Western Life Insurance Company v. Bower

• Citation: 153 F. Supp. 25
• Decision Date: 15 July 1957
• Docket Number: Civ. No. 1828.
• Parties: WESTERN LIFE INSURANCE COMPANY, a corporation, Plaintiff, v. Virginia K. BOWER and Mable Claire Bower, also known as and called Mabel N. Bower, Defendants. Virginia K. BOWER, Plaintiff in Interpleader, v. Mable Claire BOWER, also known as and called Mabel N. Bower, Defendant in Interpleader.
• Court: U.S. District Court — District of Montana

153 F. Supp. 25

WESTERN LIFE INSURANCE COMPANY, a corporation, Plaintiff, v. Virginia K. BOWER and Mable Claire Bower, also known as and called Mabel N. Bower, Defendants.

Virginia K. BOWER, Plaintiff in Interpleader, v. Mable Claire BOWER, also known as and called Mabel N. Bower, Defendant in Interpleader.

Civ. No. 1828.

United States District Court D. Montana, Great Falls Division.

July 15, 1957.

T. P. Patterson, Helena, Mont., for plaintiff.

H. Cleveland Hall and Edward C. Alexander, Great Falls, Mont., for plaintiff in interpleader.

William A. Brown, Helena, Mont., for defendant in interpleader.

JAMESON, District Judge.

This cause is submitted by the plaintiff in interpleader (hereafter referred to as plaintiff) and the defendant in interpleader (hereafter referred to as defendant) upon an agreed statement of facts. The controversy involves the proceeds of an insurance policy issued upon the life of Joseph Edward Bower by Western Life Insurance Company, which has deposited in the registry of the court the proceeds of the policy amounting to $10,093.17.

The policy was a single premium endowment policy, issued September 27, 1938, payable to the insured, if living, on September 27, 1970 and, in the event of his death prior thereto, to defendant, who was then the wife of the insured and the beneficiary named in the policy.

The policy contained the following provisions:

"9. This policy is issued with the express understanding that the insured may, without the consent of the beneficiary, receive every benefit, exercise every right, and enjoy every privilege conferred by this policy; and, without prejudice to any assignment, the insured shall have full power to agree with the Company to any change in, amendment to, release or surrender of this policy."

"13. The insured may at any time, and from time to time, provided this policy be then in force, and subject to the rights of any assignee, change the beneficiary or beneficiaries by sending to the Company at the Home Office, a written notice in due form accompanied by this policy. Such change will take effect only when endorsed on this policy by the Company and shall then relate back to and take effect as of the date the insured signed said written notice, whether the insured be living at the time of said endorsement or not, but without prejudice to the Company on account of any payment made by it before such endorsement."

On August 15, 1946, Joseph Edward Bower, the insured, and the defendant, entered into a property settlement agreement which provided in part as follows:

"Whereas, the parties to this agreement are husband and wife and certain differences have arisen between them to such an extent that one or the other of the parties hereto is about to file divorce proceedings against the other party, and

"Whereas, the parties hereto desire to settle and adjust amicably certain matters arising out of any divorce proceedings that may be instituted by either party hereto against the other, with reference to the care, custody and control of their minor children, support money for the same, alimony, property settlement and costs and fees of any such proceedings for divorce instituted by either party hereto, against the other * * *.

"III. That the first party, in lieu of any alimony for her support or any property settlement that the court may decree and determine in her favor against the second party, herewith covenants and agrees to accept in full settlement of all and any claims she has or may have against the second party for such alimony or property settlement, the property settlement set forth in the following paragraphs, to-wit:"

There follows provisions for the disposition of all of the property owned by the parties to the agreement, including as paragraph VII, the following:

"That it is understood and agreed that the party of the second part has heretofore obtained a life or endowment insurance policy from the Western Life Insurance Company for $10,000.00, in which the party of the second part named the first party beneficiary and that if and when any payments are made thereon by said insurance company, during both of the lives of the parties hereto, that the same shall be divided equally between the parties hereto; that in the event that the second party shall die first, all the benefits and payments under said policy shall inure to and belong to the party of the first part and be paid to her; in the event the party of the first part should die first, all such benefits and payments shall inure to and be payable to the party of the second part."

Paragraph VIII reads as follows:

"That the transfers of all said property to the party entitled thereto, as herein provided, shall be consummated immediately after either one of the parties hereto has obtained a Decree of Divorce from the other party hereto."

