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JACOBUS v. MASSACHUSETTS MUT. LIFE INS. CO.

April 5, 1950

JACOBUS et al
v.
MASSACHUSETTS MUT. LIFE INS. CO. et al.



The opinion of the court was delivered by: KNIGHT

Plaintiffs, basing their suit on diversity of citizenship, allege in their amended complaint that defendant insurance company issued four policies on life of plaintiff William H. Jacobus, providing for a monthly retirement income, and payable to himself or his designated beneficiaries; that said policies were issued to him as a participant in defendant P. Ballantine & Sons' pension trust established March 28, 1944, of which defendants Carl W. and Otto A. Badenhausen was trustees; that, on or about March 27, 1944, defendants collectively or individually caused certain written representations to be made to him about said pension plan in a booklet for all eligible employees of P. Ballantine & Sons and that he, such an employee, relied thereon in becoming a participant therein on or about March 28, 1944; that, as such participant, he was entitled to and 'did elect optional life insurance death benefits at his own expense and agreed to and did pay the premiums therefor'; that, on or before March 28 of each year said policies were in force- 1944 to 1947- the two Badenhausen defendants as trustees and/or defendant P. Ballantine & Sons paid that portion of the annual premiums relating to retirement income benefits and he paid the portion relating to life insurance; that he performed services of value to P. Ballantine & Sons as consideration for its payment of said part of premiums; that said policies became fully paid until March 28, 1948; that said booklet stated employees might name and change beneficiaries; that he named his wife, the plaintiff Alicia A. Jacobus, and their children as beneficiaries; that they were such beneficiaries when in July, 1947, he left employ of P. Ballantine & Sons to accept employment with George F. Stein Brewing Company, Buffalo, N.Y.

It is further alleged that plaintiff William H. Jacobus has offered cash surrender value of said policies to said trustees but they refused to accept; that they state they have surrendered said policies for cash value to defendant Massachusetts Mutual Life Insurance Company but he does not know if this statement is true; that said policies provide they may be surrendered for cash value upon written election of insured and written assent of person to whom payable; that he as insured did not so elect nor did plaintiff Alicia A. Jacobus as beneficiary so assent.

 It is further alleged that said booklet states that P. Ballantine & Sons may amend the pension trust agreement, provided that no such amendment shall divert any part of the trust for benefit of the company or for purposes other than exclusive benefit of respective participants and beneficiaries; that the surrender of the policies, if made, was for benefit of the company; that he has duly tendered full aggregate amount of annual premiums of said policies for year 1948 to defendant Massachusetts Mutual Life Insurance Company, which refused to accept; that said booklet states the pension trust is subject to approval of Commissioner of Internal Revenue; that he relied on latter's rules and regulations, which look with disfavor upon forfeitures of rights which have become vested under pension trust agreements; that he will suffer irreparable injury if Massachusetts Mutual Life Insurance Company does anything to impair plaintiffs' rights pending a final determination of this action.

 Plaintiffs therefore demand (1) a temporary injunction enjoining Massachusetts Mutual Life Insurance Company from cancelling, destroying or impairing their rights in said policies; (2) judgment setting aside the surrender to it of said policies; (3) judgment ordering it to return and deliver to said trustees and/or P. Ballantine & Sons said policies upon repayments of their cash surrender value; (4) judgment ordering said trustees and/or P. Ballantine & Sons to assign and deliver to plaintiff (sic) said policies upon payment of their cash surrender value or, in the alternative; (5) judgment ordering Massachusetts Mutual Life Insurance Company to deliver said policies to plaintiff William H. Jacobus upon payment by him of their cash surrender value and annual premiums for year commencing March 28, 1948.

 Defendant Massachusetts Mutual Life Insurance Company in its answer admits that it issued the four policies providing for monthly retirement income and death benefits and naming plaintiff William H. Jacobus as insured but denies that he paid a portion of the premiums relating to said benefits. As a separate defense it alleges that in 1944, 1945, 1946, and 1947 said plaintiff as the proposed insured and defendant Carl W. Badenhausen as trustee under P. Ballantine & Sons Pension Trust made application to it 'for a retirement income policy providing for monthly retirement income with life insurance benefits'; that it issued such policy and said trustees were owners thereof, it being intended that insured 'should have no legal incidents of ownership in the policy'; that the owners, with its assent, had the right to change beneficiary and it was under no obligation to see that the terms of said trust were carried out and that any action taken and any payments made by it under direction of said owners would release it of all liability in connection with said policies; that said owners surrendered the four policies and were paid the cash values thereof.

