Lane v. New York Life Ins. Co.

These two cases involve separate policies of insurance of $3,000 each, upon the life of the plaintiff Joe P. Lane. His wife, the plaintiff Mamie M. Lane, is the beneficiary in both. The action is to obtain an adjudication that the two policies which have been declared by the defendant to have lapsed by reason of the default in the payment of certain premium notes are of force.

The two cases, by agreement, were heard together by his Honor, Judge Dennis, upon testimony taken before the Master to whom the cases were referred for that purpose only. Judge Dennis filed a decree, dated September 19, 1925, ordering a reinstatement of both policies. Later he filed a supplemental decree, requiring the insured to pay all premiums unpaid, with interest from the dates of the checks tendered by him. The defendant has appealed from that portion of the decree which orders a reinstatement of both policies, and the plaintiffs have appealed from that portion requiring the payment of interest upon checks tendered and not accepted.

Each of the policies contained the following provisions which bear upon the issues involved:

"With the right on the part of the insured to change the beneficiary, in the manner provided for in Section 6." (The particulars of the exercise of such right do not concern the issues here involved.)

"The insured may, without the consent of the beneficiary, receive every benefit, exercise every right and enjoy every privilege conferred upon the insured by this policy."

(For convenience I shall confine my observations to the action on policy No. 6926303.)

The policy, dated March 9, 1921, called for an annual premium of $109.62; the first premium was due in advance, upon the delivery of the policy, March 9, 1921; the succeeding premiums were due upon the same day of the following years. The first premium was paid as required.

A few weeks before the maturity of the second annual premium, on March 9, 1922, and in anticipation of his inability to meet it, the insured wrote to the company asking that the payments of premiums be changed from annual to semiannual payments. The company acceded to his request, and on February 15, 1922, a written agreement was entered into between the insured and the company, which provided that thereafter, beginning with the date of the maturity of the second annual premium, March 9, 1922, the premiums should be paid semiannually. The first installment of the second annual premium was made payable on March 9, 1922, $57, and the second, on September 9, 1922. (Note. One-half of the annual premium of $109.62 would be $54.81; $2.19 less than $57. I assume that the discrepancy is due to an interest charge.) This arrangement was in conformity with a provision in the policy reading thus:

"The premium is always considered as payable annually in advance, but by agreement in writing, and not otherwise, may be made payable in semiannual or quarterly payments."

Before the semiannual payment under this arrangement fell due on March 9, 1922, the insured again expressed his inability to meet the obligation, at least he expressed the inconvenience that it would cause him, and wrote the company on March 4th that he wished to meet it by paying 50 per cent., $28.50, cash, and giving his note for the remainder, due 90 days from March 9th. The company did better by him than he asked; they wrote him on March 8th that they would accept $10.50 cash and his note for $46.50, payable June 9th, and inclosed a blank note for that amount, requesting him to sign and return it, with the required cash. Lane signed the note and returned it with cash, $10.50.

This $46.50 note, known as a "blue note," is the storm center of the controversy; it is proper, therefore, that it be set out in full. (Italics added):

"Pol. No. 6926303. March 9th, 1922.

"On or before June 9th, 1922, after date, without grace,and without demand or notice, I promise to pay to the New York Life Insurance Company Forty-six and 50/100 Dollars at S.C. Branch Office, Columbia, S.C. value received, with interest at the rate of five per cent. per annum.

"This note is accepted by said Company at the request of the maker, together with Ten and 50/100 Dollars in cash on the following express agreement: That although no part of the premium due on the 9th day of March, 1922, under Policy No. 6,926,303 issued by said Company on the life of Joe P. Lane has been paid, the insurance thereunder shallbe continued in force until midnight of the due date of saidnote; that if this note is paid on or before the date it becomes due, such payment, together with said cash, will then be accepted by said company as payment of said premium, and all right under said policy shall thereupon be the same as if said premium had been paid when due; that if this noteis not paid on or before the day it becomes due, it shall thereuponautomatically cease to be a claim against the maker andsaid Company shall retain said cash as part compensation forthe rights and privileges hereby granted, and all rights undersaid policy shall be the same as if cash had not been paidnor this agreement made, except only that the time within which the owner may make a choice of benefits after lapse, as provided in said policy, is hereby extended for three months after the date of this note, but no longer; that said Company has duly given every notice required by its rules or by the laws of any State in respect to said premium, and in further compensation for the rights and privileges hereby granted the maker hereof has agreed to waive, and does hereby waive, every other notice in respect to said premium or this note, it being well understood by said maker that said Company would not have accepted this agreement if any notice of any kind were required as a condition to the full enforcement of all its terms. "$46.50 [Name] JOE P. LANE. "[Address] Dillon, S.C."

On April 18, 1922, the insured became ill with gastric ulcer, and went to a hospital in Baltimore, where he remained until June 10th. He was then discharged, returning to his home in Dillon about the 11th, two days after the maturity of the "blue note," which was, as stated, June 9th.

On June 26th he wrote the company inquiring as to the maturity of the note which he thought was for "about $26" ($46.50 in fact). The company replied, on the 27th, that the maturity was June 9th; that it was for $46.50, and not $26.00; that it was impossible for it to be extended further; and transmitting an application for reinstatement, to be accompanied by what was termed a "self-health" certificate.

The insured, it appears, was under the impression that the "blue note" had been executed in April, instead of March, and that, running 90 days, it would mature in July instead of June.

To the company's letter of the 26th, the insured replied on the 29th, claiming that the policy had not lapsed, for the reasons that he had not been notified of the maturity of the note, and that, being disabled, the disability relieved him of the necessity of prompt payment; threatening recourse to the Court to establish his claim. With the letter he transmitted a check for $47.25, which he claimed was as much as was due on the note. He declined to sign the application for reinstatement, for the reason that he could not truthfully say that he had not been sick within the preceding 12 months.

On July 3d the company replied, claiming that the policy had lapsed for nonpayment of the "blue note," according to its terms, and returning the check for $47.25; renewing its former suggestion of an application for reinstatement; and suggesting that the insured procure from the Baltimore physician a statement giving full details of the illness of the insured, diagnosis, treatment, and result.

Complying with the last suggestion, the insured, on July 10th, transmitted the medical statement referred to, and renewed his tender of $47.25 in payment of the "blue note"; also the signed application for reinstatement — "all of this without prejudice to my original rights."

The application for reinstatement, dated July 11th (evidently an error for July 10th), signed by the insured, acknowledgedthat the policy had lapsed for nonpayment ofthe premium note due June 9th; declared that the insured was then in good health, and that he had not, within the past 12 months, had any illness or consulted or been treated by any physician, from continuously pursuing his customary occupation, and that his condition was the same as it was when he applied for the policy, with the exception noted:

"Treated by Dr. Julius Friedenwald, Baltimore, Md., at Mercy Hospital from April 17th till June 10th, 1922, for gastric ulcer."

It contained also the following statement:

"If the evidence of my insurability is satisfactory to the Company and it has received in cash all sums the policy requires to be paid for re-instatement, then, and not until then, said policy shall be deemed re-instated. If said policy is not so re-instated, I agree to accept return of all sums paid in connection with this application, without interest."

The certificate of the Baltimore physician showed that the insured had been treated for gastric ulcer from April 18th to June 10th; that an X-ray examination "revealed a definite pyloric ulcer and enteroptosis"; that the patient was discharged on June 10th "in excellent condition after having taken a thorough medical ulcer rest-cure."

