Rittler v. Smith

Miller, J., delivered the opinion of the Court. In June, 1886, Victor Smith was indebted to William H. Rittler in the sum of about $1000, and Smith being insolvent, Rittler took out certificates of insurance on Smith's life, in four several mutual aid associations, aggregating on their face the sum of $6500. These certificates were all in favor of Rittler and he paid all the premiums or assessments thereunder. Smith died in March, 1887, and Rittler collected from these insurances the sum of $2124.82, which appears to have been all that could have been collected, according to the terms of the certificates, and the financial condition of the associations.

Deducting from this sum the debt and interest due Rittler, the premiums he had paid, and the costs and expenses of effecting the insurances, there remained a balance of $474.58, as of the 1st of June, 1887. On the third of October following, letters of administration on Smith’s estate were granted to an administratrix, who thereupon filed her bill claiming this balance as belonging to the estate of the decedent. In his answer Rittler denied this claim, and insisted that the money belonged to him. The case was heard on bill and answer, and the Court below decreed in favor of the conrplainant.

Prom this decree Rittler has appealed. The question as thus presented is an interesting-one, is of first impression in this State, and has been very ably argued. On the part of the appellant it ²⁶³ is contended that where a creditor with his own money and for his own account, effects and keeps up an insurance on the life of his debtor, the whole of the proceeds belong to him unless it appears that he has gone into it for the mere purpose of speculation, which in this case is expressly negatived by the answer, the averments of which must he taken as true, the case having been heard on hill and answer. On the other hand, counsel for the appellee contend, that where the creditor receives more than enough to reimburse him for his debt and outlay, with interest, he will, as to the balance he regarded as a -trustee for the personal representative of the debtor; that the law says to the creditor in such a case, “you may protect yourself; you may by insuring your debtor’s life secure your debt with all outlay and expenses; you may make yourself whole, hut you shall not speculate on his death; you shall not have a greater direct pecuniary interest in his death than you may have in his life.” There have been numerous decisions upon this subject, some of which are conflicting.

On many points however hearing upon the question, there is a general concurrence of judicial opinion and authority. For instance, it is generally held by the Courts in this country that one who has no insurable interest in the life of another cannot insure that life. Such insurances are considered gambling contracts, and for that reason void at common law apart from any statute forbidding them. In England they were held valid at common law, hut were prohibited as introducing a “mischievous kind of gaming,” by the first section of Statute 14 Geo.

III, ch. 48. The effect of'this section, as construed by the English Courts, is to make the law of England, by Act of Parliament, the same as it has been held to he by the Courts in this country without such an Act. In some American cases they have been de ²⁶⁴ nouncecl as void not simply because they tend to promote gambling, but because they are incentives to crime. The force of this latter suggestion has been, and may well be, doubted.

It means that one not related or connected by consanguinity or marriage, who maj»' have a direct pecuniary interest in the speedy death of another, will thereby be tempted to murder him, though he knows that hanging is the penalty for such a crime. This doctrine carried to its logical result has a far-reaching effect. It strikes down every legacy to a stranger which may become known to the legatee, as is frequently the case, before the death of the testator. It makes void every similar limitation in remainder after the death of a life tenant.

Every like conveyance of property in consideration that the grantee shall support the grantor during his life, falls under the same condemnation. Yet we know of no case in which a Court has declared such testamentary dispositions or conveyances to be void on this ground. Other instances in which the same result would follow from the application of this doctrine, could be readily suggested, but we need not pursue the subject further. All the authorities also concur in holding that a creditor has an insurable interest in the life of his debtor.

In England it was at one time held that though the creditor had an insurable interest at the time the policy was issued, yet if his debt was paid in the lifetime of his debtor, and his interest had therefore ceased, he could not recover, because the contract of life insurance like insurances of property, was one of indemnity. But this doctrine has long since been repudiated, and the settled rule in England now is, that a life insurance in no way resembles a contract of indemnity, but is an agreement to pay a certain sum of money upon the death of the person insured, in consideration of the due payment of a certain fixed annual sum or ²⁶⁵ premium, during his life, and hence if the contract be valid at the time it was entered into, notwithstanding the fact that the interest of the creditor has ceased during the life of his debtor, he may still recover on the policy, though the result may he that he will be twice paid for his debt, once by his debtor and again by recovery on the policy. Dalby vs. Life Ins. Co., 15 Com.

Bench, 365. The same construction of the contract has been approved and adopted by this Court. Emerick vs. Coakley, et al., 35 Md., 193 ; Whiting vs. Independent Mutual Ins. Co., 15 Md., 326 .

In support of the view taken by the appellee’s counsel, cases have been cited in which it has been held that the assignee of a life policy, who has no insurable interest in the life, stands in the same position- as if he had originally taken out the policy for his own benefit. In other words the contention is that the assured himself can make no valid absolute assignment of his policy to one who has no insurable interest in his life. But our own decisions are opposed to this. It is settled law in this State that a life insurance policy is hut a chose in action for the payment of money, and may he assigned as such under our Act of 1829, ch. 51.

New York Life Ins. Co. vs. Flack, 3 Md., 341 ; Whitridge vs. Barry, 42 Md., 150 . It is quite a-common thing for the bond or promissory note of a private individual, to he sold through a broker to a bona fide purchaser, for less than its face value; and when the latter takes an assignment of it, without recourse, he becomes its absolute owner, and is not bound to