
    The Union Central Life Insurance Co. v. Buxer.
    
      Life Insurance — Husband procttres insurance on life payable to himself after term of years — Or to wife at death — Gives premium note with forfeiture clause — Effect on wife’s interest in the insurance — Conditions in policy not varied by subsequent dealings between the parties, when — Insured not entitled to loans on the policy when in default of premiums.
    
    1. Where a husband procures insurance on his life payable to himself after a term of years, if he shall live so long, and if not, then to his wife at his death, and after paying premiums for some years gives a premium note which has a forfeiture clause therein more onerous, as against the interests of the wife, than the forfeiture clause in the policy, such forfeiture clause in the note will not avail the insurance company as against the wife, unless she assents thereto.
    2. Where a condition in a life insurance policy is to the effect, that “in case of default for non-payment of premium after three years, and no legal surrender having been made, the insured having paid at maturity all notes given for premium, then this policy shall, without surrender, but upon payment of all outstanding premium notes, become a paid-up term policy, without change of terms or conditions,” the payment of all outstanding premium notes, though given after three annual premiums had been paid, is a condition precedent to such policy becoming a paid-up term policy.
    3. Where a policy of life, insurance is issued and accepted upon the conditions and agreements contained therein, such conditions and agreements form the contract between the parties, and will not be varied or controlled by the subsequent course of dealing between them, in the absence of fraud or bad faith.
    4. Where it is provided in a life insurance policy, that the company will loan to the insured on such policy as collateral security, certain sums of money, graded as to amount by the number of annual cash premiums paid, the insured is not entitled to such loan after he is in default in the payment of a premium, or premium note, when such default works a forfeiture of the policy by its terms and conditions, unless such default is waived by the company.
    (Decided April 10, 1900.)
    
      Error to the Circuit Court of Stark County.
    Benjamin F. Buxer received from the plaintiff in error a life insurance policy on his own life for one thousand dollars, payable to himself at a period in the future to be determined by the premiums paid and accrued profits after deducting losses, if he should then be alive, and in case of his death before that time the'amount to be paid to his wife, the defendant in error. The premium was $38.33, to be paid on or before the 15th day of August in every year during the term of twenty years, and the policy provided that the insurance was made upon the consideration of the payment of said premium “and of the payment when due of any and all notes given for premiums or parts of same.”
    The policy contained the following conditions:
    “After three years’ premiums have been paid, except in case of failure to pay at maturity a premium note, the company will, upon legal surrender of this contract while in force, and the payment of all outstanding premium notes, issue a paid-up, non-participating life policy for the amount named in table “A,” on the following page. In case of default for non-payment of premium after three years, and no legal surrender having been made, the insured having paid at maturity all notes given for premium, then this policy shall, without surrender, but upon payment of all outstanding premium notes, become a paid-up term policy, without change of terms or conditions, except as to the payment of premiums and participation in profits, and continue in force for such time as one annual premium on this policy is contained in its reserve value according to the American four per cent, table of mortality, at the end of which time this contract shall cease. If the insured shall die while the said term policy is in force, the amount of foreborne premiums, with interest at six per cent, shall be deducted from the sum insured.”
    
      “1st. This policy shall not be valid or binding until the first premium is paid to the company, or its authorized agent, and the receipt hereto attached countersigned by the company’s agent, and delivered during the life-time of the insured; and all premiums, or notes, or interest upon notes given the company for premiums, shall be paid on or before the days upon Avhich they become due, at the company’s office in the city of Cincinnati, or to the authorized agent of the company, he producing a receipt therefor, signed by the president, vice-president or secretary.”
    “6th. Upon the violation of any of the foregoing conditions, this policy shall be null and void, without action on the part of the company, or notice to the insured or beneficiary, and all payments made hereon, and all accrued surplus or profits shall be forfeited to the company, excepting as provided in the foregoing 5th paragraph.”
    “8th. After three years from the date of this policy it shall be incontestable for any cause, excepting the violation of the above conditions regarding the occupation of the insured, his becoming a drunkard or having delirium tremens, non-payment of premium or of notes given for same, or interest thereon, and misstatements as to age.”
    The policy states that it is issued and accepted upon the conditions and agreements therein.
    The premiums Avere paid either in cash or by note to August 15, 1894, and a note was given for the premium which became payable August 15, 1894, at three months, Avhich note was not paid at maturity and was renewed so as to become due May first, 1895, and Avas not paid when due or at all, and on September 30, 1895, the company notified Mr. Buxer that his policy had lapsed for non-payment of said premium note. 'He negotiated with the company for a reinstatement of his policy in December, 1895, but did not succeed, and he died May 6, 1896, leaving his widow, the plaintiff in error, surviving him.
    
