on the note executed for the aggregate sum of the three notes given in 1867, 1868 and 1869, and died on the 2nd of January, 1872.

Appellee claims that she is entitled to recover the whole amount of the original policy, less the sum due as premiums for 1870 and 1871. She alleges, but fails to prove, that prior to the default in 1870, the company had adopted what she denominates the Massachusetts plan, and that it was bound to keep the policy alive by applying to the payment of the premiums, the reserve fund to which she was entitled, and that by such application the policy would have been kept in full force up to and after the time at which her husband died. The failure of proof upon this point renders it unnecessary that it shall be further noticed. Appellee further claims that her deceased husband was a lunatic in November, 1870, when he accepted the commuted policy, and that its acceptance was obtained by the fraud of the company. The proof fails to show that Grigsby was at that time or at any subsequent time insane, but if it did, we do not see that such fact would operate advantageously to the appellee.

By the terms of the contract, the failure to pay the premiums as they became due, involved the reduction of the policy in the proportion hereinbefore set out. The party who was in default could not compel the company to reinstate the policy for the full amount, and the agreement of November 2nd, 1870, secured to Mrs. Grigsby the most that she then had the right to claim. The company resists her right to recover on the commuted policy on the ground that the failure to pay the interest in advance on the note executed when the agreement to commute was entered into, released it from all liability and determined the policy. This note was for $817.41; the amount of interest due on the 16th of August, 1871, was $49.04. The proof shows that appellee was then entitled to a dividend amounting to $42.07. The application of this dividend to the payment of the interest would have reduced it to $6.97. The direct question is presented whether from the failure to pay this amount, or even the whole of the interest due, the forfeiture of all rights under the commuted policy followed as a legal and necessary consequence. Some importance is attached to the fact that the certificate evidencing the commutation continued the new agreement in force only until the 16th day of August, 1871. We regard this attempted limitation as to time as unavailing. The company accepted the interest then in arrear, and thereby reinstated the original policy except as to the amount of insurance, and by the terms of that policy it was to continue in force during the whole term of the natural life of the insured.

The conditions in policies of life insurance providing for forfeitures for the non-payment of premiums in exact accordance with the terms of the agreement, have been upheld and enforced by the courts. Such forfeitures are not regarded as being in the nature of penalties. It is considered that in agreements of this character, time is of the essence of the contract. They are contracts to be kept in force from year to year at the will of the insured.

The right to keep the policy alive by the payment of the stipulated premiums, is a privilege secured to the insured by his agreement with the insurer. He may exercise or abandon this privilege at his discretion. But if he does abandon it, those beneficially interested cannot complain that the insurer refuses longer to be bound by a contract that has lost all the elements of mutuality. Where, as matter of favor to the insured, credit is extended him for some portion of a cash premium, the failure to pay the note representing such portion is regarded as a failure to pay the premium, and the policy will be forfeited. In this case there has been no failure to pay either the cash portion of a premium, or to satisfy a note representing any portion of a cash premium.

By the contract of November 2nd, 1870, the original policy was commuted. It thereby became essentially a paid-up policy, except that the company had the right, should its affairs render it necessary and proper, to demand the payment in whole or in part of the note executed for the unpaid portion of the three annual premiums. It does not appear from the record before us, nor from the charter of the company, nor from the amendment thereto, that the failure to pay these premium notes, or such portion thereof as may be called for, will work a forfeiture of the policy of insurance.

But however this may be, that question does not arise, as the insured was never required to pay any portion of the principal of the note held against him by the company.

The complaint is that the interest was not paid in advance. It seems that a distinction is taken between the principal sum due and the interest that may accrue thereon. From the peculiar character of the contract this distinction may exist, but we do not see that its existence can convert the accruing interest into an annual premium, for the non-payment of which the rights secured by the paid-up policy may be forfeited. If instead of executing his note, Grigsby paid off the amount due to the company, and then borrowed a like sum, agreeing that the commuted policy should be forfeited if he failed at any time to pay the annual interest promptly

in advance, it is evident the forfeiture would not have been enforced. As matter of fact the company agreed to treat these unpaid notes as loans to Grigsby. The second proviso, heretofore quoted, so denominates them. The language is that "if the said insured shall fail to pay annually in advance the interest on any unpaid notes or loans which may be owing on account of any of the above mentioned annual premiums," then the company shall no longer be liable to pay the amount secured by the policy.

The term "loan" has a direct and natural connection with the words "annual premiums," and it is manifest that the contemplated loans were to be made up of such premiums. The interest annually accruing on these loans is in no sense an annual premium due from the insured to the insurer. The loan itself does not represent a cash premium, but a debt which the insured may never be required to pay, and which ordinarily will be satisfied out of the dividends, or the insurance to which the assured may be entitled.

