Clark v. Allen , 1877 R.I. LEXIS 20 ( 1877 )

This is an action for money had and received, tried to the court, jury trial being waived. It appears that on the 26th December, 1868, one Edward T. Ross got his life insured for $2,000, payable to his wife at his decease. His wife was a second wife. He had children by his former wife, but none by her. She died before him, August 21, 1871. He was then in infirm health and short of means. He did not pay one premium promptly. The company, however, accepted payment afterwards, and issued the policy anew, payable to his legal representatives. On the 2d of January, 1872, he assigned the policy to the defendant, and received the defendant's note for $125, which was paid April 10, 1872. The surrender value of the policy at the time of the assignment was $118. The defendant was Ross's brother-in-law. After the assignment, which was assented to by the insurers, the defendant paid five quarterly premiums of $25 each. Ross died March 24, 1873. The defendant collected on the policy $2,121.20. The plaintiff, who is administrator on Ross's estate, brings this action to recover that amount, less the amount of the note for $125, and the five quarterly premiums with interest.

The plaintiff claims that the assignment was made as security for a loan, and not as an absolute sale. Testimony was submitted on this point. We think the assignment was intended to be an absolute sale.

The plaintiff contends that, if the assignment was an absolute sale, it was void as against public policy, and that he is therefore entitled to recover the money received on it, less the payments aforesaid, as money received to his use. The defendant claims that the assignment, though absolute, is valid, and that he is entitled to keep the money as his own.

Upon the question thus raised there is a conflict of decision. In Massachusetts and Indiana, it has been decided that a life policy is not transferable outright to a person who has no interest in the life insured. Stevens, Adm'r, v. Warren,101 Mass. 564; Franklin Life Ins. Co. v. Hazzard, 41 Ind. 116. A similar decision (but in a case having peculiar circumstances) has been made by the Supreme Court of the United States.Cammack v. Lewis, 15 Wall. 643. The reason given is, that it is unlawful for a person to procure insurance for himself on a life in which he has no interest, and that therefore it is unlawful for him to take an absolute assignment of a policy upon a life in which he has no interest; for otherwise the law could always be easily circumvented by first having a person get his own life insured and then taking an assignment of the policy. And it is also argued that the gambling or wagering element is the same, and the temptation to shorten the life insured is the same, in the one case as in the other. But, on the other hand, it has been decided in England, that such an assignment is valid. Ashley v.Ashley, 3 Sim. 149, cited without disapproval by Chancellor Kent, in 3 Kent's Com. *369, note. The reason given is, that such an assignment is not within the prohibition of the English statute, 14 Geo. III. cap. 48, and that the policy, being valid in its inception, is, like any other valid chose in action, assignable at the will of the holder, whether the assignee has an interest in the life insured or not. This view has been repeatedly affirmed in New York. St. John v. Am. Mut. LifeInsur. Co. 2 Duer, 419; also in 13 N.Y. 31, on appeal; Valton v. Nat. Fund Life Assurance Co. 20 N.Y. 32; and see Cunninghamet al. v. Smith's Adm'r, 70 Pa. St. 450. We think the assignment was valid. A life policy is a chose in action, a species of property, which the holder may have perfectly good and innocent reasons for wishing to dispose of. He should be allowed to do so unless the law clearly forbids it. It is said that such an assignment, if permitted, may be used to circumvent the law. That is true, if insurance without interest is unlawful; but it does not follow that such an assignment is not to be permitted at all, because if permitted it may be abused. Let the abuse, not the bona fide use, be condemned and defeated. See Shilling,Adm'r, v. Accidental Death Insurance Co. 2 H. N. 42. It is not claimed that the parties to the assignment here in question had any design to circumvent or evade the law. Perhaps Cammack v. Lewis, 15 Wall. 643, supra, may be found to be a case of that kind. Again the assignment is said to be a gambling transaction, a mere bet or wager upon the chances of human life. But the wager was made when the policy was effected, and has the sanction of the law. The assignment simply transfers the policy, as any other legal chose in action may be transferred, from the holder to a bona fide purchaser. It is true there is an element of chance and uncertainty in the transaction; but so there is when a man takes a transfer of an annuity, or buys a life estate, or an estate in remainder after a life estate. There is in all these cases a speculation upon the chances of human life. But the transaction has never been held to be void on that account. But finally it is urged that the purchaser or assignee subjects himself to the temptation to shorten the life insured, and that this the policy of the law does not countenance. The law permits the purchase of an estate in remainder after a life estate, which exposes the purchaser to a similar temptation. It has been decided, too, that a policy effected by a creditor on the life of his debtor does not expire when the debt is paid, though the holder then ceases to be interested in the continuance of the life, and is thereafter exposed to the same temptation which is supposed to beset the assignee without interest, to bring it to an end.Dalby v. India London Life Assurance Co. 15 C.B. 365; Law v. London Indisputable Life Policy Co. 1 Kay J. 223; Rawls v. Amer. Life Ins. Co. 36 Barb. S.C. 357; also in 27 N.Y. 282, on appeal; Campbell v. N.E. Mutual Life Insurance Co.98 Mass. 381; Provident Life Insurance Invest. Co. v. Baum,29 Ind. 236.

If the danger is not sufficient to avoid the policy when the interest ceases, why should it be sufficient to avoid the assignment to an assignee without interest? The truth is, it is one thing to say that a man may take insurance upon the life of another for no purpose except as a speculation or bet on his chance of life, and may repeat the act ad libitum, and quite another thing to say that he may purchase the policy, as a matter of business, after it has once been duly issued under the sanction of the law, and is therefore an existing chose in action or right of property, which its owner may have the best of reasons for wishing to dispose of. There is in such a purchase, in our opinion, no immorality and no imminent peril to human life. We should have strong reasons before we hold that a man shall not dispose of his own. Courts of justice, while they uphold the great and universally recognized interests of society, ought nevertheless to be cautious about making their own notions of public policy the criterion of legality, lest, under the semblance of declaring the law, they in fact usurp the function of legislation. Hilton v. Eckersley, 6 El. B. 47, 64.

We therefore decide that what ever the law of this state may be in regard to procuring insurance upon the life of another without any interest in the life insured, it does not forbid the sale and assignment of a valid policy, which is already in existence, to an assignee without interest in the life insured, when the assignment is permitted or not prohibited by the policy, and is made, not as a contrivance to circumvent the law, but as an honest and bona fide business transaction.

Judgment for defendant for his costs.

NOTE. — For a commentary on this case, see Amer. Law Register N.S. vol. 17, p. 83, February, 1878.