      The premium note which became due May first, 1895, and for the non-payment of which the company declared the policy lapsed, contained the following conditions:
    “Said policy including all conditions therein for surrender, or continuance as a paid-up term policy, shall without notice to any party or parties interested therein be null and void on the failure to pay this note at maturity, with interest at eight per cent, per annum, payable annually.”
    That note was not signed by the wife and she did not known that it had been given.
    The company regarded the policy lapsed and waived proofs of loss and refused payment.
    Thereupon the widow began her action in the court of common pleas against the company, and properly pleaded the policy, its terms and conditions and annexed a copy as an exhibit. ,
    She averred that “said policy of insurance contained a provision to the effect that all premiums or notes or interest upon notes given to the company for premiums should be paid at the company’s office in the city of Cincinnati or to the authorized agent of the company.” She further averred that “said policy of insurance contained a provision to the effect that if any premium or premiums, or premium note or notes or interest upon notes given to the company for premiums shall not be paid at maturity, that said policy should be null and void.”
    She averred that all premiums and premium notes had been paid except the note which became due May first, 1895, being for the premium which was payable August 15, 1894, and she pleaded in excuse for the non-payment of that note, that it was the custom of the company to collect all premiums and notes through agents who would notify the insured that his premium or note was about due and then make demand of payment at the proper time, and give a receipt signed by the officers of the company, and that in this instance no notice was given and no demand made, and that thereby the eompány waived the prompt payment of the note in question. She further averred that other payments of premium and notes were received by the company after the same were due, and that thereby and by the course of dealing he was induced to believe that prompt payment would not be required in order to retain his policy in force.
    The condition in said policy as to term insurance is fully pleaded and the benefit thereof invoked in the petition.
    The ansAver of the company admits the allegations of facts in the petition, but denies the waiver and deductions attempted to be drawn from the course of dealing, and pleads the conditions of the policy and note above shown, and the non-payment of said premium note, and avers that said policy lapsed for non-payment of said note, and that it Avas canceled on the books of the company in September, 1895, and the insured duly notified thereof. The answer also contains the following:
    “Defendant admits that said policy of insurance also contained a provision that in case of default for non-payment of premium after three years, no legal surrender having been made, the insured having paid at maturity all notes given for premiums, then said policy should, without surrender, upon payment of outstanding premium notes, become a paid-up term policy, and should continue in force for such time as one annual premium thereon Avas contained in its reserve value according to the American four per cent, table of mortality; that no legal surrender of said policy had been made; that no other premium note was then outstanding, and that the reserve value of said policy at said time would have been more than sufficient to continue said policy in full force until the death of said Benjamin F. Buxer in the manner and upon the terms and conditions as in said policy provided, had the same not been forfeited for the non-payment of said premium note.”
    The reply denied the answer except as admitted in the petition.
    . A jury was waived and the cause submitted to the court upon the pleadings and evidence. The policy and notes given for premium were introduced in evidence. There was no conflict of testimony, the facts of the case were admitted., even the acts of indulgence as to payments of premiums and premium notes were not contested by the company, but the court regarded that testimony unimportant and the record shows that those facts were not considered in rendering the judgment.
    The court of common pleas rendered judgment in favor of the plaintiff below, and the circuit court affirmed the judgment. Thereupon the insurance company filed its petition in error in this court, seeking to reverse the judgments below.
    
