MacMahon v. United States Life Ins. Co.

McCORMICK, Circuit Judge, having stated the case, delivered the opinion of the court. In our opinion, the Circuit Court erred in directing a verdict for the defendant in this case. The policies were issued on the 22d of January, 1896, by the defendant, in New York, and were thereafter delivered to insured, in Texas. Each of these policies contained the following provision: . “This policy shall take effect only upon actual payment of the first premium thereon, and delivery of this policy to assured during the life-time and sound "health of the insured, in exchange for the company's receipt for said payment signed by the president, secretary, assistant secretary oiv actuary.” It is clear that the dealings of the parties were for cash. No credit was in the contemplation of either, and there was no opportunity for a debt from the insured to the defendant to arise. The carefully guarded provisions with reference to the issuance of the binding receipts show that it was in contemplation of both parties that a receipt was to be delivered only upon payment of the premiums, and that its delivery .put the contract evidenced by the policy into effect, to con-timid, for the space of one year, with allowed grace. By the terms of the policies the company offered the insured the privilege of. renewing the same in precisely the same manner — that is to say, for cash to be paid during the life of the policy (one year, with allowed grace)— and; to .obtain therefor a similar receipt, carefully guarded in its terms ápd .execution, which should have the effect to continue the policy for.-the period of another year, with grace. In the provisions for such renewal — if renewal should be desired by the insured — there was the siáilié absence of any intent on the part of either of the -parties [391] to deal on credit, or to permit the bringing into being of a debt front (he insured to the company. When the original dealings took place,, the insured and his wife (the assured) were sojourning in Waco, Te¿c'. The premiums then paid, and a like amount subsequently paid, Carried the policies in full force up to the 221I of January, 1898. In the'fall of 1⅜)/ the insured was sojourning in the city of Puebla, Mexico, from which city he wrote the defendant asking information as to whom & ture premiums should be remitted; whether they had an agent in Mexico authorized to receipt for such remittances, and if so, where ? and, if not, whether he should remit to the New York office, and to whom? The defendant replied: “We have no agent in Mexico. You will remit premiums to the New York office within the grace allowed. Remittance may be made by check, draft or money order, payable to the order of the company.” In compliance with this advice and directions, the insured procured in the city of Puebla, Mexico, banker’s New- York exchange, drawn “payable to the order of the company,” for $183.90, American gold, and forwarded the same by mail to the defendant at its New York office, where it was duly received by the defendant on January 20, 1898. At this time the policies were still in force, and the insured veas not indebted to the defendant in any amount. On the afternoon of January 20, 1898, this banker’s draft, “payable to the order of the company,” and not indorsed by the insured, the defendant deposited for collection and credit with the Importers’ Sr Traders’ National Bank of New York, that being its usual bank of deposit; and on the same day the defendant issued and mailed to the insured’s address premium receipts in the customary and usual form, which, in due course of the mails, came into the possession of the insured. On the most approved judicial authority, it seems clear to us that this transaction, in no one of its particulars, evidences or tends to show the existence of.a debt from the insured to the defendant; but, on the contrary, negatives such existence, and permits no inference to be made other that that the dealing was strictly cotemporanecus — the offer of a given price for a given kind and quality of insurance, and the acceptance of the offer as tendered. There is nothing in the evidence tending to show that at any time the insured obligated himself to pay the amount of the premiums, or did any act from which such an obligation could have been implied. The mere sending of the draft in compliance with advice and directions, “payable to the order of the cotn-pany,” and not indorsed by him, gave the defendant no right óf action against him. It could not sue him on the draft, because he was :ridt a party to it; it could not sue him on any obligation to pay the future premiums, because he had entered into no such obligation. He had parted with his money to the “drawer bank” in the city ,of Puebla; Mexico, and obtained the drawer bank’s draft for the amount in American gold, which was the price of the article he wished to btiy, namely, the defendant’s receipts, which would put in force'for an-' other given