Opinion
April, 1922.
Gustav Lange, Jr., for plaintiff.
Holm, Whitlock Scarff ( Victor E. Whitlock and Herbert D. Chabot, of counsel), for defendants.
It appears from the complaint that the defendant's testator had two policies of life insurance upon which he had borrowed certain sums during his lifetime. This indebtedness with accrued interest was deducted from the face of the policies by the companies and the balance paid to the plaintiff, testator's wife, who was named as beneficiary in each policy. It is the claim of the plaintiff that the testator's indebtedness to the companies should have been paid out of his general estate, and by this action she seeks to be subrogated to the rights of the companies as creditors of the testator and thus recover from his estate the moneys borrowed by him. The defendant moves for judgment and dismissal of the complaint upon the ground that a cause of action is not stated.
The precise question presented seems not to have been decided and plaintiff seeks to support her action upon general equitable "principles of natural justice" applicable to the law of subrogation. Pittsburgh-Westmoreland Coal Co. v. Kerr, 220 N.Y. 137.
Reference to testator's will is made to support her claim. It contains the usual direction for the payment of the testator's debts. After giving all household furniture to the plaintiff the testator's states: "I am making no other provision in this will for my wife, because I have otherwise adequately provided for her, by life insurance in her favor." The amount of each policy is $25,000. The amounts deducted on account of the loans of the insured were $2,610.70 on one policy, and $4,561.46 on the other.
The rights of the parties must depend both upon the nature of the testator's contracts with the insurance companies, and the rights of the plaintiff under those contracts. Under the policies the insured had the right to borrow upon the policies, to surrender them in consideration of a certain cash value at any time at the end of two years, and to change the beneficiary at any time without the latter's consent. In addition, he specifically agreed to permit the companies to deduct any indebtedness from the amounts payable under the policies.
It is apparent that under these provisions, particularly that with respect to the change of beneficiary, the insured reserved the right to entirely cut off the beneficiary's interests during his life. Under the surrender clause he retained his right to become sole beneficiary if he so desired, and preserved his property rights under the policies. Travelers' Insurance Co. v. Healey, 25 A.D. 53; affd., 164 N.Y. 607; Caplin v. Penn Mutual Life Insurance Co., 182 A.D. 269; affd., 229 N.Y. 545.
The plaintiff had no vested interest as beneficiary. Her rights were contingent upon the will of the insured. If he had the right to deprive the plaintiff of all benefits under the policies, it would seem to follow that he possessed the right to reduce the amount which she should receive under them by borrowing against them for his own benefit.
I am of opinion that the provision of the insured's will referred to does not materially affect the situation. He may have considered that he had made adequate provision for the plaintiff by making her the beneficiary of his policies, less the amount of his loans.
Defendant's motion for judgment on the pleadings is granted, with ten dollars costs, and complaint dismissed.
Ordered accordingly.