Prudential Ins. Co. of America v. Rader

• Decision Date: 23 May 1951
• Docket Number: Civ. No. 2897.
• Citation: 98 F. Supp. 44
• Parties: PRUDENTIAL INS. CO. OF AMERICA v. RADER et al. (Rader, third party defendant).
• Court: U.S. District Court — District of Minnesota

98 F. Supp. 44

PRUDENTIAL INS. CO. OF AMERICA v. RADER et al. (Rader, third party defendant).

Civ. No. 2897.

United States District Court D. Minnesota, Fourth Division.

May 23, 1951.

COPYRIGHT MATERIAL OMITTED

David Shearer and Shearer, Byard, Trogner & Peters, all of Minneapolis, Minn., for plaintiff.

Robert M. Bowen and Bowen & Bowen, all of Minneapolis, Minn., for defendants and cross-complainants Sophia V. Rader, John Rader, Anna Belle Engbring and Dorothy Rader Welte.

Reese J. McGee and W. J. Giberson, of Saint Paul, Minn., for defendant and cross-complainant, Nellie P. Rader.

NORDBYE, Chief Judge.

On or about February 18, 1929, one Wilber C. Rader, hereinafter called Wilber, purchased a $10,000 life insurance policy from the Prudential Insurance Company of America. He named his wife, Sophia V. Rader, hereinafter called Sophia, as the the primary beneficiary of the policy. She at all times herein lived in Minnesota. In 1937 Wilber and Sophia separated and thereafter lived apart. In 1941 they entered into a property settlement agreement because of the divorce action commenced by Wilber and pending in Florida. In that property settlement agreement Wilber contracted, among other things, as follows: "In further consideration of the covenants herein contained, it is agreed that the said W. C. Rader will provide, in accordance with law, a beneficiary provision in his insurance policy taken out with Prudential Insurance Company of America, whereby the said three (3) children, namely John Rader, Anna Belle Rader, and Dorothy Rader, shall upon the death of W. C. Rader, receive the proceeds of the insurance policy amounting to Nine Thousand ($9,000.00) Dollars, in equal shares, with the provision that the same will not be paid to said children until they respectively reach thirty (30) years of age, with the exception that certain amounts may be withdrawn for their benefit each year provided such child or children are enrolled as students in a college or University, which amount shall be paid in accordance with the beneficiary provision in said policy, and amounting to no more than Three Hundred and Forty-five ($345.00) per year for each child, and in the event that any of said children die while any amount of said balance is due and payable to such child, then this amount shall be payable forthwith in equal shares to such of said children as may be living, if any, otherwise to the executors or administrators of the last to die of said children, and it is specifically arranged in said policy that the beneficiary cannot be changed."

The divorce was granted to Wilber C. Rader by the Florida court in a default proceeding on or about May 10, 1941. The property settlement was not incorporated in the divorce decree or referred to therein. After the divorce was granted, Wilber changed the beneficiary of his insurance policy to his children but reserved the right to borrow upon the policy. Consequently, the insurance company refused to endorse the beneficiary change on the policy as an irrevocable one.

In 1947 Wilber decided to change the beneficiary of the policy from his children to Nellie Rader, one of the defendants herein, whom he had married subsequent to his divorce from Sophia, and hereinafter called Nellie. When Prudential refused to make the endorsement upon the policy, Wilber commenced a declaratory judgment action in Florida. Originally he named only Prudential as defendant. Then by amendment he named Sophia, John, Anna Belle, and Dorothy as defendants also. Prudential was served in Florida, but Sophia, John, Anna Belle, and Dorothy were non-residents of Florida and were served by publication and by mailing summonses to them. They entered no personal appearance and defaulted. A decree "pro confesso" was entered against them. The Florida court ordered the Prudential to endorse upon the policy the change of beneficiary to Nellie, and the company obeyed the order. Shortly thereafter Sophia commenced an action in Minnesota against Wilber to require him to comply with the terms of the contract between them, with respect to the insurance policy and the beneficiaries therein named. Personal service was obtained upon him in Minnesota. But he died before that action could be tried. When both Nellie and Wilber's children (John, Anna Belle, and Dorothy) claimed the proceeds of the instant insurance policy, Prudential filed this complaint in interpleader in this Court to determine which parties are entitled to the proceeds.

Nellie Rader contends that the change of beneficiary by Wilber to her was proper, that the property settlement agreement between Sophia and Wilber was void and that the Florida court's declaratory decree was binding upon the parties to this proceeding and is res adjudicata of the issues presented here. These contentions by Nellie raise the principal issues of this case.

