Court Opinion

ID: 8187182
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:09:47.824239+00
Date Added: 2024-06-11T16:40:27.711744
License: Public Domain

On a motion for a rehearing counsel for the respondent contended, inter alia, that the provision of the policy, that in case of an assignment to a creditor all of the policy in excess of the amount due the insured should be forfeited, does not apply to an assignment as collateral security. Joyce, Insurance, §§ 888, 889, 914, 919, 2336; 19 Am. & Eng. Ency. of Law (2d ed.), 87; Curtiss v. Ætna L. Ins. Co. 90 Cal. 245; Elsberg v. Sewards, 66 Hun, 28; Hitchcock v. N. W. Ins. Co. 26 N. Y. 68; Griffey v. New York C. Ins. Co. 100 N. Y. 417; 16 Am. & Eng. Ency. of Law (2d ed.), 931. That provision as a ground of forfeiture was eliminated by the incontestable clause in the policy. Mareck v. Mut. R. F. L. Asso. 62 Minn. 39; Mutual R. F. L. Asso. v. Payne (Tex. Civ. App.), 32 S. W. Rep. 1063; Goodwin v. Provident S. L. Ass. Asso. 97 Iowa, 226; Sun L. Ins. Co. v. Taylor, 22 Ky. L. Rep. 37; Wright v. Mut. B. L. Asso. 118 N. Y. 237; Kline v. Nat. B. Asso. 111 Ind. 462; Fitch v. Ameriecm P. L. Ins. Co. 59 N. Y. 557; Patterson v. Nat. Prem. Mut. L. Asso. 100 Wis. 118.
*676The following opinion, was filed January 28, 1902:
Marshall, J.
Counsel for respondent suggest five reasons why a reargument of this case should be granted, each of which will be briefly considered.
The first proposition is that the clause in the policy upon which the decision was based refers to an absolute assignment, not to an assignment as collateral security as in this case. To that several authorities are cited. None of them, in our judgment, solves or attempts to solve the question here involved, or treats the same, except Elsberg v. Sewards, 66 Hun, 28. There the policy contained a clause like the one before us. The meaning thereof was not a subject for decision, nor was it determined, the company having paid the money into court, leaving conflicting claimants to have their rights judicially determined. Wholly outside the questions for decision, however, the court said that it was not entirely clear that the company could take advantage of the forfeiture clause as against the'assured, for the evident purpose thereof was to protect the corporation against creditors speculating upon the life of a person by obtaining something beyond what was actually due from him; that if, under such a clause, an assignment is made, absolute in form, the provision will protect the company from liability in excess of the bona fide claim of the creditor. The court suggested that such meaning must be the only effect of the provision; that it cannot be held to apply to a mere assignment as security, because of the hardship which would otherwise result. We do not deem those suggestions of any considerable importance, first, because not made in the course of the decision of any question involved in the cause; and second, because they are entirely inconsistent with the plain words of the policy. Words of a contract cannot be legitimately bent out of their ordinary meaning merely because otherwise a hard contract would result. If that were *677not so, freedom of contract would be at an end, and courts would be looked to to revise all contracts and change them so as to conform to judicial notions of equity regardless of the intention of the parties. Puffendorf’s rule, that where words express clearly the sense and intent, courts must give effect thereto regardless of the consequences,’ is one that has no exception. Courts have no right, even to avoid an absurd result as regards the effect of a contract, to ascribe a meaning to words not within their reasonable scope. Eor the purpose of saving a party- from the consequences of a hard bargain, courts cannot do more than what “ can be done by a perfectly fair and entirely rational construction of the language actually used. To do more than this would be to sacrifice to the apparent right of one party in oné case that steadfast adherence to law and principle, which constitutes the only protection and defense of all rights, and all parties.” 2 Parsons, Cont. (8th ed.), 506. By the words of the policy, “ any creditor as assignee,” it will be seen that reference is made to a person holding the policy at the time of the death of the assured as creditor. In that case the policy is made valid as to the amount due the holder as creditor, and, “ as to all amounts in excess thereof,” void. How can-a meaning be reasonably ascribed to such language that will not include the idea that it deals with creditors existing at the time of the death of the assured, holding policies assigned to and held by them as creditors, not sold to them outright ? The language repels the idea that persons holding policies as purchasers only are referred to.
