Hunter v. Federal Life Ins. Co.

• Decision Date: 24 May 1940
• Docket Number: No. 11619.,11619.
• Citation: 111 F.2d 551
• Parties: HUNTER v. FEDERAL LIFE INS. CO. et al.
• Court: U.S. Court of Appeals — Eighth Circuit

111 F.2d 551 (1940)

HUNTER v. FEDERAL LIFE INS. CO. et al.

No. 11619.

Circuit Court of Appeals, Eighth Circuit.

May 8, 1940.

Rehearing Denied May 24, 1940.

COPYRIGHT MATERIAL OMITTED

Herschell Bricker, of Little Rock, Ark., for appellant.

J. H. Carmichael, of Little Rock, Ark., for appellee Federal Life Ins. Co.

Before SANBORN, THOMAS, and VAN VALKENBURGH, Circuit Judges.

SANBORN, Circuit Judge.

This appeal is from a decree for the appellant in an interpleader suit brought on October 23, 1935, by the Federal Life Insurance Company, an Illinois corporation, as plaintiff, against the appellant, her minor children, and Henry E. Osterloh, as trustee, all citizens of Arkansas, as defendants.

The plaintiff had issued in 1925 a $5,000 policy of life insurance to LaFayette M. Hunter, the husband of appellant. She was named as the sole beneficiary. The policy contained this provision: "This policy is issued with the express understanding that the Insured may, provided that it has not been assigned, change the beneficiary or beneficiaries at any time during the continuance hereof by filing with the Company a written request, duly acknowledged, accompanied by this policy, such change to take place upon the endorsement of the same hereon by the Company."

On May 12, 1932, the insured requested that the designation of his wife as beneficiary be made irrevocable. This was done by endorsement upon the policy. On October 27, 1932, with the consent of the beneficiary, the insured's right to change the beneficiary was restored and the policy was made payable to the insured's wife if living, otherwise to their three children or to the survivors or survivor thereof. These changes were endorsed upon the policy.

On August 28, 1935, the insured sent a letter to the plaintiff with reference to a change of beneficiaries.¹

The policy accompanied the letter, and both were received by the plaintiff on August 30, 1935. No form of application for change of beneficiaries was prepared or sent by the plaintiff to the insured, and no endorsement of any such change was placed upon the policy. On September 3, 1935, the insured died. H. J. Cameron, agent in charge of the plaintiff's agency in Little Rock, Arkansas, notified the plaintiff of the insured's death. A letter from the plaintiff to Cameron, dated September 6, 1935, enclosed blanks for establishing claim.² The appellant furnished proofs of death, and the plaintiff was notified that she was not agreeable to the change of beneficiary suggested by the insured in his letter of August 28, 1935, and that she claimed the entire proceeds of the policy.

The plaintiff then filed its bill of interpleader, setting up the issuance of the policy to the insured, the various endorsements upon the policy, and the receipt of the insured's letter of August 28, 1935. It alleged that the insured had done all that he could to effect a change of beneficiaries, but that, because of his death on September 3, 1935, the plaintiff had not had time to make the necessary endorsement on the policy; that the appellant was claiming the proceeds of the policy on the one hand, and Henry E. Osterloh, trustee, and appellant's three minor children were claiming them on the other hand; that the children should have a guardian ad litem appointed to defend them; that the plaintiff was unable to determine to whom the proceeds of the policy should be paid, and had paid the full amount thereof into court, in order that the court might determine that question. The prayer of the bill was that the defendants be compelled to interplead, and that, upon a hearing, the court order a distribution of the proceeds of the policy to the party or parties entitled thereto, and that the plaintiff be allowed a reasonable attorney's fee and costs.

The appellant moved to dismiss the bill on the ground that diversity of citizenship did not exist, and that the plaintiff had not pleaded that it was without interest in the subject matter. Thereafter she filed a renewal of her motion to dismiss upon the same grounds, and an answer. In her answer she admitted that the plaintiff was an Illinois corporation; that the defendants were citizens of Arkansas; that the policy in suit and the endorsements thereon were as described in the plaintiff's bill, and that the insured had died on September 3, 1935. She set out in full the insured's letter of August 28, 1935; denied that prior to his death he did all that he could to have the beneficiaries of the policy changed; admitted that she claimed the proceeds of the policy; and denied that the other defendants were claiming the entire proceeds. She admitted that the children named as defendants were minors, and that a guardian ad litem should be appointed for them; denied that the plaintiff was unable to determine to whom the proceeds of the policy should be paid; alleged that the insured's letter requested the plaintiff to submit a proposed form for change of beneficiaries, and that the policy provided for an endorsement of any change of the beneficiary, and that it was the duty of the plaintiff to interpret the policy. Her prayer was for a dismissal of the bill or for judgment for the proceeds of the policy with twelve per cent penalty and a reasonable attorney's fee, together with interest.

