NEW YORK LIFE INSURANCE COMPANY v. United States of America, Defendant and Appellant.

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Court of Appeal, Third District, California.

NEW YORK LIFE INSURANCE COMPANY, a corporation, Plaintiff, Cross-Defendant and Respondent, v. PORT CITY CONSTRUCTION CO., Defendant, Cross-Complainant, and Appellant, United States of America, Defendant and Appellant.

Civ. 19702.

Decided: January 18, 1982

Rushing, Lyions & Anderson, George E. Anderson, Modesto, for defendant, cross-complainant and appellant. M. Carr Ferguson, Asst. Atty. Gen., Michael L. Paup, Gary R. Allen, Kristina E. Harrigan, Washington, D. C., and William B. Shubb, U. S. Atty., for defendant and appellant. Knight, Boland & Riordan, Richard J. Kilmartin, San Francisco, for plaintiff, cross-defendant and respondent.

Plaintiff insurance company brought a declaratory relief action to determine the defendants' rights with respect to a life insurance policy issued on the life of decedent.   Defendant Port City Construction Co. cross-complained for the policy amount and alleged an action in bad faith.   Two other defendants, the United States of America and the State of California, also cross-complained against the insurance company, claiming an interest in the fund for delinquent taxes owed by Port City.   The lower court found in a bench trial that the decedent had withdrawn from the partnership prior to the delivery of the policy and that it therefore did not have an insurable interest in his life.   It further found that the partnership concealed that withdrawal and that concealment invalidated the policy.   Finally, it ruled that decedent did not consent to the delivery of the policy and that lack of consent also invalidated the policy.   The court therefore concluded that plaintiff had no liability under the policy and that its only obligation was to refund the advanced premiums of $238.   It awarded those premiums to the United States in partial payment of its tax claim.   Port City and the United States appeal.

Both appellants contend that the partnership had an insurable interest in decedent's life and that the trial court erred in several of its findings.   Port City further contends that the trial court erroneously denied its right to a jury trial.   We resolve all but one of those contentions against appellants and affirm the judgment.


In 1972, decedent, Anthony C. Virgilio, and two other men signed articles of partnership forming a construction business named Port City Construction Co.   That agreement contained a provision relating to retirement which provided:

“7. RETIREMENT:  A partner shall have the right to retire from the partnership by giving written notice of his intention to retire to the remaining partners.   Such notice shall be received by the remaining partner or partners at least forty-five (45) days prior to the effective date of said retirement.”

On September 6, 1973, one of the partners, in the name of the construction company, executed applications to plaintiff for policies of life insurance for each of the partners.   The policies had a face value of $100,000 and an additional accidental death benefit of $100,000.   Port City was designated as the beneficiary.   In answer to an application question asking, “Relationship to proposed insured?”, the word “Partnership” was written.   At the agent's suggestion, the construction company requested the policy be backdated to August 11, 1973.1

An application provision stated,


“1. The undersigned agree that the written representations in this application are correctly recorded, complete and true and that the Company, believing them to be true, shall rely and act upon them accordingly.

“2. The undersigned confirm all agreements included in such application and agree that acceptance by the Applicant of any policy issued thereon shall constitute ratification of such agreements ․

“3. [N]o policy applied for herein shall go into force or take effect unless the first premium for it is paid in full during the lifetime of the person or persons proposed for coverage under it, and then only if the written representations made in the entire application for insurance would be, without material change, at time of delivery of the policy, true and complete representations of the state, at that time, of those matters inquired about in such application.”

In order to complete the insurance company's requirements it was necessary for each of the partners to submit to a medical examination.   Decedent was examined on September 10, 1973.   Neither of the other men complied and the applications for policies on their lives were never completed.

By late September 1973, Virgilio had decided to withdraw from the partnership and consulted an attorney for that purpose.   On October 2, 1973, he gave the construction company a formal written notice of intention to retire from partnership, pursuant to the requirements of the articles of partnership set out above.   The notice, prepared by his attorney, also requested an accounting.   The 45-day notice provision of the articles expired November 16, 1973.

