Brett v. Warnick

Mr. Justice Wolverton,

after stating the facts in the above terms, delivered the opinion of the court.

Two questions are presented: (1) Whether the complaint states a cause entitling plaintiffs to equitable relief, and (2) whether the agreement relied upon for recovery is subject to the objection that it is essentially a wagering contract, and therefore void, as in contravention of public policy.

1. As to the first, we are clear that the real purpose of the complaint is to require a specific performance of the alleged agreement to surrender the certificate upon the completed payment by Brett to the defendants Warnick of the sum of $90, which it is averred that they had formerly paid of the dues and assessments under an agreement by them with the assured, Brett having fulfilled, as he claims, the other conditions of his agreement in providing a home for the assured and paying his dues and assessments since forming the compact, and at the same time to prevent the order from paying the fund over to the defendants War-nick and to require its payment to the plaintiff. The relief is such that equity alone can adequately grant. An action against the defendants Warnick could not have met the purpose, as they had not as yet received the fund, and a judgment against them might prove1 unavailing if they were found to be insolvent; so that the remedy at law cannot be considered as adequate as the one adopted for equitable relief. The complaint is therefore not objectionable on the ground that it discloses a want of equity.

2. Nor does the lack of the actual substitution of plain *518 tiff as beneficiary in the certificate in the stead of the defendants Warnick in the manner provided in the constitution and by-laws of the order for making such a change affect the agreement, and deprive the plaintiff of his equity, seeing that the company does not insist upon it, and has paid the fund into court to be awarded to the contestant entitled to it in the controversy, which is now wholly between the plaintiff and the defendants Warnick: Pennsylvania Railroad Co. v. Wolfe, 203 Pa. 269 (52 Atl. 247); Swedish C. M. Soc. v. Lawrence, 79 Minn. 124 (81 N. W. 756); Benard v. Grand Lodge, 13 S. D. 132 (82 N. W. 404).

3. It has been held that, where a person becomes a member of a mutual benefit association, under an agreement with the beneficiary named in the certificate that he, the beneficiary, shall pay all the assessments, and they are so paid accordingly, the beneficiary thus acquires a vested interest in the certificate, so that the member cannot afterward make another designation without the consent of the beneficiary: Maynard v. Vanderwerher, 30 Abb. (N. C.) 134 (24 N. Y. Supp. 932). This case, it should be noted, was reversed on appeal. The error, however, related solely to a question of fact, leaving the principle here announced unaffected: Id. 76 Hun, 25, 27 N. Y. Supp, 714. So, if a member, by valid contract, assumes to dispose of his interest in the beneficial fund of the order, virtually the proceeds of the certificate of insurance, and agrees not to change the beneficiary, in consideration of the payment by the beneficiary of all dues and assessments against such member, if not in conflict with the lawful conditions upon which the order grants the insurance, it is effectual as against the subsequent attempt of the member to annul it: Clarke v. Police Ins. Board, 123 Cal. 24 (55 Pac. 576). The doctrine appeals to us as reasonable and sound, and, being so regarded, there is nothing to hinder the member, with the assent of the beneficiary, from contracting with *519 a third party, whereby the latter may obtain a vested interest in the fund designated in the certificate, provided that the contract is not such as the law will not recognize because contrary to public policy. Such is the condition here, as shown by the allegations of the complaint. Brett’s contract or agreement is not only with the member, but the beneficiaries designated in the certificate, or policy, it may be termed; and, if his allegations are true that he has acquired at least a substantial interest in the fund, if the agreement is otherwise lawful, his remedy in equity is clear. This result does not impinge upon the doctrine announced in the case of Independent Foresters v. Keliher, 36 Or. 501 (59 Pac. 324, 1109, 78 Am. St. Rep. 785). The question there presented was whether a change in the beneficiciary had been accomplished aside from any contract or agreement between the parties, and depended upon wh ether there had been a substantial observance of the regulations in the constitution and by-laws of the order relative to the subject.

