The law does not favor forfeitures, and in order to justify the court in enforcing it in this case it should be clearly and unambiguously so expressed in the contract, and the payment of the interest annually should be of the substance of the contract, and not then if the company has waived the forfeiture.

We are not prepared to say that by the terms of this contract, construed and enforced according to the principles applicable to contracts generally, a forfeiture has occurred.

The company in one clause of the policy binds itself to return to the assured at each distribution of the "surplus" after three years from its date a due proportion of such surplus on each and every year's business during the continuance of the policy. No condition is annexed to this undertaking, and we do not, therefore, see how it is possible to avoid the conclusion that the right of the assured to such surplus became vested immediately after the payment of the three annual cash premiums, and the execution of the three first premium notes, which was done before any default in the payment of the interest occurred, or a cause of forfeiture on any account existed. It is also in another clause agreed in case of default in the payment of any premium the company will pay as many tenth parts of the original sum as there shall have been complete annual premiums paid at the time of such default. It is true it is in the same clause provided that in order to secure such proportion all premium notes must be taken up, or the interest thereon paid annually in cash, on the date of the maturity of the premium until the notes are canceled by return of the surplus, or the whole policy will be forfeited. But it is difficult to reconcile the forfeiting part of this clause with a subsequent one in which it is stipulated that in case of default. in the payment of a premium or interest upon any notes "the company shall not be liable for the payment of the whole sum assured, but only for such part thereof as is expressly stipulated above, and the remainder shall cease and determine.” And it is still more difficult to reconcile it with the preceding clause in which the return of the surplus to the assured is provided for.

November, 1884-4

If the rule to construe the language of a contract most strongly against the party employing it be applied in this case, it would not be unreasonable to conclude that it was not the intention to forfeit the entire policy after there had been three complete annual cash premiums paid, and three premium notes executed and interest paid thereon.

But waiving that question we are clearly of the opinion that the stipulation for the cash payment of the annual interest on the notes on the date of the annual maturity of the premium should not be held as of the substance of the contract.

The right of the assured to a due proportion of the surplus dividend shaving, after three years from the date of the policy, become vested, as in our opinion was the case, there was in the possession of the company belonging to her an amount more than sufficient to pay the annual interest on the notes executed by her. This fund she was entitled to have returned to her, or applied to the payment of the interest accruing on the notes. It is true there is a stipulation contained in each note that "the dividends on the policy are to be applied to the payment of the notes." But it would not be inconsistent with that stipulation, nor with the right accorded to obligors of notes generally, for the assured to have the election to apply the surplus dividends belonging to her to the payment first of the interest. Nor would the company have a right to complain or be injured by such an application of the dividends; for by this process interest at the unusual and excessive rate of seven per cent. would be annually compounded, while the interest bearing principal of the note would remain intact.

But whatever may have been the rights of the assured in respect to the application of the surplus dividends belonging to her, the company has neither returned to her any part of them, nor credited the notes thereby. Having then appropriated and used for its own benefit the fund, which was more than sufficient to pay the interest on the notes, the company should-not be now permitted to claim a forfeiture upon the ground of the nonpayment by the assured of that interest.

Moreover, by the terms of the contract the annual payment of the interest as well as the ultimate payment of the notes was secured; for the lien retained on the policy comprehended the interest as well as the principal, and the company was fully indemnified against the loss of either.

There are, therefore, two reasons why the forfeiture of the entire policy should not be enforced. In the first place, having funds of the insured in its possession more than sufficient to pay the annual interest, which it has not accounted for otherwise, the company should be held to have applied it to the payment of the interest, and consequently there has been in legal contemplation no default on the part of the assured in respect to the annual payment of the interest.

In the second place, inasmuch as the company was fully secured against loss of either principal or interest, and in fact had in its possession the means with which to meet the interest, the forfeiture provided for in case of default in payment of the interest must be regarded "as a penalty to secure not the ultimate, but the prompt payment of such interest," and, therefore, not enforceable.

