Cooper's Adm'R v. Lebus' Adm'R

• Decision Date: 17 December 1935
• Citation: 262 Ky. 245
• Parties: Cooper's Adm'r v. Lebus' Adm'rs.
• Court: United States State Supreme Court — District of Kentucky

262 Ky. 245

Cooper's Adm'r v. Lebus' Adm'rs.

Court of Appeals of Kentucky.

Decided December 17, 1935.

1. Insurance. — Policy is not enforceable in favor of beneficiary unless beneficiary has insurable interest in subject-matter.

2. Insurance. — "Insurable interest" in subject-matter required to authorize beneficiary's recovery on policy exists where beneficiary will derive pecuniary benefit from preservation of subject-matter or will suffer pecuniary loss on happening of event insured against, whether personally or as a representative.

3. Insurance. — Contract whereby beneficiary built restaurant and filling station to be run by insured for one-half of profits and rented property to insured gave beneficiary "insurable interest" in life of insured.

4. Insurance. — Ohio law controlled enforceability of life policy issued on application executed and delivered in Ohio, by Kentucky resident, premiums on which were paid in Ohio.

5. Courts. — Policy issued on application executed and delivered by Kentucky resident in Ohio held enforceable in Kentucky courts, where manner in which policy was procured, executed, and delivered was not prohibited by Kentucky statutes nor forbidden by public policy.

6. Statutes. — In suit in Kentucky involving rights under policy whose enforceability was controlled by Ohio law, where contrary Ohio law was not pleaded and proved, law of Kentucky governed rights of parties to proceeds of policy.

7. Insurance. — Where insured procured life policy in favor of beneficiary who was party to contract with insured whereby beneficiary built restaurant and filling station, to be run by insured for one-half of profits, beneficiary or his legal representative held entitled to entire policy proceeds, as against claim of insured's estate, notwithstanding insured was only indebted to beneficiary for part of amount of policy proceeds (Ky. Stats., sec. 655).

Appeal from Harrison Circuit Court.

M.C. SWINFORD and HANSON PETERSON for appellant.

MILLER & MILLER, HUNT & BUSH and RUFUS LISLE for appellees.

OPINION OF THE COURT BY JUDGE RICHARDSON.

Affirming.

C.G. Cooper and Clarence Lebus, residents of Cynthiana, Ky., entered into two contracts; one dated November 24, 1925; the other July 30, 1927.

By the first, Lebus obligated himself "to make a room suitable for a restaurant, fifteen feet front by about fifty feet," and complete the same as soon as practicable, and to build a filling station, fifty feet by fifty feet, as per W.F. Humphrey's ideas and plans; Cooper "to do and have done all work running the same, including fuel, for one-half of the profits. All expenses to be paid out of the earnings," and one-half the balance left to be paid to Lebus "monthly as rent." Lebus reserved the right to employ some one at a reasonable price to assist in running the station, to be paid out of the business.

By the second contract Lebus rented to Cooper the "Talbott house" and "the Talbott yard and garden" at a rental of $100 per month, payable monthly from October 1, 1927, to January 1, 1928, and at the rate of $125 per month for 1928. The contract of 1927 contains this stipulation:

"First party can take out any time he sees fit not exceeding $10,000.00 life insurance on second party's life for first party's benefit the premiums to be paid by the first party, no part of which is to be charged to second party. Any insurance collected to go direcaly to the first party and the second party has no interest in same."

Lebus performed his part of the contracts. Cooper was experienced in conducting a "rooming house," restaurant, and filling station. He took possession of the property described in the contracts and engaged in the business of conducting a "rooming house" and a restaurant in the one and a filling station in the other, until April 1, 1929

December, 1927, Lebus and Cooper went to the home office of the Union Central Life Insurance Company, Cincinnati, Ohio, where Cooper, for the purpose of carrying out his contract with Lebus respecting his obtaining insurance, signed and delivered to the insurance company an application for a policy on his life for $10,000. After his compliance with the requirements of the insurance company, the policy was issued at Cincinnati, Ohio, in his name, designating Lebus as the beneficiary. Lebus accepted it and paid the premium of $271.60, and paid the premiums thereafter as they annually matured, at Cincinnati to the insurance company, until the death of Cooper. At his death the insurance company paid the face of the policy to Lebus' estate, he having previously died.

This action was filed by Cooper's administrator against Lebus' estate to recover the sum paid it by the insurance company on the policy, with interest from June 8, 1934, less credit of $1,951.20.

Lebus' estate defended, insisting that the policy was a valid Ohio contract, and the rights of the parties thereunder are controlled by the law of that state, and it was entitled to the proceeds of the policy against the creditors and representative of Cooper's estate, under either the law of Ohio or Kentucky, or both.

Cooper's estate contends that Lebus' estate is without right to retain the proceeds of the policy in any amount, in excess of the former's indebtedness to the latter, which it alleged was $1,951.20.

It further insists that if any other than this view be considered, then the policy in excess of this sum was and is a gambling and wagering contract, and therefore invalid and unenforceable.

Its ultimate insistence is that Lebus had no insurable interest in the life of Cooper, other than as a creditor, and when the latter's indebtedness is satisfied out of the proceeds of the policy, the excess belongs to his estate.

It is true that it is an established rule that an insurable interest on the part of the person taking out the policy is essential to its validity and enforceability. "A policy issued to a person without interest in the subject matter of the contract is a mere wager policy or contract having nothing in common with insurance except name and form, and is void and unenforcible on the ground of public policy. The fact that another person who has an insurable interest lends his consent to the transaction does not impart validity to it." 32 C.J. sec. 203, page 1109; Western & Southern Life Insurance Company v. Grimes' Adm'r, 138 Ky. 338, 128 S.W. 65. "It is a fundamental postulate of all insurance that it must not be a mere bet upon a future event. * * * In a sense every insurance contract is a wager, and it is void on this ground only when it is a mere bet or gaming venture. There cannot be either a gaming or wager policy, unless the parties mutually and knowingly consent to the gaming or wager." 32 C.J. sec. 200, page 1109. Accordingly, we have held that one who has no interest in the life of another can neither take out a policy of insurance on the life of the other, nor obtain one on his life by purchase, assignment, or otherwise. Settle v. Hill, 5 Ky. Law Rep. 691; Inter-Southern Life Ins. Co. v. Stephenson, 246 Ky. 694, 56 S.W. (2d) 332. To the same effect, see Finnie v. Alfred Walker (C.C.A.) 257 F. 698, 5 A.L.R. 831; Lee v. Mutual Life Ins. Co., 82 S.W. 258, 26 Ky. Law Rep. 577, and cases cited; Baldwin v. Haydon, 70 S.W. 300, 24 Ky. Law Rep. 900; Basye v. Adams, 81 Ky. 368.

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