Sears v. Austin

• Decision Date: 20 June 1961
• Docket Number: No. 17193.,17193.
• Citation: 292 F.2d 690
• Parties: Robert C. SEARS and LaVonne Stern, Appellants, v. Karen AUSTIN, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

292 F.2d 690 (1961)

Robert C. SEARS and LaVonne Stern, Appellants, v. Karen AUSTIN, Appellee.

No. 17193.

United States Court of Appeals Ninth Circuit.

June 20, 1961.

Jack K. Berman and Arthur H. Tibbits, San Francisco, Cal., for appellants.

David M. Glickman and Ben Barkan, San Francisco, Cal., for appellee.

Before BARNES, HAMLIN and MERRILL, Circuit Judges.

HAMLIN, Circuit Judge.

One Cecil Sears, now deceased, was an employee of the Internal Revenue Service of the United States. As a federal employee he was covered by a life insurance policy made available to him through the Federal Employees' Group Life Insurance Act, 5 U.S.C.A. § 2091 et seq. The question presented in this case is to whom shall the proceeds of this policy be paid.

Robert Sears and LaVonne Stern, appellants herein, are the children of the deceased, and they claim that they are entitled to the life insurance proceeds because they contend that no valid designation of beneficiary was made in accordance with the provisions of the policy.¹ Karen Austin, appellee herein, claims the proceeds by virtue of a holographic will, executed by the deceased on January 20, 1958, which reads in part as follows:

"In all due respect for my son and adopted daughter, Robert Cecil and LaVonne I must remember the time and care given to me by Karen when I was very ill and had no one to help me except her.

"For this I am requesting that all my personal belongings in my apartment — my banking account — my insurance policy with the Federal Government or any other asset be given to Mrs Karen Austin — I hereby give $1.00 to each and any other who may claim any right to my estate."

The proceeds of the policy have been deposited by the Metropolitan Life Insurance Company into the registry of the court, and the insurance company is no longer a party to the litigation.

The district court found that the proceeds of the policy should be paid to Karen Austin, and appellants have filed a timely appeal from that decision. Jurisdiction in the district court was based on 28 U.S.C.A. § 1332, and this court has jurisdiction of the appeal under the provisions of 28 U.S.C.A. § 1291.

The decedent retired on October 31, 1956, without having made a written designation of beneficiary as provided in the policy. As is usual with federal employees, he had not been furnished with a copy of the policy itself but had been furnished with a Federal Employees' Group Life Insurance Retired Employee's Certificate which consisted of one printed sheet. This certificate explains in general terms the rights and benefits to which the holder is entitled. Upon the reverse side of the certificate under the heading "Who Receives Your Insurance Benefits?" the following is printed:

"You do not need to name a beneficiary if you are satisfied to have your life insurance benefits paid in the order of precedence noted below. If you are survived by a designated beneficiary, the benefits will be paid to the beneficiary. If there is no designated beneficiary surviving, the benefits will be paid to your widow or widower under category (1); and if you have no survivor falling in category (1), the benefits will be paid to the survivors falling in category (2); and so on, as necessary, to the other categories.

(1) Your widow or widower.

(2) Your child or children in equal shares, with the share of any deceased child distributed among the descendants of that child.

(3) Your parents in equal shares or the entire amount to the surviving parent.

(4) The duly appointed executor or administrator of your estate.

(5) Your next of kin under the laws of your State of domicile at the time of your death.

"If you wish to name a person or persons not included in the categories above, or to name a person or persons listed but in a different order, you should designate a beneficiary. You may secure the proper form to name a beneficiary or to change the designation from the U. S. Civil Service Commission, Washington 25, D. C. To be valid, your designation or change of beneficiary must be in writing, signed and witnessed, and must be received by the Commission before your death. A witness to the designation may not receive payment as a beneficiary. You do not need the consent of anyone to change your beneficiary. You do not need to fill out a new form or notify the Commission when your address or that of a beneficiary changes."

Portions of 5 U.S.C.A. § 2093, relating to the payment of claims under group life insurance policies, and portions of Section 11 of Cecil Sears' policy are set forth in a footnote.² These provisions establish the procedure to be used to designate a beneficiary or to change the designation of a beneficiary.

