1. As the delivery of a policy of insurance and the payment of
the premium are reciprocal or concurrent considerations and,
together with the method of payment, are all essential things, it
makes no difference, when the first premium is paid by a note,
whether the words "if note be given for the payment of the premium
hereon or any part thereof, and same is not paid at maturity, the
said policy shall cease and determine" be printed upon the face or
the back of the receipt given for the note or in the policy. As
such receipt expressed the conditions upon which the note was
received, the memorandum on the back must be considered as embodied
in the policy and the endorsements thereon, as well as in the note
and the receipt given therefor.
2. When the first premium on a policy of insurance is paid by
note and a receipt with such an endorsement thereon is given and
accepted therefor, whilst the primary condition of forfeiture for
nonpayment of the annual premium is waived by the acceptance of the
note, a secondary condition thereupon comes into operation by which
the policy will be void if the
Page 187 U. S. 336
note be not paid at maturity, and no affirmative action
cancelling the policy is necessary on the part of the insurance
company if the note be not paid when due and presented, and if the
policy contains a provision that no person other than the president
or secretary can waive any of the conditions, a local agent has no
power to extend the time of payment of the note after the same has
become part due.
3. A life insurance company may, by its conduct, waive proof of
death and estop itself from setting up the provisions of the policy
requiring said proof.
4. This Court will adopt the construction of the state courts of
a state statute as to the necessity of a demand's being made before
commencement of an action.
This is an action upon a life insurance policy, and was
originally brought in the District Court of Tarrant County, Texas,
and removed by the defendant, plaintiff in error here, to the
Circuit Court of the United States for the Northern District of
Texas on the ground of diversity of citizenship.
The action was to recover $3,000, alleged to have become due
upon a life insurance policy issued by plaintiff in error to Thomas
M. Lewis, the husband of the defendant in error. The defendant in
error also, under the laws of Texas, Revised Statutes of Texas of
1895, art. 3071, prayed judgment for interest on the said $3,000
from the date of the death of the said Thomas M. Lewis, together
with a penalty of twelve percent on the amount due, and for an
attorney's fee of $750.
The case was tried to a jury and resulted in a verdict for the
defendant in error for $3,000, the principal of the policy, with
interest from January 1, 1900, $300 damages, and an attorney's fee
of $500. Judgment was entered in accordance with the verdict.
The statute of the State of Texas allowing interest and attorney
fees was attacked by plaintiff in error as being in contravention
of the Constitution of the United States. The statute was
sustained, and the case was brought here under section 5 of the
Judiciary Act of 1891
By the policy, the plaintiff in error promised to pay defendant
in error the sum of $3,000 upon the death of Thomas M. Lewis if
death should occur on or before the fourth day of March, 1900, and
to pay the sum within sixty days after the
Page 187 U. S. 337
receipt by plaintiff in error of satisfactory proofs of death
and its cause. Lewis died on the seventh of October, 1899.
The issues in the case, besides the constitutionality of the
Texas statute, are (1) whether the insurance company waived proof
of death; (2) whether the policy had ceased and determined before
the death of the insured by nonpayment of the premium. The evidence
bearing upon the issues is as follows:
"The first sentence of the policy sued upon, appearing upon the
face thereof, reads as follows:"
" The Iowa Life Insurance Company, in consideration of the
stipulations and agreements in the application herefor (a copy of
which is hereto attached), and of the provisions and requirements
upon the next page of this policy, all of which are a part of this
contract, and in consideration also of the payment of seventy-four
dollars and sixty-one cents, being the premium hereon for the first
year, hereby promises to pay the sum of three thousand dollars to
Lula T. Lewis (wife of the insured) if living; if not living, to
the insured's executors, administrators, or assigns (less any
indebtedness of the insured or beneficiary to this company,
together with the balance of any year's premium remaining unpaid),
within sixty days after receipt and acceptance at the company's
office in Chicago, Illinois, of satisfactory proofs of the fact and
cause of death, within the terms of this policy, of the said Thomas
M. Lewis, of Fort Worth, County of Tarrant, State of Texas (the
insured under this policy), provided such death shall occur on or
before 12 o'clock noon of the fourth day of March, A.D. 1900."
"Upon the second page of the policy is a provision reading as
follows, it being one of the provisions referred to in the sentence
above quoted from the face of the policy:"
" This policy is a contract made and to be performed in
accordance with the laws of the State of Iowa, and shall be
construed only in accordance with the charter of said company and
the laws of said state, and shall not go into effect until the
premium hereunder, or a semi-annual or quarterly installment
thereof, shall have been actually paid during the lifetime and
continuance in good health of the insured. Upon payment of the
premium, there shall be delivered a receipt signed by the
Page 187 U. S. 338
president or secretary and countersigned by an authorized
agent."
