Appeal from the District Court of the United States for the Northern District of Illinois, Eastern Division; John P. Barnes, Judge.
Before EVANS, MAJOR, and TREANOR, Circuit Judges.
This case was instituted, as an interpleader action, by the Lincoln National Life Insurance Company, (herein referred to as the "insurance company") in which Bernard Horwich and Stella L. Brunswick, claimants to the proceeds of two life insurance policies issued by the insurance company upon the life of Ronald F. Brunswick, were named as defendants.
Bernard Horwich claimed the proceeds by virtue of assignments from the insured to secure an indebtedness owing to Horwich individually and as trustee. Stella L. Brunswick (wife of Ronald F. Brunswick) claimed as beneficiary and disputed the validity of the assignments to Horwich. On June 8, 1939, the date of the death of Ronald F. Brunwick, the policies had a net value of $30,302.84, which the insurance company paid into the register of the court and was released. The court decided that Bernard Horwich was entitled to such proceeds and rendered judgment accordingly. Stella L. Brunswick appeals from this judgment. (Hereinafter she will be referred to as "appellant" and Bernard Horwich as "appellee.")
The contested issues presented by the appellant are, (1) that the evidence does not support the findings of fact or judgment, (2) that it was error to admit oral evidence to explain, vary, or contradict the written instruments of assignment, and (3) that the judgment was improperly rendered in favor of appellee in his individual capacity.
The Public State Bank of which appellee was director and owner of 85 per cent of the capital stock, was organized in 1920 and located in Chicago, Illinois. His son-in-law, Bernard Jadwin was vice-president, cashier and a director of the bank.Ronald F. Brunswick, by reason of his acquaintance with Bernard Jadwin, established a line of credit with the bank which enabled him to borrow money. The bank ceased active operations on July 22, 1930. Its assets generally were taken over by another bank, and its liabilities assumed. Among the assets which the other bank refused to take over, however, were the notes of Ronald F. Brunswick, in the amount of $16,000. Subsequent to its cessation of active business, the bank commenced the liquidation of its retained assets for the benefit of stockholders. By a written instrument dated July 22, 1930, they appointed appellee and Bernard Jadwin trustees, invested them with complete title to the assets with authority to collect all notes, and to maintain in their names, individually or as trustees, any proceedings necessary to enforce collection. The bank was thereafter dissolved, and the trustees have since been engaged in the liquidation of the bank's assets.
At the time the bank was discontinued as an operating institution, Ronald F. Brunswick, in addition to his indebtedness to the bank, owed appellee personally the sum of $1500 evidenced by promissory notes. At different times, Jadwin and appellee spoke to Brunswick, requesting that he discharge his indebtedness to the trustees and to appellee. In February, 1931, at a conference, Jadwin informed Brunswick that unless such indebtedness was discharged or adequately secured, the notes would be placed in judgment. Brunswick suggested that he had no security to offer other than some insurance policies on his life. Jadwin advised Brunswick that he would take the matter up with appellee and let Brunswick know whether this arrangement was satisfactory. Later, Brunswick was advised by Jadwin that appellee would agree to take the insurance policies and that he would desist from any legal proceeding. Brunswick advised Jadwin that he was leaving Chicago permanently for California and that he would make every effort to pay the indebtedness due to appellee and to the trustees of the bank. Brunswick moved to California in 1931 and remained there until his death in June, 1939. During 1931 and 1932, Jadwin wrote Brunswick on a number of occasions demanding that the policies be delivered in accordance with the agreement. About November 1, 1932, Brunswick sent by mail to Jadwin, two policies of insurance, one in the face amount of $10,000, and the other in the face amount of $25,000, both subject to policy loans theretofore made to Brunswick to the extent of the full cash value of said policies. (It is the proceeds of these policies which is in dispute.)
On November 28, 1932, Brunswick wrote Jadwin, enclosing notices from the insurance company, advising that semi-annual premiums were due upon the two policies, one of the premiums being in the sum of $365.69, and the other in the amount of $146.31. Brunswick also stated in his letter that he had sent to the insurance company what he described as "change of beneficiary blanks." After some correspondence with the insurance company as to the form of instruments of transfer, Brunswick and appellant, (his wife and beneficiary) under date of December 12, 1932, executed a written assignment as to each of said policies.*fn1 Such assignments were delivered to the insurance company. Shortly thereafter, Jadwin procured from the insurance company copies of the assignments and learned for the first time that they were made to him personally. He thereupon wrote a letter to Brunswick and reminded him that the real obligee was Horwich, and that Horwich was to pay the premiums on the policies. So far as the record discloses, no reply was received to this letter. At the time the assignments were made, or subsequently, there was no debt owing by Brunswick to Jadwin individually.