The insurance policy was delivered on October 31, 1973, to the construction company's office.   At that time, the partner who managed the office paid the premium with a construction company check.   The partner did not mention to the agent that decedent had given his notice of retirement.   In response to a question regarding decedent's whereabouts, the agent was told only that he was in the field on a job.

On or about December 28, 1973, decedent learned of the issuance and delivery of the policy for the first time when he was informed by a company secretary.   He instructed her to forward the premium notice to him so that he could have the policy cancelled.   Decedent remarked to his wife, “I didn't even know they had this policy out on me.”

The trial court determined that decedent ceased all work for the construction company by the end of November 1973, and returned company tools and equipment in his possession.   On November 20, 1973, the company's “Responsible Managing Employee,” who possessed the state contractor's license the business operated under, withdrew his license.   Decedent and the responsible managing employee, who were life-long friends, proceeded to set up a new construction company.

On December 31, 1973, decedent was the victim of a homicide.   He sustained numerous gunshot wounds.   Before expiring, he informed police that he was dissolving his partnership with the other two men.2

The policy on his life was never cancelled because the premium notice was not received at his house until after his death.

The court, in rendering its decision, announced eight conclusions of law, among which were:  (1) There was no insurance in force or effect on decedent's life under the policy prior to October 31, 1973;  (2) The partnership did not have an insurable interest in the life of decedent on October 31, 1973, and the policy delivered to the partnership on that date is invalid by reason thereof;  (3) The decedent did not consent to the delivery of the policy on his life on October 31, 1973.   Said policy is invalid by reason thereof;  (4) A material change in the relationship between decedent and the company, and decedent and the other partners, occurred after the date of the application for the policy, which was not disclosed to the insurance company, and by reason thereof the policy did not go into force or take effect;  and (5) The insurance company has no liability under the policy to any of the parties to this action.


Defendant challenges the court's determination that the policy is void because the partnership lacked an insurable interest in decedent's life.

 California Insurance Code section 280, provides, “If the insured has no insurable interest, the contract is void.”   This prohibition stems from a public policy against permitting one having no insurable interest to procure an insurance policy upon the life of another and pay the premiums on a chance of collecting the insurance money.  (Couch on Insurance 2d, § 24:118, p. 222.)  “Such contracts are an incentive to crime in that where the required relationship is lacking the person to be benefitted by the policy is interested in the death rather than the life of the insured․  [T]he rule which requires an insurable interest is designed to protect human life.”  (Ibid., fn. omitted.)

 An “insurable interest” in a life is said to exist when a person can “․ reasonably expect to receive pecuniary gain from the continued life of the other person and conversely, if he would suffer financial loss from the latter's death ․  The interest, to be insurable, must be one in favor of the continuance of the life, and not an interest in its loss or destruction.”   (Id., at § 24:119, pp. 225–226.)  “[I]t is generally sufficient that an insurable interest existed at the inception of the contract, and it is immaterial that such interest ceased prior to the death of the insured ․”  (Id., at § 24:122, p. 230.)

California Insurance Code section 10110, specifies, “Every person has an insurable interest in the life and health of:

“(a) Himself.

“(b) Any person on whom he depends wholly or in part for education or support.

“(c) Any person under a legal obligation to him for the payment of money or respecting property or services, of which death or illness might delay or prevent the performance.

“(d) Any person upon whose life any estate or interest vested in him depends.”

