
    No. 1,016.
    Union Central Life Ins. Co. v. Woods.
    Life Insurance.—Deduction of Indebtedness.—Loan to Insured.—Policy Payable to Wife.—Maturity.—A policy of life insurance was made payable to the insured in a certain sum, “for the term of his natural life, or until prior maturity, for the benefit of the insured if living at” its maturity. If the insured died before the maturity of the policy, the amount named therein was payable to “his wife, if living, otherwise to the executors, administrators or assigns of the insured.” The policy matured in fifteen years. It was also a condition of the policy that “In case of the death of the insured prior to the maturity of” the policy, it being in force, the company would pay the amount therein named within sixty days after receipt of notice, “the balance of the year’s premiums, if any, and all other indebtedness, being first deducted.” The insured died before the maturity of the policy, his wife surviving him; he, at the time of his death, being indebted in a large sum to the insurance company for money borrowed.
    
      Held,, that the amount owed by him for money borrowed could not be deducted from the amount due the wife on the policy, and that she was entitled to receive the full amount of the policy, less the remainder of the year’s premiums and any other unpaid premium; that the phrase “other indebtedness” meant premiums due and unpaid for any other year than the year of the insured’s death; and that the word “maturity” referred to the maturity of the policy during the lifetime of the insured.
    
      Same.—Deducting Amount of Loan Made from Policy.—Validity of Such a Contract.—A contract providing that the amount of any loan made by the insurer to the insured should first be deducted from the amount due him or the beneficiary under the policy, is valid.
    
      Same.—Endowment Policy.—An endowment policy is one providing for the payment of the sum insured to the person insured if he live to a certain time, or, if he die before that time, to some other person nominated in such policy.
    
      Same.—Title to Endowment Policy.—The title of an endowment policy, payable to a husband, if living at its maturity, or to his wife, if he die before such maturity, does not vest in her absolutely upon its execution, nor until his death, during the period before its maturity ; and she can not be divested of such contingent interest without her consent. He also has a contingent interest by which he may divest himself of all his rights under the policy, which will bind him if he survive its maturity.
    
      
      Same.—Construction of Policy of Indemnity.—Where indemnity is the object for which the insurance is effected, the contract must be liberally construed to that end; and if the language of the policy is equally susceptible of two interpretations, the one giving greater indemnity and sustaining the claim will be adopted.
    
      Same.—Assignment of Policy.—Law of Place.—The assignment of a policy of life insurance in this State, like any chose in action, is governed by the law of this State, though- the policy is issued and payable in another State.
    
      Same.—Assignment by Married Woman as Surety for Ser Susband.—The assignment by a married woman of a policy of life insurance within this State, issued on the life of her husband, to secure a debt owed by him, is void, although such policy was issued and payable in a State where a contract of suretyship, if entered into there, would have been valid.
    
      Same.—Assignment of Policy.-—Chattel Mortgage.—An assignment of a life insurance policy “and all sum or sumsof money that may become due by virtue thereof,” can not be construed as a chattel mortgage placed upon such sum or sums of money; and if executed by a married woman in this State to secure her husband’s debt, it is void, al1 though such sum or sums of money are payable in a State where a married woman may execute a chattel mortgage to secure his debt.
    
      Same.—-Waiver of Forfeiture.— Collection by Suit of Premiums Past Due. —If an insurance company sue upon and collect by execution the amount of a note given for the premium of a policy, instead of insisting upon a forfeiture of the policy, it will be deemed to have waived its right to insist upon the forfeiture as a defense.
    From the Knox Circuit Court.
    
      C. L. Holstein, 0. E. Barrett, G. G. Reiley, W. M. ' Ramsey, L. Maxwell, R. Ramsey and M. R. Waite, for appellant.
    
      M. W. Fields, L. G. Embree and J. W. Ewing, for appellee.
   Reinhabd, J.

The appellee sued the appellant in the Gibson Circuit Court to recover the proceeds of an insurance policy on the life of her deceased husband, of which policy she was the alleged beneficiary. The venue of the cause was changed to the Knox Circuit Court. The appellant filed an answer in eleven paragraphs, to each of which a demurrer was sustained, and upon appellant’s refusal to plead further, judgment was rendered in favor -of the appellee for $2,994.78. The ruling of the court upon the demurrer is the only error relied upon.

Some of the paragraphs of the answer are in the nature of set-offs, based upon a provision in the policy which permits the appellant to deduct certain indebtedness from the insurance money. The provision just referred to reads as follows:

“In case of the death of the insured prior to the maturity of this policy, the same being in force, the company will pay the amount herein named within sixty days after receipt of notice and satisfactory proof of death, the balance of the year’s premium, if any, and all other indebtedness being first deducted.”

