Dungan v. Mutual Benefit Life Insurance

Alvey, J., delivered the opinion of the Court. We have had this controversy before us on a former occasion. It was then in the form of an action of trover for the alleged conversion of the policy of insurance, 38 Md., 242. That action resulted adversely to the plaintiff; and immediately upon the decision of that case, the present bill was filed. In the former case, this Court decided that the assignment of the policy by Dungan and wife to Webb was not a pledge, and that, consequently, they had not at the time of the alleged conversion and suit brought, the interest and title of bailors, so as to enable them to maintain an a'ction of trover for the conversion of the policy. We expressly refrained, however, from intimating any opinion as to the rights and liabilities of the parties in a different form of action or proceeding. The policy of insurance on the life of Francis D. Dungan was issued by the defendants on the 17th of June, 1861, to and for the benefit of Mrs. Elizabeth W. Dungan, the wife of the said Francis D., for the sum of $5,000 ; and which policy contains an express agreement on the part of the defendants that, in consideration of the representations made in the application, and of the sum of $245 to them paid by the assured, and of the like sum to be annually paid on the particular day mentioned, during the continuance of the policy, they would well and truly pay or cause to be — 488 — paid, “the said sum insured to the said Elizabeth W. Dungan, or assigns, within ninety days after due notice and proof of the death of the said Francis D. Dungan.” It was also expressly stipulated that in the event of nonpayment of any premium on the day named for its payment, the policy, with all previous payments thereon, and also all interest in profits, should be forfeited to the company. This policy appears to have been issued upon the cancellation of a policy issued by the defendants in 1852, on the life of Francis D. Dungan, for the benefit of a former wife, for $5,000, and which policy was kept alive by the regular payment of premiums until it was can-celled, and the policy of the 17th of June, 1861, substituted in its stead. At the time of issuing this latter policy William P. Webb was the agent of the defendants in Baltimore, and through whom the policy was obtained. For the purpose of paying the cash part of the premium due on the 17th of June, 1862, Webb, the agent, loaned Dungan and wife the money, and took their note at four months, for $220.25. The cash part of the premium was then paid, and a note given for the residue; and this was the last premium that was ever paid by either Dungan or his wife. Webb, at the time of taking the note for the money loaned, took an assignment of the policy, under the hands and seals of Dungan and his wife, and which assignment is as follows: “ For value received, we do hereby assign, transfer and set over unto Wm. P. Webb, his heirs or assigns, the above named policy of insurance, and all sum or sums of money, interest, benefit and advantage whatsover, now due or hereafter to arise, or to be had or made by virtue thereof, to have and to hold unto the said Wm. P. Webb, his heirs or assigns.” And at time of the making of this assignment, Webb executed the following receipt and defeasance: “Received of Mrs. E. W. Dungan and Mr. F. D. Dungan, assignment of policy No. 9238, in the Mutual Benefit Life Insurance.Company — 489 — of N. J., life of F. D. Dungan, as security for the prompt payment at maturity of their note, at four months from date, amounting to two hundred and twenty T2„50 dollars; said assignment to be null and void upon the payment of said note at its maturity, otherwise to continue for sole use of Wm. P. Webb." These papers all bear date the 17th of June, 1862. The note given to Webb was not paid at maturity, and, indeed, has never been paid, and consequently the policy was not redeemed ; and Webb, as assignee, paid the premiums as they fell due in 1863, 1864 and 1865 ; and on the 28th of November, 1865, he surrendered the policy to the company, for which he received its reserve value, amounting at that time to $1,248.51. Mrs. Dungan, the assured, died in August, 1868, and Mr. Dungan, upon whose life the policy was taken, died in April, 1870. Mrs. Dungan died intestate, and letters of administration upon her estate were not obtained by the plaintiff until December, 1871. The present application proceeds upon the theory that the assignment and receipt or defeasance before cited, when taken together, constitute a mortgage to secure the payment ef the note for $220.25, and that there has been no such foreclosure as to preclude the plaintiff the right to redeem the policy, and, under the peculiar circumstances of the case, to recover the amount of the insurance as if the policy subsisted in full force at the death of Francis D. Dungan ; and, accordingly, the plaintiff not only seeks to redeem the policy, but to recover the amount thereof, less