 It is established law that a partnership may have an insurable interest in the life of a partner.  (Appleman, Insurance Law and Practice, Vol. 2, § 871, pp. 385–386;  Couch on Insurance 2d, § 24:144, p. 255.)   The trial court correctly noted an exception to that general rule.   Although California courts have not yet passed on that exception, we believe the better rule to be the one fashioned by the few courts that have considered the question, namely that the mere existence of a partnership does not in and of itself establish as a matter of law that the partnership has an insurable interest in the life of a partner.   Instead, the circumstances of each partnership situation must be considered to determine whether there exists a reasonable expectancy of pecuniary advantage from the continuation of the insured partner's life.   (See Lakin v. Postal Life And Casualty Co. (Mo.1958) 316 S.W.2d 542;  Sun Life Assur. Co. v. Allen (1935) 270 Mich. 272, 259 N.W. 281;  Powell v. Dewey (1898) 123 N.C. 103, 31 S.E. 381;  Annot., Insurable interest of partner or partnership in life of partner (1960) 70 A.L.R.2d 577.)

The trial court found no insurable interest in existence on October 31, 1973, when the policy went into effect, for decedent had already submitted his notice of withdrawal.   The partnership was terminated subject only to the passage of the specified time.   Both experts at trial agreed the withdrawal made decedent more valuable dead than alive.

Appellants' claim of an insurable interest is based on the alleged existence of several pecuniary benefits derived from decedent and enjoyed by the partnership.   First, an interest is claimed under Insurance Code section 10110, subdivision (c), which provides that a person has an insurable interest in anyone who is under a legal obligation to him for the payment of money or respecting property or service.   It is asserted that the existence of a partnership relationship gives rise to mutual obligations among the partners within the meaning of the statute.

 In the present situation, the partnership owed debts only to outside creditors, and not to each other individually.   The basis for their contention that a legal obligation existed between the partners for the payment of money as a matter of law is that partners are jointly and severally liable for partnership debts.   This, however, does not create an insurable interest in the life of a deceased partner, for, at death, the deceased partner's estate assumes responsibility for his share of the debt.   The remaining partners do not assume any greater financial obligation and they suffer no insurable loss.  (Corp. Code, § 15034;  see Yahr-Donen Corp. v. Crocker (1947) 80 Cal.App.2d 675, 678, 182 P.2d 209.)

 Once decedent's withdrawal was tendered there was also no remaining insurable interest in decedent's services, for he severed his relationship with the partnership effective after the allotted passage of time.   No evidence was presented as to the existence of any legal obligation arising from property.

 It was also asserted that an insurable interest existed because decedent controlled whether or not the Responsible Managing Employee (RME) stayed on the job.   This is without merit for the RME was free to do as he wished, including leave at any time.

 Lastly, we note the court's proper identification of October 31, 1973, as the “effective date” for purposes of determining whether an insurable interest existed.   Port City urges us to find August 11, 1973, to be the proper one, it being the date to which the policy was to be backdated.   Port City's appellate contentions are designed to move the date to a point when an insurable interest did exist.   Backdating, however, while used for premiums, policy anniversaries, etc., is not relevant for determining whether an insurable interest exists.   As specified in Insurance Code section 286, “․ an interest in the life ․ of a person insured must exist when the insurance takes effect ․”  Here, the insurance would have taken effect on October 31, when the first premium was paid;  then, by mutual agreement the policy date was to be moved back to August 11.   Before the policy date can be backdated, though, the policy must, first, validly go into effect.   Here, it never did because no insurable interest existed on October 31.


 Appellants next assert the court erred in finding the policy was invalidated due to the failure of the construction company to advise the insurance company that the representations in the application had been materially altered between the date of the application and the date of delivery.

There was a direct statement in the application that the parties were members of a partnership.   By the date the policy was issued, the partnership knew of an impending termination.   Neither the insurance company nor its agent were advised of this, despite an express application requirement that they be informed.   If they had had such knowledge, the policy would not have been delivered.