It is alleged in the paragraphs referred to that at the time of death of ^Jre insured, Isaac Woods, he was indebted to the company for borrowed money in an amount -equalling that of the insurance, and it is asked that this ■debt be set off against and deducted fróm the amount of the insurance designated in the policy.

The policy provides that the company, in consideration of “the annual payment of'the sum of $161.04 at the home office of the company, on or before the 19th ■day of October, at noon, in every year during the term of fifteen years, does insure the life of Isaac Woods, of Princeton, in the county of Gibson, State of Indiana, in the sum of $3,000 for the term of his natural life, or until prior maturity, for the benefit of the insured if living at the maturity of this policy. In case of the death of the insured prior to such maturity, said amount of insurance shall be payable to Mary E. Woods, his wife, if living, otherwise to the executors, administrators, or assigns of the insured.”

Whether the appellant was entitled to set off the amount loaned, the insured in his lifetime depends upon the terms of the contract and the meaning of the language “all other indebtedness” therein contained.

The facts pleaded show that the loan of $2,300 by the company to the insured was not made until some time after the issuing of the policy, and that it was effected partly to enable the insured to pay the premiums and to revive the policy which he had suffered to lapse, when the loan was made, though the greater portion was not for that purpose.

We see no valid reason why an insurance company and an applicant for life insurance may not enter into a binding agreement to the effect that the company will undertake to loan the insured a sum of money as well as to insure his life, and that the money loaned is to be deducted from the proceeds of the pq^cy at the time of the maturity thereof. Such a contract is not in violation of the principle of indemnity upon which insurance is generally based, for the money may be needed for the payment of premiums and other purposes to enable the insured to secure the full benefit of such insurance. Hence, if the contract in suit had provided in terms for a loan of money, and a repayment of the same out of the proceeds of the insurance, we think such a provision would be binding upon all parties, although the policy be written for the sole benefit of the wife. It is true that in ordinary life insurance, where the wife of the insured is the beneficiary, the title of the policy vests in her immediately upon execution and delivery thereof, and no arrangement between the company and the insured affecting the interest of the wife in the insurance money, which is not provided for by the terms of the policy itself, will be binding uponher. Harley, Admr., v. Heist, 86 Ind. 196; Pence, Admr., v. Makepeace, 65 Ind. 345; Bliss Life Ins. (2d ed.), p. 517, section 318.

We think it is otherwise, however, where the policy expressly provides for a restriction or limitation of the wife’s interest, or makes it depend upon a future contingency, such as an arrangement for a loan of money from the company to the husband and a repayment of the same out of the proceeds of the policy, when due. Whatever may be considered the true consideration underlying the insurance, the wife can not be said to possess a greater interest in the policy than is given her by the terms thereof. When she acquires the title to the •same, upon execution and delivery, she takes such title burdened with all its conditions and limitations. She can receive no more insurance, in other words, than the insured has contracted for in her behalf. If the insured has, therefore, stipulated for a loan to himself, to be paid out of the insurance money when it becomes due, by an acceptance of the policy she assents to the deduction of such loan from such proceeds, and she can not afterwards be heard to deny the company’s right to make such deduction.

It is not claimed, however, in the present case, that the policy in terms provides for a loan of money to the insured and the repayment of the same out of the insurance money, nor is there, in point of fact, such a stipulation. What the appellant does contend is that the provision in the policy permitting the company to deduct from the amount of the insurance money the balance of the year’s premiums, "and all other indebtedness,” is broad enough to confer upon the company the right to make such a loan to the insured and secure itself by withholding an equal amount from the proceeds of the policy at maturity.

It must be conceded, we think, that if the policy was one the ownership of which was and remained in the insured to the time of his death, he was at liberty to' use and dispose of the same in any manner that seemed proper to him. Pie could pledge it as security for his individual debts, and could in various ways incumber or divest his interest therein at pleasure. He could contract with the company for a loan of money, and would have the right to assign the policy to the company to secure the loan. But even if he did not make such an assignment, we are inclined to the view that if the policy was legally his property, or the title was such that he could pledge or assign the policy, he could contract for any legitimate indebtedness to the company subsequently to the execution of the policy, and that the provision to deduct “all other indebtedness” would entitle such company to deduct such loan from the insurance, as in that case it is easily seen that the parties could be held to have contemplated just such an arrangement, and thus provided for it in the contract of insurance.

