Knickerbocker Life Ins. Co. v. Pendleton, 112 U.S. 696 (1885)
U.S. Supreme CourtKnickerbocker Life Ins. Co. v. Pendleton, 112 U.S. 696 (1885)
Knickerbocker Life Insurance Company v. Pendleton
Argued November 11, 1884
Decided January 5, 1885
112 U.S. 696
Policy of life insurance being conditioned to be void if the annual premium, or any obligation given in payment thereof, should not be paid at maturity, and the annual premium being paid by a foreign bill drawn by the party insured, with a condition that if not paid at maturity the policy should be void. Held that the forfeiture was incurred by nonpayment of the bill, on presentment at maturity, without protest for nonpayment, although protest might be necessary to fix the liability of the drawer. Semble if it had been the bill of a stranger, protest would have been necessary for the forfeiture also.
Presentment and nonacceptance of the bill before maturity, without protest, did not dispense with presentment for payment in order to produce the forfeiture.
Want of funds in the hands of the drawee was no excuse for not presenting the bill if the drawer had reasonable expectation to believe that it would be accepted and paid.
Preliminary proof of death not required if the insurer, on being notified thereof, denies his liability altogether and declares that the insurance will not be paid.
This action was brought in the First Circuit Court of Shelby County, Tennessee, by the defendants in error, Pleasant H. Pendleton and others, against the plaintiff in error, the Knickerbocker Life Insurance Company, to recover the amount of a policy of life insurance on the life of Samuel H. Pendleton. After declaration filed, the case was removed into the circuit court of the United States and the defendant then pleaded no indebtedness, failure to pay the stipulated annual premium, failure to pay a draft given for premium, and failure to give notice and proof of death. A replication put the cause at issue, and it was tried at Memphis in November term, 1880, and a verdict rendered for the plaintiff. Judgment being entered upon this verdict, the case is brought here by writ of error. The matters for our consideration are exhibited in a bill of exceptions taken at the trial, from which it appears that the plaintiff introduced in evidence the policy sued on, dated July 14, 1870, issued for the benefit of the plaintiffs, as the children of Samuel H. Pendleton, for the sum of $10,000 on his life, in consideration of $364.60 then paid, and of the annual premium of a like sum to be paid on or before the 14th day of July in every year during the continuance of the policy. The company agreed to pay the sum insured within three months after due notice and satisfactory proof of the death of the person whose life was insured, but the policy contained the following condition, to-wit:
"The omission to pay the said annual premium on or before twelve o'clock, noon on the day or days above designated for the payment thereof, or failure to pay at maturity any note, obligation, or indebtedness (other than the annual credit or loan) for premium or interest hereon shall then and thereafter cause this policy to be void, without notice to any party or parties interested herein."
The plaintiffs next introduced in evidence the renewal receipt, in the words and figures following, viz.,
"Mississippi Valley Branch Office of the Knickerbocker Life Insurance Company at Memphis, Tenn. Principal office, 161 Broadway, N.Y. Renewal No. 94,597. "
"NEW YORK, July 14, 1871"
"Received of Pleasant H. Pendleton, &c., three hundred & sixty-four 65-100 dollars, being the premium on policy No. 2,346, which is hereby continued in force until the fourteenth day of July, 1872 at noon."
"Not valid until countersigned by the managers of the Mississippi Valley Branch office at Memphis, Tenn."
"ERASTUS LYMAN, President"
"GEO. F. GRIFFIN, Secretary"
"Countersigned at Memphis this ___ day of ___ 18__."
