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District Court of Appeal, First District, Division 2, California.


Civ. 9908.

Decided: March 05, 1937

Livingston & Livingston, of San Francisco, for appellant. Hartley F. Peart, of San Francisco (Howard Hassard, of San Francisco, of counsel), for respondent.

In an action brought to recover the amount due the beneficiary of Spencer J. Johnson, deceased, under a group insurance policy, the jury returned a verdict in favor of the plaintiff. The trial court granted the defendant's motion for a new trial. From that order the plaintiff has appealed.

After all of the parties had finished introducing evidence, the defendant made a motion that the jury be directed to bring in a verdict in its favor. The trial court denied that motion. Thereafter the defendant made a motion for a new trial. Later the motion was granted. The wording of the order granting the motion was as follows: “The motion for a new trial having been heretofore submitted to the court for decision, and the court having fully considered the same, it is ordered that the said motion for new trial be and the same is hereby granted upon the sole ground that the court erred in denying defendant's motion for a directed verdict for the reason that the premium which became due on January 19, 1932, on the policy described in the complaint was not paid within the grace period expiring February 19, 1932, and that defendant did not waive the payment thereof and is not estopped to forfeit said policy on account of such nonpayment.” The plaintiff asserts that the sole question presented by this appeal is whether the trial court erred in denying the defendant's motion for a directed verdict and if it did not then it erred in granting the motion for a new trial and the order should be reversed. The defendant contends that in its motion for a new trial it made many assignments of error and if any one of said assignments was such that there has been a miscarriage of justice then the order should be affirmed. From the conclusion which we have reached it will not be necessary to discuss anything excepting the order refusing to grant defendant's motion for a directed verdict.

Mullin–Acton Company and Mullin–Johnson Company were affiliated corporations engaged in the insurance business in San Francisco. The uncontradicted testimony showed that Mullin–Johnson Company was the alter ego of Mullin–Acton Company and for reasons best known to the latter its brokers were incorporated and in that manner acted as the brokers of Mullin–Acton Company. With the facts all known to both parties the insurance contract involved in this action was executed. It covered as one group nominal employees of both companies. On September 18, 1931, the California Western States Life Insurance Company (then Western States Life) wrote a policy of group insurance upon the lives of the employees of the affiliated corporations. That document was known as the master contract of group insurance. The original was lost, but evidence proving its contents was offered at the trial. To each employee a certificate was issued showing his interests under the master policy. By the terms of the policy the premium fell due on September 18, 1931, and monthly thereafter. A representative of Mullin–Johnson Company collected from its employees and a representative of the Mullin–Acton Company collected the amounts due from its employees and the latter company transmitted the premium moneys to the defendant's home office. In that manner every premium was paid down to and including the month of November. As to each premium the practice was for the insurance company to send to the policyholder a statement as to the amount of each premium as it fell due. Having received such statements with such notice so printed thereon, the policyholder was monthly advised as to the amount of the premium and the date the same was payable. Such a statement and such a notice went forward regarding the premium payable December 31, 1931. The policy provided thirty–one days as a period of grace. On January 14, 1932, Mullin–Acton Company drew and forwarded its check in the sum of $69.72. At that time Mullin–Acton Company was becoming financially embarrassed. On receiving the check the defendant did not immediately deposit it and when it did attempt to collect the check the bank on which it was drawn refused to pay the check because the bank had been compelled to exercise its banker's lien to protect its own self and no funds remained to pay the check. In the meantime the creditors of Mullin–Acton Company filed an involuntary petition to have the latter adjudged a bankrupt. When the defendant was informed that said check had not been paid it sent Robert F. Benjamin to attempt to collect the amount of the check from the policyholder. He called on Mr. George H. Mullin, president of Mullin–Johnson Company and formerly president of Mullin–Acton Company. Mr. Mullin advised him to call on Mr. Raymond A. Burr, the receiver in bankruptcy of Mullin–Acton Company. Benjamin did so, but without success, and when he returned to Mr. Mullin the latter caused another check to be issued and delivered to Mr. Benjamin. That check was cashed February 10, 1932. It paid the premium that fell due December 19, 1931.