period from the 22d of January, 1898, the policies originally obtained from the defendant. If we grant that the defendant’ need not have accepted this draft, and need not have executed and delivered to the insured, by mailing the same to him, the binding receipts until the draft was paid (as to which we express no Opinion),5 [392] it did, immediately upon receiving the bill of exchange, execute and forward to the insured the very article which the bill was sent to buy. If the defendant had brought an action at law against MacMahon for the amount of the premiums, counting on the same as a debt, or had brought its action on the draft, the courts would have held that MacMahon was not bound, and that the defendant’s recourse was on the “drawer bank.” In determining the question before us, we deem it immaterial whether the contracts of insurance are held to be New York contracts or Texas contracts. In our consideration of this case we have not proceeded on any theory that the law of New York has peculiar application to the action on these contracts. The decisions cited have the authority of the high court which rendered them, and of the sound reasoning with which they are supported in the opinions which accompanied their deliverance. Hall v. Stevens, 116 N. Y. 201, 22 N. E. 374, 5 L. R. A. 620: Shaw v. Insurance Company, 69 N. Y. 292; Gibson v. Tobey, 46 N. Y. 649, 7 Am. Rep. 335; Youngs v. Stahelin, 34 N. Y. 264; Noel v. Murray, 13 N. Y. 167; Whitbeck v. Van Ness, 11 Johns. 409, 6 Am. Lee. 3⅜- Of the decisions of the United States Supreme Court, by counsel for defendant, we have examined: Iowa Life Insurance Company v. Lewis, 187 U. S. 335, 23 Sup. Ct. 126, 47 L. Ed. 204; Mutual Life Insurance Company of New York v. Cohen, 179 U. S. 262, 21 Sup. Ct. 106, 45 L. Ed. 181; Equitable Life Assurance Society v. Clements, 140 U. S. 226, 11 Sup. Ct. 822, 35 L. Ed. 497; Klein v. Insurance Company, 104 U. S. 88, 26 L. Ed. 662; and Thompson v. Insurance Company, 104 U. S. 252, 26 L. Ed. 765. We have found nothing in either of them which is inconsistent with the views we have expressed. The case of National Loan & Insurance Company v. Goble, 51 Neb. 5, 70 N. W. 503, does support the contention of the defendant, but we are satisfied that it is in opposition to the weight of precedent, and we decline to follow it. There was, in these dealings of the insured with the defendant, not the slightest odor of fraud or trace of unfairness. The exchange on New York was drawn in the city of Puebla, Mexico, by a bank in good standing and credit at the time the bill was purchased, and was sent by mail to the defendant, and was received by it at New York before the “drawer bank” suspended payment. In accordance with the defendant’s directions, the draft was made “payable to the order of the company.” It was not indorsed by the insured. It cost the insured in actual money the precise amount for which it was drawn. The insured having been induced by the defendant to purchase it, and having parted with his money in perfect good faith, and duly delivered it to the defendant, which thereby became the owner of it, the resulting loss must rest with it, the owner at the time the loss occurred. The transaction, therefore, must be held to constitute payment of the premiums which the insured wished to pay and for which the defendant receipted, giving the policies effect for one year, with grace, from the-22d of January, 1898. 'There can hardly be a question that the subsequent actions of the defendant relieved the insured and the assured from the duty of remitting premiums to cover the subsequent years up to the death of [393] the insured. Within the year and allowed grace from the 22d of January, 1898, the insured made actual tender of the amount to meet the premiums required to give the policies effect after the 22d of January, 1899, and the money was refused on the ground that the policies had become void. The strictest, law and the most searching equity did not require the repetition of this tender, without notice from the defendant that it would be received. The defendant having received payment of the third premium by the acceptance of the draft and its action thereon, and having refused to accept the tender subsequently made, the policies did not become void, and the assured’s rights thereunder were not forfeited. Of course, the unpaid premiums are to be deducted, with interest, from the time at which they would have been received but for the action of the defendant. (April 5, 1904.) It follows that this case must be reversed and remanded to the Circuit Court, with directions to that court to grant the plaintiff a new trial, and thereafter to proceed in the same in conformity with the views expressed in this opinion. The question we have discussed seems to be the only one that is really controverted between the parties, therefore the other features of the case require no comment from us. ' Reversed and remanded. PARDEE, Circuit Judge, concurs in the result.