KNICKERBOOKER LU'E INS.
PENDLETON and others v. THE KNICKERBOCKER LIFE INS. Co.
(Oircuit (Jourt, W. D. Tennessee.
1. LIFE INSURANCE -
NEGOTIABLE DRAFT FOR PREMIUM -
If a life insurance company take a negotiable draft in payment of the premium, it is subject to all the requirements of the commercial law in regard to presentment for acceptance and payment, and nutice of non-accept!l,nce or non-P/lyment, which must be given or excused to entitle the company to the of a forfeiture'. provided, for in the policy, and' the draft itself, if it shall not be paid at maturity. The charge of the court in this case, reported in 5 l"ED. REP. 238, re-affirmed on motion for a new trial. '
SAME SU'BJECT -
NEGOTIABLE INSTRUMENT -
WAIVER OF PROTEST
N oTteE. Adraft in the following words is negotiable under the merto protest and notice, althciugh the policy to which chant, and it refers contains a clause that the policy shall be void, "without notice to any party or parties interested herein," if the said draft shall not be paid at maturity, viz.: "$325. AUBURN, ARK., July 14, 1871. "Three months after date, without grace, pay to the order of the Knickerbocker Life.Insurance Company three hundred twenty-five dollars, value received, for premium on policy No" 2346, which pol· icy shall become void if this draft is not paid at maturity. , , "8. H. PENDLETON. "1'0 Moaea Greenwood <t 00., New Orleana, La."
Motion for New Trial. This was an action on a policy of life insurance for $10000, and there was a verdict for the plaintiffs. The defences made and the facts of the case appear in a report of the trial found in 5 FED. REP. 238. The charge of the court will be found in that report, and, in addition to the exceptionl:i taken to it on the motion for a new trial, it was assigned for error that the court refused the following requests for instructions to the jury, offered by the defendant company:
(1) That the reception of this draft for $325 by the defendant, on account of premiums, imposed upon the drawer or the plaintiffs the duty of makingabsolute 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 topresent the same for payment. (2) That the refusal of the drawees to accept the draft, when presented
for relieved the defendant from its obligation, if any existed, to present the same far paywent, in the absence of further notice that the same would be paid when due. . . (3) That if the jury 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 Lecame void and of no effect before the death of the party whose life was insured thereby, and the plaintiffs are entitled to recover.
The court refused to charge in accordance with either of said requests, and the defendant thereupon duly excepted. llenrY W. Johnson and Edward L. Belcher, for the motion. I.Iumes a: Poston and Lowrie W. llumes, contra. HAMMOND, D. J. The most mature reflection has not con· vinced me that there was any errol.' occurring on the trial of this case for which a new trial should be granted. The defendant corporation, in order to avoid liability upon the pol. icy, is compelled to assume that they had absolutely no duty whatever to perform in relation to the draft, and that what they did do towards presenting it was merely ex gratia. It was conceded at the hearing. that if the money had been in the hands of Greenwood & Co. to pay tlole draft on the fourteenth day of October, 1871, when it was due, the company would have been'liable if it had failed to present it on that day, and the only question of fact which the company desired to try was whether or not Dr. Pendleton had thus placed funds in the hands of his merchants to pay the draft. This concession seems to have. been receded from in the printed brief submitted on tlUs motion for a new trial, and it is now said:
"That the receipt of the draft imposed no obligation upon the compl,Lny to do anything beyond presenting it for payment, at or after maturity, at the place designated therein, and we very much doubt whether we were bound to go as far as we did on the trial, and show a presentation· in· fact, for the production of the draft on the trial prima facie established its non-payment, and the burden of proof to show that it would have been paid on presentatIOn rested on the plaintiff."