      Ramsey, Maxwell & Ramsey; Day, Lynch & Day, for plaintiff in error.
    
      R. W. McOaughey, and Thayer, Webber & Turner, for defendant in error.
   Burket, J.

As this policy was made payable to the husband at maturity if then alive, and to his wife at his death if he died before its maturity, it was to the interest of both to keep the policy in force by the payment of the annual premiums, either in cash or by premium note.

Payment might be made in cash or by note as the parties should determine. As to his interest in the policy -he could give a premium note with a forfeiture clause broader and more onerous than the forfeiture clause in the policy, but as she had a vested interest in the policy, in case she survived him, he could not affect her rights by giving such a premium note without her consent. While the forfeiture clause in the premium note which became due May first, 1895, was binding upon him, it was not binding as to her, because she had no knowledge of the same and did not assent thereto. When he found himself unable to pay the premium in cash it was his interest and duty, as well to himself as to his wife, to keep the policy in force by giving a premium note, and as to himself he could insert such terms of forfeiture in the note as he saw fit, but as to her interest he could not change the contract of insurance without her consent. He might put an end to the policy by failing to pay the premium in cash or note, or by failing to pay the note at its maturity, but so long as he kept the policy alive, the interest therein of the wife remained unchanged, unless she consented to a change. She had the right to stand upon the terms ‘ and conditions of the policy, unchanged and unaffected by any forfeiture clause in a premium note. But while he could not thus affect her interest without her consent, she was equally bound Avith him by the terms and conditions of the policy; and she had no right to insist after payment of three annual premiums that he should refuse to give a premium note to keep the policy alive for both, but let it lapse as to himself so that she might thereby have the benefit of a continued paid-up term policy. The insurance was primarily for his benefit as an endoAvment, and only contingently for her benefit in case he should die before its maturity. In such cases he may do whatever the terms of the policy authorize, without coming in conflict with the authorities as to the inability of the insured or the company to change the vested rights of the beneficiary.

He paid the second and third annual premiums by giving a note therefor in the first instance, and he had an equal right to pay the fourth premium in the same manner, but if it contained a broader forfeiture clause than the terms of the policy, such clause would not be binding on the wife without her consent.

The forfeiture clause in the premium note in this case, however, is not broader, as to the question here involved, than the same clause in the policy. Both provide in effect that upon failure to pay the note given for premium at its maturity, the policy shall be null and void. The forfeiture clause in the policy is in effect that upon failure to pay. the premium, all outstanding premium notes having been paid at maturity, the policy shall become a paid-up term policy, but without the payment of such notes, the policy shall not become a paid-up term policy, but shall be null and void, without action on part of the company or notice to the insured or beneficiary. The forfeiture clause in the premium note in question is that “said policy including all conditions therein for surrender or continuance as a paid-up term policy shall without notice to any party or parties interested therein be null and void on the failure to pay this note at maturity with interest at eight per cent, per annum, payable annually.” The failure to pay a premium note at maturity would prevent the policy from becoming a paid-up term policy, under the forfeiture clause in the policy, and the failure to pay the premium note in question at maturity made the condition as to continuance as a paid-up term policy null and void; so that the failure to pay the premium note in question, prevented the policy from becoming a paid-up term policy, both under the forfeiture clause in the policy and under the same clause in the note. The forfeiture clause in the.note is, therefore, as to the question of the policy continuing as a paid-up term policy, not broader or more onerous than the same clause in the policy, failure to pay an outstanding premium note under either clause preventing its continuance as a paid-up term policy.

The plaintiff below plead the conditions of the policy as to forfeiture, the continuance as a paid-up term policy, and that the premium note which became due May first, 1895, had never been paid, and sought to excuse the non-payment thereof by the course of lenient dealing, the failure to give notice and make demand of payment, and the refusal of the company to make a loan to the insured on his policy as collateral.

