Case Name: MORGAN et al. v. MUTUAL BEN. LIFE INS. CO.
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1907-05-01
Citations: 104 N.Y.S. 185
Docket Number: 
Parties: MORGAN et al. v. MUTUAL BEN. LIFE INS. CO.
Judges: 
Reporter: West's New York Supplement
Volume: 104
Pages: 185–198

Head Matter:
MORGAN et al. v. MUTUAL BEN. LIFE INS. CO.
(Supreme Court, Appellate Division, Fourth Department.
May 1, 1907.)
1. Insurance—Assignment of Policy—Right of Assignee—Actions—Parties.
Where an assignment of a life policy as collateral security vests the title thereto in the assignee, payment by the insurer to the assignee of the amount due him is a discharge of the claim on the policy to the extent of the payment,' and therefore, in an action by the assignee against the insurer for the amount due him, the beneficiaries are not necessary parties.
[Ed. Note.—For cases in point, see Cent Dig. vol. 28, Insurance, §§ 1560, 1561.]
2. Same.
The mere fact that an assignment of a life policy was made as collateral security, and that the beneficiaries therein might reinvest themselves with title to the policy by paying the amount due to the assignee, did not deprive the assignee of the right to collect the amount due to him from the insurer.
8. Same.
An assignee of a life policy as collateral security for advancements of premiums, who sues the insurer for the amount advanced, is not required to bring in persons claiming adversely to him as parties to the action, though such persons have commenced an action against the insurer in other states, and though a judgment obtained against the insurer in the action by the assignee may not protect it against the claims of such persons.
[Ed. Note.—For cases in point, see Cent. Dig. vol. 28, Insurance, § 1561.]
4. Process—Substituted Service—Publication—Subject of Action—Statutes.
The subject-matter of an action on a life policy by an assignee thereof as collateral for premiums advanced thereon brought for the amount of the debt against the insurer and the beneficiaries in the policy is specific personal property within Code Civ. Proc. § 438, subd. 5, authorizing service of summons on a nonresident defendant by publication, where the complaint demands judgment that defendant be excluded from an interest in personal property, defined by Laws 1892, p. I486, c. 677, § 4, to include written instruments by which any financial obligation is created, etc., and a nonresident beneficiary may be served by publication.
[Ed. Note.—For cases in point, see Cent. Dig. vol. 40, Process, § 100.]
5. Same—Situs of Personalty.
A foreign insurance company complied with Insurance Law, Laws 1892, pp. 1941, 1942, 1945, c. 690, §§ 25, 26, 30, relating to foreign insurance companies doing business in the state, and issued in the state a life' policy to a resident thereof, who, with its consent, assigned it to another resident as collateral security for advancements of premiums. The assignee died a resident of the state, and the trustees of his will held the policy as an asset of his estate. Held, that the subject-matter of an action by the trustees against the company and the beneficiaries in the policy for the amount of the advancements was personal property having a situs within the state within Code Civ. Proc. § 438, subd. 5, authorizing the service of summons on a nonresident defendant by publication, where the complaint demands judgment that defendant be excluded from an Interest in personal property within the state, and a nonresident beneficiary might be served by publication.
[Ed. Note.—For cases in point, see Cent. Dig. vol. 40, Process, $ 100.]
Spring and Robson, JJ., dissenting.
Appeal from Special Term, Erie County.
Action by Susan M. Morgan and others, as trustees of Dayton A. Morgan, deceased, against,the Mutual Benefit Life Insurance Company and others. From an order denying a motion to vacate an order for the service of summons by publication on certain nonresident defendants, defendant, the Mutual Benefit Life Insurance Company, appeals.
Affirmed.
Argued before McLENNAN, P. J., and SPRING, WILLIAMS, KRUSE, and ROBSON, JJ.
Joseph'H. Morey, for respondents.
L. L. Babcock, for appellant.

Opinion:
KRUSE, J.
The defendant insurance company, although it has been properly served with the summons, attacks the order directing the service by publication of the summons upon its nonresident codefendants, upon the ground that such service will not be effective and a judgment so obtained will not be binding upon the defendants served in that manner.