"Another provision appearing upon the second page of the policy
reads as follows: 'All agreements made by this company are signed
by the president or secretary. This power will not be delegated. No
other person can alter or waive any of the conditions of this
policy, or issue permits of any kind, or make an agreement binding
upon said company.'"
"The policy sued upon is of the kind designated by the defendant
as a 'ten-year convertible term stock' policy. It is dated March
13, 1899. The annual premium thereon is $74.61."
"The policy sued upon was issued in pursuance of a written and
printed application therefor made by the insured under date of
March 4, 1899. Said application requests the issuance of a
'ten-year convertible term stock' policy, and states that the
premium of $74.61 is to be paid annually. It concludes with a
recital as follows:"
"A note for premium of $74.61 has been paid under this
application, to make the insurance binding from the date hereof, on
condition that, if the risk is not assumed by the company, this sum
is to be returned in accordance with the receipt given as voucher
for said payment."
"On March 4, 1899, the insured executed and delivered to S.E.
Starn, as agent of the defendant, in partial settlement of his
premium, his note, reading as follows:"
" $37.30 March 4th, 1899"
" Six months after date, I promise to pay to the order of myself
thirty-seven 30-100 dollars at Ft. Worth, Texas, value received,
with interest at 6 percent per annum."
"T. M. Lewis, M.D."
"Which he endorsed in blank as follows: 'T. M. Lewis, M.D.'"
"On March 5, 1899, S.E. Starn transmitted to the defendant the
insured's said application and note with a letter, which, insofar
as it is material to this bill of exceptions, reads as follows: 'I
herewith hand you application of Thomas M. Lewis for $3,000.00,
10-year term con. stock. Also his note to cover settlement.' These
papers were received by the defendant March 8, 1899 at its office
in Chicago. "
Page 187 U. S. 339
"The application was accepted by the defendant March 13, 1899.
The defendant did not signify to Thomas M. Lewis its acceptance of
his application in any way other than by making out and forwarding
to its agent, S.E. Starn, for delivery, the policy sued upon, and
the premium receipt hereinafter mentioned, which it did on March
16, 1899."
"On March 18, 1899, S.E. Starn countersigned the premium
receipt, and delivered it and the policy sued upon to the insured.
The policy and receipt were delivered at the same time and were
received by the insured"
"Said premium receipt reads as follows."
"
I
owa Life Insurance Company"
"
Chicago office"
" Received $74.61, being the first annual premium due March 4,
1899, under policy No. 30,140, on the life of Thomas M. Lewis,
subject to the terms of the contract and the conditions on the back
hereof."
" Read the notice to policy holders on the back of this
receipt."
" This receipt is not binding unless it is countersigned by"
" (Signed) C. E. Mabie,
President"
" S.E. Starn,
Ag't, Ft. Worth, Tex."
" Countersigned this 18th day of March, 1899."
" S.E. Starn."
"
(On back of receipt)"
" For terms of mutual agreement, see application and
policy."
"
Notice to Policyholders"
" This receipt, to be valid, must be signed by the president or
secretary of the company, and in exchange therefor, cash or its
equivalent, be given by the holder of the policy, on or before date
payment is due, and when payment hereon is made to an authorized
agent or collector, such agent or collector must countersign at the
date of payment to him."
" If note be given for the payment of the premium hereon or any
part thereof, and same is not paid at maturity, the said policy
shall cease and determine."
" For the first annual premium, the insured gave the
above-described note for $37.30, and agreed to perform
professional
Page 187 U. S. 340
services for S.E. Starn to the value of the remaining $37.31.
Starn was to furnish professional work to be done by Dr. Lewis in
the examination of applicants for insurance and otherwise, and Dr.
Lewis was to do it and let Starn have the fees. No work ever was
done, and no money ever was paid to S.E. Starn or the defendant in
pursuance of this verbal arrangement. Except that the note was
given and the verbal agreement made, as just above stated, the
defendant never received, and the insured never paid, anything upon
account of the premium for the policy sued upon. S.E. Starn
testified that, before the issuance of the policy, he reported to
the defendant his agreement with Dr. Lewis concerning the payment
of the premium."
"The policy sued upon is in the form always used by the
defendant in making contracts of insurance of the kind designated
by its 'ten-year convertible term stock' contracts. At the time of
issuing said policy, it was the defendant's universal practice to
issue with its policies premium receipts in form like the one
delivered to the insured in this case."
