Wayland v. Western Life Indemnity Co. , 166 Mo. App. 221 ( 1912 )

JOHNSON, J.

— This is an action on a policy of life insurance issued by an insurance company organized under the laws of Illinois and authorized to do business in this state as an assessment company. The policy was issued to John H. Wayland of Salisbury, Missouri, June 24, 1889, who paid all dues and assessments until October 12,1905, 'when he failed to pay two assessments (numbered 303 and 304) levied to pay two death losses of five thousand dollars each and thereupon defendant declared his policy forfeited.. He made no effort to be reinstated, paid no further dues and assessments and on October 28, 1908, died at his home in Salisbury, leaving a widow and three children who were the beneficiaries named in the policy. Plaintiff is one of the beneficiaries and, on the refusal of defendant to acknowledge any liability under the policy, brought this suit,- claiming the entire cause of action was vested in him by virtue of assignments to him by the other beneficiaries of their interests. When the policy was issued defendant was known as Knights Templers and Masons. Life Indemnity Company but later its name was changed to Western Life Indemnity Company.

The following issues are presented by the pleadings and evidence: 1st. Were assessments 303 and 304 which the assured failed to pay legally levied and did the failure of the assured to pay them afford ground for the forfeiture of his rights under the policy? 2d. Did his failure to pay dues and assessments which accrued or were levied subsequently ipso facto work a forfeiture of the policy? 3d. Did the conduct of the assured disclosed by the evidence constitute an - abandonment of the policy?

All of these issues were resolved by the circuit court, where the case was tried without the aid of a jury, in favor of plaintiff, who recovered judgment for $5331.65, the face of the policy, with accrued interest, and the cause is before us on the appeal of defendant. The two assessments in question were levied October 2,1905, each was made for the avowed purpose "of paying’ a specified death loss of $5000, Mr. Wayland was duly notified of the assessments and, under date of October 4th, he wrote defendant the following letter:

“Under the existing circumstances, is there no way in which I can pay the present assessment, to keep my policy in force, with the understanding that the -money be returned to me if the company goes in the hands of a receiver, in which event I would not consider my policy worth a cent. I have nothing to show I have any claim in the Western Life Indemnity Company. My policy is issued by the K. T. & M. I. Co., and as a claim against the Western would not be of very much value, things look bad to me. Can you give me any assurance that the Western is O. K?”

To this letter defendant replied October 9th, as follows:

“Receipt is acknowledged of your favor under date October 4. The Western Life Indemnity Company is identically the same company as the Knights Templars and Masons Life' Indemnity Company, merely a change of name having been made, as provided by the statute, and for reasons set forth in the notice calling policy holders together last May for the purpose of considering the change.

Tour careful attention is invited to the circular letter sent to our policy holders, which refers to this change and many other features which have been recently published in this company’s affairs. I beg to assure you that everything contained in the circular letter referred to is the absolute truth, and unless the efforts of a few misguided members acting under the advice of unscrupulous attorneys are successful in causing the ruin of a solvent organization, you need have no apprehension as- to the future.

It is quite impossible to make any arrangements whereby, the payments of premiums or assessments due can be held in escrow. This company is solvent, and doing business as usual, meeting every legitimate claim and paying same when due.

In order to maintain your insurance contract with this company it will be necessary for you to make remittances in due time, as provided in the notice sent you. ’ ’

Not hearing again from Mr. Wayland defendant, on October 16th, sent him the following notice:

“A notice of the last assessment, amounting to fifteen dollars, was mailed to you at the above address on the 2d day of October, 1905. This assessment still remains unpaid. Article 5, section 5 of the by-laws, as now in force, reads as follows:

Article Y.

Sec. 5. Any member who fails to pay or to forward the amount stated in any assessment notice to be due from him within ten (10) days,after such notice is mailed to him, is ipso facto suspended from membership and from all the benefits arising therefrom; any member thus suspended from membership and. benefits shall be reinstated ipso facto by the receipt of all amounts due'from him at the company’s home office in Chicago, while he is alive, within thirty (30) days after such notice was mailed, but the receipt of such a payment at said office from a suspended member after his death shall not affect a reinstatement, though it may have been forwarded prior to his death, and any member from whom such amounts due are not so received at said home office within thirty (3Q) days after such notice is mailed, ipso facto, terminates his membership and all the benefits arising therefrom. The death of any member during his suspension from membership and benefits, terminates the right to reinstatement by payment of any amount due from him and absolutely defeats the right of any beneficiary or beneficiaries to recover any benefits from this company.

