Prudential Ins. Co. of America v. Faulkner

68 F.2d 676, 94 A.L.R. 1160, 1934 U.S. App. LEXIS 4940

• Court: Court of Appeals for the Tenth Circuit
• Decided: January 12, 1934
• Docket: 839
• Status: Published

Opinions

BRATTON, Circuit Judge.

The parties will he denominated as they were in the trial court. Defendant issued a group insurance policy insuring certain of its employees, including plaintiff. The policy provides, among other things, that if any person insured under its terms shall become totally and permanently disabled, either physically or mentally, from any cause whatsoever to such an extent that ho is rendered wholly, continuously, and permanently unable to engage in any occupation or perform any work for compensation during the remainder of his life, the company will waive further payment of premiums so far as such person is concerned and will pay him the amount of the insurance either in one sum six months after receipt of proof of such disability, or in sixty monthly installments in the sum of $17.95 for each $1,009 specified, the first installment to be paid immediately after receipt of proof of disability, and subsequent ones on the first of each month thereafter.

Pursuant to the provisions contained in such policy, three certificates of insurance were issued to plaintiff while ho was employed by defendant, the first two being for $2,000 each, and the third being for $4,-000. Each of them provides that if plaintiff becomes totally and permanently disabled while the policy is in force and effect, the company will pay him the amount specified either in one sum or in monthly installments conforming to the group policy.

Plaintiff sued in three causes of action, each cause seeking to recover on one of the certificates. He alleged that the certificates were in force and effect; that all premiums thereon had been paid; that he was an employee of the company; that he was under the age of sixty years; that he suffered from chronic organic heart disease, chronic myo-carditis with angina pectoris, ehronie bronchitis, and severe nervous instability; that resulting from such disability he was then and had been for more than six months preceding the institution of the suit totally and permanently disabled; that he would be so throughout the remainder of his life; that proof of such impairment had been furnished and payment refused. Defendant denied the several allegations of disability, and in addition thereto it alleged that the group insurance policy expressly provides that it shall cease upon termination of employment of any employee; that plaintiff’s employment terminated on April 12, 1932; and that the insurance ceased so far as it affected him on that date. The jury returned a verdict as follows: “We, the Jury, duly empaneled and sworn in the above entitled cause find the issues joined in favor of the plaintiff and against the defendant in the sum of $8000.00, which said total sum, at the option of the defendant, shall be paid on or before six months after the - day of August, 1932, or in sixty monthly installments of $143.60 on the first of each and every month beginning with the month of August, 1932, of which there are four installments now unpaid — in the sum of $574.40.”

Judgment was rendered for plaintiff. After reciting formal matters and after quoting the verdict, it concludes with these provisions :

“And the defendant having requested the court to give the following instructions to the jury, ‘If under the instructions given you you find a verdict for the plaintiff, you will assess his damages in the sum of $143.60, with interest thereon from August 3, 1932, at the rate of eight per cent per annum,’ and having elected thereby to exercise its option to pay the amount of the aforesaid judgment in monthly installments.

“Wherefore, it is ordered and adjudged by the court that the plaintiff, Robert Faulkner, recover of and from the defendant, Prudential Insurance Company of America, a corporation, the sum of $8000.00 in sixty monthly installments of $143.60 payable on the first day of each and every month, commencing with the 1st day of August, 1932, of which there a.re four installments now unpaid in the amount of $574.40; and that the plaintiff have and recover judgment against said defendant for his costs herein incurred to be taxed upon a verified cost bill, and that he have execution therefor.”

Defendant perfected this appeal in seasonable time and in proper mode.

The first assignment of error argued relates to the admission of plaintiff’s testimony that he served in the World War; that he participated for three days in the battle at Argonne; that it was a furious battle; that the noise from explosion of shells was very great; that a shell exploded near him; that it threw him about fifty feet; that he was rendered unconscious; that he lay in mud and water until he was rescued by an officer; and that his fingers were blown off. The only objection interposed to the introduction of such testimony was that it was immaterial. Plaintiff’s allegation of nervous instability was a material one and the testimony was pertinent to establish it. It requires no argument to demonstrate that an experience of that unusual character is reasonably calculated to affect one’s nervous system, and it is easily conceivable that the effect of sueh an ordeal may manifest itself in different ways years afterwards. A general objection that tendered testimony is immaterial is not sufficiently definite to direct the court’s attention to specific grounds of inadmissibility. Obviously, the objection interposed was untenable.