"The defendant never sold or transferred the note received by it
from the insured, but continued to be the owner thereof until the
time of the trial. Some time before its maturity, the defendant
sent said note to S.E. Starn for collection. S.E. Starn deposited
it for collection with the Farmers' & Mechanics' National Bank
of Fort Worth, Texas, on August 24, 1899. The bank held the note
until September 25, 1899, when it returned it unpaid to S.E. Starn.
The manager of its collection department testified that it would
have accepted payment of the note at any time before its return to
S.E. Starn, and that it had received no instructions from S.E.
Starn with reference to the acceptance of payment after
maturity."
"S.E. Starn made no effort to collect the note before its
maturity, except that he deposited it in the bank for that purpose,
nor had he, up to that time, furnished any professional work for
the insured to do in pursuance of the verbal agreement, or made any
effort to get the insured to do any work, or pay any money on
account of such agreement."
"About September 29, 1899, S.E. Starn called at the residence of
the insured in Fort Worth (he being at the time confined
Page 187 U. S. 341
to his bed from illness, the nature of which was typhoid fever,
and from the effects of which he died October 7), and there had an
interview with the plaintiff and the insured. Concerning this
interview, the evidence is conflicting. The evidence introduced by
the plaintiff tended to prove that Starn stated that he had called
for the purpose of collecting the note, that the plaintiff promised
that it should be fixed up at once, and that Starn stated that it
could be paid at any time before the date on which he was required
to make his monthly report, to-wit, October 1 following. The
evidence was sufficient to have supported a verdict that this was a
fact. Mr. Starn denied that he called for the purpose of collecting
the note, and denied that he had made the statement that the note
could be paid at any time before October 1, or the date on which he
would make his report to the defendant."
"Dr. Green, one of the physicians attending the insured, met Mr.
Starn as the latter was coming out of the plaintiff's house. Starn
inquired of the doctor if he intended returning to the city after
seeing his patient. Being answered in the affirmative, Starn stated
that he would wait in the doctor's buggy and go up town with him.
While the doctor was in the house, the plaintiff requested him to
call on J. R. Reeves at the latter's pharmacy and ask him to pay
off the insured's note for them, held by Starn, the doctor agreeing
to do so. Dr. Green and S.E. Starn rode in the former's buggy from
the plaintiff's residence to the business portion of the City of
Fort Worth. Mr. Starn left the buggy as soon as the business
portion of the city was reached, and Dr. Green drove immediately to
Reeves' pharmacy and indicated to him the plaintiff's request. Mr.
Reeves agreed to pay off the note as requested, and the doctor
agreed to notify Starn."
"Concerning the conversation which ensued between Dr. Green and
Mr. Starn on the way to town, the evidence is conflicting. Dr.
Green testified that Mr. Starn stated that he had called at the
plaintiff's house to collect the note. Mr. Starn denied having made
such statement."
"Sometime during the afternoon of this day, Dr. Green notified
S.E. Starn that J. R. Reeves, the druggist, would pay
Page 187 U. S. 342
off the note. Concerning the conversation which occurred between
Dr. Green and Starn immediately following this notification, the
evidence is conflicting. Dr. Green testified that Starn said he
would go down to the pharmacy for that purpose; that some statement
was made about his going to Reeves' pharmacy to get the money that
evening, and that Starn said it would not be necessary, that he
would go down by nine or ten o'clock the next morning. S.E. Starn
testified that he stated to Dr. Green that he would call and see
Mr. Reeves the next morning."
"The night following this interview, Mr. Starn sent to the
defendant a night rate telegram, reading as follows:"
" Forth Worth, Texas, September 29, '99"
" Iowa Life Ins. Co., Chicago:"
" Dr. T. M. Lewis offers to pay premium today. Very sick. Shall
I receive it?"
" S.E. Starn"
"The next morning, September 30, 1899, the defendant, through
its secretary, telegraphed to S.E. Starn as follows:"
"To S.E. Starn, 615 Grove St., Fort Worth, Texas:"
" Do not accept payment on note due September 4. Answer."
" R. E. Sackett,
Sec."
"On the same day, defendant wrote to S.E. Starn a letter reading
as follows:"
"Mr. S.E. Starn, 615 Grove St., Fort Worth, Texas"
" Dear Sir: We are in receipt of your telegram as follows: 'Dr.
T. M. Lewis offers to pay premium today. Very sick. Shall I receive
it?' to which we replied as follows: 'Do not accept payment of note
due September 4. Answer.' We presume this telegram refers to policy
No. 30,140, Thomas M. Lewis, $3,000, convertible term, premium
$37.60, upon which note was received at this office in the sum of
$37.30, due September 4, 1899, and which was sent to you for
collection."