On February 4, 1933, Jadwin assigned and transferred to appellee all his right, title and interest in said policies of insurance. On February 8, 1933, the insurance company advised Brunswick of the reassignments to appellee. In December, 1932, when the policies were assigned to Jadwin, they had no cash surrender value, being encumbered by loans theretofore made to Brunswick, to the extent of their full cash value. It was stipulated on the trial that the payment by appellee of the premiums due on the two policies December 8, 1932, prevented their lapse at a time when they were of no value. From the time the two policies were assigned to appellee until the death of Brunswick, appellee paid all premiums in the amount of $6,788.60, and interest on the policy loans to Brunswick in the amount of $1,822.93. These premiums paid by appellee, the interest paid to the insurance company on Brunswick's loans with 5 per cent interest thereon from the time made until the time of the trial, plus the principal indebtedness due from Brunswick to appellee individually, and as trustee of The Public State Bank, with interest on such indebtedness to the time of the trial, amounted to $38,258.05. This was $8,000 more than the sum deposited in the registry of the court by the insurance company as the net proceeds of the two policies.
On June 24, 1939, appellant filed with the insurance company a sworn statement of the details of her claim to the proceeds of the policies. In response to the question, "Have any policies in this company ever been assigned"? she replied, "Yes. Bernard Horwich."
Appellant's contention, on which she relies largely for reversal, is predicated upon the argument that the court improperly received oral testimony as to the agreement between Jadwin and Brunswick, prior to the departure of the latter for California, by which he agreed to assign insurance policies as collateral for his debt owing the trustees and appellee individually. A number of the court's findings, it is true, are predicated upon this oral agreement. As we view the matter, it would serve no useful purpose to discuss these findings in detail. The court, after finding facts substantially as related. in reference to the assignment of December 12, 1932, found: "It was clearly intended by said Ronald F. Brunswick and Stella L. Brunswick by their assignments, to carry out the terms of the oral agreement entered into by Ronald F. Brunswick with Bernard Jarwin, as trustee for The Public State Bank, and for Bernard Horwich, in February of 1931, * * * and these assignments were intended by the parties to secure the indebtedness due from Ronald F. Brunswick to The Public State Bank and its trustees and to Bernard Horwich personally. The assignment * * * was intended by Ronald F. Brunswick and Stella L. Brunswick, to invest Bernard Jadwin with title as trustee and not individually."
It is the contention of appellant, as we understand, that oral testimony concerning any agreement between the parties prior to the execution of the written assignment was improperly received. Having thus eliminated any agreement or understanding which the parties had prior to the execution of the written assignments, it is appellant's position that the literal language of these assignments must control. Upon this basic it is claimed that the assignments were for the purpose of securing an indebtedness to Jadwin individually, and that when Jadwin reassigned to appellee, the latter acquired no greater interest than that had by Jadwin. In other words, by the language of the assignments the policies became collaterla only for debt owing, or which might be subsequently incurred, to Jadwin, and that when the policies were reassigned to appellee they continued as collateral, not for any debt due appellee individually or as trustee, but as collateral for a debt in favor of Jadwin individually. Therefore, the argument continues that inasmuch as no debt was owing to Jadwin at the time of Brunswick's death, there is nothing to be paid by reason of the assignments, and that appellant, as beneficiary, is entitled to the proceeds of the policies. This argument is so patently contrary to the clear intention of the parties that it must be rejected.
In the first place, we think the oral testimony was properly admitted. We need not analyze the authorities upon which appellant relies to the effect that a written instrument, clear and unambiguous on its face, can not be contradicted by parol evidence. This is a recognized rule. There is another rule, however, just as firmly established, and that is that parol or extrinsic evidence is admissible to explain the purpose of the execution of a written instrument, what the parties intended, the consideration for its execution and the circumstances surrounding its execution. As was said in Jones v. New York Guaranty & Indemnity Co., 101 U.S. 622, 631, 25 L. Ed. 1030: "It is common learning in the law that parol evidence is admissible to show that a deed absolute on its face is a mortgage, to establish a resulting trust, to show that a written contract was without consideration, that it was void for fraud, illegality, or the disability of a party, that it was modified as to the time, place, or manner of performance or otherwise, or that it was mutually agreed to be abandoned; also to show the situation of the parties and ...