The application for reinstatement was referred to the medical board of the company. It was considered by Dr. North, a member of the board, who advised that it be declined. It was then referred to the classification committee, whose duty it was to pass upon applications for reinstatement after unfavorable action of the medical board. It was considered by Cooper, a member of that committee, who also advised against reinstatement. It was then referred to Macfarlane, one of the company's actuaries, who formally and finally declined it, of which the insured was notified on August 7, 1922.

On August 15th the insured transmitted to the company a check for the total amount of the premium which was originally payable on March 9th, regardless of the agreement for semiannual payments and of the agreement resulting in the execution of the "blue note." The check was returned. On March 29, 1923, the insured repeated the tender just referred to, which was also declined on April 2d with an offer by the company to consider a reinstatement of the policy. This closed the correspondence, and war was declared by the institution of this action, at a date which does not appear in the transcript.

The basis of the decree of his Honor, Judge Dennis, appears from the following extracts:

"I am of the opinion that the case of Brown v. Life Ins.Co., 114 S.C. 202, 103 S.E., 555 is conclusive in favor ofthe plaintiffs, because the Court there held, in unmistakable terms, that the beneficiary's rights being vested, they could not be impaired by the forfeiture provisions of a premium note, the same being a subsequent contract to the policy, and though the acceptance of the note constituted payment, although the unusual right was reserved to change the beneficiary." (Italics added.)

And also:

"The provisions of the policies, `that the insured may without the consent of the beneficiary, receive every benefit, exercise every right, and enjoy every privilege conferred upon the insured by this policy, does not militate against the conclusion above state, because the `blue note' agreement was not a benefit, right or privilege conferred upon the insuredby the policy."

And also:

"I may add that the evidence shows beyond doubt that Mr. Lane acted in the utmost good faith to keep his policies in force, and the attempt to forfeit them for a mere oversight while he was under treatment in a hospital does not appeal to a Court of Equity."

The opinion of Mr. Justice Carter makes no reference to either the first or second proposition advanced, as above stated, in the Circuit decree; and, as the opinion is indefinite as to the approval or disapproval of them, it appears to me that it is necessary that they be discussed.

As I interpret the opinion submitted, it is proposed to affirm the decree of his Honor, Judge Dennis, adjudging a reinstatement of the policy upon the grounds:

I. That there has been no forfeiture of the policy, for two reasons:

(a) The insured was entitled to prior notice of the maturity of the premium note due June 9, 1922;

(b) The insured was entitled to a reinstatement of the policy upon the ground that he had furnished to the company evidence of his insurability, which should have been acceptable to the company;

II. That conceding that the policy was forfeited by the failure of the insured to pay the premium note due June 9, 1922, ad diem, under the circumstances of the case, the Court, as a Court of equity, should relieve the insured from such forfeiture.

It will be observed that not one of these supporting grounds is discussed by his Honor, the Circuit Judge, except only a faint allusion to the second in the closing paragraph of the decree above quoted. It further appears that no such positions are taken in the complaint, in the evidence, in the exceptions, by motion to sustain, or in the brief of counsel. Consequently it appears mandatory to consider separately the grounds upon which the decree is based, and those upon which it is proposed that it be affirmed.

I. As to the Circuit decree:

The two main grounds upon which it is based are:

(1) That the insured had no power, by his agreement for an extension of the period within which the semiannual premium due March 9, 1922, could be paid, to bind the beneficiary to the conditions upon which that extension was secured.

(2) That the acceptance of the cash, $10.50, and the note for $46.50, due June 9, 1922, constituted a payment of the semiannual premium due, under the extension agreement, on March 9, 1922.

(1) As to the first ground: That the insured had nopower, by his agreement for an extension of the periodwithin which the semiannual premium due March 9, 1922,could be paid, to bind the beneficiary to the conditions uponwhich that extension was secured.

The learned Circuit Judge cites, in addition to the Browncase, the case of Barron v. Bank, 131 S.C. 441,128 S.E., 414, as holding that the rights of a beneficiary are paramount even to an assignment made by the insured.

In reference to the cases of Gunter v. Insurance Co.,130 S.C. 1, 125 S.E., 285, and Harvey v. Ins. Co., 131 S.C. 405,127 S.E., 836, he states that "neither of them in any way, impairs the authority of the Brown case, or involves the precise situation existing in the case at bar"; demonstrating beyond a doubt that the decree is based upon the principle announced in the Brown and Barron cases, that the interest of a beneficiary, even in a policy which reserves to the insured the right to change the beneficiary,is a vested right, which cannot be divested by the insured or the Company, or both, except in the mode provided for a change of the beneficiary.

It is due to the learned and just Circuit Judge to say that his decree was filed prior to the unanimous decision of this Court in the case of Antley v. Ins. Co., 139 S.C. 23,137 S.E., 199, which specifically overruled the Brown and Barroncases, upon which, as I have endeavored to show, the decree was based: (It is proper to state that in the Antleycase Mr. Justice Stabler did not participate.)

The Antley case was intended to set at rest the question, confused by conflicting opinions as pointed out, as to the status of the beneficiary of a life policy which contains the reservation of the right in the insured, at his pleasure, to change the beneficiary. It was there held, as was held in the case of Bost v. Insurance Co., 114 S.C. 405,103 S.E., 771, in an opinion by the present Chief Justice:

"Under this provision [for change of beneficiary], the beneficiary does not take a vested interest, as the policy itself reserved the insured the right to change the beneficiary with the consent of the Company. Unless this right was reserved to the insured by the terms of the policy, the beneficiary would take a vested interest. By the terms of the policies the insured reserved the right to change the beneficiary, without the beneficiary's consent, and under this provision the beneficiary acquired, not a vested interest during the life of the insured, but only an expectancy. * * * Under the provisions of the policy the insuredhad the right to act with the policy as he saw fit; that he had the right to change the beneficiary without her consent and to enjoy every benefit given him under the policy."

It is stated in the Antley case:

"The opinion of Mr. Justice Watts in the Bost case makes the proper distinction and draws the correct conclusion."

It is settled, therefore, that the interest of a beneficiary ina policy which reserves to the insured the right to changethe beneficiary is not a vested interest, but only an expectancy; and, whatever distinction may be drawn between theAntley case and the case at bar, that principle, the opposite of which is the basis of the Circuit Decree, is fixed. In fact, it is so conceded in the reply argument of the respondent's counsel.

I apprehend that it will be conceded that the insured had the right and power, when he realized his inability to meet the payment of the annual premium of $109.62 on March 9, 1922, to have the premiums changed from annual to semiannual; a change which was for the mutual benefit of the insured and the beneficiary; also the policy would in all probability have lapsed for nonpayment of the annual premium. Clearly the insured was under no obligation to obtain the consent of the beneficiary to effect this alteration in the terms of the policy.

Then, when he realized his inability to meet the half of the annual premium, the semiannual premium, due at the same time as the annual premium had been due, March 9, 1922, for the second time he threw out a lifeline to the sinking policy, in his proposition to pay one-half of that semiannual premium and give his note for the balance. The Company, as stated, offered in reply a more favorable arrangement than the insured proposed, namely, that he pay about 20 per cent. of the semiannual premium and give his note for the balance, payable in 90 days, upon the express condition in the note, that his failure to pay the note ad diem would avoid all interest in the policy. This he accepted; paid the cash required; and signed the note, agreeing to the condition upon which the indulgence was secured. He certainly could not repudiate it.

