Novosel v. Sun Life Ass. Co. , 49 Wyo. 422 ( 1936 )

ON PETITION FOR REHEARING A petition for a rehearing has been filed herein. Counsel takes up, seriatim, numerous statements contained in our original opinion, and earnestly attempts to show that many of them, and most of our conclusions, are "illogical, illegal and unsound." Notwithstanding the eloquent arguments of counsel, we are unable to see how, under the substantially undisputed testimony on the vital points herein, plaintiffs can recover. We went into the various points of the case in detail, and meant to cover every phase of it, stating our conclusions on various alternative situations conceivable in the case, and find that counsel by reason thereof think that we hesitated and expressed doubt on this point and that. We think, however, that we stated our conclusions with reasonable certainty, and that they are correct. There are a few points, however, which, by reason of the fact that they were not mentioned in the original opinion, or by reason of their importance, deserve comment or further comment.

1. Counsel takes exception to what we said on the point of revocation of any oral assignment which the insured might have made. What we meant by that is clearly shown in the original opinion, and we need not go over that again. It is argued, however, that, in order that a minor may revoke an assignment made by him, it is necessary for him to have a guardian, go into court, give due notice to the opposite party and have the revocation duly adjudged in court. We think that this was unnecessary in this case. The change of beneficiary made by him itself, we think, revoked whatever, if anything, he had done which was inconsistent therewith. 31 C.J. 1068-1069.

2. Counsel refers at various places in his brief on rehearing to the fact that the insured was mentally incompetent when he made the change of beneficiary. We did not refer to this point in the original opinion, since counsel for plaintiffs in his original brief mentioned it but incidentally, and counsel for intervener did not mention it at all, and we did not think that there was any evidence to support the contention. The fact that the boy took a policy of $3000 and made his wife the beneficiary thereof seems like a perfectly natural act of a sane man, and the further fact that he left his parents as the beneficiary of another policy of $3000 would seem to indicate a keen and just sense of discrimination. Mrs. Mackie's testimony merely showed that the insured had the blues at times, which few, if any, of us escape. Dr. Newman testified that he examined the insured from time to time commencing with January, 1934, to March 3rd, 1934; that the boy complained of vertigo; that Mayo's later found an encephalitic condition of the brain — "a slow inflammatory process that goes on in the brain."

"Q. What would you say on the third of March, 1934, as to Ludwig Novosel Jr. being able to transact his business or transact business intelligently? A. I didn't go into the functioning of that gland especially. A man in that condition is not a normal man, and he undoubtedly had that condition before he reported to me, it is not a condition that comes on suddenly. Q. Do you know whether he went alone? (to Mayo's at Rochester, Minnesota). A. I don't recall. Q. Was he capable of taking care of himself, if he did? A. I would say he could do that, yes."

This evidence fails to show that the insured was insane at the time when he made the change of beneficiary. No man who is sick is "normal," but that does not constitute proof of insanity.

3. So many policies are taken out by parents on the lives of their minor children that it has seemed advisable to again give a thorough consideration to the subject of original ownership of the policy in question, and to clarify and amend what we said on that subject in the original opinion and consider the point in its fundamental aspects. After an exhaustive search of the authorities, both now and at the time of the original hearing, we have found none directly in point. The late case of Grosz v. Grosz, (Ore.) 50 P.2d 119, deals with a policy like that in the case at bar. The father obtained a policy on the life of his son, whether in conjunction with the latter does not appear. The original ownership was by the parties assumed to have been in the father. The court seems to have taken a different view, though the point was not directly involved. And it may be of interest to quote what was said in the case of Mut. Benefit Life Ins. Co. v. Clark, 81 Cal. App. 546, 254 P. 306, as follows:

"Where the policy of insurance names a third person as beneficiary, the policy is then a contract made for the benefit of a third person, and the third person is called the beneficiary. The beneficiary is not a party to the contract, and is not the owner thereof, and where a policy of insurance reserves to the insured the right to change the beneficiary, the interest of the designated beneficiary, prior to the death of the insured, is that of a mere expectancy of an incompleted gift, subject to revocation at the will of the insured."

