Parks' Ex'rs v. Parks

• Decision Date: 25 November 1941
• Citation: 156 S.W.2d 480,288 Ky. 435
• Parties: PARKS' EX'RS et al. v. PARKS et al.
• Court: Kentucky Court of Appeals

156 S.W.2d 480

288 Ky. 435

PARKS' EX'RS et al. v. PARKS et al.

Court of Appeals of Kentucky

November 25, 1941

Appeal from Circuit Court, Boyle County; Kendrick S. Alcorn, Judge.

Proceedings between J. T. Parks' executors, and others, and Gertrude N. Parks, and others. From an unsatisfactory judgment, J. T Parks' executors, and others, appeal.

Affirmed.

E. C Newlin, C. C. Bagby, and Chenault Huguely, all of Danville for appellants.

Henry Jackson and Nelson D. Rodes, both of Danville, for appellees.

STANLEY Commissioner.

The question for decision is whether a person whose life is insured in favor of a named beneficiary, subject to revocation or change in accordance with the terms of the policy, may effectually direct by will that the proceeds be paid to his executors. The circuit court adjudged that he can not. This appeal is prosecuted by the executors and creditors against the decedent's widow and children. The insurance companies are also made parties appellee.

This is the third appeal from a judgment rendered in a suit to settle the estate of James T. Parks. He died insolvent in a large degree unless the proceeds of his life insurance all be subjected to the payment of his debts. See Parks' Executors v. Parks, 286 Ky. 233, 150 S.W.2d 687; Parks v. Parks' Executors, 288 Ky. 350, 156 S.W.2d 90. We held in the latter case that the decedent's creditors are entitled to recover the amount of premiums paid during the last five years on life insurance in favor of his wife and children.

When Parks died in July, 1938, he had in force life insurance aggregating $60,775, payable to his widow or children, or both, and $15,000 payable to his estate. His will executed in 1930, after directing the payment of his debts and funeral expenses, reads as follows:

"I have insurance on my life in the sum of $70,000. In all these policies I have the right to change the beneficiaries without the consent of the beneficiaries named therein. One of my policies for the sum of $3,000 in the Northwestern Mutual Life Insurance Company is for the benefit of my daughter, Nevelyn. I now confirm that provision and will and direct that the proceeds of that policy shall be the property of my said daughter, to be paid to her or her guardian, if she is a minor at the time of my death.

"As to all the residue of my life insurance, including that now in force or any that hereafter may be in force at the time of my death, I do now change the beneficiaries named therein, and do will that all of my said life insurance shall be payable to my estate and to my executors, and this shall include any accident insurance that might be payable in case of my accidental death; this disposition of and provision as to my life and accident insurance shall be as conclusive, effective and binding upon the company or companies with which I am insured as fully and as effectively as if I had, prior to my death, made and filed with each of them and they had accepted formal assignments or instruments changing the beneficiaries and carrying out the provisions of my will ans herein made, so that all of said life and accident insurance shall be paid to my estate and my executors at my death.

"All of my said life and accident insurance (except the $3,000 policy for Nevelyn) shall become and be treated as a part of my estate and shall be paid to my executors and shall be disposed of by them as hereinafter provided, as follows."

Some of the policies provided that the insured could designate a new beneficiary "by filing written notice thereof at the Home Office and such change shall take place upon such filing and not before." Other policies stipulated: "No such designation, revocation, change or direction shall be effective unless duly made in writing and filed at the Home office of the Company (accompanied by this Policy for suitable endorsement) prior to or at the time this Policy shall become payable." One policy provided: "Every change of beneficiary must be made by written direction of the insured and by irrevocably designated beneficiary, and filed with the Company at its Head Office, accompanied by this policy, and the Company shall be charged with notice of such change only when endorsed on this policy by the Company."

The insurance companies, by answers, gave the history of each policy and the amount due thereon. They stated in effect that they held the proceeds subject to the orders of the court.

