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Westphal v. Kansas City Life Ins. Co.

February 5, 1942


Appeal from the District Court of the United States for the Eastern District of Wisconsin; F. Ryan Duffy, Judge.

Author: Kerner

Before EVANS, KERNER, and MINTON, Circuit Judges.

KERNER, Circuit Judge.

These appeals are from a judgment entered upon a jury verdict for the plaintiffs in their action to recover as beneficiaries on three insurance policies issued by the defendant upon the life of F. Gilbert Westphal. Westphal disappeared on November 5, 1931, and the jury found that he died before any of the lapse dates of the three policies - the earliest lapse date being 21 days after his disappearance. The Insurance Company raises as errors (1) the failure of the court to grant defendant's motions for a directed verdict and judgment notwithstanding the verdict, (2 the court's striking the Company's amendment to its answer setting up an alternative defense, and (3) certain rulings on the evidence. The insured's widow premises her appeal upon the theory that the trial court wrongfully allowed certain deductions from the face amounts of the policies as indebtedness of the insured to the defendant.

The important and controlling facts are not in dispute. On the date of his disappearance, F. Gilbert Westphal was a man of 33 years of age and had been married for ten years. He lived with his wife and three daughters in Shorewood, a suburb of Milwaukee, and was employed as cashier of the defendant Insurance Company's Milwaukee office. His salary at the time was $175 a month and he earned on the aveage an additional $110 a month from commissions on the sale of life insurance. Westphal came from a splendid family. His father and two of his brothers are ministers. A third brother is a physician and surgeon in the United States Public Health Service. The fourth brother is an aeronautical engineer. He had a married sister. With all of his family he had been on friendly terms and had visited and corresponded with them.

To all who knew him F. Gibert Westphal seemed a wholesome and industrious man "filled with friendliness, love, duty, and devotion." At an early age he joined the church. When he attended college, he carned his expenses and made the highest grades; he sang in the Glee Club and was elected to a student office of honor; on occasions he would preach in the pulpits of absent ministers; and he was in the student army training corps. After leaving college, he held positions of financial trust as an employee of a bank and as treasurer of the school board. He did not speculate on the market and he and his wife did not live in an eztravagant manner.

But for quite some time before his disappearance he had methodically embezzled the premium moneys paid to him as cashier of the defendant's Milwaukee office by falsifying the daily reports to the home office. The Company permitted an insured to pay his premiums on either an annual, semi-annual, quarterly, or monthly basis without advance notice as to which course he would pursue at the time. Westphal would collect an annual or semi-annual premium, but would deposit and falsely reprot a quarterly or monthly premium. Two weeks before the disappearance, the traveling auditor noticed an apparent irregularity in that there was a difference between a premium receipt of a policy holder and the amount that Westphal had reported as collected on the policy. The auditor at the to refer this matter to the auditor at the home office. At that time, the auditor at the found Westphal's personal check for $340 in the cash box. This was contrary to the rules of the Company, but Westphal explained it resulted from his having to pay a large automonbile repair bill. Westphal kept accounts in two bands at Chilton, Wisconsin, both of which were overdrawn at the time he disappeared. Two weeks before his disappearance, he borrowed on his note $400 at the State Bank of Chilton. On the day he left, this note was unpaid and on the day he left, this disappearance, he went unaccompanied to a Milwaukee bank and cashed his check for $450 drawn on the State Bank of Chilton. The drawee bank subsequently dishonored the dheck for lack of funds.

Although the day before his disappearance he was in good pirits and that evening had taken his wife and eldest daughter downtown, he became ill after returning home and had to take soda, But on November 5, the day of his disappearance, he kissed his wife and said goodye in the usual manner before leaving for the office. Later on that morning, Westphal telephoned his wife and told her he had to go to Racine, and could not drive her to a friend's home that noon. Mr. Madden, the Company's agent, called up Mrs. Westphal later that day and told her that her husband had "flown the coop." Westphal left two letters, one to his wife and the other to Madden, admitting the misappropriations. In his letter to Mrs. Westphal he said:

"My Dear:

"When you receive this letter you will know that I am gone, not to return until I prove before myself and my God that I am worthy of you and our three beautiful daughters.

"I know that you cannot stand a shock such as this going to be and still remain with me as my wife. I am presence annoying moving all danger of my presence annoying you by quietly slipping away.

"Goodbye Sweetie and may your loved ones be kinder to you than I have been is the wish of

"Your Tubbie.

"There is a chattel on the car. (The car is in the garage). Payments are due on the 21st of each month at the Wisc. Acceptance Corp. I long ...

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