"45,432] GREENE & LUCAS, Managers"
The plaintiff then introduced evidence tending to show that Samuel H. Pendleton died at his home, near Auburn, Arkansas, on the 26th day of March, 1872; that his children, the plaintiffs, were then under age, and that their uncles, A. O. Douglass and W. F. Douglass, on their behalf, wrote from Auburn to Greene & Lucas, the agents of the defendants at Memphis, the former on the 29th of March and the latter on the 2d of April, 1872, giving them notice of Pendleton's death. A. O. Douglass in his letter requested Greene & Lucas to advise him what steps were necessary to be taken in the matter of the policy, and Greene & Lucas at once answered by letter dated April 2d that the policy became forfeited on the 14th of October, 1871, by failure to pay the premium, explaining that when the premium became due, they took the draft of Dr. S. H. Pendleton on Moses Greenwood & Son, of New Orleans at three months, in lieu of the cash, conditioned that failure to pay the draft would forfeit the policy, and that Greenwood & Son refused to accept the draft, and refused to pay it at maturity. The correspondence was continued by an additional letter from W. F. Douglass to the agents, dated April 9, and a reply to the same, by the latter, dated April 15, 1872, repeating their position that the policy was forfeited and void, and that there was no legal claim to the insurance.
The defendants below, after an unsuccessful motion for a nonsuit, put in evidence the following draft, given by Samuel
H. Pendleton in part payment of the premium which became due July 14, 1871:
"$325.00 AUBURN, ARK., July 14, 1871"
"Three months after date, without grace, pay to the order of the Knickerbocker Life Insurance Co. three hundred and twenty-five dollars, value received, for premium on policy No. 2,346, which policy shall become void if this draft is not paid at maturity."
[Signed] S. H. PENDLETON
"To Moses Greenwood & Son, New Orleans, La"
Evidence was then introduced by the defendants tending to show that the draft was transmitted by the agents of the company, through the Union & Planters' Bank, of Memphis, to the Louisiana National Bank, of New Orleans, to be presented for acceptance, and was received by the latter bank, and presented on the 29th of September, 1871; that acceptance was refused by Moses Greenwood & Son, the drawees, assigning as the reason of their refusal that they had no advice; that no protest of the draft for nonacceptance was made, because it was marked "no protest," but that it was returned, on the 30th of September, to the Union & Planters' Bank, of Memphis; that it was again transmitted to the Louisiana National Bank on the 5th of October, 1871, for collection, but was not paid when it became due, and for the same reason as before no protest for nonpayment was made, and it was returned to the Union & Planters' Bank on the 17th of November, 1871. No direct evidence of presentment to the drawees for payment was given, but the cashier of the Louisiana National Bank testified that according to their rules and custom of doing business, it must have been presented for payment when due. Evidence was further introduced tending to show that on or about the 3d of October, 1871, when the draft was first returned from New Orleans, the agents, Greene & Lucas, informed S. H. Pendleton, by letter, of its nonacceptance, and again, on or about the 20th of November, 1871, they informed him in the same way of its nonpayment; that in the latter
part of November, or early in December, 1871, he (Pendleton) called on said agents and expressed surprise that Greenwood & Co. did not pay his draft, but said that they were then prepared to pay it; that the said agents informed him that, as the policy was lapsed by reason of the nonpayment of the draft, it would be necessary in order to reopen the same that he should be reexamined, and that he promised to call again, but never did; also that the dealings of the insurance company in reference to the issue of the policy and the payments of premiums thereon were solely with the said S. H. Pendleton.
Moses Greenwood, of the firm of Moses Greenwood & Son, a witness on the part of the plaintiffs, testified to the effect that his firm were cotton factors and commission merchants, and acted as such for S. H. Pendleton, in 1869, 1870, and 1871, furnishing him supplies for his plantation, and selling his cotton crops, and kept a running account with him, and were accustomed to accept and pay his drafts even when he had no money or property in their hands, so that he had good reason to believe that the draft in question would be honored. The witness presented a copy of the account of his firm with S. H. Pendleton, which showed a balance in his favor on the 14th of July, 1871, of about $200, but a balance against him on the 14th of October, 1871, of $502.52. The witness stated that he found no entry of the acceptance or payment of the draft in question, and had no recollection of it other than what was shown by the books, and by certain letters from the firm to Pendleton. One of these letters, dated September 29, 1871, informed him (Pendleton) that his draft for life policy (some $330) was presented that day for acceptance; that, having no advice of it, they had requested that it be held till they got an answer from him, and asked him to write at once if he wanted it paid. The other letter, dated November 4, 1871, acknowledged one from him (Pendleton) of the 27th of October, and added, "Will pay that insurance note when presented, as you request. This is the first advice we have had about it."
