Wasson v. Pyron
| Decision Date | 08 May 1967 |
| Docket Number | No. 5--4196,5--4196 |
| Citation | 414 S.W.2d 391,242 Ark. 518 |
| Parties | Delores WASSON, Administratrix v. Frances PYRON. |
| Court | Arkansas Supreme Court |
Spencer & Spencer and Don Gillaspie, El Dorado, for appellant.
Shackleford & Shackleford, El Dorado, for appellee.
Doris E. Beene died intestate on April 3, 1964. Mrs. Beene's niece, the appellee Frances Pyron, was at first the administratrix of the estate. Several of Mrs. Beene's heirs asserted , in a petition filed in the probate court, that Mrs. Pyron had kept for herself a diamond ring and $18,503.93 of insurance money that should have been inventoried as assets of the estate. The probate judge, without passing on the merits of the petition, brought the matter to an issue by discharging Mrs. pyron as administratrix, appointing the appellant as her successor, and suggesting that the appellant bring suit in equity for the recovery of the ring and insurance money.
In the chancery case the court held that the ring was an asset of the estate but that Mrs. Pyron was entitled to the insurance money. An appeal and cross-appeal bring both issues to us for review. (There is also a precautionary appeal from the probate court order, but it is unimportant.)
We turn at once to the controversy over the insurance proceeds, which presents a far-reaching question of the first magnitude--a question which, if resolved in favor of the appellant, might prove to be little short of calamitous for hundreds upon hundreds of our citizens. That question is whether the insurance company's agreement to pay the insurance money to Mrs. Pyron as a contingent beneficiary was void for want of compliance with the Statute of Wills.
The facts are simple. Mrs. Beene was the sole beneficiary of a.$19,000 group insurance certificate issued by the Metropolitan Life Insurance Company upon the life of her husband, who died on July 17, 1963. Instead of taking the insurance money in cash Mrs. Beene entered into a contract with the Metropolitan by which it agreed to pay her $108.87 a month for twenty years. If Mrs. Beene died without having received the full amount the funds still held by the company, commuted to present value, would be paid to Frances Pyron, the appellee. In the contract Mrs. Beene reserved the power to change the contingent beneficiary at any time and to withdraw the funds herself if she chose to do so. Mrs. Pyron was still the contingent beneficiary when her aunt died a few months later. The appellant now contends that the contract was a testamentary disposition that should fail for noncompliance with the Statute of Wills. The argument is that even though Beene himself might have named a contingent beneficiary of the policy, his widow could not do so by contract when the money became payable to her alone.
We are aware, as a matter of common knowledge, that agreements like this one are widely used in the life insurance business. There is certainly no public policy against such contracts, upon which countless persons are dependent. In the few cases in which the validity of similar contracts has been considered, the weight of authority sustains the arrangement, either on the basis of a statute or on the theory of a third-party-beneficiary contract. Appleman, Insurance Law & Practice, § 889 (1966 and Supp.1967); Mutual Ben. Life Ins. Co. v. Ellis, 125 F.2d 127, 138 A.L.R. 1478 (2d Cir. 1942), cert. den. 316 U.S. 665, 62 S.Ct. 945, 86 L.Ed. 1741 (1942); Hall v. Mutual Life Ins. Co. of N.Y., 122 N.Y.S.2d 239, 282 App.Div. 203 (1953), aff'd 306 N.Y. 909, 119 N.E.2d 598 (1954); Toulouse v. N.Y. Life Ins. Co., 40 Wash.2d 538, 245 P.2d 205 (1952).
In Arkansas we need not rely upon common-law authorities, for the point is explicitly covered by our Insurance Code. Section 334 of the Code reads in part: Ark.Stat.Ann. § 66--3325 (Repl.1966).
