Phelps v. Life Benefit, Inc.

• Decision Date: 04 May 1940
• Docket Number: 8326.
• Citation: 291 N.W. 919,67 S.D. 276
• Parties: PHELPS v. LIFE BENEFIT, Inc., et al.
• Court: South Dakota Supreme Court

291 N.W. 919

67 S.D. 276

PHELPS v. LIFE BENEFIT, Inc., et al.

No. 8326.

Supreme Court of South Dakota

May 4, 1940

Rehearing Denied June 20, 1940.

Appeal from Circuit Court, Beadle County; Boyd M. Benson, Judge.

Action by Robert B. Phelps, individually and as administrator of the estate of Roy B. Phelps, against Life Benefit, Incorporated and another, on a benefit certificate. From an adverse judgment, the named defendant appeals.

Reversed.

Max Royhl, of Huron, for appellant.

George E. Longstaff, of Huron, for respondent.

RUDOLPH Judge.

Defendant is a mutual assessment life insurance company organized under the provisions of Article 4, Chapter 4, Part 19, Title 6, Rev.Code 1919, which is now SDC 31.19. As a part of the law under which defendant was organized, Section 9358, R.C. 1919 (SDC 31.1906), provides: "No corporation or association organized or operating under this article shall issue any certificate of membership or policy * * * unless the beneficiary under such certificate shall be husband, wife relative, legal representative, heir or legatee of such insured member, * * * and any certificate issued * * * in violation of this section shall be void."

In 1934 defendant issued a certificate of membership or policy to one Roy B. Phelps wherein the beneficiary was described as "his fiancee, Alice Krueger, if living, otherwise to the insured's estate." Roy B. Phelps, the policy holder died and this action, based upon the certificate, is brought by his son, Robert B. Phelps, individually and as the administrator of the estate of Roy B. Phelps, to recover the face amount of the policy. Alice Krueger, the named beneficiary, is living and is conceded to be neither "husband, wife, relative, legal representative, heir or legatee" of Roy B. Phelps who died intestate. The case was tried to the court without a jury, and the court entered judgment in favor of the plaintiff, Robert B. Phelps, as administrator of the estate of Roy B. Phelps, against the defendant. The defendant has appealed.

We are convinced that a decision of the questions presented upon this appeal must depend upon the construction to be placed upon Section 9358, R.C.1919. If this statute should be construed as simply rendering ineligible a beneficiary not falling within the class or classes prescribed by the statute, then it might be that both reason and authority would sustain the decision of the trial court. However, if the statute means what it purports to say, that is, that a corporation or an association organized under its terms shall be without authority to issue a policy wherein the beneficiary falls outside of any of the designated classes and, should such policy be issued it shall be void, then we are convinced that the judgment entered by the trial court must be reversed.

We are confronted at the outset by the decision of this court in the case of Christenson v. El Riad Temple, 37 S.D. 68, 156 N.W. 581, 582, here which was a case in which the facts were similar to the facts now before us with the exception that, prior to the death of the policy holder, he had executed a will by the terms of which he had made the beneficiary named in the policy a legatee. In that case this court said: "Notwithstanding the original designation of Mary Madson as beneficiary may have been void, yet, when the insured thereafter by will designated her as a legatee and referred therein to her as the beneficiary, he then complied with the statute and gave validity to the certificate, with Mary Madson as the legal beneficiary."

It will be noted that in the above quotation the court made reference in one place to the "designation of Mary Madson as beneficiary" being void, and in another to the "validity [of] the certificate." If the court intended to construe the statute as simply making ineligible a beneficiary not falling within any of the designated classes, then we think the court was in error; on the other hand, if it was the intent to hold that the certificate itself was void when it was issued, and that the policy holder could by his own ex parte act give life or validity to this void certificate, such holding does not come within the facts now before us, because in this case the policy holder did nothing to change the status of the beneficiary from that existing at the...