Before: LUMBARD, Chief Judge, FRIENDLY and SMITH, Circuit Judges.
SMITH, C. J.: This is an action by Eleanor Strubbe, the wife of H. Ernest Strubbe, Sr. who was a New Jersey resident and president of Wolf Oil & Gas Company (Wolf), a New Jersey corporation, not a party, against Adolph Sonnenschein, Isidor Sonnenschein, and Harry L. Bermack, doing business in New York as Stratford Factors (Stratford), and Metropolitan Life Insurance Company (Metropolitan), which is an insurance company organized and existing under the laws of the State of New York and maintaining its principal office in New York City.
The action sought reinstatement and payment to plaintiff of the full amount of six life insurance policies on the life of H. Ernest Strubbe, on which Metropolitan had made a non-recourse loan of $32,508.51 to Stratford for virtually the full cash surrender value. Alternatively it sought recovery against Stratford for the amount of the loan.Metropolitan sought to recover over against Stratford. The District Court for the Southern District of New York, Judge Clancy, found for the plaintiff against Metropolitan, dismissed the claim of plaintiff against Stratford, and gave judgment over for Metropolitan against Stratford for the full amoom the judgment rendered against it in favor of plaintiff, Stratford from the judgment against it in favor of Metropolitan. Plaintiff did not appeal the dismissal of its claim against Stratford. Affirmed on Metropolitan's appeal. Modified and affirmed as modified on Stratford's appeal.
H. Ernest Strubbe, the husband of plaintiff, negotiated a loan for Wolf from Stratford, and pledged as collateral six life insurance policies issued by Metropolitan on his life. Two of the six policies had been previously assigned to plaintiff and notice thereof given to Metropolitan. She was revocable beneficiary of the remaining four.
H. Ernest Strubbe, now deceased, forged or caused to be forged the signature of his wife to the collateral assignments for the loan value of said policies, and the policies, which were in his possession, together with the collateral loan assignments were delivered to Stratford on February 27, 1956 by Kaye, an officer of Wolf who is not a party to this action. The signatures were regular on their face and purported to be acknowledged before a notary public in the State of New Jersey, February 27, 1956.
Upon receipt of the forms, Stratford submitted them to Metropolitan at its Public Inquiry Bureau in New York City where John Debus, an employee of Metropolitan, who compared the signatures in a cursory manner, placed on the assignment forms the Secretary's stamp which indicates they were recorded and filed, and returned the duplicates to Stratford.
On February 28, 1956 a loan agreement was entered into between Stratford, the lender, and Wolf, the borrower, for $25,000. On that day a certified check for $7,000 was drawn payable to Lerner Associates and endorsed, "Payment Approved, Wolf Oil and Gas Co., Inc., H. Ernest Strubbe, Sr." February 29, 1956 a $5,000 check was drawn payable to Wolf and deposited in Wolf's account. On March 1, 1956, Bermack, at Kaye's request, drew and delivered to Kaye two checks, one payable to Wolf for $4,000 and the other to Irving Trust Company, also for $4,000, which was to enable Kaye to obtain a bank draft. The trial court found that there is no evidence that the remaining $5,000 ever reached Wolf's treasury or benefited Wolf in any manner. A $5,000 check drawn March 9, 1956 payable to Bankers Trust Company pursuant to instructions from Kaye, which requested Stratford to take delivery of 43,000 shares of Stanwood Oil Corporation Capital Stock, was found by the trial court to be part of an unrelated transaction, which finding is challenged on appeal by Stratford. The $32,508.51 total which Stratford alleged to be in default and for which it obtained the nonrecourse loan was arrived at by adding a $7,500 commission charged on the making of the loan, six $1,000 monthly charges, and miscellaneous charges (discussed below insofar as they are disputed), less credit for payments made by Wolf. The trial court found that as part of the claimed debt of $32,508.51, charges of $500, $150, and a total of $364.34 in miscellaneous charges were unauthorized by the loan agreement. These findings are likewise challenged by Stratford. In addition, the trial court noted a charge of $1,000 in the month of January 1957 which was found to be unauthorized, and a check to Stratford for $8,000 drawn by Wolf and dated April 12, 1956 which does not appear in the ledger sheets and concerning which no finding was made.
The last of four demands by Stratford for payment, and notice of intention to liquidate the loan, was by letter dated November 20, 1956 after Wolf failed to pay the note on August 27, 1956, the maturity date. On January 14, 1957 Stratford notified Metropolitan of the default and demanded payment of the cash surrender values of said policies. Metropolitan suggested to Strubbe that payment be made to Stratford in the form of a loan so as to conserve the life of the policies.
On January 30, 1957, three letters were exchanged between Metropolitan and Stratford after Stratford had indicated its willingness to accept payment in the form of a non-recourse loan. Metropolitan asked of Stratford assurances that Stratford had "complied with that portion of the assignment which requires that the assignee . . . shall have mailed . . . to the insured " notice of the default and of its intention to exercise its rights under the assignment. This should be compared with the paragraph of clause E(2) of the assignment forms which requires notice to the "undersigned," which would have included Mrs. Strubbe. On the same day, Stratford replied that notice had been given to "all interested parties." A policy loan in the amount of $32,508.51 was thereafter made by Metropolitan on a non-recourse basis on February 1, 1957. Plaintiff first learned of this transaction and the forgeries in the summer of 1957.
Judge Clancy, who tried the case without a jury, found that plaintiff's interest could not be diminished by reason of forged assignments and ordered Metropolitan to restore the policies to their full value. The court gave judgment for appellant Metropolitan on its cross claim against appellant Stratford for the amount of the loan, based upon what it found to be Stratford's knowingly false representation, calculated to induce Metropolitan to make the loan, that all interested parties had been notified.
The first question requiring determination with respect to Mrs. Strubbe's action against Metropolitan is one of conflicts of laws. New Jersey holds that a revocable beneficiary has a vested interest in the policy, during the life of the assured and that no valid assignment of such policies can be made unless the beneficiary is changed in accordance with the contract of insurance, or the beneficiary joins in the assignment. Consequently, if New Jersey law controls, the assignments of the four policies naming plaintiff as revocable beneficiary were void as to her, as well as the two policies of which she was assignee. Sullivan v. Maroney, 76 N.J. Eq. 104, 73 A. 842 (1909), aff'd 77 N.J. Eq. 565, 78 A. 150 (1910). Under New York law, which appellants contend is controlling, the revocable beneficiary does not have a vested interest in the policy and a valid assignment can be made without the consent of, or notice to, the revocable beneficiary. Davis v. Modern Industrial Bank, 279 N.Y. 405, 18 N.E. 2d 639 (1939).
The Strubbes were residents of New Jersey and Mr. Strubbe applied for the insurance policies in New Jersey. Premiums were paid by Strubbe from his residence in that state. The policies were serviced by Metropolitan's Irvington, New Jersey office. They were regarded by Metropolitan as being "in force" in New Jersey districts of the company.
Metropolitan is a New York corporation having its home office in New York. The policies provide for payment of the face amounts at the home office and premiums were primarily payable there, although there is a provision that payment may also be made to any "authorized Agent of the Company." An election of settlement ...