For this nonpayment yon are now suspended and are carrying yon own risk, but if the above amount is received at this office while you are alive, any time within thirty days after the 2d day of October, 1905, yon will be thereby reinstated to membership.

Your attention is called to this as a matter of courtesy only, and we trust that you will attend to it at once. Kindly let ns hear from you on receipt of this.”

This closed the correspondence. -Mr. Wayland did not apply for reinstatement or pay any further dues or assessments and defendant regarded and treated his policy as. forfeited as appears from the following evidence of defendant:

“Q. "Was any notice given Mr. Wayland that there would be annual dues expected of him on the 24th day of June, 1906? A. I couldn’t answer that definitely, but. my impression is that there would not be any notice sent to him.

“Q. And why, Mr. Moulton? Why do yon say that your impression is that there would not be any notice sent to him? A. For the reason that he had failed to pay assessments 303 and 304,- which had been called on that policy.

“Q. Before that time? A. Before that time.

“Q. Then from your best information you would say no further notice was given with respect to annual dues? A. After Mr. Wayland’s failure to pay assessments number 303 and 304, it is my belief that there were no notices extended after that date — after that failure to pay those assessments.

“Q. If they were sent it would be contrary to the whole conduct of the company would it not? A. Yes.”

Pertinent provisions of defendant’s constitution and by-laws thus were stated by Judge Goode in Craig v. Insurance Company, 136 Mo. App. l. c. 8, an action against the same defendant, similar in all essential features to the one in hand:

‘ ‘ The constitution and by-laws are a single instrument composed of different articles consecutively numbered, but not divided or designated separately by the two titles. Such portions of-them as are relevant to the appeal will be epitomized. They require the board of directors to hold in trust the property, and assets of the company in accordance with their provisions (article 3, section 1). No member of the order may take out more than $5000 insurance. On receipt of proofs of the death of a member, an assessment must be' levied on the surviving members at a rate increasing with their age, and according to a prescribed table of rates, except in the contingency provided for in the constitution as follows:

“ ‘No assessment shall be made for less than the above table of rates (i. e., one previously set out in the constitution) nor as long as the money in the death fund will pay the'maximum loss in full.’ If a member defaults in the payment of any assessment for sixty days after he is notified, the constitution says he shall be suspended, ipso facto, from membership and all benefits accruing therefrom, subject to certain opportunities for reinstatement (article 6, section 2). An annual due of one dollar for each thousand dollars of insurance is required on life policies (article 4, sections 3, 4 and 5). A death fund and a contingent fund are to be created in this manner; seventy-five per cent of all money accruing from assessments is to be placed to the credit of the death fund and used for no purpose except paying death losses and disability claims. All other money accruing to the company must be placed in the contingent fund, out of which the expenses and ‘emergencies’ shall be paid and the surplus invested in the name of the company in reliable securities (article 8). It is apparent the contingent fund must include twenty-five per cent of the assessments, or the whole amount of them less the seventy-five per cent to be carried into the death fund, and include also the annual dues of one dollar for each thousand dollars of insurance. When a claim arises, against the company in consequence of the death of a member, and is allowed by the directors, they are required to pay it in sixty days after receipt of satisfactory proofs of death, and there is this further proviso in the same connection; when the board of directors deems it expedient,' the claim may be paid from the contingent fund ‘as an emergency, before the collection of the assessment, if any, which may be levied for the payment of said policy; and in such case the proportion of such assessment which would go to the death fund, or as much thereof as is necessary, may be used to reimburse the contingent fund’ (article 7). When the surplus or contingent fund exceeds one hundred thousand dollars, a member who has' kept up his policy for ten years, shall receive a bond bearing three per cent interest for such portion of the surplus as the total sum paid by the member during the ten years bears to the total sum received by the company during said period (article 7, section 2). The constitution cannot be changed except at a regular meeting of the company and by a vote of three-fourths of the members present and voting. ’ ’

Plaintiff claims there was more than enough money in the death fund to pay the two death losses aggregating ten thousand dollars and, therefore, that the assessments in controversy were illegal because they were unnecessary, whilst defendant contends that the death fund not only was deficient, but was overdrawn and indebted to other funds in the sum of $393,509.10.