We are unpersuaded by the argument that the remaining partners had no duty to notify the company because they thought decedent's withdrawal was revoked.   Assuming they truly had such a belief, we conclude that the insurance company was still entitled to have been made aware of such internal instability.   We note with approval language in Security Life Ins. Co. v. Booms (1916) 31 Cal.App. 119, 122, 159 P. 1000, cited in plaintiff's brief, stating, “ ‘The completion of the contract of insurance is the time to which a representation must be presumed to refer.’  (Civ.Code, sec. 2577 [now, Ins.Code, § 356].)  ‘It is well settled that the obligation rests upon an applicant for life insurance to disclose such changes in his physical condition as occur pending the negotiation as would influence the judgment of the company as to the advisability of accepting the risk.’ ”


Appellants further assert on appeal that the finding of the court, declaring the insurance policy to be invalid due to the failure of decedent to consent to its delivery, was erroneous.   We agree.

 Although the law does require an insured to consent to the issuance of an insurance policy (see Couch on Insurance 2d, § 24:123, p. 232), generally it appears to be unnecessary for the consent to occur at the time of delivery.

The only California case we found addressing this issue is Meyer v. Johnson (1935) 7 Cal.App.2d 604, 46 P.2d 822, in which an insurance policy was issued to a woman just before her husband murdered her.   The insurance company sought to avoid payment of the proceeds to her heirs, claiming the policy was never issued or delivered.   The court upheld the policy's validity, stating that, where “the deceased knew that she was applying for insurance and intended to do so in good faith, ․” it was then not even necessary for her to sign the application.  (Id., at p. 611, 46 P.2d 822.)   Sufficient consent was demonstrated by the fact that she knew who the soliciting agent was;  that she submitted to a medical examination which she was aware was for insurance purposes;  and, that she signed the medical portion of the application.   These facts demonstrated to the appellate court the wife's knowledge of a pending application of insurance.

Since decedent here submitted to a medical examination, he ratified the insurance application and hence originally consented to its issuance.   We have discovered no authority requiring the insured to consent to the delivery of a policy and none has been cited.   We conclude therefore that the trial court erred by concluding that the policy was invalidated by decedent's failure to consent to its delivery.   In view of our other determination in this case, however, that error was harmless.


Finding of Fact No. 8, declared, “[The decedent] did not withdraw ․ his Notice of Intention to Retire from [the construction company] at any time.”   Port City objected to the finding.

It is undisputed that, on October 2, 1973, decedent tendered a formal, written resignation to the partnership.   Defendants argue, however, that decedent then orally revoked his notice, prior to the delivery of the insurance policy on October 31, 1973.   They contend decedent told his partners, and one of the company's largest clients that he would remain with the partnership long enough to finish the present phase of a large housing project being constructed for the client, which was expected to take six-eight months.

In reviewing the evidence, an appellate court must consider the whole record in the light most favorable to the finding.  (Board of Education v. Jack M. (1977) 19 Cal.3d 691, 697, 139 Cal.Rptr. 700, 566 P.2d 602.)  “ ‘[I]n examining the sufficiency of the evidence to support a questioned finding an appellate court must accept as true all evidence tending to establish the correctness of the finding as made, taking into account, as well, all inferences which might reasonably have been thought by the trial court to lead to the same conclusion.’  [Citations.]  If appellate scrutiny reveals that substantial evidence supports the trial court's findings and conclusions, the judgment must be affirmed.”  (Id., at p. 697, 139 Cal.Rptr. 700, 566 P.2d 602.)

 There is substantial evidence to support the trial court's finding that the notice of retirement was never revoked.   Decedent consulted an attorney in preparing a formal withdrawal;  he told the responsible managing employee that he was leaving;  he engaged in lengthy discussions with his wife as to whether to withdraw, and never told her that he had decided against doing so;  he formed a new company in mid-November and ceased working for defendant company; 3  he expressed great fear of his partners;  and, on November 14, 1973, the company's attorney sent decedent's attorney a letter indicating that accounting information would be sent, in accordance with the terms of the notice of withdrawal.   We, therefore, find the court's determination appropriate.

