THE first of these cases is here on appeal from, and the second and third on writs of error to, the Circuit Court of the United States for the Southern District of Mississippi. The first case is a bill in equity, filed to recover the amount of a policy of life assurance, granted by the defendant (now appellant) in 1851, on the life of Dr. A. D. Statham, of Mississippi, from the proceeds of certain funds belonging to the defendant attached in the hands of its agent at Jackson, in that State. It appears from the statements of the bill that the annual premiums accruing on the policy were all regularly paid, until the breaking out of the late civil war, but that, in consequence of that event, the premium due on the 8th of December, 1861, was not paid; the parties assured being residents of Mississippi, and the defendant a corporation of New York. Dr. Statham died in July, 1862. The second case is an action at law against the same defendant to recover the amount of a policy issued in 1859 on the life of Henry S. Seyms, the husband of the plaintiff. In this case, also, the premiums had been paid until the breaking out of the war, when, by reason thereof, they ceased to be paid, the plaintiff and her husband being residents of Mississippi. He died in May, 1862. The third case is a similar action against the Manhattan Life Insurance Company of New York, to recover the amount of a policy issued by it in 1858, on the life of C. L. Buck, of Vicksburg, Miss.; the circumstances being substantially the same as in the other cases. Each policy is in the usual form of such an instrument, declaring that the company, in consideration of a certain specified sum to it in hand paid by the assured, and of an annual premium of the same amount to be paid on the same day and month in every year during the continuance of the policy, did assure the life of the party named, in a specified amount, for the term of his natural life. Each contained various conditions, upon the breach of which it was to be null and void; and amongst others the following: 'That in case the said [assured] shall not pay the said premium on or before the several days hereinbefore mentioned for the payment thereof, then and in every such case the said company shall not be liable to the payment of the sum insured, or in any part thereof, and this policy shall cease and determine.' The Manhattan policy contained the additional provision, that, in every case where the policy should cease or become null and void, all previous payments made thereon should be forfeited to the company. The non-payment of the premiums in arrear was set up in bar of the actions; and the plaintiffs respectively relied on the existence of the war as an excuse, offering to deduct the premiums in arrear from the amounts of the policies. The decree and judgments below were against the defedants.
The opinion of the court was delivered by: Mr. Justice Bradley, after stating the case, delivered the opinion of the court.
Mr. Matt. H. Carpenter and Mr. James A. Garfield for the appellant in the first case, and for the plaintiff in error in the second. The third case was submitted by Mr. Alfred Pitman for the plaintiff in error.*fn1 *
The rights involved depend upon the contract. The court will not interpolate new conditions, but hold the parties to their agreement. Dermott v. Jones, 2 Wall. 1; Jeffreys v. Life Ins. Co., 22 id. 47. It consists of two parts, and is divisible. The payment of the first premium accomplished two things: First, it effected an insurance upon the life of the applicant for one year, which is, so far as he is concerned, an executed contract. Should he die within that specific period, the company absolutely covenants to pay the amount of the policy. Second, it purchased the option of his making the stipulated payments, and thus continuing the insurance from year to year, and is in this respect an executory contract. Worthington v. Charter Oak Life Ins. Co., 41 Conn. 372. The provisions requiring payment of the agreed premium for each subsequent year are an essential part of the substance of the contract, by which the duration of the risk is limited and defined, and are not a condition in the nature of a penalty. Dean v. Nelson, 10 Wall. 158. They declare that the policy, if the requisite premium is not paid, expires by its own limitation; but if the court considers that they create a condition, then we insist that it is a condition precedent to the renewal and extension of the risk. Until its performance, no liability is incurred by the underwriter, and no right vests in the policy-holder. Want et al. v. Blunt et al., 12 East, 183; Phoenix Life Ins. Co. v. Sheridan, 8 Ho. of Lds. Cas. 745; Law R. 9 Ch. 502; id. 9 Eq. 705; id. 17 Ed. 316-320. An impossibility to perform it does not prevent the loss which results therefrom; nor will a court of equity relieve against the consequences of a breach, although such impossibility be occasioned by law. Salk. 231, 233; 3 Vern. 338, 339, 344; 1 id. 223; 1 Bro. Ch. 168; Earl of Shrewsbury v. Scott, 6 C. B. N. S. 1; Barker v. Hodgson, 3 M. & S. 267.
From the beginning of the war until the President's proclamation of Aug. 6, 1861, the assured, who lived within the rebel States, had full opportunity and permission to withdraw to loyal territory. His duty in such a case is clearly indicated in Mrs. Alexander's Cotton, 2 Wall. 421, and The William Bay ley, 5 id. 377. He elected to remain within the jurisdiction of the enemy. The result of his choice cannot be pleaded as an excuse for non-performance; nor can relief be claimed on the ground insisted upon by the other side, that, when the annual premium became due, its payment was rendered unlawful by the existence of war.