The considerations applying to the payment of the annual premium have no application to the payment of interest, or these notes or loans. On the prompt payment of the premiums depends the mutuality of the contract, and the ability of the insurance company to meet its obligations. As to this policy the contract was completely executed so far as the assured was concerned. The annual premiums had all been paid, in the mode prescribed by the contract itself, and the company was bound to look to the insured for the payment of the interest due upon the notes or loans owing by him, and to enforce the payment thereof as though he was a stranger to the contract under which appellee claims. She and those she represents cannot be affected by the default of the party to whom the loan was made, except that her policy, and all profits and payments to which she is entitled thereunder, are pledged and hypothecated to the company for the ultimate payment of the loan, and its accrued interest. The failure of Grigsby to pay the interest due on the 16th of August, 1871, did not affect the ability of the company to meet its obligations to any greater extent than the failure of any other debtor to pay the interest due from him would have affected it; and as the collateral pledged by an ordinary debtor to secure the payment of a like debt will not be forfeited to the company for the non-payment of interest in exact accordance with the terms of the loan, notwithstanding his agreement that they shall be so forfeited, we see no reason why the company shall be allowed to forfeit the

paid-up policy of insurance hypothecated to secure the ultimate payment of the "note or loan" owing by Grigsby.

The failure to pay the interest due on the note or loan, is a default which admits of a certain compensation. The insurance company holds, and has always held, ample security. We have already seen that the reasons that forbid courts of equity from interposing to relieve against forfeiture for the non-payment of premiums, or notes representing portions of cash premiums, do not apply in cases like this. We are satisfied from the nature of the contract, that the forfeiture was intended as a penalty to secure not only the ultimate but the prompt payment of the interest to become due, and as the default is only in time, and as the company can be given all that it stipulated to receive, a case is presented in which relief can and ought to be afforded. The chancellor adjudged the company to pay the amount of the commuted policy, less the note due from Grigsby and its accrued interest up to the date of the judgment. His said judgment conforms to the principles herein announced, and it is therefore affirmed, as well on the original as on the cross appeal.

UNITED STATES SUPREME COURT.

Error to the First Judicial District Court of Hamilton Co., Ohio.

HOME LIFE INSURANCE COMPANY

vs.

DUNN.

1. Where, after a suit has been properly removed from a State court into the Circuit Court of the United States, under the act of March 2nd, 1867, which allows guch removal, in certain cases specified by it, "at any time before the final hearing or trial of the suit," the State court still goes on to adjudicate the case against the resistance of the party who got the removal, such action on its part is a usurpation, and the fact that such a party has contested the suit in such State court does not, after a judgment against him, on his bringing the proceedings here for reversal and direction to proceed no further, constitute a

waiver on his part, of the question of the jurisdiction of the State court to have tried the case.

2. The language above quoted--"at any time before the final hearing or trial of the suit,"--of the act of March 2nd, 1867, is not of the same import as the language of the act of July 27th, 1866, on the same general subject - -"at any time before the trial or final hearing." On the contrary, the word "final,” in the first mentioned act, must be taken to apply to the word "trial" as well as to the word "hearing." Accordingly, although a removal was made after a trial on merits, a verdict, a motion for a new trial made and refused, and a judgment on the verdict, yet it having been so made in a State where by statute the party could still demand, as of right, a second trial,

Held, that such first trial was not a "final trial" within the meaning of the act of Congress, the party seeking to remove the case having demanded and having got leave to have a second trial under the said statute of the State.

The case is as follows: The judiciary act of 1789, 1 Stat. at Large, 79, thus enacts:

"If a suit be commenced in any State court by a citizen of the State in which the suit is brought, against a citizen of another State, *** and the defendant shall, at the time of entering his appearance in such State court, file a petition for the removal of the cause for trial into the next Circuit Court to be held in the district where the suit is pending, etc., it shall then be the duty of the State court ***to proceed no further in the cause."

Then came an act of July 27th, 1866, 14 Stat. at Large, 306. It was as follows:

If in any suit *** in any State court by a citizen of the State in which the suit is brought, against a citizen of another State, * * a citizen of the State in which the suit is brought is or shall be a defendant, and if the suit, so far as relates * * * to the defendant who is the citizen of a State other than that in which the suit is brought, is or has been instituted or prosecuted for the purpose of restraining or enjoining him, or if the suit is one in which there can be a final determination of the controversy, so far as it concerns him, without the presence of the other defendants as parties in the cause, then, and in every such case, ***the defendant who is a citizen of a State other than that in which the suit is brought, may, at any time before the trial or final hearing of the cause, file a petition for the removal of the cause, as against him, into the next Circuit Court of the United States to be held in the district where the suit is pending, *** and it shall be thereupon the duty of the State court to *** proceed no further in the cause as against the defendant so applying for its removal."

Finally came an act of March 2nd, 1867. Ib., 558. Its title is, "An act to amend an act entitled 'An act for the removal of causes