Prudential Insurance Company v. Heyn

• Decision Date: 19 March 1956
• Docket Number: Civ. No. 1759-SD.
• Court: U.S. District Court — Southern District of California
• Parties: The PRUDENTIAL INSURANCE COMPANY OF AMERICA, a corporation, Plaintiff, v. Mary Theresa HEYN, a Minor, by Mary K. Heyn, her guardian, Michael Heyn, a Minor, by Mary K. Heyn, his guardian, Fayette National Bank and Trust Company, Trustee, Fayette National Bank and Trust Company, Guardian, Union Trust Company, Trustee, Fidelity Trust Company, Trustee, John Does I and II, Jane Does I and II, Hawk Company, Defendants.

139 F. Supp. 602

The PRUDENTIAL INSURANCE COMPANY OF AMERICA, a corporation, Plaintiff, v. Mary Theresa HEYN, a Minor, by Mary K. Heyn, her guardian, Michael Heyn, a Minor, by Mary K. Heyn, his guardian, Fayette National Bank and Trust Company, Trustee, Fayette National Bank and Trust Company, Guardian, Union Trust Company, Trustee, Fidelity Trust Company, Trustee, John Does I and II, Jane Does I and II, Hawk Company, Defendants.

Civ. No. 1759-SD.

United States District Court S. D. California, S. D.

March 19, 1956.

COPYRIGHT MATERIAL OMITTED

Gray, Cary, Ames & Frye, James W. Archer, Alfred S. Wilkins, San Diego, Cal., for plaintiff.

Swing, Scharnikow & Staniforth, Phil D. Swing, San Diego, Cal., for defendant Fayette Nat. Bank & Trust Co.

Stanford & McDonough, Huntington P. Bledsoe, San Diego, Cal., for claimants Heyn.

WEINBERGER, District Judge.

The question before the Court is whether the interest annually due under four insurance policies upon the life of the insured, Leo L. Heyn, shall be paid to Mary Theresa Heyn, and Michael Heyn, children of the insured, claimants herein, or to the Fayette National Bank and Trust Company, as Trustee (hereinafter called "Bank"), a claimant herein.

Briefs and written argument have been filed and counsel have stipulated that the matter may be submitted upon the pleadings, exhibits, and the following stipulated statement of facts, and the Court has so ordered.

Statement of Facts.

On November 18, 1940, Leo L. Heyn made a declaration of trust (Bank Exhibit 3) wherein he stated he desired to create a trust for his two children; that at the time of the declaration, he was depositing 500 shares of stock and that it was his intention to add to said trust from time to time in stocks, monies and real estate. It was further stated:

"A complete record of all the assets of the Trust, including Corpus, dividends and disbursements will be found in a Ledger kept by me, together with an account, in a safety box in the Second National Bank, Uniontown, Pa., designated Leo L. Heyn, Trustee, and said Ledger will be a complete history of all the assets of said Trust for my children."

The Declaration further stated that the trust should be irrevocable, and for the time being would be administered by himself; it was further stated:

"In case of my death before I can make a proper assignment for a successor Trustee, said Trust shall be offered to the Union Trust Co. of Pittsburgh, Pa. and in case it is not accepted, the Fidelity Trust Co. of Pittsburgh, Pa."

The Declaration further provided that the income should be invested for his children, and should be divided equally between them when Michael should reach the age of thirty-five years, or if Michael should die, then when Mary Theresa should reach the age of thirty-five years.

On May 4, 1945, Mr. Heyn executed another document in the nature of a Declaration of Trust, wherein he mentioned that certain stocks and dividends had been set aside for his children and listed in a special ledger for that purpose; that the stocks would be sold and exchanged by him as trustee as circumstances demanded, and for that purpose would be held in his name; that the gifts were irrevocable and proper returns had been made and would continue to be made to the Government.

In 1947 four insurance policies of $10,000 each were issued by the Prudential Insurance Company of America upon the life of Leo L. Heyn. On the face of each, the date of October 27th is shown as the date of issue. Mary T. Heyn, one of the minor claimants and daughter of the insured, is the beneficiary on two of the policies, and Michael Heyn, another minor claimant and son of the insured, is the beneficiary on two of the policies. These policies are in evidence.

From correspondence in evidence from the files of the Prudential Insurance Company, there appear statements of Company agents that originally Mr. Heyn's two minor children signed the applications for the insurance (Ex. Heyn "A"); the manager of the Denver Office, upon learning of this, talked with Mr. Heyn, and as a result, new applications were prepared and signed October 27, 1947, wherein Mr. Heyn signed the applications for the policies as "Leo L. Heyn, Trustee for Mary Theresa Heyn" and "Leo L. Heyn, Trustee for Michael H. Heyn." (Ex. Heyn "A") According to further correspondence in the Company files, the declaration of trust executed by Mr. Heyn, November 18, 1940 (Exhibit 3) was then submitted to the Company attorneys, who ruled that under the laws by which the declaration was governed, trust funds could not be used to pay the premiums on said policies. (Ex. Heyn "C").

