State Mut. Life Assur. Co. v. Webster

• Citation: 148 F.2d 315
• Decision Date: 20 March 1945
• Docket Number: No. 10660.,10660.
• Parties: STATE MUT. LIFE ASSUR. CO. OF WORCESTER, MASS., v. WEBSTER et al.
• Court: U.S. Court of Appeals — Ninth Circuit

148 F.2d 315 (1945)

STATE MUT. LIFE ASSUR. CO. OF WORCESTER, MASS., v. WEBSTER et al.

No. 10660.

Circuit Court of Appeals, Ninth Circuit.

March 20, 1945.

L. R. Martineau, Jr., Richard C. Heaton, and Joseph P. Rinnert, all of Los Angeles, Cal., for appellant.

No brief was filed on behalf of appellees.

Before WILBUR, DENMAN, and STEPHENS, Circuit Judges.

STEPHENS, Circuit Judge.

A controversy is alleged to have arisen between the parties hereto in the matter of a request for a loan upon two insurance policies. Jurisdiction of the federal court is based upon diversity of citizenship, the plaintiffs being citizens of California, the issuing insurance company being a Massachusetts corporation, and the value of the subject in controversy exceeding $3,000. The insurance company, defendant below, appeals from the judgment entered.

The evidence in the case consists mainly of documents attached as exhibits to pleadings; their genuineness is not disputed. No testimony of witnesses is in the transcript of record, and the trial court's findings upon material allegations of fact are not attacked.

The complaint contains two causes of action. Appellee Henry M. Webster, hereinafter sometimes called the insured, is the sole plaintiff in the first. He alleges that two policies of insurance on his own life were delivered to him by the appellant insurance company, that under the terms of the policies he was entitled to borrow thereon an amount proportionate to the total premium payments made thereon in accordance with schedules therein contained, that on December 17, 1941, he demanded of the insurance company that it lend him the full combined loan value of said policies, that the insurance company construes the relevant facts as not entitling the insured to borrow against the policies, but that he believes he has the right to so borrow. He prays that the court declare the rights and duties of the parties with respect to the policies and order the insurance company to make the loan. The second cause of action is similar to the first except that therein several plaintiffs, namely, the insured's wife, Caroline H. Webster, their son, Martin H. Webster, and their daughter, Cecile B. Webster, allege that they have given their consent that the loan may be made as demanded by Henry M. Webster and pray that the court enter a judgment as requested by him.

The answer admits that an actual controversy exists as to the parties in both causes of action and sets forth the insurance company's contention that the insured has no right to borrow and the company no right to lend on the policies under the terms and conditions thereof. The controversies alleged by the parties are not identical, and the insurance company denies that the controversy between it and the plaintiffs is as alleged by the latter.

The basic facts relating to both causes of action are detailed in the trial court's unattacked findings.

Two policies of insurance were issued by the insurance company upon the life of Henry M. Webster, policy No. 207255B on January 22, 1923, and policy No. 347582B on March 14, 1931. At all times herein concerned, they were in full force and effect. Each contained clauses entitling the policyholder to a loan from the company on the sole security of the policy, provisions being included for computing the amount of the loan at any certain time. The loan provision of one policy was amended to give the insured the right to secure loans from the company without the consent of any revocably designated beneficiary, but the amendment is without significance in this proceeding.

On or about June 10, 1937, several instruments¹ were delivered to the company, which accepted them, in the order set out, as of July 6, 1937. (Exhibit designations herein are the same as the trial court's.)

1. (Ex. "C") Designation of the insured's estate as beneficiary of the policies reserving the right to change the beneficial interest without the consent of the beneficiary.

2. (Ex. "D") Relinquishment of the insured's right to change the beneficiaries without their consent.

3. (Ex. "E") Nomination of the insured's wife, Caroline H. Webster, as sole beneficiary, and assignment to her of all the insured's rights in and to the benefits of the policies.

4. (Ex. "F") Designation by Caroline H. Webster of beneficiaries — the interest income to herself for life; thereafter, the income to her son, Martin H. Webster, with the privilege of withdrawing for himself the principal upon reaching 30 years of age; thereafter, the principal to his issue, if any; thereafter, the interest to her daughter, Cecile B. Webster; thereafter, the principal to her issue, if any; should Caroline predecease the insured, all right, title and interest in the policies to vest in her son, or, if her son not living, in her daughter.

On December 15, 1937, Caroline H. Webster delivered to the insurance company another writing (Ex. "G") naming the same beneficiaries as Exhibit "F" but differing in certain respects immaterial to the matter here in controversy. Exhibit "G" was duly accepted by the insurance company and replaces Exhibit "F" to all intents and purposes.

The insured demanded of the company, on December 17, 1941, a loan of the full accrued loan value of the two life insurance policies. His wife, son, and daughter signed and consented to this demand, and they also, in another document, "consented" to the revocation of Exhibit "G", but the insurance company refused to make the loan and declined to accept the latter document as an effective revocation of Exhibit "G".

At the time of the trial the son and daughter were both unmarried and without issue.

The reason for the initiation of the action as one under the declaratory judgment statute is explained in accordance with the understanding of all the parties in the trial judge's memorandum opinion:

"The defendant's refusal to accept that request for revocation and to make the loan, on the ground that the unborn children of Martin and Cecile were irrevocably named as beneficiaries by Caroline in the instrument of December 15th, 1937, (Exhibit "G") and that the consent of such unborn children is necessary, and obviously cannot be obtained, has precipitated this suit for declaratory relief." "* * * The ultimate question the parties want decided, is whether or not the Company can make the requested loan."

The district court declared in its decree, briefly:

1. That the wife is the owner and holder of both policies. (This declaration and the findings of fact upon which it is based are not attacked, and we have taken this declaration as final.)

2. That the unborn issue of the son and daughter "* * * are not represented in this suit by Martin H. Webster or Cecile B. Webster, but that their interests have been and are sufficiently represented by the defendant insurance company and that the decree of this court is binding upon all such unborn persons."

3. That since the son and daughter are unmarried and without issue, the existence of issue is a mere possibility.

4. That any rights of unborn issue are dependent upon (a) their coming into being, and (b) the lack of prior consumption of policy proceeds by the son or daughter.

5. and 6. That consent to a loan on the insurance policies is required only of persons in being.

7. That the wife, son, and daughter had a right to revoke the designation of unborn beneficiaries.

8. That having revoked the designation of the unborn as beneficiaries, the wife is entitled to loan rights with the consent of the son and daughter. (There is nothing in the pleadings justifying such declaration. The wife has never asked for a loan on the policies, so far as the facts show, and there is not even an intimation anywhere that she desires to borrow on the policies or desires a pronouncement of the court upon that subject.)

9. That the insured has no rights to any loan on the insurance policies. (This last declaratory conclusion is exactly what the insurance company claims, and it is not requesting and could not request upon this appeal, in accordance with general law, that the conclusion be set aside. Lindheimer v. Illinois Bell Telephone Co., 1934, 292 U.S. 151, 176, 54 S.Ct. 658, 78 L.Ed. 1182; Loudon v. Taxing District, 1881, 104 U.S. 771, 774, 26 L.Ed. 923.

It might be well to note that this proceeding is not one wherein a declaratory judgment would be more useful than a judgment obtained in an ordinary action. Henry...