Opinion
June Term, 1900.
George H. Fletcher, for the appellant.
Allan McCulloh, for the respondent.
The facts in this case are not seriously disputed. The court having dismissed the complaint, the only question is whether upon the facts proved the plaintiff was entitled to any relief. It appeared that on or about the 6th of September, 1895, the Equitable Life Assurance Society had issued a paid-up policy of insurance upon the life of one Charles G. Gordon for $4,400, wherein the plaintiff's intestate, the wife of the said Gordon, was named as beneficiary. It appears that on or about September 11, 1897, the said Charles G. Gordon and Parthenia Elizabeth Gordon, his wife (plaintiff's intestate), borrowed from the defendant the sum of $1,716, and gave to it their promissory note by which the obligors agreed to pay to the defendant the sum of $1,826 on September 11, 1898, and as collateral security for the said indebtedness they assigned this policy of insurance to the defendant. This promissory note gave to the defendant authority "to surrender said policy to the Equitable Life Assurance Society of the United States and receive the surrender value thereof (said value to be determined by said society), on the non-performance of any of the promises herein contained, without notice of amount claimed to be due, without demand of payment, without advertisement, and without notice of the time and place of said surrender, each and every of which is hereby expressly waived." On September 19, 1898, after the note had become due, Mr. Gordon wrote to the defendant: "I have just returned home. Found your letter of the 9th inst. If you will kindly extend the time to Sept. 30th. It is almost possible to say that I can pay the interest also the interest due since Sept. 11th. Please ans. me at once, as a few hours would make a great difference to me."
In reply to that letter, on September 22, 1898, the defendant wrote to Gordon as follows: "We beg to advise you that if you wish to continue this loan for another year, you must remit to us promptly the interest ($109.94) according to the notice which we enclose herewith. We will hold the matter open for a few days to give you an opportunity to meet this payment, but you must arrange the matter without any further delay, as we sent you ample notice advising you of the maturity of the loan."
On October 4, 1898, Alfred D. Bailey, a son-in-law of Mr. Gordon, wrote to the defendant as follows: "Yours of some days ago to Capt. C.G. Gordon handed me to-day. In reply would say that Capt. Gordon is at present quite ill and unable to attend to any business; as soon as he is able he will communicate with you." No further communication was received from the defendant. Capt Gordon died on the 26th of October, 1898, having been taken ill on the thirtieth of September, when he became delirious and remained so until the time of his death; and without notice of any kind to the makers of the note, or those interested in the policy, the defendant, on the 14th day of October, 1898, surrendered the policy to the Equitable Life Assurance Society, and received from them $1,843.60 in full of all claims under the policy, and subsequently tendered to the maker of the note a check for $7.87, being the cash surrender value of the policy less the amount due to the defendant. The court below dismissed the complaint upon the ground that there was no evidence of a waiver by the defendant of the right to surrender the policy on the non-payment of the note.
There can be no doubt that upon the failure of the obligors to pay to the defendant the amount due on the 11th of September, 1898, the defendant was authorized to surrender the policy to the assurance society and receive the surrender value thereof without notice of any kind to the obligors. The question is, whether anything that the defendant did waived this right to surrender the policy to the assurance society without notice.