The policy contains the statement that it is written “for the benefit of the insured, if living at the maturity” thereof. The word maturity here obviously refers to the maturing of the policy during the lifetime of the insured. It provides that if the premiums are paid during the term of fifteen years, and other conditions complied with, and the insured is then living, the insurance 'shall be paid to Isaac Woods. If, however, the latter should die during the fifteen years, such insurance was to become payable to Mary E. Woods, his wife, if living, otherwise to the executors, administrators or assigns of the insured.

It is insisted on behalf of the appellant that the policy was one of endowment. “An endowment policy is an insurance into which enters the element of life. In one respect it is a contract payable in the event of a continuance -of life; in another, in the event of death before the period specified.” Anderson’s Law Dic., p. 401. Endowment insurance provides for the payment of the sum insured to the person insured if he live to a certain time, or, if he die before that time, to some other person nominated in the policy. Bliss on Life Ins., 2 ed., p. 6, section 6.

Such a policy is in many of its characteristics, respecting the rights of the parties under it, different from an ordinary life policy procured by a husband for the sole benefit of his wife. In a policy of the kind last mentioned the wife acquires the absolute title upon its execution, and she becomes its owner the same as if it were a note or other chose in action payable to her, and hence no act of her husband or the insurance company, without her concurrence or assent, can deprive her of such title to or interest in the policy, if its conditions have been complied with; while if the policy be one of endowment, payable to the husband, if living at the end of the endowment period, or to the wife, if the insured should die during such period, and she be then living, the title to the policy does not vest absolutely in the wife upon the execution of the policy, nor, indeed, until the husband’s death, during such period, and the husband retains at least a qualified interest in and title to the policy during his lifetime.

Assuming that the policy in suit is one of endowment, payable ,to the husband if living at its maturity, and to the wife in case of his death during the period of endowment, the question arises: In whom was the title to the policy at the time of its execution and delivery? The appellant’s position is that in such a case the wife acquires no interest in the policy whatever unless or until the husband dies during the period of the endowment, and that the husband, as the insured and primary beneficiary, has the absolute control of the policy as long as he lives and may dispose of the same as he may deem proper. On the other hand, the appellee contends that as soon as the policy was executed and delivered she acquired such an interest in the same as prevented the insured from transferring, incumbering or in any manner affecting the insurance adversely to her, and that inasmuch as the policy was not subject to transfer or incumbrance of any kind by the husband, the “indebtedness" spoken of in the policy could not have referred to a loan, as the parties can not be presumed to have contemplated a restriction of the contractual rights of the wife in the absence of an express stipulation to that effect.

The question is one of importance, and not free from difficulty. We have given it a careful consideration, and after an examination of the authorities cited by counsel, and such others as we were able to find, we have been led to conclude that the law upon this question is with the appellee. In a certain sense, it is true, she may be said to have no interest in the policy until her husband -s death, for it is upon this contingency that her interest depends. But in another sense she does have an interest in the policy from the time of its delivery, although it be only a contingent interest, and one which may or may not become absolute. Of this interest, contingent though it may be, she can not be divested without her consent. Had the insured lived until after the maturity of the policy, a disposition of or incumbrance upon the policy or the insurance might have been valid as against him, but he had neither the right nor the power to divest his wife of that interest with which by his previous act the law had invested her. When the policy was executed and delivered, its title vested not in Isaac Woods alone, but in him and the appellee both. Each had only a conditional title, depending upon the contingencies provided for in the contract of insurance. The title of each was in the whole policy, and so remained until after the time the loan was made to Isaac Woods by the appellant, though it is also true that under the terms of the policy the interest of the appellee might, in a certain contingency, have become divested subsequently, upon the happening of the event mentioned in the policy. Continental, etc., Life Ins. Co. v. Palmer, 42 Conn. 60, 19 Am. R. 350.

In the case of Fowler v. Butterly, 78 N. Y. 68, the policy was on the life of the insured “until the 6th day of September, 1882, or until his decease, in case of his death before that time.” In the latter event the proceeds of the policy were to be paid to the wife of the insured, if living, otherwise to his daughter. By the terms of the policy the insured would have been entitled to receive the money, had he lived until after its maturity, but in case of his death during the endowment period, the insurance was to go to his wife, if living.

The ipsured having died during the endowment period, suit was brought upon the policy. It was shown that the insured, in life, had assigned the policy, in which assignment the wife had attempted to join. The assignment by her was held void as not having been duly executed. The assignment by the husband was held not to convey the title, the wife having, upon the delivery of the policy, acquired a direct interest in the same, which could be transferred only by an assignment duly executed. These cases, we think, are in point, and they meet with our approval. The authorities relied upon by appellant’s counsel do not support their position.

