Wasson v. Pyron ( 1967 )

George Rose Smith, Justice.

Doris E. Beene died intestate on April 3, 1964. Mrs. Beene’s, niece, the ap-pellee Frances Pyron, was at first the administratrix of the estate. Several of Mrs.. Beene’s heirs asserted, in a petition filed in, the probate court, that Mrs. Pyron had kept for herself a diamond ring and $18,503.93 of insurance money that should have been inventoried, as as-; gets of the estate. The probate judge, without passing on the merits of the petition, brought the- matter to an issue by discharging Mrs. Pyron as administratrix, appointing the appellant as. her successor, and. suggesting that the appellant bring suit in equity for the recovery of the ring and insurance money.

In the chancery case the court held' that the' ring was an asset of the estate hut that Mrs..-'Pyron was entitled to the insurance money. An appeal and cross-appeal bring both issues to us for review. (There is also a precautionary appeal from the probate. court order,, but it is- unimportant.) .

We turn at once to the controversy over the insurance proceeds, which presents. á far-reaching question of the first magnitude — a question which, if resolved in favor of the appellant, might prove to he little short of calamitous for- hundreds upon hundreds of our citizens. That question is whether the insurance company’s agreement to'pay the insurance money to-Mrs.-Pyron as a contingent, beneficiary was'void-for want of compliance with the Statute of Wills. • ■ •.

The facts, are simple. Mrs. Beene was the sole'beneficiary of a $19,000 group insurance certificate issued by the Metropolitan Life Insurance Company upon the life of her husband, who died on July 17, 1963. Instead of taking the insurance money in cash Mrs. • Beene en tered into a contract with .the Metropolitan, by which it agreed to pay her $108.98 a month for twenty years. If Mrs. Beene died without having received the full amount the funds still held by the company, commuted, to present value, would be paid to Prances Pyron, the appellee. In the contract Mrs.. Beene reserved the power to change the contingent beneficiary at any time and to withdraw the funds herself if she chose to do so. Mrs. Pyron was still the contingent beneficiary when her aunt died a few months, later. The appellant now contends that the contract was a testamentary disposition that should fail for non-compliance with, the Statute of Wills. The argument is that even though Beene himself might have named a contingent beneficiary of the policy, his widow could not do so by contract when the money became payable to her alone.

We are aware, a.s a matter of common knowledge, that agreements like this one are widely used in the life insurance business. There is certainly no public policy against such contracts., upon which countless persons are dependent. In the few cases in which the validity of similar contracts has been considered, the weight of authority sustains the arrangement, either on the basis of a statute or on the theory of a third-party-beneficiary contract. Appleman, Insurance Law & Practice, § 889 (1966 and Supp. 1967) ; Mutual Ben. Life Ins. Co. v. Ellis, 125 F. 2d 127, 138 A. L. R. 1478 (2d Cir. 1942), cert. den. 316 U. S. 665 (1942) ; Hall v. Mutual Life Ins. Co. of N. Y., 122 N. Y. S. 2d 239, 282 App. Div. 203 (1953), aff'd 306 N. Y. 909, 119 N. E. 2d 598 (1954) ; Toulouse v. N. Y. Life Ins. Co., 40 Wash. 2d 538, 245 P. 2d 205 (1952).

In Arkansas we need not rely upon common-law authorities, for the point is explicitly covered by our Insurance Code. Section 334 of the Code reads in part: “Any life insurer shall have the power to hold under agreement the proceeds of any policy issued by it, upon such terms and restrictions as to revocation by the policyholder and control by beneficiaries, and with such exemptions from the claims of creditors of beneficiaries other than the policyholder as set forth in the policy or as agreed to in writing by the insurer and the policyholder. Upon maturity of a policy by death in the event the policyholder has made no such agreement, the insurer shall have the power to hold the proceeds of the policy under an agreement with the beneficiaries.” Ark. Stat. Ann. § 66-3325 (Repl. 1966).

It will be noted that the Code is liberal in allowing the insurer, by agreement with the policyholder himself, to hold the proceeds “upon such terms and restrictions as to revocation by the policyholder and control by beneficiaries” as may be agreed upon. There is no reason to suppose that the draftsmen of the Code— a comprehensive statute evidencing the greatest care in its preparation — meant to be less liberal- -with respect to subsequent agreements made between the insurer and the beneficiary. Quite the contrary, unless the second quoted sentence is so construed it is practically meaningless and practically useless, for surely statutory .authority was not deemed to be necessary to enable an insurer and a beneficiary to make a simple agreement by which the company would retain the proceeds of a policy as an investment by the beneficiary. Thus it. is an inescapable conclusion — and an altogether desirable one— that the legislature intended to validate just such agreements as the one now before us. Otherwise the statutory language is pointless.

With respect to the diamond ring Mrs. Pyron, laboring under the handicap of the Dead Man’s Statute, was unable to adduce much proof that it had been delivered to her as a gift during her. aunt’s lifetime. On this branch of the case it cannot be said that the trial court’s decision is against the weight of the evidence.

Affirmed on direct and cross appeal.

FoglemaN, J., dissents.