Wilson v. Prudential Ins. Co. of America

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] On October 22, 1926, defendant issued to Frederick J. Wilson, then 16 years of age, a 30-year $2,000 endowment policy in which plaintiffs were named as beneficiaries. Subsequently, on April 22, 1929, in consideration of an extra premium and by an appropriate rider, defendant agreed to pay an additional sum of $2,000, double indemnity, in case the insured met death by accident, this double indemnity rider to become null and void should the nonforfeiture privileges of the policy become operative. The policy provided in one of the nonforfeiture clauses that where the policy lapsed for nonpayment of premiums the insurance should be automatically extended for a period reflected by the cash surrender value of the policy. It is conceded that the quarterly premiums up to and including that due on October 22, 1929, were paid. On December 6, 1929, the insured borrowed $100 from defendant upon the sole security of the policy. He died as a result of an accident on May 9, 1931. Defendant based its refusal to pay the loss on the ground that the policy was null and void through a lapse of the policy owing to the failure to pay the quarterly premiums due after October 22, 1929. Plaintiffs brought suit and in their declaration, as modified by their reply, claimed the original amount of the policy, plus the additional $2,000, together with interest on such sums, less the amount borrowed by the insured from the defendant, plus interest. The sole question presented to the jury was:

"Were all premiums which became due prior to the death of Frederick Wilson, the insured, paid to the insurance company?"

The answer was in the affirmative. Thereupon, the trial judge entered a judgment for the full amount of the policy and for double indemnity, together with interest, less the amount due on the loan and interest thereon.

Plaintiffs on cross-appeal, in claiming that the amount of the loan should not have been deducted in the rendition of the judgment, contend that, as insured was a minor when he made the loan, the loan was voidable and was disaffirmed by plaintiffs after insured's death which occurred 17 days after he became of age. We will not discuss the question raised by the fact that plaintiffs' pleadings authorized the deduction of the $100 loan from plaintiffs' recovery, as this question was not raised in the lower court nor discussed in the briefs. We affirm the trial court's action, however, on the ground that the loan was valid and binding under 3 Comp. Laws 1929, § 12454, which provides:

"All contracts for * * * insurance made by any person between the ages of 16 and 21 years for the benefit of * * * his father, mother, * * * or for the surrender of such insurance, or for the discharge of any money payable or benefit accruing thereunder, shall be * * * of the same force and effect as though said minor had attained his majority at the time of making such contract: Provided, That this section shall not have the effect of making a promissory note or other evidence of indebtedness given by such minor in payment of premium or premiums on such contracts for insurance valid, either in the hands of the original owner or subsequent purchaser thereof."

The note given by the insured was not for the payment of a premium. The loan was made in accordance with provisions for such in the contract of insurance wherein it was provided that any indebtedness to the company should be deducted from the amount otherwise payable by the company, that in computing the period of extended insurance the amount of the loan must be considered and deduction made. The loan and the attendant contractual obligations were binding by virtue of section 12454, and the trial court was correct in deducting it.

The jury was properly instructed that upon the introduction of the policy and the submission of proper proofs of death of the insured, a presumption arose that all premiums had been paid and that the policy had not lapsed. Rousseau v.Brotherhood of American Yeomen, 186 Mich. 101. Upon submission of evidence to the contrary by the insurer, the presumption in favor of the insured disappears, but the burden is on the insurer to establish the nonpayment of premiums. Watts v.Metropolitan Life Ins. Co., 211 Ala. 404 (100 So. 812);Pilot Life Ins. Co. v. Hawkins, 222 Ala. 218 (131 So. 889);Sovereign Camp, Woodmen of the World v. Madrigal, 40 Ariz. 396 (12 Pac. [2d] 615); Little v. Illinois Bankers Life Ass'n,247 Ill. App. 547; Ragan v. Provident Life Accident Ins. Co.,209 Iowa, 1075 (229 N.W. 702); Equitable Life Assurance Society v. Campbell, 85 Ind. App. 450 (150 N.E. 31, superseding148 N.E. 505); Smith v. Ohio Millers Mutual Fire Ins. Co.,330 Mo. 236 (49 S.W. [2d] 42); Medling v. Abraham Lincoln Life Ins.Co., 225 Mo. App. 1243 (41 S.W. [2d] 6); W. C. Carden Sons v. Sons Daughters of Liberty, 179 N.C. 399 (102 S.E. 610);Bianco v. Lentino, 177 N.Y. Supp. 244; Hall v. Scottish Rite,Knight Templars Master Masons' Aid Ass'n, 6 Ohio C.C. 137 (3 Ohio C. D. 384); Sullivan v. Supreme Council, Catholic MutualBenefit Association, 266 Pa. 57 (109 A. 604); Curdts v.Pioneer Life Ins. Co., 166 S.C. 94 (164 S.E. 438); WintersMutual Aid Ass'n v. Corum (Tex.Civ.App.), 297 S.W. 238; 4 Cooley, Briefs on Insurance (2d Ed.), p. 3863; 8 Couch, Cyclopedia of Insurance Law, § 2223. Defendant contends that this rule is only applicable to fraternal insurance, but as the authorities above cited and elsewhere hold, this rule is applied against both fraternal and nonfraternal insurance companies.

