Detroit Greyhound Emp. Federal Credit Union v. Aetna Life Ins. Co., Docket No. 1661
| Decision Date | 20 July 1967 |
| Docket Number | Docket No. 1661,No. 1,1 |
| Citation | 151 N.W.2d 852,7 Mich.App. 430 |
| Parties | DETROIT GREYHOUND EMPLOYEES FEDERAL CREDIT UNION, a Federal corporation, Plaintiff-Appellant, v. AETNA LIFE INSURANCE COMPANY, a foreign corporation, Connecticut General Life Insurance Company, a foreign corporation, and the Greyhound Corporation, a foreign corporation, Defendants- Appellees |
| Court | Court of Appeal of Michigan — District of US |
Richard J. Langs, Langs, Molyneaux & Armstrong, Detroit, for appellant.
John W. Gelder, Miller, Canfield, Paddock & Stone, Detroit, for appellees.
Before LESINSKI, C.J., and FITZGERALD and GILLIS, JJ. FITZGERALD, Judge.
Detroit Greyhound Employees Federal Credit Union, plaintiff, appeals from a reversal by circuit court of a judgment entered in its behalf by the common pleas court of Detroit.
Plaintiff based its suit on an assignment, for security purposes, from an employee of Greyhound Corporation of the moneys payable to him under an annuity contract upon termination of his employment. Defendants claim this assignment is prohibited by the provisions of the group annuity contract. To set forth the positions of the parties, we adopt the following statement of facts from the trial court's opinion, designating the parties in proper context on this appeal:
A Group Annuity Contract, designated 'Group Annuity Contract GA--242' was issued by Defendant Aetna Life Insurance Company to the Greyhound Corporation, as employer, and a substantially similar policy was issued by the Defendant Connecticut General Life Insurance Company to said Greyhound, Corporation, as employer, effective July 1, 1941. Said Group Annuity Contracts are contributory, in that both the employer and employee make contributions, and in general provide for the purchase of retirement annuities for certain employees of Greyhound who qualify under these Group Annuity Contracts and two agree to make the required contributions thereunder. Contributions of the employer and employee are not accumulated in any fund but are applied each month to purchase a deferred annuity for the employee, the total of all of which deferred annuities equal the employee's retirement annuity. A covered employee who makes contributions may not withdraw his contributions while still in the employ of Greyhound. However, in the event an employee under the retirement plan terminates his employment with Greyhound before his normal retirement date, he may elect either to receive a paid-up annuity under said contracts commencing on his normal retirement date in an amount determined under said contracts on the basis of length of the employee's services with and earnings from Greyhound, or in lieu of such deferred annuity, a termination benefit equal to his contributions with interest.
Among other provisions in the contract were the following, of importance in this matter:
'This contract constitutes the entire contract between the parties, and shall be construed in accordance with the laws of Illinois where it is issued and delivered.
'Neither the employee, nor the beneficiaries, nor the joint annuitants may assign the annuities or other benefits payable under this contract.
On July 1, 1958, Rudolph B. Shepherd, then an employee of Greyhound, became eligible to participate under the Group Annuity Contracts and began making his contributions thereunder. At this time Shepherd received a certificate from Greyhound which briefly indicated the terms and conditions of the Group Annuity Contracts, explaining the plan and setting forth the non-assignability of the annuities and other benefits payable thereunder and indicating that they were exempt from claims of creditors, etc. Further, said booklet, captioned 'Employees' Retirement Plan,' provided on page 20, in part, as follows:
'Withdrawal of Contributions:
28. You may not withdraw your contributions so long as you remain in the service of the Greyhound Lines, nor borrow against them at any time, for to do so would defeat the purpose of the Plan.'
Despite the language of said Group Annuity Contracts quoted above, assignments of contributions under said contracts by employees of Greyhound to Plaintiff and others were recognized by the Defendants insurance companies without qualification for the period from 1943 through 1955. However, in 1955, the insurance companies gave notice to Greyhound, and Greyhound give notice by letter to Plaintiff Detroit Greyhound Employees Credit Union on March 10, 1955, that the insurance companies would not recognize any purported assignments from Greyhound employees. On August 2, 1955, Greyhound sent a second letter to said Plaintiff, specifically stating that the insurance companies and Greyhound would not recognize such assignments taken by Plaintiff after September 1, 1957, whether such assignments were taken before or after that date. Subsequently, through negotiations between Defendants and Plaintiff, the Defendants agreed to extend the deadline for the recognition of assignments by Greyhound employees to Plaintiff until June 30, 1958, with the understanding that such assignments would not be recognized after June 30, 1958, whether such assignments were given before or after that date.
On June i5, 1958, which was before Shepherd became eligible to participate under the Group Annuity Contracts, he, in writing, attempted to assign to Plaintiff, as security for a debt he then owed Plaintiff, all of his future contributions under the Group Annuity Contracts.
On July 21, 1958, Plaintiff sent notice to Greyhound of Shepherd's purported assignment. On July 28, 1958, Greyhound, and on August 4, 1958, the insurance companies notified the Plaintiff of their refusal to recognize or be bound by said purported assignment, indicating that they were relying on their previous notification to Plaintiff that the Defendants would not recognize any assignments after June 30, 1958.
On August 19, 1959, Shepherd terminated his employment with Greyhound prior to his normal retirement date, and consistent with one of the options available to him under the said Group Annuity Contracts, he elected, in writing, to receive an immediate termination benefit, in an amount equal to his contributions with interest as specified in said Group Annuity Contracts, and upon receipt of notice from Greyhound (to whom Shepherd exercised his option as aforesaid), Aetna, as administrator of the Group Annuity Contracts for the two insurance companies, issued a check payable to Shepherd's order in the amount of $90,54, representing his termination benefits under the Group Annuity Contracts, and transmitted this check to Greyhound for delivery to Shepherd, and the same was delivered to him by Greyhound on August 19, 1959.
The threshold question to be decided is, which state's law should apply? The master contract which created the rights of the plaintiff was signed in Connecticut, delivered in Illinois, and performed throughout the United States. The policy provided that Illinois law should apply. The general rule is stated in 29 Am.Jur., Insurance, § 33, 'A policy of group insurance is governed, as between employer and insurer, by the law of the place of issuance and delivery of the policy, where the policy expressly provides that it is to be governed by such law.' Boseman v. Connecticut General Life Insurance Co. (1937), 301 U.S. 196, 57 S.Ct. 686, 81 L.Ed. 1036, 110 A.L.R. 732.
The Boseman case concerned which state law to apply in determining the validity of a clause in a group insurance contract requiring notice by the...
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