It also appears that on October 27, 1947, Leo Heyn executed the assignments of the policies to "Leo L. Heyn, Trustee", though the assignments were not acknowledged before a notary until November 25, 1947, and were not filed in the Home Office of the Company until January 6, 1948. The assignments were made on printed forms prepared by the Company. (Bank Ex. 2).

Following the words of assignment, there appears the following:

"* * * and all rights, benefits, and advantages to be had or derived therefrom including, with limiting the generality of the foregoing, the right at any time to exercise the loan provisions thereof or to surrender the same for its cash value even though the assignment may be for collateral security only, all subject to the conditions of said Policy, and to any existing indebtedness to the Prudential Insurance Company on account of or secured by said Policy."

It next appears from the correspondence in evidence that after the Company attorneys decided the trust funds could not be used to pay for the policies, they suggested to Mr. Heyn that he execute a new declaration of trust which would permit such investment.

Under date of November 25, there appears from further correspondence in evidence a statement of a Company agent that Mr. Heyn declined to make any changes in the declaration of trust, and that "new applications on the individual form naming the children as beneficiaries" were signed and forwarded to the Home Office of the Company for approval. (Heyn Ex. "D").

These applications were evidently the ones upon which the policies were issued, and are attached to the policies, although one part of the application bears the date of October 27, 1947, and another part bears the date of October 17, 1947, the October 17 date evidently being the date upon which the insured was examined by a physician.

In the applications attached to the policies, it is specified that the beneficiary is to receive the proceeds under Option 2 of the policy which provides that the proceeds shall be paid to the beneficiary beginning immediately upon the death of the insured.

Under date of July 15, 1949, there appears Company correspondence to the effect that a Company agent in San Diego, California, forwarded a request that beneficiary settlement agreements should be prepared wherein the proceeds of the policies were to be held until the beneficiary should reach the age of 40 years, at which time the beneficiary could elect under certain options, and also, after which time, the beneficiary might withdraw certain sums at certain intervals. The question is also asked by the San Diego agent: "As we understand it, these policies were issued on the life of Leo L. Heyn and then assigned to him as Trustee. If so, does he sign the forms as Trustee or as both Insured and Trustee?" Other correspondence, evidently from the home office, dated 7/21/49 reads in part: "Since this is an unusual setup, we believe Mr. Heyn should sign both as Insured and as Trustee." (Heyn Ex. "E").

It then appears that a request to change beneficiary provision in the form shown on the policies was filed with the Company, dated August 8, 1949, and that such request was signed by Leo Heyn as insured, and by Leo Heyn as Trustee. (Heyn Ex. "F").

By this change in the beneficiary provision, it was provided that the Company should hold the proceeds of the policies under Option 3 of the policy and pay the interest to the beneficiary annually, until the beneficiary should attain the age of 40 years, after which such beneficiary might make withdrawals at certain intervals.

Under the heading "Provisions as to Modes of Settlement" on the face of the policy, preceding the enumeration of a number of options, of which "Option 2" and "Option 3" hereinbefore mentioned are two, there appears:

"None of the following Options shall apply or be available to an assignee, corporation, partnership, association, institution, trustee, executor, administrator * * *."

On October 9, 1951, Leo L. Heyn made a will. (A copy is in evidence as Exhibit 4.) (A codicil was executed on September 24, 1952, but its provisions have no bearing on the issues here before the Court.) The said will was probated as the last will and testament of Leo L. Heyn; a trust of the residue of his estate was created thereby for the benefit of his two children, and Fayette National Bank & Trust Company was named trustee, in the following language:

"All the rest, residue, and remainder of my estate, of whatever kind or character, and wheresoever situated, of which I die possessed, or to which I may in any manner be entitled, or over which I may, at the time of my death have the power of appointment, I hereby devise, and bequeath to Fayette National Bank & Trust Company, of Uniontown, Pennsylvania, and its successors by merger, consolidation, or otherwise, in trust for my daughter, Mary Theresa, and my son, Michael, to hold, manage, and distribute as hereinafter provided."

It was also provided that certain payments should be made to each child from the trust estate created by the will when each child should reach the age of forty years.

The Declaration of Trust made by Mr. Heyn on November 18, 1940 was mentioned in the will, with the statement:

"* * * I, therefore, assign, transfer, and set over to said Fayette National Bank and Trust

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