This seems to still concede.a necessity for at some time, and,· in order to meet the exigencies of the occasion ()fpresentationfor acceptance ,is taken as a compliance with that dll ty;. and, inasmuch as aCGeptl1D:ce was re-
PENDLETON V. KNICKERBOCKER LIFE INS. CO.
fused, it is said that, "on principle as well as authority, this refusal rendered a demand for payment on'the day of maturityunnecfJssary;" for which :Plato v. Reynolds, 27 N. Y. 58G, is cited. This statement of the law ignores entirely an essential factor in the rule invoked, and that is due notice of non-acceptance, which was given in the case cited,and must be always, to excuse non-presentation for payment, as the jury :were told in this case. 1 Daniell, Neg. lust. (2d Ed.) §§ 449,598. But the notice not having been given in this case, the jury were properly told that a failure to give it rendered presentation for payment as necessary on the day when the draft fell due as if no presentation for acceptance had been made. ld. §§ 449, 454. Indeed, it is possible; although the holders of this draft, payable as it was three months after date, ona day certain, were not bound to present it for acceptance, that, having undertaken to do so, the failure to protest for non-acceptance itself discharged the drawer, and operated tomake the payment of the premium complete by making the paper their own absolutely. Id. § 452; G1'acit v. Sanf()7'(]" 9 Ark. 233. There was scarcely any proof before the jury to justify them in saying that the relations between the drawer and the drawee were such as to make the drawing of this bill a fraud that would excuse the laches, which seems, under modern decisions, to be the only excuse. 1 Daniell, Neg. Inst. (2d Ed.) § 450; 2 Daniell, Neg. Inst. (2d Ed.) §§ 1075, 1076, 1077, 1078, 1079. But the charge was very favorable on this question to the defendant company, and it cannot complain that the rules of the eommeroial law were held too rigidly against them. It was repeatedly said in the argument, as it is said in this brief, that no injury could result to the plaintiffs by a want of 'presensation and notice. I do not understand, from the foregoing authorities, that this is now the test by which we determine whether the failure to present and give notice has been excused; but, if it be so, this ease manifestly falls within the cases of injury as pointed out by the adjudi-
cations cited by this learned author on the commercial law of negotiable instruments. Moreover, there were special circumstances in this case which made the probability of injury much greater, and the laches more inexcusable. In the first place, we all know that where relations like those between Dr. Pendleton and Greenwood & Co. exist, there would be much more prospect of acceptance where protest would result from refusal than where it is waived, as the agents of the company here assumed to do without Dr. Pendleton's authority. He had not waived protest, and they had no right to do it for him without discharging him from all liability to pay the draft, .andthereby i rf3leasing the condition. for a forffjiture On that liability. Again, on the facts of ,which ,tl:\is case, ground to say that there was that obliga,tiou..on tb,e' part of GrElenwood & Co. to accept and ,pay, that ,a£ailure ltQ do sq w:pu!-d :render them liableJor conse.qu6ll,tial and,jrequire them to indemnify these pl;tintitls .againrpt jhe this case, if, ,it sho\lld or pay. SedSw. Da,m. ,result fro;Jll theiJ; ,'(6tll Ed.) lDapiell,Neg.lnst. C2.d Ed.) § 564; Bil1s,§398; v. ]:1qxendale, ,L"R. 9 Exch. S. O.,26;Ill, E.·398:j Prehn v. ROY,al Bank, 5 Exch. 92; lAAggsYi, ,7Cranflh,500; v! Story, 214, 242. '. Anil: w:hether they would. be so liable, where, by or the laches of the bolder, the drawer had where they could say in their own defence, if this draft had beenpreseDetl;ld oli the day when due, we could. and would havepa,id it" ,but, not being so presented, we are now unable, or, having parted ,with the drawer's funds, should not be required now to pay, may be doubtful. Why the holder of a billof exchange, who has by his negligence released the obligation to pay it,should be allowed to claim a forfeiture for non-payment, is not clear to me; but certainly, if the drawer has by that negligence lost his remedy for damages against the drawee, he should not be permitted to enforce the forieiture. Hence, there was a greater reason for acting under the law merchant, with this draft.
PENDLETON V. XNIOKERBOOKE& LIFE INS. 00.