Cecil Sears died on August 8, 1958, and his will was probated in the California courts. Appellants have made no objection to the validity of the will, nor did they file any will contest of any kind. The sole question on this appeal is whether the designation of Karen Austin made by Cecil Sears in his will is sufficient to entitle her to the proceeds of the policy.

The district court found that the decedent intended that the appellee have the proceeds of the policy and made the following statement:

"Unquestionably, decedent failed to follow the prescribed procedure in executing the designation of plaintiff, but it is equally free of doubt that the will manifested an unequivocal intention that the proceeds of the policy should accrue to her. Considering the particular circumstances of his case, and in view of the fact that decedent was a sick and ailing man, the execution of the will can be deemed a reasonable effort on his behalf to execute the designation of plaintiff as beneficiary." 180 F.Supp. 489.

It is the correctness of this decision that is attacked on this appeal. The appellants argue that the designation is not effective, regardless of intent, if the provisions of the policy are not complied with. However, we feel that the decision of the district judge is correct, and that Cecil Sears' holographic will did effectively designate Karen Austin the beneficiary of the life insurance policy.

Our attention has not been called to any Court of Appeals decision construing the provisions of 5 U.S.C.A. § 2093, a relatively new statute. A district court decision, Smith v. Metropolitan Life Insurance Co., D.C.N.D.Cal. 1956, 142 F.Supp. 320, 322, held that the controlling factor is the intent of the insured, not compliance with formal requirements.

"The universal rule * * * is that the policy provisions specifying the method of changing the designated beneficiary are for the benefit of the insurer and not the insured, and that the clear intention of the insured should be given effect even though the method specified in the policy is not followed."³

Courts of Appeal have many times passed on situations similar to that presented by the case at bar where National Life Insurance policies were involved. Attempts to change a beneficiary have repeatedly been held effective even though the technical requirements set forth in the policies, and the statutes setting up the insurance plan, have not been complied with.

In United States v. Pahmer, 2 Cir., 1956, 238 F.2d 431, 433, certiorari denied, 1957, 352 U.S. 1026, 77 S.Ct. 592, 1 L.Ed.2d 597, the court, discussing a purported change of beneficiary in a National Life Insurance policy, said:

"Concededly, in the case before us the substitution of the mother as the insured\'s beneficiary did not fully comply with these regulations. But in the field of National Life Insurance the cases are legion which hold that in judging of the efficacy of an attempted change of beneficiary `the courts brush aside all legal technicalities in order to effectuate the manifest intention of the insured.\' Roberts v. United States, 4 Cir., 157 F.2d 906, 909, certiorari denied 330 U.S. 829, 67 S.Ct. 870, 91 L.Ed. 1278. This case may be cited as typical of this long, unbroken, line of authority."⁴

We feel that the provisions of this policy setting up the method by which a beneficiary may be designated or changed are for the protection of the insurer, and we do not feel that the technical provisions are placed in the policy to protect the insured against hasty or impetuous action. In the case now before this court, the insurer is no longer a party, and the battle is between possible beneficiaries. Since this is the case, there is no reason to invoke technical provisions designed to protect an insurer against the possibility of double payment. We feel that the clearly manifested intent of the insured should control, and we feel that the federal cases clearly support this position.

Appellant's reliance on Cook v. Cook, 1941, 17 Cal.2d 639, 111 P.2d 322, is misplaced. In the first place this court is called upon in this case to construe a policy the provisions of which are established by federal law, and federal law not state law is controlling in determining to what extent literal compliance with the policy provisions is necessary in order to effectuate a designation of beneficiary. Cook involved a private contract of insurance, not one written as part of a program established by federal law.

The appellants are in error when they assert that Erie R. R. v. Tompkins, 1938, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, directs this court to apply California law to the case at bar. The insurance policy in question was made available to the federal employee by federal legislation. The decision of this case depends on the construction to be given that legislation. This is a question of federal law not of state law. In the situation here presented it would be unwise to assume that Congress, which has the power to say what law is to govern, intended that the federal courts look to the state law to determine what acts are necessary to change a beneficiary.

The appellants have cited some cases where the federal courts have looked to state law to determine the meaning of the word "child" as...