notes and also the claims of waiver. ' The persons who represented the company when the notes were accepted were more than mere agents to secure insurance. One was the secretary and actuary of the company, and S. P. Lockwood was vice-president and “general manager of the company’s business in all departments.” Both were also directors. Neither — 425 — was a mere titular officer, but both were active and real representatives of the company. The notes were received by the defendant and were entered upon its books. The company demanded payment of the earned portion of the notes; and, moreover, the insurer has never contended, and does not now urge, that its officers were without authority to receive the notes; nor does the defendant even suggest that any act done, or alleged to have been done, by either Johnson or Lockwood was beyond the scope of his authority. The situation is not at all analogous to cases like Wilson v. Investment Company, 80 Or. 233 (156 Pac. 249), where nothing more is shown than the single fact that a person is the president of a corporation. The company cannot disavow the notes because the negotiations were conducted by Johnson and Lockwood, or either of them; nor can the defendant avoid the consequences of a waiver if the acts of the secretary or general manager are sufficient to effect a waiver: Amarillo Mut. Life Ins. Co. v. Brown (Tex. Civ. App.), 166 S. W. 658. Having concluded that the notes are not prohibited by Section 4632, L. O. L., and that the corporation is bound by the acts of its representatives Johnson and Lockwood, attention will now be directed to the contentions made by the litigants. The defendant alleges that both policies had lapsed before James M. French died. The company argues that by the express terms of the notes the policies terminated in July, 1913, for the reason that the insured failed to pay the notes when they matured. The position taken by the defendant is assailed by the plaintiff from four different angles: (1) She claims that the premiums were paid by the execution of the notes; (2) she argues that the provisions for the forfeiture of the policies, found in the notes, create new contracts which do not bind the beneficiaries because not assented to — 426 — by them; (3) she insists that the company waived its right to claim a forfeiture; and (4) she asserts that the insurer agreed to extend the time for payment of the notes. In support of the allegation of payment the plaintiff claims that since the insured owed no pre-existing debt, the mere fact that he executed the notes raises a presumption that they were given in payment of the premiums, and that therefore the notes must necessarily be regarded as payments, unless the parties expressly agreed to the contrary; that the letter of June 24, 1913, conclusively shows payment; and that the letter of November 12, 1913, confirms this theory. When the insured signed the note dated April 10, 1913, he received the official- receipt already mentioned, and it will be assumed that he also received a letter like the one dated June 24, 1913, although it is not certain that he received any letter concerning the April note. Assuming, however, that he did receive a letter, the transaction would involve the note, the receipt" and the letter. The note explains that it is given on account of the renewal premium, and it expressly states that failure to pay the full sum of $170.13 on July 15, 1913, will cause the policy to lapse on that day and immediately make the note payable “to the extent of so much thereof as may be required to cover the pro rata premium” to the date of the cancellation of the policy. The note only obligates him to pay the pro rata part of $170.13 up to July 15,1913. It is true that the writing says that the maker promises to pay $170.13, but it is also true that the note nowhere states that the full sum of $170.13 shall, at any time, “become due and payable.” The maker has the option of paying the full sum, but he is not obliged to pay the whole amount, and the only penalty for — 427 — failure to pay $170.13, is the lapsing of the policy and an obligation to pay a pro rata part of the note. The receipt contains an interlineation couched in this "unambiguous language: “Subject to note given in payment hereof”; and this is the receipt mentioned in the letter if one was written in April, 1913. The note dated June 24, 1913, except as to the attorneys’ fees, was like the April note. The interlineation in the receipt reads that it is “given in accordance with the note dated June 24, 1913”; and the letter of that date acknowledges the remittance. In each instance, the note, receipt and letter must be considered together; and, when so viewed, it is impossible to strain or warp or even torture the language into an admission that the premium has been paid. Nor does the letter of November 12, 1913, even tend in the slightest degree to show that the company received the notes as payments of the premiums. At that time the company owned three notes signed by the insured, and upon each of which money was due. The note dated July '22, 1912, and given in payment of the initial premium on the May policy, was wholly due except a payment of $62.50 made on June 11, 1913, a pro rata portion of the April 10, 1913, note was due and a proportionate part of the June 24, 1913, note was likewise due, and therefore the company correctly advised the maker of those notes when it said that “we hold several notes signed by you, which are long past due.” In that letter the defendant says that the policies both lapsed because the notes were not paid, and then the insured is informed that “the policies may be reinstated provided you are in good health by the furnishing of a health certificate and by paying up the premium.” Every statement contained in this letter is consistent with the contention of the company that it was only — 428 — asserting that a pro rata part was due on the 1913 notes; and, moreover, not a single sentence or phrase can be found in the writing which even intimates that the company regarded the notes as payment of the renewal premiums. All the writings which were made at the time the 1913 notes were executed demonstrate, when considered together, that the parties did not regard the delivery of the notes as payment of the premiums. The plaintiff argues that the beneficiaries “have the right to insist that their policies shall not be forfeited, except as prescribed by the terms of the policies themselves.” The policies did not contain any agreement for a forfeiture in case of failure to pay a premium note, and the contention is that the beneficiary is not bound by a forfeiture clause appearing in the notes. The language employed in Fidelity Life Ins. Co. v. Price, 117 Ky. 25 (77 S. W. 389), completely answers the plaintiff: ‘£ The parties had the same right to agree to the extension of the time for the