Wodell v. John Hancock Mut. Life Ins. Co.

• Decision Date: 11 June 1946
• Citation: 67 N.E.2d 469,320 Mass. 1
• Parties: CATHERINE R. WODELL v. JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

320 Mass. 1

67 N.E.2d 469

CATHERINE R. WODELL v. JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY.

Supreme Judicial Court of Massachusetts, Suffolk.

June 11, 1946

March 6, 1946.

Present: FIELD, C.

J., LUMMUS, QUA & SPALDING, JJ.

Insurance, Life insurance: insanity of insured, rights of beneficiary, change of beneficiary, surrender of policy. Payment. Insanity.

In an action of contract for the full amount of a policy of life insurance brought after the death of the insured by the beneficiary originally named therein, where it appeared that the insured while insane but not under guardianship had purported to substitute his estate as beneficiary under a right reserved in the policy and then had surrendered the policy and had received its cash surrender value fro the insurer, which acted in the change of beneficiary and in the payment to the insured in good faith and without knowledge of his insanity the plaintiff was entitled to have the policy reinstated as it had been before the purported change of beneficiary, but the insurer was entitled to credit for the amount it had paid to the insured.

CONTRACT. Writ in the Superior Court dated January 15, 1945. The claim in the declaration was for $5,000, the aggregate sum of the face value of five policies of life insurance.

The case was heard by Donnelly, J., upon a case stated, the parties agreeing that, if the plaintiff was entitled to recover, "the sum of $2,845 paid . . . to the insured is to be credited on account of the face amount of the policies, leaving the sum of $2,155 due the plaintiff, with interest from the date of death."

L. B. Newman, (F.

E. Gillen with him,) for the plaintiff.

R. C. Evarts, for the defendant.

QUA, J. This action is brought by the widow of St. Clair A. Wodell upon five paid up policies insuring his life issued by the defendant in 1917, in all of which the plaintiff was originally named as beneficiary. A report upon a case stated brings the case here.

On May 13, 1944 the insured changed the beneficiary in accordance with a right reserved in each policy and substituted his own estate for the plaintiff as beneficiary. On May 15, 1944, he surrendered the policies in accordance with the provisions thereof and received the full cash surrender value, amounting to $2,845. On May 13, 1944, and May 15, 1944, and thereafter until his death on August 25 of that year the insured was insane and lacked mental capacity to perform any legal act. The defendant had no notice of the insured's insanity and lack of capacity until after his death. It acted on the change of beneficiary and paid the surrender value of the policies in good faith and in the regular course of its business. The insured was at no time under guardianship. Due proof of death was furnished.

The beneficiary in a life policy in which a right to change the beneficiary has been reserved has more than a mere expectancy. He has a qualified property interest in the contract which ripens into an absolute right if the insured dies without having effected a valid change of beneficiary. Kochanek v. Prudential Ins. Co. 262 Mass. 174 , 177-178. Resnek v. Mutual Life Ins. Co. 286 Mass. 305 , 308. The defendant rightly refrains from questioning the standing of the plaintiff as the original beneficiary to avoid the effect of acts of the insured attempted at a time when he was legally incompetent. Savage v. McCauley, 301 Mass. 162 . Shinholser v. Henry, 151 Ga. 237. Searles v. Northwestern Mutual Life Ins. Co. 148 Iowa, 65, 75-77. Columbian National Life Ins. Co. v. Wood, 193 Ky. 395, 400. Wojtczuk v. Oleksik, 168 Md. 522. Grand Lodge Ancient Order of United Workmen v. Frank, 133 Mich.

232. Grand Lodge Ancient Order of United Workmen v. McGrath, 133 Mich. 626. Fendler v. Roy, 331 Mo. 1083, 1093. McMurtray v. McMurtray, 67 Okla. 50. And see Parry v. Parry, 316 Mass. 692 , 696, where, however, the insured had been adjudicated insane.

But the defendant relies upon the principle established in Reed v. Mattapan Deposit & Trust Co. 198 Mass. 306 , 314, where this court held that a bank which in good faith, in the ordinary course of business, and without knowledge of his condition had cashed the check of a depositor who had become insane could not be compelled to pay the money again to his administrator. The decision was placed upon the grounds that the cashing of the check was not a new contract with an insane person, but was "only the performance of the promise whereby the defendant discharged its indebtedness," and that no duty devolved upon the bank to guard against any misuse to which the depositor might put money lawfully due to him and honestly paid to him in the ordinary course of business without knowledge of his lunacy. The same principle was extended and applied in Leighton v. Haverhill Savings Bank, 227 Mass. 67 , to a case where a savings bank, without knowledge that its depositor had become insane, had paid out the amount of the deposit upon an order signed by her. The rule in these cases is to be distinguished from the general rule long prevailing in this Commonwealth that fair dealing and lack of knowledge will not prevent the setting aside of contracts of an insane person. Seaver v. Phelps, 11 Pick. 304. Gibson v. Soper, 6 Gray, 279. Brigham v. Fayer-weather, 144 Mass. 48 , 51. Reed v. Mattapan Deposit & Trust Co. 198 Mass. 306 , 314. Sutcliffe v. Heatley, 232 Mass. 231 . Brewster v. Weston, 235 Mass. 14 , 16. Foss v. Twenty-Five Associates of Roxbury, Inc. 239 Mass. 295 , 297.

There is strength in the analogy between the case of the bank paying out a deposit, whether to the depositor or on his order, and the case of the insurance company paying on a policy whether to an original beneficiary or to a substituted beneficiary or by way of surrender under an option of the policy. In all these instances it seems that a debtor is merely paying to its creditor according to a previously existing obligation and not in any true sense entering into a new contract. The arguments from the standpoint of commercial necessity are...