At the same time, and as a part of the same transaction, Joseph Edward Bower and the defendant entered into a supplemental agreement, as follows:

"Supplemental Agreement

"This Supplemental Agreement, made and entered into this 15th day of August, A.D., 1946, by and between Mabel N. Bower, Party of the First Part and Joseph E. Bower, Party of the Second Part, both of Great Falls, Cascade County, Montana.

"Witnesseth:

"Whereas, the parties to this supplemental agreement, being husband and wife have heretofore, on the same date, entered into an Agreement with reference to property settlement, the care, custody and control of their minor children, support money for the same and costs and fees of any divorce proceedings instituted by either party hereto against the other, and in consideration thereof,

"It is hereby specifically understood and agreed that unless the First Party institutes a divorce proceedings against the Second Party on or before the 1st day of October, 1946, then, in that event, the Second Party shall have the right to institute such divorce proceedings against the First Party.

"It is further understood and agreed that in the event that either party resists the divorce proceedings instituted against them by the other party, that, then in that event, said property agreement shall be cancelled and considered null and void and not be used by either party in any such divorce proceedings.

"It is further agreed and understood that the Judge of any Court which may hear such divorce proceedings is hereby authorized, if the Court deems it warranted, to include in any decree of divorce any part or portion of said property settlement agreement.

"(Duly signed and acknowledged)."

Pursuant to these agreements, the defendant on September 26, 1946, instituted an action for divorce against Joseph Edward Bower. Default decree was entered October 24, 1946, in favor of the defendant herein.

On August 15, 1946, Joseph Edward Bower was in the exclusive possession of the policy of insurance and remained in possession thereof until his death on September 29, 1955. Subsequent to October 24, 1946, Joseph Edward Bower married the plaintiff herein, and on December 7, 1949, in the exercise of his reserved right to change the beneficiary named in the insurance policy, changed the beneficiary from the defendant herein to the plaintiff herein. Plaintiff at all times since then has been, and now is, the named beneficiary. Plaintiff claims the proceeds of the insurance policy as the beneficiary named in the policy at the time of the insured's death. Defendant claims the proceeds under the agreements between insured and defendant, dated August 15, 1946.

The plaintiff herein, Virginia Bower, as the named beneficiary at the time of the insured's death, is entitled to the proceeds of the policy unless the defendant herein, Mabel Claire Bower, had a vested interest in the policy which could not be divested by a change of beneficiary under the reserved power. It is the position of the defendant that she acquired a vested interest in the policy under the property settlement agreement. Plaintiff contends that the property settlement agreement is against public policy and accordingly void and unenforceable.

It is the general rule that where a right to change the beneficiary has been reserved by the insured, the beneficiary named in the policy has a mere expectancy and no vested right or interest therein during the life of the insured. Morgan v. Penn Mut. Life Ins. Co., 8 Cir., 1938, 94 F.2d 129; Doering v. Buechler, 8 Cir., 1945, 146 F.2d 784; 46 C.J.S. Insurance § 1173 b (2), p. 62. This rule is subject, however, to well recognized exceptions, and a reserved right to change the beneficiary named in the policy may not be exercised where insured has divested himself of the right by agreement. This exception is stated by Corpus Juris Secundum as follows: "However, the reserved right to change the beneficiary may not be exercised where * * * insured has waived or divested himself of the right, as by agreeing to keep the policy in force for the beneficiary or by making a completed gift of the policy to the beneficiary, or where there are facts establishing an equitable interest in the beneficiary. Where sound equities exist in favor of the beneficiary, such rights will be protected against the substitution of a second beneficiary who is a volunteer or who has no superior equities in his favor". 46 C.J.S. Insurance § 1175 c (1) p. 71. See also 2 Appleman, Insurance Law and Practice, Sec. 922; 175 A.L.R. 1220.

Property settlements may create a vested equitable interest. This rule is stated in Appleman's Treatise on Insurance Law, Vol. 2, Sec. 922, p. 338, as follows:

"An antenuptial agreement is a satisfactory consideration for the acquisition of a vested interest in a policy designation. A settlement of property rights arising from a contemplated divorce may have the same result, as may a separate maintenance agreement, unless there is a specific statutory provision prohibiting the acquisition of vested rights by any person — in which event, of course, such

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