payment of the premium and the setting forward of the time of forfeiture as they had to enter into the original contract of insurance. The beneficiary named in the policy had no vested rights in it, because it is expressly provided therein that the insured may change the beneficiary by the surrender of the policy. Besides, under the express terms of the policy, if the beneficiary was not changed, she did not have any rights under it, unless the premiums were actually paid.” If the plaintiff has any rights at all, they are preserved by the notes, and, unless waived, the same provisions which-preserve those rights also measure them. It makes no difference whether the policy or the note alone contains the provision for the forfeiture of the policy if the premium note is not paid; in either event — 429 — the giving of the note is regarded only as a postponement of the time for payment and not as a payment of the premium; and, unless a forfeiture is prevented by a waiver, or is otherwise defeated, a failure to comply with the terms of the notes will terminate the policy: Occidental Life Ins. Co. v. Jacobson, 15 Ariz. 242 (137 Pac. 869, 870); Security Life & Annuity Co. v. Underwood (Tex. Civ. App.), 150 S. W. 293; Ressler v. Fidelity Mut. Life Ins. Co., 110 Tenn. 411 (75 S. W. 735); Fidelity Mut. Life Ins. Co. v. Price, 117 Ky. 25 (77 S. W. 384); Sharpe v. New York Life Ins. Co., 5 Neb. (Unof.) 278 (98 N. W. 66); Banholzer v. New York Life Ins. Co., 74 Minn. 387 (77 N. W. 295, 78 N. W. 244). The question of waiver and the claim that the company agreed to extend the time for the payment of the two 1913 notes may be considered together. At the very outset it must be conceded that forfeitures are not favored by courts, and that sometimes slight circumstances will be taken advantage of to avoid a forfeiture; but it must likewise be admitted that a forfeiture cannot be prevented unless warranted by evidence. The contention that there was an agreement for an extension grows out of the sale of 500 shares of stock of the Johnson Bradford Safe Company for $5,000 to one Oswell by E. P. Troeh, who was to receive a commission for the sale. Oswell gave two $2,500 notes, one of which was paid in June, 1913, and the second was liquidated on November 28, 1913. James M. French had introduced Troeh to Oswell, and on that account, when the first note was paid, Troeh divided his commission by giving $125 to French, who in turn divided that amount with another, so that French ultimately received only $62.50; and this is evidently the $62.50 which, on June 11, — 430 — 1913, was indorsed on the July 22, 1912, note held by the defendant. It is argued that French and the company agreed that when Oswell paid his second note and French received his part of the commission it would be paid to the company, in consideration of which it was understood that the time for the payment of the 1913 notes would be extended. The truth is that Edwin Lindstedt, who was a business associate of French, has claimed that he was entitled to half of the $125 commission; but, even though it be assumed that the whole sum of $125, when paid, would have belonged to James M. French, and that he agreed to pay the $125 to the defendant whenever he received the commission, still it would amount to nothing more than proof that French agreed to pay a debt which he owed in any event. The balance due on the July 22, 1912, note was $107.63; $58.59 was the earned portion of the April 10, 1913, note, and the pro rata part of the June 24, 1913, note for the period commencing May 24th of that year and ending on July 24th following was $28.35; and therefore his indebtedness on the three notes held by the company was $194.57, even on the theory that one policy was canceled on July 15, 1913, and the other annulled on July 24th following. If the whole sum of $125 had been paid to the defendant ott November 28, 1913, the date when the second Oswell note for $2,500 was paid, French still would have been indebted for premiums previously earned by policies which were then lapsed. It is difficult to understand how an agreement to pay the $125 even tends to show that the insurer stipulated for an extension of time, particularly in the light of the letter of November 12,1913, where it is expressly stated that the policies had lapsed. The parties agreed in plain language that if the notes were not paid on maturity, — 431 — the policies would immediately lapse without notice or other action on the part of the insurer, with the result that the obligation of the signer of the notes was limited to the pro rata part of the notes. Proof that the company demanded the earned portions of the notes cannot be considered as evidence of a waiver. If there was any evidence tending to show that the company demanded the payment of the $170.13, the whole amount of the note, or in some way treated the renewal premium notes as obligations for the entire amount of the annual premiums, then there would be some foundation for the claim of a waiver. If, however, the company treated the notes as obligations for the pro rata portions, and only demanded the pro rata amounts earned on the premiums, and did nothing more, then the claim of waiver falls. The record may be searched from the beginning to the end, and it will be found that every act of the defendant is in complete harmony with the agreement evidenced by the note. In the case of each policy, the note, the receipt, the letter, the entries on the card and in the premium journal, and the letter of November 12, 1913, speak out in unmistakable terms with all the unwavering certainty of truth, and demonstrate that the parties agreed that the policies would terminate, one on July 15th and the other on July 24th. Both the insurer and the insured treated the policies as lapsed after July 24th; the company only claimed the pro rata portions of the 1913 notes, and no demand was made at any time for the full face of the notes, and neither note was, at any time, treated as a binding obligation for the full sum of $170.13. The company did not carry either note as an asset for more than the pro rata portion, although the premium journal and the card contained the entries already — 432 — mentioned. The notice mailed to James M. French-on February 21, 1914, by a clerk of the defendant cannot avail the plaintiff. The notice was mailed in the course of routine business after the death of the addressee, and long after the company knew of the death. Nor does .the delay in entering the policies on the books as lapsed aid the plaintiff: Ashbrook v. Phoenix Mut. Ins. Co., 94 Mo. 72 (6 S. W. 462). There is no evidence to support a finding that there was an agreement to extend the time for the payment of the notes, and there is likewise a lack of evidence to sustain the claim of waiver, and therefore the judgment should be affirmed. Aeeirmed. Mr. Justice Eakin absent.