Court Opinion

ID: 3448876
Source: CourtListenerOpinion
Date Created: 2016-07-05 20:20:12.856518+00
Date Added: 2024-06-11T13:59:03.799276
License: Public Domain

P.W. Gault and his brother, J.A. Gault, borrowed $8,000 from appellant, and secured it by a mortgage on property located in Hazard. As further security for the loan, each agreed and was required to take, out a life policy of $8,000 in appellant company, and assign it to appellant. Pursuant to the requirement and agreement, P.W. Gault obtained the policy sued on, and assigned, transferred, and conveyed to appellant "all of the *Page 639 
right, title, interest and benefits existing, or which may hereafter become vested in him or his estate" under the policy. The policy was issued on "the annual dividend plan." The dividends are of two kinds: Dividends guaranteed to be not less than the amount shown on the coupons attached to the policy, and such additional dividends as might be apportioned from the surplus at the end of each ten years, and annually thereafter. The annual premium was $231.04, payable September 24th of each year. All premiums due on the policy were paid for eleven years. To meet the premium due September 24, 1930, $43.44 was paid in cash, and six notes executed for the balance, payable on the first of each month beginning December 1, 1930. The note payable December 1, 1930, was paid when due. The note due January 1, 1931, was not paid, and the policy was forfeited. Prior to September 24, 1930, and at the time of the default, the company had in its hands coupon dividends aggregating $403.92. By the terms of the policy the dividends could be used in reduction of the premiums, or, if the premiums were paid in full, they could be used to purchase paid-up additions, payable with the policy, or left with the company to accumulate at interest. 'The company occupied a dual position of lender and insurer. When the policy was written it was immediately assigned to the company. Whether the insured ever read the policy, or was advised of his right to have the dividends applied on the premiums, does not appear. Certain it is that he made no election, and that being true the dividends were available for the purpose of reducing the premiums, and it was the duty of the company to apply a portion of the dividends to the payment of the note due January 1, 1931, and thus prevent a forfeiture, Rogers v. Union Benevolent Society No. 2, 111 Ky. 598,  64 S.W. 444, 23 Ky. Law Rep. 928, 55 L.R.A. 605; Citizens' Life Ins. Co. v. Boyle, 139 Ky. 1, 129 S.W. 303, unless, as held in the majority opinion, the assignment of the policy deprived the insured of that right. Where a policy is assigned as security for a debt, it operates as a mere pledge, and the assignee is entitled to receive out of the proceeds of the policy only the amount of his debt and advancements, with interest. Baldwin v. Haydon, 70 S.W. 300, 24 Ky. Law Rep. 900; Irons v. U.S. Life Ins. Co., 128 Ky. 640, 108 S.W. 904, 33 Ky. Law Rep. 46, 129 Am. St. Rep. 318. In no sense were the dividends, which could be used in reducing the premiums, a part of the proceeds of the *Page 640 
policy, or a benefit under the policy within the meaning of those terms. The insured agreed to take out the policy and keep it in force. It was to the interest of the parties that it be kept in force. The only reason that the policy was taken out and assigned was that it was valuable as a security. It was never intended by the parties that the assignment of the policy should have the effect of weakening or destroying the security by depriving the insured of the right to apply the dividends so as to keep the policy in force. In their final analysis the dividends were nothing more than mere credits on the premiums, and the company was no more entitled by virtue of the assignment of the policy to a lien on these credits than to a lien on the cash payments made on the premiums by the insured.
For these reasons I am unable to concur in the majority opinion.