The jury rendered a verdict for plaintiff. Reversible error was committed in excluding from the jury's consideration the original records of the company, showing the insured's account with the company, on the ground that such evidence offended the rule prohibiting the admission of testimony equally within the knowledge of the deceased.^* A clerk of the company testified that she made entries showing the status of the insured's account on a separate card such as was made out and kept by the company in the ordinary course of business for each policyholder. Plaintiffs conceded that a photostatic copy of the card might be used were not the original inadmissible for the reason stated. Defendant claims that beneficiaries are not persons who may invoke the protection of this statute. See Schempf v. New Era LifeAss'n, 253 Mich. 152, to the contrary. The court was in error in holding that the statute prohibiting testimony equally within the knowledge of deceased applied to books of account. By the great and overwhelming weight of authority, books of account properly presented are admissible for whatever evidentiary force they may have in order to establish a claim against the deceased person despite statutes, like the one in Michigan, prohibiting testimony as to matters equally within the knowledge of the deceased. Roche v. Ware, 71 Cal. 375 (12 Pac. 284, 60 Am. Rep. 539); Haines v. Christie, 28 Col. 502 (66 Pac. 883); Robinson v. Dibble, 17 Fla. 457; Chapin v.Mitchell, 44 Fla. 225 (32 So. 875); Strickland v. Wynn,51 Ga. 600; Dysart v. Furrow, 90 Iowa, 59 (57 N.W. 644);Alling v. Brazee, 27 Ill. App. 595; Anthony v. Stinson,4 Kan. 211; Mansfield v. Gushee, 120 Me. 333 (114 A. 296); Dexter v. Booth, 2 Allen (84 Mass.), 559; Green v. Gould, 3 Allen (85 Mass.), 465, 467; Bookout v. Shannon, 59 Miss. 378;Martin v. Scott, 12 Neb. 42 (10 N.W. 532); Jones v. Gammans,11 Nev. 249; Cather v. Damerell, 5 Neb. Unoff. 490 (99 N.W. 35); West v. Van Tuyl, 119 N.Y. 620 (23 N.E. 450);McGoldrick v. Wilson, 18 Hun (N. Y.), 443; Keener v. Zartman,144 Pa. 179 (22 A. 889); Cargill v. Atwood, 18 R.I. 303 (27 A. 214); Sanborn v. Dentler, 97 Wn. 149 (166 P. 62, 6 A.L.R. 749); Swafford v. White, 28 Ky. Law Rep. 119 (89 S.W. 129); Jones, Evidence, p. 4406, § 2273; 6 A.L.R. 756. Although the authorities almost unanimously uphold the rule that such records are admissible, it must be noted that these records are not at all conclusive and subject to the right of fullest cross-examination and comment in the argument to the jury. Although it may be contended with much force that fraudulent entries might be made and that to a degree the books and records are self-serving so that the rule might work an injustice in some case, it is true that, as a rule, in the regular course of business correct entries are made and records kept and, having a certain guarantee of trustworthiness, they have considerable evidentiary force. Insurance policies and premium receipts are not usually surrendered after a lapse. In view of the fact that the burden is on the insurer to prove that premiums have not been paid, it might frequently lead to a miscarriage of justice were insurance companies precluded from showing their books because of the statute forbidding testimony equally within the knowledge of the deceased. The statute prohibiting testimony equally within the knowledge of deceased should not be extended beyond its original meaning, nor should its scope be so widened as to bring about an absurd result. Schempf v. New Era Life Ass'n, supra, and PerfectCleaners Dyers v. Kirschbaum, 257 Mich. 430, cited by plaintiffs, are not in point. They refer to the exclusion of evidence other than books of account. The exclusion of insured's card on the ground that its admission was prohibited by 3 Comp. Laws 1929, § 14219, constituted reversible error.