The case of New York Mutual Life Ins. Co. v. Armstrong, 117 U. S. 591, is certainly far from it. In that case the insurance was payable to the assured or his assigns, on the 8th day of December, 1897; or, if he should die before that time, to his legal representatives. It was held that an assignment of the policy by the insured passed the title to the assignee, the insured having died in 1878. The manifest purpose of such insurance could be for the benefit of the insured only. It was a chose in action, owned by him, and which he had a right to alienate at pleasure, under proper, circumstances.

The text quoted by counsel for appellant, from May on Insurance, section 390, does not support their contention, although it would seem, at first blush, to do so. That author says, in speaking of an endowment policy such as we assume the one in the present case to be: “The wife’s rights do not attach till the death of the husband, within the time limited.” The “rights” here spoken of, have reference, we think, to her rights in the money—the proceeds of the policy. This is true in a sense, and, in a similar sense, the husband’s rights do not attach until the period of endowment has expired. Both the context and cases cited by the author convince us that the contention of the appellee’s counsel as to the application of the sentence that the interest does not attach till the happening of the event provided for is the correct one. At 'all events, the text, as interpreted by appellant’s counsel, does not commend itself to our approval, and is not supported by authority. We are of opinion that none of the authorities relied upon sustain the appellant upon this point, but if they did, we should nevertheless be inclined to follow the cases holding the opposite view, as they are, it seems to us, grounded upon sound principles and sustained by reason and judgment. •

If, therefore, Isaac Woods had no'power or right to dispose of the policy in suit, by assignment or pledge, it can not be held that the parties to the original contract of insurance could have contemplated a loan from the company to said Woods upon the faith and credit of the policy.

The only provision under which the right to the'set-off is claimed, as we have seen, is the one which allows the company to deduct from the proceeds of the policy “the balance of the year’s premium, if any, and all other indebtedness to the company.” In giving construction to contracts containing ambiguous language, the courts will look to the situation and acts of the parties, and the end sought to be accomplished. The application for the insurance discloses that the name of the person in whose favor the insurance was to be effected was Mary E. Woods, and that she was the wife of the applicant.

The policy shows that she was a beneficiary, and that in case of Isaac Woods’ death during the period of endowment she alone was entitled to the insurance. We think it manifest from these facts, that the purpose of the insurance was indemnity to the wife in case she should outlive the husband during the fifteen years.

To hold that under these circumstances the parties intended by their contract to provide for a loan to Isaac Woods would be doing violence to the evident purpose of the insurance. Unquestionably the parties must be deemed to have meant something by the insertion of the provision permitting the deduction of “all other indebtedness.” One class of indebtedness that was to be deducted was clearly expressed in the contract, viz., “the balance of the year’s premium.” What did the parties intend should be deducted in addition to the balance of the year’t premium left unpaid? It can certainly not be true th. the parties contemplated any other indebtedness than at connected with the subject of insurance with reference to which they were contracting. If the term was to include all indebtedness, then the appellant might with propriety, have purchased a note or other chose in' action which the insured owed some third party and set it off against the policy. The indebtedness that must naturally have been anticipated between the insurer and insured was such as arose from the premiums upon which the insurance was based, and it is our opinion that this is the kind of indebtedness meant by the term employed in the policy. This does not necessarily mean cash premiums which had become due. But the parties had a right to arrange for the payment of the premiums by note or notes, and as the giving and acceptance of such would continue the policy in force notwithstanding the indebtedness for such premiums, it is easy to conceive how the insured might be indebted to the company for such premiums at the time of his death or .the maturity of the policy. It seems to us that this construction is the more rational one, and clearly tends to carry out the evident purpose of the contract, while it fully secures the appellant in all its rights within the letter and spirit of the same. Moreover, in adopting this construction, we do no more than to give effect to the rule so universally recognized and followed by the courts of this country, that where indemnity is the object for which the insurance is effected the contract must be liberally construed to that end, and when the language of the policy is equally susceptible of two interpretations, the one giving greater indemnity and sustaining the claim will be adopted. May Ins. (3d ed.), sections 174, 175.

Our conclusion upon this question is that the court correctly sustained the demurrer to those answers which attempted to set off the unpaid balance of the judgment held by the appellant against Isaac Woods, against the appellee’s claim on the policy in suit.

Other paragraphs of the answer are based upon the alleged assignment of the policy by Isaac Woods and his wife, Mary E. Woods, the appellee, to the appellant company, to secure the debt of Isaac Woods to the company.

For the reasons heretofore stated, we think the assignment of Isaac Woods was void; and as to the assignment of the appellee, she being a married woman, and the assignment being to secure a debt of her husband, it was void also. R. S. 1894, section 6964.