The insurance company in its answer plead and relied upon both conditions of forfeiture in the policy and in the note, and admitted that it had failed to give notice of the maturity of the note, and failed to demand payment thereof, and refused to make a loan on the policy.

There was some testimony introduced upon the trial, but it did not change the legal effect of the foregoing conceded facts in the pleadings. Those facts are controlling, and an application of the law to those facts will dispose of the case.

Leaving the forfeiture clause in the note out of the question, it is conceded that the premium note was never paid, and is yet outstanding, and therefore by the terms of the policy there was never a continuance as a paid-up term policy, unless there is to be found something in the transaction which is the equivalent of payment of the note. Two things are plead and relied upon in that connection.

First, the policy provided that after the payment of three annual premiums the insured might borrow certain named sums .from the company graded as to the amount, by the number of premiums paid, pledging his policy as collateral security. The petition averred that he relied upon this means of obtaining money with which to pay his premium, and that he applied for a loan about the 30th day of May, 1895, and was refused, and that such refusal was the cause of his failure to pay the premium note. The date of the application for a loan and the refusal are both admitted in the answer. The premium note became due May first, 1895, and was not paid at maturity and such non-paymeut prevented the policy from becoming a paid-up term policy, and an effort thirty days thereafter to obtain a loan was not the equivalent of payment, especially when payment was never made and never tendered. When the application for a loan was made the policy was lapsed by its own terms, and the company was then under no obligation to make the loan.

Secondly, the claim is made in the petition that the company did not in its dealing with the insured insist upon the prompt payment of premiums and premium notes, and gave no notice and made no demand of payment of this note, as is more fully shown in the statement of facts above. While such a lenient course of dealing with the insured might, under certain circumstances, entitle him to further reasonable time to make payment, it could not serve as payment itself, or the equivalent thereof. In this case there was never any payment of the premium note and no tender of payment, and therefore the policy became null and void by its own terms, and the condition upon which it might continue as a paid-up term policy — the payment of all outstanding premium notes — was never complied with. In such a case the payment of all outstanding premium notes is a condition precedent to the policy being continued as a paid-up term policy.

The policy could not be kept alive as a continued paid-up term policy under the provision of the policy following: “If the insured shall die while said term policy is in force, the amount of foreborne premiums, with interest at sis per cent, shall be deducted from the sum insured.” The insured did not die while the policy was in force, but long after it had lapsed.

It is therefore clear from the conceded and admitted facts, that the policy was not in force at the death of the insured, and that the plaintiff below has no cause of action against the insurance company.

Judgment reversed and judgment for plaintiff in error.

Williams and Minshall, JJ., concur in the first paragraph of the syllabus, but dissent from the remainder of the syllabus and the judgment.

Minshall, J.,

dissenting. The policy sued on in this case was one with many features favorable to the insured and the beneficiary. 1. It insured the life of the hsuband for the benefit of his wife for the period of his natural life, in the sum of $1,000; 2. it was, from its execution, a maturing “endoivment policy” in favor of the insured, in a like sum payable at twenty years from its date on the continued performance of its conditions; 3. after three years’ premiums had been paid, and all notes for the same, it could be converted into “a paid-up, non-participating life policy” for an ^ amount indicated in certain tables, upon the surrender of the policy first given. Again, at its maturity as an endowment policy the insured, instead of receiving payment of $1,000, could apply it to the purchase of “an annual income for life of $95.58;” or, to the purchase of “a paid-up life policy” of $1,491, with particpation in profits on furnishing a satisfactory medical examination, or, on surrendering the policy, the company agreed that it would on August 14, 1911, pay in cash its entire reserve value and its proportion of the company’s profits combined, provided the policy should not have been previously determined by lapse or death. It also contained a provision for a “paid-up term policy” in favor of the wife, in these words: “In case of default for non-payment of premium after three years, and no legal surrender having been made, the insured having paid at maturity all notes given for premium, then this policy shall, without surrender, but upon payment of all outstanding premium notes, become a paid-up term policy, without change of terms or conditions except as to the payment of premiums and participation in profits, and continue in force for such time as one annual premium on this policy is contained in its reserve value according to the American four per cent, table of mortality, at the end of which time this contract shall cease. If the insured shall die while the said term policy is in force, the amount of “foreborne premiums” with interest at six per cent, shall be deducted from the sum insured.”

