Bennett v. Bennett

• Decision Date: 21 November 1950
• Docket Number: No. 10275,10275
• Citation: 62 S.E.2d 273,135 W.Va. 3
• Court: West Virginia Supreme Court
• Parties: BENNETT, v. BENNETT et al.

Page 273

62 S.E.2d 273

135 W.Va. 3

BENNETT, v. BENNETT et al.

No. 10275.

Supreme Court of Appeals of West Virginia.

Submitted Sept. 27, 1950.

Decided Nov. 21, 1950.

Syllabus by the Court.

1. The purpose of Section 34, Article 3, Chapter 33, Code, is to exempt, except in cases of transfer with intent to defraud creditors, the proceeds and the avails of insurance policies effected by any person on his own life or another life in favor of a named beneficiary, or his assignee, who is a person other than the insured or the person effecting the insurance, from the creditors of the insured or the person effecting the insurance; and that section of the statute does not alter or control the terms of a policy of life insurance which dispose of its proceeds and avails.

2. Properly construed, the provisions of Section 34, Article 3, Chapter 33, Code, do not apply to a policy of insurance upon the life of the insured, payable to his wife as the designated beneficiary, who predeceases the insured, if the insured dies without exercising the right reserved to him to change the beneficiary, and the policy provides that, in the event of the death of any beneficiary before the insured the interest of the beneficiary shall vest in the insured; and, under the provisions of the policy, in a contest between the administratrix of the beneficiary and the executrix and the executor of the insured, the latter are entitled to the proceeds and the avails of such policy.

3. 'Whenever an act of the Legislature can be so construed and applied as to avoid a conflict with the Constitution, and give it the force of law, such construction will be adopted by the courts.' Point 3, Syllabus, Slack v. Jacob, 8 W.Va. 612.

Haymon H. Boggs, Glenville, Steptoe & Johnson, Oscar J. Andre, Clarksburg, for appellant.

Charles R. Beall, Martinsburg, Mohler, Peters & Snyder, Charleston, for appellee.

HAYMOND, Judge.

This suit in equity was instituted in the Circuit Court of Gilmer County by the plaintiff, K. M. Bennett, Administratrix of Byrd A. Bennett, deceased, to determine who, as between the plaintiff and the defendants, Loretto K. Bennett, Executrix, and P. A. Bennett, Executor, of Carey M. Bennett, is entitled to the proceeds of a policy of life insurance issued to Carey M. Bennett in his lifetime. The case was submitted for decision upon the bill of complaint of the plaintiff and its exhibits, one of which is a photostatic copy of the policy of insurance, and the separate answers of each of the defendants. No testimony was introduced by any of the parties and the material facts are not disputed. By final decree entered March 1, 1950, the circuit court held that the plaintiff, as the personal representative of the estate of Byrd A. Bennett, was entitled to the proceeds of the policy, and from that decree this appeal was granted by this Court upon the petition of the defendants.

The policy of life insurance which forms the basis of this suit was issued by International Life Insurance Company to Carey M. Bennett, the insured, on March 20, 1926, in the amount of $5,000, and was subsequently acquired and its obligations assumed by General Insurance Company. Byrd A. Bennett, the wife of the insured, was designated as the beneficiary in the policy, which contained these pertinent provisions: 'The beneficiary under this policy is designated by the insured with reservation of the right to change such beneficiary. In the event of death of any beneficiary before the insured the interest of such beneficiary shall vest in the insured.' Byrd A. Bennett, the beneficiary, died intestate on May 17, 1935, and her sole heirs and distributees were Carey M. Bennett, her husband, and P. A. Bennett, her son. After her death Carey M. Bennett, the insured, married Loretto K. Bennett. Carey M. Bennett died on November 23, 1946, more than eleven years after the death of his first wife, Byrd A. Bennett, without exercising his right to change the beneficiary designated in the policy. He left a will, in which he named Loretto K. Bennett as executrix and P. A. Bennett as executor, and in which, by a residuary clause, he gave to Paul A. Bennett, his son, and Loretto K. Bennett, his widow, equally, the residue of his estate. During his lifetime he obtained a loan upon the policy and at the time of his death the net amount of the proceeds of the policy was $2,344.27. This sum was paid by the insurer to the defendants as the personal representatives of Carey M. Bennett, and they now hold this amount of money until the final determination in this suit of the person or the persons for whose benefit it shall be administered. No question is presented concerning the right of any creditor of Carey M. Bennett to the proceeds of the policy.