The question then is, if the Company had the right to waive the punctual and full payment of the semiannual payment upon certain conditions, and if the insured had the right to and did accept the Company's proposition with its conditions, is the beneficiary bound by the conditions imposed by the Company upon this indulgence and accepted by the insured?

Considering the settled law to be that the interest of a beneficiary in a policy which reserves to the insured the right, upon compliance with certain formalities, to change the beneficiary, is not a vested interest, but a mere expectancy, I think that it is equally well settled that, under these circumstances, the absolute dominion and control of the policy, except as to the matter of the prescribed mode of changing the beneficiary, should the insured so desire, remains in theinsured. The only right which the beneficiary has in the policy is to receive the proceeds in the event that the insured should die while it is in force, without having exercised the reserved right of changing the beneficiary, and to insist that, if such an attempt should be made, the mode prescribed in the policy therefor should be strictly followed. In every other respect the control of the policy by the insured is absolute.

In 37 C.J., 581 (quoted with approval in the Antleycase, 139 S.C. 23, 137 S.E., 199), it is said:

"On the other hand, where the right to change the beneficiary has been reserved in the policy so that the beneficiary does not have a vested right or interest, it is held that insuredhas complete control and domination of the policy; that his reserved right to change the beneficiary includes the lesser right partially to affect the rights of the beneficiary by assigning or creating a lien on the policy; and that he may do directly what he might do after having changed the beneficiary to himself or his estate."

In Mutual Ben. Life Ins. Co. v. Swett (C.C.A.), 222 F., 204, Ann. Cas., 1917-B, 298 (also similarly quoted), the Court said:

"As the policy to Swett stipulated that he might, on his written request of the company for its appropriate indorsement on the policy, change the beneficiary, his wife did not acquire a permanent or vested interest in it. The existence of such an interest during her husband's lifetime was made impossible by the control over the contract of insurance given to him, independent of her will. Her right was inchoate, a mere expectancy during his lifetime, dependent on the will and pleasure of her husband as holder of the policy, and could not vest until his death happened with the policy unchanged. His control over the policy was, subject to itsitems, [terms?] as complete as if he himself had been thebeneficiary."

In Rawls v. Insurance Co. (C.C.A.), 253 F., 725, the Court said:

"The insured at all times prior to his death had completedomination and control of the policies by reason of his reserved right at any time to change the beneficiary."

In that case the syllabus is:

"Where a life policy reserved to insured right to change beneficiary, and insured, having defaulted, secured a loan on the policies to pay premiums, with the result, on the subsequent default, the automatic extended term insurance, to which the reserved was devoted, expired before the insured's death, the beneficiary cannot recover, on the theory her rights were vested, etc., for, if the insured could wholly destroy such rights by changing beneficiaries, he might do so indirectly."

In Equitable Co. v. Stough, 45 Ind. App. 411,89 N.E. 612, the Court said:

"The assured had the right * * * to change the beneficiary. The beneficiary therefore had no vested right [citing cases]. His control of the policy was complete."

Speaking of a policy in which the right of the insured to change the beneficiary was provided for, the Court inDenver Life Ins. Co. v. Crane, 19 Colo. App. 191,73 P., 875, said:

"The policy provided, in explicit language, that the insured might, without the plaintiff's consent, * * * appoint another beneficiary in her place. She therefore had no vested interest, but only an expectancy, which might at any time be defeated by the act of her husband. His controlover the policy, subject to its terms, was as complete as ifhe had been himself the beneficiary, so that his waiver of notice, * * * bound the plaintiff in the same manner and to the same extent that it would have bound himself. * * *"

Beneficiary of life policy is not party to contract, and interest, where right to change beneficiary is reserved, is mere expectancy of uncompleted gift. Mutual Ben. Life Ins. Co.v. Clark, 81 Cal.App. 546, P., 306.

It is true that the case at bar is distinguishable from theAntley case, but the distinction is decidedly in favor of the position I have taken. In the Antley case the issue was between the beneficiary and the bank which claimed as assignee of the policy from the insured; a position not only antagonistic to the expectant interest of the beneficiary, but in that particular case destructive of it. In the case at bar the act of the insured was not only not antagonistic to or destructive of such expectant interest, but actually in promotionand protection of it, for, if the "blue note" agreement had not been entered into, the policy in all probability would have lapsed for nonpayment of the first semiannual premium on March 9, 1922; it at least eased the policy over that bump in the road, and guaranteed to the insured and to the beneficiary insurance until June 9, 1922. If, then, the Antley case upholds the right of the insured to assign the policy to another, a course which is destructive of the interests of the beneficiary, surely the Court in the case at bar should uphold the right of the insured to protect and continue in force the policy which was threatened with a lapse.

As is said in the case of Rawls v. Insurance Co. (C.C. A.), 253 F., 725, in reference to the execution of a premium note by the insured:

"Certainly she [the beneficiary], had little cause to complainwhen the very purpose of the loans was to prevent thelapsing of the policies, and thus preserve her rights."

The real question at issue is this: Did the insured have the power to make an agreement which would, if carried out, save the policy for both himself and the beneficiary, and which, if breached, would lose it for both?

That the beneficiary was benefited by the agreement, that her rights were not divested but protected by it, that the agreement did not work a forfeiture of the policy, is demonstrated by the fact that, although the insured had paid only 10 per cent. of the annual premium due March 9, 1922, he was insured, for her benefit, during the full currency of the "blue note," to June 9th; and, of course, if the policy had matured, by the death of the insured during that extended period, the full amount would have been paid to her. How this can be said to have divested her of her rights, or forfeited them under the policy, is more than I can understand.

That the expectant interest of the beneficiary, except as to the mode of changing the beneficiary, was wholly at the mercy of the insured, is demonstrated by the fact that it could be defeated yet by the appointment in due form of another beneficiary; or by the failure of the insured to pay the premiums; or by his assignment of the policy; or by a pledge of it for a loan; or by the acceptance of the cash surrender value.

That the insured was bound by the "blue note" agreement, I do not think that a doubt can be entertained. It has all of the elements of a valid contract — competent parties, a legal subject-matter, a valuable consideration. A decision is suggested that, although he may be bound, thebeneficiary is not, and a decree for a reinstatement of the policy as to both should be sustained: The decree means this and nothing else, for, if the policy be reinstated, the rights of the insured under it, as well as those of the beneficiary, would be restored, notwithstanding the fact that he has, by his own agreement evidenced in the note, stipulated that a failure to pay the "blue note" at maturity would cause a lapse of the policy, and annihilation of his interest.

The injustice of this conclusion I think is manifest, even if the relief should be limited to the beneficiary, from this consideration: Under the reserved right to change the beneficiary, the insured could yet substitute his estate in the place of the present beneficiary, and himself receive the benefit of a policy which, due to his own default, has by agreement lapsed.

It seems entirely incongruous that the policy could be held lapsed, as it must, so far as the insured is concerned, and reinstated as to the beneficiary, with no one to respond to the obligation to pay the premiums. If avoided as to the insured, the rights of the beneficiary are gone.

"The right of the beneficiary being dependent upon the validity of the contract, any fraud, false statements, or breach of warranty, or condition rendering the policy void as to insured, will defeat it also as to the beneficiary, although he had no knowledge of the fact constituting the ground of forfeiture." 37 C.J., 525.