The action is brought upon a life insurance policy of $5,000, issued by the insurance company and delivered in this state to a resident thereof, who assigned the same, with the consent of the insurance company in the state, the assignee also being a resident thereof. The policy is now in the state, and held and owned, as the complaint alleges, by the plaintiffs, who are trustees under the will of the assignee, and are likewise residents of the state. The assignment was made as collateral security for premiums advanced by the assignee upon the policy, amounting to about the sum of $4,500, and which is the sum claimed by the plaintiffs, leaving due to the beneficiaries about $500,. to which the plaintiffs make no claim. The beneficiaries are made codefendants with the insurance company. They are all nonresidents of this state, residing in the states of California, Iowa, Missouri, and Colorado. The insurance company is a foreign corporation, incorporated under the laws of the state of New Jersey, but does business in this state under a license issued by the superintendent of insurance, and is subject to the laws of this state as regards the business done here, having made deposits of securities with the superintendent of insurance for the protection of its policy holders, and appointed him as its agent and attorney, upon whom all process may be served the same as though the insurance company were a domestic corporation. The policy does not seem to fix a particular place of payment by its terms.
The insurance company admits its liability upon the policy upon which the plaintiffs' cause of action is based. It contends, however, that'there are conflicting clairriánts to the insurance moneys, and sets up in its answer the pendency of another action by its codefendants against it in the state of California to recover upon' the same policy. The question which the defendant insurance company seeks to have determined upon this appeal is whether a judgment so obtained against it and its codefendants will be binding upon its codefendants as between itself and them, and so protect the insurance company in paying out the moneys due upon the policy in accordance with the judg ment which may be rendered in the action. The motion to vacate the order of publication was made on the same papers upon which the order was granted. Whether the defendants upon whom such substituted service was directed to be made have been served does not appear, nor is there any suggestion in the record that they may not appear and waive any infirmity in the order, if any there be, or that they have not already done so. Under these circumstances it may well be doubted that the question raised by the insurance company is properly before the court for determination. Neither is it at all certain that the action may not proceed against the insurance company alone in the event that the plaintiffs will be unable to obtain service of the summons upon its codefendants, or that they do not voluntarily appear in the action. It is true that the plaintiff has made them parties defendant, and the judgment demanded indicates that the relief sought is.to declare a lien upon the policy of insurance and the moneys due thereon, to the amount of the plaintiffs' claim. If the plaintiffs have not the legal title thereto, but only an equitable interest therein, very likely the individuals who have the legal title are required to be made parties to the action with the insurance company. Steinbach v. Prudential Insurance Company, 172 N. Y. 471, 65 N. E. 281. The facts set forth in the complaint, however, seem to warrant the conclusion that the defendants impleaded with the insurance company, while proper parties, may not be necessary parties to the action, and, if so, the action may proceed without them. Although the assignment was made and the policy is now held as security for the payment of moneys advanced by the assignee as premiums upon the policy, still, if the assignment vested the title thereto in the assignee, payment by the insurance company to the plaintiffs of the amount due them thereon would be a satisfaction and discharge of the claim to the extent of such payment.
The complaint alleges the assignment of the policy to the plaintiffs' testator, and further alleges that the plaintiffs are now the holders and lawful owners of the policy as security for the payment of the moneys paid as therein stated, amounting to the sum named. The mere fact that the assignment was made as collateral security, and that the beneficiaries therein named may reinvest themselves with title to the policy by paying the amount due to the plaintiffs, does not deprive them of the right to collect the amount due to them from the insurance company. The claim is a direct liability against the insurance company. The fact that there are conflicting claimants to the insurance moneys, or that there are suits threatened or have since the commencemenf of this action been- brought against the insurancé company in other states, is not sufficient reason for requiring the plaintiffs to bring in all other persons claiming adversely to them as parties to this action, nor to refrain from proceeding in this action against the insurance company without them. If embarrassment arises to the insurance company from conflicting claimants residing in different states and bringing actions therein upon the same claim, it is the necessary result of going out of the state where it was incorporated into other states and doing business therein, and voluntarily submitting itself to the conditions imposed by the laws of the particular state in which it carries on the business. It is no answer to such actions that a judg ment obtained against it may. not protect it against claims of other persons not parties to the suit, although, as a matter of comity, proceedings in an action may be stayed where there is a pending.action in another state in which the controversy between the parties may be adjudicated. Sulz v. Mutual Reserve Fund Life Ass'n, 145 N. Y. 563, 40 N. E. 242, 28 L. R. A. 379; Douglass v. Phoenix Insurance Co., 138 N. Y. 209, 221, 33 N. E. 938, 20 L. R. A. 118, 34 Am. St. Rep. 448. Assuming, however, that the insurance company may at this time .and in this manner question the validity of the order, we are of opinion that the order was properly granted. The nonresidence of the defendants directed to be served by publication and the inability to serve personally in this state is conceded. The insurance company urges that the subject-matter of the action is not specific personal property within the meaning of subdivision 5 of section 438 of the Code of Civil Procedure, and therefore the judgment would be inoperative, since nonresidence alone is insufficient to authorize the order for substituted service. Montgomery v. Boyd, 60 App. Div. 133, 70 N. Y. Supp. 139. Section 438 of the Code provides that an order directing the service of summons upon a defendant without the state or by publication may be made when the defendant is not a resident of the state, and, also, among others :
"(5) Where the complaint demands judgment, that the defendant be excluded from a vested- or contingent interest in or lien upon, specific real or personal property within the state; or that such an interest or lien in favor of either party be enforced, regulated, defined or limited; or otherwise affecting the title to such property."
