Court Opinion

ID: 3274811
Source: CourtListenerOpinion
Date Created: 2016-07-05 16:43:23.034043+00
Date Added: 2024-06-11T13:11:14.142471
License: Public Domain

The facts are not in dispute. The policy of Toy E. Morris was one of those assumed by appellant, subject to the conditions of the policy and the terms of the reinsurance agreement set out in the *Page 976 
majority opinion. This policy was issued by the Home Life September 26, 1923, and is a fifteen-year endowment policy, which matured September 26, 1938. The annual premium of $129.78 was regularly paid by Morris and the policy was in full force throughout its entire term. Morris was living when the policy matured on September 26, 1938, but died on June 2, 1939.
October 6, 1938, appellant paid Morris $5.93 and took from him the following signed receipt prepared by appellant: "Central States Life Insurance Company, Saint Louis, Dated at Little Rock, Ark., this 6th day of October, 1938. Received of Central States Life Insurance Company the sum of $5.93 in full payment of the amount due me as of September 26, 1938, on account of Home Life Policy No. 25863 on my own life, the said sum being the $2,000 face amount of the policy less automatic premium loans for $61.83 and premium lien note for $1,260.79 deducted in accordance with the terms of the said policy, and less the reinsurance lien and accrued interest amounting to $671.45 deducted in accordance with the reinsurance agreement between Home Life Insurance Company and Central States Life Insurance Company."
It thus appears that appellant settled with Morris for the amount due on the face of the policy, at the time, after deducting premium loans, less a reinsurance lien and accrued interest totaling $671.45, which was deducted from the settlement in compliance with the reinsurance agreement. It is this amount with which we are concerned here.
The reinsurance agreement was also prepared by appellant. Section I (c) provides: "Central States Life agrees that in event of the death of an insured while his or her policy is in force it will waive the aforesaid lien or any balance thereof remaining and all interest accumulations thereon and the mortality cost of waiving such lien shall be provided out of the net earnings of the business of Home Life reinsured hereunder during the calendar year in which death occurs. If such earnings are insufficient to provide such mortality cost then Central States Life will provide therefor out of its own surplus, but nothing herein shall obligate Central States Life to *Page 977 
maintain any reserve, legal or otherwise, to insure the waiving of liens. . . ."
Section I (i) is as follows: "Central States. Life agrees that on any endowment policy maturing before the lien herein provided shall have been discharged, any reduction of liens as herein provided which becomes effective after the date of such mortality shall be applied to the amount of lien outstanding at the date of such maturity and the amount of such reduction shall be paid to the owner of such endowment policy at the time such reduction becomes effective; when the total amount paid to such owner shall equal the amount of the lien at the date of maturity together with interest at 3 1/2 per cent. per annum on the balance of the lien, no further payment shall be made to such owner."
The meaning and effect of the above receipt and of these principal provisions, I (c) and I (i), along with I (b) and V (b) of the reinsurance agreement, determine this cause. In arriving at the intention of the parties concerned and the effect to be given the above provisions, the rule is generally well settled that we must construe the contract as unfavorably as its terms will permit against appellant, the party who wrote it.
In Leslie v. Bell, 73 Ark. 338, 84 S.W. 491, this court held: "A contract will be construed as unfavorably as its terms will admit against the party who proposed and prepared it."
In Fullerton v. Storthz, 182 Ark. 751, 33 S.W.2d 714, we said: ". . . if there were ambiguity about this written contract or necessity for construction thereof, all doubt must be resolved and the contract construed more strongly against the party who prepared it. Wisconsin Lumber Co. v. Fitzhugh, 151 Ark. 81, 235 S.W. 1001."
And in Metropolitan Life Ins. Co. v. Guinn, 199 Ark. 994,136 S.W.2d 681, it is said: "This contract must be construed most strongly against the insurance company that prepared it, and if a reasonable construction could be placed on the contract that would justify a recovery, it would be the duty of the court to so construe it."
See, also, Coca-Cola Bottling Co. v. Coca-Cola Bottling Co., 183 Ark. 288, 35 S.W.2d 579; Ford v. Fix, 112 Ark. 1, *Page 978 164 S.W. 726; Bracy Bros. Hdwe. Co. v. Herman-McCain Construction Co., 163 Ark. 133, 259 S.W. 384; General American Life Ins. Co. v. Frauenthal  Schwarz,193 Ark. 663, 101 S.W.2d 953.
With these guiding rules, what interpretation and effect should we give the receipt and the provisions of the reinsurance contract?
