Harrigan v. Home Life Ins. Co. , 128 Cal. 531 ( 1900 )

February 20, 1888, plaintiff's intestate applied through Conway, an agent of defendant in San Francisco, for a policy of life insurance upon his life for ten thousand dollars. The medical examination was had and the risk accepted. Hope gave his note, payable to the order of Dunphy, the general agent at San Francisco, for the amount of the first premium, and received from the agent a conditional receipt. Dunphy testified: "He gave his note, and it was to show that a settlement was made at the time the application was made. We call it a conditional or binding receipt."

The receipt provided that in the event of the acceptance of the application the policy should be in force from the date of the acceptance. The application and note were placed with the general agent at San Francisco, who forwarded them to the home office at New York for its approval and acceptance. The amount of the note was charged to Conway, the soliciting agent, and was actually paid to the company by him about one year thereafter. Whether Hope paid is left as a matter of inference and presumption.

A policy was issued at the New York office, which alone had authority to accept and issue policies, on the eighth day of March, 1888, was sent to the San Francisco agency and received there March 12, 1888. Some time during the same month, and before Conway had actually paid the amount of the first premium to the company, the policy was handed to Hope, or to his father in law for him.

It must be held that the first annual premium was paid by the promissory note, and that the delivery of the policy is evidence that payment in actual cash was waived, if it can justly be said that such payment is made a condition precedent to the delivery of the policy.

Apparently, Hope paid no further attention to the insurance, and died September 22, 1891, delinquent for three annual premiums. This action was commenced August 21, 1895.

The defendant, among other defenses, denied the issuance of a paid policy; avers that the first premium was not paid before the delivery of the policy, and, therefore, by the terms of the policy defendant is not liable thereon; also that the policy lapsed by the failure of deceased to pay the annual premiums, and pleads the statute of limitations.

At the trial a nonsuit was granted, and a motion for a new trial was made by the plaintiff, which was denied. The appeal is from that order and from the judgment.

Motion for nonsuit was based upon three grounds: 1. It does not appear that any premium except the first was paid; 2. It was proven that no premium except the first was ever tendered; and 3. The action is barred by subdivision 1 of section 339 of the Code of Civil Procedure.

It is averred in the complaint that the second premium had not been paid, and it is not contended that any part of any premium had been tendered. In fact, Hope paid no attention to it after its issuance.

The insurance company is located in the state of New York, and it is agreed that the policy is a contract which was to be performed in that state. By a statute of that state, then and now in force, it was provided: "No life insurance company doing business in the state of New York shall have power to declare forfeited or lapsed any policy hereinafter issued or renewed by reason of nonpayment of any annual premium or interest, or any portion thereof, except as hereafter provided." It is then provided that written notice shall be mailed to the assured and no forfeiture declared until thirty days thereafter. The policy contains an express waiver of this notice. In Griffith v. New York Life etc. Ins. Co., 101 Cal. 627, 40 Am. St. Rep. 96, this precise question was decided, and it was ruled that the statutory notice could not be waived. "The statute is a limitation upon the power of the company to do a specific thing, except under prescribed conditions. That which a corporation has not the power to do, if attempted to be done by it is ultra vires and void."

It is averred in the complaint, and not denied in the answer, that no statutory notice was ever mailed to Hope. It is held by the court of appeals in New York (De Frese v. National Life Ins.Co., 136 N.Y. 144) that: "The contract is to be read as if the act of 1876 had been literally incorporated into it. There could be no forfeiture for this cause unless the defendant alleged and proved nonpayment after due service of the notice required by law." This authority was followed in Griffith v. New York Lifeetc. Ins. Co., supra.

The suit was not commenced for more than three years after the death of Hope, but was commenced in less than four years. An action upon a contract, obligation, or liability founded upon an instrument in writing executed in this state is barred in four years (Code Civ. Proc., sec. 337); if founded upon an instrument in writing executed out of the state, in two years. (Code Civ. Proc., sec. 339, subd. 1.) Is the policy upon which suit is based an instrument executed in this state, or was it executed, within the meaning of the statute, in the state of New York?

The question of locality depends upon the further inquiry as to when the contract became in force. The defendant contends that it was in force as soon as the risk was accepted by the company and the policy was issued and sent from its office to its local agent for Hope. The plaintiff claims that the policy was not in force until it was handed to Hope by the local agent. This last contention is based, in part, at least, upon the fact that Hope had not paid the first premium in cash, and they argue that such payment was expressly made a condition to the taking effect of the policy. Appellant relies for authority upon this point upon Griffith v. New York Life etc.Ins. Co., supra, and Jurgens v. Life Ins. Co., 114 Cal. 165.

