Froiland v. Tritle, 17659
| Decision Date | 11 February 1991 |
| Docket Number | No. 17659,17659 |
| Citation | 484 N.W.2d 310 |
| Parties | Diane K. FROILAND, Executrix In re Estate of Richard T. Froiland, Deceased, Plaintiff and Appellee, v. James L. TRITLE, Defendant and Appellant. . Considered on Briefs |
| Court | South Dakota Supreme Court |
Lewayne M. Erickson and Eric N. Rasmussen, Erickson, Helsper & O'Brien, Brookings, for plaintiff and appellee.
Frank E. Denholm and Steven J. Britzman, Denholm, Glover & Britzman, Brookings, for defendant and appellant.
James Tritle appeals from a summary judgment entered in favor of Diane Froiland, the executrix of Richard Froiland's estate. We affirm.
James Tritle (Tritle) is a dentist from Brookings, South Dakota, who practiced for roughly forty years. In anticipation of retirement, he sold his practice to a young dentist, Richard Froiland (Froiland), pursuant to a purchase agreement (hereinafter "Agreement") dated October 4, 1985. In the Agreement, Tritle agreed to transfer all of the accounts receivable, assets, fixtures and furnishings, leasehold improvements, patient records, and a covenant not to compete to Froiland for a total purchase price of $50,000. The Agreement called for Froiland to make a down payment of $12,000 and pay the remaining $38,000 balance, plus ten percent interest, pursuant to a ten-year amortized plan, which required payments of $500 per month.
The Agreement did not require that life insurance be purchased by either party to insure complete payment in the event of Froiland's untimely death. Tritle, seeking to assure the payments provided for in the Agreement in his retirement years, requested that Froiland purchase credit life or a mortgage insurance policy. Froiland refused to pay for such insurance; but, after meeting with an insurance agent Phil Hegg (Hegg), he allowed Tritle to purchase an ordinary life policy on his life, submitted to a required physical exam, and completed necessary paperwork for the policy.
The ordinary life insurance policy (hereinafter the "policy") was subsequently issued to Tritle as the beneficiary, on Froiland's life for $38,000, which was the original principal balance on the Agreement. The policy did not provide for a reduction in the policy benefits to coincide with the gradual payoff of the principal on the Agreement.
Froiland unexpectedly passed away October 15, 1990, at which time there was a balance owing on the Agreement of $24,302.21. Tritle made a claim on the insurance policy, which was paid to him in the amount of $37,753. Diane Froiland, executrix of Froiland's estate, made several additional monthly payments to Tritle before she learned of the insurance payment. Upon learning of this insurance policy, she demanded that the money Tritle received in excess of the balance due on the Agreement be returned to the estate. She further demanded that the insurance proceeds be used to satisfy the outstanding amount owed on the Agreement. Tritle refused to apply the proceeds to the amount owed or to return any excess to the estate.
The trial court granted summary judgment in favor of Froiland, awarding the estate the amount in excess of the balance owed, plus interest less the premiums Tritle paid, or approximately $14,994.42. Trial court further ordered that the proceeds from the policy were to be applied to the outstanding amount owed in the purchase agreement. Tritle appeals.
1. Whether the trial court erred in limiting Tritle's insurable interest to the amount of debt owed by Froiland at the time of his death?
2. Whether the trial court erred in granting summary judgment prior to close of discovery period?
The standard of review for a grant or denial of summary judgment is as follows:
' '
Waddell v. Dewey County Bank, 471 N.W.2d 591, 593 (S.D.1991) ().
With these considerations in mind, we discuss the merits of Tritle's appeal.
Trial court granted Froiland's motion for summary judgment based on its conclusion that the insurable interest of a creditor exists only to the extent of the obligation owing at the time of the debtor's passing. Thus, Tritle only possessed an insurable interest for the outstanding obligation when Froiland passed away, approximately $24,302.21.
Tritle argues that he is entitled to the full amount of the death benefit proceeds because his insurable interest in Froiland's life existed at the time the Agreement was executed and is not reduced as the amount of the debt decreases as the monthly installment payments are made pursuant to the Agreement. The applicable statutes are SDCL 58-10-3 and 58-10-4(3). SDCL 58-10-3 permits a creditor to procure insurance on a debtor's life if the creditor has an "insurable interest" and provides as follows:
Any individual of competent legal capacity may procure or effect an insurance contract upon his own life or body for the benefit of any person. But no person shall procure or cause to be procured any insurance contract upon the life or body of another individual unless the benefits under such contract are payable to the individual insured or his personal representatives, or to a person having, at the time when such contract was made, an insurable interest in the individual insured. (Emphasis added.)
SDCL 58-10-4(3) defines an insurable interest as:
'Insurable interest' with reference to personal insurance includes only interests as follows:
(3) A person who is a party to a contract or option for the purchase or sale of an interest in a business partnership or firm, or of shares of stock of a closed corporation or of an interest in the shares, has an insurable interest in the life of each individual party to the contract and for the purpose of the contract only, in addition to any insurable interest which may otherwise exist as to the life of the individual. (Emphasis added.)
We have not previously interpreted these statutes, nor have we expressly ruled as to the extent of a creditor's insurable interest in a debtor's life. The trial court, however, found persuasive authority in the Eighth Circuit Court of Appeals with Sachs v. United States, 412 F.2d 357 (8th Cir.1969), cert. denied 396 U.S. 906, 90 S.Ct. 220, 24 L.Ed.2d 182, wherein that court stated:
Since the validity of a credit insurance policy depends upon the existence of a debt owing to the beneficiary of the policy, the insurance contract in the debtor/creditor relationship cannot be considered as independent and apart from the debt transaction.... If the creditor accepts the insurance proceeds, these must be applied against the debt as the insurance contract depends upon the debt for its validity.
Id. at 365. The controlling rule appears to be that a creditor only maintains an insurable interest as far as is necessary to...
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Estate of Bean v. Hazel
...74 Ga.App. 617, 40 S.E.2d 564 (1946); Burnett v. Amicable Life Ins. Co., 195 S.W.2d 237 (Tex.App.--Eastland 1946); Froiland v. Tritle, 484 N.W.2d 310 (S.D.1992). Equivocal precedent from other jurisdictions is not a compelling reason for overturning precedent of our own courts or for approv......