145 P.2d 113 | Kan. | 1944
Lead Opinion
This is an action to recover money and for injunctive relief. Judgment was for the defendant. Plaintiff appeals.
After the formal allegations, the petition alleged that on November 19,1927, while plaintiff was a resident of Oklahoma, and relying on representations of defendant’s agents, he made application for an ordinary life insurance policy with double indemnity for death by accident and increasing total and permanent disability benefits; that on November 25, 1927, an ordinary life policy was issued to plaintiff by which defendant insured the life of plaintiff for $5,000 or $10,000 for accidental death and agreed further that if plaintiff became totally and permanently disabled before becoming sixty years of age to pay him $50 per month. The petition then referred to a provision in the policy, as follows:
“The share of the divisible surplus accruing on this Policy shall be alloted as a dividend annually on each anniversary of its date, the first such dividend being payable only if any premium due on the first anniversary be duly paid.”
The petition then alleged that for a long time prior to the issuance of the policy defendant’s agents, being duly authorized to do so, made statements to plaintiff that of the total premium to be paid on this policy $115.70 was for ordinary life, $5 was for double indemnity and $17 was for disability; that these amounts were more than the actual cost of the insurance and each year there would be dividends to be disposed of at the option of the plaintiff; that if plaintiff would permit these dividends at the rate defendant was then paying to be retained by the company, plaintiff’s policy would be paid up in twenty-three years; that the annual dividend would be determined from the profits on all ordinary life policies (whether containing disability or double indemnity benefits or not); that defendant furnished to its agents a booklet, which purported to show the results of paying the dividends in cash or permitting them to be retained by the company and that this booklet classified ordinary life policy contracts with and without disability benefits in the same class. The petition then alleged that from the time plaintiff’s policy was issued until 1937, defendant made no distinction in the determination of dividends from its divisible surplus between ordinary life policies with the special benefits and those without them', and each year from 1929 to 1936 it credited plaintiff with dividends of never more than $39.94 and never less than $30.22; that for the
The first defense pleaded in the answer was a specific denial of each allegation of the petition amounting in reality to a general denial of everything except that the policy was issued to the plaintiff and that a change had been made in the method of computing the amount of dividends to be credited on plaintiff’s policy.
For a second defense, the answer pleaded an action in the name of William H. Ellis and others similarly situated against this defend
For a third defense, the answer pleaded that the cause of action involved questions relating to the internal affairs of the defendant; that they were all governed by the laws of New York over which the government and the courts of New York had exclusive jurisdiction and that the defendant had returned to its policyholders the surplus of the company in proportion to the contribution which the policies had respectively made to it; that for fifty years or more in the ascertainment of the distribution of its surplus the defendant had employed a calculation which was set out in detail in the answer.
For a fourth defense, the defendant pleaded that the matter of apportionment of its divisible surplus was solely a matter of its own internal affairs and by the laws of New York was vested in its board of trustees and that to grant the relief prayed for in the petition would require this court to interfere with the internal management of the affairs of defendant and with the rights of its policyholders, which in the interest of uniformity and practical determination should properly be determined by the courts of New York, and the courts of Kansas had no jurisdiction to entertain thé suit or to grant the relief sought by the plaintiff. The prayer of the answer was that full faith and credit be given to the proceedings in Ellis v. Mutual Life Ins. Company of New York, 237 Ala. 492, 187 So. 434, and especially to the determination in that court in that representative action on behalf of all holders of policies issued by the Mutual Life Insurance Company containing a provision for disability benefits; that the defendants had properly classified its policies with respect to the ascertainment and apportionment of the divisible surplus with respect to policyholders with death benefits only and the holders of exactly similar policies except that the latter had provisions for disability income benefits; that the principles and methods of distributing its divisible surplus be ratified and confirmed and that the action be dismissed for lack of jurisdiction and on its merits.