the amount of unpaid premiums and interest, due the company, and the amount of the note with interest due Webb, together with the premiums paid by him while he held the policy as assignee. This claim of the plaintiff is controverted by the defendants in all the aspects in which it has been presented; and there has been considerable evidence adduced to show the circumstances of the transac — 490 — tion, and the manner in which the parties concerned dealt with each other in regard to the policy after it was assigned to Webb. This evidence is, in some material particulars, conflicting ; but it gives rise to questions of the want of good faith and fair dealing on the part of Webb and the defendants, in respect to the right of the assured to redeem the policy while held by Webb, and before its surrender to the company. We have held in the former case that the assignment ' and the receipt or defeasance are to be taken together as the evidence of the contract between the parties, and the character of that contract is to be determined from the manifest intention of the parties thus evidenced. Any agreement in the assignment, or in the separate instrument, showing that the parties intended the assignment to operate as a security for the repayment of money, is all that is' necessary to make it a mortgage, and such an agreement is plainly apparent on the face of the defeasance before recited ; and when it is once ascertained that the assignment is to be considered and treated as a mortgage, then all the consequences appertaining in equity to a mortgage must be strictly observed, and the right of redemption is regarded as an inseparable incident. Jaques vs. Weeks, 7 Watts, 261. And, as a general proposition, an agreement, at the time of the loan, to purchase or take the estate at a given price, in case of default, is not permitted to interfere with the right of redemption ; the Court looking at the real contract, which is but a security for the debt, treats the time mentioned for redemption as only a formal part of the instrument, and thus makes the general intention override the words of the particular stipulation. Hipwell vs. Knight, 1 Y. & Coll. Ex. Cas., 415, 416. Indeed it may be stated as a rule never to be transgressed, that a mortgagor cannot, by any contract entered into with the mortgagee at the time of the mortgage, give up his right of redemption, or fetter it in any manner by confin — 491 — ing it to a particular time, or to a particular description of persons. This proposition is abundantly supported by decided cases, which are collected in the notes to the leading case of Howard vs. Harris, 3 Eq. L. Cas., 605, 606, and 625, 6-7. It is clear, therefore, that, notwithstanding the express terms of the defeasance, that in default of payment of the note at maturity, the policy was to continue for the sole use of the mortgagee, the right of redemption was not thereby defeated after the day of payment. Policies of insurance on life, as well as stocks and personal annuities, are not only assignable but proper subjects of mortgage ; and if accompanied by an actual transfer, the mortgagee may, after default and due notice to the mortgagor to redeem, proceed to sell, without the trouble and delay of bringing a bill to foreclose ; and in such case the title, if the sale be bona fide made, will vest absolutely in the vendee. Dyson vs. Morris, 1 Hare, 413, 425 ; Tucker vs. Wilson, 1 P. Wms., 261; Hart vs. Ten Eyck, 2 John. Ch. R., 100 ; 2 Sto. Eq. Jur., sec. 1031. Rut in case of a mortgage, or assignment of a policy of life insurance as collateral security for a debt, with right of redemption, the assured is not relieved from the obligation to pay the premiums in order to keep the policy alive, according to the requirement of the contract of insurance, unless it be by some arrangement between the company and the mortgagee; nor is the mortgagee bound, in the absence of some agreement with the mortgagor to that effect, to keep the policy alive and subsisting, by the payment of the premiums as they may accrue due. He may be prompted by his interest to keep the security alive and in an available condition ; but if he pays the premiums while he is the holder of the policy, he pays them on the faith of the policy as a security for reimbursement; but such payment in no way changes the nature of the security itself, — that is to say, such payment in no manner destroys the right of redemption. — 492 — Here the right of redemption is insisted upon, and it is not pretended,that the assured was, hy any arrangement or agreement, relieved from the payment of the premiums as required hy the terms of the policy, Webb did not assume to pay the premiums while holding the policy as mere collateral security. He accepted the assignment simply as security for the payment of the note which matured at four months from its date, and within the time whiclr the policy would subsist by reason of the last premium paid. Upon what principle, then, can the present