Francis v. Francis

• Decision Date: 12 January 1978
• Docket Number: No. 44875,44875
• Citation: 89 Wn.2d 511,573 P.2d 369
• Parties: Verbel B. FRANCIS, Individually, and as Administratrix of the Community Estate of Leslie L. Francis, Deceased, Respondent, v. Robert FRANCIS, Appellant, Silver Loaf Baking Company and the Trustees of Silver Loaf Baking Company Pension Trust, whose names are unknown, Defendants.
• Court: Washington Supreme Court

Page 511

89 Wn.2d 511

573 P.2d 369

Verbel B. FRANCIS, Individually, and as Administratrix of the Community Estate of Leslie L. Francis Deceased, Respondent, v. Robert FRANCIS, Appellant Silver Loaf Baking Company and the Trustees of Silver Loaf Baking Company Pension Trust, whose names are unknown, Defendants.

No. 44875.

Supreme Court of Washington, En Banc.

Jan. 12, 1978.

Brown & Thayer, Robert M. Brown, Spokane, for appellant.

Malott & Southwell, P. S., Thomas Malott, Spokane, for respondent.

ROSELLINI, Associate Justice.

During the course of his marriage to the respondent, Leslie L. Francis paid, with community funds, all premiums on two policies insuring his life. He designated as beneficiaries his wife, who is the respondent, and his son by a previous marriage, who is the appellant. He died testate in 1973, making provisions for the respondent in his will but leaving the residue of his estate to a daughter and the appellant. The respondent commenced this action seeking a determination that all of the proceeds of the policies belong to her. The trial court reluctantly upheld this contention, finding Occidental Life Ins. Co. v. Powers, 192 Wash. 475, 74 P.2d 27 (1937), controlling.

In a 5-to-4 decision, this court held in that case that a nonconsenting wife may void the designation of someone other than herself as beneficiary of a community-owned life insurance policy. The holding was grounded upon the theory that a life insurance policy and its proceeds constitute community property and that the designation by the insured of a beneficiary other than his spouse amounts to an attempt to give away community property. ¹

The majority opinion was immediately questioned in a Comment by Russell V. Hokanson in 13 Wash.L.Rev. 321 (1938). It has been consistently criticized over the years and to our knowledge has never been defended. ²

While the case has been cited numerous times (most often for the proposition that an insurance policy purchased with community funds constitutes community property and/or the proposition that substantial gifts of community property cannot be made without the consent of both spouses), the questionable holding of the case, namely, that where an insured designates as beneficiary of a community-owned policy a person or persons other than his spouse, the latter may void the designation as to all the proceeds and not just to a one-half share, has figured in only a few cases.

These include King v. Prudential Ins. Co., 13 Wash.2d 414, 125 P.2d 282 (1942), a departmental decision in which the rule was applied without discussion; Small v. Bartyzel, 27 Wash.2d 176, 177 P.2d 391 (1947), an en banc opinion reaffirming the decision but not recognizing or discussing the criticisms, Mallery, J., dissenting; California-Western States Life Ins. Co. v. Jarman, 29 Wash.2d 98, 185 P.2d 494 (1947), a departmental decision following the Powers case without discussion, Mallery, J., again dissenting; Wilson v. Wilson, 35 Wash.2d 364, 212 P.2d 1022 (1949), a departmental decision wherein the correctness of Powers was evidently not questioned by any party, the issue being confined to the question of what disposition should be made of the portion of a policy paid for out of separate funds of the deceased husband; and Aetna Life Ins. Co. v Brock, 41 Wash.2d 369, 249 P.2d 383 (1952), an en banc decision wherein an evenly divided court was unable to reaffirm or overrule the Powers holding.

That ever since, a cloud of doubt has hung over the rule of law upon this point is recognized in Estate of Hammel v. General American Life Ins. Co., 68 Wash.2d 862, 865-66, 415 P.2d 1017 (1966).

In the meantime this court had softened somewhat the impact of Powers by giving effect, in In re Estate of Towey, 22 Wash.2d 212, 155 P.2d 273 (1945), to a change of beneficiary wherein the insured husband's executor was named beneficiary. Under this ruling the wife's half-interest in the proceeds of the policy was preserved but the husband was able to dispose of his half of the proceeds by will. While this modification of the Powers rule ameliorated to some extent the harshness of its impact, it necessitated a circuitous action on the part of an insured in order to designate the beneficiaries of his share of the proceeds. It entailed further disadvantages such as costs of administration, increased estate taxes, and delay in distribution, which would not exist if he were able to name the beneficiary directly in the policy.

Having reexamined the Powers case and its progeny, we have come to the conclusion that the case was erroneously decided and should be overruled. The majority opinion proceeded upon the incorrect assumption that a designation of a life insurance beneficiary operates as an inter vivos gift of community property, failing to recognize that such a designation is merely a means of transmitting property at death. The opinion confuses the right of the wife to void an inter vivos gift of community property in its entirety with her right to receive the value of one-half of the community property at the husband's death. The designation of an insurance beneficiary is quasi-testamentary in nature, since the beneficiary has only an inchoate right prior to the death of the insured, at least where the insured retains the right to change the beneficiary. And even where he does not retain this right the beneficiary's interest is contingent upon the maintenance of the policy in good standing up to the time of the insured's death.

While the designation of a beneficiary is quasi-testamentary in nature, it is not subject to the requirements of the statute of wills (RCW 11.12), since it is expressly exempted under RCW 11.02.090.

The policy being community property and the husband having the right to dispose of one-half of the community property upon his death, he should have the right to give to persons other than his wife one-half the amount of the proceeds. We think the principles involved were well summarized by the California Supreme Court in Pacific Mut. Life Ins. Co. v. Cleverdon,16 Cal.2d 788, 792, 108 P.2d 405, 407 (1940), quoting from Travelers Ins. Co. v. Fancher, 219 Cal. 351, 26 P.2d 482 (1933): ³

First, where premiums of an insurance policy issued on the life of the husband after coverture are paid entirely from community funds, the policy becomes a community asset; second, the designation of a beneficiary in a policy of life insurance initiates in favor of the beneficiary an inchoate gift of the proceeds of the policy, which, if not revoked by the insured prior to his death, vests in the beneficiary at the time of his death; third, the husband may not make a gift of the entire community property without the written consent of the wife; but if he attempt so to do, in contravention of the wife's rights (as in the case of life insurance policy, by naming a third party as beneficiary) the entire gift is not a nullity; it is subject only to the wife's right to have it revoked as to the half to which she would be entitled upon his death; and as to the remaining half, the gift is valid and immune from attack by the surviving wife or by those who under the law of succession would inherit the husband's share in case he made no disposition thereof up to the time of his death. . . . '

It should be noted that this court did not hold in Powers or in the cases following it, as some have thought, that the surviving spouse was entitled to recover the entire proceeds of the policy where the insured had attempted to designate another beneficiary but rather that the designation was void in the same sense that an attempted inter vivos gift is void if attacked by the nonconsenting spouse. As a result the proceeds, not having been disposed of under the insurance policy, became part of the insured's estate to be administered according to his will or the laws of intestacy. The wife's share was also subject to administration pursuant to RCW 11.02.070. ⁴

Thus, the evil of the case was not that it gave the entire proceeds to the surviving spouse, contrary to the intent of the insured, but that it denied to the insured the right to designate the beneficiary of one-half of the proceeds, being the half attributable to his interest in the policy as community property. We know of no sound reason of public policy which demands such a result. On the contrary the fundamental principles of community...