It is on this provision in the policy that the plaintiff, the wife of the insured, asked a recovery, and on which a judgment was rendered in her favor, which was affirmed by the circuit court.

It is admitted that all the conditions requisite to a paid-up term policy had, on August 15, 1894, been performed — all premiums to that time had been paid, and there were no outstanding notes; and if nothing more had been done, she would, at the date of her husband’s death, have been entitled to $1,000, less the amount of foreborne premiums, with interest at six per cent., as the insured died within the term of such paid-up policy.

This is not disputed by counsel for the company, who has argued the case with much fairness, but I think, on a mistaken construction of the terms of the policy. The claim is that this stipulation was modified by a note given for the premium due August 15, 1894 (premiums being due and payable in advance) ; and which note contained this provision:

“Said policy, including all conditions therein for surrender or continuance as a paid-up term policy, shall, without notice to any party or parties interested therein, be null and void upon failure to pay this note at maturity, with interest at eight per cent, per annum payable annually. In case this note is not paid at maturity the full amount of premium shall be considered earned as premium during its currency, and the note payable without reviving the policy or any of its provisions.”

It is admitted in the pleadings that the wife was no party to the note containing this provision; and that it was given without her knowledge or consent. That it materially varied the terms of the policy as to this particular feature, is apparent — it, in fact, blotted out the provision as to a paid-up term policy.

It is claimed, however, that the husband had the right to give such a note, without the assent of his wife, in the interest of himself and for the benefit of his wife — as the policy would have been void as to everything secured by it, except the paid-up term, unless he were permitted to give a note for the premium. The argument is maintained with much plausibility, but it is not sound. Whether it would have been to the interest of the wife, or not, to surrender the advantage of a paid-up term policy for other possible advantages that might result from giving a note is immaterial. She could not, as we shall presently see, be affected by agreements to which she was not a party, on the ground that it might be to her interest; she had the right to be consulted in the matter and determine for herself whether she would abandon an interest that had vested in her, for some cither advantage that might accrue from giving such a note.

The provision contained in the note is inconsistent with the terms of the stipulation as to a paid-up term policy; and if such stipulations may be avoided in this way, they might as well be stricken from their policies. They would be more deceptive than real. First, it will be observed, that the right to such a policy only arises upon the non-payment of premium after three years, and no surrender of the policy has been made. As it rests upon a non-payment of premium after a certain number of premiums have been paid, a subsequent failure in this regard during the term cannot affect it — the consideration for it being the premiums that had, without default, been paid; and any agreement which requires the subsequent payment of a premium or a note given for it as a condition of its existence, is derogatory to it. To say that payments are required to preserve a paid-up policy, is a solecism in language. It cannot be a paid-up policy so long as payments are required to keep it alive as such policy: Again, it will be observed that foreborne premiums are to be deducted from the amount of the policy. This could not be if their non-payment works a forfeiture. In a case of forfeiture there is nothing to deduct from. It will be further observed, that on the happening of the conditions mentioned, it is to become a paid-term policy “without change of terms or conditions except as to payment of premiums and participation in profitsthat is, it will no longer participate in profits, nor be affected by non-payment of premiums.