It appears that in February, 1905,' defendant bought the business of the Pennsylvania Insurance Company, an old line company, for which it paid a broker named Morgan $200,000. This payment was made — so defendant’s books show — out of its contingent fund. From February to September 12, 3905, defendant collected premiums from the policy holders thus acquired (between 6000 and 7000) aggregating $99,104.20, and placed all such collections in its contingent fund. In the same period it paid death losses on “Pennsylvania” policies in the sum of $10,978.04, and these disbursements were paid out of defendant’s death fund. Defendant claims that these losses though charged to the death fund, were paid out of the contingent fund, for the reason that the death fund was insolvent to the extent of about $400,000, but though defendant’s president testified in its behalf, he gave no explanation or reason for the remarkable and, we might say, incredible state of affairs disclosed by the books.

It will be seen that the case in hand cannot be differentiated from that considered by the St. Louis Court of Appeals in Craig v. Insurance Co., supra, and we hold, as did our sister court, and for the same reasons, that the assessments for the non-payment of which defendant declared a forfeiture were illegal and void. As is well said by Goode, J., “no forfeiture of the membership of the deceased could be worked for omitting to pay an illegal assessment. The right to assess is strictly construed and it can only be exercised when the conditions prescribed in the contract of insurance exist.” [Insurance Co. v. Guse, 49 Mo. 329; Insurance Co. v. Comfort, 50 Miss. 662; 2 May on Insurance (4 Ed.), sec. 557; 2 Joyce on Insurance, 1310.]

The most serious question in the case is whether or not the conduct of the assured subsequent to the declaration of forfeiture by defendant amount to an abandonment of his policy.

“The test of an abandonment of rights under a life insurance policy is the existence of an intent to abandon and the presumption is that the owner of property intends to preserve his rights.” [Manhattan Ins. Co. v. Wright, 126 Fed. 82; Life Ins. Co. v. Berwald, 76 S. W. 442; Packard v. Ins. Co., 9 Mo. App. 469.]

The fears expressed in the letter of the assured respecting the solvency of defendant and the request they prompted, in no sense were evidence of an intent to abandon any of the rights the assured then had nor did they recognize as legal what, in fact, was illegal. It appears quite clearly that the doubts of the assured were caused by the levy of assessment which subsequent investigation has shown were wrongfully levied and it is fair to presume that had defendant pursued a legal and just course with its policy holders and levied none but proper assessments, the assured would have ^performed his part of the contract as he had been doing for sixteen years. It must be borne in mind that the declaration of forfeiture was subsequent to the letter. After that declaration the assured remained silent and the real question for our determination is whether or not such silence, coupled with a failure to pay or tender-payment of subsequent legal assessments, would indicate an intent in the assured to abandon his property.

Let us consider his position during the three years that elapsed from the date of the declaration of forfeiture to the date of his death. The notice of forfeiture he received apprised him of defendant’s purpose to regard his contract a& ended and his rights thereunder forfeited. As time went on he knew that other assessments were being levied and the- omission of defendant to give him notice of snch assessments was, in effect, notice to him that defendant was continuing in its position that he was no longer a policy holder. He knew that an offer to pay legal assessments would be rejected unless he accompanied such offer with an offer to pay the illegal assessments and complied with the rules provided for the reinstatement of a forfeited policy. Certainly no one could have the temerity to argue that he was compelled to submit to unlawful exactions on pain of being treated as having abandoned his rights, and on what principle may it be said that he was required to tender payment of legal assessments that defendant admits would have been refused, or to bring suit to have his policy reinstated when, in fact, and in law, no forfeiture had occurred? The attempted exaction of an illegal assessment and the declaration of defendant that it would not continue in contractual relation with the assured except on his submission constituted a breach of the contract of insurance that relieved the assured of the obligation to pay or tender payment of subsequent lawful assessments as long as defendant persisted in its wrongful course. The true doctrine thus is expressed in Shaw v. Insurance Company, 69 N. Y. 286:

“Where one party to a contract declares to the other party to it, that he will not make the performance on the future day fixed by it therefor, and does not, before the time arrives for an act to be done by the other party, withdraw his declaration, "the other party is excused from performance on his part, or offer to perform, and may maintain his action for a breach of the contract when the day has passed. Such is the well-established rule. [Ford v. Tiley, 6 B. C. 325; Franchot v. Leach, 5 Cow. 506; Traver v. Halsted, 23 Wend. 66.] In England the rule is carried much further, and it is held that the positive, absolute refusal by one party to carry out the contract is in itself an immediate complete breach of it on his part, and dispenses the other party from the useless formality of tendering performance of the condition precedent, and gives immediate right of action. [Cort v. Abergate R. Co., 6 Eng. L. & Eq. 230; Hochster v. De La Tour, 20 Id. 157; Frost v. Knight, L. R., 7 Exch. 111.] And see, also, for the doctrine in this state, Burtis v. Thompson, 42 N. Y. 246; 1 Am. Rep. 516.] But we need not at present go further than the proposition first stated, and sustained by decisions in our own state reports. There is no doubt that the defendant repudiated all obligation to the plaintiff, and so declared to her it would have been a useless act for her áfter that to have sought the defendant and made offer to pay the annual premium. Nor need she, though / the defendant had released future performance, act 'with effect until the death of her husband, the event which was contemplated by the contract as giving immediate right of action. It was then she sustained, the injury which was the cause of damage to her, by the nonperformance by the defendant of their contract. ’ ’

