Plaintiff appeals from an adverse judgment in his action against the administratrix of his deceased brother's estate, to recover on a promissory note. Trial was before the court sitting without a jury. We have concluded that for the reasons hereinafter stated the judgment must be reversed.
Plaintiff alleges and the court found that on October 1, 1931, plaintiff's brother, Lloyd M. Fuller, since deceased, executed and delivered to plaintiff his promissory note, as follows:
It was further alleged and found that Lloyd M. Fuller, the maker of the note, died on September 26, 1945; that in due course defendant became administratrix of his estate; that plaintiff presented to the administratrix within the time, at the place, and in the form provided by law, his claim on the note in the total sum of $2,775, which included both the $1,500 principal and also interest of $1,275 accrued from October 1, 1931, to December 1, 1945, at 6 per cent per annum; that the administratrix rejected the claim.
The court also found that plaintiff's action was barred by the statute of limitations (Code Civ. Proc., § 337, subd. 1), and, further, that the "note was paid in full prior to the filing" of plaintiff's action. Accordingly, the judgment was rendered for defendant.
Plaintiff-appellant urges as grounds for reversal of the judgment:
1. That the evidence as a matter of law fails to show that action on the note was barred by the limitations statutes.
2. That certain of the evidence upon which defendant relies to establish payment of the note was erroneously admitted over his proper objection that it was hearsay and that the finding of payment is without support in the evidence.
Defendant points to no other evidence in the record, and we have discovered none, which would indicate that decedent was able to pay the note while he lived, or, if able, when he acquired that ability. There is no proof of the amount of cash on hand, or of the value of other assets, if any, left by the decedent. It follows that the court erred in finding that the principal sum of the note was barred by the statute of limitations.
2. Evidence Concerning Payment. As already stated, the note upon which this action is based was executed on October 1, 1931. Thereafter, on June 17, 1932, a life insurance policy numbered 1,692,531, in the principal sum of $2,000, was issued by the Penn Mutual Life Insurance Company of Philadelphia upon the life of Lloyd M. Fuller, the maker of the note; the policy is by its terms payable to the "executors, administrators or assigns" of the insured. Under the date of August 11, 1932, the insured executed a "Designation of Beneficiary" by which the policy was made payable "to my brother, Jo L. Fuller, if he survives me, otherwise to my sister-in-law [the wife of Jo L. Fuller] ... if she survives me, otherwise to said brother's executors, administrators or assigns"; the insured's then wife joined in executing the described document. Both the insurance policy and the "Designation of Beneficiary" are in evidence as exhibits. Following the death of the insured (on September 26, 1945) the insurance company, on November 16,
Defendant, in support of her position that plaintiff's receipt of the policy proceeds discharged the note, offered in evidence a letter dated October 25, 1945 (one month after the insured's death) from the supervisor of claims at the home office of the insurance company in Philadelphia, Pennsylvania, to the company's general agent in San Francisco. The letter refers to the insurance policy discussed hereinabove and, so far as here material, reads as follows: "I feel that it may be possible for us to make payment of the claim under Policy No. 1 692 531 without requiring a Community Property Release. Under this policy, I find that the insured when applying for the contract requested it to be made payable to Jo L. Fuller, brother if living, otherwise to the brother's wife, and no power was to be reserved to the insured. Premium notices were to be mailed to the brother and when forwarding the application, your office stated that the applicant had borrowed some money from his brother Jo who would pay the premiums on the contract, that the loan was for business purposes and the interest on the loan would be used in payment of the premiums under the contract.
"The Underwriting Department decided to issue the policy payable to the insured's estate, but sent along a Designation of Beneficiary to bring about the settlement requested in the application. I find that that Designation was executed in San Francisco on August 11, 1932 and signed by the insured and consented to and joined in by a Mrs. Georgia A. Fuller, whom I presume was the insured's wife..." (Italics added.) It is to the two sentences of the letter which we have italicized that plaintiff particularly objects. The court admitted the letter over plaintiff's objections that "it is purely hearsay, your Honor. Even if the witness were here, the statements in that letter would be hearsay statements and would not be admissible." On appeal plaintiff urges the same
Section 1953f of the Code of Civil Procedure provides that "A record of an act, condition or event, shall, in so far as relevant, be competent evidence if the custodian or other qualified witness testifies to its identity and the mode of its preparation, and if it was made in the regular course of business, at or near the time of the act, condition or event, and if, in the opinion of the court, the sources of information, method and time of preparation were such as to justify its admission."