"A claim is made that the plaintiff in error, the beneficiary of the policy, may recover thereon, although her husband, the insured, failed to make payment of the premium.The rights of a beneficiary are dependent upon thekeeping in force of the policy under which he claims."Wastun v. Ins. Co. (C.C.A.), 12 F.2d 422; citing 2 Joyce Ins. (2d Ed.), § 730 a; Forbes v. Insurance Co.,151 Ind. 89, 51 N.E., 84; Insurance Co. v. Roberts (Tex.Civ.App.), 186 S.W. 411.

The note in the Wastun case, with the exception of a minor provision, was in the identical terms of the note in the case at bar. The facts in the two cases are as parallel as could possibly be. And would it not be a most illogical conclusion that the policy had lapsed as to the insured, by his failure to comply with the agreement, and not as to the beneficiary, who was equally benefited by such agreement, and that the policy should be reinstated in full force as toboth?

In addition to this, I think that under the provision in the policy above quoted, "That the insured may, without the consent of the beneficiary, receive every benefit, exercise every right, and enjoy every privilege conferred upon the insured by this policy," the insured had the right, subject to the provisions as to the mode of changing the beneficiary, to treat the policy as his property, and to make any contract with it as the basis that he could have made if he or his estate had been named as the beneficiary of the policy.

The very fact that he holds a policy in the company places the insured in such relation to the company entitles him to contract in reference to the policy, in any manner not prohibited by the policy. It is not necessary that every power or right possessed by the insured, by virtue of his relation through the policy to the company, shall be enumerated in the policy. If the power to accept a note be implied in the company, I see no reason why the power to give a note for the premiums may not be implied in the insured; both owing their source to the contract relation evidenced by the policy.

Pending the exercise of that right by the insured, he may participate in the surplus dividends; he may avail himself of the loan value provisions upon a pledge of the policy; he may withdraw from the company upon acceptance of the cash surrender value of the policy; he may accept term insurance in case of a loan; he may assign the policy as collateral to a loan. All of these rights are expressly conferred by the policy.

The company has the right and power, implied, to accept a note for an unpaid premium upon such terms as the parties may agree upon, and will be bound by the terms of such an agreement. It could not have such power and right, for the protection of the interests of the insured, unless the insured had a corresponding power and right to assume an obligation as a consideration for the agreement by the company; a power and a right implied in the very subject of the contract.

Suppose the insured had died within the 90-day period, would the company be heard to say that it did not have the right to enter into such an agreement? Could it have set up the defense that there was no consideration supporting its obligation, for the reason that the insured was without power or right to enter into the agreement?

If it should be held that the insured had no right to enter into the "blue note" agreement, it is clear that there was no consideration for the engagement for extension on the part of the company, and the beneficiary would find herself in the situation that, as no valid contract for extension has been made, the policy has lapsed by failure to pay the annual premium, on March 9, 1922.

In Manhattan Co. v. Wright (C.C.A.), 126 F., 82, the Court said:

"The rules of law by which the result in this case must be determined are neither recondite nor doubtful. They are that the time of payment of a premium for insurance is, in the nature of the contract, of the essence of the agreement. A stipulation in a policy of insurance, in a note for the premium, or in any other instrument evidencing the contract of insurance or a part of it, to the effect that the policy or the insurance shall become void if the premium is not paid on the agreed day, is conscionable, valid, and enforceable."

(2) As to the second ground: That the acceptance ofthe cash $10.50 and the note for $46.50, due June 9, 1922,constituted a payment of the semiannual premium due, underthe extension agreement, on March 9, 1922.

It seems impossible to conclude that the "blue note" was either intended or accepted as payment of the premium due March 9, 1922, in view of the express and explicit statement in the note itself:

"That although no part of the premium due on the 9th day of March, 1922, under Policy No. 6,926,303 issued by the Company on the life of Joe P. Lane has been paid, the insurance thereunder shall be continued in force until midnight of the due date of said note; that if this note is paid on or before the date it becomes due such payment, together with said cash, will then be accepted by said company aspayment of said premium, and all right under said policyshall thereupon be the same as if said premium had beenpaid when due."

I think that the position is absolutely annihilated by the decision of this Court (unanimous it appears to have been, with the exception of Mr. Chief Justice Gary, not participating), in the case of Gunter v. Insurance Co., 130 S.C. 1,125 S.E., 285, where the Court says:

"The policy requires the payment of a premium in cash, in advance. There can be no doubt, however, of the proposition that the company may waive this requirement by accepting a premium note. There is nothing in the policy which requires the company to do so, however, and its acceptance of a premium note, in lieu of the cash, is purely a matter of convention between the insured and the company. Being a matter of convention, it plainly is subject to such terms as the parties may agree upon; that it amounts simply to an extension of the time for the payment of the premium, waiving nothing but the payment in cash, and leaving all other conditions in force, appears too plain for an argument. As a matter of fact it was accepted in response to the request of the insured for an extension. As is very clearly stated in the case of Hipp v. Insurance Co., 128 Ga. 491,57 S.E., 892, 12 L.R.A. (N.S.), 319:

"`While the taking of the notes in lieu of a prepayment in cash waived such prepayment, or postponed the time of payment, it did so on the terms agreed upon. It did not operate both to waive the prepayment in cash, and also to waive the express * * * conditions on which the postponement of payment was agreed upon.'" (See the full authorities upon the proposition cited and quoted from in the opinion.)

In the Gunter case it is further said:

"In addition to the express statement in the note that nonpayment of it would cause a forfeiture of the policy, the statement that the insured incurred no personal liability upon the note, incorporated in the note, is conclusive that it was not intended as payment of the premium. Would it not be remarkable to hold that a note which imposed no personal liability upon the maker was accepted as payment in full of a debt?

"It would be equally remarkable to hold that the note was accepted as payment of the premium and at the same time eviscerated the note of the most important element of it; for if the element of personal liability be eliminated, as it was by its terms, nothing is left of the note except the right to declare the policy lapsed for its nonpayment.

"It is inconceivable that the note was intended as payment of the premium, when the uncontradicted evidence shows that it was accepted by the company in response to the request of the insured for an extension of the time within which the premium might be paid."

And:

"The plaintiff would stand by the benefit secured to him and repudiate his obligation, which was the condition of that benefit."

In Forbes v. Insurance Co., 151 Ind., 89, 51 N.E., 84, the syllabus is:

"On the maturity of notes given for a balance of an insurance premium, insured gave other notes in renewal, which recited that the sum therein named represented the premium on the policy, and on failure to pay them at maturity the policy was to be void. Held, that the notes were not given in payment of the premium or of the original notes."

When notes are given as a substitute for a cash payment, on a policy of insurance upon the life of a husband, for the benefit of his wife, which contains a provision policy shall become void, the nonpayment of the note forfeits the policy, notwithstanding it is made payable to the wife, and acknowledges the receipt in cash of the amount for which the notes were given, and the wife had no knowledge of the notes and their condition. Baker v. Ins. Co.,43 N.Y., 283.

"In the absence of a statute, a contract made between the insured and the insurer, providing that a policy shall cease to be in effect, if a note, which has been given for the payment of a premium on the policy, is not paid at maturity, is a valid contract, and no affirmative action by the insurer canceling the policy is necessary" — citing cases. Wastun v.Ins. Co. (C.C.A.), 12 F.2d 422.

"Although a note may be given and accepted as payment of the premium, it is not a payment when accepted conditionally. Thus the policy may provide for forfeiture upon nonpayment of the note at maturity, or within a limited time thereafter, and in case of a breach such condition controls, where it is the contract intent of the parties that it shall so operate." 3 Joyce Ins. (2d Ed.), § 1204.

