Dungan v. Mutual Benefit Life Insurance

.Miller, J.,

delivered the opinion of the Court.

This is an action of trover to recover damages for the conversion, of a life insurance policy for $5000, issued by the appellee, (the defendant below) upon the life of Francis D. Dungan, payable on his death to his wife Elizabeth W. Dungan. The suit was brought on the *249 28th of June, 1866, by Dungan and wife, both of whom died during its pendency, and it was revived on the 15th of January, 1872, in the name of the wife’s administratrix. At the trial, after the evidence on the part of the plaintiff was closed, the Court instructed the jury that upon that evidence if believed by them, the plaintiffs had not at the time of the institution of this suit, the legal title to the policy of insurance and therefore cannot' recover in trover. Unless there be material error in this instruction the judgment must be affirmed. The law which it embodies is not disputed. To sustain trover, the plaintiff must show a legal title; he must have property, general or special, and actual possession or the right to immediate possession at the time of the conversion. The conceded facts upon which we presume this instruction was based, are substantially as follows :

The policy (No. 9238,) was issued on the 17th of June, 1861, and by its terms it insures the life of Dungan to the amount of $5000, in consideration of an annual premium of $245 to be paid on the 17th day of June, in every year during its continuance ; the amount insured is to be paid to his wife, Elizabeth W. Dungan, or assigns, within ninety days after due notice and proof of his death: in case of failure to pay the premiums on or before the several days limited for their payment, the company shall not be liable for the payment of the sum insured or any part thereof and the policy shall cease and determine, and in such case all previous payments made thereon, and all profits shall be forfeited to the Company; and if assigned, written notice shall be given to the Company and their assent thereto obtained. On the 17th of June, 1862, Dungan and wile executed the following assignment of this policy to William P. Webb :

“Assignment of policy No. 9238. In the Mutual Benefit Life Insurance Company — Life of Francis D. Dungan.’’

*250 “Eor value received, we d.o hereby assign, transfer and set over unto Wm. P. Webb, his heirs or assigns the above named policy of insurance, and all sum or sums of money, interest, benefit and advantage whatsoever, now due or hereafter to arise or to be had, or made by virtue thereof, to have and to hold unto the said Wm. P. Webb, his heirs or assigns. In witness whereof, we have hereunto set our hands and seals the seventeenth day of June, one thousand eight hundred and sixty-two.

E. W. Dunsan, [seal.]

Francis D. Dun&an, [seal.]”

“Signed, sealed and delivered in the presence of

John W. Mortimer.”

Upon the execution of this assignment the policy was delivered to Webb, and at the same time he gave to the assignors the following receipt :

“ Baltimore, June 17th 1862.

“Received of Mrs. E. W. Dungan and Mr. F. D. Dungan, an assignment of policy No. 9238, in the Mutual Benefit Life Insurance Company of N. J., Life of F. D. Dungan — as security for the prompt payment at maturity of their note at four months from date, amounting to two hundred and twenty ^5,, dollars; said assignment to be null and void upon the payment of said note at its maturity; otherwise to continue for sole use of W. P. Webb.

W. P. Webb.”

The note referred to in this receipt is a note dated the 17th of June, 1862 for $220.25, payable four months after date, to the order of Webb, and signed E. W. Dungan, per Francis D. Dungan, and also with the name of the latter upon the back of it. This note was not paid at maturity nor has it ever been paid. Notice in writing of this *251 assignment, though not of the receipt, was given to the Company by Webb, on the 17th of December, 1862, and on the following day the Company returned to him their written assent to it, subject to the conditions of the policy. On the 28th of November, 1865, Webb surrendered the policy to the Company and received therefor the sum of $1248 51, he having paid the 'premiums thereon up to that date.

