Court Opinion

ID: 8037435
Source: CourtListenerOpinion
Date Created: 2022-09-09 03:22:33.596721+00
Date Added: 2024-06-11T16:37:11.491208
License: Public Domain

Paine, J.
This is an action in equity, by which Herman F. Gartner, who held a lapsed certificate, seeks to have the same reinstated in the Cosmopolitan Old Line Life Insurance Company. Trial was had to two district judges. It was held *834that Gartner, and all those certificate-holders similarly situated, had failed to reinstate as provided by the terms of the certificate itself, and that his petition was without equity, and should be dismissed. Motion for new trial overruled. Gartner appeals.
On December 12, 1936, the district court ordered the Department of Insurance of the state of Nebraska to take possession of the Cosmopolitan Old Line Life Insurance Company, and to conduct its business until further order of the court. On February 15, 1938, the district court ordered said department to proceed to liquidate the assets of said company. The court further authorized said department to enter into a reinsurance contract with the Lincoln Liberty Life Insurance Company, which contract became effective March 30, 1938, and the next day all records and effects, except $10,000 reserved for legal expenses, were turned over to the Lincoln Liberty Life Insurance Company.
From 1926 to 1929 its business had been conducted under the name of Cosmopolitan Thrift Association. During the years of its existence, from 1926 to December 12, 1936,- it had issued large numbers of thrift certificates, upon which $1 per month per unit was to' be paid in regularly over a ten-year period.
Said certificates provided that, if payments were not made, the holder should have 30 days’ grace, but if he failed to pay within said grace period, the certificate automatically lapsed, but gave the holder two years from the date of the last payment to reinstate the same by paying all over-due payments, with 6 per cent, interest. At the end of said two-year period, the holder of such certificate lost all rights thereunder.
Large numbers of certificate-holders claim they failed to reinstate their certificates, after the Department of Insurance took over said company, because they were unable to procure the cash surrender value of any of their certificates, or to procure the loan value thereof, and therefore lost these valuable rights through no fault of their own. Such certificate-holders demanded the right within a reasonable *835time to reinstate such lapsed certificates by payments of all premiums thereon, with interest.
The Lincoln Liberty Life Insurance Company, having succeeded to the rights and position of the Cosmopolitan Old Line Life Insurance Company, filed an application with the district court for Lancaster county on April 19, 1938, asking that the court consider the rights of certificate-holders, and to make specific findings, and determine whether such certificate-holders should have the right and privilege to reinstate their certificates and, if so, upon what terms and conditions.
On April 30, 1938, Herman F. Gartner, appellant herein, filed his petition of intervention, which set out all of the facts at length in reference to said matter. He further alleges in substance that on December 12, 1932, the Cosmopolitan Old Line Life Insurance Company issued to him its thrift certificate for 12 thrift units, providing for a payment of $120 on each unit, in instalments over a period of 10 years; that he made payments for two years and eight months, up until August 12, 1935, in the total sum of $384, and that, under the strict terms of his certificate, he forfeited all that he had paid and all rights under said certificate on August 12, 1937. As a justification for his failure to make any further payments subsequent to August 12, 1935, intervener sets out the taking over of said company, and the order of liquidation, and the contract for reinsurance, all as hereinbefore set out. He alleged that he could not borrow on said certificates, nor could he, or others in the same position, obtain the cash surrender values thereof, and the company utterly failed to carry out its obligations under its certificates, and conditions were such as to create great uncertainty and confusion as to the legal right and status of the certificate-holders; that the failure of intervener to make his payments was due not to his fault, but to circumstances over which he had no control. The petition was brought on behalf of the intervener and others similarly situated.
The prayer of the intervener, Dr. Gartner, was for the *836court to find that such certificate-holders had not forfeited their rights under said certificates; that the court grant a reinstatement period equal to the time that was left to them for reinstatement subsequent to December 12, 1936, the date the said company was taken over by the Department of Insurance, or such other reasonable period as may be just and equitable, during which period they shall have full rights of loan and cash surrender values.