, But aside from the obligations of the comll1ercia1:la.Wt the rules of which have been 80 much relied on by the defendant company to excuse their obvious' laches, conceded to be sufficient to prevent recovery of this were a suit upon the draft itself, while repudiating them as to all responsibility for a compliance with the ordinary duties of a holder of such paper, there is that element of fair dealing in this case which would seem to require that the agents of this company should have substantially pursued the course indicated by the commercial law before claiming a forfeiture of this policy. I did not think the facts justified the court in SUbmitting to the jury whether or not there had been a waiver, under the de'cisionson that.subject, altboughMr; Justice Bradley,m 'a case againsb ihis company; w.\1en there was involved bueM the premium notes conditioned'like this draft, indicates a · principle thlJlk!p088ibly; justmed'lthe learned counsel for the · plaintiffs; in ,claiming, a waiver. 1 · ;He " ' ." ,
l "Forfeitures li.'re nOt·favorM in the llil.1't. Theyare'oftel'f the m'e6uS:;f , grea1iQPpressic)U llIJld ;injustice..':Atid,iwliere ,be made"the law U Pilany, l;quity! W cases, .· forfeiture upon sUCh compensation being made, It is true, we held in Statharn'8(ja'se, 93 U; B. r24, thBtin life insurance time of Payment'iS"tiiaterlal,' and cannot be el'.tended' byithe courts against t.\le assent of the cOlh· pany. .'Y,here .such, a,sep\r the CQurts libera,Un transaction ?f .f0rfeiture.':' ,', ; ·
A,gaiJ;l, (l,fterciting casQs. to aays:
l1pOW the withwpich,ll«;lurtE1 ,seize hold of any drcumstances that indidate an election or intent to waive a forfeiture." Insurdiiceffb. ;; 'Nbrton, 96'0'. 234; lri8urance 0'0. v. EUflteston, Id.ti72 ; Insurance Of}. v; ,Wolff,95U. B. 326.
Itseetrled to the court that it was 'here more a question whether the forfeiture had taken place, than whether it had been waived by the laches ofthe company; and that the mest favorable view to be taken for the company was to give them the benefit of the commercial law to excuse the laches, is under it the facts would so excuse. But the view of the subject taken in the requests of the defendant company for instructions, and in the quotation from the brief already
made,1s intolerable to my sense of justice, however it may appear to others,and the only doubt I have had about the correctness of the charge to' the jury has been on the point whether the ,company was not bound to treat this draft at paid, so far as these plaintiffs were concerned; when they neglected to present it for payment on the day of its maturity. That they did not so present the draft hardly admits of a doubt on the proof, and the probability is that it was not presented because the bank at New Orleans took the same view of the law that has been urged here, namely, that refusal of acceptance excused presentment of payment, overlooking the further requirement of protest and notice to have this effect; induced thereto, no doubt, by the fact that they had been instructed not to protest, from which it might be reasonably inferred that there was no necessity for prompt action in the premises.' The burden of proving the presentment waS on the defendant, and that there was no' such proof the law requires is plain. 1 Daniell, Neg. lnst. § 598. There is as little doubt that:if the presentment for payment had been made the draft would have been paid. The draft for the cash portion, which, by caloulation, appears to have been just enough to cover the interest and agent'. oommissions, was paid, and, as precisely the same course had been pursued in reference to the first premium, it appears, by the account' of Greenwood, that that draft was not presented promptly, nor for some days after it was due. This, taken with the proof here as to the ,mode of business adopted in reference to this ,draft, shows that the agents of the oompany were not so diligent or prompt in their dealings with this and prompt policy.holder as to justify them in requiring aotion on his part. Here was a man in the wilds of Arkansas, where communication was difficult at all times, some hundreds of., miles away from this city, where the insurance agency 'was ;located, and many hundreds more away from the city where he did ali his fiIl8lncial business and got the money to pay all his debts., His insurance was solicited at. his house by a traveling agent, who, recognizing from the nature
PENDLETON V. KNICKERBOOKERLIFE INS. 00.