It is urged here that the testimony was offered for the plain purpose of enlisting the sympathy of the jury and that it inflamed their mind's. That is a new and different ground of objection not urged in the trial court. It is presented here for the first time. For that reason alone the contention cannot be sustained. But aside from that consideration and assuming that such an objection was seasonably made during the progress of the trial, it is without merit. The true test of admissibility of testimony in a situation similar to the one presented here is its relevancy and materiality. Testimony pertinent to a material issue will not be excluded merely because it may have a prejudicial effect on the opposing party or may arouse the jury. Hussmann v. Leavell & Sherman (Tex. Civ. App.) 20 S.W.(2d) 829; Pease v. Smith, 61 N. Y. 477; Vicksburg & J. R. Ry. Co. v. Patton, 31 Miss. 156, 66 Am. Dec. 552; Hiller v. Village of Sharon Springs, 28 Hun (N. Y.) 344; Orscheln v. Scott, 90 Mo. App. 352; Carrico v. West Virginia Central I. P. Ry. Co., 39 W. Va. 86, 19 S. E. 157, 24 L. R. A. 50; State v. Moore, 80 Kan. 232, 102 P. 475. The evidence, being relevant to a material issue, was properly admitted although it may have stirred the sympathy of the jury in favor of plaintiff. From a careful and painstaking examination of the entire record we do not believe it unduly upset the balance between the parties.

It is contended that the court should have instructed a verdict for defendant because the evidence fails to show that plaintiff became totally and permanently disabled ..within the meaning of the policy while it was in force. Plaintiff was employed by defendant from May, 1923, to February, 1932. His duties consisted of soliciting insurance and collecting premiums on insurance policies. Dr. Clawson, a qualified and practicing physician, testified that he examined plaintiff several times between April, 1931, and October, 1932; that on each occasion he found the existence of angina pec-toris, mitral insufficiency of the heart muscle, chronic bronchitis, and nervous instability. Dr. Anderson examined plaintiff in April, 1931, June, 1932, and October, 1932. Dr. Stevens was called to his home and examined him in January, 1931. Each of them testified to virtually the same condition as that described by Dr. Clawson. Plaintiff, his wife, and four other witnesses each testified that beginning in 1931 he suffered severe attacks of pain; that he was compelled to lie down for two or three hours at a time when thus stricken; that he plaeed his hand over his heart; that he perspired heavily and looked pale; that when stricken away from home, it was necessary to carry him home and to aid him to enter the residence. Plaintiff testified in detail with respect to the extreme pain in the upper region of the heart; that it traveled upward and extended to his left shoulder and left arm; that it felt as though the heart was being penetrated with a sharp knife; that the attacks recurred sometimes once a week and sometimes once in two weeks; and that he was extremely weak and sore for several days after each attack. The testimony clearly justified the court in submitting the issue to the jury and it abundantly sustains the finding of total and permanent disability within the purview of the policy.

Defendant challenges the verdict and judgment on several grounds. It asserts that the verdict is ambiguous, uncertain, and beyond the issues raised by the pleadings; that the judgment is indefinite, ambiguous, inconsistent, not supported by the pleadings or verdict, and beyond the jurisdiction of the court. It also urges that the court erred in refusing to instruct the jury that its liability was limited to $143.60, that being the amount of one monthly installment. The several contentions emanate from the alternative provision in the insurance contract for payment either in one sum or in installments, and may be disposed of together. Under the terms of the policy, defendant was obligated to pay plaintiff either in one sum or in installments if he became totally and permanently disabled under the age of sixty years and while employed by defendant. He became disabled at the time and in the manner he asserts. The jury so found and that finding rests upon substantial evidence. Defendant had the right to elect between the two methods of payment. If the lump-sum mode wore selected, payment was to he made six months after receipt of proof of disability, and if the installment plan were chosen, the first payment was to be made immediately upon receipt of such proof and monthly thereafter. It wrongfully refused to compensate him in either method, although proof of disability, subsequently sustained by the jury, was submitted to it, and the time authorized by either plan has long since expired. Such refusal constituted a breach of the contract — a repudiation of an obligation enjoined by its provisions. The election between the two methods is a privilege to he exercised by the insurance company when it admits liability, not after it has repudiated and resisted unavailingly. It is not a right coexistent with denial of liability in any form after the specified time for payment has expired. One who repudiates his obligation under a contract cannot thereafter exercise an, election contained in its provisions. Having assumed and still maintaining that attitude, the company waived its right to elect between the alternative methods of payment and thereupon became liable for the full amount in one sum.

