Gaethje v. Gaethje

• Court: Arizona Court of Appeals
• Writing for the Court: MOLLOY; HATHAWAY
• Citation: Gaethje v. Gaethje, 441 P.2d 579, 7 Ariz.App. 544 (Ariz. App. 1968)
• Decision Date: 05 June 1968
• Docket Number: CA-CIV,No. 2,2
• Parties: John Lloyd GAETHJE, Appellant, v. Edith N. GAETHJE, a widow, and Edith N. Gaethje as Executrix of the Estate of Edward H. Gaethje, Deceased, Appellee. 479.

Page 579

441 P.2d 579

7 Ariz.App. 544

John Lloyd GAETHJE, Appellant, v. Edith N. GAETHJE, a widow, and Edith N. Gaethje as Executrix of the Estate of Edward H. Gaethje, Deceased, Appellee.

No. 2 CA-CIV 479.

Court of Appeals of Arizona.

June 5, 1968.

Rehearing Denied June 26, 1968.

Gentry, McNulty, Toci & Borowiec, by Matthew W. Borowiec, Bisbee, for appellant.

Riley & Slaughter, by Richard J. Riley, Bisbee, for appellee.

MOLLOY, Judge.

This case involves a dispute between a widow and the son of her deceased husband by a previous marriage over the proceeds of a life insurance policy on the husband's life.

Edith N. Gaethje, is the widow of Edward H. Gaethje ('decedent') and executrix of the latter's estate. She commenced this action against the defendant and appellant, John Lloyd Gaethje, a son of the decedent by a previous marriage and the named beneficiary of the insurance policy here in question at the time of decedent's death, and she prevailed below on summary judgment.

Plaintiff and decedent married for the first time on March 23, 1947. On December 31, 1947, by reason of his employment with Phelps Dodge Company, a certificate of coverage under the latter's group life insurance policy was issued to decedent. At the time of issuance, decedent designated plaintiff, his wife, beneficiary under the policy. She remained the designated beneficiary until January 31, 1952, when the decedent made his son the beneficiary under the policy.

Shortly thereafter, on July 24, 1952, plaintiff instituted divorce proceedings against decedent. A decree of divorce was granted to plaintiff by default on August 14, 1952. The decree contained no reference to this policy.

Plaintiff and decedent were married for the second time on May 11, 1953. Shortly thereafter, decedent executed another designation naming his son as beneficiary. Decedent and plaintiff remained married and decedent remained an employee of Phelps Dodge Company until his death on May 30, 1966.

All premiums paid on the subject policy, totaling $905.94, were paid from payroll deductions taken from the wages of the decedent. It was stipulated by the parties that the policy was of the term variety and did not at any time have any cash surrender value.

There are other factual matters that are not clear on the record before us. It is alleged in the complaint and asserted in an affidavit of the plaintiff that she had no knowledge of and never consented to decedent's change of beneficiary from herself to defendant. Defendant executed a verified general denial of plaintiff's allegation, but filed no counter-affidavit. Additionally, it is asserted in behalf of defendant that plaintiff 'received more than her share of the community property' and has received or will receive more property by virtue of joint ownership and by virtue of her status as sole beneficiary of decedent's estate, now in probate. While the abstract of record before the court discloses the existence of various property of the husband which has become or will become the property of plaintiff by reason of his death, the value of such is not shown.

Both parties moved for summary judgment. The trial court held that decedent's change of beneficiary to defendant amounted to an invalid transfer of community property beyond the scope of the husband's authority in the absence of his wife's consent. The trial court further found the 'uncontroverted' affidavit of plaintiff conclusive as to lack of consent on her part, and rendered summary judgment for plaintiff in her capacity as executrix of decedent's estate for $5,803.80, representing 96.73 per cent of the total proceeds or all of the proceeds less only those which were calculated to be attributable to premiums paid while plaintiff and decedent were divorced. The son brings this appeal.

In reaching its decision, the trial court relied particularly upon the case of Occidental Life Ins. Co. v. Powers, 192 Wash. 475, 74 P.2d 27, 114 A.L.R. 531 (1937), and later Washington authorities, including Wilson v. Wilson, 35 Wash.2d 364, 212 P.2d 1022 (1949); and California-Western States Life Ins. Co. v. Jarman, 29 Wash.2d 98, 185 P.2d 494 (1947). Under those and similar cases, a designation by the husband of a person other than his wife as beneficiary of a life insurance policy upon his life, without the consent of the wife, is 'void' as a 'fraud' upon the wife's rights, and she may insist that the entire proceeds be placed in the husband's estate as community property. The only exceptions are cases in which the amount involved would fall within the rule of De minimis. Hanley v. Most, 9 Wash.2d 429, 115 P.2d 933 (1941).