Among the authorities to the same effect are the following: Heyer v. Ins. Co., 73 N. Y. 516; Guetznow v. Ins. Co., 105 Wis. 448; Pulling v. Ins. Co., 52 Ill. App. 452, 159 Ill. 603; Griesemer v. Insurance Co., 10 Wash. 202, 38 Pac. 1031; Sullivan v. Ben. Assn., 26 N. Y. S. 186; Pilcher v. Ins. Co., 33 La Ann. 222; Ins. Co. v. Smith, 42 O. St. 156; Grand Lodge v. Scott, 93 N. W. 190; 2 Joyce on Insurance, 1123; Ins. Co. v. Benefit Society, 181 Pa. 443; Agnew v. A. O. U. W., 17 Mo. App. 254; Ins. Co. v. Germany, 74 Ga. 57; 3 Cooley’s Brief on Insurance, 2330; 3 Bacon on Benefit Societies & Life Ins., sec. 376; Reed v. Ins. Co., 82 N. E. 736; Hicks on Ins. Co., 96 S. W. 962; Ins. Co. v. Ins. Co., 86 Pa. St. 236; Benjamin v. Assn., 79 Pac. 517; Heinlein v. Ins. Co., 59 N. W. 615; Strauss v. Assn., 36 S. E. 352; Life Assn. v. Kentner, 58 N. E. 966; Hayner v. Ins. Co., 69 N. Y. 435.

It must be remembered that a life insurance policy is not a contract of indemnity but a contract to pay money upon the death of the assured in consideration of certain payments being made during his life (Reed v. Ins. Co., supra), and, therefore, it is a contract for life and not merely one for the period covered by the last periodical premium with the privilege of renewal. [Life Ins. Co. v. Statham, 93 U. S. 246.] The contract continues in force during the life of the assured and can be terminated before the event of his death and against his will only by a breach by him of some obligation or duty imposed on him by the terms of the contract. The insurer cannot make its own wrongful repudiation of the contract a ground of forfeiture nor can the mere passive, silent resistance of the insured to the unlawful aggression, be tortured into an abandonment of the policy. [Guetznow v. Insurance Co., supra; Purdy v. Assn., 101 Mo. App. 109; Smith v. Roach, 59 Mo. App. 115; and cases cited; Spurlock v. Sproule, 72 Mo. l. c. 509; Bostwick v. Fire Department, 49 Mich. 513; 3 Cooley’s Brief on Insurance, p. 2398.]

There is a line of decisions that on casual reading might be considered unfriendly to the rules we have stated and have shown to be so abundantly supported by authority, but a more careful consideration and analysis of these decisions discloses that they are not out of harmony with the great current of authority to which we have referred. They relate to cases where the assured evidently did abandon the policy and after his death his beneficiary attempted to rely, not on a wilful, illegal exaction of the assurer attempted to be forced on the assured in defiance of his lawful rights, but on some mere negligence or technical error with respect to the giving of some notice in conformity with the terms of the contract.

The courts very wisely refuse to recognize as sound a position resting on such an arbitrary and unfair foundation. The holder of an insurance policy, knowing that premiums, and assessments will become due periodically, has no right to sit down in silence, fail to pay subsequent premiums and nurse the point that by some slight oversight or mere technical error the assurer has given him the right to hold his insurance without paying for it. Such are the cases of Insurance Co. v. Hill, 193 U. S. 551; Insurance Co. v. Phinney, 178 U. S. 328; Insurance Co. v. Sears, 178 U. S. 345; Smith v. Ins. Co., 63 Fed. 769; McDonald v. Grand Lodge,-Ky. Law, 883, 53 S. W. 282; Lane v. Ins. Co., 33 Wash. 577.

