Summary
disapproving assignment of a policy where "the insured was but incidentally a party to a transaction which in its inception was contrary to public policy"
Summary of this case from AXA EQUITABLE LIFE INSURANCE CO. v. INFINITY FIN. GROpinion
15790, 15791.
APRIL 17, 1947.
Accounting, etc. Before Judge Crow. Dougherty Superior Court. January 24, 1947.
Carlisle Bootle and Farkas Burt, for plaintiff.
Bennet, Peacock Perry, for defendant.
1. Count one of the petition as amended — alleging that the plaintiff's intestate, the insured, assigned a life-insurance policy to the defendant as security for a loan, and that after the death of the insured the defendant was paid the proceeds and became a trustee for the amount in excess of money advanced by him for the insured, and count two — alleging that the assignment of the policy to the defendant for the full amount of the proceeds was a wagering contract, and that he became trustee for the amount of the proceeds of the policy received by him in excess of money advanced by him for the insured — sufficiently alleged the creation of a constructive trust and a cause of action good against the general and special grounds of demurrer.
2. Error, if any, in admitting over objection testimony relating to conversations between the defendant and the deceased insured was rendered harmless by similar testimony of another witness afterwards admitted in evidence without objection.
3. The charge of the court, "If you should find the policy of insurance . . lapsed because of the nonpayment of premiums, and that [the insured] voluntarily caused the same to be reinstated, and in good faith had [the defendant] named as beneficiary, intending in the event of his death that [the defendant] should have the proceeds of the policy, and this was not done simply to permit [the defendant] to speculate on the life of the [insured], then the defendant would be entitled to prevail, and that would be true even though it appeared that [the defendant] was [to pay?] and did pay the premiums necessary to reinstate and keep the policy in force," correctly stated the applicable principles of law and was not error for any reason assigned.
4. The record not disclosing any contention that the relationship of the defendant to the insured as half first cousin constituted an insurable interest, the court did not err in failing to give the requested charge that a cousin or half cousin has no beneficial interest in the life of the insured simply by reason of that relationship; that is, the fact that the defendant is the half first cousin of the insured would not give the defendant an insurable interest in the life of the insured.
5. The evidence was sufficient to support the verdict.
Nos. 15790, 15791. APRIL 17, 1947.
Mrs. Kathryn C. Wages filed in Dougherty Superior Court a petition against Marvin E. Wages. Count one of the petition as amended alleged substantially the following: John T. Wages Jr., the petitioner's husband, died intestate on August 29, 1943, and she was appointed temporary administratrix of his estate. On February 24, 1925, Prudential Insurance Company issued a $5000 life-insurance policy to the petitioner's husband payable immediately upon proof of death. The policy originally named the mother of the insured as beneficiary and provided that, if there was no beneficiary living at the death of the insured, the proceeds from the policy should be payable to the insured's executors, administrators, or assigns, unless otherwise provided. No contrary provision was contained in the policy. The policy also gave the insured the right to change the beneficiary. Registered on the policy was an endorsement showing a change of beneficiary on August 26, 1931, to the petitioner. On October 17, 1938, the insured requested the company to change the beneficiary so as to make the policy payable to the defendant who was a cousin of the insured. The requested assignment was for the purpose of assigning the policy as collateral security to the defendant for any amount he might put up to protect the policy and keep it alive. The insured became physically and mentally sick and was a patient in Allen's Invalid Home from December 18, 1938, to February 3, 1939. During the time he was a patient, and on January 20, 1939, he signed the following printed form requesting a further change of beneficiary: "If this policy matures by death, the proceeds shall be payable to [the defendant] beneficiary, cousin of the insured, if living, otherwise to the executors or administrators of said estate;" and on the next day, January 21, 1939, the insured on the printed form of the company signed the further request for change of ownership: "All legal incidents of ownership in the policy, including the rights, benefits and advantages which the printed provisions thereof purport to confer on the insured, shall, anything in the policy to the contrary notwithstanding but subject to any limitation herein set forth, belong to [the defendant], cousin of the insured, the executors or administrators" of the defendant. The policy was endorsed on January 26, 1939, so as to make the defendant, cousin of the insured, or his executors or