of his business as a planter that he would .not be in funds till his crops matured, took a long-time draft on this com'· mercial house for the premium which was paid. Then, when' the second premium was about to fall due, the process is repeated. Now, while it must be admitted that the mercial law did not require it, acting in a spirit of libbrality and fairness, it does seem to me, that, looking at all the faots, if the company intended to rely upon the forfeiture with that strictness they now do, these agents should have forwarded the draft promptly-far more promptly than they did-for acceptance, with instructions to protest and give notice if not accepted, so that Pendleton would have timely warning to ,prepare for payment and save the immense forfeiture that· impended over him. Failing this, the least they could do was to forward it promptly for payment, which,they did; but by the neglect of the New Orleans agent, it was not 'Pre sented,-certainly not at maturity, and, as I believe from the circumstances, never at all. This is not a case, as Mr. Jus. tice Woods said, in Thompson v. Ins. Co. 2 Woods, 547; S. C: 5 Bigelow, 8, where there is an attempt to collect the policy without paying the premium, but where there is an attempt to avoid payment of the policy by taking advantage of the literalism of the contract to defeat the ordinary effect of that negligence on the part of' the company which would prevent them from recovering on this draft if this were an ordinary transaction. Why there should be any different tesult of this negligence when the consideration of the. draft is a premium of life insurance is beyond my comprehension. It is true, there was a further seGurity for payment in the condition for a forfeiture, but that ;security was described,by, and depended upon, the terms of the contract; not only those contained in the language of the draft and the policy, if, you please, but likewise those imported into the oontractbythEl law merchant when this negotiable. hlstrurnent. wits, til-ken in payment of the premium. ,': , ' I, ,The cases of Pittv. Berkshire, lQOMass! 500; Boehner v. Ins. Co., 63 N.Y. 160; Thomp8on.. v.,Jns. Op.j8't1-pra; Hakerv!
Ins. Co. 43 N. Y. 283; Robert v. Ins. Co. 2 Disney, 106 j S. C. 2 Big. 141 j S. C. 1 Big. 634; and Howell v. Ins. Co. 44 N. Y. 276, with others that might be cited to same effect, have no application to a case like this, and for the plain reason that there is a very essential distinction between the undertaking of the maker of a negotiable promissory note with a condition like that found in this case, and that of a drawer of a bill of exchange. The one is an absolute and unconditional promise to pay, and if not otherwise expressed, as these cases properly hold, the duty of the maker is to hunt up the creditor and pay him wherever found, and no demand is necessary to complete the forfeiture. The other is only a conditional 'promise to pay, and is itself defeasible if the condition is not complied with by the holder of the paper. This conditional promise is nowhere better expressed than in one of the cases cited by the learned counsel for the defendant:
"The undertaking of the drawer is that in case the bill is presented for acceptance the drawee will accept, and that he will pay the bill upon due presentment for payment, whether it has been presented for acceptance or not; and if the drawee refuses to accept upon due presentment for lIuch purpose, or refuses to pay in case payment is demanded at the maturity of the bill and notice of such refusal is given, then that the drawer will pay. His liability is conditional." Plato v. Reynolds, 27 N. Y.586,591; 1 Daniell, Neg.lnst. (2 Ed.) §§ 479, 571.
These distinctions were ignored by the agents of the company in this case, as they are now by counsel in argument, and therefore no attention was paid to them. The result, in contemplation of law, is that this premium was paid by that draft, or that, having failed to comply with these conditions, the holder of the draft has not put the policy-holder in default of payment. The contingency provided for in the forfeiture clause of the policy has not occurred. A draft was taken in payment, with a condition that the company would do certain things, as above described, or on failure to do these things aU obligation to pay it should be discharged. Having by its negligence discharged the liablilty on the draft, it cannot now, as I have endeavored to show, repudiate the agreement and rely on the original consideration, eithel
PENDLETON V. KNIOKERBOOKER LIFE INS. 00.
