Argued October 31, 1907
Decided November 26, 1907
W.H. Van Steenbergh and E.G. Bullard for plaintiff, appellant.
Charles F. Brown and William T. Gilbert for defendant, appellant. George Richards for respondents.
The facts in dispute have been finally settled by the unanimous affirmance of the judgment. The situation, as presented, is one where the interests of the parties are evident and but few questions of law of any importance have survived the disposition made below of this case. In 1887, a contract was made by the plaintiff with Benjamin F. Reed and his children, pursuant to which policies of insurance, to the aggregate amount of $25,000, were to be taken out upon Reed's life; of which his children were to be the principal beneficiaries and they were to be named, as such, in the policies. These policies were to be kept in force until the death of the assured and the plaintiff agreed to pay all the premiums and assessments. From the proceeds of the insurance, he was to be reimbursed the amount advanced by him, with ten per cent interest, (the legal rate in the state of Michigan, where the contract was made), and, in addition, he was to receive the sum of $5,000; the remainder of the insurance moneys being payable to the children of the assured. This contract was so far carried out that, upon applications signed by the deceased, the plaintiff procured the issuance of four policies, aggregating in amount $25,000, by the Massachusetts Benefit Association, the National Benefit Society and the Equitable Reserve Fund Life Association; the children being, alone, named as beneficiaries in two policies issued by the first-named company and, in those issued by the two latter companies, being jointly named with the plaintiff, who was described as nephew and creditor. The plaintiff performed his agreement to keep the policies in force by the payment of all premiums, or assessments, and, when the two last-named insurance companies failed, in 1889, he procured to be issued, still carrying out the contract, two other policies in their place; one of which, for $10,000, is the one involved in this action. In renewing, however, that particular insurance, the policy was made payable to the plaintiff, or his assigns. At the death of the assured, the policies of life insurance were in force and $15,000 of their amount have been paid over by the other two insurance companies. The plaintiff collected $5,000, the amount of one of the other policies, and from the proceeds of the other policy for $10,000, he has received with the assent of, or from, the Reed children a sum of money sufficient to reimburse him for his payments of premiums upon the insurance policies, other than the one in question. The Reed children being in this action as parties, the judgment distributed between them and the plaintiff the amount found due upon this policy; giving to the latter so much of it as would reimburse him for what premiums, or assessments, he has advanced thereon.
It is argued for the appellant company that the plaintiff had no insurable interest in the life of the assured and that the policy issued by it was, therefore, void. As nephew of the deceased, he, certainly, had no insurable interest; but he represented in himself other interests. The application for the policy represented him to be a creditor of the applicant upon whose life the insurance was solicited. Whether, if this had been the mere contract of the assured with the company, the policy, in such case, would have been valid without reference to the insurable interest of the appointee, or payee, in the life assured, presents a question, not difficult to answer, upon authority, or upon principle. A life insurance policy is not a contract of indemnity; it is a contract to pay a sum of money upon the death of the assured, in consideration of certain payments being duly made at fixed periods during his life. If the insurance is made upon the application of one who has no insurable interest whatever in the life insured, it is a wager policy, that is to say, a speculative contract, which the law condemns. But a person may insure his own life and provide in the contract of insurance that the money shall be payable to any one whom he may appoint, or assign the policy to. What will distinguish the one contract from the other is the fact as to the party actually contracting with the insurer and the distinction is substantial and controlling accordingly. (See Rawls v. American Mut. L. Ins. Co., 27 N.Y. 282-287; Valton v. Nat. Fund L. Assur. Co., 20 ib. 32-38; Olmsted v. Keyes, 85 ib. 593-598; and Dalby v. India, etc., Assurance Co., 15 C.B. 365.)