" Very truly yours,"
" R. E. Sackett,
Sec."
"Sometime in the morning of September 30, 1899, S.E. Starn
called at the pharmacy of J. R. Reeves, and Mr. Reeves
Page 187 U. S. 343
informed him that he had the money to pay off the Lewis note and
had been waiting for him. Mr. Starn thereupon informed Mr. Reeves
that he could not accept the payment of the notes because he had
received a telegram from the company instructing him not to do so.
Later in the day, Mr. Reeves and Dr. Green called on Mr. Starn, and
Reeves made a tender of the amount of the note, which Starn refused
to accept. Reeves kept the money he tendered to Starn, and did not
pay or deliver same to the plaintiff of the insured or to anyone
for them, and had no interview with the plaintiff or the
insured."
"On the same day, Starn telegraphed the defendant as
follows:"
" Fort Worth, Texas, September 30th, '99"
"Iowa Life Ins. Co., Chicago:"
" I have refused payment on Lewis policy this 10:30 A.M."
" S.E. Starn"
"The only testimony with regard to any consideration for the
promise claimed by the plaintiff to have been made to her by S.E.
Starn that he would accept payment of the note is the following
passage from the cross-examination of the plaintiff:"
" Q. Did you pay Mr. Starn anything?"
" A. No, sir."
" Q. He simply told you he had come to see the doctor about his
note, and that it ought to be fixed up, and you said you would
attend to it?"
" A. Yes, sir."
" Q. That is all that occurred between you?"
" A. Yes, sir."
"The attention of the plaintiff was not directed to the fact
that she was being questioned concerning a consideration for the
extension of the time for payment of note other than is indicated
by the questions put to her."
"At the request of the defendant, S.E. Starn returned to it the
note of the insured, which thereafter continued in the defendant's
possession. The defendant never offered to return the note to the
insured, and never before the death of the insured did anything in
the way of an affirmative forfeiture or cancellation of the policy,
and no communication passed between the defendant and S.E. Starn
regarding said note between the transmission of the note to Starn
for collection and Starn's above-quoted telegram of September 29,
1899. "
Page 187 U. S. 344
"Except for the evidence upon the question of the extent of S.E.
Starn's authority, the foregoing is a full statement of all
material facts upon the issue of the forfeiture of the policy sued
upon for nonpayment of the premium note, and the waiver of such
forfeiture."
MR. JUSTICE McKENNA delivered the opinion of the Court.
1. It will be observed that there was printed upon the back of
the receipt given for the first premium the following:
"If note be given for the payment of the premium hereon, or any
part thereof, and same is not paid at maturity, the said policy
shall cease and determine."
The contention of plaintiff in error is that such provision
constituted a part of the contract, and, contending also that the
note was not paid, urges that the policy ceased and determined. The
same contention was made in the trial court, but rejected. The
court held that the provision on the back of the receipt
constituted no part of the contract, and instructed the jury,
against the objection of plaintiff in error,
"that the contract, by its own explicit terms, is wholly
included in the policy -- the life insurance proper -- and in the
application for such life insurance policy, which, by the terms of
the policy, is made a part of the contract. This is recited to be
the case in the face of the policy and on the back of the receipt
itself.
Under the provisions and stipulations of these two
instruments, by the passing of the insurance policy to the deceased
and the note of the deceased and his promise to pay to the
insurance company, the minds of the insurance company and the
deceased met upon the conditions and provisions of the note,
contract, and the application for the insurance, which made a part
of the contract. In the opinion of the court, there was no meeting
of the minds, or agreement between the parties as to the
Page 187 U. S. 345
provision upon the back of the receipt. [The italics
are ours.] Such provision is nowhere noted in the face of the
contract of insurance, it is nowhere noted in the application for
the insurance, and the only place it is found is upon the back of
the receipt, no reference being made to any such provision
elsewhere. Even if the provision were considered a part of the
contract entered into between the parties, yet it is such a
provision that, if taken advantage of, would require affirmative
action on the part of the company -- that is to say, when the note
was not paid at maturity, the company should have within a
reasonable time thereafter notified the insured that in view of the
fact that his note given in part payment of the premium upon the
policy had not been paid, the policy, which was issued in
consideration of such note, ceased and determined. There is no
evidence that any such action was taken on the part of the
insurance company."
The court also instructed the jury
"that it was the duty of the company to notify the insured of
the nonpayment of the note, and that the policy, because of such
nonpayment, had ceased and determined, and that the company would
no longer be liable thereunder."