for the purpose of collecting the premium or enforcing a; forfeiture for non-payment. 1 Daniell, Neg. lnst. § 452. If the company could have shown anything to excuse this neglect, such as want of funds, or reasonable expectation of acceptance and payment, or other fraud, the charge given permitted such excuse; but on the facts the jury were clearly authorized to say none existed. It is claimed that, because the policy contains· a clause that "the omission to pay any premium, · · or failure to pay at maturity any note, obligation, or indebtedness for premium or interest herein, shall then and thereafter cause this policy to be void, without notice to any party or parties interested herein," by its very terms, protest and notice were waived upon this draft, or cannot be required to secure the forfeiture, however the failure to give it may operate to prevent a recovery oil the draft itself. What has already been said to show that the obligation to pay the draft has never been fixed, and therefore there has been no breach of the condition on which the forfeiture depends, is a sufficient answer to this argument. If the company could not recover in a suit on the draft itself there is no reason why it should have any benefit for its non-payment. But it is obvious that the clause was not intended to waive protest and notice on the draft, and that is not the character of notice referred to by it. It was intended to provide against the necessity to give notice that the company claimed and would insist on a forfeiture. The decisions are not uniform in determining whether the condition for prompt payment is a condition precedent or subsequent, and there may be a distinction, and probably is, on this point, as applied to the premium and a note given in payment of it. Perhaps in our courts, under the influence of the cases already cited from the supreme court of the United States, it would be treated as a condition 8ubsequent, though I am not sure the point is decided. At all events,ma.ny cases hold that no forfeiture is incurred until notice by the companythat it is claimed has been given; and all agree that the conduct of the company may be such as to waive the condiv.7,no.2--12
tion, unless that effect is destroyed by distinct reservation at the time that the conduct shall not so Ins. Co. v. French, 4 Big. 869; S. C., on appeal, 30 Ohio, 247, is an ex. ample of these cases. See, also, Ins. Co. v. 80 Ill. 410; Ins. Co. v. Anderson, n Ill. 884; Boutonv. Ins. Co. 25 Conn. 542; Jollife v. Ins. Co. 89 Wise, 119; Seamans v. Ins. Co. 8 FED. REP. 825; Young v. Ins. Co. 4 Big. 5; S. C. 2 Sawy. 325, which was reversed on appeal, because the supreme court took a different view of the facts. Ins. Co. v. Young, 28 Wall; 85. These cases were relied on by the plaintiffs to show that the company not havwgclaimed a forfeiture, by giving notice of it, none had or, at least, it had been, on the facts of this case, waived. It is plaIn, however, that the clause under consideration protects this policy from the principle of these cases SQ far as they relate to a requirement of notice, and that it is self-forfeiting with. out such notice. The language of the clause itself, makes it clear that it does not refer to. notice required by the cOmmerciallaw to parties to the draft, but notice to "any party Qr parties interested herein"-that is, in the policy; and it means that the forfeiture shall enure without notice to the plaintiffs, and I so charged t,he jury. .It would be interesting, perhaps, to follow up the effect of the. holding of the court in this case in its application to other situations of,the parties'not shown by the prool; as, for example, if the draft had been negotiated by the company and the holder had neglected to present, or if it had been accepted and the acceptors had failed to pay. But it is not necessa:ry to the soundness of the charge by such means. It will be found on thoughtful consideration, I think, to be c()Ilcsistent with any situation that is possible, to hold that· this compl!-ny .came, as to this draft, under all the obligations of any holder 9f such paper; and the minor suggested in the l.l,rgument I need noteonsider. . One of the learned counsel makes a plausibleandfq1'cible argument against the charge by insisting that the draft .aot negotia.ble under the law merchant. He urgeq. that the
PENDLETON. V. KNICKERBOCKER LIFE INS. CO.
