Baltimore & OR Co. v. Reaux

• Decision Date: 02 May 1945
• Docket Number: No. 5081 Civil.,5081 Civil.
• Parties: BALTIMORE & O. R. CO. v. REAUX et al.
• Court: U.S. District Court — Northern District of Ohio

59 F. Supp. 969

BALTIMORE & O. R. CO. v. REAUX et al.

No. 5081 Civil.

District Court, N. D. Ohio, W. D.

March 22, 1945.

On Motion for New Trial May 2, 1945.

J. S. Rhinefort, of Toledo, Ohio, for plaintiff.

Joseph C. Gribbin and Herman R. Miller, both of Toledo, Ohio, for defendants.

KLOEB, District Judge.

This is an action of interpleader brought by the Baltimore and Ohio Railroad Company under the provisions of U.S.C.A. Title 28, Section 41, Subdivision 26.

The facts of the controversy, as alleged in the bill, are here set out in summary. The company is a citizen and resident of the State of Maryland and has its principal place of business at Baltimore, Maryland. It is a railroad corporation, but is authorized by the State of Maryland to issue insurance on the lives of its employees upon a mutual or assessment plan; and did issue a policy or certificate of insurance through its relief department to an employee, named David R. Reed, in the amount of $1,000, on the 27th day of January, 1938. The policy named the claimant, Bertha R. Reaux, one of Mr. Reed's daughters, as beneficiary. On or about September 19, 1943, the company's relief department received a letter from Mr. Reed, dated September 17, 1943, and addressed to the Superintendent of the relief department, making the request that "* * * you change my insurance to read Mrs. Bessie R. Welshhans, instead of Mrs. Bertha Reaux * * *". Mrs. Welshhans is Mr. Reed's oldest daughter and the other claimant herein. A form for the purpose of changing a beneficiary was mailed to Mr. Reed, but, instead of being sent to an address given in the letter mentioned, was sent to 222 South Market Street, Frederick, Maryland. Thereafter nothing further was heard from Mr. Reed, who died on October 22, 1943. The policy provided that "No change of beneficiary will be permitted without the written consent of the Superintendent of the Relief Department", and no change was ever made on the records of the company. Both daughters claim the proceeds of the policy and one, Mrs. Bertha R. Reaux, filed suit in the State Court, whereupon the company filed its bill of interpleader.

Both claimants were enjoined from prosecuting suit and were required to answer in this suit, so that their respective rights to the proceeds could be determined. Both have filed their answers.

The case was tried upon the pleadings and stipulations of the claimants. It was stipulated that Exhibits A, B and C should be received in evidence, that the allegations of fact in the bill of interpleader be accepted as true, and that David R. Reed lived at 222 South Market Street, Frederick, Maryland, until 1935, at which time he moved to the home of Mrs. Reaux in Toledo, where he remained until 1938, then going to the home of his niece in Cumberland, Maryland.

Exhibit A is the original "Certificate of Membership in the Relief Feature, Relief Department of The Baltimore and Ohio Railroad Company". Exhibit B is a copy of the "Regulations Governing the Relief Department of The Baltimore and Ohio Railroad Company". Exhibit C is a copy of the "Application to Retain Membership for Natural Death Benefit upon Expiration of Furlough or Leave of Absence, and after leaving service".

The parts of these exhibits important to a determination of the controversy are quoted in whole or in part as indicated. (Emphasis has been supplied).

Paragraph one of the Application provides, in part, as follows: "I, David R. Reed, of Pittsburgh, in the County of Allegheny, and State of Pennsylvania, * * * do hereby apply to continue my membership in the Relief Feature of the Relief Department, for the Natural Death Benefit only, and consent and agree to be bound by all the Regulations of the Relief Department now in force, and by any other Regulations of said Department hereafter adopted, applicable to the Relief Feature;"

Paragraph two of the Application provides, in part, that: "I Also Agree to pay in advance, * * * the sum of $1.40, as a contribution to the Relief Feature of said Department, as a condition precedent to securing Four times the Natural Death Benefit * * * provided by said Regulations, * * * paid out of the fund therein provided for, in the event of my death, to My daughter—Mrs. Bertha R. Reaux—or to whomever I may hereafter from time to time designate in writing, by way of substitution without the consent of the person or persons previously deisgnated, but with the written consent of the Superintendent; * * *".

