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Vol. IV.)

New York LIFE INS. Co. v. STATHAM.

[No. 1.


to be paid on a new policy; or, thirty-eight dollars per annum in the case supposed, where the party is forty-five years old; whilst the present value of the premiums yet to be paid on a policy taken by the same person at twenty-five is but little more than half that amount. To forfeit this excess, which fairly belongs to the assured, and is fairly due from the company, and which the latter actually has in its coffers, and to do this for a cause beyond individual control, would be rank injustice. It would be taking away from the assured that which had already become substantially his property. It would be contrary to the maxim, that no one should be made rich by making another poor.

We are of opinion, therefore, first, that as the companies elected to insist upon the condition in these cases, the policies in question must be regarded as extinguished by the non-payment of the premiums, though caused by the existence of the war, and that an action will not lie for the amount insured thereon.

Secondly, that such failure being caused by a public war, without the fault of the assured, they are entitled ex æquo et bono to recover the equitable value of the policies with interest from the close of the war.

It results from these conclusions that the several judgments and decrees in the cases before us, being in favor of the plaintiffs for the whole sum assured, must be reversed, and the records remanded for further proceedings. We perceive that the declarations in the actions at law contain no common or other counts applicable to the kind of relief which, according to our decision, the plaintiffs are entitled to demand; but as the question is one of first impression, in which the parties were necessarily somewhat in the dark with regard to their precise rights and remedies, we think it fair and just, that they should be allowed to amend their pleadings. In the equitable suit perhaps the prayer for alternative relief might be sufficient to sustain a proper decree ; but nevertheless the complainants should be allowed to amend their bill if they shall be so advised.

In estimating the equitable value of a policy no deduction should be made from the precise amount which the calculations give, as is sometimes done where policies are voluntarily surrendered, for the purpose of discouraging such surrenders ; and the value should be taken as of the day when the first default occurred in the payment of the premium by which the policy became forfeited. In each case the rates of mortality and interest used in the tables of the company will form the basis of the calculation.

The decree in the equity suit and the judgment in the actions at law are reversed, and the causes respectively remanded to be proceeded in according to law and the directions of this opinion.

WAITE, Ch. J. I agree with the majority of the court in the opinion that the decree and judgments in these cases should be reversed, and that the failure to pay the annual premiums as they matured put an end to the policies, notwithstanding the default was occasioned by the war, but I do not think that a default, even under such circumstances, raises an implied promise by the company to pay the assured what his policy was equitably worth at the time. I therefore dissent from that part of the judgment just announced which remands the causes for trial upon such a promise.

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STRONG, J. While I concur in a reversal of these judgments and the decree, I dissent entirely from the opinion filed by a majority of the court. I cannot construe the policies as the majority have construed them. A policy of life insurance is a peculiar contract. Its obligations are unilateral. It contains no undertaking of the assured to pay premiums. It merely gives him an option to pay or not, and thus to continue the obligation of the insurers or terminate it at his pleasure. It follows that the consideration for the assumption of the insurers can in no sense be considered an annuity consisting of the annual premiums. In my opinion the true meaning of the contract is that the applicant for insurance, by paying the first premium, obtains an insurance for one year, together with a right to have the insurance continued from year to year during his life, upon payment of the same annual premium, if paid in advance. Whether he will avail himself of the refusal of the insurers, or not, is optional with him. The payment ad diem of the second or any subsequent premium is, therefore, a condition precedent to continued liability of the insurers. The assured may perform it or not at his option. In such a case the doctrine that accident, inevitable necessity, or the act of God may excuse performance has no existence. It is for this reason that I think the policies upon which these suits were brought were not in force after the assured ceased to pay premiums. And so, though for other reasons, the majority of the court holds, but they hold at the same time that the assured in each case is entitled to recover the surrender, or what they call the equitable value, of the policy. This is incomprehensible to me. I think it has never before been decided that the surrender value of a policy can be recovered by an assured unless there has been an agreement between the parties for a surrender, and certainly it has not before been decided that a supervening state of war makes a contract between private parties, or raises an implication of one.

