First-Columbus Nat. Bank v. D. S. Pate Lumber Co.

• Decision Date: 16 May 1932
• Docket Number: 29942
• Citation: 163 Miss. 691,141 So. 767
• Court: Mississippi Supreme Court
• Parties: FIRST-COLUMBUS NAT. BANK v. D. S. PATE LUMBER Co

141 So. 767

163 Miss. 691

FIRST-COLUMBUS NAT. BANK v. D. S. PATE LUMBER Co

No. 29942

Supreme Court of Mississippi

May 16, 1932

Division A

1 INSURANCE.

"Life insurance policy" is contract to pay specific sum on death of insured without regard to value of his life to beneficiary.

2 INSURANCE.

Corporation had insurable interest in life of one who was treasurer and active manager when policy was issued.

3 INSURANCE.

That beneficiary's interest in insured's life ceased after policy was issued had no effect upon validity of policy or on beneficiary's right to proceeds.

4 INSURANCE.

Beneficiary in life insurance policy has vested interest therein after its delivery of which he cannot be deprived without his consent, absent provision therefor in policy.

5. INSURANCE.

Courts cannot, without beneficiary's consent, change beneficiary in policy providing for such change only with beneficiary's consent.

6. INSURANCE.

That animosity existed between beneficiary's officers and insured even before he severed connections with beneficiary did not entitle insured to change beneficiary after severing connections.

HON. T. P. GUYTON, Chancellor.

APPEAL from chancery court of Lowndes county, HON. T. P. GUYTON, Chancellor.

Suit by Walter M. Holesapple against the D. S. Pate Lumber Company and another, in which the First-Columbus National Bank, as executor, was substituted as complainant after complainant's death. From a decree dismissing the bill, complainant appeals. Affirmed.

Affirmed.

Frierson & Anderson, of Columbus, for appellant.

The state of Texas is an exception to the general rule and holds very strictly that the beneficiary cannot collect insurance on the life of an insured unless the beneficiary has an insurable interest at the date of the death of the insured.

Cheeves v. Anders, 47 A. S. R. 107, 87 Texas 287.

Where there has been a divorce and remarriage by both parties the defense of cessation of insurable interest by reason of the divorce was set up. The court held that the wife was entitled to collect, although cessation in insurable interest had occurred by the divorce. Even in that case the result might have been far different, if, after the divorcement and the marriage of each party again, either one of them before the death of the other had come into a court of equity and asked for a cancellation of the contract or to be released from the contract, or for a change of beneficiary.

Conn. Mutual Life Ins. Co. v. Schaeffer, 94 U.S. 457, 24 L.Ed. 251.

Courts have decreed reformation of contract of insurance after divorce, to conform to the intention of parties.

Ann. 52 A.L.R. 386.

The necessity of an interest in the subject matter of property insured is apparently based on the principle that a contract insuring property is strictly a contract of indemnity. If a contract of life insurance is not one of indemnity there would seem to be no reason for acquiring an insurable interest in the life to support the policy in the absence of statutory provisions.

1 Cooley's Brief on Insurance, sec. 127.

While contracts of insurance are generally regarded as contracts of indemnity prevailing doctrine is that life insurance contracts are not contracts of indemnity. The reasons on which this doctrine is based are, however, regarded by some courts, as utterly inadequate and incorrect with the funadmental principles of which the validity of the contracts depends and in accordance with which it is construed. Certainly this is true in so far as creditor's policies are concerned, and these at most must be looked upon as contracts of indemnity. These contracts were first regarded as from year to year.

1 Cooley's Briefs on Insurance, 1333.

Whatever may have been the rule at common law it is settled as a fundamental principle of American law that one taking out a policy of insurance on the life of another person for his own benefit must have an interest in the continuation of the life insured.

1 Cooley's Brief on Insurance, 330.

To have an insurable interest in the life of another one must be a creditor or surety or be so related by ties of blood or marriage as to have reasonable anticipations of advantages from his life, and that an insurable interest in the life of another is such an interest, arising from the relation of the party obtaining the insurance, either as creditor or of surety for the assured, or from ties of blood or marriage to him, as will justify a reasonable expectation of advantage or benefit for the continuance of his life.

May on Insurance, 102.

There was no vested interest in the beneficiaries except by the death of the insured.

Fleming v. Grimes, Admx., 142 Miss. 522, 107 So. 420, 45 A.L.R. 618.

