Equitable Life Assurance Society of the United States v. Larocque

Equitable Life Assurance Society of the United States v. Larocque
Collection
Supreme Court Judgments
Date
1942-03-20
Report
[1942] SCR 205
Judges
Rinfret, Thibaudeau; Kerwin, Patrick; Hudson, Albert Blellock; Taschereau, Robert; Maclean
On appeal from
Quebec
Subjects
Family law
Insurance
Decision Content
Supreme Court of Canada
Equitable Life Assurance Society of the United States v. Larocque, [1942] S.C.R. 205
Date: 1942-03-20.
The Equitable Life Assurance Society of The United States (Defendant) Appellant;
and
Dame Rosa Belle Larocque (Plaintiff) Respondent.
1942: February 10, 11, 12, 13; 1942: March 20.
Present: Rinfret, Kerwin, Hudson and Taschereau JJ. and Maclean J. ad hoc.
ON APPEAL FROM THE COURT OF KING'S BENCH, APPEAL SIDE, PROVINCE OF QUEBEC
Insurance (life)—Husband and wife—Insurance contract or policy—Change of beneficiary—Loan and surrender cash values—Cash advances by insurance company upon sole security of policy—Insured appointing his wife as beneficiary—Wife asking and receiving cash advances—Whether a "loan"—Wife endorsing company's cheque in favour of husband and, proceeds deposited in his bank account—Prohibition for the consorts to confer benefits inter vivos upon each other— Obligation by the wife with or for her husband—Whether transaction in conformity with Husbands' and Parents' Life Insurance Act, R.S.Q., 1925, c. 244—Articles 1265, 1301, 1762 to 1786 C.C.
In 1917, an "ordinary life policy" of insurance for $50,000 was issued by the appellant Assurance Society upon the life of one Larocque, the latter being also styled the beneficiary. The policy contained (in general) the customary clauses usually to be found in that class and form of insurance policies. More particularly, the insured had the right to change the beneficiary by written request; and it was provided that "such change must, however, conform to the laws of the province in Canada in which the insured resides * * *". There was also inserted in the policy a table called "Table of loan and surrender values per $1,000 of insurance"; and that Table showed that, after the policy had been in force for three years, a fixed cash value for each $1,000 of insurance would be paid at the request of the insured and that 95% of such cash value was to represent what was therein called "the loan value". At any time while the policy was in force, after three full year's premiums had been paid, the appellant Assurance Society obliged itself to advance, on proper assignment and delivery of the policy and on its sole security, a sum which, with interest, would not exceed 95% of the cash value at the end of the current policy year (as stated in the Table). Interest at the rate of 6% per annum would be payable on the amount of the loan. Failure to repay such "loan", or to pay interest thereon, would not avoid the policy, except under certain specified circumstances. In 1921, the insured, exercising his right to do so and complying with the necessary formalities, appointed his wife, the present respondent, beneficiary of the insurance policy; and the change was duly accepted by the appellant Assurance Society. In 1930, i.e., over ten years after the issue of the policy, the respondent asked for and received from the appellant a cash advance of $17,000, of which $2,645.50 was applied in payment of the annual premium then due. The amount of the cheque given to the respondent by the appellant was for $15,244.21, the surplus representing the accrued dividends. The respondent then endorsed the cheque in favour of her husband and the latter deposited it in his own bank account. In connection with the advance so made, the respondent signed a document, called "special contract", wherein it was stated that the appellant had made to the respondent a cash advance, receipt being thereby acknowledged, upon the security of the value of the policy which was duly assigned to the appellant by the respondent. The respondent also therein agreed with the appellant as to the conditions upon which such advance and any future additional advances would be made, these conditions inter alia dealing with the payment of interest and providing that unpaid interest would be added to the existing loan-; it was also agreed that, upon default in payment of any premium, "the total of all advances and any interest shall not be repayable in cash but shall be deducted by "the Society from any sum * * * otherwise applicable to the purchase of paid-up or extended term insurance"; though it was also stipulated that the appellant "Society may exercise all powers necessary to effect repayment of all advances and any interest thereon". Appended to that document was a declaration signed by the insured that "I hereby consent to the execution by my wife of the foregoing agreement and to the advance or advances made or to be made thereunder"; and, at the same time, the insured signed a "special assignment" of the policy to the appellant Society. In 1932 and 1933, the respondent applied to the appellant Society and obtained two further advances, providing mostly for payment of premiums due, thus bringing the total advances up to $21,977. Default was made in payment of annual premiums in December, 1933, and the last of several extensions of time for payment terminated in August, 1934. Thereupon, the total of the advances, with accrued interest, became deductible by the appellant