Starbuck v. City Bank & Trust Co.

• Decision Date: 30 December 1970
• Docket Number: No. 19,19
• Citation: 384 Mich. 295,181 N.W.2d 904
• Parties: Mary Jane STARBUCK, Plaintiff and Appellant, v. CITY BANK AND TRUST CO., Administrator de bonis non, Estate of John Ronald Starbuck, III, Deceased, Defendant and Appellee.
• Court: Michigan Supreme Court

Page 904

181 N.W.2d 904

384 Mich. 295

Mary Jane STARBUCK, Plaintiff and Appellant, v. CITY BANK AND TRUST CO., Administrator de bonis non, Estate

of John Ronald Starbuck, III, Deceased, Defendant

and Appellee.

No. 19.

Supreme Court of Michigan.

Dec. 30, 1970.

H. A. Kinch, Jackson, for plaintiff and appellant.

James P. Graham, Jackson, for defendant and appellee.

Before the Entire Bench, except KELLY, J.

T. G. KAVANAGH, Justice.

This suit was brought by Mary Jane Starbuck to determine her right to the proceeds of an insurance policy on the life of her son, John Starbuck. At the time of her son's death, such insurance contract designated 'Peggy L. Starbuck, wife,' as the primary beneficiary and his mother as the contingent beneficiary. ¹ The current conflicting claims to the proceeds, however, are between the mother of John Starbuck and his estate. The wife is not involved in this dispute because the marriage fore John Starbuck's death the marriage was terminated by divorce. The judgment of divorce specifically excluded Peggy L. Starbuck from sharing in the directions of the policy, pursuant to the directions of M.C.L.A. § 552.101 (Stat.Ann.1957 Rev. § 25.131) which provides in part:

'Hereafter every decree of divorce shall determine all rights of the wife in and to the proceeds of any policy or contract of life insurance, endowment or annuity upon the life of the husband in which she was named or designated as beneficiary, or to which she became entitled by assignment or change of beneficiary during the marriage of in anticipation thereof, whether such contract or policy was heretofore or shall hereafter be written or become effective, and unless otherwise ordered in said decree sucn policy or contract shall thereupon become and be payable to the estate of the husband or to such named beneficiary as he shall affirmatively designate.'

Complying with this requirement the judgment of divorce provided:

'It is further ordered and adjudged that all rights of the plaintiff (wife) in and to the proceeds of any policy or contract of life insurance, endowment, or annuity upon the life of the defendant (husband) in which she was named or designated as beneficiary, or to which she became entitled by assignment or change of beneficiary during the marriage or in anticipation thereof, whether such contract or policy was heretofore or shall hereafter be written or become effective, shall hereupon become and be payable to the estate of the defendant (husband), or such named beneficiary as he shall affirmatively designate.'

The problem presently litigated arose when, subsequent to the divorce, the now deceased husband failed to name a 'primary beneficiary' to replace his divorced wife. Absent a subsequent designation of a new primary beneficiary, the estate of John Starbuck claimed that the cited statute and the judgment of divorce required the proceeds to be paid into the estate.

The mother, however, contested the estate's claim. She argued that the statute required only the naming of an alternative taker and that her son's designation of her as a 'contingent beneficiary' satisfied the requirements of the statute and entitled her to take the proceeds of the insurance policy.

The insurance company, faced with the dual claims, deposited the money with the clerk of the trial court--willing to pay either, but not both.

After quoting the statute and the virtually identical language in the judgment of divorce (above quoted), the trial court found:

'* * * that in order for the contingent beneficiary to take, some positive action would have had to be taken after the divorce to name her as beneficiary. The words 'shall' and 'affirmatively' as defined above would indicate Future positive action. The insured's naming her as contingent beneficiary previously couldn't be considered to be a future positive action.

'It is my opinion, therefore, that because the primary beneficiary was living and couldn't take by operation of law, then this court, by interpreting the same law, should determine who is entitled to the proceeds. The law states that the estate should unless there is another beneficiary named by the insured by taking positive future action to do so. This he did not do. Therefore, it is my determination that the proceeds should be payable to the estate.' (Emphasis in original)

On appeal to the Court of Appeals, the trial court's decision was affirmed.

It is perhaps pertinent to note at this point that the insurance policy does not enumerate any events upon which the mother would receive the proceeds of the policy aside from her designation as the 'contingent' beneficiary.

We are, thus, confronted with a need for a determination of both the statutory and contractual rights of the mother in the instant insurance proceeds. Does the disqualification of the wife to take, due to her divorce, allow the 'contingent' beneficiary to take under the contract? And, secondly, does the quoted statute require the husband to affirmatively designate a new beneficiary subsequent to the divorce in order to preclude payment of the proceeds into his estate?

Prior to the addition in 1939 of the above-quoted portion of the statute to M.C.L.A. § 552.101, the wife was entitled to the proceeds of the policy when she remained the designated primary beneficiary After a divorce. Ancient Order of Hibernians v. Mahon (1922), 221 Mich. 213, 190 N.W. 696, and Guarantee Fund Life Association v. Willett (1927), 241 Mich. 132, 216 N.W. 369. The effect of the amendment, as stated in the title to the statute, in the judgment of divorce, and, in the statute itself, was to affect the interest of the Wife in the insurance policy and thus cure the situation where a divorced wife could Inadvertently receive the proceeds of a perhaps forgotten policy. 'Inadvertently receive' should be stressed for the statute does not prohibit the husband or the divorce judgment itself from retaining or...