[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 335 October 19, 1928. *Page 348
The opinion of the Court was delivered by The plaintiffs, Mamie M. Lane and Joe P. Lane, instituted two actions against the defendant, New York Life Insurance Company, in the Court of Common Pleas for Dillon County, for the reinstatement of two policies, Nos. 6926302 and 6926303, in the defendant company, issued upon the life of the plaintiff, Joe P. Lane, with Mamie M. Lane, his wife and co-plaintiff, named as the beneficiary in the policies, each policy being for the sum of $3,000. The pleadings in the cases are practically the same, and, by agreement, the cases were tried and heard together before his Honor, Judge E.C. Dennis, on the testimony taken before the Master for Dillon County, to whom the cases were referred for that purpose only. From the decree of his Honor, Judge Dennis, which was in favor of the plaintiffs, the defendant has appealed to this Court, upon exceptions which will be reported.
His Honor, Judge Dennis, after having issued the decree above mentioned, bearing date September 19, 1925, later issued a supplemental decree, dated September 26, 1925, requiring the plaintiffs, within 20 days from the filing of his decree, or, in the event of an appeal to the Supreme Court in the actions, within 20 days of the filing of the remittitur, or any final decision in the cause, to pay or tender payment of the amount of all premiums due and unpaid at this time, together with interest from the date of the checks offered in evidence by the plaintiffs as covering some of the premiums involved, and with a provision for the payment of interest on the other premiums, and, further, ordering and declaring the policies null, void, and of no effect in case of failure to comply with the said order. The plaintiffs appealed from this supplemental decree.
The transcript of record contains a description of the complaint in but one case, that involving policy No. 6926303, but it is stated in the record that the complaint in the other *Page 349 case is identical, except as to one paragraph, to which we shall hereafter call attention.
The pertinent allegations of the complaint in the case under consideration, that involving policy 6926303, are, in substance, that, the defendant, for and in consideration of a premium of the sum of $109.62 paid to it, issued this policy upon the life of the plaintiff, Joe P. Lane, in the sum of $3,000, with his wife, Mamie M. Lane, named as the beneficiary; that subsequently, February 15, 1922, the plaintiff, Joe P. Lane, and the defendant entered into a contract whereby the premiums mentioned in the policy were changed from annual to semiannual payments, and that the plaintiffs have complied with all the obligations and duties devolved upon them, under the terms of the policy and subsequent change or contract; that, notwithstanding these facts, the defendant, on or about the 29th day of June, 1922, wrongfully and unlawfully attempted to cancel said policy of insurance, as a valid and outstanding contract, without any cause or reason therefor. The complaint contains, further, allegations to the effect "that plaintiff's rights and interests under said policy of insurance are valuable, and that the plaintiffs are entitled that said contract be recognized by the defendant, and the defendant be required to maintain and recognize the said contract as valid, binding and outstanding obligation, and that said defendant had no right to cancel or forfeit said contract," and "that the attempt on the part of the defendant to so forfeit and cancel said contract is an injury to these plaintiffs." The complaint closed with a prayer for appropriate relief.
As stated, the complaint in the other case, according to statement in transcript, is identical with the foregoing, except as to paragraph 4, "where the policy is copied, the terms of the policy not being the same," the policy number is 6926302, and the premium is $106.98.
The defendant in its answer, under the first defense, admitted that, as a corporation engaged in the life insurance *Page 350 business, it issued the policy in question, but denied the other material allegations of the complaint, except these specifically admitted under its second defense. Under defendant's second defense, defendant admits having entered into a written agreement with the plaintiff, Joe P. Lane, February 15, 1922, whereby the manner of payment of premiums under this policy (No. 6926303) was changed from the annual basis to a semiannual basis, beginning with the first premium on March, 1922; and alleged that the semiannual premium on this policy was $57, and alleged that on March 9, 1922, the insured, Joe P. Lane, paid to the defendant the sum of $10.50 and signed a form of blue note agreement whereby the time for the payment of the premium was extended to June 9, 1922, and at that time the cashier of the defendant's office at Columbia, S.C. gave a receipt on a regular form for that purpose to the insured, Joe P. Lane, and that said receipt set forth the form of note given as stated, and that under the terms of said receipt and note it was provided:
"That if this note is paid on or before the date it becomes due, such payment, together with said cash, will then be accepted by said Company as payment of said premium, and all rights under said policy shall thereupon be the same as if said premium had been paid when due; That if this note is not paid on or before the day it becomes due, it shall thereupon automatically cease to be a claim against the maker, and said Company shall retain said cash as a part compensation for the rights and privileges hereby granted, and all rights under said policy shall be the same as if said cash had not been paid or this agreement made, except only that the time within which the owner may make a choice of benefits after lapse, as provided in said policy, is hereby extended for three months after the due date of this note, but no longer; That said Company has duly given every notice required by its rules or by the laws of any state in respect to said premium, and in further compensation for the rights and privileges hereby granted the maker hereof has agreed *Page 351 to waive and does hereby waive, every other notice in respect to the said premium or this note, it being well understood by said maker that the said Company would not have accepted this agreement if any notice of any kind were required as a condition to the full enforcement of all its terms."
The defendant further alleged that the said insured failed to pay the amount stated in the note agreement on or before June 9, 1922, and that the policy lapsed as of the due date of the premium, to wit, March 9, 1922, and that of which fact the insured, Joe P. Lane, was thereafter advised; that on June 29, 1922, the insured wrote defendant's Columbia, S.C. branch office, stating that he had been under the impression that the note was due July 9, 1922, and not June 9, 1922, and inclosed his check for a sum sufficient to pay the note in question, and the check was returned to the insured, and the insured advised by defendant's Columbia, S.C., office, that he might apply for reinstatement and remit with this application the amount necessary to pay the note, and that such "remittance would be held subject to insured's order pending the Company's consideration of the application." Thereafter, on or about July 10, 1922, the insured sent to the Columbia branch office the said application for reinstatement, and a letter or statement from a certain doctor in the City of Baltimore concerning his health, and, along with said application for reinstatement, the insured inclosed his check for a sum sufficient to pay the note described above, and, upon receipt of these papers, the insured was advised that the same had been forwarded to the home office of the Company for attention, and, pending this defendant's consideration of his application for reinstatement, the remittance would be held subject to his order; that, after a thorough consideration of said application for reinstatement by this defendant in its home office, and after considering carefully the statement of Dr. Julius Friedenwald of Baltimore, Md., which accompanied the application for reinstatement as aforesaid, which statement showed that the insured had been *Page 352 suffering from a gastric ulcer, this defendant determined and decided that it could not reinstate the policy described above, which had lapsed for nonpayment of premium on March 9, 1922, and on the 7th day of August, 1922, advised the insured, Joe P. Lane, to this effect, and returned the check which he had sent with his application for reinstatement as set forth hereinabove.