Society from any sum or amount under the policy which would otherwise have been applicable to the purchase of paid-up or extended term insurance; and, as the advances and interest due were in excess of such sum or amount, the policy, as contended by the appellant Society, became null and void and was not in force at the death of the insured in December, 1936. The respondent, after her request for the payment of the amount of the policy had been refused, brought the present action against the appellant Society, alleging that the money advances were absolutely and radically null and void and of no effect, that, consequently, the policy should be held to have been still legally in force at the death of the insured and that the appellant Society should be condemned to pay the full amount of the policy. The grounds, upon which the action was based, were that, although admittedly the cheque for the money advanced was made to her order, the respondent had immediately endorsed it over to her husband, who had deposited it in his own bank account; that she had not received any of the money thus advanced; and that it followed that the whole transaction was: 1st, contrary to articles 1265 C.C., as being in some manner a benefit inter vivos conferred by the consorts upon each other and not in conformity with the provisions of the law under which a husband may insure his life for his wife; 2nd, a transaction whereby the wife had bound herself with or for her husband, contrary to the provisions of article 1301 C.C.; and 3rd, a transaction not in conformity with the provisions of the Husbands' and Parents' Life Insurance Act whereunder, exclusively, the consorts were authorized by the Civil Code to confer benefits inter vivos upon each other. The trial judge, holding that the cash advance to the respondent was void, maintained the respondent's action to the extent of 146,042.88, deducting part of the advances used for the purpose of the payment of the premiums due at the time of the advances. That judgment was affirmed by the appellate court "sans admettre toutes les raisons données par la cour inférieure".
Held, reversing the judgment appealed from, (Q.R. 71 K.B. 279) that the respondent's action against the appellant Assurance Society should have been dismissed. The appeal to this Court was allowed.
The money advances to the respondent were not made contrary to the provisions of article 1265 C.C.—The transfer of the policy by the insured to his wife was not a benefit inter vivos conferred in contravention of that article, as, by its very terms, a husband may, subject to certain conditions and restrictions, insure his life for his wife "in conformity with the provisions of the law", and, more particularly, with those contained in the Husbands' and Parents' Insurance Act.—Also, the endorsement by the respondent, in favour of her husband, of the cheque issued by the appellant Society was not of the Society's concern. The prohibition contained in that article is a prohibition addressed to the consorts themselves: they may not alter the covenants contained in their marriage contract and they cannot in any other manner confer benefits inter vivos upon each other; "but that prohibition does not affect the appellant Assurance Society, except possibly in so far as the latter may have acted as an accomplice to the contravention of that article by the consorts themselves. Assuming, without formally deciding it, that the provisions of article 1265 C.C. would forbid a husband from insuring his life for the benefit of his wife unless he does so within the terms of the Husbands' and Parents' Insurance Act (the wording of the exception "in conformity with the provisions of the law" does not clearly exclude any provisions of the law found to be applicable and not expressed in the Act), the insurance policy in this case does not detract from the conditions enacted in that statute and, therefore, cannot be held to have been forbidden by, and to be contrary to, the provisions of article 1265 C.C.—As long as an insurance policy does not infringe any of the "conditions and restrictions" essentially required under that statute, the latter must be construed as authorizing the insertion of such accessory clauses as admittedly are usually to be found in ordinary insurance policies. Also, section 3 of the Act authorizes a husband to "insure his life or appropriate any policy of insurance held by himself on his life for the benefit of his wife"; and the word "any" connotes the idea of an ordinary insurance policy containing the usual and customary clauses. Moreover, the condition of the policy, upon which the respondent relies for contending that the policy was still in force at the death of her husband, is not to be found in the above statute and the necessary consequence of the respondent's argument would be that such a condition should not be read into the policy, thereby entailing a fatal result for the respondent's claim. Finally, if the conditions, which the respondent contended should be disregarded, are in conflict with the above statute, or, as an indirect consequence, in conflict with article 1265 C.C., they should be held to be contrary to public order, and, therefore, such conditions would render void the appropriation itself made under the statute: then the insured himself would have remained entitled to the benefits of the policy and the respondent would have no ground of action.
