Thompson v. Insurance Company

ERROR to the Circuit Court of the United States for the Southern District of Alabama.

This was an action on a policy of insurance for $5,000, issued by the Knickerbocker Life Insurance Company, the defendant in error, on the life of John Y. Thompson, for the benefit of his wife, Ruth E. Thompson, the plaintiff in error. The policy bore date Jan. 24, 1870, and was to continue during his life, in consideration of an annual premium of $410.20, payable on or before the twenty-fourth day of January in every year. He died Nov. 3, 1874. The complaint was in the usual form, setting forth the contract contained in the policy, his death, and the performance of the conditions of the policy by him and the plaintiff. The company pleaded the general issue, and two special pleas, which set up in substance the same defence. The second plea, after setting forth the provisions of the policy for the payment of the annual premium, proceeds as follows:--

'Under said policy an annual credit or loan of a portion of said premium was provided for, and said policy also contained a condition or proviso that the omission to pay the said annual premium on or before twelve o'clock noon on the day or days above designated for the payment thereof, or that the failure to pay at maturity any note, obligation, or indebtedness (other than the annual credit or loan) for premium or interest due under said policy or contract, shall then and thereafter cause said policy to be void without notice to any party or parties interested therein.

'The defendant further says that the said annual premium was not paid on or before the twenty-fourth day of January, A. D. 1874, and thereupon the defendant did give tiem for the payment of said premium upon the condition named in the note hereinafter mentioned, and for the payment of said premium did take certain promissory notes of said Thompson, one of which was as follows:--

'$109.] NEW YORK, Jan'y 24th, 1874.

'Nine months after date, without grace, I promise to pay to the Knickerbocker Life Insurance Company one hundred and nine dollars, at Mobile, Alabama, value received, in premium on policy No. 2334, which policy is to be void in case this note is not paid at maturity, according to contract in said policy.

'No. 2334 was an error, No. 2331 being intended.'

It then avers that the note was not paid when it became due, Oct. 24, 1874, and that by reason thereof the policy became void and of no effect before the death of the assured.

To these pleas four replications were filed, numbered 2, 3, 4, and 5, as follows:--

'2d, That the said policy of insurance was renewed by said defendant on the twenty-fourth day of January, 1874, and continued in force until Jan. 24, 1875. That the payment of said note at maturity was not a condition precedent as alleged. That the said Thompson had the money in hand, was ready and willing and intended to pay said note, but that before the maturity thereof he was taken violently ill, and before and at the time the same fell due was in bed, prostrated by a fatal disease, and in this condition remained until he died on the third day of November, 1874; that during all this time he was mentally and physically incapable of attending to his business, or knowing of and performing his obligations, and was non compos mentis; that the existence of said note was not known to the plaintiff.

'3d, That it was, and had been for many years before, and on the day said note fell due, the uniform usage and custom of said defendant in such cases to give notice of the day of payment to its policy-holders; such is and was the uniform usage and custom with all insurance companies, and the said defendant had in all cases adopted and acted on said usage, and in all its dealings with said Thompson had adhered to said usage, and gave notice of the day when such payments fell due; yet said defendant in this case failed to give any notice of the day of payment of said note, notwithstanding they knew said Thompson was in the city of Mobile, and was sick. Plaintiff avers that said Thompson was ready and willing to pay, had said notice been served as in previous cases, but acting on said usage he was deceived by want of said notice, and that the plaintiff had no notice of the existence of said note, or when the same fell due, wherefore and whereby said note was not paid.

'4th, That on the twenty-fourth day of January, 1874, said policy was renewed and entered in full force for one year, to wit, until Jan. 24, 1875. That said note was for the balance of the premium of that year, which defendant agreed should be deferred and paid as set out on said note; that by said agreement said policy was not to become void on the non-payment of the note alone at maturity as alleged in said plea, but was to become void at the instance and election of said defendant, and plaintiff avers that said defendant did not elect to cancel said policy or take any steps to avoid it or give any notice of such intention during the life of said John Y. Thompson, or since, and still holds said note against said estate of said Thompson.