For reply the plaintiff denied generally all the allegations of the answer and specifically that the decision in the case of Ellis v. Mu
With the issues thus drawn the case proceeded to trial. There was some evidence offered by the plaintiff, the objection to a portion of which was sustained by the trial court. That will be noted presently in this opinion. In addition to that, the plaintiff offered certain portions of a stipulation as to the facts. When the defendant introduced its evidence it offered the entire stipulation of facts, a lengthy document. The plaintiff objected to this stipulation on the ground that many of the facts were irrelevant. The court admitted it and we have the benefit of it in considering this appeal.
The court made findings of fact to the effect that on the 25th day of November, 1927, the defendant, upon application, issued to plaintiff in Oklahoma a whole life policy with double indemnity for death by accident and increased total permanent disability benefits; that the soliciting agent of defendant in negotiating with the plaintiff for the purchase of the policy showed him a booklet, which was published by defendant, purporting to estimate the dividend results on the type of policy which plaintiff purchased, as well as on other policies (this booklet is a part of the stipulation as to the facts) that plaintiff relied upon it in making his application; that defendant did in fact from 1913 to 1936, inclusive, pay exactly the same dividends on policies with and without disability benefits; that during the years 1937 to 1939 defendant paid a much smaller dividend 'in dollars and cents per $1,000 face amount of the policy on plaintiff’s policy with disability benefits than it paid in dollars and cents upon policies exactly similar to plaintiff’s policy except that they did not contain any provision for disability benefits; that for the three years, 1937, 1938 and 1939 this difference amounted to $48.35, but that plaintiff’s policy possessed the benefits which the holders of policies without disability benefits did not possess. The court
“1. The policy of insurance under consideration is a single contract with both death and disability benefits so interwoven as to constitute a single integral insurance contract.
“2. The defendant’s apportionment of its divisible surplus to the plaintiff and the group which he represented is equitable.
“3. Judgment should be for the defendant.”
Judgment was entered pursuant to those findings and conclusions —hence this appeal.
During the trial of the action the plaintiff offered to testify that the soliciting agent for the defendant advised him that he would have ordinary life benefits, increasing disability benefits and special death benefits in this policy, and that while he would have to pay a separate premium on each of these he would receive annually the same dividends on his policy as would be paid on a similar policy issued only on an ordinary life basis, and that if his dividends were permitted to remain with the company his policy would be fully paid approximately in a period of from twenty-two or twenty-three years; that it was in reliance upon these representations and other representations contained in Exhibit 4 that he purchased the policy; that it was his intention in his original negotiations with the agent to purchase the type of policy that would be paid up in a period of about twenty years and that after the discussion just referred to with the agent he decided to purchase an ordinary life policy with special benefits. The objection of the defendant to the introduction of this testimony was sustained. The action of the trial court in sustaining this objection is the first specification of error raised by the plaintiff in this appeal. That specification is argued together with others in the brief of the plaintiff. It should be noted at the outset that Exhibit 4, referred to by the plaintiff in his offer of proof, was the booklet containing illustrations of dividend results, to which reference has already been made in this opinion.
The solution of this question requires an examination of this booklet and the. court’s findings and the agreed statement of facts. In the agreed statement of facts it is stipulated that the booklet was placed in the hands of soliciting agents of the defendant and that this booklet was exhibited to plaintiff at the time he applied for his policy and that he examined the statements contained in it and relied upon them.
The court, as has been noted, found as a matter of fact that the booklet was shown to plaintiff and the plaintiff, studied it and relied ■upon it. In the stipulation, as has been heretofore noted, it was also agreed that for the years from 1913 to 1936 the same dividend had been paid on both types of policies. In view of those findings, the question resolves itself into: To what extent plaintiff was entitled to rely upon this booklet and whether or not plaintiff’s evidence as to representations made by the agent of defendant with reference to the booklet was competent.