The cash advance made upon the strength of the policy by the appellant Society to the respondent was not a loan whereby the respondent bound herself (s'est obligee) either with or for her husband, contrary to the provisions of article 1301 C.C. and the obligation contracted by her was accordingly valid (although the respondent might be taken to have made to her husband an illegal gift inter vivos of the sums so advanced). Emphasis must be put on the word "bound" as that is the mischief, and the only mischief, which article 1301 C.C. is intended to prevent.—It was a term and condition of the policy that, at each of the periods mentioned in the "Table of loan and surrender values", the appellant Society obliged itself to advance a certain sum stated in the Table. This was one of the benefits and advantages conferred by the policy; it was, therefore, one of the benefits and advantages appropriated by the insured to his wife and conferred upon 'her at the date of her acceptance of the appropriation of the policy to her: she was at liberty to claim that benefit and advantage, at least after the expiration of ten years of the life of the policy. There was no new obligation assumed by either the husband or the wife in the "special contract": the respondent did not, by that document, or on that date, or in respect of the advance payment made to her, bind herself to anything to which she was not already subject by having accepted the appropriation of the policy.—The appellant Society, when making the cash advance, was merely carrying out the contract which it had made long before with the insured and with the beneficiary. The appellant Society was bound to carry it out and could have been compelled to carry it out at the suit of the beneficiary: it was only paying its debt to the respondent beneficiary and it was none of its concern what the respondent would do with the money.
Hamel v. Panet (2 App. Cas. 121; 3 Q.L.R. 173), Trust & Loan Co. of Canada v. Gauthier ([1904] A.C. 94), Laframboise v. Vallières ([1927] S.C.R. 193), Rodrigue v. Dostie ([1927] S.C.R. 563), Banque Canadienne Nationale v. Carette ([1931] S.C.R. 33), Banque Canadianne Nationale v. Audet ([1931] S.C.R. 293), Daoust, Lalonde & Cie v. Ferland & New York Life Insurance Co. ([1932] S.C.R. 343), Lebel v. Bradin (19 R.L.n.s. 16), Joubert & Turcotte v. Kieffer (Q.R. 51 S.C. 152) and Lacoste-Tessier v. The Bank of Montreal (Q.R. K.B. 148) distinguished.
In none of the cases which have come before the courts, and in particular in none of the cases referred to in the reasons for judgment of the appellate court in this case, did the question arise of the effect of advances made by an insurance company upon a policy similar to the one now before this Court. In every one of those cases a loan had been made by a third party, generally a bank, on the security of the policy. The lender was at perfect liberty to make the loan, or not, to the wife. The transaction which the courts, in each of these cases, had to consider was not covered by an anterior contract. These circumstances are of primary importance as distinguishing those cases from the present one.
Upon the proper construction of the insurance contract or policy and also of the "special contract", the cash advance made by the appellant Society to the respondent was not a "loan" within the meaning of that word. (Articles 1762 to 1786 C.C.).
