Stone v. Stephens

• Decision Date: 20 June 1951
• Docket Number: No. 32434,32434
• Citation: 25 A.L.R.2d 992,155 Ohio St. 595,99 N.E.2d 766
• Parties: , 25 A.L.R.2d 992, 45 O.O. 11 STONE v. STEPHENS et al.
• Court: Ohio Supreme Court

Page 595

155 Ohio St. 595

99 N.E.2d 766, 25 A.L.R.2d 992, 45 O.O. 11

STONE v. STEPHENS et al.

No. 32434.

Supreme Court of Ohio.

June 20, 1951.

Syllabus by the Court.

1. A change of an insurance policy beneficiary by last will and testament of the insured is ineffective unless a change in such manner is expressly or impliedly authorized by the terms of the policy.

2. The right of the respective claimants to the proceeds of an insurance policy are fixed by law at the time of the death of the insured and are not affected by interpleader of the insurer and the deposit of the disputed funds in court.

This cause originated in the Court of Common Pleas of Greene county.

Two actions for declaratory judgments, seeking the determination of conflicting claims to the proceeds of two insurance policies, were there heard and decided together. They involve the same questions of law and are before this court as one case.

There is no dispute as to the facts, it being conceded by the parties that the facts stated in the pleadings are true.

The facts essential to a consideration of the question of law presented may be concisely stated as follows:

Prior to January 4, 1943, Sylvan Ray Garver purchased an insurance policy and a trust certificate (in the nature of an insurance policy).

On January 4, 1943, the insured changed his previously designated beneficiary in the insurance policy to that of his then wife, Jeannette Marie Garver, which change of beneficiary was duly approved by the respective insurance companies.

On July 5, 1944, Jeanette Marie Garver obtained a divorce from the insured in Florida and was restored to her maiden name of Jeanette Stone. The insured knew of the pendency of the action, he having entered his appearance therein.

The policies of insurance with the defendant insurance companies contained provisions retaining to the insured the right to change the beneficiary of said policies, and set forth the steps required by the companies in order to effect such a change of beneficiary. So far as the record discloses, the insured made no further attempt to change the beneficiary of these policies in the manner prescribed in the policies themselves. In fact his will is the only further attempt made to change the beneficiary of the contracts.

On July 18, 1944, the insured, while serving as a pilot in the Royal Air Force and while stationed in the city of Montreal, Canada, duly executed his last will and testament. By the terms of his will he bequeathed all his property, including insurance policies to his wife. A subsequent item of the will provided as follows: 'Should I die unmarried, I hereby give and bequeath all of my said property to my grandmother, Mrs. Frank Stephens * * *.'

On or about December 16, 1944, while serving as a pilot in the Royal Air Force Transport Command, the insured disappeared at sea and was subsequently declared to be dead.

The actions for declaratory judgments were instituted by Jeannette M. Stone. Permelia Stephens (designated in the insured's will as Mrs. Frank Stephens), as an individual and as administratrix with the will annexed of the estate of the insured, and, in one case, the Investors Syndicate of America, Inc., and, in the other, The Western & Southern Life Insurance Company were made defendants.

The insurance companies, by interpleader, acknowledged their liability and paid to the clerk of the Court of Common Pleas the respective amounts of the insurance policies.

Upon hearing the Court of Common Pleas found that Permelia Stephens, as an individual, was entitled to the proceeds of the insurance policies and ordered payment thereof accordingly.

Upon appeal the Court of Appeals held the judgment of the Court of Common Pleas contrary to law and reversed the judgment.

The cause is now in this court following allowance of motion to certify.

Routzohn, Routzohn & Nevin, Dayton, for appellee.

Merritt E. Schlafman, Dayton, for appellant.

MATTHIAS, Judge.

The question of law presented in this case is whether an insured may lawfully change the beneficiary designated in his insurance policy by the execution of a last will and testament where not expressly or impliedly authorized to do so by the terms of the insurance contract.

Specifically, the question is whether the insured effectively designated a new and different beneficiary of his life insurance policies by the execution of a last will and testament wherein he directed that if he died unmarried all his property should go to Permelia Stephens, his grandmother.