The statutory construction law defines the term "personal property" as follows:
"The term 'personal property' includes chattels, money, things in action, and all written instruments themselves, as distinguished from the rights or interests to which they relate, by which any right, interest, lien or incumbrance in, to or upon property, or any debt or financial obligation is created, acknowledged, evidenced, transferred, discharged or defeated, wholly or in part, and everything, except real property, which may be the subject of ownership. The term chattels includes goods and chattels." Section 4, Laws 1892, p. 1486, c. 677.
It is, however, urged on behalf of the insurance company that' the subject-matter of this action is not personal property having a situs within the state. As has already been pointed out, the insurance company, although a foreign corporation, incorporated under the laws of the state of New Jersey, does business in this state under a license-issued by the superintendent of insurance, and is subject to his supervision the same as a domestic insurance company. Insurance Law, Laws 1892, p. 1941, c. 690, § 25. It is required to keep securities on deposit with the superintendent of insurance to be held in trust for the benefit of the policy holders. Insurance Law, § 26. It is also reT quired to execute and file a written appointment of the superintendent of insurance as agent and attorney in this state, upon whom "all lawful process in any action or proceeding against the corporation may be served, with the same effect as if' it was a domestic corporation. Service upon such attorney shall thereafter be deemed service upon the: corporation." Insurance Law, § 30. The policy was issued in the state to a resident thereof, and was assigned by him with its consent to another resident of the state, who died a resident thereof, leaving the policy as an asset of his estate, and is now in the state, held and •owned by trustees of his will appointed by, and under the control of the courts of this state. It is payable in the state, although not in express terms, and the securities deposited by the insurance company are held by the superintendent of insurance as security therefor. Under these circumstances, we think the insurance company must be regarded as an inhabitant of the state so far as all matters in the suit are concerned, and the situs of the subject-matter of the action as within this state.
The question of the situs of intangible rights and claims of this character have frequently arisen in attachment proceedings and judgments based thereon attacked for want of jurisdiction, where personal .service of process was not made upon the parties against or upon whose right or claim such process or adjudication was made. We are well aware that the decisions upon that question may not be in accord (20 Cyc. 1036, 1037), and we shall not attempt to reconcile them. The courts of our own state have frequently passed upon the question, and the following cases may serve as types of two classes, one where the proceeding has been held ineffective and void, and the other where the proceeding has been held valid: Douglass v. Phœnix Ins. Co., 138 N. Y. 209, 33 N. E. 938, 20 L. R. A. 118, 34 Am. St. Rep. 448; National Broadway Bank v. Sampson, 179 N. Y. 213, 71 N. E. 766, 66 L. R. A. 606, 103 Am. St. Rep. 851; India Rubber Co. v. Katz, 65 App. Div. 349, 72 N. Y. Supp. 658; Lancaster v. Spotswood, 41 Misc. Rep. 19, 83 N. Y. Supp. 572, affirmed in 86 App. Div. 627, 83 N. Y. Supp. 1109. In the first two cases it was held, upon the state of facts as there presented, that the attachment proceedings and adjudication based thereon was not effective, while upon another state of facts somewhat different the last two cases held the attachment good and the proceedings valid. The facts of the two classes of cases are alike in many respects. We need not stop to point out the precise difference. We assume that they are in entire harmony and accord, but think that the facts in this case are quite analogous to those in the last two cases, and that this case is within that class where the attachment was upheld and the seizure thereunder effective. The question has been quite recently before the United States Supreme Court in two cases. Harris v. Balk, 198 U. S. 215, 25 Sup. Ct. 625, 49 L. Ed. 1023; Louisville & Nashville Railroad Co. v. Deer, 200 U. S. 176, 26 Sup. Ct. 207, 50 L. Ed. 426. In the Harris Case a resident of North Carolina, who was owing another resident of that state, went temporarily to Maryland, and while there was garnisheed by the creditors of the man whom he was owing in an action brought in a court of that state; the principal defendant therein being served with process by publication according to the laws of that state. Judgment was entered and the garnishee paid the same. After the garnishee's return to the state of North Carolina he was sued by his creditor in that state. He pleaded the Maryland judgment and payment thereof as a defense, but the North Carolina court refused to recognize the judgment and payment so made, and directed judgment against hirn. The United States Supreme Court reversed the judgment of the North Carolina court, and held that, under the full' faith and credit clause of the federal Constitution, the Maryland judgment should have been recognized, and that the payment thereof extinguished the original debt; Mr. Justice Peckham saying (page 223 of 198 U. S., p. 627 of 25 Sup. Ct. [49 L. Ed. 1203]):
"We can see no reason why the attachment could not be thus laid, provided the creditor of the garnishee could himself sue in that state and its laws permitted the attachment."
