Jenkins v. Metropolitan Life Insurance , 113 Colo. 68 ( 1944 )

Mr. Justice Hilliard

delivered the opinion of the court.

June 29, 1936, the Metropolitan Life Insurance Company issued an endowment policy to one Wade. The policy provided that if Wade made payment of premiums as required by the terms until he had attained to the age of seventy-nine years, it would pay him the sum of three hundred ninety-two dollars; and in the event of his death “prior to the date of the maturity of the endowment,” the company promised that “upon receipt of proofs of the death of the insured made in the manner, to the extent and upon the blanks required herein, and upon surrender of this policy and evidence of premium payment hereunder,” to pay the like sum “to the executor or administrator of the insured, unless payment be made under the provisions of the next succeeding paragraph.” That paragraph reads: “The company may make any payment or grant any non-forfeit - ture 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 any such persons, or of other proof of such payment or grant of such privilege to any of them, shall be conclusive evidence that all claims under this policy have been satisfied.” A further provision of the policy is as follows: “The conditions, the privileges and concessions to policyholders, * * *, and any endorsement either printed or written by the company, on this or any of the pages following are a part of this contract as fully as if recited over the signatures hereto affixed.”

December 15, 1939, insured, employing a blank form of “application for designation of beneficiary” supplied by the company for that purpose, and which provided that, “The insured may, at any time by written request, change the beneficiary,” first revoking “any previous designation of beneficiary,” added, “I hereby request the Metropolitan Life Insurance Company to designate Mattie Jenkins, friend, * * * as beneficiary, to receive any death benefit under such policy, subject, however, to the following provisions: * * *. If the date of issue of such policy is prior to January 1, 1937 [as here], such designation shall be subject to the provisions in the policy authorizing payment at the company’s option to my executor or administrator, or to any of my relatives by blood, or connection by marriage, or to any other person appearing to said company to be equitably entitled to the same by reason of having incurred expense on my behalf or for my burial.” The blank form contained this additional provision: “No designation of a beneficiary shall be binding on the company unless endorsed on the policy by the company.” January 9, 1940, the company, proceeding pursuant to the foregoing application by the insured, endorsed the policy as follows: “Subject to the provisions of the policy authorizing payment to the executor or administrator of the insured, or at the company’s option to other persons, Mattie Jenkins—non-relative, has been designated beneficiary to receive death benefit only.” In compliance with policy requirements in that regard, the endorsement was signed by the secretary of the company. In addition to the foregoing writings, the Denver manager of the insurance company testified that, after careful consideration, it had consented to the change of beneficiary.

The insured delivered the policy to the beneficiary so designated, who paid all premiums accruing thereafter, and upon the insured’s death, which occurred August 7, 1940, she made proofs of death in required and satisfactory form, surrendered the policy to the company and demanded payment. In the meantime she had “contracted for the burial expenses and the expenses of the last illness of the said Wade,” and “made all arrangements with the Douglass Undertaking Company to have Mr. Wade buried.” Before consummation, however, the estranged wife of the insured learned of his death, came from Wyoming, asserted her right to have charge of the funeral (perhaps, in law not to be gainsaid), in furtherance whereof she and the Gran-berry Mortuary Company entered into an agreement, the terms whereof not appearing, but to the effect, generally, that that company would conduct the funeral of the deceased. Thereupon the Granberry company, first paying fifty dollars to the Douglass company for relinquishment of the body, obtained it for funeral purposes. Thus possessed of the body, T. G. Granberry of that mortuary, proceeding September 5, 1940, and alleging that he was a creditor of the deceased, secured appointment as administrator of the latter’s estate. It is to be observed that it does not appear that Wade left any estate, or that he was ever indebted to Granberry.

Before the insurer had paid Mattie Jenkins on her demand, although it does appear that it had drawn its check to her in the amount of its liability under the policy, Mrs. Wade, proceeding as the wife of the deceased insured (“wife” appeared in the facility of payment clause as one to whom the company might make payment, but not otherwise) and Granberry, in his claimed capacity of administrator of the Wade estate, also demanded payment. The insurance company, alleging that it was perplexed and made uncertain by the several demands, and not having elected to proceed under the facility of payment clause of the policy, withheld payment and abided. September 9, 1940, Mattie Jenkins, designated as beneficiary in manner already stated, and alleging on that premise, and not otherwise, instituted an action to recover on the policy. The company, still professing perplexity, answered and interposed a cross bill of interpleader, alleging substantially as set forth above, asking that the parties claimant be required to interplead and set forth “their rights and demands as between themselves and each other, to the proceeds of the policy (and interest) now deposited in the registry” of the court, and have their respective claims settled and adjudged, the company to stand relieved from further responsibility in the premises. It also asked that its court disbursements and reasonable attorney’s fees, be allowed out of the said fund, etc. The court ordered that Mrs. Wade, and Granberry as administrator, be made parties to the proceeding. For the purposes of the action, the widow, waiving her alleged claim, joined Granberry in a joint answer and cross complaint, in which they prayed recovery in behalf of Granberry as administrator. There were answers and replications, and the ultimate issue was, whether Mattie Jenkins, claiming as beneficiary pursuant to designation made by the insured in manner stated, or Granberry, claiming as administrator of insured’s estate, but not as beneficiary, was entitled to recover the fund so deposited.