In the policies considered in those cases it was expressly stipulated that the policy should not be in force until actual payment of the premium to the company during the lifetime and good health of the insured. There is no equivalent stipulation in the policy involved here. There was no provision that it should not be in force until the payments were made. There is no express requirement that the premiums shall be paid in money, nor were the agents restricted, as in those cases, by the express direction that they should receive only cash in payment. Still, in each of those cases it was held that the agent could waive the requirement as to cash payments, and that he did so by an unconditional delivery of the policy. Another difference between the Griffith case and this is that there the policy was issued and sent with express instructions not to deliver it until the money was paid by the insured and he was found to be in good health. There was nothing of the kind in this case.

The only mention of cash payments in this case is an indorsement upon the policy, which is signed by no one and presumably not known to the insured prior to his receipt of the policy.

In his application he was made to covenant that the policy should not bind the company "until the premium thereon shall have been received by said company in the lifetime of the assured, and that it shall not continue in force in case of default of payment of any note or notes which may be given in part payment of the premium thereon." Instead of prohibiting payment by note, this was a plain intimation that notes might be accepted in payment.

The application made by Hope was reported to the general agent at San Francsco, who was also present when the note was given. He testified: "He gave his note, and it was to show the company that a settlement was made at the time the application was made. We call it a conditional binding receipt." He said, further, that the receipt showed the amount of premium paid for the amount of insurance applied for, and stated that the insurance would be in force "from the date when the application was accepted from the company."

In the policy it is recited: "In consideration of the representations and agreements contained in the application therefor, and the sum of two hundred eighty-three dollars and sixty cents, to be paid on or before the delivery of this policy," etc. Among the covenants in regard to forfeiture is one to the effect that if the statements contained in the application shall be found to be untrue, "or in case the said John T. Hope shall not actually pay the first premium as aforesaid, before the delivery of this policy, and while the said John T. Hope is in good health"; or shall not pay subsequent annual premiums, or shall engage in certain specified extrahazardous employment; "or shall die in consequence of a duel, or of the violation of law — then, and in every such case, the said company shall not be liable for the payment of the sum assured, or any part thereof, and this policy shall cease, and be null, void, and of no effect."

Of course, a covenant for a forfeiture implies that the policy is in force, and must do so here, notwithstanding the use of the word "delivery"; and, besides, this contains no provision forbidding payments being made by note.

Finally, the attesting clause is as follows: "In witness whereof, the Home Life Insurance Company has, by its president and secretary, signed and delivered this contract at the city of New York, in the state of New York, this eighth day of March, 1888."

We may conclude that there was no rule of the company, condition in the policy, or in the application for it, nor any instruction to the agents, which prohibited payments by notes, of which rendered the policy inoperative until payment in money was made or duly waived. There is, therefore, no force in the argument that the delivery must have been in California because the contract could not be in force until such condition was waived by an unconditional delivery to Hope.

The question then is, whether the policy was in force so soon as issued and sent from the home office to the agent in San Francisco for Hope. There was no stipulated condition as to the delivery except that the first premium should be first paid while he was in health. That had been paid by his note, for which he received a conditional receipt. The condition was that the risk should be accepted, and would have been the same had the premium been paid in cash; it was a payment if the risk was accepted; otherwise not, and it was provided that the policy should be in force as soon as the application was accepted by the issuance of a policy. Could the company after the policy had been sent have then refused to deliver? The test is to suppose Hope had paid in cash, that he had been guilty of no misrepresentation, and had died while it was in transitu. There being no condition requiring an actual tradition of the instrument to him while alive and in good health, such as may be found in some cases, I think the company would have been liable.

Our statute makes the rule of delivery as to written instruments the same as in regard to grants (Civ. Code, sec.1627), and in section 1059 of the Civil Code it is enacted: "Though a grant be not actually delivered into the possession of the grantee, it is yet constructively delivered in the following cases. 1. Where the instrument is by the agreement of the parties at the time of execution understood to be delivered, and under such circumstances that the grantee is entitled to immediate delivery."

It is, therefore, a matter solely of intention. If it was intended that document should be in force before it was actually handed over, it will be deemed constructively delivered. Of course, the agent could not complete the contract of insurance, but he could, provisionally, contract, subject to the approval of the principal, whose ratification would make the contract binding as made.

The corporation, by its attesting clause, declared that the instrument was delivered in New York on the 8th of March. By itself this formal clause means but little. But the understanding was that it was then to be in force, and it was sent to the local agent for delivery without condition. No act was to be done, no fact determined, before delivery. Under such instructions, supposing everything had been properly done, and all was fair and honest, had Hope died during the transmission, his beneficiaries could have enforced the policy; and, that being so, its execution was complete when it left the New York office.