These instructions expressing the conception of the law and the
rights of the parties entertained by the court, and the court also
regarding the conduct of the company as waiving proofs of death,
naturally instructed the jury that it was its "duty to return a
verdict for the plaintiff for the face of the policy," with
interest and penalty, and attorneys' fees, as prescribed by the
Texas statute. "This, therefore," said the court, "leaves to the
jury but one question to determine -- the fixing of reasonable
attorneys' fees for the prosecution of this suit."
Were the instructions correct? And first, as to what papers
constituted the contract.
The delivery of a policy of insurance and the payment of the
premium are reciprocal or concurrent considerations. Necessarily,
therefore, the payment of the premium can be exacted simultaneously
with the delivery of the policy. Of course such payment can be
waived and a note -- the credit of the assured -- accepted, either
absolutely or upon conditions.
Page 187 U. S. 346
And we do not see how it can make any difference where the
conditions are expressed -- whether, in the policy, in the note, or
in the receipt given for the premium, or whether on the face of the
latter or on its back. The agreements of parties may be expressed
in many papers, and if the connection of the papers is not
apparent, it may be shown by parol. The present case does not even
need the aid of that rule. The receipt expressed the conditions
upon which the note was received -- unmistakably expressed them.
The receipt of the premium was expressed to be "subject to the
terms of the contract and the conditions on the back" of the
receipt. And the assured was directed to read the notice upon the
back of the receipt. The notice was as follows:
"If note be given for the payment of the premium hereon or any
part thereof, and same is not paid at maturity, the said policy
shall cease and determine."
It is not contended that it was not competent for the company to
make the condition. It is asserted that it did not become a part of
the contract upon which the minds of the parties met -- that the
minds of the parties only met upon the application, the policy, and
the note. We cannot assent to this view. The payment of the premium
was a very essential thing, and the manner of its payment, whether
in cash or by note, and provision for the payment of the note and
the effect of its nonpayment, were also essential things, and
necessarily must have been of mutual concern to the parties and
upon which their minds must be considered as having met. To hold
otherwise would be to hold that the parties were indifferent to
that which materially concerned them. It was certainly of concern
to the assured to know whether he would be indebted upon an overdue
note, or whether his insurance had lapsed.
All of the papers therefore embodied the agreement of the
parties. In
Insurance Company v. Norton, 96 U. S.
234, the agreement was considered as "embodied in the
policy and the endorsements thereon, as well as in the notes and
the receipt given therefor." Page
96 U. S.
240.
2. But determining that the minds of the parties met upon the
receipt does not solve the main question in the case. The receipt
provides that if the note, or any part of it, be not paid
Page 187 U. S. 347
at maturity, the policy shall "cease and determine." What does
this mean? That the policy shall cease and determine at the
occurrence of maturity, or at the option and upon some affirmative
action of the company? The latter is the contention of the
defendant in error, and, as we have seen, the ruling of the trial
court; the former is the contention of the plaintiff in error. Upon
the issue thus made, the cases are not harmonious. The decisions of
this Court, however, support the contention of plaintiff in
error.
In
New York Life Insurance Company v. Statham,
93 U. S. 24, Mr.
Justice Bradley, delivering the opinion of the Court, said:
"Promptness of payment is essential in the business of life
insurance. . . . Delinquency cannot be tolerated nor redeemed
except at the option of the company. . . . Time is material and of
the essence of the contract. Nonpayment at the day involves
absolute forfeiture if such be the terms of the contract. . . .
Courts cannot with safety vary the stipulation of the parties by
introducing equities for the relief of the insured against their
own negligence."
The intervention of war was held not to avoid a forfeiture.
This case was quoted, and its doctrine announced again, in
Klein v. Insurance Company, 104 U. S.
88, and again in
Thompson v. Insurance Co.,
104 U. S. 252.
In
Klein v. Insurance Co., it was said:
"If the assured can neglect payment at maturity, and yet suffer
no loss or forfeiture, premiums will not be punctually paid. The
companies must have some efficient means of enforcing punctuality.
Hence their contracts usually provide for the forfeiture of the
policy upon default of prompt payment of the premiums. If they are
not allowed to enforce this forfeiture, they are deprived of the
means which they have reserved by their contract of compelling the
parties insured to meet their engagements. The provision,
therefore, for the release of the company from liability on a
failure of the insured to pay the premiums when due is of the very
essence and substance of the contract of life insurance. To hold
the company to its promise to pay the insurance notwithstanding the
default of the assured in making punctual payment of
Page 187 U. S. 348
the premiums is to destroy the very substance of the
contract."
A forfeiture, of course, may be waived for the obvious reason
expressed in
Insurance Company v. Norton, 96 U.
