Moran v. Franklin Life Insurance

CAULFIELD, J. (after stating, the facts). — I. Plaintiff’s case concedes that there was a default in the payment of assessments or premiums, and the policy, by its terms, was void on that account unless the non-forfeiture law of Missouri (Sec. 5856, R. S. 1889) was applicable thereto and operated to extend the insurance from the time of default to the death of the insured. The non-forfeiture law is not applicable if the contract in suit is one of insurance upon the assessment plan. [McCoy v. Bankers’ Life Assn., 134 Mo. — 420 — App. 35, 114 S. W. 551; Smoot v. Bankers’ Life Assn., 138 Mo. App. 438, 120 S. W. 719; Hayden v. Franklin Life Ins. Co., 136 Fed. 285.] The trial court concluded that it was such a contract and therefore sustained a demurrer to 'the evidence. Whether that conclusion was correct is the question before us. In determining it, we might content ourselves with a reference to the very well-considered opinion in the case of Hayden v. Franklin Life Ins. Co., decided by the United States Circuit Court of Appeals, Eighth Circuit, and reported in 136 Federal Reporter, 285. So far as the question before us is concerned the facts in that case were identical with those in the case at bar and involved the same form of policy, the samé constitution and by-laws, the same contract of assumption or reinsurance, and the same insurance companies. The.policy was there held to be a contract of insurance upon the assessment plan and the non-forfeiture law inapplicable. Such holding had the unqualified approval of our own Supreme Court in Westerman v. Supreme Lodge K. of P., 196 Mo. 670, 714, 94 S. W. 470. But we will consider the matter briefly in the light of our statutes and decisions. Sec. 5860 of the Revised Statutes 1889 (now Sec. 6950, R. S. 1909) provides that “every contract whereby a benefit is to accrue to a person or persons named therein, upon the death or physical disability of a person also named therein, the payment of which said benefit is in any maimer or degree dependent' upon the collection of an assessment upon persons holding similar contracts shall be deemed a contract of insurance upon the assessment plan.” There are other provisions in the article of which said section is a part, but we need not set them forth. It is sufficient to say that in all respects the policy in suit conforms to the requirements of said article and section so as to be “a contract of insurance upon the assessment plan” if the payment of the benefit,to accrue under it “is in any — 421 — ■manner or degree dependent upon the collection of an assessment upon persons holding similar contracts.” There has been considerable discussion in the decisions as to the applicability of this language to particular policies. We need not set it forth. It is sufficient for the purposes of this suit that we may deduce from such decisions the conclusion that even though a policy contains provision for fixed and defined sums to be paid at certain intervals, still if such payments do not form the only resource for the payment of the benefit and are not necessarily sufficient for that purpose, but by the terms of the contract shall be supplemented, if necessary, by an assessment which shall be levied by some designated person or body, and be directed against and binding upon persons holding similar contracts, then such policy meets the requirement of the statute under consideration. [Hanford v. Assn., 122 Mo. 50, 26 S. W. 680; Jacobs v. Assn., 146 Mo. 523, 48 S. W. 462; Elliott v. Assn., 163 Mo. 132, 63 S. W. 400; Hayden v. Franklin Life Ins. Co., 136 Fed. 285.] It is not necessary for us to decide that a policy may not be an assessment contract unless it meets every requirement above mentioned; but we do hold that if it does meet all such requirements it is certainly an assessment contract. In determining the character in that respect of the contract before us, we may consider not only the policy but the constitution and bylaws as well, for though the policy does not in terms make the constitution and by-laws part of the contract it does, as we shall see, provide for the making of an assessment. ‘ ‘ This of itself was sufficient to advise the policy holder that he was amenable to an assessment in addition to the regular mortuary call, which characterized its policy as being on the ‘assessment plan.’ As the manner of making such assessments was not pointed out on the face of the policy, and such assessments in their very nature being mutual among the associated members, the law refers the policy — 422 — holder to the articles of association and by-laws as incident to such policy contracts.” [Hayden v. Franklin Life Ins. Co., 136 Fed. Rep. 285, 290, 291.] Now in the light of the foregoing, how does the contract in suit meet the necessary requirements? While it is true that it contemplates the payment at certain intervals of a fixed and defined sum and to that extent might be held an old-line policy (Hanford v. Mass. Ben. Assn., 122 Mo. 50, 26 S. W. 680), still such payments do not form the only resource for the payment of the benefit and are not necessarily, and were not in fact, sufficient for that purpose. They were to be applied in certain parts toward the accumulation of a mortuary fund and an emergency fund, and death losses were primarily payable out of the mortuary fund and if that proved insufficient, then out of the emergency fund. The policy expressly provided that “should the emergency reserve fund be used, in excess of statutory requirement, for the payment of death claims, its impairment shall be made good by additional premium calls sufficient to pay the maximum amount of insurance stated in the policy.” The bylaws provide that such additional premium calls shall be “against all members of the association according to the ratio of the mortuary call,” and empower the “executive committee” to levy the same and prescribe the extent and manner of serving notice thereof. It seems to us that the contract meets all the requirements of the statute under the decisions. The plaintiff suggests however, that it is necessary that the assessment shall be upon “persons” holding similar contracts, and they must become personally liable to pay the assessment when levied. Granting that that is a correct statement of the law, the provision for assessment under this policy is sufficient under it. The provision is that impairment of the emergency fund “shall be made good by assessment in addition to the regular premium call. ’ ’ The by-laws provide that such — 423 — assessment shall be against “each member of the association” and that “none but policy holders shall be members.” Only one plan of insurance is contemplated by the by-laws and that is the one embodied iu the contract in suit. The form of such contract renders the holder personally liable for assessments regularly made while his membership in the association continues. [Ellerbe v. Barney, 119 Mo. 632, 25 S. W. 384.] Thus it appears that it is compulsory on the part of the association to levy the assessment in the event named; that the assessment must be levied on all members, and members must all be holders of policies, and policies must all be of the kind in suit, and the liability of members to meet assessments is fixed. The contract was an assessment contract in all respects. II. Nor are we impressed by plaintiff’s insistence that the contract of assumption transformed the asesssment contract into a simple life policy on the level premium plan. For the contract of assumption to effect such a change, amounting to a complete novation, it must express clear intent to that effect. [Hayden v. Franklin Life Ins. Co., 136 Fed. Rep. 285.] The one before us does not do that. On the contrary it is plain therefrom that all the parties, the Merchants’ Life Association, the policy holder, and the defendant, intended that the policy should be assumed as it was, viz.: as an assessment contract. In the contract between the Merchants’ Life Association and the defendant, the latter was bound to assume merely the “outstanding policy contracts” and “all obligations to policy holders and beneficiaries thereunder.” ' As part of the consideration therefor the Merchants’ Life Association was to transfer to the defendant all its outstanding policies, with all premiums due or to become due thereon, and to completely substitute the defend-, ant in place and stead of the Merchants ’ Life Associa — 424 — tion, so far as it lay in the latter’s power. In the special contract between the defendant and the insured the defendant merely “assumes under and according to the terms and conditions thereof” the policy in suit. All this indicates a clear purpose to assume the contract as it was, as an assessment contract, and nothing else, and betrays no desire or intent to change its character or make a different contract, except that by their conduct, the defendant by levying assessments and the insured by paying them, they assumed that the contract gave the defendant the right to levy assessments. But such a change as this, if it be considered a change, did not change the nature of the contract. It was still an assessment contract though the assessments were to be levied by another than the original authority. But plaintiff insists that the defendant had no power to levy assessments and therefore the assessment feature would be eliminated from the contract by operation of law. If it be true that defendant lacked the power mentioned it would not affect the contract in the manner indicated. It would not deprive policy holders of their right originally given to them by solemn contract and never surrendered to have others holding similar contracts contribute by paying assessments toward paying death benefits as they accrue ; nor should it deprive defendant of the consideration solemnly promised to it in consideration of its entering into the very contract of assumption which plaintiff seeks to enforce. The executive committee of the Merchants’ Life Association might make them in order to fulfill its contractual obligations to the policy holders and the defendant, or if that committee would not or could not levy such assessments, a court of equity would have power to levy them, or cause them to