And such, I think, are all the authorities. In Bliss on Life Insurance, section 150, it is said: "If the company so far accepts the application as to prepare and forward a policy to its agent for delivery, and if payment of the premium has been made, or if such payment is not a condition of the policy's taking effect, or, being a condition, is waived, the contract is then complete, and the company cannot revoke its acceptance, though the policy had not been delivered."

To the same effect is 1 May on Insurance, 97; 1 Beach on Insurance, sec. 482; Richards on Insurance, 54; Elliott on Insurance, sec. 14; 1 Wood on Insurance, 49; Ford v. Buckeye etc.Ins. Co., 6 Bush, 133; 99 Am. Dec. 671, note.

The matter is elaborately considered in Yonge v. EquitableLife. Assur, Co., 30 Fed. Rep. 902; also in Hallock v. CommercialIns. Co., 26 N.J.L. 268. In this last case it is said: "Breck, the agent, and the mail were only the vehicles to carry it to him, and it was the same thing as if mailed or sent directly to the plaintiff. The defendants suggest in answer that Breck was their agent, and that by sending it to him they did not part with the possession of the policy, and that they only gave authority to Breck to deliver, which they could and did revoke before actual delivery. But when they mailed the policy to Breck to deliver, they did not constitute him their agent to receive it and keep it for them, nor to retain it as their agent. . . . It was a delivery to Breck to deliver it to plaintiff, which was a good delivery to plaintiff." This was affirmed in the court of errors. (Commercial Ins. Co. v. Hallock, 27 N.J.L. 645; 72 Am. Dec. 379. See, also, Fried v. Royal Ins. Co., 47 Barb. 127; affirmed 50 N.Y. 243.) In New York Life Ins. Co. v. Babcock,104 Ga. 67, 69 Am. St. Rep. 134, the matter is again gone over and the cases cited and discussed. It is concluded that the delivery is complete when sent to the local agent to be unconditionally delivered, and, though it was lost on the way, it was nevertheless the property of the insured.

Regarding, therefore, the expressed intention of the parties, and the law as declared in the authorities, the policy was in force when it was transmitted from New York, and is an instrument executed out of this state.

But the appellant argues that, conceding that section 339 of the Code of Civil Procedure is applicable, still it does not appear that the claim is barred, because it is not shown that the cause of action accrued two years before the commencement of the action. Hope died September 22, 1891. The complaint was filed August 21, 1895, in which it is averred that notice of the death was given more than sixty days before the action was begun.

No proof having been made, we must assume that no notice of proof was made until immediately before the action was commenced. The only statement in the policy upon the subject is the covenant to pay the legal representatives of John T. Hope, after due notice and satisfactory proof of death and interest, in accordance with the terms of the contract. It is not provided, as in Case v. Sun Ins. Co., 83 Cal. 473, that an action shall not be commenced until something else has been done in addition to the demand. The main thing is notice and proof of death and the interest of the party giving the notice. These things must necessarily be stated in any notice. Practically, this covenant calls for a demand only.

But, in any event, the demand, notice, and proof should be made within the period of limitations, or the demand is stale and suit cannot be maintained thereon. (Meherin v. San Francisco etc.Exp., 117 Cal. 215; Thomas v. Pacific etc. Co., 115 Cal. 136;Williams v. Bergin, 116 Cal. 56.)

In Palmer v. Palmer, 36 Mich. 487, which is a leading case upon this question, it is said: "He is really and in fact able at any time to bring an action when he can by his own act fix the time of payment. It is no stretch of language to hold that a cause of action accrues for the purpose of setting the statute in motion as soon as the creditor by his own act, and in spite of the debtor, can make the demand payable." This is, in my judgment, the true doctrine. Otherwise, the demand is in this condition: The cause of action has accrued if the creditor so wills, but if it suits his convenience its life will be prolonged indefinitely. The rule is put upon a different theory in Bills v. Silver Min.Co., 106 Cal. 9, which, however, may work the same result. It is there practically said that the cause of action does not accrue until demand, but where demand can be made at any time it must be made within the period of the statute or the right of action is lost. This leaves undetermined whether, if the demand is made within the period, the creditor has not the whole period allowed by the statute after demand. But I think that is not the doctrine of the decisions. In Palmer v. Palmer, supra, the rule is applied as though the statute is put in motion as soon as demand may be made. Otherwise, the creditor could, if he saw fit, add to the life of the contract a period equal to the statutory limitation. He cannot prevent the statute from running by failing to make the demand. (Ball v. Keokuk etc. Ry. Co., 62 Iowa, 751.) Whenever he can, if he chooses, by the terms of the contract, commence an action, the cause of action has accrued, for the purposes of the statute. (Great Western Tel. Co. v. Purdy, 83 Iowa, 430; Atchisonetc. R.R. v. Burlingame, 36 Kan. 628; 59 Am. Rep. 578.)

The order and judgment are affirmed.

Henshaw, J., and McFarland, J., concurred.