McEachern v. New York Life Insurance , 15 Ga. App. 222 ( 1914 )

Graham, J.

(After stating the foregoing facts.)

The judgment of the trial judge having been predicated on an agreed statement of facts, the issue is raised as to whether or not, under the principles of law applicable thereto, the plaintiff is entitled to recover any larger sum than the amount awarded by the court. If the policy sued on was properly foreclosed, under the terms of the loan agreement, after default of the insured and prior to his death, or if the policy was legally converted into paid-up insurance under the first paragraph of the non-forfeiture porvisions of the policy, then the judgment of the trial judge is correct; because it is undisputed that the principal sum recovered is fully equal to the amount of paid-up insurance which the reserve on the policy, less the indebtedness, taken as- a single premium, would have purchased upon the life of the insured according to the stipulations of the loan agreement, and in conformity with the provisions of the first paragraph of the non-forfeiture clause of the policy.

Taking the issues presented in their natural order, the first question demanding attention is, whether or not, after default and prior to death of the insured, the pledge was properly foreclosed. It is contended by learned counsel for the defendant that when the insured defaulted in the payment of interest on the loan and premium on the bond, the loan agreement made the loan due and payable and caused the pledge to be immediately and automatically foreclosed. In view of the provisions of that agreement, it seems to us this argument is hardly plausible. “The cardinal rule in construing contracts is to ascertain the intent of the parties, so that the whole contract and every part thereof may, so far. as they are consistent with the rules of law, be carried into effect.” West v. Randle, 79 Ga. 31 (3 S. E. 455). "Would it be consonant with the terms of that agreement to say that inaction of the company, after default of the insured, would not leave the matter of foreclosure in suspense,—that failure of the company to take affirmative action would not continue the loan, notwithstanding non-payment of interest or premiums ? The company did not so construe the contract, for according to the letters written by the defendant to the insured after the default, the matter of foreclosure was held in suspense “pending the return of the application for reinstatement of the policy and the company’s own consideration thereof.” Going a step further, if foreclosure was suspended during the negotiations between the defendant and the insured and until the insured’s check was returned by the company, as appears from the agreed statement of facts, when and at what moment was the alleged automaton set in motion? What evidence is there in the record that anything occurred prior to the death of the insured, either automatically or otherwise, effectuating the provisions of the loan agreement in reference to the foreclosure? If the pledge was not automatically foreclosed as contended, were any effectual proceedings to foreclose initiated by the company prior to death of the insured ?

"Foreclose” has been defined to mean: “to shut out; to bar; used of the process of destroying an equity of redemption.” Bouv. L. Diet. Foreclosure of the pledge, under terms of the loan agreement, required some affirmative action on the part of the defendant, amounting to a compliance with the stipulations contained in that contract,—some unequivocal act sufficient to show that the pledge was in fact foreclosed in accordance with the method specified in the agreement. Stratton v. N. Y. Ins. Co., 115 Va. 257 (78 S. E. 639, 640); Brady v. Prudential Ins. Co., 9 Misc. 6 (29 N. Y. Supp. 44); O’Brien v. Prudential Ins. Co., 12 Misc. 127 (33 N. Y. Supp. 67). The language used in the loan agreement obviously required the company, if it foreclosed the pledge under the power delegated, to do something for the benefit of the insured. It was required, after deducting the indebtedness from the reserve, to apply the balance to the purchase of paid-up insurance of a certain kind on the life of the insured, different in some respects from the primary insurance guaranteed in the policy. Was this duty performed? At the time of the death of McEachern, what evidence, either documentary or parol, did he have to show that he possessed a paid-up policy of insurance as provided for in the loan agreement in event of foreclosure ? The burden of proof rested upon the defendant to prove the foreclosure, if any occurred, and, yet, as appears from the record, the absence of any satisfactory evidence of foreclosure is conspicuous. Practically the- only evidence relating to that issue is the undated and unsigned entry stamped on the side of the loan agreement, and the letters of the defendant, written after the death of the insured; and these letters contain no definite statement as to when the company converted the policy into paid-up insurance.