Appellant relies upon section I (i) which provides that on any endowment policy maturing before the lien is discharged, the owner of the policy shall be given the benefit of any subsequent reduction of the lien. It is insisted that Morris had an endowment policy and that section I (i) established the right of endowment policyholders to share in future reduction of lien and that this is the only section applicable to endowment policies, and that section I (c), covering release of the lien at death, has no application to endowment policies.
It is clear to me that the receipt, supra, purports to cover only what was due on the maturity date of the policy, which recites $5.93 "in full payment of the amount due me as of September 26, 1938." It further provides that $671.45, the amount of the reinsurance lien, was being deducted "in accordance with the reinsurance agreement." This lien money was properly deducted under I (b), [set out in the majority opinion] as of September 26, 1938. Under this section the lien money was not then payable and required the subsequent death of Morris to render it payable. I see nothing in this receipt that bars any subsequent right to the lien money which might accrue under the terms of the reinsurance agreement. It is my view that I (c) applies with equal force to endowment policies as well as life policies. Standing alone, there could be no doubt about it. Had appellant intended that this section should not apply to endowment policies, why did it not plainly say so?
The plain, unambiguous language of this section, I (c), requires appellant to release and pay this lien in full on the death of Morris. It treats Morris like any other policyholder. Courts will prefer that construction of a contract which is most consonant with justice and equity. The applicable rule is stated in 17 C.J.S. 739, *Page 979 
319, as follows: "The words of a contract will be given a reasonable construction, where that is possible, rather than an unreasonable one, and the court will likewise endeavor to give a construction most equitable to the parties, and one which will not give one of them an unfair or unreasonable advantage over the other."
Appellant wrote this provision, I (c), but insists that I (i) takes care of endowment policyholders and under its terms the appellee, Morris' beneficiary, cannot collect the lien money at his death, although beneficiaries under life policies would be entitled to the payment of lien money on the death of the insured. I think no such discrimination was intended or can be read into the provisions of the reinsurance agreement, and that Morris' beneficiary is entitled to collect this lien money at his death just as life policyholders.
Let it be remembered that the insured, Morris, paid the highest insurance rate annually on this fifteen-year endowment policy until he had matured it. Had he died prior to the maturity date, the lien would have been paid just as on life policies, but since he died nine months after his policy matured, the majority opinion holds that his beneficiary is not entitled to this lien money. Why this discrimination against Morris' policy?
Section I (i) provides that endowment policyholders shall have the benefit of "any reduction of liens as herein provided" to be paid "at the time such reduction becomes effective, as provided in V (b). I think the effect of section I (i) is to bring endowment policyholders within the same class as all other policyholders and to permit them to share equally with all other policyholders in the reduction of liens provided for in section V (b). Section I (i) became necessary for the reason that an endowment policy, by its terms, may mature during the lifetime of the insured, as happened in the instant case. Section I (b) provides that from the "pay-off" during the insured's lifetime the amount of the lien and interest shall be deducted, as was done in the instant case. While ordinarily a settlement at the maturity of an endowment policy terminates the contract, the insured here is, under provision I (i) the endowment policyholder, given the *Page 980 
same interest in the future reduction of liens that is given to all other policyholders, thereby placing him on a parity with other policyholders. Section I (i) was inserted to bring about this parity.
Section I (i) deals with the reduction of liens, while section I (c) does not contemplate a reduction, or partial release of the lien money, but requires full payment thereof at death. Section I (i) provides for reduction of liens during the lifetime of the policyholder, while I (c) becomes operative only at his death. Under section I (i) the net assets of the Home Life are to be applied annually during the policyholder's lifetime toward paying off the lien money, but only in case such assets amount to 55 per cent. of the Home Life net liabilities but under section I (c) any lien money not paid under I (i) becomes unconditionally payable at the policyholder's death. Section I (i) covers the time during the policyholder's lifetime, whereas I (c) comes into play at his death. It seems to me there is no conflict in the two provisions and that effect should be given to both, and when this is done appellee should recover in accordance with the provisions of I (c). The language used is clear and understandable. Unless the intention of the parties clearly appears to the contrary, we should not write into these provisions a meaning that would deny appellee the same benefits and protection afforded ordinary life policyholders.
The record reflects also that Morris had never surrendered the policy in question to appellant. It was found among his papers at his death. In fact, appellant admits that the policy was in full force and effect in so far as it was affected by I (i), but not as to I (c). it seems to me a strained construction to say that the policy was in force for one purpose, but not for another. It is my view that the judgment should in all things be affirmed.
Mr. Justice HUMPHREYS and Mr. Justice MEHAFFY join me in this dissent. *Page 981