APPEAL from the judgment of the Court of King's Bench, appeal side, province of Quebec[1], affirming the judgment of the Superior Court, Duclos J., and maintaining the respondent's action based upon a policy of insurance issued by the appellant Society upon the life of the respondent's husband. The appellant Society was condemned to pay to the respondent the sum of $45,622.88 with interest.
The material facts of the case and the question at issue are fully stated in the above head-note and in the judgment now reported.
Aimé Geoffrion K.C., Gustave Monette K.C., and A. H. Elder K.C. for the appellant. L. E. Beaulieu K.C. and L. Beauregard K.C. for the respondent.
The judgment of the Court was delivered by
Rinfret J.—On January 4th, 1917, The Equitable Life Assurance Society of the United States insured the life of Mr. Charles Alphonse Arsène Larocque and agreed to pay $50,000 in lawful money of the Dominion of Canada to his executors, administrators, or assigns, upon receipt of the proof of his death, provided the policy was then in force and was then surrendered properly released.
An insurance policy was accordingly issued by the Society, wherein Mr. Larocque is styled the beneficiary ("with the right on the part of the insured to change the beneficiary").
The policy contained the following material provisions:
Upon payment of the second year's premium and at the end of each subsequent policy year, the policy was to participate in the distribution of the surplus of the Society as ascertained and apportioned by it, the dividends, at the option of the insured (or of the assignee, if any), to be, in each year, either paid in cash; or applied towards the payment of premiums; or applied to the purchase of additional paid-up insurance; or left to accumulate at 3% interest, compounded annually.
The insured could, from time to time during the continuance of the policy, change the beneficiary, or beneficiaries, by a written request filed at the Home Office of the Society, such change to take effect upon the endorsement of the same on the policy by the Society, provided the change would conform to the laws in the province of Canada in which the insured resided at the time the change was requested (in this case, the province of Quebec).
If there was no beneficiary surviving at the death of the insured, the proceeds of the policy were payable to the executors, administrators or assigns of the assured.
No assignment of the policy was to be binding upon the Society unless in writing and until filed at its Home Office.
The Society assumed no responsibility for the validity of any assignment.
The policy, and the application therefor, a copy of which was endorsed on it or attached thereto, was to constitute the entire contract between the parties. No agents were authorized to modify or, in event of lapse, to reinstate the policy or to extend the time for the payment of any premium or instalment thereof.
The insurance was granted in consideration of the payment in advance of $2,645.50 and of the payment annually thereafter of a like sum upon each 18th day of December, until the death of the insured.
All premiums were payable in advance in the city of Montreal. It was stated that the policy was based upon the payment of the premium annually (except that, upon the Society's written approval, the premium could be paid in instalments), provided that, in the event of the death of the insured, any unpaid portion of the premium for the then current policy year might be deducted: of the amount of the death claim thereunder.
A grace of thirty-one days, subject to an interest charge at the rate of 5% per annum, was to be granted for the payment of any premium after the first, during which period the insurance was to continue in force. If death occurred within the days of grace, the premium for the then current policy or any unpaid instalment thereof was to be deducted from the amount payable thereunder.
Except as therein expressly provided, the payment of any premium, or instalment thereof, was not to maintain the policy in force beyond the date when the premium or instalment thereof became payable.
There was inserted in the policy a table called "Table of loan and surrender values per $1,000.00 of insurance"; and, as the policy was for $50,000, the values were to be fifty times those stated in such Table. However, the term far which extended insurance was to be granted remained the same without regard to the amount of the policy.
This Table showed that, after the policy had been in force for three years, a fixed cash value if or each $1,000 of insurance would be paid at the request of the insured; that 95% of such cash value was to represent what is therein called "the loan value", which the Society undertook to advance. The Table also showed the amount of paid-up life insurance for $1,000 of insurance which the Society would issue in each of the several years therein mentioned. It also showed the number of years and months for which the policy would remain in force and the time for which the payment of the premiums would be extended after the policy had been in force for each of the years stated.
