Opinion
Rehearing Denied July 27, 1936.
Hearing Granted by Supreme Court Aug. 24, 1936.
Appeal from Superior Court, Los Angeles County; H. D. Burroughs, Judge.
Action by Sally E. Sawyer and another against the Sunset Mutual Life Insurance Company, a corporation. Judgment for plaintiffs, and defendant appeals.
Modified and, as modified, affirmed.
Rehearing denied; YORK, Acting P. J., dissents. COUNSEL
Sylvan Y. Allen and Harry C. Hedberg, both of Los Angeles, for appellant.
Lon A. Brooks, De Forrest Home, and Eugene Kelly, all of Los Angeles, for respondents.
OPINION
WHITE, Justice pro tem.
Appeal by defendant Sunset Mutual Life Insurance Company from a judgment in favor of plaintiffs in the sum of $3,032 and costs.
Briefly, the facts are that on July 24, 1929, the Roosevelt Mutual Life Insurance Association, a California corporation, insured the life of one Mack Lewis Sawyer for $3,000. Respondents herein were the beneficiaries under this policy. On June 9, 1930, while said policy was in force, the Roosevelt association and appellant Sunset Mutual Life Insurance Company entered into a certain agreement, under the terms of which appellant insurance company assumed, according to their terms and conditions, the policies and certificates of membership of the Roosevelt company then outstanding; it being further provided that the Roosevelt company would transfer to appellant all defenses contained in the said policies or certificates. This agreement was approved by the insurance commissioner of California on June 26, 1930. Under this agreement the collection of assessments and payment of death losses were consolidated under one management. It was further provided in the contract that when death notices were received by the Roosevelt insurance company, the latter should forthwith submit them to the Sunset insurance company, and that proofs of loss were to be forwarded by the Roosevelt insurance company to the Sunset insurance company for the latter’s approval and adjustment, and when the amount to be paid was approved by the Sunset company the latter was to forward its check to the Roosevelt company for settlement with the beneficiary. Final settlement papers, properly signed, and surrendered policies or membership certificates, properly released, were to be furnished by the Roosevelt company to the Sunset company. Following the execution of the agreement, the two insurance companies moved into the same suite of offices, and the medical examiner for the Sunset company acted in a like capacity for both companies. It also appears that the president of the Sunset company was vice president of the Roosevelt company. The Roosevelt company forwarded to all its agents and some of its policy holding members a mimeographed copy of a letter signed by the Sunset company, in which it was stated that on and after June 26, 1930, all risks carried by the Roosevelt company were fully covered by the Sunset company. some $800 was paid by the Roosevelt company to the Sunset company pursuant to the contract.
On September 29, 1930, and while this agreement between the two insurance companies was in effect, the insured, Mack Lewis Sawyer, died, and proofs of death were submitted to the Roosevelt company, with a claim for payment of the amount due under the policy. On January 7, 1931, the Roosevelt company disallowed the claim of respondents herein as beneficiaries under the policy for payment thereunder.
On January 31, 1931, the so-called reinsurance agreement was canceled by mutual consent of the Roosevelt and Sunset insurance companies. Shortly thereafter, the respondents herein, as beneficiaries under the policy, brought an action against the Roosevelt company, and on September 23, 1932, secured judgment for $3,000 and costs. This judgment became final and remains wholly unsatisfied. On November 7, 1934, respondents secured an assignment from the Roosevelt insurance company of all the latter’s rights to proceed against appellant under the reinsurance agreement; thereafter commencing the present action, which was tried before the court, sitting without a jury, resulting in a judgment in favor of respondents, from which this appeal is prosecuted by the Sunset company.
Appellant’s first attack upon the judgment is founded upon the claim that the so-called contract of reinsurance between appellant and the Roosevelt insurance company invested respondents with no right whatever to proceed against and compel payment by the appellant reinsurer; and in support of this contention we are cited to section 2646 of the Civil Code, reading, "A contract of reinsurance is one by which an insurer procures a third person to insure him against loss or liability by reason of such original insurance," and section 2649 of the Civil Code, which provides, "The original insured has no interest in a contract of reinsurance."
The weight of authority in this state seems to be that if a reinsurer, by its contract of reinsurance, assumes all outstanding policies of the insured, it is liable directly to the beneficiaries. Grbavach v. Casualty Co. of America, 40 Cal.App. 376, 180 P. 835. It is argued, however, by appellant that the contract between the companies referred to and their subsequent action in carrying it out amount to nothing more than a naked contract of reinsurance under the Code; but we are of the opinion that the facts in this case show the contract in question to be much broader than a mere technical contract of reinsurance. In Arnold v. Lyman, 17 Mass. 400, 9 Am.Dec. 154, it is said: "The promise being not to Hutchins expressly, but general in its form, the assent of the creditors made them parties to the promise; and this assent is sufficiently proved, as respects the plaintiffs, by their bringing an action upon the contract." See, also, Morgan v. Overman S. M. Co., 37 Cal. 534; Flint v. Cadenasso, 64 Cal. 83, 28 P. 62; Lockwood v. Canfield, 20 Cal. 126.