administrators, the beneficiary. The insured was in a highly nervous state when he signed the two endorsements, all of which was known to the defendant, and he was induced to do so by the defendant to protect an advance of approximately $489.89. The defendant was not dependent upon the insured and had no insurable interest other than as a creditor. Subsequently the defendant collected the proceeds of the policy. The petitioner has sought an accounting with the defendant regarding the same, but the defendant has steadfastly refused to divulge any details, and has declined to inform her what indebtedness, if any, was owing to him by the insured at the time of his death. The assignment of the policy was made to the defendant as collateral security for a debt, and when he collected the proceeds of the insurance, he became trustee of such fund, and the petitioner is entitled to an accounting. The petitioner is also entitled as temporary administratrix to the entire proceeds of the policy less any unpaid balance of the indebtedness which the assignment of the policy secured. There was no new consideration for the two requests for assignment on January 20 and January 21, 1939. By these requests the insured had no intention to change the status of the policy other than to furnish collateral security to the defendant for the aforesaid advance. It would not have been necessary for the petitioner to be appointed administratrix and to incur the expense of filing this suit, had the defendant frankly informed her of the status of the policy and made a proper accounting to her, and the defendant has caused the petitioner unnecessary trouble and expense.
The prayers in count one were: 1. That the defendant account to the petitioner for the proceeds of the policy. 2. That the court decree that the defendant is a trustee of the funds which he received as proceeds of the policy on the life of the insured, and as trustee must account to the petitioner. 3. That the court decree that the proceeds of the policy constitute money had and received by the defendant for the benefit of the estate of the insured, and that the petitioner as the personal representative of the estate is entitled thereto. 4. That a judgment be entered awarding to the petitioner all of the proceeds of the policy which remain after the deduction of the indebtedness secured by the policy. 5. That because of his stubborn litigiousness the defendant be required to pay all of the expenses to which the petitioner has been put in order to obtain an accounting, including the cost of this proceeding and a reasonable attorney's fees. 6. That process issue. 7. That the petitioner have such other and further relief as to the court seems meet and proper.
Count two contained allegations similar to those in count one, except that, instead of alleging that the policy was delivered as collateral security, and that the insured was induced to sign the two endorsements in favor of the defendant to protect an advance of approximately $489.89, it was alleged: At the time the request was made, the policy had lapsed by reason of the insured's failure to pay the premiums and the same was reinstated by the defendant with the understanding that he would be named beneficiary and pay the premiums on the policy as they became due and pay all costs or amounts necessary to reinstate the policy, and in the event of the death of the insured the defendant should receive the proceeds of the policy. The defendant paid no other consideration for the assignment of the policy and the change of the beneficiary. The assignment and change of beneficiary were made to circumvent the law against wagering policies. The defendant at the time of the assignment and change of beneficiary intentionally entered into a speculation upon the life of the insured, wagering the premiums to be paid by him against large profits which he would receive on the death of the insured, the defendant having no insurable interest in the life of the insured. Therefore, the assignment of the policy and change of beneficiary constituted a wagering contract, which is illegal and void, and the defendant holds the proceeds received from the policy as trustee for the petitioner. Count two contained prayers similar to those in count one, except that there was no prayer for general relief, and instead of praying that the court decree that the proceeds of the policy constituted money had and received, it was prayed that the agreement under which the defendant received and held the policy be declared a wagering agreement prohibited by law.
The defendant filed to the original petition a demurrer on general and special grounds. After the petition was amended, the defendant filed a second demurrer renewing his original grounds and adding additional grounds. The defendant also filed an answer admitting that the insurance company issued a $5000 policy to the insured; that the insured died intestate; that the defendant was a cousin of the insured and was not dependent upon him for support, but denied other material allegations. The court overruled all of the grounds of demurrer, and the defendant filed proper exceptions pendente lite.
