Lock v. Lock

• Decision Date: 07 August 1968
• Docket Number: No. 1,CA-CIV,1
• Citation: 444 P.2d 163,8 Ariz.App. 138
• Parties: Anthony Charles LOCK, Stephen Lock and Patricia Ann Lock, Minors, by Hazel Margaret Lock, their Guardian, and Hazel Margaret Lock, a divorced woman, Individually, Appellants, v. Helen L. LOCK, a widow, Individually, and as Administratrix of the Estate of Charles H. Lock, also known as C. H. Lock, Deceased, and Bankers Life Company, a corporation, Appellees. 585.
• Court: Arizona Court of Appeals

Page 163

444 P.2d 163

8 Ariz.App. 138

Anthony Charles LOCK, Stephen Lock and Patricia Ann Lock, Minors, by Hazel Margaret Lock, their Guardian, and Hazel Margaret Lock, a divorced woman, Individually, Appellants, v. Helen L. LOCK, a widow, Individually, and as Administratrix of the Estate of Charles H. Lock, also known as C. H. Lock, Deceased, and Bankers Life Company, a corporation, Appellees.

No. 1 CA-CIV 585.

Court of Appeals of Arizona.

Aug. 7, 1968.

Rehearing Denied Sept. 16, 1968.

Review Denied Oct. 22, 1968.

James L. DeSouza, Phoenix, for appellants.

Kramer, Roche, Burch, Streich & Cracchiolo, by Earl E. Weeks, James K. LeValley, Phoenix, for appellee Helen L. Lock.

Fennemore, Craig, von Ammon, McClennen & Udall, by John J. O'Connor, III, Phoenix, for appellee Bankers Life Co.

STEVENS, Judge.

This case involves an appeal from a judgment of the trial court finding that the appellants had no valid claim upon the proceeds of an insurance policy insuring the life of Charles H. Lock, now deceased.

Appellant Hazel Margaret Lock was married to Charles H. Lock in 1943 at Bardsley, Lancashire, England. Sometime after their marriage they emigrated to Canada and from there to Arizona in 1954. They resided continuously in Arizona thereafter. When the parties arrived in Arizona they had no assets and all of their accumulations thereafter were acquired during their marriage and during their Arizona residence.

Charles H. and Hazel Margaret Lock were the parents of three children, the minor appellants in this action. Hazel Margaret Lock is the duly appointed guardian of these children.

Hazel Margaret Lock filed an action for divorce against Charles H. Lock in Maricopa County in May, 1961. While the action was pending, negotiations were carried on between the parties to the divorce action, acting by and through their respective attorneys. Hazel Margaret Lock was represented in the proceedings by an attorney who is now deceased. A written property settlement agreement negotiated by the attorneys was executed by Hazel Margaret Lock and Charles Henry Lock on 29 June 1961. This property settlement agreement was approved by the Superior Court and incorporated in and made a part of the decree of divorce which was entered on 11 July 1961. The property settlement agreement provided, in part, as follows:

'3. Husband agrees to maintain in full force and effect a policy of insurance on his life having a face value equal to the face values of policies now in force, and to create an irrevocable trust into which the proceeds of the insurance would be paid for the use and benefit of the three minor children during their minority, and the remaining principal to be equally divided among the three children upon the youngest child reaching majority.'

On 29 June 1961 and 11 July 1961, the dates of the property settlement agreement and divorce decree, Charles Henry Lock's life was insured by the appellee, Bankers Life Company Policy No. GL 239, a group term life insurance policy without surrender value, and on those dates the beneficiary of record was the estate of Charles H. Lock. The policy contained a provision giving Charles H. Lock the right to change the beneficiary by filing a written notice of change of beneficiary with the company at its home office. Policy No. GL 239 was issued during the marriage of Charles H. Lock and Hazel Margaret Lock and during their residence in Arizona. The premiums, up until the time of the divorce, were paid for by earnings of the husband during the marriage. On 9 April 1962, Charles H. Lock executed, and caused to be delivered to Bankers Life Company on 11 April 1962, a form of request for change of beneficiary changing the beneficiary of Policy No. GL 239 to Helen L. Lock, appellee, second wife of the insured, if living, otherwise to the estate of the insured.

At no time prior to his death did Charles Henry Lock inform Hazel Margaret Lock of the change of beneficiary and at no time prior to his death did Hazel Margaret Lock have any knowledge that the beneficiary of the policy had been changed or that she was not the named beneficiary of that policy.