In this connection we shall first examine this booklet. On the cover page we find that its title is “Illustrations of Dividend Results” in rather large print. At the bottom of the cover page is the statement “This leaflet issued for instruction of agents.” On the third page appears the statement “This leaflet gives accumulated dividend illustrations for policies on the following plans.” Then follows a tabulation of the different forms of policies issued by the company. After this tabulation appears the following statement:
“The dividends on which these tables are based are those of the 1927 scale,*717 and since there is no assurance that this dividend scale will continue without change for the several periods indicated, these figures are in no sense estimates of results under policies now being issued, because any increase or decrease in future dividend scales will correspondingly increase or decrease the figures given. It must be clearly understood that the results shown herein are not to be used as a basis for any promise or guarantee on the part of the Company or its representatives.”
The fifth page contains a copy of a section of the statutes of New York, which makes it a criminal offense, amongst other things, for the agent of an insurance company to misrepresent a policy. The following pages give the actual dividend per $1,000 insurance for different types of policies based on the 1927 annual dividend scale. The second line at the top of each page is the following:
“Any increase or decrease in future dividend scales will correspondingly increase or decrease the figures given.”
It is true, as pointed out by the plaintiff, the figures show the same rate of dividend for the policies with special benefits as it .shows for those without special benefits. Had plaintiff read the whole book he would have noted on the cover page the statement that the figures in it were illustrations, not representations. Had he read on he would have noted on the third page the positive statement that the results shown were not to be used as a basis for any promise or guarantee on the part of the company. It may be said that plaintiff saw only those pages of the booklet that contained the figures applying to the policy for which he was applying. In this event he is met by the statement that appears at the top of each page to the effect that any increase or decrease in future dividend scales would correspondingly increase or decrease the figures given. The effect of admitting the evidence offered would be to permit plaintiff to take the position that he was only bound to notice the statements and figures in the booklet that are favorable to his case. We cannot do that. A final answer to this question depends on provisions of the policy. The last paragraph of section 14 of that document provides as follows:
“Notice. — No agent or other person except the President, Vice-president, a Second Vice-president, or a Secretary of the Company has power on behalf of the Company to bind the Company by making any promises respecting benefits or accepting any representations or information not contained in the written application for this Policy, or to make or modify this contract, or to extend the time for payment of a premium, or to waive any lapse or forfeiture or any of the Company’s rights or requirements.”
“Where an application for a life insurance policy provides that it shall not take effect until the first premium has been paid during the good health of the insured and that no agent shall have any right to waive any requirements, and the agent attempts against definite instructions to put it into effect by delivering it to the wife of the applicant, knowing that the applicant is sick and in the hospital at the time, the insurance company will not be deemed to have waived its right to the defense of lack of good health at the time of such delivery.” (Syl. n.)
In Klein v. Farmers & Bankers Life Ins. Co., 132 Kan. 748, 297 Pac. 730, the court dealt with the same situation and held to the same general effect.
See, also, Supica v. Metropolitan Life Ins. Co., 137 Kan. 204, 19 P. 2d 465, where the question decided w'as the authority of the agent to accept less than the amount of premium that was specified in the policy. This court held:
“Where an insurance policy provides in plain and unambiguous language that the premium on the policy shall be payable semiannually, the payment to the soliciting agent of the company of an amount less than the semi-annual premium provided in the policy does not operate to keep the policy in force.” (Syl. If 1.)
See, also, West v. Metropolitan Life Ins. Co., 144 Kan. 444, 61 P. 2d 918; Stephan v. Mutual Benefit H. & A. Ass’n, 146 Kan. 307, 69 P. 2d 694, and Nixon v. Manhattan Mutual Life Ins. Co., 153 Kan. 39, 109 P. 2d 150.
These cases all sustain the position that an agent does not have
We hold, therefore, that the court did not err in refusing to admit the proffered testimony of the plaintiff as to the representations the agent of defendant made to him with reference to the dividends to be paid on the policy in question.