On the trial there was uncontroverted evidence showing the following facts: The insurance policy in question was issued in 1925. The insured carried it for about twelve years, at which time, because of physical and financial reverses, he became unable to pay the premiums. In 1938 the policy which had become lapsed was reinstated upon the payment by the defendant, who was a half first cousin of the insured, of the premiums that were in arrears. Thereupon the insurance company, at the request of the insured, changed the beneficiary so as to make the policy payable to the defendant. The policy was delivered to the defendant, and he paid the premiums until the insured died on August 29, 1943, and then collected from the insurance company $4381.86, representing the proceeds from the policy. The insured was survived by a widow and three small children. The widow, who is the petitioner, was appointed temporary administratrix upon the insured's estate.
The evidence was conflicting on the question as to what was the purpose of the insured in requesting the change of beneficiary and in delivering the policy to the defendant. As to this issue, there was evidence for the petitioner that the name of the beneficiary had been changed and the policy delivered as security for $489.89, which the defendant had loaned to the insured for the purpose of reinstating the policy, and of which amount $406.19 represented a loan on the policy and $83.70 represented premiums that were in arrears; it having been agreed that, in the event the insured died, the defendant should deduct the amount of the loan and the premiums from the total amount of the insurance, and the balance would go to the petitioner and the children. There was evidence for the defendant that he was reared in the home of the insured and grew up with him. He had frequently been called upon to assist the insured in financial ways, and the insured told the defendant that he wanted to give him the policy, and that, if he would not take it, the insurance was going to be dropped because the insured could not carry it. Other facts will be stated in the opinion.
At the conclusion of the evidence the jury returned a verdict in favor of the defendant. The petitioner's motion for a new trial as amended was overruled, and she excepted. The defendant filed a cross-bill of exceptions assigning error on his exceptions pendente lite.
1. The defendant demurred to the original petition and to the petition as amended on the grounds: It set forth no cause of action, either legal or equitable; it shows on its face that the plaintiff, as well as the insured, was guilty of laches, and the suit is barred as a result thereof; the plaintiff as named therein is not the proper party plaintiff.
This is not a suit against the insurance company, making material for consideration the provisions of the policy, but is an action by the administratrix of the estate of the insured against one alleged to be illegally withholding funds belonging to the estate. and no question arises as to the provisions of the policy. The petition shows that the insured died on August 29, 1943, and the suit was filed on May 5, 1945.
In Quillian v. Johnson, 122 Ga. 49 (5) ( 49 S.E. 801), it was held: "Irrespective of whether the holder of a policy of insurance on his own life may legally sell and assign the policy to one having no insurable interest in his life, the policyholder is certainly not at liberty to make the policy the subject-matter of a purely wagering and speculative contract between himself and a person having no interest therein." In Union Fraternal League v. Walton, 109 Ga. 1 ( 34 S.E. 317, 46 L.R.A. 424, 77 Am. St. R. 350), it was held: "While a valid contract of insurance can not lawfully be taken on the life of another by one who has no insurable interest therein, because it contravenes public policy, yet, as one has an insurable interest in his own life, he may lawfully procure insurance thereon for the benefit of any other person whose interest he desires to promote. Such a contract can not be defeated because of the want of insurable interest in the beneficiary, when it appears that the person whose life was insured acted for himself, at his own expense and in good faith, to promote the interest of the beneficiary, in taking out the policy. A contract so entered into is in no sense a wagering or speculative one." It was said in the opinion: "The rule which restricts the execution of a valid contract of insurance on the life of another to one who has an insurable