In the so-called contract of reinsurance before us we find the following covenant: "The Company agrees that the membership of the Association so reinsured shall for the purpose of levying assessments be consolidated with its own assessment department and only such assessments levied as will enable the Company to pay all just claims in full according to the terms of the policies and/or certificates covered under the term of this contract."
Again, we find the appellant Sunset insurance company in its contract of reinsurance providing: "The Company assumes the policies and/or certificates of membership of the Association now outstanding according to their terms and conditions including days of grace and reinstatement and the Association transfers to the Company all defenses contained in policies and the applications therefor."
In addition to the foregoing, we find in the contract the following covenant: "It is agreed that an Assistant Secretary of the Company shall be elected as Assistant Secretary of the Association with authority to install systems and audit the accounts of the Association and make or supervise the making of all quarterly and annual statements to the Insurance Department and that the expense of such Assistant Secretary be paid by the Company."
Further in its agreement the Roosevelt association agreed at its own expense to prepare and mail mortuary assessment calls, and collect and receipt for assessments collected under such notices, but to deposit all such collections in a depository designated by appellant.
The contract further provided that the Roosevelt insurance company must submit all notices of death of members forthwith on receipt of same to the appellant insurance company, and forward to beneficiaries blank proofs of loss on forms approved by the appellant; and further that when proofs of death were received they were to be forwarded to the appellant company for its approval and adjustment.
The finding of the court that under the terms of the contract between the respective insurance companies appellant assumed all the outstanding policies of the Roosevelt Mutual Life Association, and agreed to adjust, pay, and settle all claims arising under said policies, including the policy of insurance sued on herein, is amply supported by the evidence. The holders of policies issued by the Roosevelt Mutual Life Association in this state could avail themselves of said promise and undertaking made for their benefit by the appellant Sunset insurance company; and as was said in Whitney v. American Insurance Co., 127 Cal. 464, 470, 59 P. 897, the bringing of suit is sufficient evidence of assent on the part of respondents to said agreement and undertaking. Under the facts of this case, we are of the opinion that the law created the privity necessary for the maintenance of the action. The Sunset Mutual Life Insurance Company was jointly liable with the Roosevelt Mutual Life Association on the policy.
Appellant next urges that the cancelation of the so-called reinsurance agreement by mutual consent of the respective insurance companies on January 31, 1931, extinguished, canceled, settled, and disposed of all rights which had accrued under the policy of insurance herein by reason of the death of the insured, whose demise occurred prior to the cancelation agreement. With this contention of appellant we cannot agree. The document by the terms of which the contractual relations existing between the two insurance companies were terminated is denominated "cancellation of contract," and in part reads as follows: "* * * that a certain contract of reinsurance entered into between the two companies under date of June 9, 1930, be and hereby is cancelled by mutual agreement as of the date of January 31, 1931."
Appellant uses the words "cancelation" and "rescission" interchangeably and synonymously, and, we think, erroneously, because the word "canceled," applied to the agreement under the circumstances of the instant case, means no more than the doing away with an existing agreement; but this does not, in our opinion, extinguish any obligations that accrued prior to the date of cancelation. Winton v. Spring, 18 Cal. 451. In Young v. Flickinger, 75 Cal.App. 171, 242 P. 516, 517, we find the following: "To ‘cancel’ a contract means to abrogate so much of it as remains unperformed. It differs from ‘rescission,’ which means to restore the parties to their former position. The one refers to the state of things at the time of the cancellation; the other to the state of things existing when the contract was made."
Upon the authority of this case, coupled with the statement contained in the cancelation agreement that the same became effective as of the date of January 31, 1931, we conclude that the cancelation served only to do away with the existing agreement as of the date mentioned; but such termination did not relieve appellant of obligations incurred to third parties, such as respondents herein, during the time the contract was in force. The contract in question being one between the two insurance companies for the benefit of third parties, viz., policyholders, the makers thereof cannot cancel the same so as to extinguish the accrued rights of third parties without the assent of the latter. Gifford v. Corrigan, 117 N.Y. 257, 22 N.E. 756, 6 L.R.A. 610, 15 Am.St.Rep. 508; Moore v. Baasch, 109 Wash. 568, 187 P. 388. When the insured Mack Lewis Sawyer died, September 29, 1930, respondents, as his beneficiaries, became thereby vested with a right to recover jointly from the insurance companies, and the lower court was correct in holding that the subsequent cancelation of the contract between the insurance companies did not obliterate or destroy the vested right and claim theretofore created in respondents.
Concluding, as we do, that by reason of the so-called contract of reinsurance both the Roosevelt company and the Sunset company became jointly liable to respondents, we deem it unnecessary to discuss appellant’s claim that the assignment by the Roosevelt company to respondents subsequent to the cancelation agreement of the company’s rights under the reinsurance contract against the Sunset company, vested in respondents no right of action; for the reason that, in our opinion, respondents’ claim and appellant’s responsibility is not predicated upon the assignment, but springs from the contract entered into between the two insurance companies, which we hold to be a contract for the benefit of the policy holders of the Roosevelt Mutual Life Association.