This question has been already passed upon by this court in the case of St. Louis Mut. Life Ins. Co. v. Grigsby, 10 Bush, 317, and as we think the ruling was correct it must be adhered to.

It is true in that case, after a default in the payment of cash premiums, the policy was commuted, and a new certificate issued. But the question whether default in the payment of the annual interest worked a forfeiture of the policy was presented, considered and decided by the court.

There it was held that as the default was only in time, and as the company could be given all that it stipulated to receive, a case was presented in which relief against a forfeiture could and ought to be afforded.

Here the default, if any has occurred, is not of the substance of the contract, but in time of the payment of interest, and the company can be given all that it stipulated to receive. On

the other hand, to forfeit the whole policy on account of default in time of payment of the interest, which formed but a small part of the consideration, and which the company is fully secured in the ultimate payment of, if not already paid, would impose upon the assured the entire loss of the premiums actually paid.

A forfeiture under such circumstances would be extremely oppressive, and if provided for in a contract between individuals concerning any ordinary business transaction be held as in the nature of a penalty. And as we are unable to perceive any reason for changing or relaxing the rule in respect to contracts about the business of life insurance, the forfeiture provided for in this case must be likewise so held.

It is, therefore, not necessary to decide whether there has been any waiver of the forfeiture by the company.

We do not, however, agree with counsel for appellee that he is entitled to recover more than three-tenths of the sum assured. For the language of the policy is that if default be made in the payment of any premium the company will pay only as many tenth parts of the original sum assured as there shall have been complete annual premiums paid at the time of such default."

66

It is not pretended that more than three complete annual premiums have ever been paid, and hence only three-tenths of the sum assured can, according to the contract, be recovered. To render judgment for more would be to disregard the language and pervert the obvious meaning of the contract.

There is no provision for canceling any of the notes. And as the one executed in January, 1871, was voluntarily given by the assured, appellee should not be permitted to repudiate it, but it must be regarded, like the other three, as forming part of the consideration for what he is seeking to recover from the company.

Nor do we think that after the assured refused to pay any other cash premiums, to execute any other notes, or to make cash payment of the annual interest she was entitled to a full participation in the profits; certainly no more than necessary to offset the interest accruing on the notes given.

Wherefore, the judgment is affirmed on the original and

cross appeal.

Barnett, Noble & Barnett for appeilants.

Temple Bodley and C. S. Grubbs for appellee.

SUPERIOR COURT OF KENTUCKY.

PULMAN PALACE CAR CO. v. GAYLORD.

(Filed October 29, 1884.)

1. Sleeping car company-Liability of-A, while occupying a berth on a sleeping car, had his diamond pin stolen from the berth, as he alleged, without negligence on his own part. Held-A sleeping car company is not liable in such cases unless negligence is shown on its part or on the part of its servants. The common carrier's or inn-keeper's liability does not apply.

Appeal from Jefferson Court of Common Pleas.

Opinion of the court by Judge Richards.

T. G. Gaylord sued the Pullman Palace Car Co. to recover $300, the value of a diamond scarf pin stolen from him while a passenger on one of the defendant's cars. A demurrer having been overruled to the petition, and the company declining to plead further, a judgment was rendered for the plaintiff, proof as to the value of the pin having been waived.

The material facts admitted by the demurrer are that plaintiff, being the holder of a first-class ticket from Chicago to Louisville by way of the Louisville, New Albany & Chicago Railroad, purchased from the defendant, for the price of $2, a ticket entitling him to a berth on its car attached to the train on said road; that he entered said car at night, and was assigned a berth by the officer in charge; he disrobed himself, placing the scarf, which was worn by him and contained said pin, in the receptacle at or near the end of the berth within the walls of the subappartment called the section; that said receptacle, at or near the head of plaintiff's bed, had been prepared by the company for such articles; that thereafter, while he was asleep, said pin, without the fault of the plaintiff, was stolen from said receptacle, and has not been returned, though