These several figures or values specified in the Table were susceptible of being modified according as dividend additions may be available.
In connection with the so-called loans, at any time while the policy was in force, after three full year's premiums had been paid, the Society obliged itself to advance, on proper assignment and delivery of the policy and on the sole security thereof, a sum which, with interest, would not exceed 95% of the cash value at the end of the then current policy year (as stated in the Table), less any indebtedness to the Society thereon, provided all premiums or instalments on the same had been fully paid. It was stipulated that, in such a case, interest at the rate of 6% per annum would be payable, on the amount of the "loan", on the premium anniversary date of the policy. The "loan" could be increased by the cash value of dividend additions credited to the policy, if any. Unless, however, the "loan" was for the purpose of paying premiums to the Society, the granting of the same could be deferred by the Society for a period not exceeding ninety days after receipt of application therefor. Failure to repay such "loan", or to pay interest thereon, was not to avoid the policy, unless the total indebtedness thereon should equal the total "loan value", nor until thirty-one days after notice should have been mailed to the insured and to the assignee of record, if any, at the addresses last known to the Society.
The policy was styled an "ordinary life policy" on the life of Mr. Larocque (the insured); but it was stated that, at any anniversary date during its continuance, it could be converted into a "limited payment life policy" by the payment of increased premiums for a stipulated period; after which premiums would cease. Such option was available upon the written request of the insured and the return of the policy to the Home Office of the Society for proper endorsement. At the maturity of the policy, after the insured's death and in case the insured had made no election, the beneficiary was to have the option of getting the net sum due either paid in cash; or left on deposit with the Society during the lifetime of the beneficiary, to be paid upon the death of the beneficiary, to the beneficiary's legal representatives or assigns, with interest at the rate of 3%; or paid in a fixed number of annual instalments; or converted into a fixed income to the beneficiary for life, by the payment of a fixed amount annually for twenty years certain, said payments to be continued thereafter during the beneficiary's life as shown by a table thereto appended.
Finally, it was agreed that the terms of this insurance contract were to be subject to the laws of the Dominion of Canada, and that any action to enforce any obligation under the policy might be validly taken in any court of competent jurisdiction in the province where the policy holder resides or last resided before his decease.
It is not disputed that, at the date of its issue, the insurance policy just outlined was absolutely legal, nor that the several clauses therein regarding beneficiary, assignments, grace for payment of premiums, cash surrender value, "Loan value", paid-up insurance, paid-up extended term insurance, were (in general) the customary clauses usually to be found in that class and form of insurance policies.
Exercising his right to change the beneficiary mentioned in the policy, Mr. Larocque, on the 11th day of January, 1921, complied with the necessary formalities to appoint his wife, the present respondent, the beneficiary of the insurance policy in question. The change was duly accepted by the Society and the appropriate entries were made accordingly in the register. The fact of the change was endorsed on the policy as follows:
Jan. 14th, 1921. Beneficiary: Rosa L. Belle Larocque, wife, if living.
On December 17th, 1930, the respondent asked for and received from the Society a cash advance of the amount of $17,000, of which $2,645.50 was applied in payment of the annual premium on the said policy payable on December 18th, 1930. The amount of the cheque given to the respondent by the appellant was for $15,244.21, the surplus representing the accrued dividends. In connection with the advance so made, the respondent signed a document on the nature and effect of which her contentions in the present case largely rely; and, for that reason, this document must be carefully examined.
It is called a "special contract". It states that the Society has made to the respondent a cash advance, receipt whereof was hereby acknowledged, upon the security of the value of its policy, on the life of Charles A. A. Larocque, and the dividend additions thereto, if any.