The defendant further alleged that it received from the insured August 15, 1922, a check covering the premium due on the policy in question for September 9, 1922, and March 9, 1923, and that the check was returned to the insured by the Columbia branch office; and that again on March 29, 1923, the defendant received from the insured a check, at defendant's Columbia branch office, for a sum claimed by insured to be sufficient to cover the premium payment due March 9, 1923, and that this check was returned to the insured, with advice to him that the Company could not consider the matter of reinstatement of the policy until it received a medical examination by Dr. Craig, of Dillon, S.C. on a form which was sent to the insured at said time, informing the insured in said letter that:
"If the insured would have such examination and return the check for an amount sufficient to cover the premium due to date and also check for 1923 premium, with interest at the rate of five per centum on premiums not paid from March 9, 1922, the reinstatement of the policy would be considered; that the insured refused to have this examination or file an application for reinstatement."
Under this alleged statement of facts, the defendant contends that the policy lapsed for nonpayment of premium, and that there exists no right of reinstatement of the policy.
The transcript contains a statement that the answer in the other case is identical with this answer, except as to the number of the policy and the amount of the premium. *Page 353
We have quoted at length from defendant's answer for the purpose of setting forth clearly defendant's viewpoint, and on account of its bearing on the case.
By reference to the decree of Judge Dennis, wherein his Honor ordered adjudged and decreed the policies involved to be in full force and effect, it will be observed that his Honor based his decision upon the principle announced in the case of Brown v. Life Insurance Co. of Virginia, 114 S.C. 203,103 S.E., 555. After the case at bar was heard by Judge Dennis, and before the hearing of the appeal by this Court the opinion in the case of Antley v. New YorkLife Insurance Co., 139 S.C. 23, 137 S.E., 199, was filed, in which case this Court overruled the principles announced in the Brown case, in so far as that case holds that the beneficiary's interest is vested although the right to change the beneficiary is reserved in the policy.
Counsel for respondents, however, take the position that the Antley case does not overrule the Brown case in so far as the questions in the case at bar are concerned. Their position is that, while a beneficiary's right is not a vested right, it is something more than a mere contingent right, that it is a substantial right which may be divested in the manner provided in the policy, or recognized by the Courts, and, until this is done, the right exists; and they contend that, while it is true that under the Antley case Mrs. Lane did not have a vested right in the policy involved in the case at bar, she did have very substantial rights therein, and that such rights "were subject to two conditions in the policyonly, to wit: (a) That Mr. Lane might change the beneficiary, but he could only do this by complying with the terms of the policy; and (b) that Mr. Lane "had the right, without the consent of the beneficiary or beneficiaries, to receive any benefits, exercise every right, and enjoy every privilege conferred upon the insured by the policy." In this connection counsel for respondents call attention to the fact that, at the time the blue notes were given, "Mrs. Lane's rights *Page 354 under the policy had not been divested, the beneficiary had not been changed and no right or privilege conferred upon Mr. Lane by the policy had been exercised," and that, pursuant to an agreement independent of the policy, the insurance company accepted from the insured a partial cash payment and the blue notes; and contend that the following quotation from the Brown case is applicable to the questions raised in the case at bar, to wit:
"There is no question that, if the note had not contained the condition as to forfeiture, it, together with the $5.19 in cash, would have constituted payment of the premium that was due on the 25th of February, 1919, and would have had the effect of continuing the policy in full force."
Counsel also call attention to the following quotation from the Brown case:
"The policy itself does not contain a provision that in case a note be given for the premium, and be not paid at maturity, the policy shall be forfeited."
Summing up, the position of respondents' counsel is, conceding that the assignment of a policy, as held in the Antleycase, is tantamount to a change of beneficiary, "that while under the Antley case Mrs. Lane did not have an absolute vested right, she did have rights thereunder which could not be affected by the contract made by the insured and the insurer, independently of the policy, while her rights had not been divested in the manner provided by the policy." In support of this position counsel cite the case of Merchants'Bank v. Garrard, 158 Ga. 867, 124 S.E., 715, 38 A.L.R., 102, cited in the opinion in the Antley case.
The position of counsel for respondents is not without merit, but, under the view we take of the case, it is not necessary to pass upon this proposition. According to our conception, the case should be decided upon broad, equitable principles, and, with that end in view, we shall discuss at length the facts in the case. In the discussion, let it be understood that we are dealing with the case that involves policy *Page 355 No. 6926303, and our decision in that case will apply to the other case.
On the 9th day of March, 1921, the defendant, New York Life Insurance Company, in consideration of a premium of the sum of $109.62, paid to it, entered into a contract of insurance, whereby it insured the life of the plaintiff, Joe P. Lane, under policy No. 6926303, in the sum of $3,000, in favor of the plaintiff, Mamie M. Lane, beneficiary. The contract of insurance called for the payment of $109.62, as premium on each annual date, March 9th of each year. On February 15, 1922, on application of the insured, an agreement was entered into between the insurer and the insured, whereby it was agreed that the premiums on this policy, No. 6926303, should be payable "in equal one-half installments of fifty-seven and no/100 dollars each, on the 9th days of March and September, instead of annually as provided in said policy." The said agreement contained also the following additional provisions: "That all the conditions of said policy as to the payment or nonpayment of any premium shall apply to any installment payable under the preceding agreement," and "all the conditions of said policy, except as herein modified, remain in full force."
On March 4, 1922, the insured wrote the insurer, at the Columbia, S.C. office, as follows:
"I want you to send me a 90-day note for one-half of the premiums due on these two policies. In other words, I want to pay 50% on each policy, and carry balance 90 days for me on my note. Please fix up notes to this effect, and send them to me at once."
In reply to this letter the insurer, on the 8th of March, 1922, wrote the insured as follows:
"We are enclosing blue notes for $46.50 for extending payment of the premiums on the above policies two months. Kindly sign these notes and return with your check for $21." *Page 356
A check for the said sum of $21 was promptly sent the insurer by the insured, together with the notes, duly executed. The following is a copy of the note involving policy No. 6926303:
"Pol. No. 6926303. March 9th, 1922.
"On or before June 9th, 1922, after date, without grace, and without demand or notice, I promise to pay to the New York Life Insurance Company forty-six and 50/100 dollars at S.C. Branch Office, Columbia, S.C. value received, with interest at the rate of five per cent. per annum.
"This note is accepted by said Company at the request of the maker, together with ten and 50/100 dollars in cash, on the following express agreement: That although no part of the premium due on the 9th day of March, 1922, under policy No. 6926303, issued by said Company on the life of ____ has been paid, the insurance thereunder shall be continued in force until midnight of the due date of said note; That if this note is paid on or before the date it becomes due, such payment, together with said cash, will then be accepted by said Company as payment of said premium, and all right under said policy shall thereupon be the same as if said premium had been paid when due; That if this note is not paid on or before the day it becomes due, it shall thereupon automatically cease to be a claim against the maker, and said Company shall retain said cash as part compensation for the rights and privileges hereby granted, and all rights under said policy shall be the same as if cash had not been paid nor this agreement made, except only that the time within which the owner may make a choice of benefits after lapse, as provided in said policy, is hereby extended for three months after the due date of this note, but no longer; That said Company has duly given every notice required by its rules or by the laws of any state in respect to said premium, and in further compensation for the rights and privileges hereby granted the maker hereof has agreed to waive, and does hereby waive, every other notice in respect to said *Page 357 premium or this note, it being well understood by said maker that said Company would not have accepted this agreement if any notice of any kind were required as a condition to the full enforcement of all its terms.