If parents desire to take out a policy for their own benefit, that is easily done. All that is necessary is to leave out of the policy the right to change the beneficiary. In such case, it is universally held that the rights of the originally designated beneficiary become vested. 37 C.J. 578. When it is so easy to fix such vested interest, a course taken to the contrary to that above mentioned ought not lightly to be construed as though in conformity therewith and thus give rise to all kinds of litigation, as it did in this case. If a person is insured, with right in the policy such as granted in that in the case at bar, such insured, ordinarily at least, would be considered the owner of the policy. But let us take for granted that, as claimed, the father took out the policy on the life of his son. That act in this case meant at most that he told the agent to have the policy written and that he would pay the premiums. He did not, however, take out the policy by himself, but only in conjunction with his son, so that we need not express an opinion of a situation when a policy is issued without the co-operation of the insured. The contract finally consummated in this case was between the son and the insurance company. The son reserved the right to change the beneficiary. The powers granted in the policy were those granted to the son — to have the right to the surrender value, to assign the policy, to obtain a loan thereon, to change the beneficiary. If a policy had been taken out without the clause giving a right to change the beneficiary, the rights of the parents would, of course, have been irrevocable, as already mentioned. Under the policy taken out, they had but an expectancy. They had no property right therein. Mutual Benefit Life Insurance Company v. Swett, 220 Fed. 201; Golden Star Fraternity v. Martin, 59 N.J. Law 207, 216, 35 A. 908. By reason of the clause giving the right to change the beneficiary, the insured had, ordinarily at least, complete control over the policy. Equitable Life Assurance Society v. Stouch,45 Ind. App. 411; Rawls v. Penn Mutual Life Ins. Co., 253 Fed. 725. The rights granted to the son with the knowledge and agreement of his father — for the latter must in any event be held charged with knowledge of the terms of the contract — were substantially all the indicia of ownership of the policy issued pursuant to the contract, and they became effective when the policy was issued. In the absence of a principle of law of closer analogy, we might compare the situation here to one where a parent purchases property and takes title in the name of his son. Such purchase, it is said in 65 C.J. 417, "by a parent in the name of the child will be presumed to be an advancement or gift." In this case a written application for the policy was made by the son. The application was accepted by the insurance company, the contract was between them, and prima facie at least would vest all rights thereunder in the son. That gave him the rights already mentioned, the indicia of ownership, and while we cannot strictly speak of the title to the policy, the analogy to a situation where the title to property is taken is sufficiently close so as to call, it seems, for the application of a similar rule of law. Accordingly, the testimony herein that the father took out the policy of the character here in question on the life of his son in no way whatever showed that he was the owner of the policy, but, on the contrary, under the presumption above mentioned, showed that the policy was that of the son. With the indicia of ownership as here mentioned in the son, it would seem that the delivery of the policy to the father was but a delivery to him as the natural guardian of a minor son. In any event, he accepted the policy with the conditions embodied therein and must necessarily be held to be bound thereby, unless, of course, the situation was legally changed thereafter. In other words, he accepted the policy with the condition that his right and that of his wife was merely one of expectancy, which could be wiped out at any moment. This acceptance with these conditions was equivalent to a declaration that his possession was in trust for the purpose mentioned in the policy, so that, if delivery of the policy to the son would ordinarily have been necessary in order to invest him with all the indicia of ownership and complete a gift, the acceptance of the father upon the conditions above mentioned would seem to fulfill that purpose. See 65 C.J. 277, 278. We might mention that in Grosz v. Grosz, supra, the court said that in view of the fact that the policy was nonnegotiable, possession thereof was immaterial. Of course, the father may have thought that, in view of the fact that he had possession of the policy, the power reserved by and granted to the son, namely, to change the beneficiary, could not be exercised, except with his consent. But after all, in its fundamental aspects the policy is merely a contract in writing. It came into existence by the offer made by the son, shown by his application, and by the acceptance thereof by the insurance company. Even if the father caused the application, or offer, of the son to be made, he must be held to have done so upon the conditions contained therein, and one of the conditions was that the son should have the right to change the beneficiary. It is difficult to see how the son could be deprived of any benefits of his contract by merely withholding from him the evidence of the acceptance of his offer. The power to change such beneficiary has been treated by the courts as independent of the possession of the policy, and it is said in note 34 A.L.R. 771 as follows:

"It is uniformly held that where insured's failure to complete the change of beneficiary in his policy before his death by a return of the policy to the insurer was caused by a refusal of the beneficiary named therein to surrender the policy to him, his efforts, if otherwise in substantial compliance with the requirements imposed by statute or contract will — at least as between the persons claiming as beneficiaries — be given effect, and the equitable rights of the person designated by him as the new beneficiary will prevail over the strict legal title appearing on the face of the policy."

4. Counsel still insists that since the insurance company failed and refused to endorse a change of beneficiary on the policy, no change was effected. He insists that there is a distinction in this respect between a fraternal insurance policy, or one similar to that, and a policy of the ordinary life insurance company; that accordingly the rule laid down in the case of Brotherhood of L.F. E. v. Ginther, 35 Wyo. 244,248 P. 852, 252 P. 1026, which involved a fraternal life insurance policy, is not in point. Counsel considers this distinction of crucial and controlling importance herein, for he states that if this case involved a fraternal or similar insurance policy "this suit would never have been brought by the writer in the trial court, much less a rehearing asked for in the supreme court." This statement accords with the fact that so much stress was laid on this point on the original hearing of this case, and it implies a fair and frank admission that, unless he is right on this point, the plaintiffs ought not to recover herein and that a new trial would subserve no good purpose. In the view which we have taken, and now take, of the case, we see no good reason why we should not accept counsel's statement and admission as correct. But in doing so the result is inescapable that the petition for rehearing herein must be denied and the original opinion herein must stand, for the distinction which counsel has sought to make, as above mentioned, between fraternal insurance policies and ordinary policies of insurance, which, as in the case at bar, reserve the right to change the beneficiary, does not exist. No such distinction has been, and none, we think, can be, pointed out. Whatever difference there may have existed in the past in the holdings of the courts on that point, or may still exist, the rule as stated in the Ginther case is gradually becoming the recognized rule of American jurisprudence. Some of the cases specifically discuss the point of distinction and hold that there is none. Wentworth v. Equitable Life Assurance Society, 65 Utah 581, 238 P. 648; Mutual Life Ins. Co. v. Lowther, 22 Colo. App. 622, 126 P. 882; Love v. Clune,24 Colo. 237, 50 P. 34; New York Life Insurance Co. v. Rose,70 Cal. App. 175, 233 P. 343; Rossman v. Ins. Co.,127 Md. 689, 96 A. 875; Ann. Cas. 1918C 1047. In a number of other cases, involving an ordinary life insurance policy, the principle of the Ginther case was applied or was held to apply, some of them citing cases involving fraternal insurance and old line insurance indiscriminately. The rule was stated in Brajovich v. Metropolitan Life Ins. Co., 189 Minn. 123, 248 N.W. 711, involving an ordinary life insurance policy, thus:

