Opinion
January Term, 1898.
William L. Learned, for the infant appellants.
George R. Donnan, for Peterson Packer, appellants.
George H. Mallory, for Ann Healey, appellant.
Patterson, Bulkeley Van Kirk, for the respondent.
A majority of the court are of opinion that this action is maintainable for the reasons stated by Mr. Justice PUTNAM upon the former appeal (86 Hun, 534). That conclusion having been reached, a majority of the court concur in the following opinion, and in the judgment directed.
If this action is maintainable, then I advise that the $740 be awarded to the defendant Ann Healey. The policy, at the option of the holder, was convertible under the terms of the 8th clause into an endowment policy for his benefit. Alonzo H. Doty in May, 1874, took out the policy and paid the premiums for the ten years thereafter as required by its terms. He thus became the holder and owner of the policy. ( Garner v. Germania Life Ins. Co., 17 Abb. [N.C.] 7.) In common phrase he who takes out the policy and pays the premiums is the policyholder. ( People v. Security Life Ins. Co., 78 N.Y. 114; People v. Empire Mutual Life, 92 id. 105.) But, of course, by proper transfer the transferee may become the holder. By its terms Alonzo H. Doty's life was insured for $2,000, payable upon his death to his wife Josephine if she should survive him; if she should not survive him, then to their children surviving him; and, if neither wife nor child should survive him, then to his executors, administrators or assigns, subject, however, to the 8th clause of the policy, which provided, "That this policy may be converted into cash at the option of the holder at any time after the expiration of fifteen years from the date hereof for the amount indorsed upon the back of this policy." Thus, if the holder should exercise the option he would become the beneficiary in the lifetime of Alonzo H. Doty, and the wife Josephine and the Doty children would cease to be beneficiaries, or, rather, never would become beneficiaries at all. The plaintiff by the terms of the policy held out to Alonzo H. Doty two inducements, one, the provision for his wife or children, if he could get along without himself resorting to the policy in his lifetime; the other, that if he could not get along, if poverty or misfortune constrained him, he could himself after fifteen years pass, realize its cash value.
Alonzo H. Doty thus had the right to become sole beneficiary of the policy; it was a property right and he could dispose of it without consulting either his wife or his children, since whatever interests they had were subject to the contingency that he by exercising the option could make his own right superior and absolute, and thereby cut off their contingent interests. Chapter 248, Laws of 1879, as it seems to me, does not impair this right. It provides that "All policies of insurance heretofore or hereafter issued within the State of New York upon the lives of husbands for the benefit and use of their wives, in pursuance of the laws of the State, shall be from and after the passage of this act assignable by said wife with the written consent of her husband." To the extent that this policy was for the benefit and use of the wife, the written consent of the husband was necessary to her assignment of it, but to the extent that it was for the benefit and use of the husband it was not; her written consent or assignment was not necessary; nor need the husband's assignment be in writing, since at common law he could insure his own life for his own use, and of course dispose of his interest in the policy to his own advantage without asking leave of his wife or children. ( Valton v. National Fund Life Co., 20 N.Y. 32.) In Whitehead v. N.Y. Life Ins. Co. ( 102 N.Y. 152) it is held that the interest of the wife and children in the policy becomes vested at the moment of its execution, but that is said with reference to a policy taken out by the wife upon the life of her husband for her benefit, or, in case of her death before his, of their children, with no privilege in it for the husband to take the benefit to himself. This fact is emphasized in the opinion. The contract is said to be about the husband, not with him. (See Walsh v. Mutual Life Ins. Co., 133 N.Y. 408.)
Cases arising after the death of the husband upon policies insuring his life for the benefit of his wife or children, with no optional cash converting provision in his favor in his lifetime, or, if so, with the option unexercised, are foreign to the case presented by this policy.
Here the claim of Ann Healey does not rest upon the wife's assignment, but upon the husband's assignment to her of his endowment interest therein, which cuts off every other interest. The policy is either an endowment policy or a life policy, at the option of the holder. If the policy had said that at the expiration of fifteen years $740 should be paid to Alonzo H. Doty or to the holder in full for the insurance, the interest of the wife and children would then have ceased. ( Miller v. Campbell, 140 N.Y. 457.) It can make no difference that, instead of fixing the exact period when the endowment shall mature, the policy gives the holder the option to fix it at any time after fifteen years. That is certain which can be made so, and, as in this case, has been made so. What was said in Brummer v. Cohn ( 86 N.Y. 11), about the non-assignability by the wife of an endowment policy, had reference to a policy payable to herself in the event of her surviving her husband, or surviving the term of the insurance, and none whatever to a husband's assignment of his own separate and superior interest in an endowment policy, the endowment being payable to him if he survived the term of the insurance. By the transfer to Ann Healey she became the owner and holder of the policy. ( Marcus v. St. Louis Mutual Life Ins. Co., 68 N.Y. 625; St. John v. Am. Mut. Life Ins. Co., 13 id. 31.)
Every person holding collateral security has the right to use it in whatever lawful way he can make it most effectual as security, and the only lawful way open to Ann Healey to make it most effectual was to exercise the option to convert the policy into cash. That right of convertibility was the only feature which gave the policy any value to her, and of course it passed to her with the transfer by the husband of the policy, expressed and inhering in it.
Whether the delivery of the policy to Ann Healey was an assignment or a pledge is immaterial. The amount of her lien upon it is greater than $740, its endowment value at the time she exercised her option. The plaintiff admits in this action that if she is entitled to recover, she is entitled to recover $740, and that being so, there is no residue for the other claimants. If the transfer was a pledge, the pledgor, Alonzo H. Doty, is the only person who had a pledgor's rights to redeem or to insist upon a sale of the policy, and these Ann Healey offered to show that he had waived by a subsequent assignment to her in which his wife united. It is enough that they concern no other party to the action.
Judgment modified by directing judgment for defendant Ann Healey for the fund brought into court, with costs against the plaintiff in the several courts, and enjoining the prosecution of her separate action against the plaintiff, and with judgment in favor of the plaintiff against the other defendants, declaring that they have no interest in the policy, with costs in favor of the plaintiff against the defendants Peterson Packer, and in favor of the infant defendants against the plaintiff for the costs as awarded below with the disbursements upon this appeal.
Judgment modified and directed as stated in opinion.