The trial court found that Mattie Jenkins was entitled to “the sum of $100.00, as a trustee, for attorney fees incurred in connection with the bringing of this action, together with her costs.” Also, the court found, that, for and on account of its cross bill of interpleader, the insurance company should receive twenty-five dollars as attorney’s fee and five dollars for its costs incurred; in other respects it found in favor of Gran-berry, as administrator. Adjudging on its several findings, the court awarded thirty dollars to the insurer, one hundred dollars to Mattie Jenkins, and the remainder of the proceeds of the policy to Granberry, as administrator of the Wade estate. Subsequently, however, the court amended its findings and judgment by striking therefrom the words “as administrator of the Wade estate,” and awarded to Granberry personally that which had been awarded to him as administrator. Counsel for the two interested parties seemingly agree that the adjudged allowance to Mattie Jenkins was not legally predicable. It is clear she sought no such relief. Her demand, as we have seen, was as beneficiary and for the proceeds of the policy.

The authorities are in agreement that the facility of payment clause commonly found in industrial insurance policies, as here, is permissive in character, and of which only the insurance company may make avail. Here, concededly, the insurer did not elect to act under that clause of the policy. In such situation, as we announced in Moore v. Hendley, 97 Colo. 258, 48 P. (2d) 808, “the provision is not involved.” “The facility of payment clause, it has been held, is for the protection of the insurer and does not grant or take away a cause of action from any person.” 29 Am. Jur., p. 956, §1280. “Beyond affording the company protection in paying to another, the facility of payment clause does not affect the beneficiary’s rights.” 31 C.J., p. 970 [§8]. 2. “The ‘facility of payment clause’ need not be considered, as the company, for whose benefit the clause was inserted, did not exercise any rights thereunder when it saw fit to pay the money into the court.” Pashuclc v. Metropolitan Life Insurance Co., 124 Penn. Superior Ct., 406. For exhaustive discussion, see Blanchett v. Willis, 161 S.C. 83, 159 S.E. 469.