S. 235 -- "a party always has the option to waive a
condition or stipulation in his own favor" -- and an agent can be
given such power, and, whether it has been given or not, may be
proved by parol.
The latter case is an important one. The policy provided that
not only a failure to pay any premium, but
"the failure to pay at maturity any note, obligation, or
indebtedness (other than the annual credit or loan) for premium or
interest due under said policy or contract shall then and
thereafter cause said policy to be void without notice to any party
or parties interested therein."
The Court not only asserted the doctrine of strict punctuality
of payment
ad diem, but applied the rule to a note for
part payment.
Expressing its view of forfeitures, the Court said:
"Forfeitures are not favored in the law. They are often the
means of great oppression and injustice. And where adequate
compensation can be made, the law in many cases, and equity in all
cases, discharges the forfeiture upon such compensation being made.
It is true we held in
Statham's case,
93 U. S. 24,
that in life insurance, time of payment is material, and cannot be
extended by the courts against the assent of the company. But where
such assent is given, the courts should be liberal in construing
the transaction in favor of avoiding a forfeiture."
We shall presently consider how far these principles apply to a
claim of waiver of forfeiture in the case at bar. Our present
inquiry is when and how does forfeiture occur, and it seems an
obvious conclusion from the cited cases that forfeiture occurs upon
nonpayment of the premium
ad diem. But, against the
conclusion,
Insurance Co. v. French, 30 Ohio St. 240, and
its approval by this Court in
Thompson v. Insurance Co.
are cited.
It was contended in the latter case that the mere taking of
notes in payment of the premium was in itself a waiver of the
conditional forfeiture, and
Insurance Company v. French,
30 Ohio St. 240, was cited to support the contention. To the
Page 187 U. S. 349
contention and citation it was replied:
"But in that case, no provision was made in the policy for a
forfeiture in case of the nonpayment of a note given for the
premium, and an unconditional receipt for the premium had been
given when the note was taken, and this fact was specially adverted
to by the court. We think that the decision in that case was
entirely correct. But in this case, the policy does contain an
express condition to be void if any note given in payment of
premium should not be paid at maturity. We are of opinion,
therefore, that whilst the primary condition of forfeiture for
nonpayment of the annual premium was waived by the acceptance of
the notes, yet that the secondary condition thereupon came into
operation, by which the policy was to be void if the notes were not
paid at maturity."
A review of
Insurance Company v. French is demanded.
Was the reasoning in that case approved, or only its conclusion?
The policy passed upon contained a provision for forfeiture if the
premium should not be paid, but no provision for forfeiture if
premium notes should not be paid. The receipt which had been given
was absolute. The provision for forfeiture was contained in the
note. The case was somewhat complicated by questions of fact
regarding the power of the company's agent to accept the notes or
to grant extensions of time, but that the power existed was
accepted as concluded by the verdict. The insurance company
nevertheless asserted as a conclusion from the nonpayment of the
note that the policy had been forfeited. To this the court (Supreme
Court of Ohio) replied:
"In most of the cases which have been cited in argument the
policy contained a clause that it should be void upon nonpayment of
the premium, or any note given for such premium. This policy,
however, contains no clause of avoidance for the nonpayment of
notes given for premium."
"It is not insisted that the nonpayment of the check alone
forfeited the policy, but it is claimed that failure to pay the
note does work out this result. It will be seen that the note
stipulates in terms that if it is 'not paid at maturity, said
policy is to be null and void.'"
"It cannot be successfully maintained that this clause makes
Page 187 U. S. 350
the policy absolutely void upon nonpayment of the note. Under
the authorities, such a clause, being introduced for the benefit of
the insurance company, means that the policy shall be void if the
company insist upon it, but it is their option to say whether this
result shall follow or not."
And further --
"We therefore cannot consider payment of this note as absolutely
necessary before the renewal attached. It may not, perhaps, be
necessary to hold, as did the court below, that demand of payment
the day the note was due was necessary to work a forfeiture, but
certainly something must be done between the date the note was due
and the end of the year to establish and proclaim the forfeiture,
or it must be held to be waived."
To sustain the conclusion, the following Illinois cases were
cited: 77 Ill. 384; 37 Ill. 354; 49 Ill. 180. The court also cited
Joliffe v. Madison Ins. Co., 39 Wis. 119, and quoted the
following principle:
"Forfeitures are not favored in the law, and will not be
sustained upon mere inferences. Where, upon breach by one party of
a condition or stipulation in a contract, the other party thereto
has the option to declare the contract forfeited and thus relieve
himself from liability upon it, and seeks to exercise such option,
he must do so unconditionally and in plain, positive, and
unmistakable terms."