The contract, under the circumstances, and by his own voluntary act, was, if for no other reason, made void by the war; because its continued existence depended upon the performance of certain conditions by a person who remained within the Confederate lines, when all intercourse was prohibited by law. Hanger v. Abbott, 6 Wall. 536; Duer on Insurance, 473, note 2; Thompson v. United States, 15 Wall. 400. As insurance of the property or lives of enemies violates the laws of war, all such continuing policies are annulled when hostilities commence between the countries where the insurance company and the assured respectively reside. The war, ipso facto, dissolved the contracts sued on. Furtado v. Rogers, 3 Bos. & Pull. 191. There can be no well-founded distinction between a promise to indemnify a hostile country and one to indemnify its citizen or subject, though a non-combatant, against loss of life. Upon his death, should the contract be valid, and the non-performance of the condition which he has assumed be waived, an absolute right to a sum of money accrues, even though payment might not be enforced until the close of the war. We also insist, that during the war, and when the insured died, the contract, by its own limitation, or by reason of the non-performance of the condition, ceased and determined. The ground taken on the other side is, that only the particular clause requiring the stipulated annual payment was suspended, and that no loss arises from a non-compliance with its terms. This extraordinary result then follows. The contract, so far as the company is concerned, remains in force, and absolutely binds it, whilst the enemy is excused from performance. Should the insured survive the war, there would be no obligation to pay the back premiums, the contract being unilateral; if he dies, the assured can claim, as is done in these cases, the amount of the policy.
But if the court should reject these views, and hold that the defences are not a valid bar to a recovery in these suits, it will not affirm the judgments and decree for the entire amount of the several policies. If any equitable adjustment of the matters in controversy be made, the policy-holder, whose policy was alive when the war began, should not be entitled to any thing beyond its surrender value at that date. Such an adjustment would not impose on the assured the forfeiture of the premiums paid, or on the company the hardship of paying all lapses, whether voluntary or involuntary.
Mr. Clinton L. Rice for the appellees in the first case, and Mr. Joseph Casey for the defendant in error in the second. The third case was submitted by Mr. W. P. Harris for the defendant in error.
A contract of insurance, when made upon and for the life of the insured, is a contract for life, and not from year to year. Manhattan Life Ins. Co. v. Warwick, 20 Gratt. 620; Reese v. Mut. Benefit Life Ins. Co., 26 Barb. 556; Hodson's Adm'rs v. Guard. Life Ins. Co., 97 Mass. 144; Hillyard v. Mut. Benefit Ins. Co., 37 N. J. 444. The payment of the premiums is a condition subsequent, the performance of which is excused when rendered illegal by the interdiction of commerce and intercourse in time of war between the countries where the contracting parties respectively reside.
It is not an executory contract of such a nature as to be ipso facto terminated or abrogated by a state of war. The war did not, therefore, proprio vigore, annul it, or impair any vested right under it. It had no other effect than to suspend the remedy upon, or the performance of, it. Statham v. New York Life Ins. Co., 45 Miss. 592; Cohen v. New York Mut. Life Ins. Co., 50 N. Y. 610; Sands v. New York Life Ins. Co., id. 626; Manhattan Life Ins. Co. v. Warwick, supra; New York Life Ins. Co. v. Clopton, 7 Bush, 179; Hamilton v. New York Mut. Life Ins. Co., 9 Blatch. 234; Semmes v. Hartford Ins. Co., 13 Wall. 158; Griswold v. Waddington, 16 Johns. 438; Bliss on Life Ins. (2d ed.) pp. 657-702. Conditions are void, if, at the time of their creation, their performance is impossible, or afterwards becomes so, by the act of God or the law. Walker v. Osgood, 53 Me. 432; Wood v. Edwards, 19 Johns. 205; Glover v. Taylor, 41 Ala. 124; People v. Bartlett, 3 Hill, 570; Story's Eq. sects. 1304, 1307; Brewster v. Kitchen, 1 Ld. Raym. 317; Coke's Com. 206 a; 2 Pars. on Contr. 672-674. The nonperformance of a condition subsequent, where its performance is a forbidden and unlawful act, does not work a forfeiture of the policy. There is no forfeiture, in the just sense of that term, where the law prohibits performance (Semmes v. Hartford Ins. Co., supra; Dean v. Nelson, 10 Wall. 169; Brewster v. Kitchen, supra; Tenlevey v. Hubbard, 3 B. & P. 291); and every intendment consistent with the contract will be made to prevent a forfeiture. McAllister v. N. E. Mut. Life Ins. Co., 101 Mass. 558; N. E. Mut. Life Ins. Co. v. Hasbrook, 32 Ind. 447; Helme v. Phila. Life Ins. Co., 61 Penn. 107; Bliss on Life Ins., sects. 186, 190; Thompson v. St. Louis Mut. Life Ins. Co., 52 Mo. 469. On the cessation of hostilities, the former state of things revived, and rights under a valid contract were restored to their original vigor. United States v. Grossmeyer, 9 Wall. 72; Montgomery v. United States, 15 id. 395; United States v. Lapene, 17 id. 601.