The respondent thereby assigned the policy and the dividend additions, if any, to the Society, as security for the repayment of the advances and of all additional advances which might be made thereafter upon such security (delivery of the policy being waived by the Society). The respondent therein agreed with the Society that the conditions upon which all such advances would be made were as follows:
1. Interest shall be payable to the Society from the date of such advances at the rate of 6% per annum (or such lower rate as may be stated in the policy or from time to time established by the Society) and, unless otherwise stated in said policy, such interest shall be payable upon the next premium anniversary date and annually thereafter. Interest if not paid when due shall be added to the existing loan and shall bear interest at the same rate.
2. Unless repaid to the Society prior to default in payment of any premium while said policy is in force all said advances and any interest thereon shall become due to the Society:
(a) When the total of said advances and interest shall equal or exceed the loan value of said policy and of the dividend additions thereto, if any. In that event such loan value shall be applied by the Society in repayment of said advances and interest, and said policy and dividend shall be cancelled without notice or upon such notice as is stated in said policy. If the loan value is not fixed by the provisions of said policy it shall be deemed to be the full reserve on the basis of the American Experience Table of Mortality, with interest at the rate of four and one-half per cent (4½%) per annum;
Or (b) Upon maturity or termination of said policy. In that event the total of all advances and any interest thereon shall be deducted from any sum otherwise payable on said policy and the dividend additions thereto, if any;
Or (c) Upon default in payment of any premium on said policy. In that event the total of all advances and any interest thereon shall not be repayable in cash but shall be deducted by the Society from any sum (including the surrender value or dividend additions, if any, to such policy) otherwise applicable to the purchase of paid-up or extended term insurance.
3. The Beneficiary, provided said policy be not assigned, or the absolute assignee, if any, of said policy, shall have the sole and exclusive right from time to time, without the execution of any additional agreement, to apply for and receive additional advances upon the security of the value of said policy and the dividend additions thereto, if any, until the total advances and the interest (thereon shall equal the then loan value thereof, it being understood that the Society is hereby authorized to make such additional advances to and upon the sole application of such Beneficiary or such absolute assignee, as the case may be.
4. The Society may exercise all powers necessary to effect repayment of all advances and any interest thereon including the commutation of any amount payable in instalments under said policy.
5. Nothing herein contained shall restrict any right of revocation or change of beneficiary reserved in said policy, but any such right reserved therein may be exercised in the manner therein stated, provided, however, that all the interest of the new or substituted beneficiary shall be subject to the lien of all said advances and any interest thereon; and the Society shall have the right to retain this agreement for use as evidence upon repayment of all said advances and any interest thereon.
6. The undersigned agrees to make and deliver to the Society at any time and from time to time such other or further written agreements as the Society may demand for the due performance of the conditions hereof.
7. This agreement is made and delivered and the amount of the first advance is paid and received at the Society's Home Office in the city of New York. All applications for additional advances shall be made and accepted and the amount thereof paid and received at the Society's said Home Office. All advances and any interest thereon are repayable at the Society's said Head Office and this agreement is made under and pursuant to the laws of the state of New York and shall be construed in accordance therewith, except that if the policy upon the security of the value of which an advance is made is a policy issued in Canada the provisions of this section 7 shall not apply.
The document was signed by the respondent, who acknowledged that she had executed it before a justice of the peace of the district of Montreal, who certified that the respondent had personally come before him, that she was known to him, and that she had signed it before him.
Appended to the document was the following (signed by Mr. Larocque):
I hereby consent to the execution by my wife of the foregoing agreement and to the advance or advances made or to be made thereunder.
At the same time, Mr. Larocque signed this "special assignment":
The undersigned hereby consents to the conditions of the agreement on the reverse side hereof, to the assignment of the policy therein referred to, and to the advance or advances made or to be made in accordance with said agreement, and in consideration of the sum of one dollar in hand paid, and other good and valuable considerations, receipt of which is hereby acknowledged, does hereby assign to The Equitable Life Assurance Society of the United States said policy and the dividend additions thereto, if any, as security for the repayment of such advance or advances. Although called "special contract" and "special assignment", the forms used in this particular transaction were the usual forms used by the Society for similar transactions in Alabama, Florida, Georgia and the Dominion of Canada; and it was not contended that the agreements signed in this instance by the respondent and her husband were not the usual agreements which insured and beneficiary respectively were called upon to sign upon cash advances being made by the Society under the provisions of an insurance policy such as we have in the premises.
