State Farm Life Ins. Co. v. Fort Wayne Nat. Bank, 3-384A72

• Decision Date: 18 February 1985
• Docket Number: No. 3-384A72,3-384A72
• Parties: STATE FARM LIFE INSURANCE COMPANY and Robert Houser, Defendants-Appellants, v. FORT WAYNE NATIONAL BANK, as Personal Representative of James L. Zimmerman, Deceased, Plaintiff-Appellee.
• Court: Indiana Appellate Court

Page 524

474 N.E.2d 524

STATE FARM LIFE INSURANCE COMPANY and Robert Houser Defendants-Appellants, v. FORT WAYNE NATIONAL BANK, as Personal Representative of James L. Zimmerman, Deceased, Plaintiff-Appellee.

No. 3-384A72.

Court of Appeals of Indiana Third District.

Feb. 18, 1985.

Edward L. Murphy, Jr., Edward J. Liptak, Livingston, Dildine, Haynie & Yoder, Fort Wayne, for defendants-appellants.

Frederick A. Beckman, Thomas J. Goeglein, Beckman, Lawson, Sandler, Snyder & Federoff, Fort Wayne, for plaintiff-appellee.

HOFFMAN, Judge.

Fort Wayne National Bank, in the capacity of personal representative, filed suit against State Farm Life Insurance Company and Robert Houser, for failure to properly effect insurance on the life of its decedent, James Zimmerman. Following trial to the court, judgment was rendered in favor of the estate for $34,373.97, plus pre-judgment interest. State Farm and Houser appeal.

The record discloses that James owned 95% of Zimmerman Excavating Service, Inc., while his son, Steven, owned the remaining 5%. In 1975, James purchased insurance on his life from Robert Houser of State Farm Insurance. Steven was named beneficiary, and the undisputed purpose of this policy was to fund Steven's purchase of stock in the event of James' death. On April 1, 1980, James died. The insurance proceeds were paid to Steven, but because the policy named James as owner, the proceeds passed through his estate causing a $34,373.97 tax consequence.

The dispute between the parties centers around James' ownership of the policy. The trial court concluded that State Farm and Houser were negligent in that they knew the purpose of this policy, but failed to advise James of the consequences. Had Steven been named as owner, the estate would have saved $34,373.97 in state and federal taxes.

State Farm first contends that the trial court erred in excluding the testimony of its agents under Indiana's Dead Man's Statutes. At trial, State Farm sought to introduce the testimony of Houser and Vernon Deutsch concerning statements made by James at the time he applied for insurance. The trial court declared the agents incompetent to testify under IND.CODE Secs. 34-1-14-6 and 34-1-14-8. IND.CODE Sec. 34-1-14-6 provides as follows:

"Sec. 6. In suits or proceedings in which an executor or administrator is a party, involving matters which occurred during a lifetime of the decedent, where a judgment or allowance may be made or rendered for or against the estate represented by such executor or administrator; any person who is a necessary party to the issue or record, whose interest is adverse to such estate, shall not be a competent witness as to such matters against such estate: Provided, however, That in cases where a deposition of such decedent has been taken, or he has previously testified as to the matter, and his testimony or deposition can be used as evidence for such executor or administrator, such adverse party shall be a competent witness for himself, but only as to any matters embraced in such deposition or testimony."

Generally, the purpose of this statute is to protect decedents' estates from spurious claims. Summerlot v. Summerlot (1980), Ind.App., 408 N.E.2d 820. The Dead Man's Statutes guard against false testimony by a survivor by establishing a rule of mutuality, wherein the lips of the surviving party are closed by law when the lips of the other party are closed by death. Satterthwaite v. Estate of Satterthwaite (1981), Ind.App., 420 N.E.2d 287. A witness is rendered incompetent under IND.CODE Sec. 34-1-14-6 when the following requirements are met:

"a. The action must be one in which an administrator or executor is a party, or one of the parties is acting in the capacity of an administrator or executor;

"b. It must involve matters which occurred within and during the lifetime of the decedent;

"c. It must be a case in which a judgment or allowance may be made or rendered for or against the estate represented by such executor or administrator;

"d. The witness must be a necessary party to the issue and not merely a party to the record;

"e. The witness must be adverse to the estate and must testify against the estate."

420 N.E.2d at 289-290.

State Farm specifically argues that the statute does not render witnesses incompetent where the estate appears as party plaintiff to prosecute such witnesses or their principals with charges of negligence. In the alternative, State Farm alleges that an estate which prosecutes a negligence action waives the right to have adverse witnesses rendered incompetent under the statute.

Indiana cases demonstrate that the Dead Man's Statute applies to all cases in which a judgment may result for or against the estate, notwithstanding the parties' positions as plaintiff or defendant.

See, Satterthwaite, supra; IND.CODE Sec. 34-1-14-6. Furthermore, the Dead Man's Statute has been applied to render parties defendant incompetent to testify in tort cases brought on behalf of an estate. Zimmerman v. Beatson (1906), 39 Ind.App. 664, 79 N.E. 518. Neither the express language of the statute nor accepted concepts of fairness should preclude application of the statute so long as no statements made by the decedent are admitted through depositions or public records made during his life.

State Farm also contends that its agents did not possess interests adverse to the estate, sufficient to render them incompetent. The trial court also found the agents incompetent under IND.CODE Sec. 34-1-14-8, which provides in part that:

"No person who shall have acted as an agent in the making or continuing of a contract with any person who may have died, shall be a competent witness, in any suit, upon, or involving, such contract, as to matters occurring prior to the death of such decedent, on behalf of the principal to such contract, against the legal representatives, or heirs of the decedent, unless he shall be called by such heirs or legal representatives."

In order to render an agent incompetent under this section, the agent must have actively negotiated an agreement on his principal's behalf. Hoopingarner v. Bowser et al. (1972), 153 Ind.App. 399, 287 N.E.2d 570. Unlike IND.CODE Sec. 34-1-14-6, this section does not require that the proffered witness possess an interest adverse to the estate. It is sufficient that he actively represented his principal in making or continuing the contract.

Robert Houser served as State Farm's local agent in negotiating the insurance policy with James Zimmerman. Houser was accompanied by State Farm's agency manager, Vernon Deutsch, who rendered technical advice on terms and conditions of the policy. The trial court reasonably inferred from this scenario that Houser and Deutsch...