And the court finally concludes that,
"in the case at bar, the company should not have retained the
check and note and remained silent, as they did. Yet it appears
that, on July 6, 1868, when Simpson refused the premium for that
year, French offered to give up his policy if the company would
return his check and note. This was refused."
What, then, did this Court mean by pronouncing the decision in
Insurance Company v. French as "entirely correct?" Were
the various principles the law expressed in that case approved, or
only the conclusion of the court from the facts? Did this Court
intend to approve the proposition that to cause a forfeiture some
affirmative action was necessary by the company -- a
Page 187 U. S. 351
declaration to that effect and the surrender of the premium
notes? To hold the latter would be to hold that this Court intended
to reverse a number of decisions made upon careful consideration.
Indeed, it would be contrary to the reasoning in the very opinion
in which the French case is approved. A replication was set up
alleging a usage of the insurance company to give notice to the
assured of the date of payment, and, answering it, this Court
said:
"This is no excuse for nonpayment. The assured knew, or was
bound to know, when his premiums became due. . . . The reason why
the insurance company gives notice to its members of the time of
payment of premiums is to aid their memory and to stimulate them to
prompt payment. The company is under no obligation to give such
notice, and assumes no responsibility by giving it. The duty of the
assured to pay at the day is the same whether notice be given or
not."
And again, as to the usage of the company not to demand punctual
payment at the day, or to give thirty days of grace, it was said:
"This was a mere matter of voluntary indulgence on the part of the
company, or, as the plaintiff herself calls it, an act of
leniency.'"
In our other decisions, which we have cited, it was held that
time is the essence of the contract, and nonpayment at the day
involves absolute forfeiture. In none of the cases was there any
affirmative action by the company. Forfeiture occurred from
nonpayment of the premium. The same principle was announced and
illustrated in
Life Insurance Company v. Pendleton,
112 U. S. 696. In
that case, a foreign bill of exchange was accepted in payment of
the premium, but, upon presentation to the drawee, was not
accepted. There was some controversy as to whether it was presented
for payment. The trial court (circuit court of the United States)
held (7 F. 169), and instructed the jury, that the true measure of
the duty of the company was to be found in the rules of law
governing the holder of commercial paper; that, by taking the
draft, the company assumed all of the duties of the holder of such
paper, and that it was therefore the duty of the company to have
had the draft protested and to have given notice of
nonacceptance
Page 187 U. S. 352
as a condition of forfeiture. This Court disagreed with the
circuit court, and held that protest and notice were not necessary.
In other words, held not the law of commercial paper, but the
contract of the parties, determined the conditions of forfeiture,
and that the contract of the parties was expressed in the draft to
be that the policy should become void if the draft was not paid at
maturity. "We think it clear," was said:
"therefore, that, notwithstanding the renewal receipt, the
condition expressed in the draft was binding on the insured. As we
have shown, that condition was that the policy should become void
if the draft was not paid at maturity. The draft, being without
grace, matured on the 14th of October, 1871. If not paid on that
day, the policy was forfeited, unless it was the usage of the New
Orleans banks to grant days of grace even when they were waived, of
which there was some evidence on the trial. In such case, the
forfeiture would take place if the draft were not paid on the 17th
of October. Of course, it must be presented for payment on the one
day or the other, for the drawees could not pay it unless it was
presented, for they would not know where to find it. But, supposing
it to have been presented for payment and payment refused by the
drawees, then the condition of forfeiture was complete. Protest and
notice of nonpayment might be further necessary to hold the drawer
if the insurance company desired to hold him, but they were not
necessary to the forfeiture. That occurred when nonpayment at
maturity or presentation occurred. The drawer, Pendleton, who took
entire charge of the policy for his children, put its existence on
the condition of payment of the draft at maturity, and it was his
business, as agent or guardian of his children, to see that the
draft was thus paid; that the requisite funds were in the hands of
the drawees, or that they would pay it, whether in funds or not.
Such, we think, was the clear purport of the condition, and as the
court below took a different view, holding that the insurance
company was bound not only to present the draft for payment, but to
have it protested for nonpayment, before a forfeiture would ensue,
the judgment must be reversed. "
Page 187 U. S. 353
See also same case,
115 U. S. 115 U.S.
339.
It has been held in cases in the state courts, as in
Insurance Company v. French, that no forfeiture is
incurred until notice by the company has been given that it is
claimed. And other cases hold that, when the condition of
forfeiture is in the note only, the mere fact of nonpayment at
maturity does not of itself avoid the policy. A review of the cases
we do not consider necessary. We prefer to follow our own
decisions.