interest in that life is founded alone on public policy, and it may be stated in general terms that where one has an interest in a life that interest is insurable. Beyond all controversy a man has an insurable interest in his own life, and we fail to see, when having that interest he enters into a contract with an insurer by which, for a stipulated sum which he periodically pays, the insurer becomes liable to pay a given sum of money at the death of the insured, why he who is most interested, whether actuated by the ties of relationship, motives of friendship, gratitude, sympathy or love, may not make the object of his consideration the recipient of his own bounty." This decision was followed in Rylander v. Allen, 125 Ga. 206 ( 53 S.E. 1032, 6 L.R.A. (N.S.) 128, 5 Ann. Cas. 355), where it was held: "One has the right to procure insurance on his own life and assign the policy to another, who has no insurable interest in the life insured, provided it be not done by way of cover for a wager policy." In Exchange Bank of Macon v. Loh, 104 Ga. 446 ( 31 S.E. 459, 44 L.R.A. 372), it was held: "A creditor has for the purpose of indemnifying himself against loss, but for no other, an insurable interest in the life of his debtor." The interest of the creditor in the proceeds of an assigned policy of insurance is stated in Morris v. Georgia Loan Co., 109 Ga. 12 ( 34 S.E. 378, 46 L.R.A. 506), as follows: "A creditor of a person having his life insured, who takes an assignment of the policy to secure his debt, is only entitled to retain after collection of the policy such an amount as is sufficient to pay the debt together with all advances the creditor has made to keep the policy in force." In Turner v. Davidson, 183 Ga. 404, 406 ( 188 S.E. 828), it was said: "While it is true that it has been held that the question of lack of insurable interest can be raised only by the insurer ( Clements v. Terrell, 167 Ga. 237, 145 S.E. 78, 60 A.L.R. 969), this principle, we think, is applicable only where it is sought to invalidate the policy on that ground. The fact of a lack of insurable interest may be considered as throwing light upon the nature of the transaction between the insured and the beneficiary or assignee, — as to whether or not it invaded the rule as to public policy, so as to determine their respective equities. It makes no difference that the insurer has for several years been paying the benefits to Davidson, thus apparently waiving any defense it may have on the ground of lack of insurable interest of the beneficiary or assignee in the life of the insured. Such a waiver does not exculpate Davidson, whose testimony and that of his witnesses confirm his intention to make a wagering contract. Under the testimony of the defendant and the insurance agent, the insured was but incidentally a party to a transaction which in its inception was contrary to public policy. It is true that in the Code, § 37-112, it is provided that `When both parties are at fault, and equally so, equity will not interfere, but will leave them where it finds them;' but it is also provided in that same section that `The rule is otherwise if the fault of one overbalances, decidedly, that of the other.' In this case Davidson and the insurance agent took advantage of Turner's embarrassment and colluded to have the insurance policy issued in favor of Davidson. And if the arrangement to have the policy issued on the life of the insured, upon his application, and then assigned by him to the real beneficiary, Davidson, was a cover for a speculating risk, contravening the general policy of the law, it would not be sustained."
It has also been held: "As a general rule the proceeds of a policy in which a third person is named as beneficiary belong exclusively to such beneficiary as an individual, and are not subject to administration as an estate of the insured ( Doody Co. v. Green, 131 Ga. 568 (2), 62 S.E. 984; Cates v. Bankers Health c. Insurance Co., 27 Ga. App. 159, 107 S.E. 615; 37 C. J. 566); but where it appears as a matter of fact that the policy is held by a creditor merely as security for a debt of the insured, the creditor is entitled only to reimbursement, and is bound to account for the balance to the legal representative of the debtor. . . Morris v. Georgia Loan Co., 109 Ga. 12 ( 34 S.E. 378, 46 L.R.A. 506); Sprouse v. Skinner, 155 Ga. 119 ( 116 S.E. 606); 37 C. J. 568, § 328." Saville v. Lee, 43 Ga. App. 263 (4) ( 158 S.E. 441); Chapman v. Lipscomb-Ellis Co., 194 Ga. 640, 643 ( 22 S.E.2d 393, 143 A.L.R. 286).
