Court Opinion

ID: 5249352
Source: CourtListenerOpinion
Date Created: 2022-01-06 18:08:43.202989+00
Date Added: 2024-06-11T08:27:55.130153
License: Public Domain

Putnam, J. (dissenting):
Borrowing on one’s life insurance, arising from ■ business necessities, was not authorized in this State until 1892. (Insurance Law [Gen. Laws, chap. 38; Laws of 1892, chap. 690], § 16, as amd.; now Insurance Law [Consol. Laws, chap. 28; Laws of 1909, chap. 33], § 16, as amd.) Defendant’s policy has a printed clause, providing for such advance on “ proper assignment of the policy.” Obviously such a special clause should be read and construed with the other policy provisions. What is a proper assignment of this policy? Suppose the beneficiary named were a creditor for whom the insurance was taken out. Could the borrowing insured nevertheless incumber that policy to the extent of the premium reserve? Such a right to policy loans must, in fairness to the beneficiary and to the company, depend on the status of the insured and upon the extent of the authority and title left in his hands to pledge through a valid assignment.
The familiar principle is that the interest of a named beneficiary which the insured cannot revoke or change is vested, so that the person procuring the insurance has no power to transfer or incumber that interest. (Washington Central Bank v. Hume, 128 U. S. 195, 206; Tyler v. Treasurer & Receiver General, 226 Mass. 306, 309.)
Such a'printed option to borrow is obviously attached to the regular policy form, whether it be life or endowment *275insurance, and for the frequent case where the loss is payable» to one’s personal representatives. Can we infer that such an option, on a proper assignment, was meant to overturn and annul the security provided for these infant beneficiaries?
Where the policy expressly gives such borrowing power to the “ holder ” of the policy (Travelers’ Insurance Co. v. Healey, 25 App. Div. 53), the instability of the fund is apparent, so that the beneficiaries are left to look merely to the residue which the holder’s loans have not exhausted. A like power would pass by the clause reserving the right to change the beneficiary without the latter’s consent. (Mutual Benefit Life Ins. Co. v. Swett, 222 Fed. Rep. 200.) But without some wording indicating an unusual right reserved in the insured, his continued premiums work for the benefit of the beneficiary. The insured may let the policy lapse, or otherwise remain passive, but he cannot affirmatively prejudice the trust thereby created either by its surrender or by the less destructive effect of policy loans. To do this, an express clause is required. For instance: “It is understood, that in the event of the surrender of this policy, the beneficiary hereunder shall have no claim whatever upon said company.” (Hilliard v. Wisconsin Life Ins. Co., 137 Wis. 208, 214.) Or where the contract to pay to the named beneficiaries had this parenthetical clause — “ with power to the insured to surrender this policy to said company at any time,” the insured had a full right' to surrender, which right he could assign. (Blinn v. Dame, 207 Mass. 159.) But without some express provision making the insured’s privilege paramount to the security of the beneficiary, his. surrender cannot prejudice the vested rights of the beneficiary. (Whitehead v. New York Life Ins. Co., 102 N. Y. 143; Haskell v. Equitable Life Assur. Society, 181 Mass. 341; Burke v. Prudential Ins. Co. of America, 221 id. 253; Timayenis v. Union Mut. L. Ins. Co., 21 Fed. Rep. 223; People v. Globe Mutual Life Ins. Co., 15 Abb. N. C. 75; 96 N. Y. 675.) A late author says of the vested right of such a beneficiary: “ This rule applies to a policy to which there are attached the incidents of loan value, cash surrender value and automatic extension by premiums paid so that when sufficient premiums have been paid to produce extended insurance beyond the time of the death of the *276insured, the surrender by him of the policy for its surrender value did not impair the rights of the wife beneficiary in the policy.” (Bacon Life & Accident Insurance [4th ed.], § 377 [1917].)
There are the further considerations that the power to revoke a trust (which is the effect of sustaining plaintiff's demand for loans) should not be left to uncertain implication. This provision for such loans must mean loans only to those having full right to incumber the fund, and not to the creator "of a vested security for dependent infants. In making such policy loans, defendant should have the protection of the unquestioned title of the assignors.
By a reversal with a decree requiring these loans, the court would give its sanction to a pro tanto revocation of these trusts, and would, I submit, depart from what has hitherto "been the essential basis for the stability of such insurance.
Furthermore, the jurisdiction to decree specific performance does not extend to an agreement to borrow or make a loan of money. (Conklin v. Peoples Building Association, 41 N. J. ,Eq. 20; Larios v. Gurety, L. R. 5 P. C. 346.) True, defendant did not raise this point, but the equity jurisdiction cannot be extended by consent. (New York Dry Dock Co. v. American Life Ins. & Trust Co., 11 Paige, 384.)
It may be said that this contract is not the usual agreement to lend money, but a promise to lend upon the proceeds of a contract which thereby plaintiff’s assignor was induced . to make. Even a promise to lend on a company’s own debentures, which was an inducement to take such debentures, . cannot be enforced by a decree for specific performance. (South African Territories, Ltd., v. Wallington, L. R. [1898] App. Cas. 309.)
Therefore, both on the right and on this attempted remedy,
I think the complaint was rightly dismissed.
Jenks, P. J., concurred.
Judgment reversed and judgment directed for the plaintiff, with costs. Findings to be settled on notice in accordance with the opinion.