In Iowa Life Ins. Co. v. Lewis, 187 U.S. 335,23 S. Ct., 126, 47 L.Ed., 204, the syllabus is this:

"When the first premium on a policy of insurance is paid by note and a receipt with such an indorsement thereon is given and accepted therefor, whilst the primary condition of forfeiture for nonpayment of the annual premium is waived by the acceptance of the note, a secondary condition thereuponcomes into operation, by which the policy will be void if the note be not paid at maturity, and no affirmative action canceling the policy is necessary on the part of the insurance company if the note be not paid when due and presented. * * *"

If the "blue note" may be considered as a payment of the premium due March 9, 1922, so far as the beneficiary is concerned, why should it not be so considered so far as the insured is concerned? As to him, clearly, it cannot be so considered, for the reason that it is expressly declared in the note that, if it should not be paid at maturity, the policy should lapse, and the note be no longer considered as an obligation of the insured. We should have then the anomalous situation that it constituted payment as to the beneficiary, and not as to the insured.

It is everywhere recognized, as held in the Antley case, that, while the payment of premiums in advance, in cash, is usually required, the company may waive this requirement by accepting premium notes; its acceptance of such notes is a matter of convention between the parties; the company having the implied power to make such an agreement, by virtue of its relation through the policy contract with the insured, the insured necessarily had the reciprocal power by virtue of the same relation, to enter into such an agreement. His power and right, by convention, flow from the policy, the contract relation; they therefore may rightly be considered as "conferred by the policy," and I think come clearly within the provision.

The process of reasoning by which the result is attained that the insured and the beneficiary are entitled to a reinstatement of the policy appears to be this: (1) The company is bound by its agreement to extend the policy to June 9th; (2) the insured is not bound by his agreement which was the consideration for the company's agreement; (3) the beneficiary is not bound by the agreement for extension made by the insured; (4) the beneficiary is entitled to the benefit of the agreement for extension, minus the conditions upon which it was granted; (5) ergo, the insured and the beneficiary are both entitled to a reinstatement of the policy, Q.E.D.

Even when the right to change the beneficiary is not reserved, and the interest of the beneficiary is thereforevested, the policy may be avoided by some stipulated act or default of the insured. As is said in 2 Joyce, Ins. (2d Ed.), p. 1650:

"Consequently, if no such right is expressly given or reserved to him, the insured cannot defeat the rights of the first-named beneficiary by a subsequent appointment without the consent of the person first designated, and althoughthe contract may be annulled by the company for sufficient cause, yet the disposal of the fund while the policy is in force, is not within the control of the assured."

"The rule stated under the preceding section as to the interest of the beneficiary under a life policy being vested, is declared to be dependent upon the policy being kept alive and therefore not applicable where the policy is forfeited for nonperformance of a condition upon the performance of which the life of the policy depends, as the beneficiary takes his interest in the contract strictly in accordance with its terms, and he takes only such rights and interest thereunder as said contract gives him, and the assured can no more diminish the insurer's rights or enlarge his obligations without his consent than (the insurer can) destroy the insured's rights without the latter's consent, so that the beneficiary's rights are dependent upon the performance of the conditions that the premiums shall be paid in order to keep the policy alive." 2 Joyce, Ins. (2d Ed.), § 730 a.

The circuit decree declares:

"In the Gunter case the policy contained the provision (not in the policies herein involved) that `failure to pay any premium or note will forfeit the policy and all payments made thereon.'"

I think that there can be no doubt but that the note contains the provision for the lapse of the policy in the event of failure to pay the premium note. There does not appear to be any contest as to that proposition.

The note provides:

"That although no part of the premium due * * * under policy * * * has been paid, the insurance thereundershall be continued until midnight of the due date ofsaid note. * * * That if this note is not paid on or before the day it becomes due * * * all rights under saidpolicy shall be the same as if cash had not been paid nor thisagreement made, * * *" — which necessarily refers back to the conditions in the policy: "The payment of the premium shall not maintain the policy in force beyond the date when the next payment becomes due"; the payment of premiums annually during the life of the insured (changed by agreement to semiannually), and, "If any premium is not paid on or before the day it falls due, the policyholder is in default," which means clearly that the nonpayment of the premium note shall have the same effect as if the premium due March 9, 1922, had not been paid and no agreement for a "blue note" had been entered into.

The fact that the provision for a lapse of the policy may have appeared in the policy in the Gunter case, and in thenote in the case at bar, can make no difference. See the cases quoted from at length in the Gunter case, sustaining the position that it is immaterial whether the provision for a lapse of the policy for default in payment of a premium note is contained in the policy, in the note, in a draft for the premium, or in a receipt for the premium.

It is unfortunate that the insured labored under the erroneous impression that the "blue note" was executed in April and not in March, and that it fell due in July and not in June. His inquiry indicated his anxiety and his appreciation of the importance of meeting it at maturity. The Company had extended to him every indulgence, even more than he asked for, and, if it should be held that it did not have the right to stand upon the conditions upon which that voluntary indulgence was granted, such conclusion would appear to me an unwarranted denial of solemn contractual rights.

"Plaintiff basing claim for recovery on life insurance policy upon insurer's acceptance of note for premium was bound by terms of note." Diehl v. Insurance Co.,204 Iowa, 706, 213 N.W., 753, 53 A.L.R., 1528.

"Stipulation in premium note that policy would lapse if note was not paid on due date held valid." Wilson v. InsuranceCo. (Mo.App.), 300 S.W. 550.

"When the note contains the forfeiting stipulation, and the policy does not, nonpayment is fatal according to Hollyv. Metropolitan Life Ins. Co., 105 N.Y., 437,11 N.E., 507; Ressler v. Fidelity Life Ins. Co., 110 Tenn., 411,75 S.W., 735. See, also, Hale v. Michigan Farmers' MutualIns. Co., 148 Mich., 453, 111 N.W., 1068; Underwoodv. Security Life and Annuity Co., 108 Tex., 381,194 S.W., 585. An interesting note on this subject is in Yale Law Journal, Vol. 35, No. 2, Dec., 1925, 236." Hayworth v.Insurance Co., 190 N.C. 757, 130 S.E., 612.

"Where a premium is not paid within the time stipulated in the policy, and where within the grace period an extension agreement is entered into, evidenced by a note and a conditional receipt, the provisions of such note and conditional receipt with reference to termination of the policy upon nonpayment are controlling." Kroksather v. InsuranceCo., 49 N.D., 619, 193 N.W., 48.

"The provision of a note for premiums given by the holder of a life insurance policy that the policy should forfeit upon nonpayment of the note held valid." Home Life AccidentCo. v. Haskins, 156 Ark. 77, 245 S.W. 181.

"Where a note accepted by the Company as the balance on a life insurance premium recited that it was so accepted on the express agreement that if it was not paid on the due date the Company could retain the cash already paid as compensation for having continued the insurance, the policyholder is bound by the contract which he made by signing the note, and his beneficiary cannot claim that the cash payments already received should be considered as a part payment on the annual premium or applied as a quarterly or semiannual payment to extend the life of the policy, when such contentions were contrary to the provision of the policy as well as of the note." Robnett v. Insurance Co.,148 Ark. 199, 230 S.W. 257.

Where insured gave notes for premium providing that insurance should terminate if they were unpaid when due, though insurer retained notes unpaid after maturity, the insurance lapsed. Dunn v. Insurance Co., 18 Ga. App. 383,89 S.E., 432.

