Knights Templars & Masons Life Indemnity Co. v. Vail

Mr. Presiding Justice Waterman delivered the opinion of the court. It is manifest that in preparing the form of bond issued in this case by the company to the assured, pains were not taken to have it correspond in all respects with the constitution of the company. The policy of membership issued to the assured provided that he should receive a bond, bearing three per cent annual interest on his proportion of the surplus, which bond should be available at any time without notice in payment of assessments as set forth in article 7, section 3 of the constitution on the back of the policy. The constitution did not provide that the bond could be used only upon surrender of the same; neither did it provide that if the policy were forfeited, the bond should be likewise; neither did it provide that the bond should not be negotiable or transferable, or that it should be available for no purpose other than that expressed in the bond (which was for use in the payment of assessments), provided it were first surrendered to and in the possession of the company for cancellation. Forfeitures are not favored by the law; indeed, it is sometimes said they are so odious that courts will resort to all reasonable methods of interpretation and proceeding for the purpose of avoiding a forfeiture. The constitution provides that the bond can be used at par and accrued interest at any time, without notice, in payment of assessments, and that if unused it shall be payable with the policy at the death of the insured. It is neither a strained nor forced construction of the constitution to say that its provision is that the bond can be used in payment of assessments, either by the company or by the assured. Especially is this the case, when the bond has been, without having been so required by the constitution, made nontransferable and non-negotiable, and if unused, is payable with the policy at the death of the assured. The company thus has in its hands means for completely protecting itself. If all or a portion of the bond be by it used in payment of assessments, without the request of the assured and ivithout a surrender or cancellation of the same, as the bond is non-transferable and not negotiable, and payable only at the death of the assured, when after such death presented, the company can readily show, if such be the case, that all or a portion thereof has been used in payment of assessments. The fact that the bond was received and retained by the assured without protest against the conditions imposed therein, not contained in the constitution, did not constitute a contract upon his part to a change in the conditions of his policy, which were that he was to receive a bond in accordance with the constitution. It is urged by appellant that the company could not make use of the funds in its hands belonging to the assured, represented by the bond, in payment of assessments, without his request that it so do. In Girard Life Ins. Co., Adm’r of Ed. McGarge, v. Mutual Life Insurance Co. of New York, 97 Pa. St., p. 15, the court say: “ It is quite possible there may be facts which in the judgment of the officers of the defendant company justified them in declaring the policy forfeited' in this case, yet we are constrained to say that it is inequitable and against the policy of the law to permit an insurance company to forfeit a life policy for non-payment of a premium, when such company has in its possession the money of the assured to an amount covering the premium, and which it has the power to apply to its payment.” And in the same case the court say, upon the question of whether the assured consented to such application, “ as a matter of fact, the consent of the assured to the application may be presumed; that he would object to it and thereby forfeit his policy is a proposition too absurd to be considered.” We see no reason why the instrument issued to the assured representing his interest in a surplus should not be designated as a bond. The instrument to be issued under the terms of the constitution is twice mentioned in it as a bond and the' paper actually received by the assured is therein spoken of, eight times, as a bond. No additional efficacy is imparted to it by calling it a bond. It provides conditionally for the payment of a sum certain and is under seal. If it were called a simplex óbligatio, which it is not, it would have no more force than if designated as a paper representing a credit. Being of the opinion that the bond might have been by the company used in payment of assessments without request of or surrender by the assured, we find that there was no warrant for the forfeiture of the policy. The judgment of the Superior Court is therefore affirmed. The foregoing is the conclusion of a majority of the court in which the writer of this opinion does not concur; he being of the opinion that the provision in the” bond that it should be used in payment of assessments only when surrendered to the company and thus necessarily only upon the application of the assured, without such application and surrender, the company had no right to use it in payment of assessments. The decision of the majority of the court is in effect a holding that all the policies of this very large company, with its thousands of members, are subject to the rule here announced, that the company must in every instance before forfeiture make use of the amount owing upon such bonds in payment of assessments, although they be not surrendered and no request for such application be made. Whether such bonds payable with the policy, or the sums represented by such bonds at the death of the assured belong to the beneficiary named in the policy, or descend to the heirs of the assured, or may be by him devised, is a question not now presented to this court. It is manifest that such bonds, issued as they are to be, each ten vears, may in many instances amount to a very considerable sum, nearly, if not quite, equaling the policy itself. If the company as a condition before forfeiture is obliged without request by the assured and without surrender of the bond to apply the credit represented thereby to the payment of assessments, it may, in after time, find itself seriously involved by contention between the heirs or devisees of persons assured and the beneficiaries named in the policies. - It is not the case that parties holding life insurance policies are never willing to let the forfeiture occur. On the contrary the experience of all life insurance companies is that the great majority of those who take out life policies permit them to lapse and in many cases apply for a surrender. Nor is the question presented in this case, whether the clause in the bond providing that if the policy be forfeited, the bond shall likewise be forfeited and void, is, under the constitution, a valid and binding condition. Nor is such question determined by the judgment in this case. I should be glad to see a way in which, in consistence with the plain and reasonable provisions of the bond that it should be applied in payment of assessments only upon a surrender thereof by the assured, such -provision can, under the law, be held to be of no effect, and the judgment in thisc ase affirmed.