The appellants' pleadings raised issues of law in respect to several contentions, all of which were held inapplicable by the circuit court. Their argument here that the insured could by will effectually exercise his reserved right to change the beneficiary and dispose of the proceeds of the policies notwithstanding the conditions of the policies, may be thus closely abridged: A policy of life insurance is a chose in action which is property that may be disposed of by will; the designation of a specific beneficiary is only an instruction to the insurer of the insured's then desire as to its payment, and the method prescribed for changing the beneficiary is but a form agreed upon for the benefit and protection of the insurance company which can be waived by it. The named beneficiary has only an expectancy, assimilated closely to the expectation of a legatee, and he has no vested right in the insurance; the insured owes him no duty, and his retained control over the disposition of the proceeds is complete. The provision as to the method to be used adds nothing to the expectancy. The beneficiary named in the policy cannot take advantage of its terms which were never intended by either the insurer or the insured to create any right in the person designated to receive the proceeds. A substantial compliance with the formalities prescribed for changing the beneficiary is sufficient if the company's interests are protected.

In the instant case (a) the intention of the insured to have the change made and to dispose of the proceeds in the manner directed in his will is manifested by his having done so and having preserved the instrument as written for eight years until his death; (b) the insurance companies are protected; and (c) as a matter of law and of fact they have waived their right to insist upon a compliance with the terms of the contracts in this respect by having failed to assert the same. It is further contended that if the proceeds are payable to the named beneficiaries the sum is impressed with a trust for the benefit of the creditors and otherwise in accordance with the will.

Appellants' thesis is in the main supported by the authorities. But not all is applicable. The argument loses its plausibility and the conclusion its force in the consideration of the particular facts to which the propositions of law have been applied and of the particular facts of this case.

It is agreed that as the privilege to revoke or change the beneficiaries originally or subsequently named was reserved in all these policies, they had no vested right and the insured owed them no obligation as a matter of law not to exercise his reserved power and privilege. Hoskins v. Hoskins, 231 Ky. 5, 20 S.W.2d 1029; United States Trust Company v. Winchester, 277 Ky. 434, 126 S.W.2d 814. However, calling the right of a beneficiary as only an expectancy is not altogether accurate. Technically, it may be regarded as something more. It is a right subject to be defeated by the exercise of the reserved power or the lapsing of the policy. Couch, Cyc. of Ins. Law, § 308; 29 Am.Jur., Insurance, §§ 1276, 1315. As stated in Martinelli v. Cometti, 133 Misc. 810, 234 N.Y.S. 389, 391: "There is no question that an existing beneficiary in the policy of insurance is protected until the conditions imposed by the contract are complied with."

It is agreed that the prescribed mode for making the change is a matter of contract between the insured and the insurer, is for its own convenience and protection, and constitutes an exclusive method. Provident Savings Life Assurance Society v. Dees, 120 Ky. 285, 86 S.W. 522; Metropolitan Life Insurance Company v. Brown's Adm'r, 222 Ky. 211, 300 S.W. 599; Couch, Cyc. of Ins. Law, Section 815a; 14 R.C.L. 1390. Where no steps are taken to comply with the method the mere expressed purpose to do so is but an unexecuted intention and accomplishes nothing. Spurlock v. Spurlock, 271 Ky. 70, 111 S.W.2d 443. Furthermore, it is agreed that in this jurisdiction a substantial compliance with the formalities or terms of the provisions is sufficient. The rigor of the rule requiring observance of the particular method is relaxed if the insured did about all he could do under the circumstances and that which remained to be done was but a ministerial act on the part of the company. In such a case equity will treat as done that which ought to be done and will regard a change in the beneficiary as having been effected. Twyman v. Twyman, 201 Ky. 102, 255 S.W. 1031; Hoskins v. Hoskins, supra; Farley v. First National Bank, 250 Ky. 150, 61 S.W.2d 1059; Inter-Southern Life Ins. Company v. Cochran, 259 Ky. 677, 83 S.W.2d 11; Pikeville Nat. Bank & Trust Company v. Shirley, 281 Ky. 158, 135 S.W.2d 431. This is in accord with the general rule. Annotations, 36 A.L.R. 771; 78 A.L.R. 970.

But the proposition that the policy of insurance is a chose in action must be qualified in considering it as the subject of testamentary disposition. It has attributes different from other forms of property. Farley v. First Nat. Bank, 250 Ky. 150, 61 S.W.2d 1059. If the proposition be confined to a policy payable to the insured's estate or his personal representative, it may well be designated as such an item of property for it is part of his estate and, therefore subject to testamentary disposition. Watson...