Apparently while straightening out the check tangle Mr. Mullin became aware of the dangerous condition in which the insurance of the employees was becoming involved. The pro rata contributions of the Mullin–Johnson Company amounted to $10.40. That sum he offered to pay Mr. Benjamin but he declined to accept it. In doing so he stated to Mr. Mullin that the bankruptcy of the Mullin–Acton Company had resulted in the appointment of a receiver, Mr. Burr, and that Mr. Burr refused to continue the policy so far as the employees of Mullin–Acton Company were concerned; under those circumstances it was necessary to recalculate premiums; and until the latter step had been taken Mr. Benjamin did not know what sum or sums to collect. About this time several conversations were had between Mr. Mullin and Mr. Benjamin. No other tender was made to Mr. Benjamin, nor was any sum sent to the home office of the defendant. Affairs stood as stated above when, on February 24, 1932, Spencer J. Johnson died. The last date on which the premium which fell due January 19, 1932, could have been paid under the terms of the policy expired February 19, 1932––that is, five days before the date of the death of Mr. Johnson.

The plaintiff does not claim the policyholder paid the premium but she asserts that the defendant is estopped from setting up that defense by reason of things said and done by Mr. Benjamin. The defendant replies that it is not estopped and quotes from the policy as follows: “Modifications and Authority. 18. No agent can make, alter or discharge this policy or extend the time for payment of premiums, nor can this policy be varied or altered or its conditions waived or extended in any respect, except by the written agreement of the Company, signed by the President, or Vice–President, or Secretary, or Assistant Secretary, whose authority will not be delegated.” It was not claimed that Mr. Benjamin held any one of the offices mentioned in clause 18. Nor was there a particle of evidence that he was anything other than a special agent. His powers were, in general, expressed in his written appointment which provided: “The Company appoints the above–named its special agent, to solicit applications for insurance on the lives of individuals, to collect and pay over to the Company only such premiums as directed by the Company, to perform such other duties in connection therewith as shall be required by the Company, and for no other purpose whatsoever.” There was direct evidence that he was directed to collect the check returned “no funds.” There was no evidence he was authorized nor directed to make any contract for the defendant. Mr. Mullin, over the objection of the defendant and under the promise of the plaintiff that the proof would be connected up later, testified that when Mr. Benjamin refused to accept the $10.40 tendered to him he stated that the policy was still in force and would continue in force until the defendant notified the insured of the amount of the recalculated premium. A motion to strike out was later made, but the motion was denied. The defendant asserts the testimony so given by Mr. Mullin was improperly received and that it tended to show that Mr. Benjamin attempted orally to modify a written contract which he did not have power either to write or to modify. The plaintiff contends that in this assertion the defendant is in error. The record before us does not show what was the fact. A document was introduced in evidence by the defendant which it claimed was a copy of the policy as written. That document was not copied by the reporter and the exhibits have not been brought up. Whether the contract contained covenants allowing a recalculation of the premium, and, if so, the terms of such covenants, we are not advised. By paragraph (b), subdivision 2, section 629b, Political Code it is provided that the policy, the application of the employer, and the application of the individual shall constitute the entire contract between the parties. No one of those papers is before us. By subdivision 1, section 629b, Political Code it is provided that a policy of group insurance may issue to cover not less than fifty employees. When, as here, the number of the employees is reduced more than 50 per cent. by discharge and the number remaining is twenty–five or less, the record is silent as to the provisions of the contract applicable to such contingency. Under the uncontroverted facts, Mullin–Acton Company was the employer. Mullin–Johnson Company was the broker of the former. When Mullin–Acton Company was adjudged a bankrupt it ceased to be an employer. By the same token plaintiff's decedent and the other certificate holders ceased to be employees of Mullin–Acton Company. In paragraph (d), subdivision 2, section 629b, Political Code, it is provided that to each employee will be issued a certificate reciting that in case of the termination of the employment for any reason whatsoever the employee shall be entitled to have issued to him by the company upon application made to the company within thirty–one days a policy of life insurance, etc. But the record before us does not show whether the policy was so written nor the provisions relative thereto. It will be presumed that its provisions conformed to the law. Code Civ.Proc. § 1963, subd. 33.

The motion for a directed verdict was expressly directed to the issues of waiver and estoppel. The presumption is that the trial court correctly decided the motion for a new trial. As this record is presented to us it is clear we may not say the oral evidence of Mr. Mullin was competent, that the court properly received it, nor that the court properly denied the motion for a directed verdict. The burden rests with the plaintiff on this appeal. It follows that we may not say the trial court erred in granting the motion for a new trial on the ground on which it based its order.

The order appealed from is affirmed.


We concur: NOURSE, P. J.; SPENCE, J.

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