Port City further contends that the trial court erred in failing to find that the policy was constructively delivered in late September 1973.   That contention is predicated on the theory that plaintiff had extended credit to Port City for the premium.   There is nothing in the record to substantiate that claim.


Port City urges us to find an abuse of discretion because the judge refused its request for a jury trial.   Prior to trial, Port City had waived its right to a jury in its at-issue memorandum.   Plaintiff then requested a jury and, on the first day of trial, withdrew the request.   This prompted Port City to now ask the judge to withdraw the waiver and allow it to have a jury.   The other defendants indicated no such desire.   The court denied Port City's request.

 A negative response in an at-issue memorandum constitutes “․ an express waiver of the right to a jury trial under Code of Civil Procedure section 631, subdivision (2) ․”  (March v. Pettis (1977) 66 Cal.App.3d 473, 477, 136 Cal.Rptr. 3.)   Subdivision 4 of that section allows the court “in its discretion” to grant relief from such a waiver.

The March case, relied on by the trial court in making its decision, cited with approval language from Hayden v. Friedman (1961) 190 Cal.App.2d 409, 12 Cal.Rptr. 17, stating, “ ‘It is true that Code of Civil Procedure, section 631, subdivision 4, permits a court in its discretion to allow a trial by jury where there has been a waiver of such trial, but it does not compel a court to do so and no relief can be obtained on appeal unless the trial court grossly abuses its discretion.  [Citations.]’ ”  (Id., at p. 480, 12 Cal.Rptr. 17.)

The March court concluded that, “Appellant voluntarily waived a jury, presumably as a matter of trial tactics.   No problem of delay was presented, as appellant immediately offered to tender jury fees when the parties who had demanded a jury announced their waiver.   But three other parties neither desired nor requested a jury.   Considering the disadvantage to these defendants, the trial court denied appellant relief from her waiver.   That determination has not been shown to be an abuse of discretion.”  (Ibid.)

The California Supreme Court, in Gonzales v. Nork (1978) 20 Cal.3d 500, 506–507, 143 Cal.Rptr. 240, 573 P.2d 458, considered the issue and observed, “․ ‘It has been a general rule in California that once a party has waived his right to a jury trial waiver cannot thereafter be withdrawn except in the discretion of the trial court.’  [Citations.]  Because the matter is one addressed to the discretion of the trial court, that court's denial of a request for relief of jury waiver cannot be reversed in the absence of proof of abuse of discretion.  [Citations.]  As with all actions by a trial court within the exercise of its discretion, as long as there exists ‘a reasonable or even fairly debatable justification, under the law, for the action taken, such action will not be here set aside, even if, as a question of first impression, we might feel inclined to take a different view from that of the court below as to the propriety of its action.’ ”

Lastly, we note language from Broadway Fed., etc., Loan Assn. v. Howard (1955) 133 Cal.App.2d 382, 398, 285 P.2d 61, stating, “Where a trial by jury has been regularly and voluntarily waived, such waiver cannot later be withdrawn except in the discretion of the court.  [Citation.]  Under the circumstances ․ which suggest no more than that defendants changed their minds after two waivers, the court did not abuse its discretion in having the case tried without a jury.  [Citation.]”

 In the present case, Port City offered no reason for its request for a jury.   We are left to conclude it was due to tactical considerations or a change of mind.   This alone, under the cases cited above, would allow the court to decide there was insufficient justification for the jury request and, therefore, deny it.   The court here, however, was also aware that none of the other defendants desired a jury.   Requiring them to have a jury is said to result in a disadvantage.  (March v. Pettis, supra, 66 Cal.App.3d at p. 480, 136 Cal.Rptr. 3.)   The above considerations are sufficient to preclude a finding of an abuse of discretion.

