Court Opinion

ID: 7196812
Source: CourtListenerOpinion
Date Created: 2022-07-24 17:03:34.197998+00
Date Added: 2024-06-11T16:16:22.387370
License: Public Domain

*756DISSENTING Opinion on Application por Rehearing.
Watkins, J.
Notwithstanding I concurred in the opinion and decree of the court when first rendered, more mature deliberation upon the questions-involved have influenced me to believe that the ends of justice would be best subserved by an affirmance of the judgment of the district court in favor of the defendants.
Two propositions are presented for our consideration in reaching a conclusion in this case, viz. :
1. Whether or not a policy of life insurance which is made payable to the insured, his heirs and legal representatives, is a good commercial collateral security.
2. And if it is not, whether the defendants acquired the Kernan notes under circumstances warranting their recovery of their face value from the succession of Hays as maker thereof.
If such a policy of insurance is a good commercial collateral, such as the deceased had a legal right to pledge to a stranger, defendants as third holders of his commercial obligations, necessarily occupy just as favorable a situation as the first taker: but if not, have not the defendants the right to recover from the succession of the maker the face value of those notes, independently of the pledge of the insurance policy, they being ordinary creditors of the deceased on that score?
The transaction simply stated is as follows, viz.:
In March, 1891, the defendants purchased from Fergus Kernan six notes which Hays had issued and theretofore placed upon the market, aggregating in amount $19,472.18, for the price of $11,175, whereby Kernan was fully reimbursed his outlay; and the defendants took his place in the contract with Hays — the policy of insurance on Hays’ life being thereto annexed as collateral security.
The defendants kept the premiums paid up and the policy in force during the lifetime of the insured, and at his death they collected the full amount from the company, and, on settlement with the plaintiff representing the succession, they claim the right to retain the full amount of said notes.
This demand of the defendants is resisted by the widow on the ground that the transaction between them and her deceased husband was of the character of a wagering contract, which is not enforceable in law beyond the limit necessary for their full reimbursement from the avails of the policy.
*757This theory was adopted by the court in its opinion on the authority of the following cases, viz.: Warnock vs. Davis, 104 U. S. 779; Insurance Co. vs. Luchs, 106 U. S. 503; Cammack vs. Lewis, 15 Wallace, 643; New York Mutual, etc., vs. Armstrong, 107 U. S. 597; Stevens vs. Warren, 101 Mass. 564; Cooper vs. Shaffer, 11 Atlanta Rep. 548; Raller vs. Moore, 10 Southeastern Rep. 241. And the opinion announces the conclusion of the court to be that where a note is made for a special “ purpose, or taken to be collected exclusively from a policy of insurance under the circumstances of this case, we think it is taken out of the . rule which governs negotiable instruments in so far as it relates to equities.
“ The defendants are entitled to their fees and to all they have paid for the' claim they hold and interest. Their demand for the remainder, after these will have been paid, is rejected.”
I have examined with care the cases of Warnock vs. Davis and Cammack vs. Lewis—the others I could not find by the references given — and my conclusion is, that they are not applicable to the case at bar. The distinguishing feature of the case of Warnock vs. Davis is, that the engagement between the party insured and the Trust Company antedated the issuance of the policy of insurance, and the insured assigned the policy to the Trust Company on the date of its issuance, less one-tenth which he retained; and the Supreme Court very correctly held that “ such a policy would constitute what is termed a wager-policy, or a mere speculative contract upon the life of the assured with a direct interest in its termination.”
The point made and decided in Cammack vs. Lewis was the same as shown by this statement of the opinion, viz:
“To procure a policy for three thousand dollars to cover a debt of seventy dollars is of itself a mere wager.”
It is quite evident that the court in those cases, exclusively, dealt with contracts entered into between the parties, antecedent to the issuance of policies of insurance; and, finding them to be circumstanced as stated, declared that the policies were wager-policies.
These opinions have, in my opinion, no application to contracts of the class we have under consideration, which were made long subsequent to the issuance and delivery of the policy to the insured.
And not only was the contract between Neman and the defendants made long subsequent to the issuance of the life policy to Hays, the insured, but the notes of Hays which the defendants took from *758Kernan, were the identical notes upon which Hays had previously realized over eleven thousand dollars on the faith of this policy, and in addition to the payment of the premiums which had been paid by others in order to preserve the the life of the policy, prior to defendants’ acquisition thereof.
The legality and binding force of such contracts have frequently been maintained by the New York Court of Appeals, and they have held that “ a valid policy of insurance effected by a person on his own life is assignable like an ordinary chose in action, and that the assignee is entitled, upon the death of the assured, to the full sum payable, without regard to the consideration given for the assignment or to his possession of any insurable interest in the life of the assured.” St. John vs. American Mutual Life, etc., 18 N. Y. 31; Vallon vs. National Loan Fund, etc., 20 N. Y. 32; Olmstead vs. Keys, 85 N. Y. 593.