Dr. George J. Wagner, the appellee herein, intervened and filed an answer, in which he alleged that on April 31 (30), 1932, there was issued to him a thrift certificate of five units; that his certificate and the certificate of intervener Gartner, and all others similarly situated, provided in paragraph 5 thereof that the company agreed to pay to the holder at the terminal age of the certificate a proportional share of money left in the fund by reason of lapsation of other holders of said certificates, together with interest accumulations; that said provision created a contractual obligation with each and every certificate-holder, and is for the benefit of such members as shall keep their certificates in full force and effect and prevent their lapsation; that having made all payments of premiums and kept his certificate in full force and effect, he is entitled to participate, along with others who have kept their certificates in good standing, in the money left by the lapsation of the certificates of the intervener Gartner and others; that said intervener Gartner has failed to set out any legal or equitable reason or excuse to pay premiums on his certificate and for his failure to keep said certificate in force and effect; wherefore, the intervener Wagner asked that the petition of intervener Gartner be dismissed, and relief thereunder be denied.
The Department of Insurance filed its answer, alleging that it was authorized by the court and did receive all payments made by. certificate-holders, and receipt therefor, and examined, adjusted, and paid all proper claims for death benefits and annuities.
The evidence in the bill of exceptions discloses that there were 1,876 certificates, representing 6,709 units, upon which *837the two-year period of reinstatement expired and they had lapsed; also that, as of December 31, 1937, there were 7,824 certificates in force and effect, representing 40,708 units outstanding.
No new business was written while the company was in the hands of the Department of Insurance, nor were any loans made to certificate-holders, but applications for loans were received and filed. The cash value of intervener Gartner’s certificate was $103.58 just before his two-year reinstatement period expired on August 11, 1937.
However, Dr. Gartner could not have made any application for a loan for the reason that his contract was not in full force and effect, so it had no loan value until it was reinstated. At the time the company was taken over by the Department of Insurance, Dr. Gartner’s contract was delinquent, but he made three payments as of December 12, 1936, which paid his contract up to August 12, 1935. At any time for two years from that date he could have paid up his back payments, with 6 per cent, interest, and been reinstated.
Otto Gross testified that the intervener, Dr. Gartner, never made any application for a loan while it was being run by the Department of Insurance.
As to the legal questions involved, we find that the same form of contract involved in the case at bar was before this court in Howie v. Cosmopolitan Old Line Life Ins. Co., 132 Neb. 367, 272 N. W. 207. It was held there that forfeitures are not favored, and will be enforced only when the contract requires. The careful discussion in the text of that opinion is in point in the case at bar. This court said in that case, in discussing this same kind of certificate : “It is not like the ordinary old line insurance policy where, by regular payments through a long course of years, the insured is building up a reserve and surplus in which he has a continued property right for a considerable time, but, as the original name under which this policy was written indicates, it was called a thrift policy, wherein the investor engaged to make his payments promptly for a definite num*838ber of years and the contract contemplated and provided that, if he so continued to make his payments, he would profit by the lapses of others. He himself, like all others, had thirty days of grace and if the current premium was paid within that time the contract was kept in force. * * * While in some respects it may seem harsh, it is in no way illegal or against public policy. It seems very evident that the contract sued upon is one in which the holder expected and had contracted to profit by the lapsations of the contracts of others who would be unable to complete their contracts to their maturities.”
In this case we held that, if the certificate-holder allowed his certificate to lapse, he was not entitled to recover the cash values until he reinstated the policy.
The appellant in his argument called attention to his reply brief, in which he cites the case of People v. Empire Mutual Life Ins. Co., 92 N. Y. 105, where the following rule is laid down in the syllabus: “One holding a policy of life insurance does not forfeit his policy by omitting to pay annual premiums thereon after the company issuing the policy has ceased to do business, transferred all of its assets and become insolvent.”
In Jensen v. Grand Lodge, A. O. U. W., 106 Neb. 66, 182 N. W. 599, this court said that the laws of the benefit association provided for automatic suspension without notice. He made his last payment in May and died in September. There was nothing to distinguish his attitude from that of a' member who had made up his mind to drop his insurance. Evidence was held to establish that insured abandoned his insurance and his rights as a member.
The decree entered in this case by the trial judges set out that the failure of the Department of Insurance to make loans, or to pay the cash surrender values, did not prevent the period of reinstatement of two years from running; that the intervener Gartner and all other certificate-holders similarly situated who permitted said period to expire, without exercising their rights, lost all their rights thereunder, and finds that the petition of intervener is without *839equity, and should be dismissed. Finding no prejudicial error in the record, the decree of the trial court is hereby
Affirmed.