On or about January 22nd, 1932, pursuant to the agreement, the respondent applied to the Society for and obtained a further or second advance of $3,379.33, to provide in part for payment, amongst other items, of the annual premium of $2,645.50 due on the policy on December 18th, 1931; thus bringing the total advances up to $20,379.33.
On or about August 23rd, 1933, the respondent, in like manner, applied to the Society for and obtained a further or third advance of $1,597.67, to provide in part, amongst other items, for payment of the then still unpaid balance of $1,587.30 and interest thereon, in respect of the annual premium on the policy, which had become due on December 18th, 1932; thus bringing the total advances up to $21,977.
Default was made in payment of the annual premium on the policy due on December 18th, 1933; and, while several extensions of time for the payment of the premium were granted by the Society to, and at the request of, the insured, in consideration of money deposits made on account, the last of these extensions of time for payment terminated on August 18th, 1934.
Thereupon, in accordance with the provisions of the agreement, the total of the outstanding advances, amounting to $21,977, and interest accrued thereon, became deductible by the Society, in so far as could be, from the sum or amount under the policy, which would otherwise have been applicable to the purchase of paid-up or extended term insurance under the provisions of the policy. The total amount of advances and interest accrued thereon to that date was in excess of the sum or amount referred to; and there being in consequence no such sum, or amount, or any balance of any kind remaining under the policy on August 18th, 1934, the policy had no further value or effect and became null and void under the terms of the policy; and accordingly, so it was contended by the Society, was not in force and was absolutely without effect at the death of the insured, which occurred on December 24th, 1936.
When, therefore, upon the insured's death, the respondent claimed the payment of the amount, the Society, relying upon the documents and facts above stated, refused to pay, on the ground that the policy had lapsed.
The respondent brought this action against the Society, alleging that the money advances made to the respondent by the Society on the strength of the policy were absolutely and radically null and void and of no effect as having been, made contrary to the provisions of arts. 1265 and 1301 of the Civil Code of the province of Quebec as well as contrary to the Husbands' and Parents' Life Insurance Act, being chapter 244 of the Revised Statutes of the province of Quebec, 1925; that, therefore, these advances could not be taken into consideration by the Society; and that, if they were eliminated (as they should be), there would have been in the hands of the Society sufficient reserve to carry the policy on to the death of the respondent's husband; that, consequently, the policy must be held to have been still legally in force at the death of the insured and the Society must be condemned to pay the full amount provided for in the said policy.
Article 1265 of the Civil Code reads as follows:
1265. After marriage, the marriage covenants contained in the contract cannot be altered, (even by the donation of usufruct, which is abolished), nor can the consorts in any other manner confer benefits inter vivos upon each other, except in conformity with the provisions of the law, under which a husband may, subject to certain conditions and restrictions, insure his life for his wife and children.
Article 1301 C.C. is as follows:—
1301. A wife cannot bind herself either with or for her husband, otherwise than as being common as to property; any such obligation contracted, by her in any other quality is void and of no effect, saving the rights of creditors who contract in good faith.
The argument of the respondent was based on the fact that, although admittedly the cheque for the money advanced was made to her order, she had immediately endorsed it over to her husband, who had deposited it in his own bank account; she had not received one cent of the money thus advanced by the Society; and it followed that the whole transaction was: 1st, contrary to art. 1265 C.C., as being in some manner a benefit inter vivos conferred by the consorts upon each other and not in conformity with the provisions of the law under which a husband may insure his life for his wife; 2nd, a transaction whereby the wife had bound herself with or for her husband, contrary to the provisions of art. 1301 C.C.; 3rd, a transaction not in conformity with the provisions of the Husbands' and Parents Life Insurance Act where under exclusively, so it was contended, the consorts were authorized by the Civil Code to confer benefits inter vivos upon each other.
