Belknap v. Johnston

• Decision Date: 27 May 1901
• Parties: CHRISTINA L. BELKNAP, As Executrix of the Estate of JAMES BELKNAP, Deceased, Appellant, v. ELLEN C. JOHNSTON, Appellee
• Court: Iowa Supreme Court

86 N.W. 267

114 Iowa 265

CHRISTINA L. BELKNAP, As Executrix of the Estate of JAMES BELKNAP, Deceased, Appellant, v. ELLEN C. JOHNSTON, Appellee

Supreme Court of Iowa, Des Moines

May 27, 1901

Appeal from Delaware District Court.--HON. FRANKLIN C. PLATT, Judge.

THIS is a controversy over the avails of a certificate of membership in the Northwestern Masonic Aid Association, a corporation doing business in the state of Illinois, issued to J. L Belknap, and payable originally to his devisees or heirs at law. Plaintiff seeks to recover the indemnity as legal representative of the deceased, and defendant claims title thereto as beneficiary, under a substituted certificate, as a creditor of the member. The trial court dismissed plaintiff's petition, and she appeals.--Affirmed.

Decree AFFIRMED.

Yoran Arnold & Yoran and Warner & Lemon for appellant.

Dunham Norris & Stiles and Bronson & Carr for appellee.

OPINION

DEEMER, J.

June 30, 1880, J. L. Belknap, a resident of this state, became a member of the Northwestern Masonic Aid Association. His devisee or heirs at law were named as beneficiaries. Thereafter he devised the avails of the certificate to J. F. Johnston. On June 20, 1883, another and additional certificate was issued to Belknap by said association, the beneficiaries being the same as in the first certificate. He also devised one-half of the avails of this certificate, which bore the number 8,585, to Johnston. Soon thereafter Johnston died, and defendant, Ellen C. Johnston, became possessed of his estate, including some notes held against Belknap, amounting to about $ 7,000. Efforts to adjust this indebtedness resulted in an agreement for an assignment by Belknap of certificate No. 8,585 to Mrs. Johnston as security for the indebtedness. As the articles of incorporation and by-laws of the association forbade such an assignment, but permitted the cancellation of the certificate and the issuance of a new one, making the creditor a beneficiary, that plan was adopted, and it was agreed that upon the death of Belknap and the payment of the certificate the indebtedness should be canceled. Thereupon a new certificate, No. 60,514, was issued in which defendant was named as beneficiary. It was agreed that defendant should pay the assessments on the new certificate, but Belknap in fact paid them uptil his death. By the laws of the state of Illinois and the organic laws of the association, this change of the beneficiaries was authorized. When the original certificate, 8,585, was issued, there was nothing either in the laws of this state or of Illinois forbidding the transaction in question; but when the new certificate, No. 60,514, was issued, chapter 65 of the Acts of the Twenty-first General Assembly was in force. Belknap died in the year 1898, and the association paid the amount of his certificates into court, and was released from all liability.

The controversy, as will be observed, is between Mrs. Belknap, executrix, legal representative of the deceased, who claims under the original certificate, and defendant, Mrs. Johnston, who claims as beneficiary under the substituted certificate. Plaintiff contends that the designation of defendant as beneficiary was null and void, under chapter 65, Acts Twenty-first General Assembly; that the contract with defendant was a wagering contract, she having no insurable interest in the life of Belknap; that Mrs. Johnston failed to pay the assessments as agreed, and has forfeited her rights in and to the substituted policy; and that the designation of defendant as a beneficiary was obtained by fraud and undue influence, and by reason of criminal relations between her and Belknap. These are the issues between the parties, and, before going to the vital points in controversy, it seems proper to dispose of the minor propositions.

