Davis v. Acacia Mut. Life Ins. Co.

• Decision Date: 13 August 1935
• Docket Number: 14127.
• Citation: 181 S.E. 12,177 S.C. 321
• Parties: DAVIS v. ACACIA MUT. LIFE INS. CO.
• Court: South Carolina Supreme Court

181 S.E. 12

177 S.C. 321

DAVIS v. ACACIA MUT. LIFE INS. CO.

No. 14127.

Supreme Court of South Carolina

August 13, 1935

Appeal from Common Pleas Circuit Court of Florence County; R. W Sharkey, Judge.

Action by Annie E. Davis against the Acacia Mutual Life Insurance Company. From a judgment which directed a verdict for defendant, plaintiff appeals.

Affirmed.

McEachin & Townsend, of Florence, for appellant.

Thomas Lumpkin & Cain, of Columbia, and Chas. W. Muldrow, of Florence, for respondent.

STABLER Chief Justice.

On May 1, 1906, the Masonic Mutual Relief Association, predecessor of the Acacia Mutual Life Insurance Company, issued to one James P. Davis insurance in the sum of $1,000 written on the twenty-payment life plan. On January 17, 1927 after the twenty-year period had expired, Davis borrowed from the company $566, the full loan value of the policy, and executed in its favor a note in that amount, bearing interest at 5 per cent. On February 17, 1928, the defendant canceled the insurance, claiming that the principal amount of the loan with interest to December 31, 1927, exceeded the reserve value of the policy as of that date. On May 19, 1933, the insured died; and this action was then brought by the plaintiff, the named beneficiary, for damages, both actual and punitive, in the sum of $3,000, for the asserted fraudulent cancellation by the company of the contract of insurance, it being alleged that "the reserve value and the dividends due as of December 31, 1927, were sufficient to keep the said policy in full force and effect"; and that "the plaintiff as beneficiary of the said policy, whose interest was absolute during its assignment to the defendant received no notification of the lapse of the said policy."

The defendant, while admitting the issuance of the insurance, alleged that the rights of the plaintiff as beneficiary were never vested, and that the company canceled the policy, as it had a legal right to do under the terms of the loan note, when the loan and interest exceeded the reserve.

On trial of the case, Judge Sharkey directed a verdict for the defendant, and later refused to grant the plaintiff's motion for a new trial.

The appellant, plaintiff below, states the following questions as raised by her exceptions: (1) Was the policy properly assigned, and did the plaintiff as beneficiary have a vested interest in it during its assignment? (2) Was either the insured or the beneficiary bound by the notice mailed the insured by the company on January 16, 1927? (3) Was interest on the note due on May 1, 1927, and, if so, was its payment on that date waived? (4) Do the terms of the policy or of the loan note control? (5) Was there evidence of fraud in the cancellation of the insurance? These we will consider in the order named.

I. As to cash loans, the policy provides: "Upon previous written request at the end of the third of any subsequent anniversary of the issuance of this policy, and at other times at its convenience, and upon a valid and satisfactory assignment of this policy as security, the Association will loan, at five per cent. interest, the amount shown in writing in the table of cash loans hereon opposite the number of years the policy may then have been in force, less any existing indebtedness of the holder to the Association on account of this policy; provided the premiums are paid up to the anniversary of the insurance next succeeding the date when the loan may be obtained."

And as to change of beneficiary: "This policy is issued with the express understanding that the insured may, providing the policy has not been assigned, with the approval of the Association endorsed thereon, change the beneficiary or beneficiaries at any time by filing with the Association a written request, duly acknowledged and accompanied by this policy, such change to take effect upon the endorsement of the same upon the policy by the Association; the Association will not, however, assume responsibility for the validity of any assignment or change of beneficiary."

It is now the settled law of this jurisdiction, and of most jurisdictions, that where a right to change the beneficiary has been reserved to the insured in the policy, the named beneficiary has a mere expectancy and not a vested right or interest. Bost v. Insurance Company, 114 S.C. 405, 103 S.E. 771; Antley v. Life Insurance Company, 139 S.C. 23, 137 S.E. 199, 60 A. L. R. 184; Livingston v. Life Insurance Company, 173 S.C. 87, 174 S.E. 900, 902. But this expectancy, while held subject to the exercise of the right of the insured to change the beneficiary, is entitled to the protection which the policy gives it-not to be defeated except in the contract method; that is to say, where the policy prescribes a plan for changing the beneficiary, there must be at least a substantial compliance therewith. Wannamaker v. Stroman, 167 S.C. 484, 166 S.E. 621.

The appellant contends, however, that the decisions cited and relied on by the respondent are not in point; that in the Antley Case, supra, which Judge Sharkey held was decisive of the issue here involved, this court was not called upon to consider the clause in the provision of the policy for changing the beneficiary, "providing the policy has not been assigned," as the appeal in that case merely challenged the validity of any assignment without the consent of the beneficiary; that the quoted clause was evidently inserted by the company "to secure the cooperation of the beneficiary in keeping the policy alive after assignment," and that "once the policy is assigned the rights of the named beneficiary become vested in the remainder" of it, "which cannot become divested during assignment and which entitle the beneficiary to notification of impending forfeiture or cancellation."

Even conceding as true that the point here made was not passed upon in any of the cases cited and relied on by the respondent, and that, therefore these decisions are not controlling, we think, nevertheless, upon mature deliberation, that the appellant is wrong in her contention that the quoted clause, "providing the policy has not been assigned," applies where a loan is made the insured by the company on the policy. In such a case one of the contracting parties is dealing with the other party to the agreement, and not with a stranger. When the contract of insurance before us was entered into in 1906 the company agreed with Davis that it would make loans to him, as provided therein, "upon a valid and satisfactory assignment of this policy as security." As between the parties, it being reserved to the insured to change the beneficiary at will, the right to obtain such loans was paramount to any right of the beneficiary who, under the terms of the insurance contract, had only an expectancy which could be defeated at any time during the life of the insured. In such a case, as stated in Underwood v. Jefferson Standard Life Insurance Company, 177 N.C. 327, 98 S.E. 832, 835, "the policy had not been "assigned,' in the sense that word is used in the contract. The assignment spoken of is one to a stranger, and not one to the company; for the latter could waive any objection to the change of the beneficiary, and did so by assenting to the one which was made in this case. Where a stranger is assignee, his rights could not materially be affected in the absence of his consent, and consequently the company, without authority for that purpose, could not waive for him. The provision was inserted to prevent confusion or complication, and to relieve the company from any danger of liability growing out of changing the beneficiary after the policy...