The issues are presented upon the pleadings and the transcripts of docket entries of the Court of Common Pleas and the Court of Appeals. The record fails to disclose the terms of the life insurance policies alleged to have been altered by the insured's will. The petition of the plaintiff alleges that 'in said contract or policy of insurance insured reserved the right to change the beneficiary.' It is conceded by the parties that the insured had effected one change of the beneficiary in the policies as evidenced by an indorsement thereon whereby his wife, Jeannette Marie Garver, was name beneficiary. It is agreed also that after the date of that change no other effort was made to change the beneficiary except by the will in question.

Our question, therefore, is not whether the execution of the will in question constituted a substantial compliance with the provisions of the policies in regard to change of beneficiary as was presented in the cases of Arnold v. Newcomb, 104 Ohio St. 578, 136 N.E. 206, and Atkinson v. Metropolitan Life Ins. Co., 114 Ohio St. 109, 150 N.E. 748. Those cases involved no question of an attempted change of beneficiary by will, nor was any such situation considered or referred to in the opinion of either case.

The rights of a beneficiary to the proceeds of a life insurance policy upon the death of the insured has heretofore been considered by this court in the case of Katz v. Ohio National Bank, Ex'r, 127 Ohio St. 531, 191 N.E. 782, 783. In that case this court held in paragraph one of the syllabus:

'A life insurance policy, which reserves to the insured the privilege of changing the beneficiary therein, gives the named beneficiary only an expectancy during the life of the insured, which does not become a vested right until the insured's death. (Oetting, Gdn. v. Sparks, 109 Ohio St. 94, 143 N.E. 184, second proposition of syllabus, approved and followed.)'

The following quotation, from the opinion of Judge Zimmerman, in support of the holding of the court in the above-quoted syllabus is pertinent:

'A majority of the cases hold that if a life insurance policy reserves to the insured the right to change the beneficiary, the beneficiary first designated does not take a vested interest, but has only an expectancy during the life of the insured, contingent upon being the beneficiary at the time of the insured's death. 7 Cooley's Briefs on Insurance (2d) 6406; 2 Couch, Cyclopedia of Insurance Law, 825; 14 Ruling Case Law, 1376; 37 Corpus Juris, 579. This is the rule adopted in Ohio. Oetting, Gdn. v. Sparks, 109 Ohio St. 94, 143 N.E. 184.

"If, however, no change is made during the life of the insured, the interest of the beneficiary designated becomes vested on insured's death.' 7 Cooley's Briefs on Insurance (2d) 6409.'

In accord with this well established rule, at the time of the death of the insured, his wife, Jeannette Marie Garver, became the possessor of a vested right to the proceeds of the policies. The will executed by the insured (the record not showing notice thereof to the companies) had no effect whatever until his death. From the conceded fact the insured had the right to change the beneficiary of his life insurance from time to time, it necessarily follows that this was a personal right to be exercised by him during his lifetime. A change of beneficiary during the lifetime of the insured cannot be made by will for the very simple reason that the will is without legal effect prior to the death of the testator.

The weight of authority in this country requires the insured, who wishes to exercise his contractual right to change beneficiaries of his life insurance policies to proceed substantially in accordance with the requirements of such policies. The cases in which a change of beneficiary by will has been considered are collected in 2 Appleman Insurance Law and Practice, 494, Section 1072, and 509, Section 1079. See, also, ibid., 505, Section 1078. There is sound reason both in law and in public policy for holding that a change of an insurance policy beneficiary by last will and testament of the insured is ineffective unless authorized by the terms of the policy. In most of the cases in which a change of such beneficiary by will has been permitted by the courts the change was either expressly or impliedly authorized by the terms of the insurance contract. In the instant case there is an absence of evidence that such change of beneficiary by a last will and testament was expressly or impliedly authorized by the policies.

In the case of Wannamaker v. Stroman, 167 S.C. 484, 166 S.E. 621, 623, the situation presented to that court was practically identical with the instant case. It was there held that an insured could not change beneficiaries in policies payable to his wife by making a will bequeathing the insurance to his daughters and a grandson. The following statement from the opinion of the court, following a review of the authorities, is pertinent for it discloses the reason why the weight of authority prohibits such unauthorized changes of beneficiaries in insurance policies:

'To hold that a change in beneficiary may be made by testamentary disposition alone would open up a serious question as to payment of life insurance policies. It is in the public interest...