The contract reviewed in the early ease of Choice v. Moseley, 1 Bailey (S. C.) 136, 19 Am. Dec. 661, provided that it should he discharged on or before a specified day through payment of money or by delivery of a horse. The obligor sought to discharge it after that date by the latter method. The court held that his right of election could not he exercised subsequent to’ the specified time. That case was cited with approval in a,n excellent statement of the doctrine made by Hon. D. Lawrence Groner, then Commissioner, afterwards Judge of the United States District Court in Virginia, and now a member of the Court of Appeals of the District of Columbia, in Grace & Co. v. Luckenbach S. S. Co. (D. C.) 258 F. 49, 53. It was said: “In order to apply these general principles to the facts as shown by the evidence at hand, the first question which arises is the amount of tonnage as to which defanlt was made. The contract, as has been repeatedly shown, provided specifically that the steamship company should furnish to Grace & Co. freight room for 75,000 tons; hnt it is insisted by the steamship company that, since this clause of the contract contained an option to it to reduce this amount 10 per cent., it was in fact liable only for the carriage of 67,500 tons, less the amount actually carried. In other words, it' now insists that after its breach of contract it has the right to exercise the option, and that, instead of 75,000 tons of nitrate, it may and does elect to bo hound only to the lesser extent. There is, I think, no question that, if the contract had not been violated, the steamship company could have claimed fulfillment of its obligation when and after it had delivered freight room for 67,-500 tons, hnt another and different question arises under the circumstances here. During the period of its recognition of the contract, confessedly it made no specific election. If there were nothing more in the case, I should unhesitatingly conclude that the status of the contract was at the time of its breach identical as at the time it was made, for I take it that the rule is very clear that, when one contracts in the alternative to do one of two things within a given time, he has until the time is past the right to elect which of them he will perform, but, if he suffers the time to elapse without performing either, his contract is broken and Ms right to elect is lost.” As disclosed by the opinion in that case, the District Court approved and adopted the report of the Commissioner, as to both reason and conclusion. The Circuit Court oE Appeals likewise adopted it with respect to the measure of damages and the statement just quoted entered into that question. Luckenbach S. S. Co. v. W. R. Grace & Co., 267 F. 676. Certiorari was denied. 254 U. S. 644, 41 S. Ct. 14, 65 L. Ed. 454. The reason supporting the rule is so well stated that nothing need be added.

The general principle thus declared has been applied in cases where the election related to alternative methods for the payment of disability insurance, that is to say, between a lump sum and insiolhnents. In Milburn v. Royal Union Mutual Life Ins. Co., 209 Mo. App. 228, 234 S. W. 378, 381, the insurance policy was for $6.000 payable in two hundred and forty equal installments of $25 each. The company denied liability for $6,000 and contended that by reason of nonpayment of px-eminm it was liable for only $428. The court held that it was lia ble for the full amount; that having thus denied liability and having defaulted in some' of the monthly installments, it should be paid in a lump sum. The court said:

“It is well settled that the law frowns upon a multiplicity of cases where one action will suffice. Defendant’s position that in the instant ease the judgment should have been rendered, in any event, only for the installments then due, is contrary to this well-known principle of law. Plaintiff cites Knisely v. Leathe, 256 Mo. 341, 166 S. W. 257, in support of his contention ’that the law of this state is well settled that when defendant failed to perform its contract and defaulted, all the installments thereby became due and payable.

“We think this is good law and applies in this ease. This is a suit on contract, and the principle that, defendant being in default in making payments as prescribed in the contract, the full amount became due and payable, is controlling. This principle is so fundamental that citations are unnecessary.”

Travelers’ Insurance Co. v. Turner, 239 Ky. 191, 39 S.W.(2d) 216, 219, involved a group insurance contract containing provisions quite akin to those under consideration here. There, the insurance 'company denied liability — just as was done here — asserting that the employee did not become totally and permanently disabled while employed by the company carrying such insurance. The jury found for plaintiff. The insurance company then contended that it had the right to make payment in installments. The court rejected that contention. In doing so, it said: “The reason for the rule of these cases is that the elections concerning the mode and time of payment reserved to the insurer in its policy of insurance are obviously meant for its protection where it acknowledges liability, but, where it repudiates liability, it at the same time waives all of its elections to pay such repudiated liability.”

That doctrine was reaffirmed in the subsequent ease of Hancock Mut. Life Insurance Co. v. Cave, 240 Ky. 56, 40 S.W.(2d) 1004, 1006, likewise involving a group policy quite similar to the one under consideration here. After denying liability and being defeated in that contention, the insurance company asserted its right to pay by installments. The court said: “It is the settled rule that denial of liability waives the option to pay in installments, even under a contract of that character, and it necessarily follows that such conduct would operate as a waiver of a right to have a third party fix the amount of the installments. The court did not err in rendering a judgment for the full amount due the plaintiff.”