Other community property states have taken positions differing from that of the Washington court. See Vol. 1 de Funiak, Principles of Community Property § 123, at 353--57. See also Huie, Community Property Laws as Applied to Life Insurance, 18 Tex.L.Rev., at 121 et seq.

In California, the attempted change of beneficiary is voidable, rather than void, and if the wife brings an action to recover the proceeds, her recovery is limited to one half of such proceeds. Blethen v. Pacific Mut. Life Ins. Co., 198 Cal. 91, 243 P. 431 (1926). The remaining half goes to the designated beneficiary under California law, the theory being that the designation is testamentary in character and the California probate code gives the husband testamentary disposition over one half of the community property. Tyre v. Aetna Life Ins. Co., 54 Cal.2d 399, 6 Cal.Rptr. 13, 353 P.2d 725 (1960).

There is a third view, which prevails in Texas. It is well stated in de Funiak, § 123, at 354:

'But in the states, such as Texas, which recognize the right of the husband to make moderate gifts or donations from the community property, not excessive and not in fraud or injury of the wife's rights, it appears that a husband may, during marriage, insure his life in favor of his parents or of children by a former marriage, and pay the premiums with community funds, and that so long as he is fulfilling a duty, even though it be only a moral one, to provide for such relatives, and so long as the community funds so expended are not unreasonably out of proportion to the other community assets remaining, there is no fraud upon the wife and she cannot recover any of the premiums so paid or any of the proceeds of such policies for the benefit of the community.'

We think that our own Supreme Court's decision in the case of Gristy v. Hudgens, 23 Ariz. 339, 203 P. 569 (1922), gives to Arizona its own rule, differing from the approach of each of its three sister states.

In Gristy v. Hudgens, the insured under an employees' benefit association plan had designated a minor child, unrelated to him, as beneficiary of his interest upon his death. The widow of the insured claimed the proceeds notwithstanding the designation. In holding for the minor child, the named beneficiary, the court first noted that the record did not disclose that the policy had been purchased with premiums paid for out of community funds, and stated that no assumption would be made to the effect that it was so purchased. The court's disposition of the issue on those grounds alone would be questionable under the doctrine which presumes payment from community funds. Blaine v. Blaine, 63 Ariz. 100, 159 P.2d 786 (1945); Rundle v. Winters, 38 Ariz. 239, 298 P. 929 (1931); Malich v. Malich, 23 Ariz. 423, 204 P. 1020 (1922); and La Tourette v. La Tourette, 15 Ariz. 200, 137 P. 426 (1914).

The court, in Gristy v. Hudgens, went on to state, however, at 23 Ariz. 348, 203 P. 572:

'Even if this court should assume that to be true (that community funds were used to pay premiums), there is no showing or statement that such funds were paid in fraud of the wife's rights, And no showing that the wife had not received even more than her share of the community property. Furthermore, it is elementary that the husband has a right to dispose of the personalty belonging to the community as he sees fit, provided that he does not, by his disposal of the same, thereby defraud his wife.'

(Emphasis ours)

Another portion of the prevailing opinion in Gristy v. Hudgens was disapproved in Day v. Clark, 36 Ariz. 353, 285 P. 682 (1930), but the quoted passage has not been demeaned as authority. It is clearly in point in the case at bar and we do not feel at liberty to disregard it.

Our conclusion concerning Arizona law in this specific area of insurance law touching community property rights is strengthened by our Supreme Court's holding in Mortensen v. Knight, 81 Ariz. 325, 305 P.2d 463 (1956), that, while the community property decisions of the State of Washington are informative, they are not necessarily more persuasive than those of California or Texas in determining the community property law of this state.

Of the three views, Washington, California and Texas, Gristy appears the most compatible with the law of Texas. In Texas, the husband as head of the community has the right to make limited gifts of the community property, so long as they are not 'excessive or capricious gifts,' 1 Speer, Law of Marital Rights in Texas, § 186, at 303 (1961); Aaron v. Aaron, 173 S.W.2d 310 (Tex.Civ.App.1943, error ref. w.m.); Locke v. Locke, 143 S.W.2d 637 (Tex.Civ.App.1940); Watson v. Harris, 61 Tex.Civ.App. 263, 130 S.W. 237 (1910). Using this as a standard, Texas permits the husband to designate a beneficiary other than his wife of a life policy in which he is the insured when the gift of community property which results from such designation is not 'excessive, fraudulent or capricious.' Brown v. Brown, 282 S.W.2d 90, 92 (Tex.Civ.App.1955). Conversely, when the designation of a beneficiary to a life policy results in a 'capricious and excessive gift of community property,' there is a 'constructive fraud' of the wife's rights, regardless of the subjective intent of the husband. Davis v. Prudential Ins. Co. of America, 331 F.2d 346, 352 (5th Cir. 1964).

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