On appeal from the Supreme Court.
For the appellant, Osborne, Cornish & Scheck (Abram H. Cornish, Ervin S. Fulop and Frederick H. Nash (of the Massachusetts bar), on the brief).
For the respondent, Henry P. Brown (Edward Gaulkin, of counsel).
The opinion of the court was delivered by
PERSKIE, J. This is a suit on a life insurance policy. The basic question involved is whether the cancellation or termination of the policy by the insurer was, under the proofs of the case, proper. The answer to that question depends upon the legal effect which is to be given to the transaction between the insurer and its assured concerning the purported payment by the assured of the third annual premium of the life insurance policy in issue. If the transaction was in fact a loan, then the trial judge correctly concluded that, in the absence of the required notice of forfeiture that the insurer's cancellation of the policy was improper; but if the transaction was in fact the payment, or the extension of the time for payment, of the premium under the policy then the cancellation was proper.
The record submitted consists in part of stipulated facts and in part of oral testimony.
Sadie Paul, plaintiff below and respondent here, is the beneficiary of a life insurance policy issued to her now deceased husband, Samuel A. Paul, by The Columbian National Life Insurance Company, defendant below and appellant here. The policy was issued on December 12th, 1928, and the assured paid the first and second year's premium in the sum of $263.60 each. He was apparently unable to pay the third premium within the thirty-one day grace period allowed after the expiration of the second year. Upon the payment of this year's premium, but not before, the policy would have had a loan value of $216.20.
Within the grace period defendant and its assured entered into an arrangement concerning the third annual premium of $263.60. By this arrangement, defendant agreed to loan its assured the sum of $216.20 which was the amount of the cash surrender or loan value of the policy after the payment of the third annual premium. The assured and his beneficiary executed and delivered to defendant an assignment of the policy. Additionally, assured executed and delivered his promissory note to defendant in the sum of $60.37, payable on April 12th, 1931, $47.40 of which was the balance due on the third annual premium and $12.96 of which was the interest in advance on the policy loan.
The assignment of the policy, as security for the policy loan of $216.20 provides: "* * * and if at any time when the total indebtedness against said policy, including any unpaid premiums, together with interest thereon, shall equal or exceed the loan value of said policy, default shall be made in the payment of this loan or any interest thereon, the said policy shall (provided thirty-one days' notice has been mailed to the last known address of the insured) be canceled by said company and all insurance thereunder terminated." (Italics supplied.)
The note for $60.37, on the other hand, does not provide for the thirty-one days' notice. It provides: "This note shall be a lien upon the policy in event of my death before it is paid and is given with the full knowledge and intent on my part that if it is not paid when due, without grace, said policy shall, without further notice, become void and the insurance
thereunder terminate as of the date to which premiums have ...