It will be noted that the Code is liberal in allowing the insurer, by agreement with the policyholder himself, to hold the proceeds 'upon such terms and restrictions as to revocation by the policyholder and control by beneficiaries' as may be agreed upon. There is no reason to suppose that the draftsmen of the Code--a comprehensive statute evidencing the greatest care in its preparation--meant to be less liberal with respect to subsequent agreements made between the insurer and the beneficiary. Quite the contrary, unless the second quoted sentence is so construed it is practically meaningless and practically useless, for surely statutory authority was not deemed to be necessary to enable an insurer and a beneficiary to make a simple agreement by which the company would retain the proceeds of a policy as an investment by the beneficiary. Thus it is an inescapable conclusion--and an altogether desirable one--that the legislature intended to validate just such agreements as the one now before us. Otherwise the statutory language is pointless.
With respect to the diamond ring Mrs. Pyron, laboring under the handicap of the Dead Man's Statute, was unable to adduce much proof that it had been delivered to her as a gift during her aunt's lifetime. On this branch of the case it cannot be said that the trial court's decision is against the weight of the evidence.
Affirmed on direct and cross appeal.
I would reverse the lower court on that phase of the case having to do with the insurance proceeds.
The conclusion that this is an attempted testamentary disposition of the proceeds of life insurance on the life of an insured by his beneficiary seems inescapable to me. Doris E. Beene was entitled to this money at the time of her husband's death. The fact that there were optional modes of settlement did not change the fact that it was she, not her designee, who was entitled to the entire proceeds. Even under the contract she entered into with the insurance company, she was entitled to withdraw the balance on hand at any time at her absolute election. Even though she designated appellee to receive whatever balance had not been paid to her under the installment settlement, she reserved the unrestricted right to change that designation at any time.
Clearly we would have to find that this was a gift in order to sustain the position of appellee, except for Ark.Stat.Ann. § 66--3325 (Repl.1966) (). This cannot be done because there must be both a delivery and the surrender of possession, dominion and control to validate any gift, either inter vivos or causa mortis. Marshall Bank v. Turney, 105 Ark. 116, 150 S.W. 693; Fancher v. Kenner, 110 Ark. 117, 161 S.W. 166; Umberger v. Westmoreland, 218 Ark. 632, 238 S.W.2d 495; Smith v. Clerk, 219 Ark. 751, 244 S.W.2d 776. Obviously the agreement is not in compliance with our statute of wills, not being in the handwriting of the testator as required by Ark.Stat.Ann. § 60--404 (Supp.1965) or executed in the presence of witnesses as required by Ark.Stat.Ann. § 60--403. It goes without saying that it was contrary to the statutes on descent and distribution.
There is no evidence that Carter R. Beene designated any contingent beneficiary or authorized his beneficiary to do so.
It seems to me that not only a donee or legatee but any third-party-donee beneficiary would be eliminated by the holding in Ragan v. Hill, 72 Ark. 307, 80 S.W. 150, from which I quote:
'* * * W. M. Rees was an old man, being 78 years of age; was feeble; afflicted with some disease; did not expect to live long; had $1,000; offered to and did loan it to John C. Hill & Son; and they executed to him therefor the following instrument of writing: At the time he loaned the money he stated that it was 'to go to B. C. Rees at his death.' He was a good friend of B. C. Rees. He died on the 18th of August, 1899. John C. Hill & Son advanced $191.85 to pay his funeral expenses. Was the $1,000 a gift to B. C. Rees?
In every case a delivery is necessary to constitute a gift. In this case W. M. Rees loaned the money to John C. Hill & Son. He never parted with dominion over it in his lifetime. It was not delivered to B. C. Rees, or to any one for him. In the language of witness John C. Hill, 'it was to go' to B. C. Rees at the death of W. M. Rees. The directions of the latter (W. M. Rees) in this respect were testamentary in character, and were not effective, because not made and proved as a will.'
This decision should certainly be controlling in Arkansas over any authorities from other states, in the absence of any statutory law to control. The majority claim to find this in Ark.Stat.Ann. § 66--3325 (Repl.1966), a part of the Insurance Code. The section, except for the last sentence, is quoted in the majority opinion. The first sentence cannot have any application because there is no evidence of any agreement of the insured with the insurer which could be applicable here. The necessary statutory law, then, to permit avoidance of our rules governing gifts and wills must be found in the second sentence, which the majority purports to do, by reasoning I am unable to follow, and which seems illusionary to me. That section simply says...
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