There is considerable evidence in the case that tends to show that the policy had lapsed through nonpayment of premiums, but not sufficient so that we might hold that the contrary finding of the jury was against the great weight of the evidence or that the trial judge should have directed a verdict for the defendant. Inasmuch as we remand this case for a new trial on account of the error committed in excluding the card showing defendant's records for the reason stated, it is unnecessary to review or weigh this testimony except to state that the manner in which the case was presented led to confusion rather than enlightenment. Mrs. Wilson stated that after the death of the insured she and her husband went to the company's office and delivered the policy and receipts for premiums to a Mr. Wadsten, assistant superintendent of defendant's office. She did not state what the receipts showed. Wadsten, in turn, gave her a receipt for the policy itself, but not for any premium receipts. The company offered to produce Mr. Wadsten for cross-examination by plaintiffs. Their attorney, however, did not accept the offer. On the other hand, defendant also might have assisted the jury by putting Mr. Wadsten on the stand. While the parties were technically within their rights, the testimony might have shed considerable light on the controversy.

It was stipulated by counsel, without prejudice to the claim of plaintiffs that a 30-day notice was required, that if the loan were valid and no additional premiums were paid after the one due October 22, 1929, the automatic extended insurance provided for in the policy would extend the life of the policy only 35 days. This would run from January 22, 1930, and expire on February 26, 1930, more than a year before the death of the insured. As the jury found that all the premiums had been paid, the question of extended insurance was not an issue in the lower court. Had the records of the insurance company been introduced, or fuller testimony given, the jury might have reached a different result. On the new trial, should it be found that not all the premiums were paid and should the plaintiffs rely upon automatic extended insurance in an attempt to show the life of the policy extended beyond the death of the insured, it should be noted that as the loan was valid, it would have to be deducted from the cash surrender value of the policy in computing the amount of automatic extended insurance. The policy so provides, and the cases interpreting such provisions have so held. Pilot Life Ins. Co. v. Owen (C. C. A.), 31 Fed. (2d) 862; Massachusetts Mutual Life Ins. Co. v.Jones (C.C.A.), 44 Fed. (2d) 540; Langley v. Prudential Ins.Co., 271 Fed. 776; Meridian Life Ins. Co. v. Hobbs,200 Ala. 487 (76 So. 429, L.R.A. 1918 A, 904); NationalLife Ins. Co. v. Kuykendoll, 206 Ky. 361 (267 S.W. 140);Winters v. Reserve Loan Life Ins. Co., 221 Mo. App. 519 (290 S.W. 109), certiorari quashed in 315 Mo. 1295 (290 S.W. 115);Mills v. National Life Ins. Co., 136 Tenn. 350 (189 S.W. 691);Meserole v. Southwestern Life Ins. Co. (Tex.Civ.App.),203 S.W. 1161; Couch, Cyclopedia of Insurance Law, § 647a; 4 Cooley, Briefs on Insurance (2d Ed.) p. 3818.

We shall not discuss any other questions that suggest themselves, but are not raised in the briefs. The judgment is reversed and a new trial granted. Defendant will recover costs.

NORTH, C.J., and FEAD, WIEST, BUSHNELL, EDWARD M. SHARPE, and TOY, JJ., concurred. POTTER, J., took no part in this decision.

^* See 3 Comp. Laws 1929, § 14219. — REPORTER.