On 29 June 1961 and 11 July 1961, Policy No. GL 239 was in the amount of $12,500. On 1 March 1962 the amount of that policy was increased to $17,500. The insurance provided by that policy was in full force and effect in the amount of $17,500 at the time of Charles Henry Lock's death. On 29 June 1961 and 11 July 1961, Charles Henry Lock's life was also insured by the defendant Bankers Life Company under policy No. 1948611 in the face amount of $20,000 with an additional insurance rider for $30,000 giving total coverage on that policy of $50,000. This policy was issued on 1 August 1960 with the estate of the insured named as beneficiary. The beneficiary under that policy was never changed and the policy lapsed without value on 1 May 1962. Therefore, it appears that the face value of the policies insuring the life of Charles Henry Lock in effect on the date of the property settlement agreement and the divorce and thus the amount of insurance which he agreed to maintain in full force and effect for the benefit of the appellant minors, pursuant to the property settlement agreement, was $62,500.

Following his divorce by Hazel Margaret Lock, Charles Henry Lock was married to Helen Sproule, now Helen Lock, an appellee in this action, at Las Vegas, Nevada, on 1 December 1961. Charles Henry Lock was an insurance agent engaged in selling the policies of appellee Bankers Life Company. On 1 August 1961, Charles Henry Lock took out a policy of insurance, Bankers Life Company Policy No. 1984156, in the amount of $50,000 upon his own life naming as beneficiary the executor or administrator of his estate. When he took out this policy, he told a representative of Bankers Life Company that he was taking out the policy for the purpose of complying with the divorce decree. That policy later lapsed without value.

Following the divorce between Hazel Margaret Lock and Charles Henry Lock, they had conversations during which, in response to her specific inquiry, he stated to her that he had fully complied with the provisions of the property settlement agreement. Hazel Margaret Lock never had any of the policies insuring the life of Charles Henry Lock in her possession.

Charles Henry Lock died intestate on 3 February 1963. The appellee Helen L. Lock was duly appointed, qualified and acted as administratrix of his estate. At the time of his death, policy No. GL 239 was still in full force and effect in the amount of $17,500. On 25 February 1963, Hazel Margaret Lock's attorney wrote a letter to Bankers Life Company, which was received by Bankers Life Company on 27 February 1963. This letter notified Bankers Life of the claim of Hazel Margaret Lock and the plaintiff minors to the proceeds of all policies upon the life of Charles Henry Lock. The letter made specific reference to the property settlement agreement and the divorce decree. On 5 April 1963, her attorney wrote another letter to Bankers Life Company setting forth a claim of community ownership of the policies.

Following the death of Charles Henry Lock, Bankers Life Company made payment of proceeds of Policy No. GL 239 to Hazel Margaret Lock as follows: on or about 7 February 1963, the sum of $2,500; on or about 23 April 1963, the sum of $6,000; on or about 23 August 1963, the sum of $1,500. At the time of the judgment the company continued to hold the sum of $7,500.

The appellants brought suit against the appellees claiming that the minor appellants had an absolute vested right in the proceeds of all insurance policies upon the life of Charles H. Lock at the time of his death. The case was tried to the court, sitting without a jury, under several theories of liability. The trial court rejected all of the theories set forth by the appellants and the appellants have appealed from the rulings of the trial judge setting forth several questions for review.

The first question presented is whether Charles H. Lock, when he agreed with Hazel Margaret Lock, by property settlement agreement later incorporated into the divorce decree, to maintain insurance on his life payable to a trust for the benefit of his children, did thereby create an absolute vested right in his children to the proceeds of all insurance upon the life of Charles H. Lock so as to preclude him from changing the beneficiary to his second wife, Helen L. Lock.

While a named beneficiary of a policy, which provides for a change thereof by the insured, secures only a contingent interest therein, a subsequent agreement of the insured in consideration of a settlement of property rights in contemplation of a divorce by the terms of which he contracts to make a party the sole irrevocable beneficiary of the policy, vests the party with an equitable interest therein which may not be defeated without that party's consent. Shoudy v. Shoudy, 55 Cal.App. 344, 203 P. 433 (1921); Mutual Life Insurance Company of New York v. Franck, 9 Cal.App.2d 528, 50 P.2d 480 (1935). It is upon this theory that the appellants' claim to the proceeds of the life insurance policy No. GL 239 is based. In other words, the appellants claim that when Charles H. Lock entered into the property settlement agreement with Hazel Margaret Lock, the children acquired a vested interest in all life insurance proceeds upon the life of the deceased. We approve the rule set forth in the above cited cases and our research has revealed that this rule is well established in many jurisdictions. However, the case with which we are presently concerned does not fall within the factual situations to which this rule has been applied. In all the cases which we have found to which this rule has been applied, the property settlement agreement or the divorce decree has been specific in designating a particular policy to which the agreement was meant to apply or there have been circumstances under which ...