"$46.50 [Name] JOE P. LANE. "[Address] Dillon, S.C."
The two notes were identical. It will be observed that, while the letter from the insurer to insured stated that the blue notes for $46.50 for extending payment of the premiums on the policies were two months, the notes were made payable June 9th, making the time three months, that is, 90 days, as requested by the insured. See above letter of the insured dated March 4, 1922.
On the 26th of June, 1922, the insured wrote the insurer as follows:
"I gave you a note some time ago for payment of part of premium on policy of insurance. Please write me by return mail when that note matures, as I desire the notes taken care of. I think the note is for about $26.00, and please write me if I must pay on exact date due, or have a little time after it becomes due."
June 27, 1922, the insurer wrote the insured as follows:
"On March 11th, you paid $10.50 for a blue note settlement extending premium for two months, due 6/9/22. This note for $46.50 has not been paid, and we regret that there is no way that we can extend payment further. Please complete the attached self-health certificate and return with your check and interest."
June 29, 1922, the insured wrote the insurer as follows:
"Your letter written on my letter dated by you the 27th has been received and in reply thereto will state that as I understood it there were two policies of insurance, Nos. 6926302 and 6926303, which in April I got you to change from annual premium to semiannual premium some thirty days before the time expired for the payment of the annual premium then about due and you changed those premiums *Page 358 in both policies from annual to semiannual as aforesaid considerable time before said annual premiums were due. I gave you then part cash payment on each of those semiannual premiums and the balance of each premium on each policy in separate notes. Afterwards my impression was all along that those notes were ninety-day notes.
"On April 18th I went to Baltimore and was examined by Dr. Julius Friedenwald and he decided that I had an ulcerated stomach and I went to Mercy Hospital in Baltimore and was treated by Dr. Friedenwald for almost eight weeks. I came back home on the 10th day of June, one day after those notes were claimed to have been due by you. My health is good. I am getting along fine and Dr. Friedenwald pronounced me cured before I left.
"Now, then, I received no notice whatsoever concerning the date these notes were due while in the hospital or since I have returned therefrom. I left my stenographer in charge of my office with instructions to report to me everything that came to me by mail or otherwise, which she did, and I am sure that no notice of the maturity of these notes reached my office during my absence. While in the hospital I thought sure those notes would mature in July instead of June and did not give them any attention on that account, because as aforesaid, I was certain in my mind when I did think about them, that they would become due in July.
"Not only that, however, but these policies were disability policies and at the time these notes matured I was disabled and had been so disabled for eight weeks to attend to any business as I was in the hospital all the time.
"Therefore, I cannot sign the paper which you sent me to sign along with your letter of June 27th, which you call Request for Reinstatement. As I understand these policies, disability avoids payment of premium, anyhow, and not only that, under the fact that I was not notified I could not be expected to pay a note exactly when due, a copy of which I did not have. *Page 359
"Therefore I am sending you today two checks for $47.25 each so as to be sure that I am making the checks large enough to recover the two blue notes you have, if you have two, and I think you have. As aforesaid, my health is good, I am getting along all right but I cannot say that I have not been sick in the last twelve months, and therefore I am giving you the full facts at this time so that if we are going to have any trouble about these policies we will have it now and be through with it. I am going to take the position that these policies are in force and if necessary establish the principle in Court that they are still in force. Therefore, I am tendering you these checks for the amount due on the notes and I am sure that I am enclosing sufficient to cover the face of the notes with interest.
"I have always been a friend to your company and have assisted you and advocated your company and in many respects have been the cause of your company getting insurance that you would not have gotten otherwise.
"If you attempt to forfeit these policies you will be doing so from a technical standpoint and I am sure you will not be able to get by with it but I do not believe your company would try to take any such stand.
"Hoping that this matter will be closed up at once and properly closed, I am."
In reply to the above letter, the insured received from the insurer the following letter:
"We, of course, regret that notes due June 9th on these policies were not paid when they became due, and that the policies were allowed to lapse. We also regret that you did not receive the notices of these notes being due, but according to our records notices were mailed from this office, addressed to you at Dillon, S.C. on May 30th.
"You are correct when you state that you were under the impression that the notes that you gave were ninety-day notes. The premiums on the policies were due March 9th. Notes were dated the due date of the premium and drawn *Page 360 payable June 9th. For your information, I attach a blank form of note which is the kind of note you signed in connection with the premiums due March 9th under each of these policies.
"Your two checks, dated June 29th, 1922, drawn on the First National Bank of Dillon, payable to the New York Life Insurance Company for $47.25 each, are returned herewith.
"These policies stand lapsed for nonpayment of notes due June 9th, within the time specified in the notes.
"We will, however, be very glad to consider the reinstatement of these policies and would suggest that you complete application for reinstatement of the policies sent you several days ago and state in the blank space provided for that purpose that you were treated by Dr. Friedenwald for about eight weeks at the Mercy Hospital for an ulcerated stomach. I would suggest that you write to Dr. Friedenwald and get him to give you a statement over his signature, giving full details of your illness, giving his diagnosis of treatment prescribed and result of that treatment. You can send that application in to us with the settlement covering the payments due on notes with interest at the rate of 5% per annum from March 9th to the date of your remittance. The amount of the note under each policy is $46.50.
"Any remittance received from you, however, will be held subject to your order, pending the Company's consideration and approval of your application for reinstatement."
The application was filled out according to instructions, and sent to the insured, together with a certificate of the eminent physician, Dr. Friedenwald, of Baltimore, and check for the amount of money requested, and in connection therewith the insured wrote the following letter to the insurer:
"Enclosed find the original statement of Dr. Julius Friedenwald as requested of me by you in your letter of July 3rd.
"Enclosed also find two checks, each for $47.25, both dated June 29, 1922, which I previously sent you. Enclosed *Page 361 also find application by me for reinstatement for policies Nos. 6926302-303.
"I am signing this application for reinstatement, and writing you this letter and sending you this statement of Dr. Friedenwald's, and in fact I am doing all of this without prejudice to my original rights.
"According to my contentions I do not have to do any of this, but my policies are still in force at the present time. I am merely doing this as probably the easiest means for getting the entire matter adjusted, but none of my actions in complying with your request shall waive any of my rights under the law of contracts, policies, premiums," etc.
Attached to this letter was the application and the certificate of Dr. Friedenwald, as follows:
"Application to New York Life Insurance Company. Home Office: 346 Broadway, New York, N.Y. Without Prejudice. For Reinstatement of Policy No. 6926302303 Amount $ ____, which lapsed for nonpayment of premium due on the 9th day of June, 1922.
"I hereby apply for reinstatement of the above numbered Policy, and for the purpose of inducing said Company to reinstate said Policy and with the understanding that it will rely and act on what I here say, I represent to it that I am now, to the best of my knowledge and belief, in good health; that within the past twelve months I have not had any illness, nor consulted nor been treated by any physician, nor been prevented by illness or accident from continuously pursuing my customary occupation which is the same now as it was when I applied for said Policy; that no Life Insurance Company has within the past twelve months examined me either on, or in anticipation of, an application for life insurance, or for the reinstatement of life insurance, without issuing or reinstating such insurance; and that no application for insurance on my life is now pending.