4. With relation to the second question presented, the defendants urge that Brett was without an insurable interest in the life of deceased, and hence that the alleged agreement was unlawful, as being contrary to public policy. It is beyond cavil that a person may take out a policy of insurance on his own life, and make it payable to whomsoever he pleases, he being the moving spirit, and assuming the responsibility of meeting the premiums or assessments. It would seem to follow logically from this that lie might also, having effected a valid insurance upon his life, dispose of the policy, or assign it to whomsoever he desires, if the transaction is contrived in good morals, and not as a shift or cover for illegitimate purposes. But before one can be permitted to take out a policy of insurance upon the life of another for the former’s benefit he must have an insurable interest in the life of the latter. If he *520 has not such an interest, and procures the policy notwithstanding, the law denominates it a “wagering contract,” and, being in contravention of public policy, the holder will not be permitted to profit by his investment. “To have an insurable interest in the life of another,” says Mr. May in his valuable work on Insurance, “one must be a creditor or surety, or be so related by ties of blood or marriage as to have reasonable anticipation of advantage from his life 1 May, Ins. (3 ed.) § 102a. Speaking upon the same subject, in Warnock v. Davis, 104 U. S. 775, 779, Mr. Justice Field says with more elaboration : “ It is not easy to define with precision what will in all cases constitute an insurable interest, so as to take the contract out of the class of wager policies. It may be stated generally, however, to be such an interest, arising from the relations of the party obtaining the insurance, either as creditor of or surety for the assured, or from the ties of blood or marriage to him, as will justify a reasonable expectation of advantage or benefit from the continuance of his life. It is not necessary that the expectation of advantage or benefit should be always capable of pecuniary estimation, for a parent has an insurable interest in the life of his child, and the child in the life of a parent, a husband in the life of his wife, and a wife in the life of her husband. The natural affection in eases of this kind is considered as more powerful—as operating more efficaciously—to protect the life of the insured than any other consideration. But in all cases there must be a reasonable ground, founded upon the relations of the parties to each other, either pecuniary or of blood or affinity, to expect some benefit or advantage from the continuance of the life of the assured ; otherwise the contract is a mere wager, by which the party taking the policy is directly interested in the early death of the assured. Such policies have a tendency to create a desire for the event. They are, therefore, independently of any *521 statute on the subject, condemned, as being against public policy.” See, also, Connecticut Mut. L. Ins. Co. v. Schaefer, 94 U. S. 457; Loomis v. Eagle L. & H. Ins. Co. 6 Gray, 396.

The rule seems to be stated generally by a line of authorities that all the objections against taking out a policy of insurance upon the life of another, without an insurable interest in such a life, exist with equal force and potency against the holding of such a policy by mere purchase and assignment to another: Warnock v. Davis, 104 U. S. 775; Franklin Life Ins. Co. v. Hazzard, 41 Ind. 116 (13 Am. Rep. 318); Kessler v. Kuhns, 1 Ind. App. 511 (27 N. E. 980). In the latter case are collated all the principal authorities supporting the doctrine. Undoubtedly, if the policy was procured in the first instance by one without an insurable interest, its assignment to another without such an interest could not help the matter; as both transactions would be alike tainted with illegality. But where the policy is procured by one upon his own life, or by one upon the life of another in which he has an insurable interest, and therefore perfectly legitimate in its origin, another line of authorities holds that it may be assigned to one without such an interest, subject to the condition and restriction that it is not made as a cloak or cover for wagering purposes, or for mere speculation upon the life of the person upon whom the policy has been issued. It is easy to see how a contract, apparently valid in its inception, might be rendered invalid when coupled with a contract of assignment, where the purpose is eventually to procure a policy upon the life of another in whom there exists no insurable interest. For instance, a husband may take out a policy upon the life of his wife, in which, by all the authorities, he has an insurable interest. If now the policy be at once assigned to a third person without an insurable interest in the wife’s life, on condition merely that he pay the premium, nothing more, with a view to *522 his obtaining the insurance at the death of the wife, the transaction would be indicative of an intendment to effect insurance contrary to public policy. It would be tantamount to procuring insurance indirectly which the law will not tolerate to be done directly, and the evil would be the same. A like inference would also be deducible where the consideration or insurable interest to support the assignment was merely nominal. It would be apparent that the transaction was intended as a cover only to conceal the real device—that is, to secure insurance upon the life of another without having at the time an insurable interest in such life—which is the vice that the law will not tolerate.