After the evidence was closed, the defendant below (the insurance company), through its counsel, requested the court to direct the jury to find a verdict in favor of the defendant on
the ground that the policy sued on was not in force at the time of the death of the person whose life was insured thereby. The court refused to give such direction, and the defendant excepted. The defendant then requested the court to give the following several instructions to the jury:
1. That upon the undisputed facts appearing from the evidence, the defendant is entitled to a verdict.
2. That the reception of this draft for $325 by the defendant on account of premium imposed upon the drawer or the plaintiffs the duty of making absolute provision for its payment at maturity at the place of payment, and if he or they failed to do so, the defendant was under no obligation to present the same for payment.
3. That the refusal of the drawees to accept the draft when presented for acceptance relieved the defendant from its obligation, if any existed, to presented the same for payment in the absence of further notice that the same would be paid when due.
4. That if they believed from the evidence either that the drawer had not placed any funds in the hands of the drawees to meet the draft at its maturity or that it was in fact presented for payment at or after its maturity, the policy became void and of no effect upon the death of the party whose life was insured thereby, and the plaintiffs are not entitled to recover.
The court refused so to charge, and the defendant excepted.
Thereupon the court proceeded to charge the jury upon the whole case, but it will only be necessary to examine a single point in which, as we think, the charge was erroneous, and upon which the whole case depends.
"The defense of the company is that the condition for payment has been violated, and the policy ceased before the death of Pendleton. This is undoubtedly a good defense unless the law imposed some obligation on the company to perform some duty in respect to the draft which it has not performed and the neglect of which precludes it from invoking the breach of the condition for payment as a defense. In other words, if by its own laches and neglect of the duty assumed by its holder of the draft, the failure to pay has occurred, or the parties have
been injured, the company cannot rely on the breach of this condition as a defense. What, then, were the duties imposed on the company as the holder of this draft by the contract of the parties? . . . I have concluded that the true measure of the duty of the company is to be found in the rules of law governing a holder of commercial paper, and that by the very fact of taking a draft like this they assumed, in reference to this paper, all the duties devolving on a holder of it taken for any other consideration, and were obliged to proceed with it as any holder would be under the commercial law. On the other hand, any neglect to proceed properly in the discharge of that duty would be excused under the same circumstances as such neglect would be excused with any other holder, and not otherwise. The condition in the policy was a security to the company, of which it can avail itself only by showing a strict compliance with that duty, or some lawful excuse for noncompliance."
"There is no doubt the draft was sent forward for acceptance, presentment, and acceptance refused. . . . It was not protested for nonacceptance, the agents of the company having directed that no protest should be made, and no legal or proper notice of nonacceptance was given to the drawer. This was a clear breach of duty on the part of the company, and precludes it from claiming a forfeiture of the policy unless excused, as to which I shall instruct you further on. If protest and legal notice had been given for nonacceptance, the company need not have presented it for nonpayment, but, not having protested the note for nonacceptance, it was its duty to present at maturity and demand payment. There is some dispute as to whether the note was presented for payment on the day of its maturity, namely, October 14, 1871, or later, but there is no claim that it was protested for nonpayment and legal notice given. The only notice was a letter from the agents, dated November 20, 1871. This was not legal notice, and the drawer was clearly discharged unless the neglect was excused. By this neglect, as well as the neglect to protest and give legal notice for nonacceptance, the company precluded itself from relying on a breach of the condition in the policy. "