When a life policy would have been forfeited for nonpayment of premium, subject to a right which would have kept it in force for a time, insured paid the company $31.25, and gave it his note, due in eight months, providing that the insurance should be continued in force till the due date of the note; that, if then paid, such payment, with the $31.25, would be accepted as payment of the premiums, and all rights should continue as though the premium had been paid when due; and that, if the note was not then paid, all rights against the company should be the same as though the cash had not been paid and the agreement in the note had not been made. Held that the policy ceased to be in effect except as continued in the provision in the note. White v.Insurance Co., 200 Mass. 510, 86 N.E., 928.

"The failure of an insured to pay at maturity a note given for a premium due on a policy of insurance is a complete defence as to liability for loss of property insured during default, where it is provided that the policy, because of non-payment of such note, shall lapse and be of no force and effect unless the conditions are waived by the insurer."Antes v. Insurance Co., 61 Neb. 55, 84 N.W., 412.

"Where extended time for payment of an insurance premium is granted for a note given, a stipulation that if the note given for the premium is not paid at maturity the policy, including all conditions for surrender or continuance as a paid-up term policy, should be null and void, is one that will be sustained by the Courts." Seeley v. Insurance Co.,10 Pa. Super., 270.

"On the maturity of notes given for a balance of an insurance premium, insured gave other notes in renewal, which recited that the sum therein named represented the premium on the policy, and on failure to pay them at maturity the policy was to be void." Held that the notes were not a payment of the premium or of the general notes until paid, and that policy was forfeited on their non-payment. Forbes v.Insurance Co., 151 Ind. 89, 51 N.E., 84.

II. As to the opinion of Justice Carter: Repeating for convenient reference the analysis of the opinion above set forth, it is proposed to affirm the Circuit decree upon the grounds:

I. That there has been no forfeiture of the policy, for two reasons:

(a) The insured was entitled to prior notice of the maturity of the premium note due June 9, 1922.

(b) The insured was entitled to a reinstatement of the policy, upon the ground that he had furnished to the company evidence of his insurability which should have been acceptable to the company.

II. That, conceding that the policy was forfeited by the failure of the insured to pay the premium note due June 9, 1922, ad diem, under the circumstances of the case, the Court, as a Court of equity, should relieve the insured from such forfeiture.

As to the proposition that there has been no forfeiture ofthe policy for the reason that the insured was entitled toprior notice of the maturity of the premium note due June9, 1922:

In view of the positive and explicit terms of the contract for extension of the premium due March 9, 1922, I cannot understand how it can be contended that the insured was entitled to such notice. The note of March 9, 1922, which is the evidence of that contract, provides:

"On or before June 9, 1922, after date, without grace andwithout demand or notice, I promise to pay ____. This note is accepted by said Company * * * on the following express agreement: That * * * the insurance thereunder shall be continued in force until midnight of the due date ofsaid note. * * * That if this note is not paid on or before the day it becomes due * * * all rights under said policy shall be the same as if cash had not been paid nor this agreement made. * * * That said Company has duly given every notice required by its rules or by the laws of any State in respect to said premium, and in further compensation for the rights and privileges hereby granted the maker hereof has agreed to waive, and does hereby waive, every other notice in respect to said premium or this note, it being well understood by said maker that said Company would not have accepted this agreement if any notice of any kind were required as a condition to the full enforcement of all its terms."

I know of no law which requires the payee of a note to give the maker notice beforehand of its maturity; there is nothing in the policy or in the note, in the case at bar, which requires it; in fact, the stipulation is specific in the note that demand and notice are waived. If, notwithstanding this conventional immunity from the obligation to give notice, the company has continuously given it to the insured, and he has acted upon that custom, with the knowledge of the company, there might be ground for insisting upon an estoppel (Knoebel v. Insurance Co., 135 Wis. 424, 115 N.W., 1094, 20 L.R.A. [N.S.], 1037), and note; but in the case at bar no such conditions are presented. There is no evidence that any other note had ever been given by the insured, or that he had acted upon an alleged custom of the company to extend such notice to others. In fact, the insured assumed the duty upon his own accord to inquire as to the maturity of the note. It does not even appear that the insured was aware of any such custom, and it appears illogical to claim the benefit of a custom which he knew nothing of.

As to the proposition that there has been no forfeiture ofthe policy for the reason that the insured was entitled to a reinstatement of the policy, upon the ground that he hadfurnished to the company evidence of his insurability whichshould have been acceptable to the company:

There is nothing in the complaint which indicates an intention to insist upon the right of reinstatement of the policy. The contention is, that it has never been forfeited. Of course, there can be no reinstatement except after a lapse or forfeiture of the policy. No such right was considered by the Circuit Judge, and I find in the brief of counsel for the respondent not a suggestion of it.

The unfairness to the company in sustaining the decree upon such a ground under such circumstances is apparent when it is considered that it has had no opportunity of meeting the position with either evidence or argument. It might be shown, as doubtless was the fact, that the condition of the insured had existed for some time; that he had consulted and been treated by a physician for awhile before he went to Baltimore; and that his condition after he returned was such as to justify the conclusion by the company as to his insurability.

But, aside from this, and considering that the claim for a reinstatement is properly before the Court, what do we find?

The policy provides:

"At any time within five years after any default, upon written application by the Insured and upon presentation at the Home Office of evidence of insurability satisfactory to the Company, this Policy may be reinstated together with any indebtedness in accordance with the loan provisions of the Policy, upon payment of loan interest, and of arrears of premiums with five per cent. interest thereon from their due date."

The insured has by contract agreed to submit to the home office evidence of his insurability "satisfactory to the company," as a condition of reinstatement.

I do not think that any one could deny the justness of the principle announced by this Court in the case of Thompsonv. Insurance Co., 63 S.C. 290, 41 S.E., 464, and so clearly stated by the late Chief Justice (Gary):

"It is bad faith and unfair dealing for a person to act unreasonably in an ordinary business transaction when there is nothing in the contract of a personal nature. The action of the insurance company in the case under consideration was not dependent upon taste or upon any fact of a personal nature, but solely upon the existence of a fact in an ordinary business transaction, and it would be bad faith for it to refuse to be governed by reason and common sense in determining the existence of such fact." See Thompson v.Insurance Co., 226 N.Y., 363, 123 N.E., 750; Hinchcliffev. Minnesota Commercial Men's Ass'n, 142 Minn., 204,171 N.W., 776.

The right of reinstatement, in the case at bar, was a right secured by contract, the policy of insurance, upon certain conditions. The provision in the policy appears upon its face to lodge the arbitrary power with the officers of the company to decide whether the applicant for reinstatement was, on the day the application dated July 11, 1922, reached the company, an insurable risk. But, notwithstanding, the case falls under the well-established rule, that in ordinary business transactions, not involving matters of personal taste and convenience, neither party has the arbitrary right to decide the existence of a particular fact upon which his obligation under the contract depends. The parties may contract to leave the decision of that issue to one or the other, but the law requires that in that decision the party who is vested with the power of decision shall act fairly, honestly, and reasonably, in view of all the circumstances, and that the other party shall not be bound by that decision when it is shown that it has been exercised arbitrarily, capriciously, and unreasonably.

The parties, however, by contract, having committed to the officers of the company the power to decide this particular issue of fact, prima facie their decision must be deemed to have been a just one; the presumption is that it was the result of the exercise of a fair, honest, and reasonable judgment; and the burden upon the applicant, attacking that decision, was to show the contrary.