Mr. Justice CLIFFORD, dissenting. Where the parties to an executory money contract live in different countries and the governments of those countries become involved in public war with each other, the contract between such parties is suspended during the existence of the war and revives when peace ensues; and that rule, in my judgment, is as applicable to the contract of life insurance as to any other executory contract. Consequently I am obliged to dissent from the opinion and judgment of the court in these cases.

Mr. Justice HUNT concurs in this dissent.

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(To appear in 43 Md.)




A building association was organized in August, 1871, under the act of 1868, ch. 471,

the general incorporation law of the state, and by the 9th and 11th articles of its association, it was provided that its board might issue promissory notes on mortgages only, and that such notes should always be drawn to the order of the mortgagor, who should in all cases indorse the note thus drawn. The president, secretary, treasurer, and three directors were authorized to sign all promissory notes issued by the association. Under the authority of these articles the association issued its note to the appellees instead of money, for which a mortgage was given. The note was strictly in form a promissory note, payable to the order of the appellees. It was drawn at sixty days' time, and payable at a certain named bank ; and was signed by the officers designated in the articles of association to execute promissory notes. In one corner of the face of the note there was the type or emblem of what was alleged to be the seal of the corporation; this alleged seal consisted simply of an emblem or symbol printed by the printer at the time when the printed blank note was struck. The note was indorsed by the payees, and by them negotiated, and at maturity was duly presented for payment, and was dishonored and protested, and notice given by the notary to the said indorsers, and payment duly demanded of them. Suit was brought on the note by the indorsees against the indorsers, who contended that they were not liable by rea

son of their indorsement, because the instrument sued on was a single bill. Held :: 1. That the note sued on was a negotiable promissory note, and by the indorsement

thereof in the ordinary way, the indorsers became liable. 2. That the nature of the transaction itself, the objects and purposes to be subserved

by the issue of the note, as well as its form, indicated that the parties must have understood that the note was negotiable, and that it would be so accepted and dealt

with by the commercial community. 3. That the symbol or printed representation of the seal, if it be conceded to be a

sufficient seal, was not printed on the note to restrain its negotiability, or to change it

into a specialty, but rather as a mark of genuineness. 4. That the note in no manner depended upon the seal for its validity, but derived its

entire authenticity from the signatures of the officers authorized to execute it.

APPEAL from the superior court of Baltimore city.

This was an action of assumpsit brought by the appellants against the appellees as indorsers of the following promissory note:



BALTIMORE, June 21, 1873. Sixty days after date, Old Town Permanent Building Association promises to pay to the order of Myers Brothers, nine hundred dollars, with interest, for value received, payable at the German Savings Bank.

Thomas H. Boyer, Pres't.
Robt. L. Dickey, Sec'y.

A. S. Miles, Treas. G. S. Windsor, Martin Zirpe, John A. Stokes, Directors. (Seal of Old Town Permanent Building Association.) On the margin of the note was the memorandum: “ This note is issued on mortgage of Myers Brothers, left for record June 18, 1872.

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The words of the note italicised were written with a pen, and the words or portions not italicised were printed ; and the circle around the words “Seal of Old Town Permanent Building Association," as well as the words themselves, were printed ; and it was proved that the said words and circle, and other printed portions, constituted a printed form used by the officers of the corporation in writing the promissory notes issued under articles nine and eleven of the constitution, and that many such notes had been issued and negotiated. The genuineness of the signatures to the note, as also of the indorsement of the defendants thereon, was proved by the plaintiffs.

It was admitted that the Old Town Permanent Building Association was incorporated on the 31st of August, 1872, under the act of 1868, ch. 471, the general incorporation law of the state. Article 9 of the constitution of the association was as follows:

“ Sec. 1. The board may issue promissory notes on mortgage only, and must always be drawn to order of mortgagor. When a transfer of mortgage is executed, all notes must be lifted or new ones drawn to order of the new mortgagor, and in case of renewal of notes the new ones must also be drawn to order of the mortgagor, and mortgagor must in all cases indorse the notes when to his or her order.