"(If there is any exception or qualification to the above, write it out here fully.) *Page 362
"Treated by Dr. Julius Friedenwald, Baltimore, Maryland, at Mercy Hospital, from 17th April till June 10th, 1922, for gastric ulcer.
"If the evidence of my insurability is satisfactory to the Company and it has received in cash all sums the Policy requires to be paid for reinstatement, then, and not until then, said Policy shall be deemed reinstated. If said Policy is not so reinstated, I agree to accept return of all sums paid in connection with this application, without interest. "Signature of insured Joe P. Lane. "P.O. Address Dillon, S.C. "Name of employer __________. "Address of employer __________ ___. "Dated at Dillon, S.C. this 11 day of July, 1922."
EXHIBIT N. "Letter of Dr. Julius Friedenwald, date July 8, 1922, sent in with application for reinstatement:
"Julius Friedenwald, M.D. "Theodore H. Morrison, M.D. "Paul Foreman Wiest, M.D. "1013 N. Charles Street "Hours: 10 A.M.-1 P.M. "Baltimore, July 8, 1922.
"This is to certify that Mr. Joe P. Lane consulted me on April 17th complaining of indigestion, which consisted of pain in the stomach (relieved by food, but the discomfort recurring later on) gas, constipation and belching.
"Physical examination was practically negative, except for a tender area in the epigastrium. A gastric analysis showed a total acidity of 40, free Hcl. 20; blood pressure 120/70.
"An X-ray examination made by Dr. F.H. Baetjer revealed a definite pyloric ulcer and Enteroptosis.
"My diagnosis was a gastric ulcer. He was sent to the Mercy Hospital on the 18th of April and was discharged on *Page 363 June 10th in excellent condition after having taken a thorough medical ulcer rest cure. "[Signed] Julius Friedenwald, M.D."
Receipt of this letter, together with all papers, was duly acknowledged, stating that the papers had been sent to the New York office for further attention, and stating that, pending the consideration of the application, the remittance received would be held subject to the order of the insured.
Later the insured received from the insurance company the following letter:
"We regret to advise that although the Company has given the reinstatement of your Policy careful consideration, they are obliged to decline to reinstate either Policy. We are returning herewith your checks for $47.25 on each policy given in connection with your application for reinstatement."
August 8, 1922, Mr. Lane, the insured, wrote the insurance company this letter:
"In regard to my policies of insurance I want you to send me a statement giving all policy numbers, amounts, due dates, whether annual or semiannual, that is of all the policies that I have with your Company.
"I received the checks you returned where you refused to accept premiums for those two policies. You are making a big mistake.
"P.S. Please write me exact dates, amounts of when premiums come due according to your books on my policies numbers 6926302-303."
In response to this letter, the insurance company wrote Mr. Lane giving the information requested.
On August 15, 1922, Mr. Lane, the insured, sent the insurance company the following letter, together with check for the sum of money mentioned therein, $216.60:
"Enclosed you will find my check for the sum of $216.60. This is the total annual premiums for the above mentioned policies for the next twelve months in advance. This is a *Page 364 tender of the payment of twelve months premiums on both of said policies above mentioned. This covers semiannual premiums due September 9, 1922, and March 9, 1923. I am making this as a tender of my policies above-named, as I see the law at the present time in said matter. I am not going to lose this insurance, therefore, am taking every legal step necessary to keep said insurance in force.
"Now write me either acceptance or refusal of the advanced premium payment.
"If you object to the form of the tender, say so, and I will have the tender made to you in actual cash. I hope you will not put me to the trouble of actually making the tender in cash money, but I can readily do so if you prefer that I should offer you cash.
"I am making this tender purely to protect my legal rights in the matter, and desire your immediate acceptance or refusal on said payment of premiums. This tender is made in the name of, and for the benefit of Joe P. Lane, the insured, and also my wife, the beneficiary."
In letter of August 16, 1922, the insurance company returned to Mr. Lane check referred to in above letter, and in this letter stated:
"The Company has carefully reviewed evidence of insurability with your application for the reinstatement of these policies and found that evidence of insurability was not up to the Company's standard and reinstatement of the policies declined. We could thank you to please acknowledge receipt of your check which is being returned herewith."
Mr. Lane acknowledged return of the check referred to.
Again on March 29, 1923, Mr. Lane wrote the Company for the purpose of trying to get this insurance matter shaped up with the Company, and sent the amount of money stated in his letter:
"Enclosed you will find my check for $216.60 in full payment of the premiums on each of the above-mentioned policies due March 9, 1923. This tender that is being made is *Page 365 within the thirty-day period of grace. I have already tendered you at different times premiums on these policies, but you have refused to accept them. You will recollect that I tendered you $216.60 on the 15th of August, 1922, which would cover premiums on these policies from that date. Previous to that I also tendered to you, in accordance with your request, two checks for $47.25 each, dated June 29, 1922.
"This tender I am making now is in addition to all other tenders heretofore made, although the tender of August 15, 1922, would run the policies longer than this date, that is, March 29, 1923. Nevertheless, I am tendering this today for the year beginning March 9, 1923. If there is any objection to the manner or substance of this tender, please say so, and either accept or refuse by letter by return mail."
The insurance company replied to the above matter as follows, returning check:
"We return herewith your check on the First National Bank of Dillon, S.C. for $216.60. As your policies lapsed for the nonpayment of the March, 1922, premiums, we cannot apply the attached check towards the payment of the March, 1923, premiums, or give the matter of reinstatement our attention until we receive medical examination by Dr. L.R. Craig, of Dillon, S.C. on the enclosed form, without expense to the Company.
"If you will return completed examination with checks covering the annual premium due March 9, 1922, of $109.62 on Policy 6926303; and $106.98 on Policy 6926302; also checks for the March, 1923, annual premiums and interest at the rate of 5% per annum from March 9, 1922, to date of repayment, we will be glad to consider reinstatement of your policies."
This closed the correspondence, and suit was afterwards commenced.
In addition to identifying the several exhibits referred to, Mr. Lane, the insured, testified that the two notes referred *Page 366 to in the letters introduced in evidence were signed by him and returned to the company, together with his check for the difference in cash, whatever that might be; that one of the notes was $45.15 and the other for $46.50; that the "difference in cash due on semiannual premiums at that time was forwarded with check and duly accepted." Mr. Lane further testified:
"I went to Baltimore, Md., to Dr. Julius Friedenwald on April 16, 1922, was examined on April 17th by Dr. Friedenwald, and on his advice went to the Mercy Hospital and remained there under his treatment until June 10th. I was discharged by Dr. Friedenwald on June 10th. I arrived at home in Dillon on the morning of the 11th of June. I went to the office the next day and spent about thirty minutes there. I spent nineteen hours in bed the last day that I was in the hospital, and after coming home I continued to spend from fifteen to twenty hours in bed for a period of two weeks, or probably more. I came to the office every morning during that period, but was not strong enough to attend to my business very much. I was so happy to get home that I did not care about business. I gradually increased my time spent at the office, and at end of thirty days I spent five hours at the office. I gradually improved until I was back on the job within sixty days of my return. The letters that I wrote, and that have been introduced into evidence are true, to the best of my knowledge. My wife, Mamie M. Lane, knew nothing of the transaction, with the exception of the fact that I did have the insurance with the Company."