It is urged in behalf of the defendant that even if there was no foreclosure before McEachern’s death, the power of foreclosure, like a power of sale in a loan deed, survives the death of the maker of the instrument and can be exercised at any and all times. Conceding this to be the general rule; in the light of the record it would hardly be compatible with legal and equitable principles to confirm a forfeiture pure and simple by holding that after the policy had become a death claim—after the defendant had become both debtor and creditor with the fund in hand—the company had the right to change the status quo by exercising the power of foreclosure and thereby deprive the plaintiff of any valid right of action which had accrued to her upon the policy by reason of the death of the insured. By referring to clause (b) (1) of paragraph 4 of the loan agreement, it will be seen that just such a,contingency was therein anticipated and provided for. The death of the insured was one of the specified events that would render the loan due and payable; and it is therein stated that “in any such event the amount due on the loan shall be deducted from the sum to be paid or allowed under said policy.” We are, therefore, constrained to hold, in view of the facts contained in the record, that there was no proper foreclosure of the pledge, and that the loan and loan contract were subsisting at the time of the death of the insured.

The next questions to be determined more directly touch the vital issues of the case. The pledge not having been foreclosed, what valuable rights, if any, did the insured have in the policy at the time of his death? And if he had any such rights, did they survive to the plaintiff as his representative? “No rule in the interpretation of a policy is more fully established, or more controlling and imperative, than that which declares that in all cases it must be liberally construed in favor of the insured, so as not to defeat without plain necessity his claim to indemnity, which, in making the insurance contract, it was his object to secure.” May on Insurance, 182; N. Y. Life Ins. Co. v. Babcock, 104 Ga. 77 (30 S. E. 273, 42 L. R. A. 88, 69 Am. St. R. 134); Arnold v. Empire Ins. Co., 3 Ga. App. 685 (60 S. E. 470); Mut. Life Ins. Co. v. Durden, 9 Ga. App. 797 (72 S. E. 295). It is undisputed thatMcEachern did not pay the premium falling due October 22, 1911, and that it was not paid during the thirty days of grace, to wit, on or before November 22 following. The check sent by him to the company and held by it till January 16, 1912, was not received and accepted as payment; nor did the holding of the check amount to a waiver; for the company, upon receipt of the cheek after expiration of the grace period, immediately advised the insured that it could not accept the check as payment, and that it was held subject to his order, pending the return of the application for reinstatement. Therefore, as the case stands, the premium falling due October 22, 1911, was not paid and the policy lapsed. On January 13 McEachern died, two months and twenty-two days after the default, and more than thirteen years after the issuance of the policy. The non-forfeiture clause of the policy provided that after the policy had been in force full three years, if any subsequent premium was not paid it would be converted into paid-up insurance, provided demand was made therefor with surrender of the policy within six months; or, if the policy was not surrendered as above provided, the insurance under the policy would, after repayment of any indebtedness, be extended for the full amount of $10,000 during the term provided for in the table on the preceding page. There were two forms of insurance provided for,—primary and secondary. So long as the premiums were duly paid the insured was entitled to the primary insurance, which if carried to maturity would have entitled the insured to certain accumulation benefits therein provided for, in addition to the face value of the policy. When the policy lapsed, as above stated, his right to primary insurance was forfeited, and the company’s liability was remitted to the secondary insurance provided for in the non-forfeiture provisions above quoted, to wit, paid-up insurance or extended insurance. During the thirteen years preceding the lapse, the premium paid each year by the insured was not only paying for current insurance, but was building up a reserve to the policy, which paid for, and legally entitled him to, the secondary insurance guaranteed by the policy in case the lapse should occur by failure to pay premiums. He was as much entitled to the secondary insurance after the lapse as he was to the primary-insurance prior to the lapse. He had paid for both. The privilege of election between the two forms of secondary insurance—paid-up and extended insurance—after lapse, was not a mere gratuity on the part of the company. The insured under the terms of the policy was simply allowed, in one of two ways, the privilege of enjoying the benefit of a reserve which he had accumulated by paying from year to year more than the sum necessary to carry current insurance. Therefore, by every rule of reason it would seem that this right of election between the two forms of secondary insurance, guaranteed to the insured by the non-forfeiture provisions of the policy, was a valuable property right, which, if existing at the time of his death, survived to his legal representative. And it has been so held by this court, and by some courts of other jurisdictions. Veal v. Security Mutual Life Ins. Co., 6 Ga. App. 721 (65 S. E. 714); Winchell v. John Hancock Mut. L. Ins. Co., Fed. Cas. No. 17866; Nielson v. Prov. Assur. Soc., 139 Cal. 332 (73 Pac. 168, 96 Am. St. R. 105); New York Life Ins. Co. v. Noble, 34 Okla. 103 (124 Pac. 612, 45 L. R. A. (N. S.) 391); Lenon v. Mutual Life Ins. Co., 80 Ark. 563 (98 S. W. 117, 8 L. R. A. (N. S.) 193, 10 Ann. Cas. 467); N. Y. Life Ins. Co. v. Curry, 115 Ky. 100 (72 S. W. 736, 61 L. R. A. 268, 103 Am. St. R. 297); Stratton v. N. Y. L. Ins. Co., supra.