It is, however, contended on behalf of the appellant that under the averments of the eleventh paragraph of the answer the assignment must be held sufficient “upon the theory that the policy being an Ohio contract, and the assignment being a mere incident to the policy, both the policy and assignment are to be construed according to the laws of Ohio; and, further, that the assignment is a chattel mortgage of the insurance money, the situs of •which is in Cincinnati, Ohio, and that.the assignment is therefore to be construed by the laws of Ohio, and that by the laws of that State the assignment is valid.”

It is true that the policy itself is an Ohio contract and governed by the laws of that State, but this rule has no application to the contract of assignment which, though made by indorsement on the policy, is yet a separate and distinct contract from that of the policy. An insurance policy is a chose in action, for a chose in action is an instrument upon which may be founded a right of proceeding in a court to procure the payment of money. Vawter v. Griffin, 40 Ind. 593 (601).

The policy being a chose in action, it may be assigned in the same manner as a note, bill of exchange or account. The assignment transfers the ownership or interest of the assignor. In the case of a note, or bill of exchange governed by the law merchant, the assignor, in addition to transferring his interest in the debt, impliedly obligates himself that the instrument is genuine, that he is the owner of the same, and that the maker will pay it when due. An assignment of a policy, like an assignment of an open account, does nothing more than to transfer the property. The assignment of a chose in action is governed by tbe law of the place where the assignment is made. Rose v. Park Bank, 20 Ind. 94; Rose v. President, etc., 15 Ind. 292.

Under the rules of the common law, the assignment or transfer of a chose in action was forbidden as in violation of the law against maintenance and champerty, and because the vendor could not sell a thing he did not then really have but which he only expected to obtain at some future time. Co. Lit., 266a.

*But this ancient rule has long since been disregarded in the courts of equity, and not only dioses in action, but mere possibilities, expectancies and things in esse may be assigned, and such assignments will be enforced in equity, and the assignee will acquire the property by the assignment. 1 Am. and Eng. Encyc. of Law, 827.

Our statute recognizes the right of assignment of any claim or chose in action, not only in writing, but by simple delivery of the thing assigned, but unless the assignment is by indorsement in writing, the assignor must be made a party defendant in a suit by the assignee upon the claim. R. S. 1894, section 277; Lynam v. King, 9 Ind. 3; Cole v. Merchants’ Bank, etc., 60 Ind. 350; Strong v. Downing, 34 Ind. 300.

We do not think that in this State an assignment of a policy of insurance is governed by any rule of law different from those obtaining in cases of assignment of choses in action generally. The validity of any contract must depend upon the law of the place where it is made. If the appellant has any assignment it must be by reason of the contract by which the same was effected. That contract was made in Indiana and not in Ohio.

The case of Lee v. Abdy, 17 L. R., Q. B. Div., 309, is precisely analogous. In that case the suit was by the assignee of a life policy issued by an English company. The assignment was made at Gape Colony, where the assignor and assignee both resided at the time. By the laws of Cape Colony the assignment was void, though valid under the law of the place where the policy was issued. It was held that the law of Cape Colony governed, as the contract of assignment was made there, and the assignment was, therefore, adjudged to be void.

To the.same effect is Prentice v. Steele, 4 Montreal L. R. (Superior Ct.) 319, where it was expressly decided that the assignment of a life policy, which is a chose in action, is governed by the law of tho place where it (the assignment) was made, and not by the law of the place where the policy was issued or the insurance is payable. And to the same effect is Miller v. Campbell, (N. Y. App.) 35 N. E. Rep. 651, where a Massachusetts corporation had issued an endowment policy insuring a husband’s life for fifteen years, payable to the wife, if living, in case of the husband’s death during the endowment period, which was assigned by the husband and wife, who resided in New York. It was held that the laws of New York governed the validity of the assignment.

We hold, therefore, that the law of Indiana controls the assignment in suit, and by that law the assignment is void.

It is next contended, as we have seen, that the assignment of the policy constitutes a chattel mortgage for the security of Isaac Wood’s debt to the company, and that .as the chattel which was mortgaged, i. e. the insurance money, was in the State of Ohio, where a married woman may become surety for her husband, the law of Ohio must govern, and the assignment, or mortgage, must be held valid. The contention is based upon the clause in the assignment which undertakes to set over the policy •"and all sum or sums of money that may become due by virtue thereof,” etc.