The policy of insurance herein involved provided: "If Member is in good standing the Association hereby agrees to pay Sally E. Sawyer and George W. Sawyer (share and share alike) Member’s wife and son (the beneficiary hereunder) the sum of Three Thousand ($3,000) Dollars in cash, immediately upon receipt of due proof of death of said Member, * * * provided, however, that said amount payable hereunder is conditioned that there be at least Three Thousand (3,000) members in good standing, in the Association, at the time of the death of said Member, it being understood and agreed that should there be fewer than Three Thousand (3,000) members in the Association at the time of the death of said Member, the amount payable hereunder shall be the sum of one ($1.00) dollar for each such Member, all in good standing, but in no event shall the amount paid under this certificate exceed the sum of Three Thousand ($3,000) Dollars."
In its fifth separate and distinct defense to the complaint, appellant alleged that on the date of the death of said Mack Lewis Sawyer, to wit, September 29, 1930, there were only 820 members of said Roosevelt Mutual Life Association in good standing, and by the terms of said policy the total amount due thereunder to plaintiffs, if anything, was the sum of $820 and no more. On the issue thereby raised the court made a finding, as follows: "* * * the court finds that it is not true that at the time of the death of the said Mack Lewis Sawyer, or at the time the said Roosevelt Mutual Life Association received due proof of loss and notice of the death of the said Mack Lewis Sawyer, that there were only 820 members of said Roosevelt Mutual Life Association in good standing, and the court further finds that the evidence on said issue is insufficient for the court to make a finding as to the exact number of members in good standing at said time."
Appellant earnestly insists that there was definite testimony in the record as to the number of members of the association in good standing at the date of the death of the insured, and we find ourselves in accord with this claim of appellant. An examination of the record reveals the following testimony, given by the witness Harry R. Alsdorf, secretary of the insurance company:
"Q. Now, Mr. Alsdorf, you brought with you this morning some books and records of the Roosevelt Association?
A. Yes, sir.
"Q. Have you made an examination of those books and records, and can you produce them, to show the number of members that were in good standing in the Association on September 29, 1930?
A. There was 772 members that paid and 131 new members, making 903."
We find no evidence contradictory of the direct and positive assertion of the insurance company’s secretary that 903 members were in good standing on the books of the company at the time of the death of the insured herein.
Respondents assert that while there is some evidence of 903 members being in good standing at the date of death of the insured, that there is no evidence as to how much money these members would have paid had an assessment been levied. The record indicates that upon the death of a member of the association an assessment was sent out to the members, and the members were required to pay in their assessments. It further appears that if a member had a $1,000 policy he paid an assessment of $1, and if he had a $3,000 policy he paid a $3 assessment. Respondents contend that there is no evidence in the record to indicate how much money would have been received had the company recognized respondents’ claim as beneficiaries under the policy. While this is true, still, in our opinion, the liability of the insurance company was not measured by the amount of money received from an assessment, but, under the plain terms of the policy, if there were less than 3,000 members in the association at the time of the death of the insured, the beneficiaries were entitled only to the sum of $1 for each member in good standing. The evidence is positive and unequivocal in the record that at the date of the death of the insured herein there was a total of 903 members in good standing. Under this state of facts, in our opinion, the lower court could and should have made a finding to that effect. It follows, therefore, that under the terms of the policy herein, the beneficiaries thereunder were entitled to receive only the sum of $903.
Pursuant to the provisions of section 956a of the Code of Civil Procedure, empowering this court to make findings of fact contrary to those made by the trial court, it is ordered that finding No. XIII be amended to read: "That it is true that the policy of insurance issued by the Roosevelt Mutual Life Association on July 24, 1929, contained the provision as set forth in defendant’s fifth, separate and distinct defense, paragraph II thereof; but the court finds that it is not true that at the time of the death of said Mack Lewis Sawyer there were only 820 members of said Roosevelt Mutual Life Association in good standing, but on the contrary, the court finds that at the time of the death of said Mack Lewis Sawyer there were 903 members of said Roosevelt Mutual Life Association in good standing."
The right of an appellate court to make findings contrary to the findings of the trial court when affirming a judgment was settled in the case of Tupman v. Haberkern, 208 Cal. 256, 268, 280 P. 970, 975, in which our Supreme Court said: "It is beyond question that under the new law the court on appeal may, on the findings made contrary to the findings of the trial court or in addition thereto on the record evidence, or pursuant to new evidence taken in the reviewing court, render such a judgment in the reviewing court as would affirm or modify and affirm the judgment of the trial court, thus terminating the litigation." (Italics ours.)
The attempted appeals from the verdict and from the order denying the motion for a new trial are dismissed, as no appeals lie therefrom.
The judgment appealed from is modified by reducing the principal amount thereof from $3,032 to $903, and as so modified the judgment is affirmed, each party to bear their own costs on appeal.
I concur: DORAN, J.
I dissent: YORK, Acting P. J.