We agree with the court below, that the contract is not an assurance for a single year, with a privilege of renewal from year to year by paying the annual premium, but that it is an entire contract of assurance for life, subject to discontinuance and forfeiture for non-payment of any of the stipulated premiums. Such is the form of the contract, and such is its character. It has been contended that the payment of each premium is the consideration for insurance during the next following year,–as in fire policies. But the position is untenable. It often happens that the assured pays the entire premium in advance, or in five, ten, or twenty annual instalments. Such instalments are clearly not intended as the consideration for the respective years in which they are paid; for, after they are all paid, the policy stands good for the balance of the life insured, without any further payment. Each instalment is, in fact, part consideration of the entire insurance for life. It is the same thing, where the annual premiums are spread over the whole life. The value of assurance for one year of a man's life when he is young, strong, and healthy, is manifestly not the same as when he is old and decrepit. There is no proper relation between the annual premium and the risk of assurance for the year in which it is paid. This idea of assurance from year to year is the suggestion of ingenious counsel. The annual premiums are an annuity, the present value of which is calculated to correspond with the present value of the amount assured, a reasonable percentage being added to the premiums to cover expenses and contingencies. The whole premiums are balanced against the whole insurance.
But whilst this is true, it must be conceded that promptness of payment is essential in the business of life insurance. All the calculations of the insurance company are based on the hypothesis of prompt payments. They not only calculate on the receipt of the premiums when due, but on compounding interest upon them. It is on this basis that they are enabled to offer assurance at the favorable rates they do. Forfeiture for non-payment is a necessary means of protecting themselves from embarrassment. Unless it were enforceable, the business would be thrown into utter confusion. It is like the forfeiture of shares in mining enterprises, and all other hazardous undertakings. There must be power to cut off unprofitable members, or the success of the whole scheme is endangered. The insured parties are associates in a great scheme. This associated relation exists whether the company be a mutual one or not. Each is interested in the engagements of all; for out of the coexistence of many risks arises the law of average, which underlies the whole business. An essential feature of this scheme is the mathematical calculations referred to, on which the premiums and amounts assured are based. And these calculations, again, are based on the assumption of average mortality, and of prompt payments and compound interest thereon. Delinquency cannot be tolerated nor redeemed, except at the option of the company. This has always been the understanding and the practice in this department of business. Some companies, it is true, accord a grace of thirty days, or other fixed period, within which the premium in arrear may be paid, on certain conditions of continued good health, &c. But this is a matter of stipulation, or of discretion, on the part of the particular company. When no stipulation exists, it is the general understanding that time is material, and that the forfeiture is absolute if the premium be not paid. The extraordinary and even desperate efforts sometimes made, when an insured person is in extremis, to meet a premium coming due, demonstrates the common view of this matter.
The case, therefore, is one in which time is material and of the essence of the contract. Non-payment at the day involves absolute forfeiture, if such be the terms of the contract, as is the case here. Courts cannot with safety vary the stipulation of the parties by introducing equities for the relief of the insured against their own negligence.
But the court below bases its decision on the assumption that, when performance of the condition becomes illegal in consequence of the prevalence of public war, it is excused, and forfeiture does not ensue. It supposes the contract to have been suspended during the war, and to have revived with all its force when the war ended. Such a suspension and revival do take place in the case of ordinary debts. But have they ever been known to take place in the case of executory contracts in which time is material? If a Texas merchant had contracted to furnish some Northern explorer a thousand cans of preserved meat by a certain day, so as to be ready for his departure for the North Pole, and was prevented from furnishing it by the civil war, would the contract still be good at the close of the war five years afterwards, and after the return of the expedition? If the proprietor of a Tennessee quarry had agreed, in 1860, to furnish, during the two following years, ten thousand cubic feet of marble, for the construction of a building in Cincinnati, could he have claimed to perform the contract in 1865, on the ground that the war prevented an earlier performance?
The truth is, that the doctrine of the revival of contracts suspended during the war is one based on considerations of equity and justice, and cannot be invoked to revive a contract ...