The plaintiff claims the net proceeds of the policy under the provisions of Section 34, Article 3, of Chapter 33 of the Code of 1931. This statute was enacted March 5, 1929, as Chapter 27 of the Acts of the Legislature, 1929, Regular Session, and it became effective ninety days after its enactment, which was nearly three years after the policy was issued to Carey M. Bennett. The defendants contend that the statute does not apply to the policy and that, if it does, it impairs the obligation of the contract of insurance between the insurer and the insured and for that reason violates Article I, Section 10, of the Constitution of the United States, and Article III, Section 4, of the Constitution of West Virginia, which respectively declare that no State shall pass any law impairing the obligations of contracts and that no law impairing the obligation of a contract shall be passed.

The pertinent part of Section 34 of the statute is in these words: 'If a policy of insurance, whether heretofore or hereafter issued, is effected by any person on his own life or on another life, in favor of a person other than himself, or, except in cases of transfer with intent to defraud creditors, if a policy of life insurance is assigned or in any way made payable to any such person, the lawful beneficiary or assignee thereof, other than the insured or the person so effecting such insurance, or his executors or administrators, shall be entitled to its proceeds and avails against the creditors and representatives of the insured and of the person effecting the same, whether or not the right to change the beneficiary is reserved or permitted, and whether or not the policy is made payable to the person whose life is insured if the beneficiary or assignee shall predecease such person: * * *.' Statutes of the same general character have been enacted in a number of other jurisdictions and they have been held to be exemption statutes and not statutes which effect or govern the distribution of life insurance proceeds contrary to the terms of the policy. In re Rose's Estate, 95 N.H. 208, 210, 60 A.2d 116; Barton v. Provident Mutual Relief Association, 63 N.H. 535, 3 A. 627; Massachusetts Linotyping Corporation v. Fielding, 312 Mass. 147, 43 N.E.2d 521; Dellefield v. Block, D.C.N.Y., 40 F.Supp. 616; Mutual Life Insurance Company of New York v. Corodemos, D.C.Mass., 7 F.Supp. 349.

The statute has not been construed in any decision of this Court, but it has been considered with respect to its effect upon the claims of creditors of the insured to the proceeds of a policy of life insurance which designates a special beneficiary, and in Scruggs v. Jefferson Standard Life Insurance Company, 125 W.Va. 89, 23 S.E.2d 74, 76, the opinion contains this statement: 'The question of the rights of creditors to the proceeds of a life insurance policy has been the subject for determination in numerous instances and the general rule is that, in the absence of special equities, creditors of the insured have no interest in the proceeds of a policy designating a special beneficiary. Cooley's Briefs on Insurance, 2d Ed., Vol. 7, page 6494. In this jurisdiction the essence of the general rule, in the absence of an intent to defraud creditors, has been embodied in a legislative enactment. Code, 33-3-34.'

The purpose of the statute, Code, 1931, 33-3-34, and of similar statutes in other jurisdictions, in instances to which such statutes apply, is to protect the proceeds of life insurance policies, in which a person other than the insured is named as beneficiary, against creditors of the insured. See Dellefield v. Block, D.C.N.Y., 40 F.Supp. 616; Massachusetts Linotyping Corporation v. Fielding, 312 Mass. 147, 43 N.E.2d 521; Chatham Phenix National Bank & Trust Company v. Crosney, 251 N.Y. 189, 167 N.E. 217; United States v. Sullivan, D.C.N.Y., 19 F.Supp. 695, affirmed, 2 Cir., 95 F.2d 1021; In re Messinger, 2 Cir., 29 F.2d 158; In re Weick, 6 Cir., 2 F.2d 647; In re Rose, D.C.Pa., 24 F.2d 253; In re Firestone, D.C.N.Y., 2 F.Supp. 96; 22 Am.Jur., Exemptions, Section 72.

The decisions of the courts in the different jurisdictions, in which statutes of the general character of the statute involved in this suit exist, are not in entire accord as to the meaning and the effect of such statutes with regard to policies of insurance to which they variously relate.

A statute of the State of New York, added by Section 55a, Chapter 468 of the Laws of 1927, to Chapter 33 of the Laws of 1909, effective March 31, 1927, contained, among others, these provisions: 'If a policy of insurance, whether heretofore or hereafter issued, is effected by any person on his own life or on another life, in favor of a person other than himself, or, except in cases of transfer with intent to defraud creditors, if a policy of life insurance is assigned or in any way made payable to any such person, the lawful beneficiary or assignee thereof, other than the insured or the person so effecting such insurance, or his executors or administrators, shall be entitled to its proceeds and avails against the creditors and representatives of the insured and of the person effecting the same, whether or not the right to change the...