Some of those decisions, hold, however, as we have seen, that a
waiver of forfeiture may be inferred from the conduct of the
company, and that "courts seize hold of any circumstances that
indicate an election or intent to waive a forfeiture."
96 U. S. 96
U.S. 244.
We do not think such circumstances exist in this case. Of
course, such circumstances must have come from the company or from
its agent acting within his authority. In the case at bar, we need
only look at that which took place after the note was given. What
preceded that, including the arrangement between Starn, the agent
of plaintiff in error, and the assured for the employment of the
latter by the former, must be considered as having been approved by
the company. Its rights and the rights of the assured depend
therefore upon what it did in regard to the note before or after it
became due, or what Starn did within his authority. The company did
nothing but send the note to Starn for collection, and Starn
deposited it for collection with the Farmers' & Mechanics'
National Bank of Fort Worth, Texas, on August 24, 1898 -- a month
before it was due. The assured did nothing; made no movement, as
far as the record shows, for its payment. In other words, the day
of maturity came and went, and the note was not paid, and the
condition upon which the policy should "cease and determine"
occurred, unless Starn's authority lasted and could be exercised
after the note became due. He received the note back from the bank
on the 25th of September, and on the 29th of September he called at
the residence of the assured -- the latter then being confined to
his bed with typhoid fever (of which he died October 7). The
evidence of what transpired there was conflicting, but the record
admits would have supported a verdict;
Page 187 U. S. 354
"that Starn stated that he had called for the purpose of
collecting the note; that the plaintiff promised that it should be
fixed at once, and that Starn stated that it could be paid at any
time before the date on which he was required to make his monthly
report, to-wit: October 1st following."
And it must also be accepted as true that Starn told Dr. Green
that he (Starn) had called at Lewis' house to collect the note, and
that the doctor notified Starn that Reeves, the druggist, would pay
it, and the latter, on September 30, in the presence of Dr. Green,
tendered the amount of the note to Starn, who refused it.
On the 29th of September, as set out in the statement of facts,
Starn telegraphed to the company that Lewis offered to pay the
premium, and asked if he should receive it. On the 30th, the
company replied in the negative, and on the same day wrote to
Starn. Were Starn's acts authorized? They can only be so held as an
inference from the authority given him to collect the note. In
other words, that the authority to collect the note conferred
authority to extend the time of payment and to waive the forfeiture
which had occurred by nonpayment. It would be difficult to so hold
even if his contract with the company did not forbid the exercise
of such power and the provisions of the policy preclude it. The
policy provides as follows:
"All agreements made by this company are signed by the president
or secretary. This power will not be delegated. No other person can
alter or waive any of the conditions of this policy, or issue
permits of any kind, or make an agreement binding upon said
company."
And the contract constituting Starn the company's agent contains
the following:
"The party of the second part agrees to submit to and abide by
all rules and regulations of said company. . . . Agents are not
authorized to collect any renewal premium after the day on which
the same becomes due except in accordance with special instructions
from the company in each individual case."
There is no evidence of any course of dealing of the company or
of Starn which enlarged or modified these instructions or which
induced and excused the default of the assured.
3. The circuit court instructed the jury substantially that
Page 187 U. S. 355
the plaintiff in error was estopped from setting up the
provision of the policy requiring proofs of death. The instruction
is assigned as error. We concur with the circuit court. The conduct
of the company was tantamount to a waiver.
Insurance Company v.
Pendleton, 112 U. S. 696.
4. Notwithstanding our decision in
Mutual Life Association
v. Mettler, 185 U. S. 308, the
plaintiff in error urges the unconstitutionality of the Texas
statute, authorizing the recovery of damages and attorneys' fees
for failure by life and health insurance companies to pay losses.
We are, however, entirely satisfied with the case and its
reasoning.
It is insisted, however, that to justify a recovery of the
statutory damages, demand of payment of the policy before suit was
necessary, notwithstanding the denial of liability by the company.
The contention is sustained by the decision of the court of civil
appeals of Texas in the case of the
Northwestern Life Assurance
Co. v. Sturdivant, 24 Tex.Civ.App. 331. That case also decided
"that the suit itself would not be such demand as the statute
intended." It was held, however, that demand could be made after
suit and set up by "an amended petition as an original suit." The
Supreme Court of Texas refused a writ of error to review the case.
94 Tex. 706. We may therefore adopt its construction of the state
statute. It can be easily conformed to by defendant in error if a
new trial of the case at bar be prosecuted.
On account of the errors indicated
The judgment of the Circuit Court is reversed, and the cause
remanded, with directions to award a new trial.
