James C. Roberts met his death in an automobile accident. The beneficiary, named in the life insurance policy issued to said Roberts by defendant company, seeks to recover the additional indemnity provided therein for accidental death. The defense rests upon the theory there was a forfeiture of the policy as to this additional indemnity, for nonpayment of premiums.
As to the semiannual premium due September 11, 1930, within the grace period provided in the policy, insured forwarded $100, and asked for extension for the balance due of $114, which was duly granted to January 11, 1931, with the agreement that, if not paid on that date, the policy would lapse. Roberts died on January 17, 1931, without having made the payment, and the policy therefore lapsed unless matters presently to be considered sufficed to prevent its forfeiture.
In April, 1929, insured borrowed, on the sole security of the policy, the sum of $510, and the loan was never repaid. On February 15, 1930, insured received from defendant notice of a cash dividend apportioned to his policy, payable March 11, 1930. As to this cash dividend, insured had certain options, to receive the cash, apply it to payment of premium, purchase of paid-up insurance payable in a single sum, or leave with the company to accumulate at 3 per cent., compounded annually, interest. If, within a given period after notice, insured failed to elect one of these options, the dividend was to be applied to the purchase of the additional paid up insurance. On April 29, 1930, insured by letter, directed that the dividend of $197 be applied on his loan. The letter, though received, was misfiled and overlooked, or at least the insured's direction was not complied with; but, on the contrary, the dividend was applied according to the automatic alternative of the policy, to the purchase of additional insurance. Insured died without ever having any information that his directions as to the application of the dividend had been disregarded. No revocation of these directions appears in the proof, and, on former appeal (Equitable Life Assurance Society v. Roberts,226 Ala. 8, 145 So. 157), where a more detailed statement of essential facts appears, it was held that the averment of revocation in replication 12, as framed, was material, and the cause reversed for the failure of proof in that regard.
We there approved, however, the principle (recognized by the weight of authority) that, where the insurer, at the time of default in the payment of a premium, has in his hands dividends duly declared, sufficient to meet such premium or unpaid portion thereof, and which have not been theretofore otherwise applied in accordance with the terms of the policy, or by mutual consent, a legal obligation is on the insurer to apply such dividends to the payment of the premium in order to avoid a forfeiture of the policy.
The pleadings on this trial were reframed by plaintiff so as to make applicable this principle. There were pleas, replications, rejoinders, and rulings on demurrers thereto. But the facts are undisputed and, indeed, there is here presented an agreed case under section 6095, Code, as amended by General Acts 1931, page 409; and it is agreed by all that the whole case rests upon the single proposition as to whether or not the dividend of $197 was available to be applied, and as a matter of law should be applied, to the payment of the balance of the premium due to be paid January *Page 542 11, 1931. There is therefore no occasion for any detail treatment of the several rulings on pleadings.
The dividend of $197 was the property of the insured. He had directed, in the exercise of an option provided for by the policy, that these funds be used in a certain manner — credited on his loan. His direction was disregarded, and his money used for another and wholly different purpose — purchase of additional insurance. The money was in defendant's hands, and diverted for a purpose not authorized. Defendant, prior to the direction given by insured, had money, which in equity and good conscience belonged to the insured. After such direction was given, the money was thereby effectively appropriated.
Insured had no notice of the application of his funds to the purchase of additional insurance, and they were therefore not applied by mutual consent. Nor were they applied pursuant to the directions of the insured, as authorized by the terms of the policy. On the contrary, the money was appropriated to an unauthorized purpose. Nor was there occasion for the application of the automatic alternative application in the policy, as insured had made an election, and such provision could only come into play in the absence of an expression of choice by the insured.
The situation is the same in legal effect as if insured had remitted that amount of money to the company, and directed its application to a debt for borrowed money. If he had done so and the check or cash was received from insured with that instruction, it would have operated as a payment on that debt, regardless of what sort of book entries the company may have made. That is the legal consequence of retaining the money. To avoid that result, it must have been returned to the debtor. Petty v. Dill, 53 Ala. 641; Levystein v. Whitman, 59 Ala. 345; McCurdy v. Middleton, 82 Ala. 131, 2 So. 721; Lynn v. Bean,141 Ala. 236, 37 So. 515; Brown v. Scheuer, Wise Co., 210 Ala. 47,97 So. 50; Dewberry v. Bank, 227 Ala. 484, 150 So. 463 (15).
When the debtor makes such a direction, the retention of the money finally fixes its status as thus directed, so that neither can otherwise apply it without the consent of the other. Johnson v. Thomas, 77 Ala. 367; Redd Bros. v. Todd,209 Ala. 56 (4), 95 So. 276; Lynn v. Bean, supra.
In order to sustain the right of this plaintiff, we must hold that, though the insured directed its application to his note for borrowed money, and though the company in fact applied it to purchase paid-up insurance under the automatic provision, it must be treated as not applied by either of them, and, therefore, should be treated as credited by law upon the premium. This cannot be done if either the insured or the company made an effectual application of it to some other purpose.
The proper treatment of the question may be either upon the basis of an application of it as a payment or as an election of optional rights. The right of election when it exists in a person is independent of the course pursued by some other, though he may be interested in it, but not having the right of veto. If one has a right to elect, it is inconsistent to say that such right is dependent upon what some other person may do or fail to do. Collins v. Whigham, 58 Ala. 438. Any "decisive act of a party with knowledge of his rights and of the facts indicating an intent to pursue one remedy rather than the other determines his election." 20 C. J. 19.
In State Life Ins. Co. v. Finney, 216 Ala. 562, 114 So. 132,134, it is said that "all that was required to constitute an election in accordance with the contract was that the insured give the company notice." The question there, as here, was to determine the effect of that notice upon the continued life of the policy to the death of insured. When the notice was given, the rights of the parties were determined. Their status was then fixed. Subsequent events not amounting to mutual understanding are immaterial.
Here insured knew his rights and the facts, and indicated his choice by notice to the company, which was duly received. The company thereafter had no further power to dispose of the credit; neither did any legal principle enforceable by the court control it to a different result. An election once made is final and irrevocable. Collins v. Whigham, supra; Alexander v. Mobile Auto Co., 200 Ala. 586, 76 So. 944; Mobile Towing Wrecking Co. v. Hartwell, 208 Ala. 420, 95 So. 191; Phillips v. Sipsey Coal Mining Co., 218 Ala. 296, 118 So. 513; 13 C. J. 630; 6 R. C. L. 860. The payment was complete, the right of election exercised, and the status of the parties fixed.
The judgment of the circuit court is reversed, and one here rendered denying the claim sued for.
Reversed and rendered.
ANDERSON, C. J., and BROWN, FOSTER, and KNIGHT, JJ., concur. *Page 543