The plaintiff asked the trial court to enjoin the defendant from determining dividends on plaintiff’s policy in such a manner as to discriminate against plaintiff and in violation of plaintiff’s contract. It is conceded that the domicile of defendant is in New York. The granting of the relief sought would require this court to exercise the power of visitation over a corporation of another state. In Boyette v. Preston Motors Corp., 206 Ala. 240, 89 So. 746, the action was in Alabama by a shareholder in a Delaware corporation to compel the issuance of stock to the complainant. On the question of the jurisdiction of the court to entertain the action, the court said:
“The many authorities bearing upon the question are to the effect that courts of one state have no jurisdiction to exercise visitatorial or supervisory powers over the management of the internal affairs of a corporation organized and domiciled under the laws of another state, such powers belonging to the state in which the corporation was created, and by which it is continued in life. As a corollary of such rule, state courts have no jurisdiction to interfere by injunction, mandamus, or otherwise in the management of the internal affairs of a foreign corporation at the suit of a resident stockholder, even though the corporation may maintain an office and place of business in the state, and may, expressly or impliedly, agree to submit to the jurisdiction of the court in suits against it.”
In Smith v. Mutual Life Insurance Company of New York, 14 Allen (Mass.), 336, the court held, in effect, state courts, other than in the state in which a corporation is created, have no jurisdiction to exercise authority over the organization, the corporate functions, the bylaws, the relations between the corporation and its members, or to determine the rights and obligations of the corporation or its members arising under the law of its creation, such questions or matters depending on local law.
See, also, annotation in 18 A. L. R. 1376.
Many courts have considered the question of what are internal affairs of a company over which a court of another state will not exercise jurisdiction.
In North State Copper and Gold Mining Co. v. Field, 64 Md. 151, 20 Atl. 1039, in speaking of this question, the court said:
*720 “It may not be in all cases easy to draw a clear line of distinction between the acts of a corporation relating to its internal management, and those which do not. But we apprehend the distinction to be this: That where the act complained of affects the complainant solely in his capacity as a member of the corporation, whether it be as a stockholder, director, president, or other officer, and is the act of the corporation, whether acting in stockholders’ meeting, or through its agents, the board of directors, that then such action is the management of the internal affairs of the corporation, and in case of a foreign corporation, our courts will not take jurisdiction. Where, however, the act of the foreign corporation complained of affects the complainant’s individual rights only, then our courts will take jurisdiction, whenever the cause of action arises here.”
See, also, Kelly v. Thomas, 234 Pa. 419, 83 Atl. 817.
There is every reason why the rule above stated should prevent a court in this state from issuing the injunction prayed for here. The very nature of fhe business of mutual life insurance companies requires this. The statutes of New York require that the apportionment of the divisible surplus shall be equitable. (See Ins. Laws of New York, ch. 30, sec. 83.) It is conceded in the stipulation as to the facts that a calculation of the dividends to be paid on any one policy requires a taking into account of the amount contributed to the divisible surplus under every policy. A rule that would permit the courts of this state to issue the injunction prayed for would make it necessary for the company to operate subject to the rules laid down and orders made by courts in each of the forty-eight states. This would create an impossible situation.
The conclusion that has been reached on the above question makes it unnecessary to discuss the question of whether full faith should be extended to the judgment in Ellis v. Mutual Life Ins. Company of New York, 237 Ala. 492, 187 So. 434.
The judgment of the trial court is affirmed.