Counsel for appellant insist that "chattel mortgages are governed by the same rules of interpretation as totlieir validity, nature, and obligation as contracts relating to and affecting the title of real estate,” and that the appellant not having sought this forum to enforce the contract, but having been brought here by the appellee, in invitum, “the appellee will not be allowed to use the courts of this State to enforce the policy against the defendant, and to repudiate her mortgage of that policy to the defendant.”

If we should concede that the attempted assignment of the policy amounts to a mortgage on personal property in Ohio, and that the same law must be applied as if it were a mortgage on land in Ohio, and that the appellant is entitled to have the controversy settled by the interpretation of the courts of that jurisdiction, we apprehend the appellant would fare no better, for in a very recent case decided by the Supreme Court of that State it was held that a mortgage executed in Indiana by a married woman domiciled in this State, on real estate in Ohio, to secure an obligation as surety to be performed in Indiana, where she is without capacity to make such a contract, is void in Ohio -as well as in Indiana. Evans v. Beaver, 33 N. E. Rep. 643.

But we need not decide what would be the proper rule if the transaction in question were a mortgage. It is not a mortgage, and the words quoted above do not stamp it with that character. In the written transfer itself, it is denominated an “assignment” four times, and what it undertakes to do is to “assign, set over and transfer” the policy. The appellee and her husband owned a chose in action, represented by the policy. This chose in action was for money to become due in Ohio. We apprehend that if a person residing in Indiana, who holds a note or claim against a citizen or corporation in Ohio, and attempts, by indorsement, to “assign, set over and transfer” such note or claim “and all sums of money that may become due by virtue thereof,” it would hardly be claimed that this was a mortgage on the money to become due in Ohio, and that although the transfer of the note might be void so as to retain the legal title of the same in the assignor, yet that an interest in the money in Ohio would be conveyed to the .assignee. We regard the position of appellant’s counsel (that the attempted transfer of the policy, though void as an assignment, is still valid as a chattel mortgage) as utterly untenable. It is the policy that constitutes the chose in action attempted to be transferred, and the situs of the policy is the domicile of the owner, and by the laws of the place where the transfer was made or attempted to be made, the contract must be controlled. Crouse v. Phœnix Ins. Co., 14 Atl. Rep. 82.

The third and last defense set up by the appellant is contained in the remaining paragraphs of the answer, and presents the question whether the company may, after failure of the insured to pay the premium, enforce its collection, and also insist upon a forfeiture of the policy, when the policy provides for a forfeiture upon failure to pay such premiums when due and that the default in payment shall entitle the company to treat the premium as earned.

It is disclosed by the pleadings, and conceded in argument by appellant’s counsel, that the premium note, for the nonpayment of which the forfeiture is claimed, was afterwards merged into a judgment taken by the company against Isaac Woods, in which other notes due the company for a loan were also involved, and that more than enough of the judgment to cover the note in question was subsequently made out of the said Isaac Woods’ property which had been mortgaged to secure the same' and said other notes, although it is averred in some of the paragraphs, that the money collected was applied by the company to the payment of the loan.

The parties doubtless had a right, by the insurance contract, to provide for a forfeiture of the policy by reason of failure to pay the premiums or any of them. The appellant had the right to insist upon this condition in the policy, and to claim a forfeiture upon failure of the insured to comply with the same. But it is also the settled law that the right to insist upon a forfeiture may be waived by the insurer, and that such waiver may be manifested through the conduct, as well as through the words, of thejnsurer. Phenix Ins. Co., etc., v. Tomlinson, 125 Ind. 84.

Forfeitures are not favored, and the law will be strictly construed to defeat them, although they will be upheld if the conditions underlying them are strictly complied with by the insurance company.

In the present case, the company had received the premium,—had enforced its collection by suit, when the insured died, for it is not insisted that the appellant had the right to apply the money realized on the foreclosure proceedings to the extinguishment of the $2,300 loan, which was not yet due, in preference to the premium debt, then past due. The failure to declare a forfeiture was not a waiver, as the policy provides that upon failure of the insured to comply with any condition in the policy, the same was to become null and void, without any action on the part of the company, or notice to the insured or beneficiary. But we are of opinion that the enforced collection of the premium after forfeiture, or what would have been a forfeiture, constituted a waiver, and this is true, we think, notwithstanding any provision in the policy that the premium thus collected should be considered as having been earned. Michigan Mut. Life Ins. Co. v. Custer, 128 Ind. 25; Phenix Ins. Co. v. Tomlinson, supra; Mutual Life Ins. Co. v. French, 30 Ohio St. 240.

Filed April 20, 1894.

From what we have said, it must be apparent that our views of the law coincide throughout with those of the court below, and that, in our judgment, no error was committed in sustaining the demurrer to the several paragraphs of the answer.