The evidence does not sustain the claim of fraud and undue influence, and that issue may be considered out of the case. Mrs. Johnston was a creditor of Belknap, and, as such, had an insurable interest in his life. Hume v. Bank, 128 U.S. 195 (9 S.Ct. 41, 32 L.Ed. 370); Morrell v. Insurance Co., 10 Cush. 282; Hale v. Investment Co., 65 Minn. 548 (68 N.W. 182); Goodwin v. Insurance Co., 73 N.Y. 480; Levy v. Taylor, 66 Tex. 652 (1 S.W. 900). Moreover, it is now generally held that where the insured contracts directly with the insurer, paying the premiums himself, he may designate as beneficiary one who is totally without an insurable interest in his life. Mitchell v. Lodge, 70 Iowa 360, 30 N.W. 865; Olmsted v. Keyes, 85 N.Y. 593; Association v. Blue, 120 Ill. 121 (11 N.E. 331). It matters not, so for as this point is concerned, whether the insured or the beneficiary paid the assessments on the certificate of membership. Johnson v. Van Epps, 110 Ill. 551. It may be that if the beneficiary had no insurable interest, and was to pay the premiums, the policy would be null and void as a wagering contract, Warnock v. Davis, 104 U.S. 775 (26 L.Ed. 924), although there are authorities to the contrary. But we need not dwell on this point, for it is clear that defendant had an insurable interest in the life of Belknap.

The agreement for an assignment of policy No. 8,585 was reduced to writing, and signed by the parties. Among other things, it assigned the policy to defendant in consideration of the surrender and release of the obligations held by her and her deceased husband against Belknap, and defendant "assumed the right and obligation to keep up all assessments on the policy, and a failure to keep and maintain the agreement" was to work a forfeiture of all rights under the assignment. It was further agreed that Belknap's notes should be surrendered to one Haeberle, and held in escrow by him, to be delivered to Belknap's widow when the policy was paid to the defendant. When it was discovered that this assignment was invalid under the Illinois law, it was practically abandoned, and Belknap himself paid all assessments on policy No. 60,514. There was no assignment of policy No. 8,585, unless what was done thereafter amounted to an assignment. But, whether there was an assignment or not, defendant's failure to pay the assessment should not in our opinion, of itself, defeat her claim as beneficiary in the policy. In any event, the evidence clearly discloses a waiver by Belknap of his right to insist on that part of the contract obligating defendant to pay the assessments. We need not set out the facts on which we base our conclusions. It is sufficient to say there is no dispute in the evidence on this point. Belknap was endeavoring to pay his obligation on the Johnston notes, to save the insurance, and paid the assessments voluntarily, pursuant to a subsequent oral arrangement between himself and the beneficiary.

Having disposed of some of the minor points in the case, we now come to the more important, difficult, and controlling features. It is practically conceded that the original certificate, No 8,585, was an Illinois contract, and that there was nothing in the charter of the association or the laws of the state forbidding the making of a creditor a beneficiary. It is also conceded that at the time the certificate issued there was no law of this state that forbade the making of a creditor a beneficiary. At the time of its issuance the member had the right to make such designation of beneficiary as he saw fit. The new certificate, No. 60,514, was issued as a substitute for the original, and provided that it should rest on the same considerations, agreements, and warranties as the one surrendered, and that all existing advantages resulting from duration of previous membership be retained by Belknap. The new certificate was issued in Illinois, at the request of one acting for Belknap, and was sent to Haeberle at the request of both Belknap and Mrs. Johnston. Haeberle was not an agent of the association, and no agent of the company had power to issue certificates. Haeberle was to deliver the policy to Mrs. Johnston when she surrendered her notes to him, but this was no concern of the company, and was not exacted by it. The benefit was made payable in Illinois, and the assessments were also payable at the office of the company. The written assignment of the policy was, of course, executed in this state, and we may concede was void, both under our law and the charter of the corporation. Chapter 65 of the Acts of the Twenty-first General Assembly is for the regulation of mutual benefit associations. Sections 1-4, 8, 12, and 16 of that act clearly refer to domestic societies, and sections 13, 14 and 17 just as clearly refer to foreign benefit societies. The material part of section 7 reads as follows: "No corporation or association organized or operating under this act shall issue any certificate of membership or policy * * * unless the beneficiary * * * shall be the husband, wife, relative, legal representative, heir, or legatee of such insured member. Nor shall any such certificate be assigned, * * * and any certificate issued or assignment made in violation of this section shall be void. * * * Any member of any corporation, association or society operating under this act, shall have the right at any time, without the consent of such corporation," etc., "to make a change in his beneficiary, without requiring the consent of such beneficiary." Section 20 of the act contains this provision: "This act shall not relieve any corporation or assessment association now doing business in the state, from the fulfillment of any contract heretofore entered into with its members under its certificate of membership." There is no doubt that by the act in question the legislature undertook to control, in so far as it had authority to do so, the operation of mutual benefit societies doing business...