“ Sec. 2. The board may accept or negotiate promissory notes of any good, responsible building association, or other corporation in good standing and credit, in payment for stock in this association, and on terms to be arranged by the board."

Article 11 was as follows:

" The president, vice-president, secretary, treasurer, comptroller, and directors shall constitute the board for the transaction of such business as shall be intrusted to them by these articles, a majority of whom shall constitute a quorum. They may hold special meetings whenever called by the president. They shall have the general supervision of the affairs of the association, and the duties of its officers. The president, secretary, treasurer, and three directors shall sign all promissory notes issued and authorized by the association. They shall incur no expense, except providing for the necessary accommodations of their own and regular meetings, when authorized to do so by a vote of this association. They shall judge of the sufficiency of all mortgages and other securities offered to this association."

The plaintiffs proved by one Rennolds that in 1872 the defendants told the witness they had a good building association note — naming the Old Town Permanent Building Association as the maker - indorsed by themselves, which they wanted to negotiate ; he thereupon informed Miss Priscilla Lynch (since married, and one of the appellants), who upon his advice authorized him to take the offered note; with her money he paid the defendants nine hundred dollars, less an agreed discount, and received the note from them and gave it to the said Priscilla. That the note so negotiated was dated June 18, 1872, and was payable twelve months after date to the order of the defendants; was indorsed by them in blank, and was otherwise like the note sued on. A mortgage executed to the Old Town Permanent Building Association by the appellees, dated June 18, 1872, and duly recorded, was offered in evidence, and admitted to be

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the same mortgage referred to in the margin of both of said notes. When the twelve months' note was about maturing, the appellees applied to Rennolds, as he testified, to have it renewed for sixty days; he saw Miss Lynch, and she consented to take a renewal of the note with indorsement of the appellees; that one of the appellees brought him the note sued on, and the original or twelve months' note was surrendered.

The note sued on was presented at maturity for payment, was dishonored and protested, and notice given by the notary to the appellees as indorsers, and payment duly demanded of them. Rennolds further testified that before the note matured he told the appellees that he intended, on behalf of Miss Lynch, to have it protested if it were not paid, and to hold them responsible; and that was why he had insisted upon their indorsing it; they never denied their obligation to pay the note; but after it was due, admitted they owed the money, promised to pay it, and said they were making negotiations to raise money for the purpose, and requested that no suit should be brought upon the note; and it was upon their request that suit was not sooner brought.

Thomas H. Boyer, on the part of the defendants, testified that in 1872, and subsequently, he was President of the Old Town Permanent Building Association; that the note dated June 18, 1872, was issued to the defendants under article 9 of the constitution, on the mortgage offered in evidence; that no money was paid by the association to the defendants, but the note was accepted by them as money.

The witness further testified, subject to exception, pointing to the printed impression on the note sued on, “ that is the seal of the association — that is our seal; we had no other seal; we recognized and adopted that seal when the note was filled up; that particular seal in that particular case was recognized as ours ; all the officers who signed that note recognized that as our seal."

On cross-examination, the witness testified: “ There was no action of the board of directors, that I know of, recognizing the seal; the only recognition of it was the issue of the notes with it upon them.”

Prayers were offered on both sides, but their insertion is deemed unnecessary. The defence set up was that the note in question was to be regarded as a sealed instrument, and that therefore the defendants were not legally responsible on their mere indorsement; and this defence was sustained by the rulings of the court. The verdict and judgment were for the defendants, and the plaintiffs appealed.

The cause was argued before Bartol, C. J., Stewart, Miller, Alvey, and Robinson, JJ.

William A. Fisher of Arthur W. Machen, for the appellants. The writing in question, upon the evidence, was a promissory note, and not a specialty. The instruments the board of directors of the association were authorized to issue were called promissory notes; and the definition of a promissory note is a promise in writing payable to order or bearer, and “signed but not sealed.” Byles, ch. 2. Farther, it is expressly said that they are to be drawn to order ; which cannot effectively be done unless the instrument is negotiable. It is required that they shall be drawn to the order of the party to whom they are issued, and that he must indorse them; and “the effect of indorsing is a conditional contract

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