Judgment affirmed.

On Petition fob a Reheabing.

Reinhabd, J.

In their brief upon the petition for a rehearing, counsel for appellant say:

“The answers of appellant to the appellee’s complaint show:—

“1. The issuing of the policy in suit, a partial payment of the premium necessary to carry it in force and the execution of notes payable in installments for the balance of the year’s premium.

“2. That the policy in suit lapsed for the nonpayment of premiums, the decedent failing to pay the notes given for the deferred payments of the first year’s premium.

“3. That after the policy in suit had been forfeited, the appellee and her husband procured a loan of $2,300, the appellant believing, as it had the right to believe, that if Isaac Woods lived he would keep up his insurance and pay his debts, and if he died that the insurance money would pay the debt, the appellant having the right to deduct the indebtedness from the policy out of this loan of $2,300; the answers show the premiums in arrears on the policy in suit were paid and the forfeiture waived and new life put in the policy.

“This is a fair statement of the issues raised upon the ■question of the construction of the policy, 'all other indebtedness being first deducted,’ etc. The provision last above quoted is not meaningless; it is not ambiguous, and we think clearly means that the indebtedness owing, growing out of or connected with the policy in suit, is to be first deducted before the ■ appellee has any right of recovery.”

Granting that the above is a fair statement of what was involved in the transaction between the parties in connection with the contract of insurance, the conclusion that the contract authorized a deduction of the amount of the loan does not follow. It is true that some insurance companies loan money, but it does not, therefore, follow that when any insurance company issues a policy in which it is provided that out of the proceeds of the policy all other indebtedness, except that specifically mentioned, shall be deducted, that the parties contemplated a loan by the insurance company to the insured, and that this was one of the items to be deducted. The parties must beheld to have contemplated only what was. fairly within the scope of their present negotiations. 'Could it be justly maintained that if the company had, subsequently to the issuing of the policy, sold the insured a farm or a house and lot that such an item of indebtedness was contemplated by the parties? Possibly such an item might be properly deducted if the transaction were confined to the original contracting parties— the company and the insured. But when a third party, who has a right or interest in the policy, which vested before the indebtedness accrued, comes in and asserts a claim to the insurance money, can it be held that she took the policy subject to a burden that was not fairly within the contemplation of the parties to the contract when it was made? We think not.

But it is urged that the policy had been forfeited, that new life was given it only by virtue of the loan, and that if this had not been made, the appellee would not have had any policy at all. This may be conceded. And yet the making of the loan did not create a new contract of insurance between the parties. It only revived what rights either party or all parties had after the original contract had been entered into. The loan did not impress the original contract with any new features whatever, any more than if the policy had been revived without the making of the loan, but by the simple payment and acceptance of the premium. It will not do to say that the effect of our ruling will be to “destroy the rights of many people and lay down a dangerous principle of law,” as counsel urge in their brief. It is an easy matter for an insurance company, when it issues a policy, to insert a provision that any money loaned the insured shall be deducted from the proceeds of the policy. If the contract is between the company and the insured alone, the former can also secure itself in any loan it may make in future by an assignment of the policy. It is always a safe rule to hold the parties to their contract, interpreted in the light of the surrounding circumstances and the position of the parties. The danger lies in courts suffering themselves, out of mere consideration that a hardship might be entailed upon a party in a particular case, to give constructions to contracts un-warranted by the terms thereof, and not within the scope of the manifest intention of the parties. It is useless to attempt to invoke the legal principle here that where a married woman receives a benefit from her contract she can not accept such benefit and reject the burden of the contract, or disavow it entirely. The appellee did not procure any loan from the appellant. The fact that she signed the notes given for the loan does not prove that she obtained the money, nor indeed does it make her liable thereon, if, as in the present case, she was only surety for her husband. All the transactions connected with the loan occurred after the making of the original contract of insurance, and her vested interest in the same could not be defeated by the fact that her husband subsequently obtained a loan from the company for which he attempted to pledge the policy.

