Guernsey v. Loyola Federal Savings & Loan Ass'n

PER Curiam. Harriett D. Guernsey, plaintiff-appellant, sued Loyola Federal Savings and Loan Association, defendant-appellee, for allegedly permitting a policy of insurance on the life of her hus ⁷⁹ band to lapse. The policy had been taken out by Mr. Guernsey on November 18, 1949 with a Virginia life insurance company. Its agreed purpose was to secure an outstanding balance of $10,000 owed under a mortgage executed on April 22, 1947 by Mr. and Mrs. Guernsey to Loyola as mortgagee, to enable the Guernseys to purchase a home.

The policy provided for insurance in the initial amount of $10,000 with ultimate coverage scaling down to $4,000. Mr. Guernsey named his wife, appellant, as primary beneficiary and his children as contingent beneficiaries. He also reserved the right in the policy to change the beneficiaries during his lifetime without notice. Prior to issuance of the policy, it was assigned by Mr. Guernsey to Loyola on November 10, 1949 as collateral security for the mortgage.

By a separate agreement Loyola was to advance the premiums on an annual basis and Mr. Guernsey was to repay Loyola for their cost on a monthly basis along with his mortgage payments. Mrs. Guernsey was made a party to the assignment since she was a party to the mortgage and primary beneficiary under the policy. Mr. Guernsey apparently had difficulty meeting policy payments and shortly after obtaining a loan on the policy from the insurance company he requested Elizabeth Dettor, assistant secretary of Loyola, to have the policy cancelled. The policy was cancelled as of December 1, 1953, for non-payment of premiums and non-payment of the policy loan.

The expense portion of the mortgage payments was then reduced accordingly to reflect the absence of premium payments. On January 11, 1955 Mr. and Mrs. Guernsey refinanced the existing mortgage by giving Loyola a new mortgage for the amount then due. The memorandum of settlement for the new mortgage made no mention of life insurance, nor was any such insurance applied for or carried by the mortgagors. Mr. Guernsey died on December 21, 1957.

At the trial of the present action, Mrs. Guernsey testified that she was not informed by Loyola or by anyone that the policy had lapsed until after the death of her husband and that as a result of the lapse she was required to pay the balance outstanding on the mortgage without the benefit of the insur ⁸⁰ anee. She also stated that she “didn’t notice” the reduction in the expense account of the mortgage payments that resulted from discontinuing the policy. Mrs. Dettor testified, over appellant’s objection, that the policy was cancelled in December, 1953, at the request of Mr. Guernsey and that no premium charge was included in the Guernsey mortgage expense account thereafter. On cross-examination Mrs.