Persuasive authorities hold that the promisee of a valid contract by which the insured promises to make the promisee an irrevocable beneficiary of an insurance policy carried by the insured upon his own life can recover the proceeds of the policy after the insured's death as against a person who was expressly and gratuitously named the beneficiary of the policy subsequent to the making of the contract with the promisee. Thomson v. Thomson, 8 Cir., 1946, 156 F.2d 581, certiorari denied 329 U.S. 793, 67 S.Ct. 370, 91 L.Ed. 679, rehearing denied 329 U.S. 833, 67 S.Ct. 501, 91 L.Ed. 706; Metropolitan Life Ins. Co. v. Richardson, D.C.La.1939, 27 F.Supp. 791; Kansas City Life Ins. Co. v. Jones, D.C.Cal., 1937, 21 F.Supp. 159; Stockwell v. Reid's Estate, 170 Mich. 476, 136 N.W. 476. Counsel for Nellie cite no sound authority to the contrary, and urge instead that the settlement contract here is void. The general rule noted applies in interpleader cases like the instant one, for by bringing the interpleader action and depositing the insurance money with the court, the insurance company waives its right to insist upon compliance with the terms of the policy, including the company's right to pay the money to the beneficiary named in the policy. Thomson v. Thomson, supra; Kansas City Life Ins. Co. v. Jones, supra; Metropolitan Life Ins. Co. v. Richardson, supra.

Consequently, John, Anna Belle, and Dorothy may recover the proceeds here up to $9,000 as against Nellie Rader if the property settlement contract between Sophia and Wilber is valid and the Florida court's declaratory order is not adversely res adjudicata of the issues herein. For the provision of the settlement contract governing disposition of the insurance policy, and which is quoted above, obviously was made with the intent to benefit the children. Consequently, they were third party donee beneficiaries of that provision of the contract and can enforce their rights as such. La Mourea v. Rhude, 1938, 209 Minn. 53, 295 N.W. 304. Sophia may also maintain an action as a party to the contract in order to obtain the insurance funds for the third party beneficiaries of her contract with Wilber. But she is entitled to none of the proceeds under the terms of that contract.

Nellie urges that the property settlement contract between Wilber and Sophia is void en toto upon the theory that it was a contract concerning realty made during coverture. Minnesota law forbids such transfers, and contracts including such provisions are void en toto if the contract's valid provisions are not separable from the invalid ones. Simmer v. Simmer, 195 Minn. 1, 261 N.W. 481. But here the stipulation regarding the transfer of the homestead is clearly separable from the remaining covenants. And Minnesota does permit a husband and wife to execute a contract with reference to property settlements which are connected with a divorce proceeding pending between them. Nelson v. Vassenden, 1911, 115 Minn. 1, 131 N.W. 794, 35 L.R.A.,N.S., 1167. Florida also appears to follow the same rule, Gallemore v. Gallemore, 94 Fla. 516, 114 So. 371, 372, which is supported by many courts. 17 Am. Jurisprudence, Div. and Sep., § 499. The property settlement contract was signed by Sophia in Minnesota.

In the instant case, the contract seems clearly to have been executed with reference to the divorce proceedings and to have been intended to take effect after the obtaining of the decree which might be entered. The fact that the contract was not incorporated into the Florida decree does not change this intent with which the contract was made. Nor does it deprive Sophia and the children of the rights created by the contract. It merely requires them to rely upon the contract rather than the court order.

That the settlement contract was entered into in contemplation of the divorce decree which might be entered by the Florida court is apparent from the contract's preamble, which states the pendency of the divorce decree as the main reason why the property settlement contract was being executed. Moreover, correspondence between counsel for Wilber and Sophia and between Wilber and Sophia establishes that the contract was related to the divorce proceedings. The question of incorporating the contract in the decree was discussed, and all obviously assumed that the settlement would not take effect before the divorce was effective. In fact, the paragraph of the contract which relates to transfer of the homestead to Sophia from Wilber provides expressly that the transfer would take place within five days after the divorce was granted. Other paragraphs of the contract also were to be performed in the future, for by the nature of their subject matter and provisions, they did not constitute immediate transfer of property to Sophia.

Nellie points to the paragraph of the contract by which Sophia releases all her interests, rights and claims in Wilber's property. But that paragraph does not declare specifically the date on which that release would take effect. It merely states that she released her interest by the agreement. And part of the...