Dissenting Opinion
(dissenting): The question in this case is, what was the contract between the insured, plaintiff here, and the insurer? Concededly, the contract is evidenced by the application and by the policy. The real question is, what does the policy mean with reference to its classification for the payment of dividends? It does not provide how policies are classified for computing dividends to be paid to the holders of various kinds of policies issued by the insurer. The insurer prepared and furnished its soliciting agent with a booklet explanatory of how its policies were classified with respect to the payment of dividends. It is true it represented the experience of
This question was not presented nor decided by the court in Ellis v. Mutual Life Ins. Co. of New York, 237 Ala. 492, 187 So. 434. Neither was the question raised nor decided in any of the fifteen opinions: Uhlman v. New York Life Ins. Co., 109 N. Y. 421, 17 N. E. 363; Greeff v. Equitable Life Assur. Society, 160 N. Y. 19, 54 N. E. 712; Equitable Life Assurance Soc. v. Brown, 213 U. S. 25; Miller v. New York Life Insurance Co., 179 Ky. 246, 200 S. W. 482; Maddox v. Mutual Life Ins. Co., 193 Ky. 38, 234 S. W. 949; Pittsfield Bank, etc., Co. v. Equitable Life (Mass. [Dist. Ct.] 1934);
Counsel for appellant cite Forman v. Mutual Life Insurance Co., 173 Ky. 547, 191 S. W. 2d 279; Noel v. Continental Casualty Co., 138 Kan. 136, 23 P. 2d 610; Fuller v. Metropolitan Life Ins. Co., 37 Fed. 163, and Southern Mutual Life Insurance Company v. Montague, 84 Ky. 653, 2 S. W. 443, in support of their contention that the illustration from the booklet issued by the insurer and shown plaintiff at the time he made application for the policy in question, and which shows that the dividends were computed at the same rate as dividends on similar policies without special benefits, was explanatory of the policy and should be read with it. The cases cited tend to sustain that view. Counsel for appellee contend that the Forman case has been “distinguished and practically repudiated” by later decisions of the Kentucky court of appeals. I agree the later decisions distinguish the case, but not that they repudiate it. In fact, they seem to make it clear that is not being done. The Forman case was cited and followed in Thomas v. Life Assurance Society, 198 Mo. App. 533, 205 S. W. 533, and more recently cited J vith approval in Automobile Underwriters, Inc., v. Camp, 217 Ind. 328, 27 N. E. 2d 370-373.
The principle contended for by appellant is sustained in Rasmussen v. New York Life Ins. Co., 267 N. Y. 129, 195 N. E. 821. The policy there involved contained a provision for double indemnity in case of death by accident, but further provided:
“Double indemnity shall not be payable if the insured’s death resulted from . . . the taking of poison or inhaling of gas, whether voluntary or otherwise.”
The court said: “Unless ineffective for reasons in the record, this exception defeats plaintiff’s recovery,” citing Osburn v. Commercial Traveler’s Mut. Acc. Assn., 265 N. Y. 671, 193 N. E. 438. At the
“ ‘Double indemnity for accidental deaths. Experience of the New York Life in 1927, the tenth year of this feature. Double indemnity added 11,983,-060.01 to the amounts otherwise payable. Who can say that this feature is not valuable? Causes of death: . . . Carbon Monoxide, 16 . .
Plaintiff testified that in the course of solicitations for the insurance defendant’s agent suggested double indemnity, and left a similar pamphlet with her husband. The court said:
“The document offered by plaintiff is thus probative of the fact that the general words of this policy were used by both insurer and insured to connote accidental death by carbon monoxide as among the contingencies in which double indemnity would be paid. . . . Had the excluded evidence been admitted, the jury could have found that the insured was induced to accept the policy by a clear assertion that death by carbon monoxide was not to be understood as death by poison or gas within the exception to the provision for double indemnity in the event of fatal accident.”
The court quoted the American Law Institute, Restatement of Contracts, § 242, and cited 5 Wigmore on Evidence, 2d ed., §§ 2463, 2465, and earlier New York cases, and reversed the trial court. One paragraph of the syllabus reads:
“The circumstances under which parties contract may be looked at to indicate the proper choice of possible meanings of a writing even though it be not, on its face, ambiguous.” (Syl. ¶ 2.)
In the circular in that case, as in the booklet here, there was no effort to change the terms of the policy. All that was being done was explaining the policy, and the contract was made in harmony with the explanation. Other cases in which it was claimed a booklet, letter or circular influenced the applicant could be cited. In some of them the insurer was held bound and in others not, depending upon who prepared the literature and what it contained and how it was used.