But in any case it would be very difficult after the policy had continued for any considerable time for the courts without the aid of legislation to attempt an adjustment of equities arising from the cessation of interest in the insured life. A right to receive the equitable value of the policy would probably come as near to a proper adjustment as any that could be devised.

Mutual Life Ins. Co. v. Schaeffer, 94 U.S. 457, 24 L.Ed. 251.

Life insurance in such a case as the one before us is valid and is not a wagering contract. Life insurance in such a case is like that of fire and marine insurance a contract of indemnity. The benefits to be gained by death has no periodicity. It is a substitution of money value for something permanently lost, either in a house, a ship or a life.

United States v. Supply Biddle Hardware Co., 265 U.S. 192, 68 L.Ed. 970, 975.

Marine and fire insurance is considered as strictly an indemnity, but while this is not so as to life insurance which is simply a contract, so far as the company is concerned, to pay a certain sum of money upon the occurrence of an event which is sure at some time to happen, in consideration of the payment of the premiums as stipulated, nevertheless the contract is also a contract of indemnity. If the creditor insures the life of his debtor, he is thereby indemnifying against the loss of his debt by the death of the debtor before payment yet, if the creditor keeps up the premiums and his debt is paid before the debtor's death, he may still recover upon the contract which was valid when made and which the insurance company is bound to pay according to its terms, but if the debtor obtains insurance on the insurable interest of the creditor and pays the premiums himself and the debt is extinguished before the insurance falls due, then the proceeds would go to the estate of the debtor.

Bank of Washington v. Hume, 128 U.S. 195, 205, 32 L.Ed. 370, 375.

The policy is a chose in action.

Murphy v. Red, 1 So. 761, 64 Miss. 614; Grant v. Independent Order of Sons and Daughters of Jacob, 52 So. 698, 97 Miss. 182.

To have insurable interest in another's life, there must be reasonable ground founded upon relation of parties to expect advantage from the continuation of assured's life.

National Life & Accident Insurance Company v. Ball, 126 So. 268, 157 Miss. 163; Warnock v. Davis, 104 U.S. 775, 779, 26 L.Ed. 924; 14 R. C. L. 919; 37 C. J. 391.

None of the courts anywhere permit the taking out of an insurance policy on the life of the third party where insurable interest does not exist in the beneficiary.

Colgrove v. Lowe, 333 Ill. 360, 175 N.E. 569.

A policy payable to the wife, became, upon its delivery to the insured, a vested interest in the wife, and such interest thereafter irrevocable by the insured, except with the consent of the beneficiary.

Jackson Bank v. Williams, 26 So. 965, 78 A. S. R. 530.

Our contention is that the phraseology for the benefit of the beneficiary named in the policies was only to prevent a fraudulent change of beneficiary; that is, a change of beneficiary by the insured which would have defrauded the beneficiary named to the extent of loss of expenses incurred by way of premiums or any indebtedness which the insured might owe the beneficiary, or change by the insured while the beneficiary still had an insurable interest. The limitation was for the benefit of the beneficiary so long as the relationship continued on which the insurable interest was grounded. Otherwise, why have any clause in the policy about "change of beneficiary?" Why not strike it out.

Where there was a question as to whether the proceeds of the policy went to the legal heirs of the beneficiary named in the policy or to the legal heirs of the insured, the proceeds went to the legal heirs of the insured.

Fleming v. Grimes, 142 Miss. 507, 107 So. 420, 45 A.L.R. 618.

But insurable interest is not dependent upon who pays the premiums, solely upon the relationship of the parties toward each other.

Western & Southern Life Insurance Company v. Webster, 189 S.W. 429, L.R.A. 1917B 375, 376.

If a contract is against public policy, the courts will not lend their aid to its enforcement.

Howe's Executor v. Griffin's Admr., 26 Ky. 373, 103 S.W. 714, 128 A. S. R. 296.

Life insurance is protection given to one person against the damage he may suffer through the death of another, and hence that where this element of protecting is wanting the insurance is a wagering contract.

Fuller v. Met. Life Insurance Company, 70 Conn. 647, 41 A. 4.

Our own state holds that a divorce does not terminate insurable interest, but we have not found any case that denied the right of the insured where proper application and proper form had been made to reform the insurance contract so as to change the beneficiary, following a divorce, even where the right to change the beneficiary had not been reserved.

Grego v. Grego, 28 So. 817, 78 Miss. 443.

The amount of a creditor's insurable interest is the amount of his debt.

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