"Where, as here, the insured has the unrestricted right to change the beneficiary and has done substantially all that he is required to do to effect such change, the change becomes effective notwithstanding the fact that the insurance company has lost the instrument executed by the insured or has failed or refused to indorse such change upon the policy. In such case equity will consider that done which should have been done by the insurance company."

The rule is supported by numerous authorities, some of which are the following, all involving an ordinary policy of insurance and not fraternal insurance: Hancock Mut. Life Ins. Co. v. White,20 R.I. 457, 40 A. 5; Brown v. Home Life Ins. Co.,3 F.2d 661; McDonald v. McDonald, 212 Ala. 137, 102 So. 38, 36 A.L.R. 761 and cases cited; Metropolitan Life Ins. Co. v. Olsen, 81 N.H. 143,123 A. 576, 32 A.L.R. 1472; Taff v. Smith, 114 S.C. 306,103 S.E. 551; Philadelphia Life Ins. Co. v. Mooney, 117 N.J. Eq. 448; 176 A. 166; Reliance v. Bennington Ins. Co., 142 Md. 390;121 A. 369; New York Life Ins. Co. v. Cook, 237 Mich. 303;211 N.W. 648; Metropolitan Life Ins. Co. v. Lewis, (La.App.)142 So. 721; Kimball v. Nat. L. Acc. Ins. Co., 8 La. App. 228; Brajovich v. Metropolitan L. Ins. Co., 189 Minn. 123;248 N.W. 711; Catham Phoenix Nat. B. T. Co. v. Travellers Ins. Co.,232 A.D. 598; 251 N.Y.S. 43; White v. White, 194 N.Y.S. 114; Hall v. Prudential Ins. Co., 132 Misc. 162; 229 N.Y.S. 228; State Mut. L. Ins. Co. v. Bessett, 41 R.I. 54; 102 A. 727; Farley v. Bank, 250 Ky. 150; 61 S.W.2d 1059; Baley v. Prudential Life Ins. Co., 263 N.Y.S. 244; Mutual Life Ins. Co. v. Burger, (Mo.App.) 50 S.W.2d 765. Many other cases might be cited. See Am. Digest `Insurance' sec. 587; 37 C.J. 585; 14 R.C.L. 1392; Joyce on Insurance (2d ed.) sections 746, 751; Couch, Ency. of Insurance Law, Sec. 324. The case of Supreme Council v. Behrend,247 U.S. 394, 62 L. Ed. 1182, 38 Sup. Ct. 522, 18 A.L.R. 392, relied on by counsel, is in no way in conflict with this rule. It is true that the court there mentioned a difference between ordinary life insurance and fraternal insurance, but an examination of the case discloses clearly that reference was made merely to the rule mentioned in note 36 A.L.R. 771; Couch, Ency. of Insurance Law, Sec. 313; 14 R.C.L. 1388, namely, that the right to change the beneficiary under a mutual benefit certificate exists, though no reservation to that effect has been made, while in the case of ordinary insurance policies, such change cannot be made unless the right thereto has been reserved. We might mention incidentally that counsel contends that not even the Utah case of Wentworth v. Equitable Life Assurance Soc., supra, is in point here, for the reason that the insurance company actually endorsed the change of beneficiary on the policy. But counsel has overlooked the fact that this was done after the death of the insured, and added nothing to the right of the substituted beneficiary. Unless the latter had a definite, fixed right, either at law or equity, at the time of the death of the insured, he or she would have none at all, for whatever rights the respective parties had, either at law or equity, vested at that time which could not be changed by any subsequent act of the insurance company. 37 C.J. 580-581; McDonald v. McDonald, supra; Langdeau v. John Hancock Mutual L. Ins. Co.,194 Mass. 58, 80 N.E. 452, 18 L.R.A.N.S. 1190; Chartrand v. Brace,16 Colo. 19, 26 P. 152.

For the reasons pointed out, the petition for rehearing herein must be denied.

Rehearing denied.

KIMBALL, CH. J., and RINER, J., concur.

(April Term, 1936)