The insurer here does not contend that it did not prepare the booklet in question and send the same to its agent;' neither does it contend that the agent improperly used it in soliciting plaintiff’s insurance. Neither is it contended that the booklet does not disclose that the dividend upon the policy issued to plaintiff would be computed on the same basis as dividends upon similar policies which did
The insurance law of New York (ch. 30, sec. 83), as applicable here, shortly stated, provides that on December 31 of each year the insurer shall ascertain the surplus earned by it during the year, and after setting aside sums for certain items “shall apportion the remaining surplus equitably” to the policies entitled to share therein.
The insurer here contends that since losses upon policies of the kind held by plaintiff have been somewhat greater than was anticipated, it would be inequitable to pay dividends upon plaintiff’s policy on the same basis as on policies otherwise similar but without special benefits. To illustrate this counsel present the analogy of plaintiff’s “mythical twin brother” who, on the same day plaintiff took out the policy here in question, took out a policy similar to it but without special benefits, and argue it is “inequitable” for the insurer to pay plaintiff the same dividend they would pay the twin brother. The analogy should go a little further. Let it also be assumed that the same agent took the application for both policies; that he explained the basis of the insurer for computing dividends upon each of them; that one of the policies cost more money in premiums than the other but had some special benefits, and with this knowledge the plaintiff chose one policy at greater cost to him, and his twin brother chose a similar policy but without special benefits at a less cost, and both of them knew and understood that their dividends would be computed upon the same basis. In such a situation the lack of “equitable” distribution of dividends as between them becomes “mythical.” I have rather a deep-seated notion that when competent parties, fully informed and with no intention of being unfair to each other — and in this case there is no contention that either the plaintiff or the insurer through its agent attempted to be unfair to the other — make a contract in terms which both of them understand, that it is equitable for each of the parties to carry out its part of the contract.
The circumstances which brought this controversy about are quite
In 1930 the insurance commissioner of the state of New York advised all authorized life insurance companies of his ruling pertaining to “Minimum valuation requirements for disability benefits included in life policies issued after June 30, 1930.” Since this policy was issued prior to that date, most of the ruling does not pertain to.it, but the ruling contained the following:
“On business issued prior to July 1, 1930, companies should accumulate over a period of a few years such additional reserves over and above the Hunter’s table as appear sufficient in the light of the best information available to take care of the liberal disability benefits granted in the past.”
This is the only ruling respecting the matter shown by the abstract to have been made by the commissioner of insurance of New York. I see nothing wrong with it. It fixed a date as of July 1, 1930, for the actuarial security of policies issued after that date, and required insurers to accumulate such a reserve as would take care of their obligations upon policies issued prior thereto. Apparently the appellee did so until 1937, when it appears from the abstract to have
I have only this to say with reference to the powers of the board of directors in issuing its circular in 1937, above referred to, that it had no authority to violate the contract which the insurer’s agent made with plaintiff with the full knowledge and approval of the insurer. I think the duty of the board of directors was to conform to the ruling of the insurance commissioner of the state of New York respecting business issued prior to July 1, 1930, by building up such a reserve as would take care of the liabilities of the company on its policies previously issued.
It is no financial hardship on the insurer to pay dividends on the basis of its agreement with appellant, as explained in the booklet and as actually carried out until 1937. The record in this case discloses that the insurer is a prosperous going concern. On December 31 of each year it ascertains the surplus earned by it during the year, sets aside certain items, and disburses the remainder among its policyholders. It has only the one fund to disburse, and it disburses that fund. It costs the insurer no more to disburse the fund as it had done up to 1937 than it does to disburse the fund by paying a smaller amount of it to plaintiff and a larger amount of it to plaintiff’s “mythical twin brother.” This theory of “equity” is too mythical for me to understand.
The judgment of the court below should be reversed with directions to enter judgment for plaintiff.