Mr. E.T. Ridgeway, cashier in defendant's Columbia, S.C., office, testified at the reference, and, in addition to testifying concerning the correspondence offered in evidence and certain formal matter, gave the following testimony pertinent to the questions involved:
"Q. Are you familiar, from your records, with the blue note settlement that was taken March 2, 1922? A. Yes, sir. *Page 367
"Q. From the correspondence introduced in the case, and an application for reinstatement of the two policies in question, was later sent in to the branch office at Columbia, did you handle this transaction? A. Yes, sir.
"Q. Where was the application, Exhibit M, forwarded by you? A. To the home office in New York City.
"Q. Why was it sent to the home office? A. Because it could not be handled in the branch office. I have not the authority.
"Q. Did the home office accept or reject the application for reinstatement? A. They rejected it.
"Q. Mr. Ridgeway, in the operation of your office at Columbia, and under your supervision, are notices of due dates of premium notes, commonly called blue notes, sent out from your office? A. Yes, sir.
"Q. What was the custom in your office concerning such notices? A. To send a notice of the note due to the insured, also a copy of the notice to the agent who wrote the business.
"Q. Was that a carbon copy? A. Yes, sir.
"(It is understood that the above objection goes to all this kind of testimony.)
"Q. I show you two carbon copies of notice dated March 16, 1922, covering two policy numbers; the same has been introduced in evidence in this case. From whom did you receive these two copies of notices? A. From Agent Rufus Edwards.
"Q. Did he write these policies as agent for the Company? A. Yes, sir.
"(Offering in evidence copies of notices.)
"Q. Where did Mr. Edwards deliver these notices to you? A. In my office.
"Q. Where does Mr. Edwards live? A. In Florence, S.C.
"Q. Will you state whether the two copy notices which I have shown to you, and are marked `CC' and `DD,' are copies of the original made out in your office in Columbia, under *Page 368 the customs and plans referred to in your testimony? A. Yes, carbon copies with the exception of the address on the notice.
"Q. Why is the address not made out in carbon copy? A. Because the original is sent to the policy holder and the carbon to the agent.
"(Form of receipt given to Mr. Lane introduced in evidence and marked Exhibit EE.)
Cross-examination:
"Q. Did you mail them? A. Not personally, but under my direction. I mean that I did not do it personally, but they were mailed by other parties.
"Q. Do you recollect this specific instance? A. No, sir."
Mr. Lane in his reply testified:
"I did not receive any notice whatsoever of the due date of the notes after signing and sending same in. Neither did my wife receive any such notice. I am worth the sum of $4,000, above all liabilities and exemptions allowed by law. I am the owner of 156 acres of real estate and one-half interest in 148 acres of real estate in Dillon County, also I consider myself solvent, and was solvent at the due date of the blue notes."
The deposition of Mr. John C. McCall, of defendant's New York office and second vice president of the Company, was introduced in evidence at the reference, whose testimony for the most part was with reference to the matters set forth in the letters referred to and quoted hereinabove. In the course of Mr. McCall's testimony he stated that the application of the insured for reinstatement and the certificate of Dr. Friedenwald were considered by the several departments of the Company, the application refused, and the insured notified.
This constitutes the testimony in the case pertinent to the issues involved. On this state of facts it is the position of the plaintiffs that the policies in question should be declared of full force and effect; whereas, the defendant contends *Page 369 that the policies have long since lapsed for nonpayment of premiums, and that no right for reinstatement of the policies exists, and contends that the Court should declare the policies null and void and of no effect.
Which position is correct? In answering this question we should, according to our view, as stated at the outset, be guided by broad equitable principles, applicable to the facts in the case.
One of the principles well recognized by our Courts of equity is that "the Courts do not look with favor upon forfeitures"; another is that "Equity will not suffer a wrong without a remedy."
The provision in the policy under which the insurance company claims the right to cancel the policy, and, in conjunction with the provisions contained in the "blue note" quoted above, works a forfeiture, reads as follows:
"If any premium is not paid on or before the day it falls due the policyholder is in default; but a grace of one month (not less than thirty days) subject to an interest charge of five per centum per annum will be allowed for the payment of every premium after the first, during which time the insurance continues in force."
We can well understand how Mr. Lane, sick as he was, did not keep a strict account of the time or the due date of the notes. Soon after Mr. Lane executed and forwarded the notes to the insurance company, he became sick and went to Baltimore, Md., for treatment, where he remained under treatment until June 10, 1922, at which time he returned to his home, Dillon, S.C. arriving there the following day. But it was several days before he returned to his office, except for a few minutes each day, remaining at his residence the greater part of each day for a period of about two weeks for the purpose of recuperating before taking up his work at his office. On June 26, 1922, Mr. Lane wrote the insurance company as follows: *Page 370
"I gave you a note some time ago for payment of part of premium on policy of insurance. Please write me by return mail when that note matures, as I desire the notes taken care of. I think the note is for about $26, and please write me if I must pay on exact date due, or have a little time after it becomes due."
From this letter it clearly appears that Mr. Lane did not know the notes were past due, but, on the other hand, he was under the impression that the notes were not yet due, and that he desired to get the due date and arrange for making payment. He even asked in this letter if the Company would require payment on the due date, or if he might have a little time. On June 27, 1922, the insurance company replied to Mr. Lane's letter in the following language:
"On March 11th, you paid $10.50 for a blue note settlement extending premium for two months, due 6/9/22. This note of $46.50 has not been paid, and we regret that there is no way that we can extend payment further. Please complete the attached self-health certificate and return with your check and interest."
It will be observed that the reply was rather "blunt," and did not give Mr. Lane the information requested, except in an indirect way. But from this letter Mr. Lane learned what had taken place.
June 29, 1922, Mr. Lane wrote the insurance company again, going more into detail, and sending his check to cover all premiums, together with interest, and later wrote additional letters along the same line, again sending his check for all premiums and interest thereon, which checks were promptly returned, which letters are quoted above along with the other testimony.
Considering the correspondence between the parties in connection with the provisions contained in the policies, as well as the testimony of Mr. Lane and the testimony of the witnesses for the defendant, we are forced to the conclusion that Mr. Lane was honestly under the impression and *Page 371 belief that the notes in question were not due until in July; that the 30-day grace period stipulated in the policies was intended for his benefit in the payment of notes as well as premiums, regarding the notes as substitutes for the premiums; and, further, that Mr. Lane fully intended to meet his obligations when due, unless granted additional time by the insurance company.
On the question of notice, the insurance company contends, and correctly so, that the notes in question provided that no notice should be necessary. Following this provision strictly, no notice was necessary. However, in this connection, we call attention to the testimony of Mr. Ridgeway, officer and witness for the insurance company. On this phase of the case Mr. Ridgeway testified:
"Q. Mr. Ridgeway, in the operation of your office at Columbia, and under your supervision, are notices of due dates of premiums notes, commonly called blue notes, sent out from your office?
