Stephen v. Gallion

• Decision Date: 18 November 1971
• Docket Number: No. 338--11,338--11
• Citation: 5 Wn.App. 747,491 P.2d 238
• Parties: Nora E. STEPHEN, Appellant, v. Louis H. GALLION et al., Respondents.
• Court: Washington Court of Appeals

Page 747

5 Wn.App. 747

491 P.2d 238

Nora E. STEPHEN, Appellant, v. Louis H. GALLION et al., Respondents.

No. 338--11.

Court of Appeals of Washington, Division 2.

Nov. 18, 1971.

Review Denied Feb. 9, 1972.

Thomas J. Gagliardi, of Gagliardi & Gagliardi, Tacoma, for appellant.

A. Eugene Hammermaster, of Hammermaster, Robbins & Boettcher, Sumner, for respondent.

PETRIE, Chief Judge.

This case presents another variation of a perennial theme: as between two parties (one of thom is usually a wife), who is entitled to the proceeds of a life insurance policy?

The agreed statement of facts reveals that Jack and Nora Stephen were married in 1944 and divorced on December 5, 1968. Jack died slightly more than a month later, on January 7, 1969. Since 1953 Jack had been employed by The Boeing Company and had been the named insured under a group life insurance policy issued by the Aetna Life Insurance Company and owned by The Boeing Company, the policy holder. The policy had no cash surrender value, and no survivor benefits were payable under the policy at the time the divorce decree was entered. During the course of Jack's employment, The Boeing Company paid the entire premium on a monthly basis. Jack paid no part of the premium. The Boeing Company paid at least one monthly premium on the policy after the date of divorce and before Jack's death.

The decree of divorce neither disposed of nor mentioned the group life insurance policy, but did order that any and all property thereafter acquired by either party thereto would be his or her separate property. Prior to the divorce Nora had been the named beneficiary. Before his death but after the divorce, Jack had changed the beneficiary designation from Nora to his minor daughter, Jackie M. Stephen.

We are not advised of the precise manner in which this case was presented to the trial court, but it appears that the insurance company deposited the insurance proceeds (death benefit) with the National Bank of Washington, Tacoma, as guardian of the estate of Jackie M. Stephen, and Nora then brought this action seeking one-half of the proceeds. After trial to the court, Nora's complaint against the minor's guardian was dismissed with prejudice. Nora appealed to this court.

This jurisdiction is now firmly committed to the proposition that a potential right to receive proceeds of a life insurance policy constitutes property and not a mere expectancy and, if the premiums are paid with community funds, the insurance proceeds are community property at least so long as a beneficiary has not been irrevocably designated. Occidental Life Ins. Co. v. Powers, 192 Wash. 475, 74 P.2d 27, 114 A.L.R. 531 (1937); In re Estate of Towey, 22 Wash.2d 212, 155 P.2d 273 (1945). Even though there is no accumulating cash value, when the premiums on a group policy insuring against death or disability under term insurance are paid monthly by community assets, the proceeds of the policy constitute community property categorized as an inchoate interest acquired month by month. Small v. Bartyzel, 27 Wash.2d 176, 177 P.2d 391 (1947); Chase v. Chase, 74 Wash.2d 253, 444 P.2d 145 (1968).

In the present case, the guardian for Jackie M. Stephen contends that no portion of the premiums were paid by community assets, but rather, were paid exclusively by the employer. This is a distinction without a difference. A retirement pension under a noncontributory, employer-financed pension plan is not a gratuity, but is pay withheld, and constitutes delayed compensation for services rendered. Jacoby v. Grays Harbor Chair & Mfg. Co., 77 Wash.2d 911, 468 P.2d 666 (1970). Just as the pension benefits do not constitute a gratuity, so also the premiums paid or payable by the employer to finance the plan are not gratuities. They are paid by the employer as an essential part of employment based upon the continuing employment of each and every employee covered under the plan during any given monthly period. Although no portion of any given premium passes through the pockets of any given employee, and thus he receives some tax advantage, nevertheless it does constitute something produced by such employee by his toil or talent. The benefit to the employee is part of the consideration for his services. To that extent, if he is married, it is earned by and belongs to the community.

For purposes of determining the legal status of policy proceeds, we see no logical reason to distinguish between an...