 Defendant P. Ballantine & Sons in their answer admit that they surrendered the policies to Massachusetts Mutual Life Insurance Company and that plaintiff William H. Jacobus offered them the cash surrender value thereof. As an affirmative defense they rely on their pension trust plan according to which all rights of said plaintiff and his beneficiary in said policies terminated when he entered the employ of their competitor George F. Stein Brewing Company.

 Defendant Carl W. Badenhausen in his answer relies on the same defense.

 By order of this court dated May 10, 1948, the action was dismissed as to the defendant Otto A. Badenhausen.

 On May 10, 1948, a temporary injunction was granted against Massachusetts Mutual Life Insurance Company as prayed for in the complaint.

 On June 27, 1949, the court, upon motion of plaintiffs, ordered that their cause of action against said insurance company founded on allegations that it 'cancelled certain policies of life insurance without the consent of the insured or the beneficiaries thereof, be separated from the other issues in the alternative between plaintiffs and defendants Massachusetts Mutual Life Insurance Company, P. Ballantine & Sons and Carl W. Badenhauser, Trustee, and separately tried in advance thereof.'

 As so limited, this action was tried November 17, 1949. Plaintiffs testified for themselves. Only one witness was sworn by defendant.

 This action is governed by the law of the forum.

 'The law of the forum, that is, the law of the place where suit is brought, governs matters relating to the remedies on an insurance contract and to evidence and procedure, regardless of where the contract was made or is to be performed.' 44 C.J.S.,Insurance, § 51, p. 503. See United Services Life Ins. Co. v. Farr, D.C.S.D. N.Y., 60 F.Supp. 829, 832; Klaxon Co. v. Stentor Co., 313 U.S. 487, 496, 61 S. Ct. 1020, 85 L. Ed. 1477.

 Plaintiff William H. Jacobus testified that he was employed by defendant P. Ballantine & Sons from 1938 until July 1, 1947, when he became employed by George F. Stein Brewing Company, a competitor in Buffalo, N.Y., from July 1, 1947, until September 26, 1949; that in 1944, while employed by Ballantine, he received a booklet, put in evidence, entitled: 'P. Ballantine & Sons Pension Trust Plan. For Eligible Employee of P. Ballantine & Sons and its Subsidiaries.' Under the preliminary statement 'to eligible employees' dated March 27, 1944, and signed by Carl W. Badenhausen, President of P. Ballantine & Sons, it is said: 'Under the provisions of the Social Security Act, which became effective January 1, 1937, our Company and its Employees are making joint contributions to a Plan that provides retirement benefits, commencing at age 65, for all our employees. Death benefits are also provided for the protection of an Employee's dependents, in event of an Employee's death either before or after retirement * * * . The Plan has been approved by the Director of the Company subject to approval by the Commissioner of Internal Revenue * * * . Participation in the Plan is not compulsory. However, inasmuch as the Company is bearing all of the premium cost, the plan is unusually attractive as a medium of providing income at retirement as well as protection for dependants in the event of death, either prior to or after retirement. I hope every eligible Employee will take advantage of the opportunity that the Plan offers.'

 Then follows a 10 page 'Outline of the P. Ballantine & Sons Pension Trust Plan.' Under the heading 'Termination of Employment' on page 8, it is said: 'If, prior to death or retirement, a Participant shall cease to be an employee of the Company as a result of acts involving moral turpitude or if he should enter into the employ of a competitor or a business substantially similar to that of this Company, all the values of this contract shall inure to the benefit of the Trust.'

 Plaintiff William H. Jacobus testified that he never received any other information about the trust plan except what was contained in this booklet and that he relied upon the booklet when he applied for participation in the plan.

 The four applications for participation signed by said plaintiff respectively on April 4, 1944, March 29, 1945, March 25, 1946, and March 17, 1947, are all addressed 'To the trustees of the P. Ballantine & Sons Pension Trust Plan'. In each he expressed his desire for 'a contract with life insurance benefits' and named the beneficiaries of the death benefits. Each application contains the provision: 'I agree to be bound by and subject to all of the terms, provisions and conditions contained in the said agreement of trust.'

 This agreement is annexed to the answer of defendant P. Ballantine & Sons.

 In each of the four policies, photostatic copies of which were received in evidence, William H. Jacobus is the named insured. Policy No. 1525815, issued March 28, 1944, contains ...


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