Hutsell v. Citizens' Nat. Bank

• Decision Date: 18 November 1933
• Citation: 64 S.W.2d 188,166 Tenn. 598
• Parties: HUTSELL v. CITIZENS' NAT. BANK et al.
• Court: Tennessee Supreme Court

64 S.W.2d 188

166 Tenn. 598

HUTSELL v. CITIZENS' NAT. BANK et al.

Supreme Court of Tennessee.

November 18, 1933

Appeal from Chancery Court, McMinn County; T. L. Stewart Chancellor.

Suit by E. O. Hutsell against the Citizens' National Bank and others. To review an adverse decree of the Court of Appeals complainant brings certiorari.

Decree reversed, and decree entered for complainant in accordance with opinion.

MCKINNEY Justice.

This suit involves the right to the proceeds of a $10,000 policy issued in 1927 by the Volunteer Life Insurance Company on the life of Lillian Earnestine Hutsell, daughter of complainant. The policy provides that, upon the death of insured, if the policy is in force, subject to the conditions and provisions contained therein, the company will pay said above sum to "Ernest Olen Hutsell, Father, if living, if not, to the Executors, Administrators, or Assigns of the insured." It further provides:

"This policy is issued with the express understanding that the insured may, without notice to or consent of the beneficiary, exercise every right, enjoy every privilege, and receive every benefit provided for by its terms, as fully as if no beneficiary were named herein; provided the right to change the beneficiary shall not have been specifically revoked in writing by the insured and acknowledged by endorsement hereon by the Company. ***

No assignment of this policy shall be binding on the Company unless and until such assignment shall be in writing and verified under oath and the original, or a verified copy thereof, filed with the Company at its Home Office and its receipt duly acknowledged. The claim of any assignee shall be subject to proof of insurable interest and to any indebtedness to the Company secured by this policy, whether incurred before or after receipt of notice of assignment. The Company will not assume responsibility for the validity of any assignment."

The policy provided double indemnity if insured met her death by accidental means.

The insured, who was twenty-eight years of age, committed suicide by shooting herself with a pistol about noon on October 16, 1929. There are circumstances from which it may be inferred that she endeavored to make it appear that she was accidentally shot, thus increasing the liability of the company to $20,000. The above policy was the only one she had on her life. Insured had been employed by the defendant bank for two years as bookkeeper, and by manipulating the books had succeeded in defrauding the bank of $24,000. Dodson, the cashier, discovered irregularities in her books on the night of October 15. The next morning President Lockmiller accosted her about these irregularities, and she admitted a shortage of $1,000. The cashier, Dodson, also had a conference with her, and she stated to him that her shortage was $2,000. Being advised that she could no longer work for the bank, she stated to Lockmiller that she would kill herself. Insured left the bank, purchased pistol cartridges, went to her home, and shot herself.

Before doing so, however, she wrote and mailed a letter to the cashier of defendant bank, which was received the next day after her death, and which is as follows:

"Mr. Dodson: The amount I owe the bank is exactly $24,000. I had Chilhowee Mills sheet out too. I spent most of the money on the Hamptons and my family.

My insurance will pay the $20,000, and the other $4,000 can be gotten from selling some of this junk I have, or from the Bus Co. I wish you would explain affairs to dad and take over the things and straighten them up yourself. This Harmon house that I live in is supposed to have a sleeping porch, stucco up around the front porch, and this porch extended out to drive the car under. I have paid him all but $400 for this by entering deposits on his sheet, also the work he is doing on the farm is paid for.

I wish you could keep all that I have done from the public, if possible.

Also phone Mr. Gates with the Southern Auto Supply Co. and cancel my order with him.

I have some notes and papers in the black fold in my drawer at my desk at the bank, also my insurance policy is in there.

I don't owe any accounts out in town at all. My box is 55 and you will find a marriage certificate in there. Euel Brown and I have been married in name only for some time. He knows nothing about this. He has promised that if I die before he that he will not say anything about our marriage--so please destroy the certificate as it would only disgrace him.

I am sorry that I did all this because you and Mr. Lockmiller trusted me.

One more thing--that note in the bank for $675 with grandfather Hutsell's name on it is a forgery. He knows nothing about it.