The pertinent portion of the policy under consideration in Travelers’ Protective Ass’n v. Stephens, 185 Ark. 660, 49 S.W.(2d) 364, 368, provided for payment of $25 per week for a period not exceeding one hundred and four weeks if the insured became totally disabled. Suit was instituted and judgment rendered during that period. The company there, as here, defended on the ground that there was no permanent disability and consequently no liability. Plaintiff recovered for the full amount; that is to say, for the one hundred and four weeks. The court said: “It is strongly insisted by the defendant that the court erred in allowing the plaintiff to recover for total disability for 104 consecutive weeks, as provided in the policy, when the trial of the ease took place within a shorter period of time. Defendant’s contention now is that it was entitled to a reduction of the amount recovered to the value at the time the trial was had. We do not agree with defendant in this contention. The defendant denied that it was liable to the plaintiff in any amount under the terms of the policy. It did not offer to pay him the weekly indemnity for total disability as long as such disability should continue. It sought to defeat his claim altogether. The jury only allowed the plaintiff to recover for the period of time provided for in the policy. In railroad damage cases, recovery for permanent disability is allowed for a period of time according to the life expectancy of the plaintiff shown by mortality tables prepared by insurance companies. In the case at bar defendant was only required to pay for the time it agreed to do so in its contract of insurance.” i

It has been held that upon breach of a contract of insurance payable in future installments, the insured may recover damages consequent upon such breach. The recovery in such circumstances is the present value of the installments, past and future, based upon the specified rate of payment during the provided period, or throughout the life expectancy of the insured, as the ease may be. Metropolitan Life Ins. Co. v. Day, 145 Ga. 425, 89 S. E. 576; National Life & Accident Ins. Co. v. Whitfield, 186 Ark. 198, 53 S.W.(2d) 10; Sun Life Assur. Co. v. Coker (Ark.) 61 S. W.(2d) 447. One of the leading eases falling in this class is Federal Life Insurance Co. v. Rascoe (C. C. A. 6) 12 F.(2d) 693, 696, in which Milbum v. Royal Union Mutual Life Ins. Co., supra, was cited with approval. There plaintiff sought recovery upon a policy which obligated the insurance company to pay her $25 per week so long as she suffered total disability from accidental injury sustained while a passenger on a common carrier for passenger service. She charged that she was injured while a' passenger on a train _of the Louisville & Nashville Railway Company; that her injuries were total and continuous; that she would continue to he thus disabled during ■the remainder of her life; that the sum of $840.37 had been paid, covering hospital expenses and the weekly installments from May 16, 1922, to January 2, 1923; that on the latter date further payments were refused. By an amended declaration she averred that the action of the company in refusing to make further payments constituted an abandonment, breach, and repudiation of the contract. She sought damages for such breach. Trial by jury was waived. The trial court rendered judgment for plaintiff in the sum of $21,518.98. Defendant contended in the appellate court that the amended pleading failed to state a cause of action because it was sought to recover upon an anticipatory breach of a unilateral contract for the payment of money at a future time. The court disagreed with that contention. It said: “This is a single contract. The fact that defendant is required to perform in part at stated intervals does not change its unitary character into a multiplicity of contracts, each relating to but one installment. If there has been an actual breach, coupled with repudiation, of this one contract, then, to avoid a multiplicity of suits, public policy requires that plaintiff may maintain but one action for the entire damages occasioned by such breach.” The ease was decided by a divided court. Certiorari was denied. 273 U. S. 722, 47 S. Ct. 112, 71 L. Ed. 859. The judgment being for damages computed on the basis of $25 per week during life expectancy was closely akin, if not tantamount in result, to recovering future payments under the policy. Such recovery was sanctioned because the company had breached the contract by failing to make payment at the time and in the manner provided. So, as previously said, it follows frota the verdict of the jury in this ease that defendant brea.ehed the contract when it failed and refused to make payment in one of the authorized methods touching time and amount, following receipt of proof of disability.

The policy involved in Ætna Life Ins. Co. v. Phifer, 160 Ark. 98, 254 S. W. 335, 337, provided for payment at the rate of $20 per month during permanent disability. The insured submitted proof of such disability. The company refused payment. Insured alleged wrongful breach of the contract and sought damages in the sum of $2,-000. A ver diet was returned and judgment entered in his favor for $1,000. The court said: “This denial of liability justified appellee, who was not in default, in treating the contract as breached and suing for gross damages, which he did. The measure of h:s damages was the amount appellant would have been required to pay him under the contract, if it had not breached it, reduced to its present value. According to the mortuary tables introduced in evidence, appellee had an expectancy of 28.18 years. The payment provided for in the contract of the $2,-000 policy was $20 a month. The present value thereof, according to appellee’s expectancy, was more than $1,000.”