The respondent was married to Mr. Larocque under a marriage contract stipulating separation as to property. The wife could not, therefore, bind herself with or for her husband under art. 1301 C.C.
The learned trial judge stated that the "special contract" of December 17th, 1930, was a writing whereby the respondent and the husband jointly transferred the insurance policy in question to the Society for a "cash advance"; and that, by this writing signed at her husband's request, the plaintiff clearly obligated herself with and for her husband, contrary to the provisions of art. 1301 C.C. (in support of which opinion the learned judge referred to the plaintiff's factum and to the authorities therein cited to form part of the judgment as if recited at length therein); that the respondent did not benefit in any way from "this loan"; that the Society did not plead its good faith
and it is inconceivable that the Society was in good faith in making this loan. The loan was arranged with the husband, a cheque was handed to the husband, none of the Society's officials ever communicated with the plaintiff;
that the Company seemed to have wilfully closed its eyes to the true nature of the loan which the slightest inquiry on their part would have revealed; and that if anybody on behalf of the Society had interviewed the respondent, the truth would have immediately been known.
The parties had filed admissions of facts to the effect that the amounts and dates of the respective advances alleged by the Society were correct and that, in the event of it being determined by final judgment that the advances were not to be taken into consideration as against the respondent on the ground of their being null and void, the policy of insurance was still in force and effect on the day of the death of Mr. Larocque, except in so far as they represented advances for the purpose of the payment of premiums in respect of the policy, in which case the policy was to be held still in force and effect on December 24th, 1936 (the date of the death of Mr. Larocque) and the amount payable thereon was $46,042.88, with interest thereon from the date of the demand, as claimed by the respondent's action.
Upon these admissions, and having come to the conclusion that the cash advance directly made to the respondent was void, but that the advances for the purpose of the payment of the premiums were to be taken into consideration, the learned trial judge maintained the action of the respondent to the extent of $46,042.88, with interest and costs.
In the Court of King's Bench (appeal side), this judgment was confirmed "sans admettre toutes les raisons données par la Cour inférieure"; but the reasons of the learned judges of the court of appeal show that they did not agree on the grounds upon which the judgment ought to stand.
Létourneau, J., based his judgment on all three points, to wit: arts. 1265 and 1301 of the Civil Code, and the Husbands' and Parents' Life Insurance Act. Galipeault and Walsh JJ., restricted their references to art. 1301 C.C. Barclay J., on the contrary, thought that this was not a case for the application of art. 1301 C.C.; but that nowhere in the Husbands' and Parents' Life Insurance Act was there any mention made of a permission to get advances whether by the assured or by the beneficiary, except for the purpose of paying the premiums. The consequence was that the advances made to the respondent, both under the special Insurance Act and under art. 1265 C.C., were totally null and void; McDougall J., sitting ad hoc, thought that, not only art. 1301 C.C. was an insuperable obstacle to the Society's pretentions, but, as pointed out by Barclay J., the nullity resulting from art. 1265 C.C. was equally fatal to them. This Court has had the benefit of a very exhaustive and extremely able argument by counsel both for the appellant and the respondent. It is now our duty to give our decision on the important points which have been raised at the argument and which are likely to affect, as we were told, a considerable number of transactions of the same character in the province of Quebec.
Our attention should first be directed to the application in the premises of art. 1265 of the Civil Code.
So far as this case is concerned, this article may be viewed from two different angles: the transfer of the insurance policy by Mr. Larocque to his wife, the respondent, may be a benefit inter vivos conferred in contravention of the article; or the endorsement by the respondent in favour of her husband of the cheque issued by the insurance company may be looked upon as a gift inter vivos from the wife to the husband, contrary to the provisions of the article.
As to the first, the simple answer is that, by the very terms of art. 1265 C.C., a husband may, subject to certain conditions and restrictions, insure his life for