There is just one thing I want to beg you to do, please don't tell anybody. I guess they will find it out tho'.

"Lillian H."

The chancellor and the Court of Appeals erroneously held that this letter constituted an equitable assignment of the policy to the bank. At common law an assignment of a chose in action is illegal. Such assignments, however, were given effect by courts of chancery, and hence were denominated "Equitable Assignments."

In 2 Ruling Case Law, p. 614, it is said:

"Since equity disregards mere form, no particular words or particular form of instrument is necessary to effect an equitable assignment. Any language, however informal, if it shows the intention of the owner of the chose in action to transfer it so that it will be the property of the transferee, will amount to an equitable assignment, if sustained by a sufficient consideration, which should be a valuable and not merely a good consideration."

As to the nature of such an assignment, we quote from 5 Corpus Juris, p. 840, as follows: "An assignment is a contract, and is subject to the same requisites as to validity as other contracts, such as proper parties, mutual assent, consideration, and legal subject matter."

In Mutual Benefit Life Ins. Co. v. Swett, 222 F. 200, 205, Ann. Cas. 1917B, 301, the Circuit Court of Appeals said:

"Whether, on account of Swett's indebtedness to the bank exceeding the amount of the policy, the assignment was in effect a change of beneficiary, is not in our judgment important to determine. However, the assignment of a policy and a change of beneficiary are not the same, but different, things. An assignment is the transfer by one of his right or interest in property to another. It rests upon contract, and, generally speaking, the delivery of the thing assigned is necessary to its validity. The power to change the beneficiary is the power to appoint. The power of appointment must be exercised in the manner agreed upon in the contract of insurance. Niblack, Benefit Societies & Acc. Ins. (2d Ed.) § 173. Swett made an assignment of the policy. He did not exercise or attempt to exercise the power to appoint another beneficiary. His wife still remained such. She takes nothing as beneficiary, but that is because the debts, which the policy was assigned to secure, consumed the entire proceeds of the policy."

In Cronbach v. Aetna Life Ins. Co., 153 Tenn. 362, 284 S.W. 72, the court was dealing with the mode of changing beneficiaries, and the question of assignment was not involved; hence that case is not an authority for complainant.

It is generally held that a stipulation in a policy against its assignment without the consent of the insurer, or without filing a written copy with the company, is for the benefit of the latter and is good as between the parties. 14 Ruling Case Law, pp. 998, 1001; 37 Corpus Juris, p. 431.

The rule also prevails in most jurisdictions that the acceptance of an assignment of a policy of life insurance is necessary, but may be implied from the failure of the assignee to dissent. 14 Ruling Case Law, p. 1002; 37 Corpus Juris p. 430.

The death of either party before acceptance is communicated causes an offer to lapse. 13 Corpus Juris, p. 298; Foust v. Board of Publication, 8 Lea (76 Tenn.) 552.

So assuming that the letter copied above was intended as an assignment of the policy to the bank, the insured having died before her offer was accepted, the offer lapsed, the assignment was incomplete, and the beneficiary named in the policy would be entitled to collect the insurance.

It may well be doubted whether the language employed in the letter constituted an assignment. There was no express assignment, and the insured may have acted upon a belief that her creditors were entitled to this insurance as a matter of law, or that her father would pay same.

In Bennett v. Rosborough, 155 Ga. 265, 116 S.E. 788, 792, 26 A. L. R. 1397, 1406, it was held that a letter written by insured to the beneficiary asking him to pay certain creditors, retain a designated amount, and pay the balance of the proceeds to another creditor, is not an assignment of the policy. The court said: "The letter did not designate any particular policies, or purport to assign the policies, but was a statement by the insured having reference to a disposition of money that would be collectible on policies held by the insured after his death."

In Kreh v. Moses, 22 Ont. 307, it was held that a written assignment to take effect after the death of the assignor does not constitute a valid assignment of the policy.

The Court of Appeals based its decisions upon Northwestern Mut. L. Ins. Co. v. Joseph (Ky.) 103 S.W. 317, 12 L. R A. (N. S.) 439. In that case it appears that under a provision of the policy the insured on a specified date had the option of a settlement in either one of three ways. On the designated date he appeared before the general agent of the company and exercised his choice in writing, acknowledged same, and delivered it with the policy to the agent who...