Opinion
May, 1910.
Lewis S. Goebel, for appellant.
Frederick B. Merkle, for respondents.
The plaintiff sued upon a promissory note for $2,000 on which he alleged that the sum of $1,240 had been paid. At the trial the note was introduced in evidence and showed on its face that the defendants deposited, as collateral security for the payment of the note, a full paid $2,000 insurance policy on the life of Philip Lindemann. The plaintiff testified that he had surrendered the policy and received therefor the sum of $1,240. Since the policy is an instrument for the payment of money, its deposit as collateral security, in the absence of a distinct provision permitting its sale, gave the plaintiff only the right to collect and not to sell or surrender. Wheeler v. Newbould, 16 N.Y. 392. If he does surrender the policy wrongfully, the debt is satisfied to the extent of the value of the security surrendered. The value of the policy is not the surrender value. Toplitz v. Bauer, 161 N.Y. 325. Presumptively, the value is the face value of the instrument (Hawks v. Hinchliff, 17 Barb. 492), but the actual value may be shown. Griggs v. Day, 136 N.Y. 152. The defendants should have been permitted to show that the insured was no longer an insurable risk; and the face value of the policy, properly discounted to the actual or probable date of his death, would be the actual value of the surrendered collateral. Kelly v. Security Mutual Life Insurance Co., 106 A.D. 352; revd. on other points, 186 N.Y. 16; Toplitz v. Bauer, supra.
The defendants also pleaded a gift of the interest. One of the defendants is the wife of the plaintiff and she was precluded from testifying as to conversations with her husband on the ground that they were confidential communications. If the communications were sufficient to establish an executed gift, they were material; and in any event they were business communications and not confidential, nor induced by the marital relation. Parkhurst v. Berdell, 110 N.Y. 386, 393.
The trial justice properly set aside his direction of a verdict, and his order should be affirmed, with costs.
I concur in all of the opinion by Mr. Justice Lehman except the statement that the actual value may be shown, and that the actual value was the face value discounted to the actual or probable date of the death of the insured.
The policy pledged as collateral was a full paid policy for $2,000. By the surrender of this policy without the authorization or consent of the pledgor, the pledgee converted the collateral. Having converted it, he must either restore to the pledgor a full paid policy on the life of the insured for the amount of $2,000 or be held liable for its face value. Bailey v. Gordon, 52 A.D. 402; affd., 165 N.Y. 672 on opinion below; Coleb. Coll., § 96. It may be that the defendants might be able to show that, owing to the insolvency of the insurance company, the actual value of the policy was less than its face value (Griggs v. Day, 136 N.Y. 153); but even that is not clear when we consider the language of the court on a subsequent appeal. See Griggs v. Day, 158 N.Y. 1, 17. But that would be upon the theory that the face value would not be paid at maturity. I know of no case that holds the pledgee, who has converted the collateral, liable only for the discounted value at the date of the conversion. The defendants should have been allowed to show that the insured was no longer an insurable risk, thus eliminating the possibility of restoring to the pledgor a policy on his life.
The case of Kelly v. Security Mutual Life Ins. Co., 106 A.D. 352, was an action by a policy-holder against the company for declaring it lapsed without just cause. The measure of damage in such a case would not be the same as in the case at bar. In Toplitz v. Bauer, 161 N.Y. 325, the insurance company had cancelled the policy for non-payment of a premium, and the only deduction suggested was the value of the premium necessary to keep the policy alive. In the case at bar the policy was fully paid.
SEABURY, J., concurs.
Order affirmed, with costs.