The rulings of the New York court are in keeping with those of the highest courts of other States, as is instanced in the following reports: Ashley vs. Ashley, 3 Simmons, 149; Mutual Company vs. Allen, 138 Mass. 24; Eckel vs. Renor, 41 Ohio St. 232; Martin vs. Stebbins, 126 Ill. 387; Fitzpatrick vs. Insurance Co., 56 Conn. 116; Clark vs. Allen, 11 Rhode Island, 439; Rittler vs. Smith, 70 Maryland, 261; Murphy vs. Red, 14 So. Rep. (Miss.) 761.
Indeed, the Supreme Court in Warnock vs. Davis refer to some of the New York cases, and say:
“It must be admitted that they are sustained by many other adjudications.”
In those opinions, the courts had under consideration assignment of policies made by persons insured .to strangers; and such assignments were upheld and maintained as good and valid in law.
On the same principle, they would have undoubtedly held that a pledge of such policies as collateral security would have been equally good and valid.
The language employed by the Massachusetts court in the leading case can be appropriately cited here:
“In Mutual Life Ins. Co. vs. Allen, 138 Mass. 24, the Supreme Court of Massachusetts, * * * after referring to the dicta in Cammack vs. Lewis, 15 Wall. 643, and Warnock vs. Davis, 104 U. S. 775, and showing that it was not decided in either of those cases that all assignments for life insurance policies without interest are illegal, *759said, that the right to receive money on the death of another is assignable, at law or in equity, will not be questioned. It is true that every person who is in expectation of property at the death of another has an interest in the death, but it does not follow and it is not true that the law does not allow the possession and assignment of such expectations. * * * We see nothing in the contract of life insurance which will prevent the assured from selling his right under the contract for his own advantage, and the fact that the assignee has no insurable interest in the life insured is neither conclusive nor pirma facie evidence that the transaction was illegal. In the well considered case of Clark vs. Allen, 11 R. I. 439, the Supreme Court of Rhode Island used this language: “It is said that such assignment, if permitted, may be used to eircumvent the law. But it does not follow that such an assignment is not to be permitted at all, because if permitted it may be abused. Let the abuse and not the bona fide use be condemned and defeated. The truth is, it is one thing to say that a man may take insurance upon the life of another for no purpose except asa speculation or bet on his chances of life, and may repeat the act ad libitum; and quite another thing to say that he may purchase the policy as a matter of business, after it has once been duly issued under the sanction of the law, and is therefore an existing chose in action or right of property. There is in such purchase, in our opinion, no immorality and no imminent peril to human life. We should have strong reasons before we hold that a man shall not dispose of his own. Courts of justice, while they should uphold the great and universally recognized interests of society, ought, nevertheless, to be cautious about making their own notions of public policy the criterion of legality, lest, under the semblance of declaring the law, they, in fact, usurp the functions of legislation.” (My italics.)
In the recent case of Stuart vs. Sutcliffe, 46 An. 240, we have this identical principle affirmed.
In that case, as in this, the legal representatives of the deceased policy-holder sued Kline as possessor thereof under a contract of pledge securing the payment of certain notes of the deceased, claiming the proceeds which had been collected of the insurance company.
In the opinion it is said:
‘ ‘ Plaintiffs do not make claim as beneficiaries of said policy, but as the executors and heirs of deceased; hence, for all purposes of this case, they occupy exactly the same situation as that occupied *760by the deceased, and can invoke no other cause of nullity than such as he could have urged while living.”
Having announced the foregoing postulate the court states its conclusion to be, that it “ has for many years maintained the assignability of such policies of insurance, as that of an incorporeal right”— exactly in keeping with the State decisions we have quoted above.
In Succession of Hearing, 26 An. 326, the court distinctly and pointedly said:
“ A man may take out a policy of insurance on his life, in the name of any one, or having taken it out in his own name, he may, with the consent of the insurers, transfer it to whom he pleases.”
In Succession of Richardson, 14 An. 1, the' court gave effect to an assignment of a policy made by the insured upon the day of its issuance.
The court distinguished a policy which is made payable to the heirs and legal representatives of the insured, like the one involved in the case of Stuart vs. Sutcliffe and in this case, from one payable to some third person as beneficiary—citing Succession of Bofenschen, 29 An. 711; Putnam vs. Insurance Co., 42 An. 739, and other cases.
To my thinking the foregoing authorities are conclusive as to the assignability of the life insurance policy of Hays; and, consequently, defendants are quite as much entitled to hold and retain the full amount of the Kernan notes out of the proceeds collected as Klein was allowed to hold the proceeds of the Stuart policy, as such a policy is in all respects a good commercial collateral for the debts of the insured.
Entertaining "these views, I respectfully recall my assent to the opinion of the majority of the court and file this as my dissenting opinion.