Manhattan Life Insurance Company of New York v. Cohen

The defendant in error was the plaintiff below, and sued the Manhattan Life Insurance Company, which we shall speak of as the company, on two policies on the life of Jacob Cohen in his own favor, written in 1893, in Texas, where Cohen resided, the company then doing business in that state through an agency. It was averred that although the company had admitted liability on the policies, it had not paid the loss, and was therefore responsible not only for the sum due insured, with interest, but also for 12 per cent as statutory penalty or damages, and $1,000 attorneys' fees.

The answer denied liability to the plaintiff. It admitted issuing the policies, but averred that in 1907 the insured, Cohen, borrowed $875 on each, and pledged the policies as security, which loans were unpaid. It was averred that in July, 1907, Cohen sold to Hilsman, of Atlanta, Georgia, his interest in the policies, and executed assignments and orders on the company to deliver the policies to him on payment of the debts for which they were pledged. These documents were annexed to the answer. The origin and course of the negotiation which ultimated in the assignments were thus stated: Hilsman had an agent at San Antonio, Texas, where Cohen lived. The transactions 'were begun' and 'definitely agreed upon' between Cohen and the agent, 'the agreement being that Hilsman would pay Jacob Cohen $460 for his equity in said policies, whereupon Cohen wired Hilsman to send papers, and the following correspondence, by letter and telegram, passed between them.' Hilsman in answer to the first telegram from Cohen wrote, inclosing him assignments of the policy and necessary notices to the company, with directions for their execution, and asking, besides, for certain papers which he required to show Cohen's ownership free from the claims of other persons, the letter ending with the statement, 'Send all the papers that are herewith inclosed, duly executed, in a sealed envelop, with this draft attached (evidently the draft for the price), and upon arrival, if in good shape, we will duly honor.' Cohen replied by letter, explaining that he did not have particular papers which had been asked for, but had others which he thought were their equivalent, and proposing to execute the assignment and send these papers, the letter concluding with the statement, 'if this meets with your approval, please wire me upon receipt of this letter, and I shall forward papers.' Hilsman answered by telegram favorably, and confirmed it by letter, saying that if the papers were sent, 'we will promptly honor the draft, provided the papers are in good shape.' On the day the telegram last referred to was received, Cohen transmitted the executed papers with the accompanying documents by mail, saying, 'I beg to inclose all documents. . . which I trust you will find correct, and will honor my draft for $460 attached to these documents.' The answer specifically alleges that the draft was sent from San Antonio for collection through a bank in that place, and as the answer states that the draft was attached to the papers, and this conformed to the instructions which we have seen were given by Hilsman to Cohen, the answer therefore in effect averred that the papers and draft were delivered to a bank in San Antonio, to be transmitted to Atlanta, the papers to be delivered to Hilsman if, after examination, he found the papers satisfactory and paid the draft. The answer then, in paragraph 8, contained the following averments:

'Said Jacob Cohen, Hilsman, and his said agent, were engaged in speculative transactions, and said assignments were made as a part of and in connection with a certain transaction in what is commonly called 'cotton futures,' the money being paid to and received and used by Jacob Cohen to speculate in the future price of cotton, without its being contemplated that there would be actual delivery thereof, or bargain and sale, and said Hilsman or his said agent, being interested in the transaction, and the purpose of the transaction being known by all the parties, which purpose was carried into effect, through the said agency of J. H. Hilsman and J. H. Hilsman, he being engaged in the brokerage business.'

It was averred that after the death of Cohen, both his executor and Hilsman, as owners of the policies, made demand upon the company for payment; that the company admitted liability to someone, and simply professed its desire to have the matter as to who was owner of the policies settled so that it might make payment with safety. To reach this result it was alleged that an unsuccessful effort was made to have the parties agree to appear in a suit where, as to both of them, the company admitting liability, their rights might have been determined; and that failing in this respect, and being advised that under the law of Georgia, where the assignment to Hilsman was made, it was legal, and therefore his claim was valid, as the most expeditious way of clearing up the matter the company paid Hilsman, and took from him an indemnity bond. While admitting that before the assignment and at the time of its delivery Hilsman had no interest whatever in the life of Cohen, it was nevertheless averred that the assignment of the policies was valid ana authorized under the laws of the states of Georgia and New York. Averring, moreover, that all the acts of the company in the premises had been in good faith, and arose not from any desire to deny liability, but simply from an honest purpose to have it determined who owned the claims under the policy, it was asserted that there could be in no event any liability for interest by way of damages and for the attorneys' fees as prayed.