In the opinion of Justice Woods, in the case of GuaranteeCo. v. Charles, 92 S.C. 288, 75 S.E., 387, Ann. Cas., 1916-B, 687, occurs this statement:

"It is an attempt to make one of the parties the final judge in his own case, of a matter of ordinary business accounting as distinguished from matters of personal fancy, taste, convenience, or preference. At the most such a stipulation cannot be effective further than to make the conclusion of the party in whose favor it is made prima facie evidence of the fact of default."

If this be true (and it is the opinion of the majority of the Court participating in the decision), the declination of the application for reinstatement upon the ground that the applicant had not submitted evidence of his insurability, in the opinion of the home office, must be taken as prima facie to have been the result of an honest investigation and decision. The applicant agreed to submit the determination of this question to the officers of the company. They have acted, not by a single officer, but separately by four; if the applicant would override that decision, the burden is upon him to show that the decision was so unreasonable as to amount to a fraud. As it is declared in the Thompson case:

"The reasonableness of the promisee's action in determining the question, is the element entering into the contract, and a disregard of this element is in the nature of a fraud on the rights of the promisor."

In the case of Lane v. Insurance Co., 142 N.C. 55,54 S.E., 854, 115 Am. St. Rep., 729, which was a case of reinstatement under a policy provision which required the assurance of good health to be approved by the medical director and president of the company, the application was rejected.

The Court said:

"In the absence, certainly, of any showing that the approval of the officers has been fraudulently withheld and that their denial of the application is purely arbitrary, we do not see why their refusal to reinstate the plaintiff is not fatal to his right of recovery in this action."

The Court further said:

"Where there is no suggestion of fraud or other legal wrong, there can be no valid reason why the applicant should be permitted to attack the soundness of their judgment or the justness of their conclusion. We must hold it to be right, and unassailable in any such manner, because the parties have solemnly agreed that the matter shall be decided in that way, and we have no power to change their contract; and besides, the power lodged with those officers is consistent with the purposes of the organization, and its exercise is necessary for the protection of the rights of other members and is not otherwise at all inconsistent with reason and justice."

In Brun v. Council, 15 Colo. App. 538, 63 P., 796, the Court said:

"When a party has failed to comply with his contract, and relies upon the performance of a condition subsequent, whereby his right, under the terms of the agreement, is to be revived, he must undoubtedly both allege and prove the performance of the condition or the happening of the event, either one or the other of which revives his right, and establishes the obligation of the other party."

If this had been, as clearly it is not, an action to enforce a reinstatement of the policy, there can be no doubt but that the complaint should have alleged a default on the part of the insured within five years, and the facts upon which the claim for reinstatement depended — that the insured had submitted to the home office evidence of his insurability satisfactory to the company at that time. It is a proper concession to him that his proof will be sufficient if he shows that the declination was arbitrary, capricious, and unreasonable. Clearly, then, the burden of showing this was upon the applicant.

In the opinion of Mr. Justice Carter it is said:

"It is thus seen that the inquiry devolved upon the Court at this juncture is, did Mr. Lane the insured make a reasonable compliance with the requirement stipulated in the policy for re-instatement? Would men of common sense and reason be expected to reach the conclusion that Mr. Lane did make a reasonable compliance? If so, the Court should require a re-instatement of the policies."

I think that the learned Justice is mistaken in his conception of the issue in the case. His position is that the whole matter depends upon the question whether or not Mr. Lane was an insurable risk on the date of the application. That is not the controlling issue, as I understand it. The matter by contract having been left to the decision of the officers of the Company, the issue is, not whether as a matter of fact Mr. Lane was at that time an insurable risk, but whether the officers to whom the decision of that question was committed exercised the power conferred upon them fairly and honestly, or so arbitrarily, capriciously, and unreasonably as to amount to a legal fraud upon the rights of the applicant.

I do not think that there is a particle of evidence tending to show that the declination of the application was arbitrary, capricious, and so unreasonable as to constitute a fraud upon the applicant. In the first place, an insurance company is in the business to insure, not to decline, applications, and the presumption is in their favor that, if the risk is an insurable one, it will be accepted. As soon as the application was received, it was referred to the medical board, and from it to three of the officers of the Company who in separate reports recommend a declination. They had before them the letter of the Baltimore physician that the applicant had been treated for two months for a gastric ulcer; that the X-ray examination showed a pyloric ulcer, that is, an ulcer at the pylorus, the valve opening from the stomach into the intestines, accompanied by enteroptosis, "an abnormal sinking downward and forward of the abdominal viscera." They may have differed with the eminent Baltimore physician in his statement that the applicant left the hospital in "excellent condition." At any rate, they were under no obligation, so long as they exercised an honest judgment of their own, to accept his statement. As a matter of fact, the applicant was confined to his bed for hours a day, according to his testimony, and for weeks after he returned home; a result of his disease hardly compatible with good health, "excellent condition," and a physical status the same as when he applied for a policy more than a year before.

The seriousness, due to effects and possible complications, of an ulcer of the stomach, which are explained in the medical works of Dr. Elsner, professor of medicine in the college of medicine, of Syracuse University, may well give the officers of an insurance company pause in accepting an applicant for original insurance, or an applicant for the reinstatement of a lapsed policy. (So far as the fact of insurability is concerned, they are on precisely the same basis.) In his Monographic Medicine, Vol. 6, beginning at page 585, he says that a fatal hemorrhage, even from a small ulcer, is possible; that "freedom from symptoms during longperiods, does not by any means signify cured or healedulcer"; that among the leading complications and dangers are a perforation of the wall of the stomach, causing peritonitis or blood poisoning; hemorrhage; degenerative changes leading to cancer of the stomach, "ulcer of the stomach isa positive factor in the production of cancer"; adhesions in 40 per cent. of ulcers; anemia and consequent exhaustion; swellings; lockjaw, and acidosis. Some of these results are not considered by him as highly probable, but all possible. With a caged beast of this ferocity, would the officers of the Company be just to the stockholders in opening the door of the cage? Can their declination, with this light before them, be held by this Court to have been arbitrary, capricious, and unreasonable? I do not think so; they would have been remiss to a degree in their duty if they had done otherwise.

Suppose Mr. Lane had never taken out any insurance, and upon an original application it developed that he had been such a sufferer from ulcer of the stomach as, upon the advice, which may be assumed, of his family physician and as adernier resort, to require the attention of a distinguished specialist in Baltimore; had been treated there for two months; had returned home, and for three weeks could not attend to his regular business; with all the possible complications that might result — can it be considered for a moment that he would have been accepted by any company as an insurable risk?

It seems to me that the charge that an insurance company, whose business it is to insure people, to make money out of the premiums collected, would arbitrarily, capriciously, and unreasonably turn down an application of a perfectly insurable risk is itself unfounded and unreasonable.

As to the proposition that, conceding that the policy wasforfeited by the failure of the insured to pay the premiumnote due June 9, 1922, ad diem, under the circumstances ofthe case, the Court, as a Court of equity, should relieve theinsured from such forfeiture:

The same observation is applicable to this proposition as to the preceding one: There is nothing in the complaint which indicates an intention to insist upon the right of relief from the forfeiture. The contention is that the policy has never been forfeited. Of course, there can be no relief from a forfeiture, if none ever existed. It was not considered by the Circuit Judge, and I find in the brief of counsel for the respondent not a suggestion of it.

