Mutual Ben. Life Ins. Co. v. Swett

• Decision Date: 12 April 1915
• Docket Number: 2497.
• Citation: 222 F. 200
• Parties: MUTUAL BEN. LIFE INS. CO. v. SWETT et al.
• Court: U.S. Court of Appeals — Sixth Circuit

222 F. 200

MUTUAL BEN. LIFE INS. CO. v. SWETT et al.

No. 2497.

United States Court of Appeals, Sixth Circuit.

April 12, 1915

[Copyrighted Material Omitted]

Lewis Brucker, of Mansfield, Ohio, and E. L. Beach, of Saginaw Mich., for appellant. Jacob Kleinhans, of Grand Rapids Mich., and Wallace Foote, of Muskegon, Mich., for appellees.

Before WARRINGTON, Circuit Judge, and SATER and HOLLISTER, District judges.

SATER District Judge.

The question for decision is: Are the Hackley National Bank of Muskegon, Mich., and the executors of Charles H. Hackley, deceased, entitled to the proceeds of the $15,000 policy issued by the Mutual Benefit Life Insurance Company of Newark, N.J., to Edward R. Swett on September 4, 1900, and made payable 'to Myra M. Swett, his wife, if living, otherwise to the executors, administrators, or assigns of the said insured'; or do such proceeds belong to Mrs. Swett, who was named as his beneficiary and is now his widow? The case is here on her appeal from a decree against her.

The policy by its terms was assignable, but provided that no assignment of it should be effective until written notice of its was given to the company. One of the special privileges accorded by it was that the insured, at any time while the policy was in force and not assigned, might change the beneficiary by returning the policy to the company with his written request for its appropriate indorsement of such change on the policy. The policy by apt language defines the owner of it to be either the person who is made such by its terms or who becomes such by its assignment. At the time the policy was issued, the bank held Swett's notes for borrowed money to the amount of $16,305, one of which, for $10,305, was unsecured. On the $6,000 note, Hackley was an accommodation indorser. Both were soon to mature. As Swett was not able to pay them, he agreed with the bank to take out a policy to secure them. He also agreed in 1896 to insure his life to protect his wife on her loan to him of some $14,000 or $15,000, which he had a few months previous given to her. She claims that the policy, whose proceeds are in question, was, in pursuance of such promise, for her benefit. On September 18, two weeks after the policy issued, Swett and his wife, without protest on her part, executed and delivered to the bank a written assignment of the policy and of 'all sum or sums of money, interest, benefit and advantage whatsoever now due or hereafter to arise, or to be had or made by virtue hereof, to have and to hold unto the said Hackley National Bank to secure an indebtedness of $15,000. ' On September 28 the company filed a copy of the assignment in its office, and also indorsed on the original assignment the fact that a copy had been so filed, and that, if the assignment should be thereafter canceled, the bank should return the original to the company. The policy was delivered to the bank, and was never in the wife's possession, nor did she ever make any inquiry concerning it or her husband's bank indebtedness. On October 25 Swett by letter directed the cashier of the bank, in case of his death, to apply the proceeds of the policy, first, to the payment of the $10,000 note and interest; and, second, to the protection of Hackley on his indorsement of Swett's paper as he (Hackley) might direct. A copy of the letter was not transmitted to the company.

When the larger note became due, Swett paid $305 and renewed the note for the residue, which was the original principal sum. This note, and also that for $6,000, were periodically renewed, but neither of them was reduced or paid prior to his death, which occurred in October, 1906. Hackley died in February, 1905. The bank presented to his executors the $6,000 note as a claim; on June 3 following, it was paid. The bank subsequently executed and delivered an assignment of an undivided one-third interest in the policy to such executors. Shortly prior to his death Swett was adjudged a bankrupt. The trustee in bankruptcy, in consideration of $500, sold and transferred all of the right, title, and interest of Swett in and to the policy to the executors of Hackley. As the bank and Hackley's executors on the one hand, and the widow on the other, each claimed the entire proceeds of the policy ($17,448.41), the insurance company by its bill caused the respective claimants of the fund to interplead and deposited the value of the policy in court. Appropriate pleadings were interposed, and on the final hearing the result heretofore mentioned was obtained.

The contentions of the widow, in so far as they need be noticed, are that, upon the issuance of the policy, she became the sole owner, or, at least, acquired a vested interest in it, of which she could not be divested without her consent; that the assignment of the policy to the bank was, as to her, without consideration; that, if the assignment was valid, she occupied merely the position of a surety, in consequence of which the lien on the policy was released and discharged by the subsequent extensions, without her knowledge and consent, of the time of the payment of the notes held by the bank; that no change of beneficiary was possible after the policy had been assigned, and that, therefore, Swett's letter of September 25 to the bank was ineffective for any purpose; that the Hackley executors took nothing by the purchase of her husband's interest, if any, from the trustee in bankruptcy; and that in any event she is entitled to all of the funds in excess of $10,000, for the reason that the assignment of the policy was to secure only the $10,000 note due the bank. Her several claims are controverted by the bank and the Hackley executors.

The rule is well settled that, under an ordinary policy of life insurance in which there is no reservation of a right to cut off or modify the interest of the beneficiary, the policy and the money to become due under it belong, from the time it issued, to the person named in it as the beneficiary, and that the insured is without power, whether by deed assignment or will, or by surrender of the policy for a new one, or by any other act of his, to transfer to any other person the interest of the person so named as beneficiary. In such a policy the beneficiary acquires, the moment it is issued, a vested right which cannot be affected by any act of the insured subsequent to the execution of the policy, except it be a breach of condition. Washington Central Bank v. Hume, 128 U.S. 195, 206, 9 Sup.Ct. 41, 32 L.Ed. 370; May on Ins., Sec. 399L (4th Ed.); Cooley's Briefs on the Law of Insurance, 3755. If, however, by the terms of the policy itself there is reserved to the insured the right,...