It has been held that recovery cannot he had for future installments. Robinson v. Exempt Fire Co., 103 Cal. 1, 36 P. 955, 24 L. R. A. 715, 42 Am. St. Rep. 93; Mid-Continent Life Ins. Co. v. Walker, 128 Okl. 75, 260 P. 1109; Atkinson v. Railroad Employees Mut. Relief Society, 160 Tenn. 158, 22 S.W.(2d) 631. But in those eases and others to the same effect, only one method of payment was provided. No question of the right of a party to exercise the privilege of election between two methods of payment after breach of the contract was involved or decided. And recovery in advance of the due date likewise has been denied unless the contract he executory on both sides, that is, requiring future performance of interdependent obligations. Roehm v. Horst, 178 U. S. 1, 20 S. Ct. 780, 44 L. Ed. 953; Moore v. Security Trust & Life Ins. Co. (C. C. A. 8) 168 F. 496; Parks v. Maryland Casualty Co. (D. C.) 59 F.(2d) 736; Kithcart v. Metropolitan Life Ins. Co. (D. C.) 1 F. Supp. 719; Wyll v. Pacific Mut. Life Ins. Co. (D. C.) 3 F. Supp. 483. But that question is not involved or decided here. We do not hold that plaintiff is entitled to recover for future installments, or in damages measured by their present value. Our conclusion, is that by its failure and refusal to pay the insured within the time and in the manner specified in either method, by allowing such time to pass long' since, thereby breaching the contract, defendant surrendered its right to elect between the two methods.

The court instructed the jury definitely that they could not return a verdict for plaintiff unless they found that he became and was totally and permanently disabled while under sixty years of age and during his employment by defendant. Under such instructions, the jury found those facts in his favor. That finding and the further one that he should recover in the total sum of $8,000 rendered the verdict complete. The remainder respecting payment in one sum or in installments was surplusage. Surplusage in a verdict may be disregarded by the court in entering judgment thereon. Pennsylvania Ry. Co. v. Logansport Loan & Trust Co. (C. C. A. 7) 29 F.(2d) 1; Dextone Co. v. Building Trades Council (C. C. A. 2) 60 F.(2d) 47; Doty v. Western & Southern Life Ins. Co., 223 Mo. App. 360, 16 S.W.(2d) 712; Hall v. McClure, 112 Kan. 752, 212 P. 875, 30 A. L. R. 782; Lake Erie & W. R. Co. v. Halleck, 78 Ind. App. 495, 136 N. E. 39; Scrambling Co. v. Tennant Drug Co., 25 Ohio App. 197, 158 N. E. 282; Pearson v. Arlington Dock Co., 111 Wash. 14, 189 P. 559. Judgment should have been rendered for $8,000. The remainder of the verdict should have been disregarded.

We are mindful of the eases of United States v. Worley, 281 U. S. 339, 50 S. Ct. 291, 74 L. Ed. 887; Id. (C. C. A.) 42 F.(2d) 197, United States v. Winkler (C. C. A. 8) 52 F.(2d) 369, and others in harmony therewith, holding that in a suit upon a war risk insurance contract, judgment may not he entered for future installments. The rule, obtaining in eases of that character, is founded upon relevant statutory provisions relating exclusively to such cases. Section 512, 38 USCA, provides that, except as otherwise specified therein, the insurance shall he payable in two hundred and forty monthly installments. Section 514 provides that if the designated beneficiary does not survive the insured, or dies before receiving all of the two hundred and forty installments, the estate of the insured shall receive the present value of the installments thereafter to be paid. Both sections of the statute are mandatory. The United States gave its consent to be sued with those limitations attached and, of course, it had a perfect right to do that. Obviously, the judgment could not include future installments, because if the beneficiary should die during the two hundred and forty months’ period the United States would immediately become liable, under section 514, to the estate.of the insured for the then value of the installments properly maturing thereafter, thus bringing about a double liability. The statute specifying that the insurance shall be payable in monthly installments is mandatory; it is not optional, and no authority is vested in any ageney to waive it or make the method of payment optional. No such strictures were imposed upon the parties in the ease now under consideration. In determining their contractual obligations, they appropriately provided the alternative methods of .payment subject to the election of the insurance company.

i We find no error in the trial proceedings, hut the judgment on the verdict should have been entered for $8,000 and costs. Tho cause is remanded to the lower court, with directions to modify the judgment in accordance-herewith, and as so modified, it will stand affirmed.