"A. Yes, sir.
"Q. What was the custom in your office concerning such notices?
"A. To send a notice of the note due to the insured, also a copy of the notice to the agent who wrote the business."
It is clear from this testimony that it was the custom and is the custom of the insurance company to notify the insured of the due date of premiums notes, commonly called blue notes, such as the notes in question in this case. This being the custom of the insurance company, to give to its policyholders notice of the due dates of such notes, then, regardless of the provision in the notes, the plaintiff, Mr. Lane, was entitled to the benefit of this custom. That is, he should have been treated as other policyholders and given notice of the due dates of the notes. Mr. Lane testified that he received no notice; that he was not so notified. It is the contention of the insurance company that Mr. Lane was notified. An examination of the testimony *Page 372 convinces us that the Circuit Judge was correct in finding as a fact that the insurance company did not notify Mr. Lane of the due date of the notes. The testimony on the part of the insurance company on this point is as follows, Mr. Ridgeway, cashier, testifying:
"Q. I show you two carbon copies of notice dated March 16, 1922, covering two policy numbers; the same has been introduced in evidence in this case. From whom did you receive these two copies of notices?
"A. From Agent Rufus Edwards.
"Q. Did he write these policies as agent for the Company?
"A. Yes, sir. (Offering in evidence copies of notices.)
"Q. Where did Mr. Edwards deliver these notices to you?
"A. In my office.
"Q. Where does Mr. Edwards live?
"A. In Florence.
"Q. Will you state whether the two copy notices which I have shown to you, and one marked `CC' and `DD' are copies of the original made out in your office in Columbia under the customs and plans referred to in your testimony?
"A. Yes, carbon copies with the exceptions of the address on the notice.
"Q. Why is the address not made out in carbon copy?
"A. Because the original is sent to the policyholder and the carbon to the agent."
On cross-examination, Mr. Ridgeway testified on this point as follows:
"Q. Did you mail them?
"A. Not personally, but under my direction. I mean that I did not do it personally, but they were mailed by other parties.
"Q. Do you recollect this specific instance?
"A. No, sir."
To our minds this testimony affords no proof that the insured was notified as contended by the company. Furthermore, the copy of the notice, the original of which the company *Page 373 contends was mailed to the insured, is dated March 16, 1922, just seven days after the notes in question purport to have been executed. Even if a notice had been sent at that time, it would have been of little or no service as a reminder to the insured of the due date of a note to become due nearly three months later. But, be that as it may, we agree with the Circuit Judge in his finding that the company did not notify the insured of the due date of the notes in question.
If we accept this view of the facts, that it was the custom of the insurance company to notify its policyholders of the due date of the kind of notes in question in the case at bar, that the company did not notify the insured in this case of the due date of the notes, that this failure to so notify him was the cause of his failure to make payment on the due date, and that he promptly tendered payment when he ascertained the due date of the notes, all of which clearly appears from the record, could there be a forfeiture? And ought not the insurance company have accepted payment when promptly tendered by the insured on learning the due date of the notes?
But, grant that there was a forfeiture, should not the Court of equity, clothed with its broad equitable powers, under the facts of the case, grant relief from forfeiture? As was stated in the case of Ross Tin Mine v.Cherokee Tin Mining Co., 103 S.C. 248, 88 S.E., 8, while the Court of equity "will not lend its aid to a plaintiff, seeking to have a forfeiture declared or a penalty enforced," "it is a well settled principle of equity, that in proper cases it will grant relief from the forfeiture, also from a penalty."
At this juncture we call attention to the fact that the policy contract between the parties is not a contract for assurance for one year with the privilege of revival upon performing certain acts or complying with certain conditions, for instance, the payment of a certain sum of money, but that is an entire contract of assurance for *Page 374 life, subject to discontinuance and forfeiture for nonpayment of premiums when they become due according to the terms of the policy. N.Y. Life Insurance Co. v. Statham,93 U.S. 24, 23 L.Ed., 791. It is a condition subsequent and not a condition precedent. Therefore the Court of equity, under a proper showing, can and should grant relief against forfeiture to the party seeking such relief, requiring the payment, to the party relying upon the forfeiture, of such amount as is just and proper under the facts of the case. "Equity does not favor forfeitures or penalties and will relieve against them when practicable in the interest of justice." Bangert v. Lumber Co., 169 N.C. 628,86 S.E., 516, and cases therein cited, 2 Story, Eq., p. 644; Carpenterv. Wilson, 100 Md., 13, 59 A., 187; Selden v. Camp,95 Va., 527, 28 S.E., 877. In 10 R.C.L., 328, the principle is stated thus:
"A familiar class of cases where Courts of equity relieve a party from the consequences of his own inadvertence to some extent, is where by the terms of his contract he is made liable at law for a penalty, or is subjected to loss in the nature of a forfeiture, owing to the nonperformance by him of certain conditions and covenants, contained therein. All such contractual arrangements are viewed by equity with extreme disfavor, so much so that not only do they receive a strict construction against those for whose benefit they are introduced, but in equity the harsh remedy of forfeiture will be forced to yield to compensation when fair dealing and good conscience seem to require it. The right in general to relieve against penalties and forfeitures is based on the ground that a party having a legal right shall not be permitted to avail himself of it for the purposes of injustice, or fraud, or oppression, or harsh or vindictive injury, and that it is wholly against conscience to say because a man has stipulated for a penalty in case of his omission to do a particular act (the real object of the parties being the performance of the act) that if he omits to do the act he shall suffer *Page 375 an enormous loss wholly disproportionate to the injury to the other party."
In the discussion on this subject in 1 Pomeroy's Equity Jurisprudence, p. 864, Ind., 450, we find this statement of the rule:
"It is well settled that where the agreement secured is simply one for the payment of money, a forfeiture either of land, chattels, securities, or money, incurred by its nonperformance will be set aside on behalf of the defaulting party, or relieved against in any other manner made necessary by the circumstances of the case, on payment of the debt, interest, and costs, if any have accrued, unless by his inequitable conduct he has debarred himself from the remedial right, or unless the remedy is prohibited, under the special circumstances of the case, by some other controlling doctrine of equity. * * *" "In the absence of special circumstances giving the defaulting party a higher remedial right, a Court of equity will set aside or otherwise relieve against a forfeiture, both when it is incurred on the breach of an agreement expressly and simply for the payment of money, and also on the breach of an engagement of which the obligation, although indirectly, is yet substantially a pecuniary one."
