Case Name: William Kelly, Respondent, v. Security Mutual Life Insurance Company, Appellant
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1906-10-02
Citations: 186 N.Y. 16
Docket Number: 
Parties: William Kelly, Respondent, v. Security Mutual Life Insurance Company, Appellant.
Judges: 
Reporter: New York Reports
Volume: 186
Pages: 16–27

Head Matter:
William Kelly, Respondent, v. Security Mutual Life Insurance Company, Appellant.
1. Insurance — Premature Action to Recover Damages for the Repudiation by a Mutual Life Insurance Company of Its Obligation Under a Policy. The rule that renunciation of a continuous executory contract by one party before the day of performance gives the other party the right to sue at once for damages is usually applied only to contracts of a special character, even in jurisdictions where it obtains at all; it is not generally applied to contracts for the payment of money at a future time, and has not been extended in. this state to such contracts made by mutual life insurance companies.
2. Remedy of Policyholder Is an Equitable Action to Preserve Contract of Insurance. Where in an action upon a policy issued by a mutual life insurance company to recover damages for an alleged breach of its contract to pay a sum of money on the death of the plaintiff, the only allegation in the complaint as. to a breach was that the defendant wrongfully declared the contract “void and forfeited, denied that the plaintiff had any right thereunder,” and refused “ to continue said policy in force,” a judgment for damages cannot be sustained, since the time not having arrived for performance the policy is still in force and an action at law will not lie; the plaintiff’s remedy, if any, is in equity to compel recognition by the defendant of its obligations under the policy.
Kelly v. Security Mutual Life Iris. Co., 106 App. Div. 352, reversed.
(Argued June 14, 1906;
decided October 2, 1906.)
Appeal from a judgment of the Appellate Division of the Supreme Court in the third judicial department, entered July 10, 1905, affirming a judgment in favor of plaintiff entered upon a verdict and an order denying a motion for a new trial.
The complaint contains two counts, in the first of which the plaintiff alleged, in substance, that in August, 1889, the defendant, a domestic corporation duly authorized, issued to him its policy of insurance for $1,000, payable on his death to his wife, the policy being referred to as part of the complaint; that the plaintiff performed his part of the contract, but the defendant wrongfully declared said policy forfeited and refused to continue it in force; that the beneficiary transferred her rights thereunder to him. and that the policy was worth to him $1,000, in which amount he alleged he had sustained damages.
The second count was upon a like policy payable to the children of the plaintiff, who transferred their rights to him before the commencement of the action. Judgment was demanded for the sum of $2,000, with costs.
Each policy was a certificate of the defendant admitting the plaintiff to membership, subject to certain specified conditions, including the prompt payment of quarterly dues on the days named. Upon his death his wife in one case and his children in the other, became entitled to payment from the reserve fund of the sum of $1,000. The. failure to pay dues rendered the contract void and forfeited all payments made thereon, with an unimportant exception. The answer alleged as an affirmative defense that the policies became null and void on the 2nd of May, 1903, because the defendant failed to pay the premiums which fell due on that day as required by the contracts.
The question sent to the jury was whether the defendant by its course of dealing with the plaintiff had waived strict performance as to the payment of dues on the law day. They were instructed if they found a waiver to bring in a verdict in favor of the plaintiff for the present value of the policies, including interest. The jury found a general verdict for the plaintiff for $1,289.78. The judgment entered thereon was unanimously affirmed by the Appellate Division and the defendant appealed to this court.
Célora F. Martin and F. W. Jenkms for appellant.
, The complaint did not state a cause of action, and there was no proof to justify the judgment from which this appeal is taken, (Hencken v. U. S. L. Ins. Co., 11 Daly, 282; 98 N. Y. 627; St. John v. A. M. L. Ins. Co., 13 N. Y. 31; Walsh v. M. L. Ins. Co., 133 N. Y. 408 ; Olmstead v. Keyes, 85 N. Y. 593; Atty.-Gen. v. Ins. Co., 82 N. Y. 172; People v. Ins. Co., 103 N. Y. 480; Ins. Co. v. Stratham, 93 U. S. 24; Frank v. Ins. Co., 102 N. Y. 266; Fowler v. Ins. Co., 116 N. Y. 389 ; Attorney-General v. C. L. Ins. Co., 93 N. Y. 70; Holly v. M. L. Ins. Co., 105 N. Y. 437; Langan v. Supreme Council, 174 N. Y. 266; 176 N. Y. 595.)
8. Mack Smith for respondent.
An action at law is the proper remedy for the general breach of a contract of life insurance. (I. & G. T. Co. v. Tod, 180 N. Y. 230; Steinbock v. Diepenbroek, 158 N. Y. 30; Meyer v. K. L. Ins. Co. 73 N. Y. 516 ; Fisher v. H. M. L. Ins. Co., 69 N. Y. 161; Day v. C. L. Ins. Co., 45 Conn. 480; Shaw v. R. L. Ins. Co., 69 N. Y. 286 ; Speer v. P. M. L. Ins. Co., 36 Hun, 322; Evans v. S. T. M. R. Assn., 182 N. Y. 453; Whitehead v. N. Y. L. Ins. Co,, 102 N. Y. 143.)