In Loper v. Morrison (1944), 23 Cal.2d 600, 608-609 [145 P.2d 1], this court, in holding certain hospital records to be admissible under the act, declared that "The purpose of this act is to enlarge the operation of the business records exception to the hearsay evidence rule ... The business entry statutes are not limited to entries in commercial enterprises, and hospital records are properly included within their operation. [Citations.] There is no reason to believe that a hospital record is not as truthful as a record kept by a commercial firm. It is a record upon which treatment of the patient is based, and experience has shown it to be reliable and trustworthy. [Citation.] It is the object of the business records statutes to eliminate the necessity of calling each witness, and to substitute the record of the transaction or event." (See also 32 C.J.S. § 683a, p. 554; McDowd v. Pig'n Whistle Corp. (1945), 26 Cal.2d 696, 700-701 [160 P.2d 797].)
"Q. Now, during the time that you and he lived together, do you know of your own knowledge that Mr. Lloyd Fuller assigned to his brother, Jo Fuller, the life insurance policy which he called (sic) in the Penn Mutual Life Insurance Company as security for the payment of the loan that we have just been discussing? A. No, I couldn't say I am positive of that. I do know that there was a policy that Jo maintained himself, that way. Mr. Fuller told me that, because they were to do that; and during the depression we were very hard-up for money and I know he told me at that time that Jo maintained this insurance policy.
.... .... . .
"Q. Do you recall making an assignment of a life insurance policy, and your consenting thereto, as security for this loan? A. No, I don't.... I beg your pardon, I believe I do remember he assigned a policy over to him. I don't remember what policy it was, at the time Mr. Fuller borrowed the money from Jo. But I do remember him taking out a policy for his brother at that time.
.... .... . .
"Q. Then there was a policy ... on the life of your former husband in existence at the time? A. At that time, it seems to me — I think — I am not just positive — I can't be positive about this, but it seems to me that we did assign the policy. Now, I am not positive about that.
.... .... . .
"Q. Tell us what that policy was assigned for. A. I don't
In addition to the quoted testimony, there was before the court, as a part of the insurance policy which was received in evidence, a photostatic copy of the application for the policy. From the application, which bears the signature of decedent as applicant, it appears that decedent requested that the policy, when issued, be made payable to his brother, Jo L. Fuller, if living, or if not living, then to the brother's wife; and the right to change beneficiary was expressly "not reserved." In a separate boxed-off portion of the application is the following declaration, with the applicant's signature affixed thereto: "Absolute Owner's Joinder (To be signed only if the policy is to be payable to third person as absolute owner.) This application is based on a pecuniary interest in insured's life greater than amount of policy, and owner is to have all privileges granted in policy." (Italics added.)
Although the evidence on the subject (disregarding the erroneously admitted letter, hereinabove discussed) is in some respects sketchy and uncertain, and to some extent conflicting, we are satisfied that from the testimony given by decedent's former wife, together with the statements appearing in the policy application, the trial court was warranted in inferring that, as claimed by defendant, the policy was intended by the insured and by plaintiff to constitute security for the note upon which plaintiff here sues. But even if we assume it probable that such inference would have been drawn by the trial court without the corroboratory significance of the erroneously admitted hearsay letter, it does not necessarily follow that payment of the policy proceeds to plaintiff fully discharged the note. The sole evidence relating to payment of the premiums on the policy, aggregating approximately $540 during the policy's life, indicates that they were paid by plaintiff in order to preserve his security. In such case, he is entitled to offset against the policy proceeds of $2,066.88 any sums actually paid by him as premiums, to apply the amount then remaining on hand to the $1,500 principal of the note and to accrued interest thereon (see 21 Cal.Jur. § 40, p. 332), and (if action on the note is not barred by limitation) to have judgment against defendant for any balance of such principal and nonbarred interest then remaining unpaid.
From what has been said it appears that the judgment, in its present form and substance, cannot be sustained. The ensuing
For the reasons above stated the judgment is reversed and the cause is remanded for a new trial.
Gibson, C.J., Shenk, J., Edmonds, J., Carter, J., Traynor, J., and Spence, J., concurred.