draft was not payable absolutely, and the drawer had an option to discontinue the policy by refusing payment. Perhaps the drawer of this draft had no option to discontinue the policy. by refusing to pay the premium itself. He was not in terms bound to pay it. It was the contract of his children, and, while he may have refused to keep it up for them, they could by other means have continued it. The option was theirs, not his. But certainly, in his capacity as drawer of this draft, he had' no option about it. If the necessary steps to charge him had been taken he would have been liable and the company had. the option to collect it, or, on non-payment, surrender it and rely on the condition for forfeiture. If it had been accepted, or otherwise secured, as by a mortgage, the company, having fixed the liability of the parties, may have chosen to waive the forfeiture and collect the draft; and, as to all the parties to it, the promise was unconditional. That it was negotiable is established by authority. Jarman v. Ins. Co. 3 Cent. Ll1w. :r,. 303; 8 .. 0.22 Int. Rev. Rec. 162; Kirk v. Ins. Co. 39 Wis. 138; William' v. Ins. Co. 19 Mich. 451; WaU v. Ins. Co. 36 N. Y.157; Boehner v. In,. Co. supra, at pag3 165 of 63 N. Y.; 1 Dimiell, Neg. lnst. (2d Ed.) § 52; ld. §§ 85-44; Bank of Sherman v. Apperson, 4 FED. REP. 25. The Jarman Case, ,upra, by the very able judge of the eastern district of Michigan, sitting in this court, is, on principle, conclusive in favor of the charge given by the court in this case, and so are the others cited; because, if this draft, or the note in that case, be negotiable, so that it would be entitled to grace, (if it had not been waived,) there is no reason why it is not subject to all the other incidents and rules of the commercial law, as the court held it t() be. On the whole, I am satisfied the ease was correctly tried, and ,that the verdict is right. Motion overrUled.
Mwou, Adm'r, eta., v.
(Circuit Court, 8. D. New York. May 5,1881.) J.
GUARDIAN-POSSESSION OF PROPERTY IN ANOTHER STATE-PAST-DuE
V RESTS-AcCOUN'fING BEFORE AND AFTER TERMINATION OF GUARDIANSHIP.
It is the duty of a guardian to take into his possession, so far as he is able, the estate of his ward, wheresoever it may be; hence, where the property consisted of of stock in a Georgia bank, a transfer of which he could have procured to himself, and it did not appeal' that the guardian had taken the steps required by the laws of that state to enable a foreign guardian 'to remove property within the state belonging to his ward, held, on the evidence,-the burden of proof being upon the,guardian lO,show that he could not get possession of the property an,d invest it as required by the terms of his appointment,-that the defendant was properly charged in the accounting with the value oithe ,property. Where, the, guardian transferred to his newly-appoIntedsucceSl'lpr .raih;oad and city bonds! together with the past-due coupons !l:ccompanying them" and it was agreed that the bonds worth at the timii a certain' pet'cedt. of their face value, held, that this prtma ftki8 evideace that 'the, oveJ;.due coupons were ,worth an equallper,centage of their '.' , " rejected the investIllents m!l:de br the gua;aian, and demanded iil :money' the equivalent' of' a proper inv'estment, the rateoI' interest with: which he is to be charged during the period of the guardianship is that which, with proper llnd sde he Jnight.have realized, and therefore less than Hence, 'wherldthe guardianship long before'the legal rate 'of interest in New York state wl1schanged' from 7 't6 6);>er cent,; a guardian accounting in this court should be' charged with interest during the period of the guardianship at the rate of 6 per cent,,'-1 per cent, less than the current rate,-the account to be taken with annuafrests. King v, Talbot, 40 N, Y, 9 6 , ' From the termination of the guardianship, however, the guardian's lial>ility was simply to pay over presently a certain sum of money, not to invest or keep it invested, Therefore, t'llere is no reason for computing the account with annualrests after the termination of the guardianship, nor for charging a less rate than the legal rate of intereet in this state, which was 7 per cent, down to January 1, 1880, and 6 per cent. from that date to the present time.
George O. Holt, for complainant. O. O. Beaman, Jr., for defendant.