South Branch Valley Nat. Bank v. Williams

• Court: West Virginia Supreme Court
• Writing for the Court: CAPLAN
• Citation: South Branch Valley Nat. Bank v. Williams, 155 S.E.2d 845, 151 W.Va. 775 (W. Va. 1967)
• Decision Date: 11 July 1967
• Docket Number: No. 12620,12620
• Parties: SOUTH BRANCH VALLEY NAT'L BANK, a Corp. v. Charles E. WILLIAMS, Jr., et al., etc. v. METROPOLITAN LIFE INS. CO., a Corp.

Page 845

155 S.E.2d 845

151 W.Va. 775

SOUTH BRANCH VALLEY NAT'L BANK, a Corp. v. Charles E. WILLIAMS, Jr., et al., etc. v. METROPOLITAN LIFE INS. CO., a Corp.

No. 12620.

Supreme Court of Appeals of West Virginia.

Submitted May 9, 1967.

Decided July 11, 1967.

Syllabus by the Court

1. Where a bank applies to an insurance company for a creditors group life insurance policy, the purpose of which is to insure the lives of its eligible debtors for its benefit, the contract of insurance is between two principals, the bank being the policyholder and insured and the insurance company being the insurer.

2. In a creditors group life insurance policy whereby the lives of the eligible debtors of the insured bank are insured to protect the bank against loss in the event of the death of a debtor the contract for such insurance is between the bank and the insurance company as principals, there being no contractual relationship between the debtors and the insurer.

3. A bank insured under a creditors group life insurance policy is not constituted an agent of the insurance company by its act of collecting premiums from its eligible debtors and remitting them in a lump sum to the insurance company.

4. A creditors group life insurance policy which provides that no debtor of the insured bank shall be eligible for insurance thereunder, as to any agreement executed on or after his sixty-fifth birthday, cannot provide coverage for a debtor over sixty-five years of age and any attempt by the bank to include such debtor within the covered group is not binding on the insurer.

D. H. Rodgers, Jr., Martinsburg, for appellant.

Hyer, Gibson & Talbott, Milford L. Gibson, Elkins, for appellee.

CAPLAN, Judge.

The plaintiff, South Branch Valley National Bank, a corporation, instituted a civil action in the Circuit Court of Hardy County to recover from the defendants, Charles E. Williams, Jr. and Ralph J. Bean, Administrator with the will annexed of John T. Williams, deceased, the sum of $10,000.00. This sum represents the amount alleged to be due and owing on two separate loans obtained from the Bank by Charles E. Williams, Jr. and John T. Williams.

On May 28, 1965, after a trial by the court in lieu of a jury, a judgment was entered in favor of the Bank in the sum of $3,000.00. The judgment order further provided, in regard to the remaining $7,000.00, that if the plaintiff and Metropolitan Life Insurance Company, which had been impleaded by the defendants as a third party defendant, could not effect as equitable settlement between themselves, the court reserved the right to hear further evidence and argument before passing on that question. Subsequently, on June 28, 1966, judgment was entered wherein it was ordered that the South Branch Valley National Bank recover from Metropolitan Life Insurance Company the sum of $7,000.00. It is from that judgment that this appeal is prosecuted.

Charles E. Williams, Jr. and John T. Williams, his uncle, in furtherance of their joint livestock business, periodically borrowed sums of money from the plaintiff bank. These parties, on October 2, 1963, having obtained a loan, executed a note payable to the order of the Bank in the sum of $5,000.00 and payable in 180 days thereafter. On November 3, 1963, John T. Williams and Charles E. Williams, Jr., renewing a note of July 6, 1963, executed a second note payable to the Bank in the sum of $5,000.00 and payable in 120 days. The funds received from these loans were deposited to the account of Charles E. Williams, Jr. The deposit slips of October 2, 1963 and July 6, 1963, carried a notation which indicated that the amounts deposited were the proceeds of these loans and showed deductions for interest and insurance premiums.

In November, 1960, the Bank made application for and obtained from Metropolitan Life Insurance Company a creditors group life insurance policy. The purpose of this policy was to insure the lives of borrowers from the Bank so that in the event of the death of a borrower, prior to the payment of his loan, the Bank would be paid by the insurer the amount of the unpaid balance. Thereunder, the Bank is called the creditor and any person indebted to it is a debtor. It is provided in the policy that 'If an agreement is executed by more than one person, the person whose signature appears first on the agreement is the Debtor.' Effective November 1, 1962, this policy was amended to provide that 'No debtor shall be eligible for insurance hereunder as to any agreement executed on or after his 65th birthday * * *.' A copy of this amendment purportedly was forwarded by the Bank to all of its debtors. The amount of insurance on any debtor, whether indebted under one or more agreements, is limited by the policy of $7,000.00. The aforesaid group policy was in effect and purported to cover all the Bank's eligible debtors when the above loans were obtained by C. E. and John T. Williams.

Prior to the due date of the above notes, John T. Williams died and Ralph J. Bean was appointed Administrator with will annexed of his estate. Upon the refusal of the debtors to pay the amount due on said loans, the Bank instituted an action for recovery thereof against Charles E. Williams, Jr. and Ralph J. Bean, Administrator. Upon the motion of these defendants, Metropolitan Life Insurance Company was made a third party defendant. In the third party complaint it was alleged that the notes involved were a continuation of a series of identical transactions with the Bank, beginning in October, 1961; that credit had been extended to John T. Williams; that his life was insured, thereby assuring payment to the Bank of any indebtedness owing by him; that premiums for such insurance had been collected from the debtor; that premiums were paid to the Bank as an agent of Metropolitan which ultimately received such premiums; and that Metropolitan, having accepted the premiums, owes the creditor under the policy, the Bank, the sum of $10,000.00.

As noted above, judgment was entered in favor of the Bank against Charles E. Williams, Jr. and Ralph J. Bean, Administrator of the estate of John T. Williams in the sum of $3,000.00. After further hearing of this matter the trial court expressed its opinion that George J. Ours, the cashier of the Bank, acted as an agent of the Insurance Company and that his actions in 'affecting insurance on the John T. Williams and Charles E. Williams, Jr., loans despite the age of John T. Williams, resulted from his interpretation of the Amendment of November 1, 1962, to the effect that the age prohibition did not apply to one who had been obtaining insured bank loans prior to November 1, 1962, and that his conduct as such agent plus the collection of the insurance premiums and transmitting them to the insurance company where they were accepted was binding upon third-party defendant, Metropolitan Life Insurance Company.' Judgment was thereupon entered in favor of the Bank and against Metropolitan in the sum of $7,000.00.

It is clear from the exhibits introduced during the proceedings in the trial court, and it is undisputed, that the signature of John T. Williams appears first on the notes in question. Under the provisions of the group...