If this proposition should be sustained by the Court, insurance companies may as well "fold their tents like the Arab" and depart. That, notwithstanding the most specific and explicit condition requiring the payment of a premium upon the due date, and providing for a lapse of the policy in case of default, "upon the broad principles of equity," the Court may, upon proof of sickness in a hospital, forgetfulness, negligence, ability and willingness to "carry on," make a new contract for the parties by expunging that portion of it, is a new and startling proposition to me.

The general rule of relief from penalties and forfeitures in equity is thus expressed in 10 R.C.L., 328 (it appears just as reasonable):

"* * * In equity the harsh remedy or forfeiture will be forced to yield to compensation when fair dealing and good conscience seem to require it. The right in general to relieve against penalties and forfeitures is based upon the ground that a party having a legal right shall not be permitted to avail himself of it or harsh purposes of injustice or fraud or oppression or harsh vindictive injury, and that it is wholly against conscience to say because a man has stipulated for a penalty any acts or his omission to do a particular act (the real object of the parties being the performance of the act) that if he omits to do the act he shall suffer an enormous loss wholly disproportionate to the injury to the other party."

At page 332 it is said:

"Likewise promptness in the payment of premiums is essential to the business of life insurance. Calculations of insurance companies are based on the hypothesis of prompt payments. Forfeiture for nonpayment is a necessary means of protection from embarrassment. Therefore, if a life insurance policy is conditioned to be void for the failure to meet premiums when due equity cannot relieve against a forfeiture occasioned by the neglect of the insured to perform this condition."

In the case of N.Y. Life Ins. Co. v. Statham, 93 U.S. 24,23 L.Ed., 791, the claim was that the Court should relieve the insured from a forfeiture of the policy by reason of default in the payment of an annual premium, the default being due to the existence of a state of war between the states. The Court denied the relief, saying:

"But whilst this is true, it must be conceded that promptness of payment is essential in the business of life insurance. All the calculations of the insurance company are based on the hypothesis of prompt payments. They not only calculate on the receipt of the premiums when due, but on compounding interest upon them: It is on this basis that they are enabled to offer assurance at the favorable rates they do. Forfeiture for nonpayment is a necessary means of protecting themselves from embarrassment. Unless it were enforceable, the business would be thrown into utter confusion."

The Court further states:

"The case, therefore, is one in which time is material and of the essence of the contract. Nonpayment at the day involves absolute forfeiture, if such be the terms of the contract, as is the case here. Courts cannot with safety vary the stipulation of the parties by introducing equities for the relief of the insured against their own negligence."

In Nederland Ins. Co. v. Meinert, 199 U.S. 171,26 S. Ct., 15, 50 L.Ed., 139, the Court said:

"A statute of this kind should not be construed so as to make it a trap for either side. Forfeitures, though generally not regarded with favor by Courts of equity, yet are necessary, and should be fairly enforced, in cases of life insurance. Promptness of payment is essential in such business" — citing N.Y. Life Ins. Co. v. Statham, 93 U.S. 24,23 L.Ed., 791.

In Iowa Life Ins. Co. v. Lewis, 187 U.S. 335,23 S.Ct., 126, 47 L.Ed., 204, the Court said:

"The decisions of this Court, however, support the contention of plaintiff in error [the company, that the policy determined at the occurrence of the maturity of the premium, without payment, and that no affirmative action on the part of the company was required]. In New York Life InsuranceCompany v. Statham et al., 93 U.S. 24 [23 L.Ed., 791], Mr. Justice Bradley, delivering the opinion of the Court, said: 'Promptness of payment is essential in the business of life insurance. * * * Delinquency cannot be tolerated nor redeemed, except at the option of the company. * * * Time is material and of the essence of the contract. Nonpayment at the day involves absolute forfeiture, if such be the terms of the contract. * * * Courts cannot with safety vary the stipulation of the parties by introducing equities for the relief of the insured against their own negligence.' The intervention of war was held not to avoid a forfeiture. This case was quoted and its doctrine announced again in Klein v. Insurance Co., 104 U.S. 88 [26 L.Ed., 662], and again in Thompson v. Insurance Co., 104 U.S. 252 [26 L.Ed., 765]. In Klein v. Insurance Co. it was said: 'If the assured can neglect payment at maturity and yet suffer no loss or forfeiture, premiums will not be punctually paid. The companies must have some efficient means of enforcing punctuality. Hence their contracts usually provide for the forfeiture of the policy upon default of prompt payment of the premiums. If they are not allowed to enforce this forfeiture they are deprived of the means which they have reserved by their contract of compelling the parties insured to meet their engagements. The provision, therefore, for the release of the Company from liability on the failure of the insured to pay the premiums when due is of the very essence and substance of the contract of life insurance. To hold the Company to its promise to pay the insurance, notwithstanding the default of the assured in making punctual payment of the premiums, is to destroy the very substance of the contract.'"

In 2 Joyce, Ins. (2d Ed.) § 1104, it is said:

"In case the premium is not paid when due, in consequence of which a forfeiture is incurred under the conditions of the contract, equity will not grant relief."

In Donald v. Insurance Co., 4 S.C. 321, the Court said:

"That the policy was void for nonpayment of the premium according to its terms, and consequently that the plaintiffs had no cause of action" and that "the conditions of a policy of insurance as to payments of annual premiums must be strictly complied with by the insured, or his policy will be void."

In Perkins v. Insurance Co., 93 S.C. 88, 76 S.E., 29, the Court said:

"The policy itself provides by its own terms that it shall lapse for nonpayment of premiums one month after January 1, 1911. Hence, it was a dead contract and not a live one after February 1, 1911. This becomes obvious if we ask the question. If not on February 1, 1911, then on what subsequent date can the policy be regarded as dead for nonpayment of premium? The policy itself contains no provision within itself whereby its life can be prolonged unless the company by virtue of a new agreement, understanding, or contract agrees to reinstate it. * * * If the policy was not dead on February 1, 1911, then on what future date did it or could it become so? No means exist fixing such a date. Suppose insured had neglected to pay the premiums for six months after February 1, 1911, who would contend that the policy would have survived until August 1, 1911? Yet every reason for declaring it dead on August 1, 1911, applies with equal force to February 1, 1911."

In Parry v. Insurance Co., 95 S.C. 1, 78 S.E., 441, the Court assumed without question that the policy had lapsed for nonpayment of the premium due. No suggestion appears that the Court could relieve from such forfeiture.

In 2 Joyce, Ins. (2d Ed.), § 1103, it is said:

"If the policy provides that the premiums shall be paid on or before a stipulated day or the policy shall become forfeited and void, or that the Company shall be released from all liability, time becomes of the very essence of the contract, and a failure to pay as agreed determines the contract, unless there be a waiver or estoppel" — citing an array of cases.

The theory of relief in equity from a forfeiture or penalty, generally, is that the party claiming a forfeiture may be compensated in money for the breach — it is usually limited to contracts involving the payment of money, and is awarded in the interest of justice. How the cause of justice is advanced by denying to one the benefit of a specific and explicit contract, not involving the payment of money, I cannot see.

I agree with the statement in the opinion that, in the event of reinstatement, the insured should be allowed credit for the dividends in the meantime declared; but I do not see how he could be allowed credit for the loan value of the policy. If the policy should be reinstated, it would be reinstated with all of its original provisions, one of which is the benefit of the loan value which he could take advantage of or not as he might choose.