It is contended that when the policy lapsed for non-payment of premiums, it became forfeited and was no longer in force, etc. That is true in a qualified sense only. It lapsed and was forfeited in so far as the primary insurance was concerned, but remained in force to the extent necessary to secure to the insured the secondary insurance therein provided for. The policy stipulated six months from date of the lapse as the period in which demand for paid-up insurance should be made, but no limit of time was fixed within which the insured was required to avail himself of the extended insurance. The question of time, however, is not involved in the ease at bar. The insured died, proofs of death were duly submitted, and the full value of the policy demanded—all within six months from the date of the lapse. By October 22, 1911, Mc-Eachern had paid thirteen annual premiums, amounting to $6,357 in.\ actual cash, and the reserve of the policy had accumulated to the extent that he was entitled, under the terms of the polic}1', to seven years extended insurance, without further payment of premiums; the only condition annexed thereto being “repayment of any indebtedness.” His right to pay the loan at any time before the foreclosure of the pledge, and thereby eliminate that condition, seems to be indisputable. The $2,620 which he had gotten from the company was not given back to him as a part of the reserve he was accumulating. That sum was loaned to him by the company from its funds, and he was required to pay interest thereon the same as if he had borrowed it from any other lender. ’ Incurring the debt did not extinguish the policy or any part thereof. He did not sell the policy to the company; he simply pledged it as security. All rights guaranteed to him by the policy continued, subject to the company’s right to have the indebtedness paid, and its power to foreclose the pledge for that purpose.

It has been said that when an insurance company lends money to one of its policyholders, it is in no different position from any' other lender of money; and in lending its money it is subject to the same rules governing banks, trust companies, and other corporations engaged in lending money. Stratton v. N. Y. L. Ins. Co., N. Y. Life Ins. Co. v. Curry, supra. The pledge not having been foreclosed, McEachern, at the time of his death, had the lawful right to pay to the 'company the money he had borrowed, with the interest thereon, and thereby, under automatic provisions of the policy, come into the unconditional enjoyment of the extended insurance, for which he had already fully paid. This right, like an equity of redemption, was not a mere personal privilege, but a valuable property right surviving to the representative of the in-, sured} and when the policy matured by reason of the death of Mc-Eachern, it became a death claim impressed with the respective rights of the parties. The plaintiff having made demand for the full value of the policy, payment of the indebtedness with other funds was not a condition precedent to recovery. The defendant being thereby placed in the attitude of both debtor and creditor with the fund in hand, the plaintiff was entitled to recover the amount of extended insurance stipulated in the policy, less the loan and interest thereon.

As the rulings herein made will leave the case pending in the city court for further trial, it' is not necessary to review other issues raised by the assignments of error.

Judgment reversed.

Roan, J., absent.