In this case, I think we must hold, upon the facts as they have been found, that the insurance was applied for and was effected by the plaintiff; but, also, that he had an insurable interest in the life to be insured. In the first place, it appears that all of the insurance was procured in pursuance of the contract between the plaintiff, the assured and his children. It was to be maintained by the plaintiff for their benefit and they were to be named as the beneficiaries; but the plaintiff was to be compensated by the repayment from the proceeds of the policies of the amount of his advances of premiums, or assessments, with interest, and by the payment of a substantial sum in addition. This and the other policies, therefore, were based upon the insurable interest of Reed's children, who were represented, and financially assisted, by the plaintiff. By their agreement, he acted for them and he could be held to the performance of the contract, if necessary, as their trustee. In causing the present policy to be issued in his name, alone, the fact of the insurable interest was in no wise affected; for the finding is that it was procured in pursuance of the contract. In the second place, however, the plaintiff, personally, did have an insurable interest as a creditor of the assured, when this policy issued. It is the fact, and it is so found, that, at the time, he had already advanced and paid the premiums, or assessments, upon the $25,000 of life insurance, taken out some two years previously. To the extent of his payments, he was, under the contract, a creditor of the assured. It did not affect the fact of the personal indebtedness that the plaintiff might be repaid from the proceeds of the insurance. The assured was a debtor for the premiums paid by the plaintiff to maintain the insurance on his life. If there was an insurable interest in the plaintiff when this policy issued, the legal liability of the company is established and it is of no consequence that the plaintiff's interest, as a creditor, was less than the amount of the policy. (See Olmsted v. Keyes, supra; Wright v. Mutual Ben. Life Association, 118 N.Y. 237.) The Reed children have been brought into the action, (and this upon the express consent of the company), and their rights could be, and they were, adjusted, without prejudice to the company. ( Wright v. Mutual Ben. Life Association, supra.) The policy having been validly issued and the plaintiff having procured it pursuant to the agreement that he should do so for the benefit of the Reed children, the insurer is not in a position to complain that others than the payee named are entitled to some of the insurance moneys. If the Reed children had not been brought into the action, the plaintiff could have collected the insurance moneys and he, then, would have held their portion as a trustee. On this phase of the case, I find no reason for disturbing the judgment below.
It is contended that the policy lapsed by reason of the non-payment of certain premiums. The trial court has found that the plaintiff paid all the premiums, or assessments, down to January 12, 1895, about a year before the death of the assured, and that the company refused to accept the premium which was due, and which was tendered to it, on that date. It seems that the refusal of the company was upon the ground that the tender of the premium was made too late; but the finding, as to that fact, is that it was duly tendered. It is argued, however, that the subsequent premiums should have been paid, or tendered, and that the failure to do so caused the policy to lapse. The refusal of the company to accept the premium due in January, 1895, was a perfectly good reason for not offering to pay subsequent premiums. If the company's refusal had a legal basis, the contract of insurance was at an end by reason of the violation of the terms of the contract. Its attitude was, and has continued to be, one of repudiation of its obligation to the plaintiff. After its refusal, he was not required to perform the vain and useless act of making further tenders on recurring premium dates. ( Shaw v. Republic Life Ins. Co., 69 N.Y. 286 -293; Hayner v. Am. Popular Life Ins. Co., Ib. 435-439; Miesell v. Globe Mut. Life Ins. Co., 76 ib. 115, 120.) Provision was sufficiently made in the judgment for the deduction of unpaid premiums, with interest thereon to the date of the death of the assured, from the amount of the policy. ( Meyer v. Knickerbocker Life Ins. Co., 73 N.Y. 516, 528.)
I think that the objection of the company to the award of two bills of costs against it, one to the plaintiff and another to the Reed children, is good. The plaintiff was entitled to his costs, as of course; but I can perceive no legal reason for awarding another bill to the Reed defendants. The action was not in equity, where costs might be awarded in the discretion of the court. It was at law upon a single contract of insurance running to the plaintiff. If he was not, individually, entitled to all of the moneys due upon it, he would receive and hold them as trustee for the Reed children. Their intervening did not change the character of the action. If they voluntarily came into it, however convenient for purposes of adjustment, or as a measure of protection, it would be unjust and without authority in the statute, so far as I am aware, to compel the company to pay to them an additional bill of costs and an allowance. (See Roberts v. N.Y. Elev. R.R. Co., 155 N.Y. 31, 39.) Whether they were in or out of the action, their rights were worked out through the plaintiff, under the contract which I have heretofore spoken of.
No other questions, in my opinion, require consideration by us. I advise that the judgment appealed from should be modified by striking therefrom the award of costs and of an allowance to the defendants Reed and Davidson and that, as so modified, the judgment should be affirmed; without costs in this court to either party as against the other.
CULLEN, Ch. J., O'BRIEN, WILLARD BARTLETT and CHASE, JJ., concur; VANN, J., concurs in result; WERNER, J., absent.