claim he maintained, — the assured herself having failed to pay the premiums after the 17th of June, 1862, and there being no premiums paid by any one after the 17th of June, 1865. There seems to he a want of harmony in the authorities as to the real and true nature of the contract of insurance, such as that contained in the policy before us. By some it is maintained, and with great show of reason, that the insured, upon the payment of the first premium, effects an insurance upon the particular life only for one .year, or until the next premium day, and purchases a right to continue that insurance from year to-year, during the life insured, at the same rate, leaving it optional with the assured whether to renew or continue the policy or not, and thus making the payment of the premiums a condition -precedent to any subsequent liability on the part of the > insurers. This view of the subject is strongly maintained hy the Supreme Court of Connecticut, in the recent case of Worthington vs. The Charter Oak Life Ins. Co., 41 Conn., 372. While on the other hand, a majority of the Supreme Court of the United States have held, in the case of The New York Life Ins. Co. vs. Statham, 3 Otto, 24, that j the contract is an entire contract of assurance for life, sub- J ject .to discontinuance and forfeiture for non-payment of any of the stipulated premiums, and thus the payment of | the premiums is made a condition subsequent. But, according to either view of the subject, it is certainly true that — 493 — exactness and promptitude of payment are all-important to the success of the business of life insurance companies. Without promptness in the payment of premiums all the calculations of the company are liable to be deranged and disappointed. This would work detriment and loss not only to the company hut to its policy-holders generally; and nothing would more certainly destroy all confidence in the company than an understanding that parties dealing with it were not required to observe with strictness the terms of their contracts. Such strict observance is essential to the very nature of the business, and it is the general understanding that time is of the essence of the contract. From this view of the requirements of the contract, it is clear that, in order to maintain the position of the plaintiff in this case, it is necessary to show by satisfactory evidence, that the assured, while it is admitted she did not pay the premiums, did that which was equivalent to actual payment; that is to say, that she tendered payment of them as they became due. But in this we think the plaintiff has faijed. The evidence of the tender of the premiums due the 17th of June, 1863, is not in all respects satisfactory; and it is explicitly denied by Webb, the agent. But, conceding the tender to have been then made to Webb, the defendant’s agent, as contended by- the plaintiff, it becomes immaterial in the present aspect of the case, inasmuch as Webb, as assignee, did, in fact pay the premium, and continued to pay it for the years 1864 and 1865, and thus kept the policy alive, subject to the right of redemption, upon.payment of the mortgage debt, and the premiums advanced for the preservation of the security. It is not pretended that there was any tender of the mortgage debt to Wehh at that time, or at any subsequent time. Indeed, the witness admits that he did not know at the. time that, the. policy.had been, assigned ta Webb,. o,r — 494 — that he had any claim to hold it. So if the premium then due had been received from the witness it would only have relieved Wehh from the necessity of advancing the premium? and not in any manner restored the policy to the control of the assured. After young Dungan’s interview with Wehh in June 1863, there was no further steps taken on the part of the assyired in reference to the policy until September 1865, when, distrusting the representations of Webb as to what hq-d been done with the policy, inquiry was made in regard to the matter at the home office of the defendants. At that time the policy was still alive and subsisting, and would so continue until June 17th, 1866. And theassured was so informed by the officers of the defendants. The correspondence that ensued, and before the policy was surrendered by Webb, between the attorney of the assured and the president of the insurance company, had reference to the claim and demand of Wehh, — the defendants at the time having no interest in the policy other than mere insurers. Mr. Grover, the president, by his letter of the 6th of November 1865, informed Mrs. Dungan’s attorney of the claim of Webb, and the terms upon which he, Webb, was willing to re-transfer the policy. The president did not, in that lettér, profess to he acting in the interest of the company, but only as he was authorized to speak for Wehh as the holder of the policy. It was not until December 12th, 1865, that the president of the'company communicated the fact that the policy had been surrendered by Webb; the surrender having been made on the 28th of November 1865. In all this correspondence and negotiation there was no tender or offer to pay either the amount claimed by Wehh, which was excessive, or the amount actually and fairly due on account of the note, and money advanced for premiums. And it was not until May, 1866, that young Dungan, according to his testimony, went to the office of the defendants in Newark, and — 495 — there saw the vice-president of the company, and told him that he, the witness, had come prepared to pay the amount the company had named to the attorneys, arid to which the vice-president replied that the policy had been surrendered and was ended. This statement of the witness is contradicted in the testimony of Miller, the vice-president; hut conceding it to he true, the witness admits that he had not the money with him, hut states that he had made arrangements for it, and would have got it in New York, and then sent it on from Baltimore. What the arrangements were, with what degree of certainty he expected to receive the money, and how and at what time it was to he sent from Baltimore, the witness has not informed us. Row it is hardly necessary to cite authorities to show that this transaction did not amount to a tender. In 2 Greenleaf’s Ev., sec. 603, it is laid down as the settled law, supported by many authorities, that “The production of the money is dispensed with, if the party is ready and willing to pay the sum, and is about to produce it, but is prevented by the creditor’s declaring that he will not receive it. But his hare refusal to receive the sum proposed, and demanding more, is not alone sufficient to excuse an actual tender. The money or other thing must be actually at hand, and ready to he produced immediately, if it should he accepted ; as, for example, if it be in the next room or up stairs ; for if it be a mile off, or can he borrowed and produced in five minutes, or, being a bank check, it be not yet actually drawn, it is not sufficient.” And in the recent case of Talty vs. The Freedman s Saving & Trust Co. in the Supreme Court of the United States, (3 Otto, 325,) where -the question was fully considered as to what constitutes sufficient tender, in a case of a voucher pledged as collateral security, and which had been transferred by the pledgee, it was held, that a simple offer by the pledgor, unattended with any tender of the amount due, was insufficient; that an. offer to .pay. is. not the equivalent for an actual tender. — 496 — In this case, after the occasion just mentioned, there was no other attempt to make tender either of premiums or the amount due Webb. And as the punctual payment of the premiums was an essential condition to the life of the policy, and the question whether the policy should be kept in force or allowed to lapse, being entirely at the option of the assured, or her assignee, there is no principle upon which the claim to redeem and enforce the policy,, as if in force at the death of the life insured, can be sustained. The company could not be made to bear the risk without consideration. Want vs. Blunt, 12 East, 183 ; Simpson vs. Accidental Death Ins. Co., 2 C. B. (N. S.,) 257; Pritchard vs. Merchants’ & Tradesmen’s Mut. Life Ins. Society, 3 C. B. (N. S.,) 662. But, notwithstanding we decide that the present bill cannot be sustained for the redemption and collection of the policy, as if in force, we think that, under the facts and circumstances of this case, there is an equity to which the plaintiff is entitled.. Webb holding the policy as mortgagee, held it subject to the right of redemption, provided the right was exercised within a reasonable time. He could only sell the policy after giving due notice to the assured to redeem, and while we think it was perfectly competent for him to surrender the policy to the company either for its reserve or equitable value, as an advantageous mode of sale and foreclosure, yet it was necessary that notice should have been given to redeem before the surrender took place ; and the party purchasing, or the company accepting, the surrender, without such notice, would only acquire the interest .of the mortgagee, and hold subject to the right of redemption, as the mortgagee held before the sale or surrender. Now, there is no pretence that any notice was given to redeem before the surrender of the policy. On the contrary, Webb seems to have proceeded as if he were the .absolute owner, and in utter disregard of. the right of — 497 — redemption. Moreover, his misrepresentations made, first to young Dungan, in June 1863, and again to Lipscomh, the attorney, in September, 1865, were well calculated to mislead and deceive the parties. Wehh, it is true, denies making the representations sworn to by the two witnesses named; but they so distinctly corroborate each other in regard to the statements made by Webb, as to what had been done with the policy, that we cannot do otherwise than accept their evidence as reliable. He stated to these witnesses