It does not necessarily follow, however, that, where a policy is taken out upon one’s life for the benefit of another, and is assigned to a third party, who pays the premium, it stamps the'transaction as a wagering device, but it depends upon the good faith of the transaction; that is, whether the policy was in fact intended to be what it purports to be, or whether the form was adopted as a cover for a mere wager: Bliss, Life Ins. (2 ed.) § 26. “ The rule,” says Mr. Justice Earl in Olmsted v. Keyes, 85 N. Y. 593, 600 “as gathered from these authorities, is that where one takes out a policy upon his own life as an honest and bona fide transaction, and the amount insured is made payable to a person having no interest in the life, or where such a policy is assigned to one having no interest in the life, the beneficiary in the one case and the assignee in the other may hold and enforce the policy if it was valid in its inception, and the policy was not procured or the assignment made as a contrivance to circumvent the law against betting, gaming, and wagering policies. It follows, therefore, that one may, with the consent of the insurer, deal with a valid life policy as he could with any other chose in action, selling it, assigning it, disposing of it, and bequeathing it by will, and it has been well said that, if *523 he could not do this, life policies would be deprived of a large share of their utility and value.” There is abundant authority for holding that a life policy valid in its inception may be assigned to one not having an insurable interest in the life of the assured when not used as a cloak for a wager or mere speculation in the life of another. The exigencies attending such a transaction are strongly set forth in Murphy v. Red, 64 Miss. 614, 618 (1 South. 761, 60 Am. Rep. 68), where the court say: “A man may have the best of reasons for wishing to dispose of the policy on his life. The exigencies of business or absolute necessity may require him to do so. He may have paid large sums in premiums and afterward become unable to pay more, and, if he is not allowed to sell or assign on the best terms he can make, the policy may be lapsed and lost. To impair the value and utility of his policy, or require him to lose it on the ground that, if he were to sell or assign it, the assignee or purchaser would have a motive to kill him, or that any sale or assignment he might be able to effect with one who had no insurable interest in his life would be tainted with the vice of gambling, is, as matters of law, extremely fanciful and unsatisfactory.” Such, also, is the reasoning in Bursinger v. Bank of Watertown, 67 Wis. 79 (30 N. W. 290, 58 Am. Rep. 848). See, also, Martin v. Stubbings, 126 Ill. 387 (9 Am. St. Rep. 620, 18 N. E. 657); Stevens v. Warren, 101 Mass. 564; Mutual Life Ins. Co. v. Allen, 138 Mass. 24 (52 Am. Rep. 245); Rittler v. Smith, 70 Md. 261 (16 Atl. 890, 2 L. R. A. 844); and a comparatively recent case from Indiana (Nye v. Grand Lodge, 9 Ind. App. 131, 36 N. E. 429), ably and exhaustively considered, where the learned jurist announcing the opinion differentiates the Warnock, Hazzard, and Kessler Cases.

The reasoning of this line of authorities impresses us as cogent and sound, and we feel free to adopt the doctrine thus announced as more salutary, and better calculated to *524 serve the ends of justice, than that which seems to have been promulgated by the authorities herein first alluded to, if there is any real distinction when the cases are properly considered with reference to the facts that control them. Now, to apply the doctrine to the case in hand. Brett was a cousin of the assured, which was not a sufficient blood relationship to give him an insurable interest in the life of the latter. It was legitimate for him to take an assignment of the policy, the rules of the order not inhibiting it, for security for any advance made on the faith of it (Gilman v. Curtis, 66 Cal. 116, 4 Pac. 1094; Insurance Co. v. O’Brien, 92 Mich. 584, 52 N. W. 1012), and, if the transaction was conceived in good faith, and not with a view to avoiding the inhibition of the law against wagering contracts, the alleged agreement for the assignment of the policy by the assured, the beneficiaries consenting, would be valid to carry the entire interest in the policy to Brett. But, if not so contrived, it would, at any rate, be sufficient for Brett’s reimbursement for all outlays made upon the faith of it, such as a reasonable expenditure for bringing the assured tc his home at Spokane, providing him with a home, and the payment of the dues, assessments, and funeral charges, and the defendants Warnick would be entitled to the balance. The complaint is sufficient in either view, and it is a question of fact for the court to determine whether the alleged agreement falls under the ban of the law as a wagering contract, and therefore entitling Brett to recover only his outlay made in pursuance thereof, or whether the agreement was entered into in good morals, and in consequence he should recover the entire proceeds of the policy.

The decree of the trial court will be reversed, and the cause remanded for such other proceedings as may seem meet, not inconsistent with this opinion. Reversed.