be levied. Nor can it avail plaintiff to contend, as it does contend, that defendant had no power to assume an assessment contract, being an old-line com — 425 — pany. We know of no authority for holding that because a corporation lacks power to make the only contract which it intended to make, therefore it should be held to have made an entirely different contract, which, though within its power, it had no intention; of entering into. Upon the plainest principles of equity and common honesty, plaintiff should not be permitted, by applying the doctrine of ultra vires, to deprive defendant Oof substantial benefits and conditions of its' contract and yet hold it to the letter of its obligation: This is not a case where an insurance company issued or assumed a policy which by operation of law necessarily included the provisions of the non-forfeiture statute; on the contrary, the contract which defendant assumed at the time of such assumption had been fully and properly created as an assessment contract, free from the operation of the non-forfeiture statutes and as such obligatory upon and in favor of the assessment company and its members. We can discover no principle upon which to base a holding that the mere' assumption of it by an old-line company completely ah tered its character and provisions. ' : III.' The letter of October 3, 1905, was written nearly four years after the time the petition conceded that the policy lapsed for the non-payment of premiums, and some eighteen months after the death' of the insured. Therein defendant’s secretary informed the plaintiff’s attorney that the policy “remained in force until December 20, 1901, when it lapsed and became-null and void by reason of Mr. Moran’s failure to pay an assessment due on that date.” Plaintiff asserts that defendant had no right to levy said assessment, it being a special assessment, and therefore the policy could not have been avoided because of it. She contends that having in said letter given the non-payment of said assessment as a reason for the policy having become void, it could not rely in the trial court upon — 426 — the non-payment of the subsequent regular premiums as a cause for such avoidance. In response to this contention we are inclined to the opinion that the letter is insufficient either as a waiver of, or as an estoppel to set up, the avoidance of'the policy for defaults subsequent to that of December 20, 1901, and we are strongly impressed that the contract of assumption, as acted under by the defendant and the assured, recognized defendant’s right to make special assessments, and plaintiff cannot deny that right while suing on the contract conferring it. But it is not necessary for us to pass upon either of those questions for the reason that plaintiff’s pleading is' not sufficient to let in the contention now made. Plaintiff has not attempted to plead either waiver, estoppel, or performance in the respect under consideration. On the contrary plaintiff admits that payments were made only to January .15, 1902, “when the said Michael A. Moran discontinued the payment of further premiums” and proceeding says, “plaintiff states that at the time of said lapse, to-wit: on the 15th day of January, 1902,” etc., etc. Here is a clear admission that the policy had lapsed for non-payment of premiums on January 15, 1902. The only allegation of performance is, “plaintiff states that the said Michael A. Moran in his life time had duly complied with all the terms and conditions of the said contract to be done and performed by him, except as hereinbefore stated.” Here is no allegation of performance of the provisions of the policy so far as the payment of premiums subsequent to December 20,1901 is concerned, but on the contrary an admission that the terms and conditions of the contract in that respect had not been complied with or performed by the insured. It is well settled in this state that in a suit on an insurance policy evidence of a waiver of a condition is admitted under an allegation of performance, for the reason that “it is merely evidence of a performance,” and is “proof of performance” within — 427 — the meaning of the conditions of the policy. [Ins. Company v. Kyle, 11 Mo. 278; McCullough v. Ins. Co., 113 Mo. 606, 616, 21 S. W. 207.] And it may be conceded for the purposes of this ease that the same rule would apply to evidence of estoppel. But neither the rule nor the reasoning could apply to this case because the petition herein concedes non-performance. This case was brought and tried on the sole theory that there had been default in the payment of premiums and that the policy was void unless saved by the application of the non-forfeiture laws. The letter was admissible for the purpose of proving waiver of the proofs of death, as to which the petition contained proper allegations. We are satisfied that the last was the sole purpose for which it was offered and admitted in evidence. The present contention was clearly an after-thought suggested for the first time in this court. It is overruled. The judgment of the trial court is affirmed. Reynolds, P. J., and Nortoni, J., concur.