'5th, And for further replication to the first and second special pleas by said defendant pleaded, plaintiff says that it was the general usage and custom adopted by said defendants, and practised by them before and after the making of said note, not to demand punctual payment of such premium notes on the days they fell due, but to give days of grace thereon, to wit, for thirty days thereafter, and the said defendants had repeatedly so done with said Thompson and others, and they led said Thompson to believe and rely on such leniency in this case, and thereby said Thompson was deceived, and said note not paid, and he did rely on them for such notice.'

Demurrers to these replications were sustained by the court. The case was then tried upon the plea of the general issue. On the rejection of evidence at the trial, the same questions presented by the replicatious were raised. Exceptions were taken in due form and preserved on the record.

The was a judgment for the defendant. The plaintiff thereupon sued out this writ of error.

The policy having been renewed and continued in force by the company for a year on Jan. 24, 1874, when the note in question was given, the payment of that note, if a condition at all, was a condition subsequent operating by way of defeasance, and mere non-payment ad diem was not alone sufficient to effect an absolute forfeiture of the insurance. Insurance Company v. French, 30 Ohio St. 240.

The whole contract evidenced by the policy and the note, taken together, means, that, after the renewal receipt was given, the policy was voidable at the option of the company, and unless a forfeiture should be asserted and declared, at the proper time, the insurance remained. The case is essentially different from a purely unilateral contract, where the risk has not fully attached for the particular year in which the death occurred, and is like a release which is subject to be avoided by the happening of a condition subsequent, as, for example, the non-payment of a composition. The release is good and operative, unless itself subsequently avoided. Newington v. Levy, Law Rep. 5 C. P. 607.

The distinction between a precedent and a subsequent condition is as well marked in this contract as in others. Giddings v. Insurance Company, 102 U.S. 108; 2 Langdell, Cases on Contracts, p. 1009. There are no technical words whereby such conditions are distinguished. The governing rule is the fair intention of the parties to be collected from the transaction. Porter v. Shepard, 6 T. R. 668; Finlay v. King's Lessee, 3 Pet. 346; Nicoll v. New York & Erie Railroad Co., 12 N. Y. 121.

In the present case it cannot be supposed that it was intended that the mere non-payment of a fractional part of the premium ad diem should operate as the non-performance of a condition precedent. It would be unconscionable and oppressive to give the contract that effect. Pordage v. Cole, 1 Wms. Saund. 320 b; Campbell v. Jones, 6 T. R. 570; Boone v. Eyre, 1 H. Bl. 273, note; 2 W. Bl. 1312; Graves v. Legg, 9 Ex. 709; Ellen v. Topp, 6 id. 424.

The condition in question being at most a condition subsequent operating by way of defeasance, its performance was excused by the inevitable accident alleged by the plaintiff, and the liability of the company became absolute, in accordance with settled principles of jurisprudence. People v. Bartlett, 3 Hill (N. Y.), 570; People v. Manning, 8 Cow. (N. Y.) 297; Carpenter v. Stevens, 12 Wend. (N. Y.) 589; Wolfe v. Howes, 20 N. Y. 197; Baldwin v. New York Life Insurance Co., 3 Bosw. (N. Y.) 530; Davis v. Gray, 16 Wall. 203.

The court erred in not overruling the defendant's demurrers. Insurance Company v. Eggleston, 96 U.S. 572; Helme v. Philadelphia Life Insurance Co., 61 Pa. St. 107; Insurance Company v. French, 30 Ohio St. 240; Mayer v. Mutual Life Insurance Co., 38 Iowa, 304; Hanley v. Life Association of America, 69 Mo. 380; Leslie v. Knickerbocker Life Insurance Co., 63 N. Y. 27; Nicoll v. New York & Erie Railroad Co., supra; Newington v. Levy, supra; Teutonia Life Insurance Co. v. Anderson, 77 Ill. 384; Howell v. Knickerbocker Life Insurance Co., 44 N. Y. 276; Mutual Benefit Life Insurance Co. v. Hillyard, 37 N. J. L. 444; Martine v. Insurance Company, 53 N. Y. 339; Code of Alabama, sect. 3001.

Mr. J. Hubley Ashton and Mr. Thomas N. McCartney for the plaintiff in error.

Mr. Fletcher P. Cuppy and Mr. Thomas H. Herndon, contra.

MR. JUSTICE BRADLEY, after stating the facts, delivered the opinion of the court.