Henry E. Osterloh, as trustee, filed an answer, disclaiming any interest in the proceeds of the policy.

The children, by their guardian ad litem, filed an answer, asserting that the insured's letter of August 28, 1935, had effected a change of beneficiaries; that an annuity for LaFayette McClintock Hunter, Jr., should be purchased from the proceeds of the policy, and that the balance of the proceeds should be paid to Henry E. Osterloh, trustee, in accordance with the directions contained in the insured's letter; and that if Osterloh failed or refused to accept the trust, the court should appoint a substitute trustee. The children's prayer was that the appellant take nothing, and that the Clerk of the Court be directed to pay to plaintiff a sum sufficient to purchase an annuity for LaFayette McClintock Hunter, Jr., and that the balance be paid to Osterloh, trustee, or some other trustee, in accordance with the terms of the trust created by the letter of the insured, and that the children be allowed a reasonable attorney's fee for their guardian ad litem.

Appellant then filed an amended answer, in which she claimed that, under the disability provisions of the policy, the insured at the time of his death was entitled to the return of $116.75, a premium which he had paid on November 18, 1934. She amended her prayer and asked for a dismissal of the plaintiff's bill or for judgment for $5,116.75 plus twelve per cent penalty, plus an attorney's fee and interest.

On June 23, 1938, the District Court, upon the pleadings, found that it had jurisdiction; that $5,000 had been deposited in the Registry of the Court by the plaintiff; that the attorneys for the plaintiff should have an allowance for their services, and that the plaintiff should be discharged upon its interplea and deposit of $5,000, without prejudice to any right or remedy of the defendants, or any of them, against the plaintiff for any further sum it might owe; and that Osterloh, trustee, and the children should proceed to establish their rights, if any. The case was then tried upon its merits, and resulted in a decree sustaining the bill of interpleader; directing the Clerk to purchase an annuity of $5,000 for LaFayette McClintock Hunter, Jr., in accordance with the wishes of the insured as expressed in his letter of August 28, 1935; providing for the payment of a fee to the children's guardian ad litem; and requiring that the residue of the fund should be retained by the Clerk until the further order of the court. The appellant appealed from this decree, but her appeal was dismissed for want of jurisdiction, since the District Court had only partially disposed of the issues. Hunter v. Federal Life Ins. Co., 8 Cir., 103 F.2d 192. Upon remand of the case, it was resubmitted and reargued. In July, 1939, findings of fact, conclusions of law, and a final decree were entered. The decree was in favor of the appellant, but it overruled her motion to dismiss, and allowed counsel for plaintiff and the guardian ad litem fees for services, to be paid from the fund.

The appellant's first contention is that the court below was without jurisdiction, because diversity of citizenship did not exist, the claimants all being citizens of Arkansas, and the plaintiff being a nominal party.

While the question of federal jurisdiction under such circumstances as here exist will not be finally put to rest until decided by the Supreme Court of the United States (see Treinies v. Sunshine Mining Co., 308 U.S. 66, 73, 60 S.Ct. 44, 84 L.Ed. ___), we think that the right of a stakeholder to be relieved of vexation, the danger of multiple liability, and the responsibility of undertaking to decide, at his peril, which of two or more adverse claimants is entitled to money or property in his hands, has the effect of making him a real party in interest. In this case the plaintiff's right to maintain this suit was controverted, and the appellant sought to subject the plaintiff to penalties and attorney's fees under the statutes of Arkansas. There was nothing unreal about the plaintiff's controversy with the appellant with respect to its right to resort to interpleader. We think that the requisite diversity of citizenship was present.³

The appellant also contends that the plaintiff's bill does not contain all of the essential elements of a strict bill of interpleader in that it does not aver that there are two or more claimants in existence capable of interpleading and claiming a right to the proceeds of the policy, and in that the bill does not contain an averment that the plaintiff claims no interest in the proceeds of the policy or stands perfectly indifferent between the adverse c...