The policy does, however, recognize the right of the insured to give, and of the company to receive, premium notes; and provides that a failure to pay them at maturity shall render the policy void; and from this it is argued that the note with the forfeiture clause in it as to the paid-up term policy, was authorized by the policy as issued. This policy, however, must as any other agreement, be construed together and such meaning given to it as will preserve all of its terms without impairing any of them, if that can be reasonably done; and like every instrument imposing a forfeiture it should be construed against the forfeiture, for forfeitures are not favored in law. There is, however, no difficulty in construing the language conferring the right to give notes for premiums with the provision that if not paid at maturity the policy should be void, so as not to affect a paid-up term policy that had previously accrued. As already pointed out, the policy has in it many features securing interests to the insured that are separate from those of the beneficiary; hence, in accordance with settled rules of construction, the effect of giving premium notes that are not paid at maturity, must be confined to the interest of the insured in the policy, and cannot be extended to an interest in the beneficiary that has already vested, unless by the consent of the latter. Unless that be the proper construction, a paid-up term policy would be defeated any time after it accrues, by the insured giving an ordinary note for unpaid premiums; and we should have the absurdity, that, whilst an accrued paid-up term policy would not be affected by a non-payment of premium, the non-payment of a simple note given for the premium would render it void. The company did not think so, else why was a clause forfeiting the paid-up term policy inserted in the note? It was only by the unauthorized clause inserted in the note that the policy in question was to become void by non-payment- — not by any provision in the policy or any note authorized by it to be given. A promissory note in the usual form is one thing, and a note with a forfeiture clause in it, is another and different thing. It is said in the opinion of the majority that as the premium note was not paid, therefore, by the terms of the policy, there was not a continuance of the paid-up term policy. 'The fallacy consists in this: The policy was a paid-up term policy, at and before the note was given. It was such policy in favor of the wife, whether another cent was paid, or note given, for premium for a period that included the death of her husband. The failure to pay the note, had there been no forfeiture clause in it, would not have prevented it from becoming a paid-up term policy — it had become such before the note was given. It is the very essence of a paid-up term policy that it cannot be affected by any default whatever. If the insured dies within the term, the amount is to be paid the beneficiary, after deducting foreborne premiums, and not in case premiums, or notes given therefor, are paid. As then the note given and on which the company founds its defense to the action was not within the purview of the terms of the policy, and was nnauthorzied by the plaintiff, she is entitled to recover.

Where a policy of insurance is taken by one for the benefit of another, it is in the nature of an executed gift, or as said by some, is a settlement in trust for the benefit of the beneficiary; and it is settled laAv that after it becomes vested, it cannot be changed or affected Avitliout the assent of the beneficiary. Bliss Life insurance, section 339; Lemon v. Phoenix Ins. Co., 38 Conn., 294; Ricker v. Ins. Co., 27 Minn., 193; Pilcher v. Ins. Co., 33 La Ann., 322; Chapin v. Fellowes, 36 Conn., 132; Timagenis v. Ins. Co., 21 Fed. Rep., 223; 2 May on Insurance, Sect. 399 P; 2 Joyce on Insurance, Secs. 730 and 1651; Pingrey v. Insurance Co., 144 Mass., 382; Manhattan Insurance Co. v. Smith, 44 Ohio St., 163, 167; The interest of the beneficiary is so distinct from that of the person procuring the insurance, that even the acts or declarations of the latter are not evidence against the beneficiary. Insurance Co. v. Applegate, 7 Ohio St.,, 292; Insurance Co. v. Cheever, 36 Ohio St., 201. Hence, though the hsuband had the right to give a note for the premium that became due August 15, 1894, £e had not the right to stipulate therein that, if it Avas not paid at maturity, the paid-up term policy should become void. This term in the note exceeded his authority and did not therefore affect his AAife. If it had been omitted, the effect of the non-payment of the note would simply have affected his OAvn interest, and there being no authority for its insertion, the effect of the non-payment of the note on the interest of the wife is the same as if it had been omitted.

If, by the taking of a note for the premium (that is, a straight note, which he might have taken without the assent of his Avife) a paid-up policy did not then accrue, it did on the non-payment of the note, for then in the language of the policy “a default for non-payment of premium” occured. The default occnrred May 1, 1895, as the note then matured, and was not paid. And whether the time of the term should be reckoned from the date of the note, or from its maturity and non-payment, is not material; as, in either case, the husband died within the period of the term.

I therefore concur in the first and dissent from the other propositions of the syllabus, and from the reversal of the judgment.

Williams, J., concurs in this opinion.  