Opinion:
Yawn, J.
Before any evidence was taken at the trial the defendant moved to dismiss the complaint upon the ground that it did not state facts sufficient to constitute a cause of action, hut the motion was denied and the defendant excepted. This ruling survives unanimous affirmance by the Appellate Division and is open to review by this court. (Jones v. Reilly, 174 N. Y. 104; Sanders v. Saxton, 182 N. Y. 477, 478.)
The defendant was not required to present the question by demurer or answer, but could raise it by motion made at the trial. (Weeks v. O'Brien, 141 N. Y. 199, 203; Code Civ. Pro. § 499.)
The case made by the complaint was not in equity to relieve from forfeiture and reinstate the policy, but purely at law to recover damages for the breach of its contract by the defendant. The only promise made by the defendant in the contract was to pay a sum of money on the death of the plaintiff, but no breach of that promise was alleged. The plaintiff is still living and nothing is yet due upon the contract, according to its terms. What breach was alleged ? The only allegation on that subject is that the defendant wrongfully declared the contract " void and forfeited," denied that the plaintiff had "any rights thereunder," and refused "to con tinue said policy in force." IIow or why, when, to whom or by whom the defendant declared the contract forfeited, or denied the plaintiff's rights thereunder, or refused to continue it in force, is not stated. There is no allegation of a refusal to receive premiums, or give receipts therefor, or that the defendant had never recognized its contract, or that it had not retracted its repudiation, or that it was in such a position that it could not retract. The pleader was satisfied with the conclusion that he set forth. This was not a breach of the contract, because the time for performance by the defendant had not arrived. An attempt to repudiate such a contract does not make it due. If the maker of a promissory note, given for borrowed money and due one year after date, notifies the holder the next day that he repudiates it and will not pay it, can the holder sue at once ? Can a mortgagor make his mortgage due before the law day by repudiating it in advance ?
The rule that renunciation of a continuous executory contract by one party before the day of performance gives the other party the right to sue at once for damages, is usually applied only to contracts of a special character, even in the jurisdictions where it obtains at all. It is not generally applied to contracts .for the payment of money at a future time and in some states the principle is not recognized in any way whatever. (Daniels v. Newton, 114 Mass. 530; Stanford v. McGill, 6 N. Dak. 536; Carsteus v. McDonald, 38 Neb. 858 ; King v. Waterman, 55 Neb. 324.) In other states and in the Federal courts the principle is adopted but applied with caution. (Roehm v. Horst, 178 U. S. 1, 17, 18 ; Schmitt v. Schnell, 14 Ohio C. C. 153; Brown v. Odill, 104 Tenn. 250; Roebling's Sons Co. v. Fence Co., 130 Ill. 660; Unexcelled Fire Works Co. v. Polites, 130 Pa. St. 536.) In this . state it seems to be limited to contracts to marry (Burtis v. Thompson, 42 N. Y. 246); for personal services (Howard v. Daly, 61 N. Y. 362) and for the manufacture or sale of goods (Windmuller v. Pope, 107 N. Y. 674; Nichols v. Scranton Steel Co., 137 N. Y. 471); at least we have not extended it to mutual life insurance policies, perhaps for the reason that the question of fact opened to unscrupulous persons by such extension might undermine the solvency of the company and inflict gross injustice upon the other policyholders.
The plaintiff alleges a breach only by anticipation. We held directly against his contention in a recent case which we regard as controlling. (Langan v. Supreme Council Am. L. of H., 174 N. Y. 266.) That was an action at law founded upon a certificate of insurance, whereby the defendant promised, upon the death of the plaintiff, to pay his wife a sum not exceeding $5,000. the plaintiff alleged performance until the " defendant by its wrongful act broke the said contract and declared the same void." He further alleged that the defendant had " failed to carry out the conditions of the contract by declaring that it will not perform the contract or pay the insurance agreed to be paid, and that, upon his death, the beneficiary will not then be entitled " to the sum specified, " and that by reason of the breach of the aforesaid contract by defendant, plaintiff has sustained damages in the sum of $5,000." A judgment for $1,505.96, " the present value of the policy," was affirmed by the Appellate Division, but reversed by this court, upon the ground that " there was no breach of contract which justified an action for damages; that the action of the plaintiff " in tendering performance " preserved the contract of insurance as it was; that he was not, thereupon, compelled to a course of inaction, but might resort to a court of equity . * and compel the defendant to live up to its contract."
The principle of that case controls this. Both actions were at law to recover damages for the breach of the same kind of a contract and in the same way. As we held that an action at law would not lie in that case because there was no breach, and that the remedy of the plaintiff was in equity, we are compelled to hold the same way in this case. The plaintiff had no right to sue for damages before the time for performance by the defendant had arrived. He had sustained no damages, for the policy was still in force, and if it refused to recognize its obligation thereunder he could compel recognition by a judgment exactly adapted to the situation.
The judgment below should be reversed and a new trial • granted, with costs to abide event.