When the note became due on the eleventh of September, the defendant did not enforce this right. What it did was to enter into negotiations for the extension of the loan. Mr. Gordon requested an extension of time to the thirtieth of September to pay the interest for another year, which would entitle the obligors to a renewal of the loan; and no doubt if the defendant had accepted that proposition, with the statement that the obligors would be in default unless the arrangements for the new loan were completed by that day, the plaintiff could not have complained if the defendant, at the time specified, had exercised its right to surrender the policy of insurance. That, however, the defendant did not do. It stated to Mr. Gordon that if he wished to take the loan for another year he would be required promptly to remit the interest according to a notice sent, and that defendant would hold the matter open for a few days to give him an opportunity to meet this payment. Here was an indefinite extension of the time to make the payment which, if made, would have been a valid extension of the note for another year. During this indefinite time, however, when such payment was to be made, and a new contract for another year closed, the defendant had waived its right to resort to the forfeiture contained in the original note, and to surrender the policy of insurance without notice. It would not, I think, be claimed that the defendant, the day after writing the letter, would have been justified in surrendering the policy and enforcing the forfeiture without notice to the obligors. If not on the next day, on just what day would the right of the defendant to enforce this forfeiture accrue? Its notice to Mr. Gordon was to the effect that he would have a few days and that the matter would be left open for that time to give him an opportunity to meet the payment. The defendant allowed the matter to rest in this indefinite way without further notice to the obligors. On the fourth day of October a letter was written by the plaintiff to the defendant which was in form a reply to the defendant's letter of September twenty-second, stating that Mr. Gordon was quite ill and unable to do any business. No answer seems to have been made to this letter. No notice of any kind was given that the few days allowed by the defendant to Mr. Gordon to close the proposition made by the defendant to extend the loan for another year had expired; nothing to fix a definite time in which the loan must be paid or the arrangements for the continued loan consummated. On the fourteenth of October, without further notice and with knowledge of the fact that the assured was quite ill and unable to attend to business, the defendant surrendered the policy, thus forfeiting the pledge given to secure the payment of the indebtedness. If defendant had waived its right to thus forfeit the pledge without notice, such a forfeiture was a conversion of the policy for which the defendant would be liable. The rule to be applied to this case is recognized and settled by the case of Toplitz v. Bauer ( 161 N.Y. 325), which was an action for the conversion of a life insurance policy under conditions somewhat similar to these under consideration, and the rule as stated there is, "The pledgee doubtless has the right to exact strict performance of the contract according to its terms, and upon default in the payment of the debt at the time stipulated, he may, under a contract like this, dispose of the pledge. But if he waives the right to exact strict performance, and gives time and indulgence to the debtor, he cannot recall this waiver at his own option without notice to the pledgor, to the end that the latter may have an opportunity of protecting the pledge. The good faith which the law exacts from a person dealing with trust property will not permit the pledgee, after having once waived the forfeiture or the right to dispose of the pledge upon default of payment at the prescribed time, to suddenly stop short and insist upon the forfeiture for the non-payment of the debt, when the other party is unprepared to redeem." It would seem that the exact conditions there referred to were present here. The defendant certainly gave the pledgors the right to pay the note or accept the conditions imposed for the extension of the loan for another year. Having thus waived its right to dispose of the pledge upon the failure of payment on the day it became due it cannot insist upon a forfeiture without notice to the pledgors or without giving them reasonable opportunity to redeem the pledge. We think, therefore, that it was error for the learned court to dismiss the complaint upon the ground that there was no evidence of waiver of the right to forfeiture.
We think that the plaintiff was entitled to recover as damages the difference between the amount due to the defendant and the amount due from the insurance company. In Toplitz v. Bauer ( supra) it was said: "It is obvious that the surrender value, or what the company was willing to pay for it, based upon tables of mortality applied to a sound risk, would be no indemnity for the loss. The reasonable and just rule of damages in such cases would seem to be the cost of replacing the policy on the same terms in a perfectly sound company at the time of the surrender, but the pledgor had then ceased to be an insurable risk under any circumstances existing in the business of insurance; so that the real loss was the face of the policy less what it would cost to carry it by payment of another premium which fell due before the death of the insured." Here the defendant had notice given that the insured was sick and unable to attend to business, in fact he died a few days after the surrender of the policy, and as it was clearly impossible for the plaintiff to obtain a new policy on the day whereon he had notice that the defendant had violated its obligations, the proper measure of damages would be the difference between the amount due to the defendant and the amount that would have been received from the insurance company if the defendant had not wrongfully forfeited the policy in violation of its duty to the pledgors. It follows, therefore, that the judgment should be reversed and a new trial ordered, with costs to the appellant to abide the event.
PATTERSON, RUMSEY and McLAUGHLIN, JJ., concurred.
Judgment reversed, new trial ordered, costs to appellant to abide event.