emphatically that the policy had been surrendered and was dead ; that it was out of his control and no longer available ; and that the only way the matter could be fixed was to have a re-examination of Erancis D. Dungan for a new policy ; a thing known to all parties to he then impracticable, owing to the declining and feeble state of Mr. Dungan’s health. These statements by Webb in regard to the policy were without foundation in fact, for at the time they were made the policy had not been surrendered, but was then in his control, and in full force. It is contended for the defendants that they should in no manner he affected by Webb's misstatements in regard to the policy before its surrender. But we do not assent to this. Whatever Webb may have done that would create a right or an equity in respect to the policy, as against himself, will, under the circumstances of this case, affect the defendants, who claim to hold under him, and by virtue of his supposed right to surrender the policy. But the defendants took the policy with express notice of the adverse claim of the assured. They knew that the matter was in dispute between Webb and the assured; and it would appear that it was with a view of aiding and assisting Webb in his contention that the surrender was effected. Webb states in his testimony that he surrendered the policy in obedience to the desire of the company, and the president of the company admits that he made suggestions to Webb, as to the impropriety or impracticability of con — 498 — tinuing the policy for his own benefit, that may have determined him, Webb, to surrender it; and in his letter of the 27th of November 1865, the president offered Webb strong inducements to that course. In view of these facts, we are compelled to say that there is an apparent want of good faith in the matter. The utmost candor and "good faith were required, not less on the part of the company, its officers and agents, than the-assured ; and not only in the inception of the contract, but in alLsubsequent dealings in respect to it. The policy is exceedingly questionable that gives sanction to any such dealing as that here disclosed between the insurance company and its agent. At any rate, in such case, all the intendments should be made against the company, and in favor of the assured, who may have been prejudiced by the conduct of the agent, sanctioned and adopted by the company, as in the present instance. Upon the whole, we think it but just to declare that the right of redemption continued to exist at the time of the surrender of the policy, and that the surrender should be regarded as having heen made on the joint account of Webb and the assured, according to their respective interests ; that is to say, on account of Webb to the extent of the interest secured hy the assignment of the policy, including premiums paid, and on account of Mrs. Dungan, the assured, for the residue of the reserve value which the ■ defendant agreed to allow Webb. The defences relied on by the defendants, of the bar of the Statute of Limitations, and lapse of time, we think should not prevail. The Statute of Limitations as a positive har has no application to a case like this ; and as to the lapse of time, the circumstances of the case afford full explanation of that. In a case of this nature, under ordinary circumstances, such length of time as has been allowed to elapse in this case, before bill filed, would show such laches as to preclude relief. The principle of the case of Lockwood vs. — 499 — Ewer, 2 Ath., 303, and many other subsequent cases, would apply and he controlling. But each case depends, more or less, upon its own special circumstances ; and here Mrs. Dungan was a feme covert from the date of the policy to the time of her death in 1868, and Mr. Dungan, her husband, was, for several years immediately preceding his death in 1870, utterly unable to attend to business by reason of his mental condition. There has been, however, no acquiescence in the claim of either Webb or the defendant in respect to the policy ; for in 1866 an action of trover was brought by Dungan and wife against the defendant for the alleged tortious conversion of the policy, and that action was not finally determined until 1873. And although that action was misconceived, yet it was notice to the defendant of the adverse claim of the assured, and there is nothing in the case to show that the defendant has been in any manner prejudiced by the delay. (Decided 8th May, 1877.) We shall reverse the decree appealed from and remand the cause, that an account may be taken, if necessary, upon the principle that the defendants are to be charged with the reserve value of the policy at the time of its surrender, that is to say, $1248.51, and be credited with the amount due Webb at the time of the surrender on account of the note, and premiums advanced, with interest to that date ; the balance, with interest, to be decreed to the plaintiif, with costs. Decree reversed, and cause remanded.