In our analysis, we have excluded consideration of a third basis used by the court in making its decision.   The court relied on Kaliterna v. Wright (1949) 94 Cal.App.2d 926, 933, 212 P.2d 32, for the statement that, “It is well settled in this state that in actions for declaratory relief the court may refuse to submit disputed questions of fact to a jury and may itself determine them.”   The judge had asked an attorney to Shepardize the case for him and was misinformed as to its continued validity.   The case was specifically overruled in State Farm etc. Ins. Co. v. Superior Court (1956) 47 Cal.2d 428, 431–432, 304 P.2d 13, by this language:  “The general rule is stated in 13 American Law Reports 2d at page 778: ‘․ if the issues of fact arising would have been triable by a jury as of right in an action which might have been substituted for the declaratory judgment action by either party, then there is a right to jury trial on such issues.’   While Kaliterna v. Wright, 94 Cal.App.2d 926 [212 P.2d 32], appears to hold that, regardless of the circumstances, the court in a declaratory relief action may dispose of all factual issues without a jury, such view fails to preserve the distinction between legal and equitable issues, and it must be disapproved.  [Citation.]  In short, the ‘courts will not permit the declaratory action to be used as a device to circumvent the right to a jury trial in cases where such right would be guaranteed if the proceeding were coercive rather than declaratory in nature.’  [Citations.]”

Any error resulting from reliance on Kaliterna is harmless.   As articulated above, absent any consideration of this third basis, there is still justification for the court's denial of the request for a jury trial and, therefore, no abuse of discretion.

Port City also claims the trial judge was prejudiced, an assertion devoid of merit.   The basis for the charge is their belief that the court had knowledge of allegations that the partners murdered decedent, and that this influenced his decision.   Our review of the record reveals no evidence of prejudice or bias;  to the contrary, it reflects an impartial trial and a well reasoned opinion.


The United States argues the trial court erred in denying a requested conclusion of law stating the United States is entitled to judgment against each of the partners, individually, and decedent's estate, for the amount of employment taxes and interest owed by Port City.

 A review of the pleadings reveals that the United States never sued decedent's estate, which bars any present claim against that party.   As to the claims against the partners, we conclude the court acted properly in issuing a denial of the request.   The record indicates the court felt the United States had not presented enough information, regarding their request to allow the court to properly issue the desired conclusion of law.   The United States also did not submit a proposed form of judgment.   Due to the absence of the attorney for the United States, the court was left to guess at what was desired.   Given the circumstances, we hold the court acted properly.   Nothing in our holding, however, precludes the United States from seeking an appropriate judgment from the trial court.


 Port City's reply brief contains a “motion for new trial” or, in the alternative, a request that we strike plaintiff's appellate brief.  Rule 41 of the California Rules of Court requires all motions to be made by filing a typewritten motion, stating the grounds upon which the motion is based and the relief requested.   This is then to be served on the other parties.   Inclusion of a motion in a reply brief is improper.   Moreover, a motion for new trial must be made to a trial court and not an appellate court.  (Code Civ.Proc., § 655.)

 Port City's alternate request is that we strike plaintiff's opening brief on appeal because it also contains “inflammatory matter.”   Though a separate trial was to be held on the issue of whether the partners murdered decedent, the briefs contained statements such as “[decedent] was murdered in a contract-type slaying ․” behind the construction company's attorney's office “where he had been lured by [the partners] ․  He died shortly thereafter ․ after implicating [the partners] in his shooting․

We note that even Port City noted in its opening brief that “[t]his case has, undeniably, an undercurrent that ‘allegedly’ [the partners] murdered Virgilio.”   In any event, we are familiar with the record and the proper scope of our review.   We find no need to strike the brief and hence deny the motion.

The judgment is affirmed.


1.   Backdating resulted in less expensive premiums.

2.   A separate trial is being held on whether the other partners arranged his murder.

3.   The end of the 45-day withdrawal period, begun October 2, 1973, was November 16, 1973.

SPARKS, Associate Justice.

REGAN, Acting P. J., and REYNOSO, J., concur. Hearing denied;  REYNOSO, J., did not participate.