Trusts are implied, "1. Whenever the legal title is in one person, but the beneficial interest, either from the payment of the purchase-money or other circumstances, is either wholly or partially in another." Code, § 108-106. "Constructive trusts are such as are raised by equity in respect of property which has been acquired by fraud, or where, though acquired originally without fraud, it is against equity that it should be retained by him who holds it." O'Neal v. O'Neal, 176 Ga. 418 (2) ( 168 S.E. 262); Murray County v. Pickering, 196 Ga. 208 (2) ( 26 S.E.2d 287); Harris v. Rowe, 200 Ga. 265, 270 (2) ( 36 S.E.2d 787). A constructive trust is "not created by any words either expressly or impliedly evincing a direct intention to create a trust, but by the construction of equity in order to satisfy the demands of justice." 65 C. J. 223, § 14. However, "If, from all the facts and circumstances, an implied trust is otherwise established, it is not destroyed by an express verbal agreement which may have constituted a part of the transaction." Hudson v. Evans, 198 Ga. 775 (2b) ( 32 S.E.2d 793).
The allegations of the petition as contained in counts one and two were sufficient to allege the creation of a constructive trust, and a cause of action good against the general grounds of demurrer.
The defendant also demurred on numerous special grounds. These have been carefully examined but have been found to be without merit, and no extended discussion is deemed necessary, especially in view of the ruling on the merits in the fifth division of the opinion.
2. Special grounds 1 to 6 inclusive of the motion for new trial complain of the admission in evidence of conversations between the defendant and the deceased insured, to the effect that the insured had given the policy and its benefits to the defendant. Substantially the same testimony, from an agent of the insurance company, was afterwards admitted without objection; and, under repeated decisions of this court, the previous error, if any, was thereby rendered harmless.
3. The 7th special ground complains of the following charge: "If you should find the policy of insurance in question in this case lapsed because of the non-payment of premiums, and that [the insured] voluntarily caused the same to be reinstated, and in good faith had [the defendant] named as beneficiary, intending in the event of his death that [the defendant] should have the proceeds of the policy, and this was not done simply to permit [the defendant] to speculate on the life of [the insured], then the defendant would be entitled to prevail, and that would be true even though it appeared that [the defendant] was [to pay?] and did pay the premiums necessary to reinstate and keep the policy in force."
While numerous objections are stated in this ground, they are found upon examination to be without merit, and no extended discussion is deemed necessary. The charge fully presented to the jury the respective contentions of the parties, correctly stated the applicable principles of law, and was not in conflict with another portion of the charge, as insisted by the movant.
4. The 8th special ground complains that the court erred in failing to give the following requested written charge: "A cousin or half cousin, simply by reason of that relationship, has no beneficial interest in the life of the insured. That is, the fact that the defendant, Marvin Wages, is the half first cousin of the deceased, John T. Wages Jr., would not give Marvin Wages an insurable interest in the life of John T. Wages Jr."
Since the court sufficiently charged the jury that the defendant would not be entitled to a verdict in his favor unless it was shown that he had an insurable interest in the life of the insured under the facts of the case, and the record does not show any contention that the fact that the relationship of the defendant to the insured as half first cousin constituted an insurable interest, the court did not err in failing to give the requested charge.
5. It could not be said under the evidence in this case that a finding was demanded as a matter of law that the policy was assigned solely to secure the defendant for the money advanced by him, or that the agreement constituted a wagering contract. The insured, as he had a right to do, procured a policy on his own life, in which he manifestly had an insurable interest, and for a period of about 12 years paid the premiums out of his own funds. Although, at the time the defendant advanced money for payment of an outstanding loan, the policy had lapsed, yet the insured still had the right to control the policy and to cause the company to reinstate it. The defendant could not originally have caused the policy to issue with himself as beneficiary, but it would be unreasonable to say that, though the insured procured the policy himself, he did so with an intention to place its benefits in the defendant 12 years later and thus circumvent the law. Certainly, after maintaining the policy 12 years, the insured, as the rightful owner thereof, could legally agree for the defendant to become the beneficiary in consideration of money advanced by him and his agreement to pay future premiums on the policy.
The evidence, though sharply conflicting as to whether it was the intention of the insured that the defendant retain the total proceeds of the policy or only the amount of the money advanced and paid by him, was sufficient to support the verdict in favor of the defendant for the full amount of the proceeds of the policy, and the court did not err in overruling the plaintiff's motion for a new trial. Judgment affirmed on both the main and cross-bill of exceptions. All the Justices concur.