An interesting case on this subject, and in point, is the case of Springfield Northeastern Traction Co. v. Warricket al., heard by the Supreme Court of the State of Illinois; reported in 249 Ill., 470, 94 N.E., 933, Ann. Cas., 1912-A, 187. The question involved in that case was whether or not a forfeiture resulted, and the land conveyed reverted to the grantor on account of the grantee, the Railway Traction Company, having failed to construct and put into operation a certain line of the proposed railroad by a certain date, as required by the terms of the deed. The Court held that such a provision in the deed created a condition subsequent, and that a breach of such did not entitle the grantors to a reentry on the land, under the facts in the case, and that the remedy *Page 376 of the grantors was an action for damages for breach of covenants. This was the opinion of the Illinois Supreme Court notwithstanding that the deed in question in that case contained this clear provision:
"And in case said grantee shall fail to construct, build and continuously operate said proposed railway as to one track within two years from Springfield to Lincoln, or shall fail to keep and perform any of the terms and conditions imposed in this deed as therein provided, which are hereby made a part of the consideration thereof, then the strip or piece of land therein conveyed shall revert back and become the property of the grantors without the repayment of the sum of money above mentioned, which shall be retained by the grantors"
The Court took the position that the grantees had made an honest effort to comply with the conditions stipulated in the deed and were entitled to be relieved against forfeiture, giving this general statement of the rule:
"Forfeitures will be enforced by Courts in clear cases, but they are not regarded with favor, and their prevention is within the protecting care of equity whenever wrong or injustice will result from their enforcement," citing Palmerv. Ford, 70 Ill., 369; Post v. Weil, 115 N.Y., 361,22 N.E., 145, 5 L.R.A., 422, 12 Am. St. Rep., 809; 6 Am. Eng. Enc. Law (2d Ed.), 503.
Quoting further from Pomeroy's Equity Jurisprudence, § 451, the principle is stated thus:
"There are, as intimated above, special circumstances which will entitle a defaulting party to relief against a forfeiture in cases where otherwise it would not be granted. Although the agreement is not one measurable by a pecuniary compensation, still, if the party bound by it has been prevented from an exact fulfillment, so that a forfeiture is incurred, by unavoidable accident, by fraud, by surprise, or by ignorance, not willful, a Court of equity will interpose and relieve him from the forfeiture so caused, upon his making *Page 377 compensation, if necessary, or doing everything else within his power." (Italics added.) Under the editorial notes of this valuable work, this observation is made: "Many cases under this doctrine are those of covenants in leases but the doctrine, of course, extends to all agreements." (Italics added.)
We may add that we know of no reason why the doctrine should not apply to a contract of insurance, such as involved in the case at bar, under the existing facts of this case; recognizing, of course, the fact that promptness in the payment of premiums is essential to the business of life insurance; that calculations of insurance companies are based on the hypothesis of prompt payments; and that forfeiture for nonpayment (subject to the equitable power of the Court to grant relief against forfeiture in a proper case) is a necessary means of protection. 10 R.C.L., 332; Clifton v. LifeInsurance Co., 168 N.C. 499, 84 S.E., 817; New YorkLife Insurance Co. v. Statham, 93 U.S. 24, 23 L.Ed., 789;Klein v. New York Life Insurance Co., 104 U.S. 88,26 L.Ed., 662. In each of these cases the Court declined to grant relief. But an examination of these cases will disclose that the facts involved therein were wholly different from the facts in the case at bar. In each of these cases the person upon whose life the insurance was issued died after default in payment of premium and before tender of payment of the premium was made. Tender of payment of premium was made by the beneficiary, after the death of the insured. In the case at bar the insured was placed in the hospital for treatment, remained there for about two months, and was discharged from the hospital on June 10th (1922), the next day after the premium note became due, in excellent condition. Arriving home the following day, in a short time, he wrote the insurance company to advise him the exact due date of the premium notes, so that he could make arrangements for payment, being under an honest belief that the notes were not due until some time in July, and asked if *Page 378 payment would be required on the due date, or if he might have a little time. When the insured received a reply to his letter, telling him that the notes were due June 9th (1922), he immediately tendered payment. It is clear, therefore, that these cases are not controlling in the case at bar.
There is also the consideration already pointed out that the policy is not a contract for a single year, but an entire contract for insurance for life. The calculation of premiums is made on this basis. It is a matter of common knowledge, of which the Court may properly take notice, that the yearly premiums for short-term policies — even the five and ten year term policies — are much smaller than the yearly premiums on life policies. There are, therefore, certain equitable values in a life policy which belong of right to the insured, and which cannot be forfeited without rank injustice. It has been said that "insurance is a business proposition"; and that it would be inequitable conduct on the part of the insured to "default while in good health, but retain a right to pay up when bad health gives a warning." But it is only intentional or heedless default that can be said to amount to inequitable conduct, and, when under the circumstances of the particular case the good faith of the assured is apparent, and the forfeiture works a real and substantial injustice, there is in our opinion no controlling reason why a Court of equity should not interpose and exercise the power of its saving grace to relieve him from the forfeiture. The principles of equitable relief, as stated in Pomeroy (Section 451), have their logical application in cases where "a forfeiture is incurred, by unavoidable accident, by fraud, by surprise, or by ignorance, not willful."
There is also another phase of the case which we think should have a bearing on the decision — the application for reinstatement. When the insurance company notified the insured that the notes were past due, in response to his letter asking when the notes would become due, the insurance company in the same letter (dated June 27, 1922), instructed the *Page 379 insured to fill out an inclosed application for reinstatement and to return the same to the company, together with check for the amount owing with interest. This application form for reinstatement also contained a proposed representation on the part of the insured, to be signed by the insured, to the effect that he was at that time in good health, and that withinthe past twelve months he had not had any illness, nor consulted nor been treated by any physician nor been preventedby illness or accident from continuously pursuing his customaryoccupation. In reply, the insured wrote the company that he could not make this representation, and explained why he could not, informing the company of his past illness and of his treatment at the hospital by the eminent physician, Dr. Julius Friedenwald. The insured stated his rights from his viewpoint, insisted that he was not in default, and tendered to the company payment of the notes with interest, stating that, while he could not sign the representation requested for the reasons explained, he was nevertheless in good health at the time. The company refused to accept payment of the notes, and returned the remittance to the insured. In this letter, dated June 29, 1922, the company again asked the insured to make application for reinstatement, and requested or suggested that he procure a certificate from Dr. Friedenwald, giving full details of insured's illness, diagnosis and treatment prescribed and result of the treatment, and to send same to the company along with the application for reinstatement and remittance in payment of the notes and interest. The insured complied with this instruction, but wrote the company at the time that he did not waive any of his rights.
The policies contain the following provision as to reinstatement:
"At any time within five years after any default, upon written application by the insured and presentation at the Home Office of evidence of insurability satisfactory to the Company, this policy may be reinstated together with any *Page 380 indebtedness in accordance with the loan provisions of the policy, upon payment of the loan interest, and of arrears of premiums with five per cent. interest thereon from their due date."