The distinction between those cases and the one in hand is obvious. In the one class the insurer was guiltless of conscious wrongdoing and merely negligent or mistakenly inaccurate in the performance of some technical duty and the beneficiary of the lapsed policy was attempting to take what the court in the Hill case (supra) designated as “snap judgment.” In the case under consideration the assurer by levying assessment’s that had no contractual or legal foundation, deliberately violated the contract and then arbitrarily declared it forfeited because the assured would not submit to the imposition. On what principle should he be required to protest and to keep on protesting' against an injury of that character, or to tender lawful assessments subsequently levied which the excessive and high handed conduct of the assurer proclaimed would not be accepted? Or why should he be required to engage in expensive litigation to reinstate his policy — a contract for life — which had not been legally forfeited and which he had performed until the breach by defendant made further performance impossible?

We fail to find a single case in support of a doctrine so unfair and so violative of fundamantaí principles of contract law that would hold the assured remiss for standing on his contract in reliance on his right to require the assurer to treat him fairly and to perform its part of the contract. Our attention has been called to the case of Ryan v. Life Assn., 96 Fed. 795. In that case the assured, disgusted at the conduct of the assurer wrote a letter in which he expressly stated that he “had quit” — - had abandoned the policy. Of course a party to a contract which has been breached by the other party may elect to terminate the contract. That is a familiar rule of contract law, but it has no application here for the reason that Wayland did not make such election but merely remained silent after he received notice of the forfeiture.

And there is another class of cases to which we are referred that are not in point. They relate to the suspension or expulsion of members of fraternal beneficiary societies, stock exchanges, guilds, etc. [Glardon v. Supreme Lodge, 50 Mo. App. 45; Miller v. Grand Lodge, 72 Mo. App. 499; Lavin v. Grand Lodge, 112 Mo. App. 1; Range v. Supreme Council, 128 Mo. App. 461; Kouter v. St. Louis Stock Exchange, 189 Mo. 26.]

A terse statement of the rule of such cases is that a member of a lodge, fraternal society, or guild, should exhaust the remedies offered him by the rules and practices of the society for the correction of an injury caused by a wrongful suspension or expulsion before he resorts to the courts and, failing to avail himself of such opportunity, will be held to have acquiesced in his suspension or expulsion. Conceding, arguendo, the soundness of this rule, it does not apply to old line or assessment insurance where, as here, the so-called member is a member only in name and has no opportunity of appealing to the legislative body of a democratic organization for a redress of his wrongs. In Lavin v. Grand Lodge, supra, Goode, J., observed the difference in this respect between fraternal and old line or assessment insurance. Speaking of decisions relating to the latter classes of policies, he says:

“It is obvious such decisions have a very remote bearing on tbe question at issue in tbe present controversy. They were given in cases not against benevolent societies but where a company organized for profit was endeavoring to avail itself of a default which it had caused. Tbe purpose of tbe present defendant is not profit but to provide for tbe families of deceased members; and there is nothing even tending to prove it would have refused to reinstate Lavin, or correct tbe blunder made against him, if be bad sought redress. No motive for such a refusal appears.”

But in a fraternal society where tbe injury is. not tbe result of a mere blunder as in tbe Lavin case, but is clearly shown to be an intentional and wrongful aggression against tbe rights of tbe member, committed or ratified by tbe supreme power in tbe society, there is no reason in law or morals for compelling tbe injured member to go through tbe vain and useless form of obtaining redress in tbe society.

But it is suggested that it would be unjust -to allow an assured whose policy bad been wrongfully forfeited to sit idly by for, perhaps fifty years, without paying or offering to pay lawful premiums or assessments. But if tbe forfeiture has been caused by tbe intentional wrong of tbe assurer, or by its breach of tbe contract, of which it must have known, and it persists in its unlawful attitude, wherein lies tbe injustice • of bolding it to its contract?

It is a misconception of tbe rules we are applying to say they give tbe assured free insurance and, therefore, give him an advantage over paying members. In tbe first place, members who submit to unlawful exactions are not entitled to any special consideration on account of such complaisance, and in tbe next place, tbe law charges lawful premiums on assessments against tbe assured and bis beneficiary must have them deducted from tbe benefit and may recover only the difference. [Reed v. Ins. Co., supra, and cases cited.]

This sufficiently answers the free insurance agent argument. Our conclusion is that Wayland did not abandon his policy by his mere failure to protect against the forfeiture and his subsequent omission to tender payment of valid assessments.

We find no error in the rulings of the trial court on declarations of law asked by defendant and a careful inspection of the record convinces us that the issues were fairly tried.

The judgment is for the right party and is affirmed.

Broaddus, P. Jconcurs; Ellison, J., dissents in separate opinion.