Paragraph five of the Application provides that: "I Understand And Agree that this application, when accepted by the Superintendent, shall constitute a contract between me and the said Company, governed in its construction and effect by the laws of the State of Maryland, by which my rights as a member of said Relief Feature shall be determined as to all matters within its scope; that each of the statements herein contained shall constitute a warranty by me, the truth whereof shall be a condition of payment of the benefits aforesaid."

Paragraph seven of the Application states that: "In Witness Whereof, I have signed these presents at Frederick, in the State of Maryland, this 11 day of January, 1938. Effective from and after June 24, 1937, date granted an annuity by the Railroad Retirement Board".

Paragraph nine of the Application states that: "The foregoing application is accepted at the Office of the Superintendent of the Relief Department, Baltimore, Maryland, this ____ day of Jan. 14, 1938."

Paragraph one of the Certificate of Membership provides, in part: "In Consideration of the representations, statements and agreements made in an application for membership, dated January 11, 1938, effective from and after 6/24/37, which are hereby referred to, and as warranties made a part hereof, * * *".

Paragraph five of the Certificate of Membership provides that: "No change of beneficiary will be permitted without the written consent of the Superintendent of the Relief Department".

The last paragraph of the Certificate of Membership states: "In Witness Whereof, The Relief Feature of the Relief Department of The Baltimore and Ohio Railroad Company has, by its Superintendent, executed and delivered this Certificate, and has caused the same to be duly countersigned, at Baltimore, Maryland, on this 27 day of January, 1938".

Article 15 of the Regulations provides, in part, as follows: "An employee who desires to participate in any of the forms of relief afforded by the Relief Feature, must execute an application * * *. This application, when accepted by the Superintendent, will constitute a contract between the applicant and the Company, binding each to be governed by the terms of the application and all the Regulations of the Department then in force, and by any other Regulations of said Department thereafter adopted. The evidence of the acceptance and approval of the application will be the issuance to the applicant of a certificate of membership."

Article 60 of the Regulations provides, in part, that: "No assignment of benefits or change of beneficiary will be permitted without the written consent of the Superintendent, * * *".

It is apparent that the right of either claimant to the insurance depends, first, upon the right or power of the decedent, David R. Reed, to change the beneficiary and, second, upon whether, if he had the power, it was effectually exercised. Both questions must be determined by the provisions of the contract of insurance and the law properly applicable thereto. "The power to change the beneficiary is a power of appointment, and the terms of its exercise are fixed by the contract between the insurer and the insured * * *." Reid v. Durboraw, 4 Cir., 272 F. 99, 101.

Here, the contract is comprised of the Application, Certificate and Regulations, Exhibits A, B and C, the pertinent parts of which have been quoted.

Claimant Welshhans relies strongly upon the case of Atkinson v. Metropolitan Life Insurance Co., 114 Ohio St. 109, 150 N.E. 748. Syllabus No. 1 in that case states: "Where a life insurance policy contains therein written a condition that such `policy is written with the right of the insured to change the beneficiary,' such right is absolute and may be exercised at any time during the lifetime of the insured and the consent of the insurance company is not essential thereto."

Syllabus 4 states: "The provisions in a policy of insurance regulating the mode and manner of making a change of beneficiary are for the benefit of the insurance company and may be waived by it."

Syllabus 5 states: "In the event of a controversy between a former named beneficiary and a new beneficiary, if the insurance company interpleads in an action by a claimant to recover the proceeds of the policy it thereby waives any interest in the outcome of the action and thereupon the cause shall proceed between the respective claimants uninfluenced by any rights or interest of the insurance company."

Claimant Reaux contends, on the other hand, that the Atkinson case applies only to "oldline insurance companies", that this is fraternal insurance, and that, under Modern Woodmen of America v. Myers, 99 Ohio St. 87, 124 N.E. 48, the mode and manner of making changes of beneficiary is subject to reasonable regulation, and failure to comply with the strict terms of a policy of a fraternal and beneficiary society is fatal to an effectual change of beneficiary. Mrs. Reaux contends, also, that the company, having mailed the form for change of beneficiary to a former address of Mr. Reed's, there is a presumption that he received it and failed to return it, thereby indicating that he had not done all in his power to change the beneficiary. This latter contention may be disposed of quickly. Unless a letter is correctly addressed to the street, number and city in which the addressee lives, the usual presumption that it was received will not be entertained. Henderson v. Carbondale Coal & Coke Co., 140 U.S. 25, 11 S.Ct. 691...