By leave the plaintiff amended his petition 'in replication and answer to. . . the answer of the defendant, Manhattan Life Insurance Company,' and asserted, among other things, that the assignments of the policies alleged in the answer were void upon two distinct grounds: (1) Because 'under and by virtue of the laws of the state of Texas, the state of New York, and the state of Georgia, and each of them, an assignment of a life insurance policy to a person without insurable interest in the life of the insured is invalid and not binding upon the assignor or his representative.' (2) Because 'said alleged assignments of the policies of insurance sued upon herein are invalid and not binding upon it, and were without legal consideration under the laws of the state of Texas, the state of New York, and the state of Georgia, for this: that at the time that said assignments and each of them were made, executed, and delivered, that the said Jacob Cohen, J. H. Hilsman, and his said agent, were engaged in speculative transactions, and that said assignments and each of them were made as a part of and in connection with the said transactions in what is commonly called 'cotton futures,' the money being paid to and received and used by the said Jacob Cohen to speculate in future prices of cotton without its being contemplated that there would be actual delivery thereof, or bargain and sale; the said Hilsman and his agent being interested in the transaction, and the purpose of the transaction being at and before the time known to and by all the parties, which said purpose was carried into effect through the said agency, J. H. Hilsman and J. H. Hilsman, he being engaged at that time in the brokerage business; all of which said facts were well known to the defendant insurance company at and before the time that it paid the said policies to the said Hilsman, as in its said answer alleged and set forth.'

For the purpose of the trial by the court without a jury a written statement of facts was agreed to by both parties in the form of petitioner's case, the case of the defendant company, and the reply of the petitioner. The statement of the plaintiff admitted the issue of the policies, the lending of the money by the company, and the pledging of the policies to secure it, the transfer or assignment by Cohen for the consideration we have stated, and under the circumstances which we have detailed, the gambling nature of the transaction being expressly stated in accordance with the averment of the answer of the company, and with the allegation of the amended pleading of the plaintiff, the death of Cohen, the claim of both parties on the insurance company, the effort of the company to secure a suit to which both the claimants should be parties in order to relieve it from responsibility, its failure to secure that result, and its payment to Hilsman of the amount upon the giving by him of indemnity, all substantially as alleged in the pleadings we have stated. The agreed facts contained this statement:

'It was not the purpose of the insurance company to contest or delay payment, and the payment to Hilsman was made under the circumstances above set out. It is not the purpose of this agreement to determine how far, if at all, the facts in respect to notice and good faith are material issues in this case, that being deemed a question of law; nor is this agreement to be construed as admitting as a matter of law that Hilsman had any right to said policy or their proceeds, or that said payment, or any part thereof, was rightfully made to him. It is, however, agreed as a fact that Hilsman has not been repaid said sum of $460, and the insurance company has not been repaid the amount of said loan, except as above stated, and that nothing has yet been paid to the plaintiff.'

The company, as part of its case, introduced certain statutes of the state of Georgia and decisions of the court of last resort of that state, interpreting the same for the purpose of showing that Cohen had a right to sell and Hilsman to purchase in Georgia the insurance policies, although Hilsman had no insurable interest in Cohen's life. In rebuttal the plaintiff introduced certain decisions of the court of last resort of Georgia, deemed to establish the contrary result, and also offered statutes of that state dealing with gambling transactions and the right to sue concerning the same. The trial court found the facts substantially as embodied in the statements referred to.

Mr. William J. Moroney for plaintiffs in error.

[Argument of Counsel from pages 128-130 intentionally omitted]

Messrs. Wilmer S. Hunt, Sterling Myer, and C. A. Teagle for defendant in error.

[Argument of Counsel from page 130 intentionally omitted]

Mr. Chief Justice White, after making the foregoing statement, delivered the opinion of the court: