Opinion
13189
June 30, 1931.
Before JOHNSON, J., Abbeville, March, 1930. Affirmed.
Action by Glenn Blanchett, as Administrator of the estate of Henry New, against Mrs. Willis. From a judgment for plaintiff, defendant appeals.
The order directing the verdict in favor of plaintiff is as follows:
MOTION FOR DIRECTED VERDICTThat the plaintiff in this case alleges, in effect, that Mrs. Willis was paid this money as a kind of trustee, and that she represented to the Metropolitan Company that, in the event it were turned over to her, she would use the amount in paying the funeral and burial expenses of the said Henry New; and that the money was paid over to her for that purpose; and that she received that money for that purpose, and refused to so apply it.
The testimony in this case fails to show anything of that kind. The testimony of Mr. Armour is that all that she said about it was, he asked her who would be responsible for the funeral expenses, and she said she would. That is a different thing from the cause of action alleged in the complaint. They couldn't maintain an action upon that statement, even if they had alleged it in the complaint. They have not alleged that cause of action in the complaint. They allege that she received this money for a specific purpose, that is, to pay the burial expenses, and that she fraudulently appropriated it to her own use. His testimony is that he paid this money over to her, and he asked her who was going to pay the funeral expenses, he asked who was responsible, and she said she would be responsible.
We ask for a directed verdict on the further ground that the plaintiff in this case voluntarily paid this bill without any conditions or agreement on the part of Mrs. Willis, and, having voluntarily paid it, he can't recover it from her.
After arguments for and against the above motion, the Court stated that it was a case in which a verdict should be directed by the Court for either the plaintiff or the defendant, and asked that counsel agree to allow the Court further time in which to look up the law of the case, decide which side was entitled to a directed verdict, and render the Court's ruling upon motions for directed verdict. Counsel for both sides agreed.
On May 23d, the following was received by the stenographer from Judge J. Henry Johnson:
Pursuant to agreement with counsel, upon the close of evidence in the above-entitled cause, I will thank you to incorporate in your stenographic record of the trial the following ruling upon the motions for directed verdict:
Upon consideration of the motions for directed verdict herein, I have reached the conclusion that I should order a verdict for plaintiff for the proceeds of the policies paid over to defendant by the insurance company, his counsel having in open Court waived any claim to damages.
The action sounds in tort, is predicated upon two alleged causes of action not separately stated (though no objection thereto was made by defendants), whereby defendant is charged (1) with the fraudulent procurement of such funds, and (2) with the fraudulent misappropriation or wrongful withholding of such funds, and, while there is a total failure of proof of actionable fraud in the procurement of such funds, under the view that I take of the matter, defendant's conduct in refusing to pay over the same unto the administrator amounts to a wrongful withholding, or legal fraud upon the estate of the intestate.
While the complaint did not so allege, the photostatic copies of the policies in question, admitted in evidence without objection, show that the policy contracts provide for the payment of the proceeds thereof, if the insured shall die prior to the date of the maturity of the endowment (which he did), "To the Executor or Administrator of the Insured, unless payment be made under the provisions of the next succeeding paragraph"; and then follows that provision of the policy quoted in the fourth paragraph of the complaint, and in the sixth paragraph of the answer.
This quoted provision has been popularly termed by the Courts generally as a "Facility of Payment Clause," and is universally held to be for the convenience and protection of the insurer; to permit it to make prompt payment after death, and yet procure a valid acquittance of its obligation under the policy. The authority granted by the policy contract in such clause is that the company "may" make payment, etc., and the effect of such provision is invariably held to give the insurer the option of making such settlement, to the end that those in need of the proceeds for last illness and burial expenses may collect without the delay incident to administration, and that the company may be protected in its prompt discharge of its contract obligation.
Practically all cases on the subject, which is one of novel impression in this jurisdiction, involved litigation between some relative or personal representatives of insured, on the one hand, and the insurance company, on the other; and, in every case which I have had an opportunity to examine, the insurer, under such, "Facility of Payment Clause," had already paid the proceeds of the policy over to some one of the class mentioned in such clause, and, because of the right of the company thus to procure its discharge from liability by making settlement in accordance with such clause, it was held by all Courts that there could be no recovery against the insurer; it is bound only by its written contract, and when it makes a settlement authorized by such contract its liability is at an end, except that, of course, the Courts could relieve against such a settlement upon clear proof that such provision of the policy was taken advantage of for some fraudulent purpose.
In the case at bar, however, the contest is between the administrator and one member of the class named in the "Facility of Payment Clause," to which action the insurer, having already paid over the proceeds to such member of the class mentioned, is not a party. In other words, the instant cause involves the rights of the parties among themselves, and not the liability of the insurer, and but few reported cases of this nature are to be found.
The question arises, therefore, whether or not a policy of life insurance, made payable "to the executor or administrator of insured," which, for the convenience and protection of the insurer alone, gives to it a mere option to make payment to some relative of insured, vests the title to such proceeds, when so paid, solely in the member of the class selected by it to the exclusion of the intestate insured's personal representative and other distributees at law?
In my opinion, reason and justice favor the right of the personal representative to recover the proceeds from such collecting member of the class mentioned for the benefit of the estate generally, and for a ratable distribution of any surplus above intestate's debts among his distributees at law as a whole; otherwise a single member of the class mentioned in the "optional settlement plan," and a person not specifically named as beneficiary might collect and retain for his or her individual use and benefit (as defendant is doing here) thousands of dollars of insurance upon the life of an intestate to the absolute exclusion and disinheritance of other distributees at law much closer by blood, and in actual fact, to the insured, and that also without even paying the last illness and burial expenses of such insured, as defendant is doing here.
And this view of the Court is supported by Caveny v. Healey, 94 N.J. Law, 28, 109 A., 204, judgment affirmed in 95 N.J. Law, 245, 111 A., 925, for the reasons assigned in the opinion first cited; and in Ogletree v. Hutchinson, 126 Ga. 454, 55 S.E., 179.
In the former it is held, in substance, that payment by the insurer to one of the class referred to in the "Facility of Payment Clause," did not change the original contract of life insurance by which the company had agreed to pay "to executors or administrators of insured," and did not change the beneficial interest in the fund, the clause affecting only the right of the company to make payment, and not the rights of the claimants among themselves. In other words, the "Facility of Payment Clause" is solely for the convenience of the insurer, to enable it to make prompt settlement in the event of death, with certainty that the validity of such settlement could not be questioned, so far as it is concerned.
And in Ogletree v. Hutchinson, supra, it was held, syllabus by the Court: "A stipulation in a policy of life insurance that payment of the amount of the policy to any relative of the insured belonging to a designated class will discharge the company from liability is valid, but such a stipulation does not have the effect to make the person actually receiving the money thereunder the beneficiary of the policy. It is merely an appointment, by the parties to the contract, of a person who may collect the amount due under the policy for the benefit of the person ultimately entitled thereto." While it is true there was a designated beneficiary in the policy considered in this case (with a "Facility of Payment Clause" also), the reasoning of the Court is equally applicable here, since, in the policies in the instant clause, the executor or administrator was the designated beneficiary, and the "Facility of Payment Clause" (inserted for the convenience of the insurer, who alone could exercise the option thereby granted), merely appointed the defendant (not by name), or any other member of the class named as the person who might collect for the benefit of those ultimately entitled to the fund, the personal representatives of insured.
The case of Brown v. Dunn, 45 R.I. 63, 119 A., 758, relied upon by defendant, does not appeal to my sense of justice as much as Caveny v. Healey, supra, and Ogletree v. Hutchinson, supra. Moreover, I do not consider that decision in point for the reason that the Court held there that, when intestate's mother (who was specifically named as beneficiary) predeceased the insured there was no beneficiary living at the time of insured's death, and, therefore, payment to any of the class mentioned in the "Facility of Payment Clause" was good. It will also be observed that the Court does not hold that plaintiff could not maintain some other action against defendant, but only that he could not maintain assumpsit. While I am not very familiar with the system of common-law pleading of force in Rhode Island, I am of the opinion that, under such system of pleading, trover was the proper action for plaintiff to have brought. "The legal wrong denominated `Conversion' is any unauthorized act of dominion or ownership exercised by one person over personal property belonging to another; and trover is the technical name of the common-law action provided for the redress thereof." 38 Cyc., 2005-1006. It would seem, therefore, that Brown v. Dunn is authority only for the proposition that, under the system of pleading obtaining in Rhode Island, the plaintiff in that case pitched his right to recover upon the wrong theory; upon assumpsit, rather than upon trover; upon the theory of money had and received, rather than upon the theory of conversion.
I am of the opinion, therefore, that, inasmuch as the policy contracts before me provide for payment to the administrator of insured, and establish the beneficial interest in the proceeds in the estate of the intestate, merely appointing defendant (not by name, but as one of the class mentioned in such "Facility of Payment Clause" to whom the company, at its option, might make payment) as one of those who might collect the proceeds for the benefit of all ultimately entitled to share in it, and thereby legally acquit the insurer of further liability, recovery should be had by plaintiff upon that cause of action charging defendant with fraudulent misappropriation, or wrongful withholding, of the proceeds.
Of this I am convinced there can be no question, since plaintiff might have alleged a lawful procurement by defendant, and a fraudulent misappropriation, or wrongful withholding, or wrongful conversion, after collection of the fund. The evidence establishes a lawful procurement, under the terms of the "Facility of Payment Clause," but, in the view I have taken of the law applicable, it also establishes a wrongful withholding or conversion of such fund, after her lawful procurement thereof for the benefit of those ultimately entitled to it; the personal representative of insured for the payment of intestate's debts, and for ratable distribution of any surplus among defendant and all other distributees of insured.
While the evidence shows policies were made payable to "the executor or administrator of insured," the complaint did not so allege, but, in the interest of justice, the Court will allow an amendment of the complaint in that respect to conform to the proof.
Plaintiff having offered to withdraw any claim for damages, in order to permit the Court to dispose of the cause by motion for directed verdict, it is ordered that a verdict be directed for plaintiff for $750.12, the proceeds collected by defendant and wrongfully withheld from plaintiff, and that the complaint be amended to conform to the proof, by alleging that such policies were made payable to the executor or administrator of insured.
Messrs. J. Moore Mars and Wm. P. Greene, for appellant, cite: Amendment changing cause of action improper: 126 S.E., 520; 119 S.C. 259; 26 S.E., 600. Facility of payment clause made person selected by company entitled to proceeds: 24 At. Rep., 82; 72 N.E., 989; 119 At. Rep., 758; 164 N.E., 192; 55 S.E., 159; 31 Cyc., 1038-39.
Messrs. Hubert C. Cox and J.M. Nichols, for respondent, cite: Amendment proper: 127 S.C. 551. Personal representative proper payee of insurance policy: 94 N.J. Law, 28; 109 At. Rep., 204; 55 S.E., 179; 50 N.J. Law, 72; 22 N.E., 703; 16 N.E., 14; 72 N.E., 989; 58 Atlantic, 454; 87 Pa., 133; 182 N.Y.S., 221.
June 30, 1931. The opinion of the Court was delivered by
It is our opinion that the order of his Honor, Circuit Judge Johnson, directing a verdict in favor of the plaintiff, correctly disposed of this cause. It will be reported, and is hereby affirmed.
MESSRS. JUSTICES STABLER and CARTER and MR. ACTING ASSOCIATE JUSTICE JOHN I. COSGROVE concur.
MR. JUSTICE COTHRAN dissents.
This is a contest between the plaintiff, as administrator of the estate of Henry New, deceased, and the defendant Lula Willis, a sister of the intestate, over the proceeds of certain policies issued upon the life of Henry New, amounting to $750.12, which were in force at the time of his death, and which were paid by the insurance company to the defendant, Mrs. Willis.
The admitted facts of the case are these:
During his lifetime, the intestate Henry New held three life insurance policies in the Metropolitan Life Insurance Company, the dates and amounts of which do not appear in the record for appeal, and are not material in the present controversy; the insured died in February, 1929, and the total amount due upon the three policies was ascertained to be $750.12. The insured was a single man and his heirs-at-law were his sister, Mrs. Willis, his brother, Miller New, and S.P. White, a son of a predeceased sister; the plaintiff administrator is a son-in-law of Mrs. Willis, having married her daughter.
On March 28, 1929, about a month after the death of the insured, the company paid to Mrs. Willis the proceeds of the insurance, $750.12; the plaintiff contends that the proceeds were payable to him as administrator, and that Mrs. Willis induced the payment to her upon the false representation that she would pay the "funeral and burial" expenses of the insured, which she has failed and refused to do; the defendant contends that the company was authorized to pay, and she to receive, said proceeds under the terms of the policy; that the same were paid to her, and that she is in no manner accountable to the plaintiff therefor.
The case was tried before his Honor Judge Johnson and a jury, and after motions by the respective parties for a directed verdict the case was withdrawn from the jury, and later, upon consideration, his Honor filed an order for judgment in favor of the plaintiff for $750.12, the claim for damages having been withdrawn. From this judgment, the defendant has appealed.
The appeal turns upon the right of the insurance company, under the terms of the policies, to make payment to Mrs. Willis, and upon the effect of such payment, as between the administrator and Mrs. Willis.
The policies provided that the amount of the policy in each case should be paid "to the executor or administrator of the insured, unless payment be made under the provisions of the next succeeding paragraph."
The next succeeding paragraph is as follows: "The company may make any payment or grant any non-forfeiture privilege provided herein to the insured, husband or wife, or any relative by blood or connection by marriage of the insured, or to any other person appearing to said company to be equitably entitled to the same by reason of having incurred expense on behalf of the insured, or for his or her burial; and the production of a receipt signed by either of said persons, or of other proof of such payment or grant of such privilege to either of them, shall be conclusive evidence that all claims under this policy have been satisfied."
It will be observed that the amount of each policy was payable to the executor or administrator of the insured, only upon the conditions expressly stated, that payment had not been made under the provisions of the next succeeding paragraph, which is the paragraph just quoted.
Under this quoted paragraph, the company had the legal right to pay, and a member of either of the classes named had the legal right to receive, the proceeds of the insurance. There were two classes: (1) Certain persons related by affinity or consanguinity to the insured; (2) any other persons who may appear to the company to be equitably entitled to the fund by reason of having incurred expense on behalf of the insured or for his or her burial. It is clear that the company may have exercised its option to pay any member of the first class regardless of the condition attached to the second class; that is to say, it was not necessary for any one related in the degrees mentioned in the first class to show that he or she was equitably entitled to the fund as indicated. The evidence shows that the defendant, Mrs. Willis, was able to qualify as a member of either class.
The fact, if it be a fact, that Mrs. Willis induced the company to pay to her the proceeds upon her promise to pay the funeral expenses, cannot be considered as a false representation, the statement of an existing fact; the most that can be said of her failure to carry out that promise is that she has broken an executory agreement; if the company saw fit to rely upon that promise, no one has the right to complain, unless it be, possibly, some one who would be entitled to enforce it as a beneficiary, one who had supplied the essentials of the funeral, or who had ministered to the deceased in his last illness.
It appears as a fact, however, that the company recognized the defendant as the beneficiary, not upon the ground that she had promised to pay these expenses, but upon the ground that she was "a sister and care-taker" (see proofs of death), coming within both of the classes of beneficiaries.
The complaint apparently is based upon the theory of subrogation: That the plaintiff as administrator was secondarily liable for the funeral expenses; that he paid them; and that he was thereby subrogated to the rights of the undertaker against Mrs. Willis, who had promised to assume the cost. The decree proceeds upon an entirely different theory: That the estate was the immediate beneficiary and that, when Mrs. Willis received the proceeds of the insurance, she held them as trustee for the administrator.
The theory of the administrator cannot be sustained for the simple reason that he was in a representative capacity the primary debtor, and it is universally held that the right of subrogation enures only to the benefit of one secondarily liable.
The theory of the decree cannot be sustained, for the reason that it has no support in the complaint, which is based upon an entirely different theory; and for the further reason that the policy distinctly provides that the administrator shall be entitled to the proceeds, only in the event that a beneficiary in one or the other of the classes named is not appointed by the company as beneficiary. (See provision above quoted.)
It is suggested that the provision is intended for the benefit of the company, and cannot be considered as determining any rights as between the administrator and the one selected by the company as the beneficiary. It would appear illogical to hold that the company had the right to pay and Mrs. Willis the right to receive, but that she must surrender her legal right to the administrator, whose right does not come into existence at all, except upon the failure of the company to designate a beneficiary from the classes indicated.
The authorities, in my opinion, overwhelmingly sustain the position of the appellant, as will appear by an examination of the following, many of which have construed the identical clauses under review in the present case.
The case of Prudential Ins. Co. v. Brock, 48 App. D.C., 4, 9 L.R.A., 1918-E, 489, involved a policy in the exact terms of the policy in the case at bar. Upon the death of the insured, the company paid the proceeds of the policy to the husband of the insured, who accompanied the proofs of death with a statement that he would pay the funeral expenses. The policy was payable to the executor, primarily, with the same limitation as in this policy. He sued the company for the proceeds of the policy, and in the trial Court had a verdict. Upon appeal, the judgment was reversed the Court holding, quoting from Thomas v. Ins. Co., 148 Pa., 594, 24 A., 82, as follows: "The company paid this money to the person appearing to it to be equitably entitled thereto, and produced a receipt signed by her for the same. This was a complete defense, under the very terms of the policy. It is for the company to judge who is the person to be equitably entitled to the money. This discretion is vested in it by the contract between the parties. The contract itself does not offend against any rule of law or public policy, and we cannot hold that the administrator is entitled to recover without making a new contract for the parties."
See, also, Metropolitan Life Ins. Co. (the same company involved in the case at bar and the same policy) v. Nelson, 170 Ky., 674, 186 S.W. 520, Ann. Cas., 1918-B, 1182 L.R.A., 1916-F, 457, and note; Sheridan v. Ins. Co., 230 Ill., 33, 82 N.E., 426.
It was held in Metropolitan Life Ins. Co. (this company and this policy) v. O'Farrell, 64 Kan., 278, 67 P., 835, 836, that where the estate of the insured is named as beneficiary the application, "subject to provisions of policy applied for as to payment," and the policy provides that the benefit shall be paid to one of the persons described in a condition authorizing payment either to the executor or administrator, husband or wife, or any relative by blood or lawful beneficiary of the insured, and providing that production of a receipt in full, signed by either of them, shall be conclusive evidence that all claims under the policy have been fully satisfied, a payment of the benefit in good faith to the husband of the insured bars a recovery by the administrator of the latter.
See, also, Renfro v. Metropolitan Ins. Co., 148 Mo. App. 258, 129 S.W. 444; Brooks v. Met. Ins. Co., 70 N.J. Law, 36, 56 A., 168; Metropolitan Life Ins. Co. v. Schaffer, 50 N.J. Law, 72, 11 A., 154; Brennan v. Ins. Co., 170 Pa., 488, 32 A., 1042; Brown v. Dunn, 45 R.I. 63, 119 A., 758; McDaniels v. Ins. Co., 332 Ill., 603, 164 N.E., 192.
Under the provision in the policy which makes the proceeds payable to the administrator "unless payment be made under the provisions of the next succeeding paragraph," and the payment has been made under that paragraph to the defendant who was a member of the class indicated, I do not see how it is possible to conclude that the administrator has any rights whatever in the proceeds of the insurance.
I think, therefore, that the motion of the defendant for a directed verdict in her favor should have been granted.