It is now insisted that we were in error in assuming that the money realized from the sale of the real estate was applied to the extinguishment of the premium notes then due from the insured in preference to the payment of the loan; and counsel state that there is nothing in the pleadings to warrant such a conclusion. Counsel for appellant, in their original briefs, discussed the alleged errors of the rulings of the court upon the several paragraphs of the answer together, and did not direct our attention to the sufficiency of the several paragraphs in detail. In one of the answers the pleader sets forth the substance of the judgment and decree of foreclosure of the mortgages of the real estate. It appears from this judgment and decree that the court found that certain sums of money, to secure which the mortgages were executed, were then due, and others would subsequently become due; that the amount then due was $352.51, upon certain notes not specified, together with $178.62 attorney’s fees; that there were to become due thereafter on certain notes the following sums, to wit:

October 30,1889................$ 161.04

October 30,1890................ 161.04

January 1,1890................ 184.00

January 1,1891................ 184.00

January 1,1892................ 184.00

March 31, 1892................2,346.00

It was then decreed that the land be sold to satisfy the mortgages; that the proceeds be applied, first, to the payment of the costs accrued and accruing; then to the amount due, to wit, the $352.51 and the attorney’s fee of $178.62, making in all $531.13, and the interest thereon, and lastly to'the amount not yet due. Of course, we can only presume that these payments were applied according to the decree of the court, whether such decree was correctly or incorrectly made.

It is further shown in this paragraph of the answer, that the property sold for $587.28, and that after payment of costs the sheriff paid the appellant $534.66, which must have been applied, first, to the payment of said $531.13 then due, according to the order of the court in the foreclosure proceedings, and which amount represented what was due on the premium notes. With this payment, as we held in our former opinion, the policy was revived, and if the policy remained in force after the payment of the third premium note (which was included in the payment of the $531.13), it continued to remain in force until the death of the insured as a paid-up term policy under the stipulations of the contract of insurance. It is now contended that the amount of forborne premiums remaining unpaid at the time of the death of the insured, should have been deducted from the face of the policy. It is true the policy provides for such deduction, but there is no answer raising this question, nor was there any motion to so modify the judgment as to make it conform to the contract in this respect. The question can not now be presented for the first time.

Appellant’s learned counsel further contend, however, that the assignment of the policy by the wife was not an act of suretyship, hut that “her signature merely had the effect of making her a party to an agreement that if the insurance company would loan her husband $2,300, he would take out insurance upon his life to secure the loan, and make her a gift of whatever money might be payable under the contract of insurance after the lien had been discharged.”

We do not so construe the contract for the loan. The reviver of the insurance policy was not a new contract of insurance. If the appellee’s husband had borrowed the $2,300 from a third person and had applied a portion of it to the payment of premiums so as to revive the policy, and the appellee had attempted to assign the policy to the person who loaned her husband the money, as a security for the loan, no one would certainly contend that the assignment was not an act of suretyship by the wife in behalf of her husband. There is no difference in principle. The fact that the wife in some way receives a benefit from the transaction will not render her liable, if she is in reality a surety. A husband may borrow money and give his wife as surety, but her act in becoming surety will not bind her, even though it is shown that the husband subsequently made her a present of the money.

Here it is not contended that the wife was liable for any portion of the debt which her husband owed the appellant for insurance, nor that the money was borrowed for the benefit of her own estate. Had the husband lived till after the expiration of the fifteen years for which the policy was written, he would have received the whole amount of the insurance. The cases relied upon by appellant’s counsel do not support their contention. Vogel v. Leichner, 102 Ind. 55; Orr v. White, 106 Ind. 341; Thacker v. Thacker, 125 Ind. 489.

Petition overruled.

Filed Dec. 12, 1894.

Dissenting Opinion.

Davis, C. J.

I am not able to agree with the major-, ity of the court in this case. Under the terms of the policy, and on account of the failure to pay the first year’s annual premium, the policy became forfeited. The loan was thereupon made, by the terms of which a part of the money borrowed was applied to the payment of the annual premiums due and to become due, and in consideration of which the forfeiture of the policy was waived by the company. The policy expressly provides for the payment of the amount therein named, “the balance of the year’s premium, if any, and all other indebtedness to the company being first deducted.”

The rights of Mr. Woods are subject to all the terms and conditions of the contract. It is the reasonable and fair presumption that the loan was made with reference to the provision above quoted. Justice and equity, under the circumstances disclosed in the answer, would seem to dictate that the balance only should be- paid to her after deducting the indebtedness. If the loan was not made in good faith, in the due, ordinary and regular course of business, a different question would be presented. It is a matter of common knowledge, of which courts will take judicial notice, that insurance companies make a business of loaning money.

The words, “all other indebtedness,” referred to something other than unpaid premiums, in my opinion. In the line of legitimate business, I do not know what indebtedness could have been in contemplation of the parties aside from premiums and loans. The company certainly had the right to provide for the deduction of any unpaid premiums from the amount of the insurance, and I fail to see why such contract should not be made for the deduction of any loan which might thereafter be made to the insured by the company, in the usual and ordinary course of business.

The hasty observations I have made are intended to apply only to the contract in question in the light of the facts and circumstances of this particular case.

Filed April 20, 1894.  