The question was again presented in the Louisville & Nashville Railroad Company v. Deer, supra. In that case it appeared that the railroad company did business and was liable to service and suit in the state of Florida, and was owing a resident of the state of Alabama. The creditor of the latter brought suit in Florida, in which the railroad company was summoned as garnishee; the Alabama creditor,. the principal defendant therein, being served by publication only. A judgment was recovered, the railroad company paying the sum due thereon into court. Thereafter the Alabama creditor brought suit against the railroad company in the state of Alabama. The Alabama court refused to recognize the Florida judgment and the payment made thereon, and upon appeal to the United States Supreme Court that judgment was reversed; it being held that the Florida judgment was valid against the Alabama creditor, and that the Alabama court should have given full faith and credit thereto under the provisions of the federal Constitution. It would seem, therefore, that under these decisions of the United States Supreme Court a claim for moneys due upon this policy from the insurance company to its nonresident codefendants would be subject to an attachment in this state by a creditor of such nonresident codefendants, for they themselves could sue the insurance company in this state upon their claim, and, if so, their creditors could attach the claim. So that whether the plaintiffs are-creditors of the insurance company or of the nonresident codefendants, or merely have a lien, it would seem to follow that the claim based upon the policy and the moneys due thereon has such a situs in this state as to enable the courts of the state to pass upon and subject it to-their jurisdiction by the proper process. Even if our local laws as declared by the courts of this state are inadequate to subject such a claim to seizure under a warrant of attachment, yet that is not decisive of the question involved in this case, since this proceeding is not an attachment. If the subject-matter of this suit and the cause thereof' is specific personal property within the state, although not attachable, it may be acted upon by the courts of this state, and the adjudication-, thereof be binding upon all the parties to the suit as a judgment in rem.
The suggestion is made that, the insurance company having been-i incorporated under the laws of the state of New Jersey, its domicile is there, and this suit may be maintained in the courts of that state. Undoubtedly that is true, but it also has at least a quasi domicile in, this state. The very purpose of requiring it to deposit Securities and appoint the superintendent of insurance as its agent and attorney was- to secure its policy holders and subject the company and its property within this state to the jurisdiction of our courts. In the case of New England Life Insurance Co. v. Woodworth, 111 U. S. 138, 4 Sup. Ct. 364, 28 L. Ed. 379, where it appeared that the husband of the insured commenced an action in the state of Illinois against the insurance company organized under the laws of the state of Massachusetts upon a policy of insurance, the insured having died in the state of New York, the plaintiff thereafter going into the state of Illinois, and taking the policy with him, it was held that the action was maintainable in the Illinois court, and that the company might be regarded as present and an inhabitant of the state where it had an agent upon whom pursuant to the laws of that state process might be served. That case was cited with approval and the principle applied in the case qf Sulz v. Mutual Reserve Fund Life Ass'n, 145 N. Y. 563, 40 N. E. 242, 28 L. R. A. 379.
If such an action as this is not maintainable in the courts of this state, and the insurance company may resist payment on the policy without making all of the persons claiming an interest in the moneys due thereon parties to the suit, serving them personally with process, it is difficult to see how the company can be compelled to pay at all, unless all of the persons are in accord and unite in one suit or voluntarily appear therein, since the claimants reside in five different states. Certainly there is no more reason for bringing the action in the California court than here.
The order should be affirmed, with $10 costs and disbursements. All concur, except SPRING and ROBSON, JJ., who dissent.