The next proposition is that the forfeiture clause was waived by the agreement and conduct of the parties. The agreement and conduct referred to are the company’s assent to the assignment and directions as to how it should be effected. ¥e are unable to see in that any indication of a waiver. All the indications are in perfect harmony with the preservation of the insurance contract as it was written. *678It prohibited any assignment of the, policy except by compliance with certain rules. It required assent by the company and stipulated that in case of an assignment of the policy to a creditor, and the presentation by him of a claim thereon at its maturity, the contract should be void except as to the amount of such claim. The consent given in this case, and conduct of the appellant by way of advising how to effect the transfer, gave no other indication than that the assignment could be made in accordance with the terms of the contract.
The third proposition is that the forfeiture clause was eliminated by a provision rendering the policy incontestable after being in force for five years, for any cause except nonpayment of dues, etc. Counsel favor us with a very plausible argument in support of that proposition, citing numerous cases. It would not be profitable to review them. It is sufficient to say that they are all cases involving the effect of violations of conditions of insurance contracts where there is an incontestable clause. No case is cited, and we venture to say none can be, holding that an agreement between the assured and the insurer, subsequent to the issuance of the policy and in strict accordance therewith, rendering a policy partly or wholly void, is affected by the incontestable clause. The clause in that regard, in the policy before us, is the one usually found in insurance contracts. The effect thereof is that no violation of the conditions of the policy, except in the cases specified, shall constitute a defense thereto, at the maturity of the contract. There was no violation of the terms of the insurance contract in this case, either by act of omission or commission. There was merely an assignment of the policy by consent of the company according to its terms. By necessary inference, as a condition of the assignment, it included the clause limiting the validity of the policy to the amount due the creditor at the time of the maturity of the contract, in case at such time such creditor should hold it. At every *679stage in the consideration of this case we have fully appreciated the hardship of the construction of the policy we have been compelled to adopt, but no other can be adopted, as it seems, without doing violence to the language of the contract. While courts are to look with as much disfavor as they reasonably can _ upon all clauses in insurance contracts which may be considered from two aspects, one which will defeat and one which will sustain a cause of action upon it, and for the full amount called for thereby at the maturity of the policy, they must stop at the boundaries of reason the same in case of an insurance contract as in any other.
The fourth proposition is that the defense that the policy was not a valid claim except as to the amount due the as-signee at the time of the death of the assured, and the payments made by the assignee to keep up the policy, cannot be considered, because it was not pleaded or insisted upon on the trial, nor any error in respect thereto, committed by the trial court, preserved for consideration by proper exceptions. The record does not bear out that contention. On the contrary the defense was fully pleaded in subdivision 8 of the answer, and there was a specific exception to the order of the court for judgment on the special verdict for the full amount of the policy. There is ample evidence that the defense, was deemed by appellant’s counsel one of the important features of the answer and subjects for consideration on the trial, and for exception to the result reached by the trial court.
The last proposition is that the city of Eau Claire was not a creditor within the meaning of the policy because it did not possess any legitimate enforceable claim against Mc-Quillan for money advanced for his benefit from the poor fund. That proposition would be true as applied to the ordinary circumstance of supporting a pauper out of the poor fund of a municipality. But such was not this case. There was a contract between McQuillan and the city whereby *680he agreed to become a debtor of the city for the money advanced by it for his benefit. That contract was executed. Whether it would have been valid as an executory contract is not material to the case. Having been executed, it was binding on McQuillan, making him a debtor the same as if he had obtained the money from a private party. That a debtor and creditor relation was agreed upon between Mc-Quillan and the city is stated by the learned counsel in his argument in respect to the second proposition, where it is urged upon the attention of this court that in the arrangement between the insurance company, the'city, and McQuil-lan, an assignment of the policy to the city, as collateral security for an indebtedness, was contemplated.
We say again that we have fully appreciated the unfortunate outcome of this litigation from the standpoint of respondent, and have given the case the most careful study, applying all the established rules for the construction of insurance contracts for the protection of policy holders, without being able to discover how a different result could be reached than the one embodied in our judgment, without grossly violating the liberty of contracting. There is some reason for saying that such violations have sometimes taken place in some jurisdictions in respect to insurance contracts. They have probably occurred through mistaken notions of the extent to which courts can go merely to effectuate judicial notions of equity. They do not strictly observe the established principle that courts cannot make contracts for parties by bending the meaning of words out of their reasonable scope to avoid inequitable results,— cannot do that even to effect the intention of the parties. The best that can be done is to carry out such intention so far as it can be discovered and found expressed, reasonably, by the words they saw fit to use therefor.
By the Court. — The motion for rehearing is denied.
Bardeen, J., took no part.