On these admitted facts it is insisted on the part of the appellee that this assignment and accompanying receipt constitute either a conditional sale and transfer of the policy, which became absolute and irrevocable, both at law and in equity, upon failure to pay the noteat maturity, or a mortgage of it, and in either event there was no legal title in the plaintiff's to support trover. On the other hand the appellant’s counsel contend that the transaction was merely a pledge or deposit of the policy as collateral security for the payment of the note, and hence under the law of bailments, title “to maintain trover,” remained in the bailors. The legal result in each case cannot be subject of dispute; in the one case the legal title passes to the vendee or mortgagee, and in the other the general title remains in the pledgors. The difference between a pledge and a mortgage of goods or dioses in adion is said to be marked and easily understood, but it is sometimes in practice very difficult to determine whether a particular contract is the one or the other. The general distinction is that in a mortgage the title is conveyed with a condition of defeasance, that is to say, a condition rendering the conveyance void on the payment of a certain sum of money on or before a day agreed upon ; while in a pledge the goods bailed are deposited as a collateral security, and only a special property is transferred to the bailee, the general title in the meanwhile, remaining with the bailor. The difference has also been well stated thus: “A mortgage is a pledge and more; for it is an absolute *252 pledge to become an absolute interest if not redeemed at a certain time. A pledge is a deposit of personal effects, not to be taken back but on payment of a certain sum, by express stipulation or the course of trade, to be a lien upon them.” With respect to goods and chattels it is in most cases vbry easy to apply this distinction, but with respect to choses in action ■ which cannot be otherwise delivered, the fact that title passes does not necessarily create a mortgage. To constitute a mortgage the title must be conveyed, but it is not in all cases a mortgage because the title is conveyed. Thus a transfer of stock may be absolute, but still if its object and character are qualified and explained by a contemporaneous paper which forms a part of the contract, and declares it to be a deposit of the stock as collateral security for the payment of a loan, and there is nothing in the contract to work a forfeiture of the right to redeem or otherwise defeat it, except by a lawful sale under the power expressly conferred in the agreement, the transaction will be regarded as a pledge. It is also well said that here, as in other cases, the intention of the parties and real effect of their agreement are to be considered and respected in its enforcement : the purport and substance of the contract determines whether it shall be considered a mortgage or a pledge. It is thus, in substance, that the distinctions between these two forms of contract are stated by the elementary writers of the highest authority, making their deductions from adjudged cases. 2 Story’s Eq , sec. 1030 ; Story on Bailments, secs. 287, 345, 346; 2 Kent’s Com., 581; Edwards on Bailments, 201, 251, 252, 253 ; 1 Parsons on Contracts, 113, 115. The same result is stated in the more recent work of Bateman on Commercial Law, secs. 674, 681. The still more recent decisions of the Courts, many of which have been cited in argument, throw no new light upon the subject and furnish no better rules *253 or guides for determining whether a particular transaction be the one or the other of these contracts.

Applying the tests thus laid down to this case, and reading, as we must, the assignment and receipt together as forming one contract, we are clearly of opinion that if it be possible to effect a conditional sale or mortgage, as contradistinguished from a pledge of a running life insurance policy, it has been here effected. The assignment is under seal, and in the most formal terms conveys to Webb, his heirs and assigns, the policy itself and all interest and advantage existing or hereafter to arise under it. Language affords no more apt words to make it absolute and complete. Then comes a defeasance clause in the most technical form : iCsaid assignment to be null avid void upon payment of the said Dote at maturity, otherwise to covdinue for the sole use of’ the assignee. There is no declaration that the policy was deposited as collateral security for payment of the note and there is expressly conferred no power of sale in case of' default with or without notice. The purport and substance of the contract and the intention of the parties as disclosed by the language they have made use of to express it, clearly indicates a sale or mortgage rather than a pledge. If the subject matter of the contract be considered, it leads to the same conclusion. Continuing life policies, if they have any, have not the same easily ascertained market value as personal chattels or shares of stock in hanks or other corporations. They are not ordinary articles of sale in market-overt or at the stock hoards. The power of sale incident to a pledge could not be readily exercised, if at all, in ease of default, and hence no one would he inclined to accept them as securities for loans and advances with no more interest or title in, or control over them than that which the law of bailments confers. The assignee of such an instrument must, in order to keep it alive as a contract against the company, *254 pay the accruing premiums and run the risk of other conditions upon which it may become null and void. The company may stand upon their contract and refuse assent to an assignment or to pay anything for its surrender, relying upon the expectation or contingency in a particular case, of greater profits resulting from the duration of the life insured and annual premiums payable thereon. Nor do we discover any thing in the acts, declarations of conduct of the parties anterior to or at the time this transaction took place, or subsequently, (even if such subsequent acts or conduct could be considered in construing the contract,) which could induce us to determine they considered it as a mere pledge of th.e policy as collateral security for the note. Notice to the company of the terms óf the receipt was not necessary, and notice of the assignment was given and assented to by the company in due time. Even if a failure in that respect could affect the validity of the transaction as between the assignors and assignee.

It follows from what has been said that upon these conceded facts the plaintiffs had not, at the time of the alleged conversion and suit brought, the interest and title of bailors so as to enable them to maintain trover. We are also of opinion there is nothing in the fact that Webb, the assignee, was at the time of the assignment and subsequently, the acting agent of the company ; nor in any of the other evidence in the record, or inferences legitimately deducible therefrom, that can avail to support this action. What effect they would have if the suit were founded upon the policy itself, or in any other form at law or in equity, is a question upon which we refrain from expressing any opinion. For the purposes'of this case it suffices to determine there is no ground upon which trover can be supported.

These views render the ruling upon the admissibility of evidence, to which an exception was taken, entirely *255 immaterial; for had the excluded evidence been admitted it would in no wise have affected the determination of the main and vital question in the case.

(Decided 25th June, 1873.)

Judgment affirmed.

Stewart, J.; dissented.