Regardless of any default on the part of the insured, if he complied with these conditions, he was entitled to be reinstated. There is no question raised as to the application having not been filed within time and at the proper place. Neither is there any contention made that the insured did not tender the necessary sum of money required under this provision. These facts are clearly established. The only remaining inquiry is, Did the insured furnish "evidence of insurability satisfactory to the Company"? In answering this question, we must look alone to the contents of the application of the insured and the certificate of Dr. Friedenwald, for it appears from the testimony in the case, and is alleged in defendant's answer, that the company reached its conclusion to refuse reinstatement on consideration of these papers alone, and that this was all the company asked of the insured before making its decision to refuse reinstatement. The principal question to be determined in considering these papers is, Has the company the right to exercise its discretion in granting or refusing the application for reinstatement, or must the papers be considered on their merit? According to our view, the provision in the policy for reinstatement is a substantial contractual right which the insured has under his policy, and that this right cannot be destroyed at the will of the company. To hold that the company could within its discretion refuse to allow a reinstatement of the policy when application is duly made would be equivalent to striking the reinstatement provision from the policy. In our opinion, the requirement of evidence "satisfactory to the Company" does not clothe the company with power to act within its discretion in passing upon the application for reinstatement but that the application, together with the supporting evidence, must be considered in the light of common sense and *Page 381 reason, and not under the influence of some whimsical or fanciful idea, or arbitrarily. In passing upon this phase of the case, we must keep in mind the distinction between contracts of a personal nature and contracts of a business nature. In considering a question of this nature in the case of Thompson v. Insurance Co., 63 S.C. 299, 41 S.E., 464, in which the opinion of the Court was written by Mr. Justice Gary, afterwards Chief Justice, the Court made clear the distinction of contracts of a personal nature and contracts of a business nature, such as the one involved in the case at bar; quoting from that opinion:
"When the object of a contract is to gratify taste, serve personal convenience or satisfy individual preference, the benefit which the promisee derives therefrom is of a personal nature, and his pleasure, which he has in view in entering into the contract, consists in its performance to his satisfaction. The personal character of such a contract is an element entering into it of which the promisor is bound to take notice. If the promisee was not allowed to be the sole arbiter of the one performance of the agreement in such cases, he might be compelled to accept, what in his estimation was of no value or benefit to himself and which would have deterred him from entering into the contract. In other cases the reasonableness of the promisee's action in determining the question is the element entering into the contract, and a disregard of this element is in the nature of a fraud on the rights of the promisor. It is bad faith and unfair dealing for a person to act unreasonably in an ordinary business transaction when there is nothing in the contract of a personal nature. The action of the insurance company in the case under consideration was not dependent upon taste or upon any fact of a personal nature, but solely upon the existence of a fact in an ordinary business transaction, and it would be bad faith for it to refuse to be governed by reason and common sense in determining the existence of such fact." *Page 382
In stating these salutary principles, the Court had under consideration a question growing out of a provision in the policy that the evidence on a particular matter must be "satisfactory to the company." The question here involved in the case at bar is similar, and these principles so clearly stated in the opinion in the Thompson case, supra, are controlling in the case at bar. See, also, the following cases, in which the Thompson case was cited with approval and the principle therein stated adhered to: Guarantee Co. v.Charles, 92 S.C. 287, 75 S.E., 387, Ann. Cas., 1916-B 687; Singleton v. Cuttino, 105 S.C. 44, 89 S.E., 385;Furman v. Tuxbury Co., 112 S.C. 71, 99 S.E., 111; Levanv. Metropolitan Life Insurance Co., 138 S.C. 263,136 S.E., 304. In the case of Singleton v. Cuttino, supra, the controversy before the Court grew out of a contract to purchase if the title to the property satisfied his lawyer. The Court held that a refusal to purchase could not be sustained, unless based on reasonable grounds, and further held that, the plaintiff having tendered a good marketable title, it should have been accepted. See, also, in connection with the authorities cited herein, 37 C.J., 498.
It is thus seen that the inquiry devolved upon the Court at this juncture is, Did Mr. Lane, the insured, make a reasonable compliance with the requirement stipulated in the policy for reinstatement? Would men of common sense and reason be expected to reach the conclusion that Mr. Lane did make a reasonable compliance? If so, the Court should require a reinstatement of the policies.
In making application for reinstatement, Mr. Lane, the insured, followed closely the suggestions and instructions of the company. He filled out the application blank furnished him by the company, and executed the same, containing the representations as to his health as outlined by the company in letter written him by the company, and forwarded the same to the company, together with the health certificate furnished by Dr. Friedenwald. By reference *Page 383 to these papers, copies of which appear at the first part of this opinion, it will be observed that the application on the part of Mr. Lane shows, if his statement is true, and there is nothing in the record to the contrary, that at the time of making the application he was in good health, that during the twelve months prior thereto he had not had any illness, not consulted nor been treated by any physician, not been prevented by illness or accident from continuously pursuing his customary occupation, except that, as he explained in the statement, he was treated by Dr. Julius Friedenwald, Baltimore, Md., at Mercy Hospital, from 17th of April, 1922, until June 10, 1922, for gastric ulcer. In the certificate of Dr. Friedenwald, the doctor explained Mr. Lane's symptoms, the diagnosis made, the treatment administered, and the results obtained, stating that Mr. Lane was discharged from the hospital on June 10, 1922, "In excellentcondition, after having taken a thorough medical ulcer restcure." This certificate of the eminent physician, Dr. Friedenwald, in connection with the unqualified and unquestioned statement of Mr. Lane, as to Mr. Lane's good health, ought, it occurs to us, be sufficient in the absence of any showing to the contrary, to convince men of common sense and reason of Mr. Lane's good health, and should be satisfactory proof to the company, and therefore, according to our view, the company should have passed favorably on the application for reinstatement of the policy.
The defendant lays emphasis upon the fact that in a letter written to Mr. Lane the defendant offered to consider another application for reinstatement if he would have a certain other physician make an examination and pass upon his physical condition. This offer was not made until in April the following year after rejecting the application. The company having in the first instance rejected the unqualified statement of Mr. Lane that he was in good health, and also rejected the clear and full statement of the eminent physician, Dr. Friedenwald, who treated him, that he was in *Page 384 "excellent condition," no doubt Mr. Lane put little faith in this offer made at that late day when the company had been informed of Mr. Lane's purpose to enter suit to establish his rights.
Taking the case as a whole, after a careful consideration of the facts from every angle, bearing in mind that the hazard of insurance risk was not increased during the period of default, and that the Courts lean against forfeitures, we are convinced that the case is one in which equity should intervene against the forfeiture declared by the company.
As to the supplemental decree of Judge Dennis, bearing date September 26, 1925, we think the same should be modified. In making payment of the premium, the insured would have the right, if he desired, to have the dividends to which he may be entitled under the terms of the policy applied toward the payment of the premium, and the same is true as to the loan value provided in the policy; furthermore, the amount of dividend and amount of loan to which the insured may be entitled being within the knowledge of the insurance company and not known to the insured, the insurance company should furnish this information to the insured, and the said supplemental decree should not operate against the rights of the plaintiffs until this information is furnished.
It is therefore the judgment of this Court that the defendant's appeal be dismissed, and the decree of Judge Dennis, bearing date September 19, 1925, in so far as his Honor adjudged and decreed the insurance policy, involved in each of the cases to be of full force and effect, and in every other respect wherein it is not inconsistent with the conclusion reached and views herein expressed, be and the same is hereby affirmed; and that the supplemental decree of Judge Dennis be modified in accordance with the views herein expressed.
MR. CHIEF JUSTICE WATTS and MR. JUSTICE STABLER and MR. ACTING ASSOCIATE JUSTICE WHITING concur. *Page 385