It is clear, therefore, that where death of insured occurs prior to maturity of the endowment, as here, and the insurer voluntarily does not discharge its obligation pursuant to the facility of payment clause, also as here, payment only is enforceable at the instance of one qualifying as beneficiary. The record considered, Who was the beneficiary? As the policy originally provided, the personal representative of the insured’s estate (executor or administrator) was the beneficiary. That subsequently the insured, proceeding as was permissible, took usual and the required steps to change the beneficiary, and named Mattie Jenkins in substitution of the personal representative of his estate, is not open to question. The formal documents make that clear. Not only so, but the company’s responsible representative testified that after full and careful examination of the attending circumstances, consent to change of beneficiary had been given. Neither the company, nor either party cross complaining, questions Mattie Jenkins’ status of beneficiary. The company challenges neither the application of the insured to change the beneficiary nor its endorsement of consent thereto, as to substance or form. So, with the cross complainants—neither claims as beneficiary. On the contrary, their allegations are “that said insurance is, according to its terms, payable to the persons showing that they have paid said last illness and funeral bills or have made themselves responsible for the payment thereof,” and, therefore, “the proceeds of said policy” are payable other than to the beneficiary. The policy contains no such provisions. In effect, the allegations of cross complainants consist of “arguments” which were properly addressed to the insurance company in an appeal for preferment under the facility of payment clause of . the policy. The company’s failure to respond favorably thereto concluded them in the authority of their sole reliance. In behalf of the accomplishment of the purposes outlined in cross complainants’ allegations, the company, proceeding in good faith, of primal importance, and acting by virtue of the original facility of payment clause, or its additional. reserved option to pay the “executor or administrator,” as expressed in the insured’s application to change the beneficiary, might have paid the administrator, or any of those mentioned in the facility of payment clause, but in the absence of such action, as here, the policy only is enforceable at the instance of the designated beneficiary. That beneficiary, as we held in Moore v. Hendley, supra, a holding altogether reasonable and consistent with court decisions generally, is the insured’s last designation thereto—Mattie Jenkins here. What is imported by the word “beneficiary” in an insurance policy? It is the right to collect the proceeds. “The company ‘grants this insurance’ to whom? The company ‘will pay the amount due’ to whom? To the person named as beneficiary, of course. The word ‘beneficiary,’ itself imports this. Its lexical meaning is ‘The person named in a policy of insurance as the one who is to receive the proceeds or benefits accruing thereunder.’ And so it is also judicially defined.” Moldovan v. John Hancock Mutual Life Insurance Co. (Mo. App.), 124 S. W. (2d) 541. That Moore v. Hendley, supra, does not control here is not even suggested by counsel for the cross complainants, and counsel for the insurance company says the case is important upon the question of the disposition of the fund. The case in itself not only is important, but it announces the doctrine that prevails in such cases. Prudential Insurance Co. v. Young, 14 Ind. App. 560, 43 N.E. 253; Turner v. Prudential Insurance Co., 150 Kan. 899, 96 P. (2d) 641; Pashuck v. Metropolitan Life Insurance Co., supra. In those cases the policies provided that in case of death prior to maturity of the policies, as here, the insurer was authorized to make payment under the facility of payment clause, failing which, it was to pay to the “executor or administrator” of the insured, precisely as here. In all of them, the insured, again as here, subsequently specifically designated a named individual as beneficiary, and in every instance the beneficiary substituted for the “executor or administrator” prevailed. Specifically, in the Indiana case against the insurance company which undertook to defend on the theory that the representative of the estate of the insured held precedence over the subsequently designated beneficiary; in the Kansas case against an interpleaded administator, as here, and in the Pennsylvania case where the substituted beneficiary was interpleaded by the company in an action by an administrator, the reverse of here. Those cases, and their like, and the books abound in them, explode the theory to the effect that an “executor or administrator” named by the insured in a policy in the circumstances here, enjoys an abiding “mandatory right” which the insured may not transfer to a beneficiary subsequently named, as in this instance. In the cases it is explained that by designating his “executor or administrator” as beneficiary, the insured, in effect, has named his estate or himself, whereby a “right” in his behalf comes into potential being, over which, as with other property or choses in action of his ownership, he retains control and right of disposition. In emphasis of the doctrine announced, the authorities call attention to the obvious truth, that, while the life of an insured holds, no right vests, or has vested, in his executor or administrator, for, as one of the cases expresses it, not until death is the personal representative of one’s estate “in esse.” The insured here exercised his undoubted right to substitute plaintiff in error as beneficiary, and, barring the reserved right of the company to make payment under the facility of payment clause, not exercised, his action is unchallengable. It follows that Mattie Jenkins, as we said in Moore v. Hendley, supra, was “entitled to the death benefit, not because he [she] was the insured’s husband [wife], but because he [she] was duly substituted as beneficiary.” See, also, Prudential Insurance Co. v. Young; Turner v. Prudential Insurance Co.; Pashuck v. Metropolitan Life Insurance Company, all cited supra. In the Pashuck case the Pennsylvania court said: “If the right to name or change the beneficiary existed in the insured [as it did there and does here], the specified beneficiary supersedes any personal representative in so far as the right to the proceeds of the policy is concerned. The executor or administrator would not therefore, be entitled to collect on the policy under such circumstances.”

The right of the company to interplead and enjoy recovery of costs and attorney’s fee, adjudged below, is questioned on error. Considering that the company, acting under its uncontrollable discretion in that regard, had declined to make payment pursuant to the facility of payment clause, either as it was originally drawn or as enlarged to include the personal representative of the estate of the insured, it was bound, as we are convinced, to make payment to the beneficiary named in the policy. By the insured’s written designation, and with the company’s formal written permission and consent thereto, plaintiff in error had become, and at the time she demanded payment was, such beneficiary. “If an insurer has permitted the insured to change the beneficiary in a policy, * * *, it is generally, if not universally, held that the insurer is not indifferent to the outcome of disputes between the claimants as to the proceeds of the policy, and consequently may not maintain interpleader between them.” 30 Am. Jur., p. 222, §11. The authority from which counsel for the inter-pleader quoted a paragraph of the syllabus as given in the Atlantic Reporter, and on which he so much relies (Prudential Ins. Co. v. Gleim, 131 N.J.Eq., 215, 24 A. [2d] 511), had to do with a policy of insurance in which “no beneficiary was named,” and, as we think, clearly is distinguishable. More to the point, as we conceive, is Pouch v. Prudential Ins. Co., 204 N.Y. 281, 97 N.E. 731, where, on allegations comparable to those by the inter-pleader here, the New York court held adversely to the plea. The action taken by the company here caused plaintiff in error to undergo burdensome litigation and suffer unreasonable delay of payment. We cannot think justification attended.

Let the judgment be reversed in all particulars, with instructions to the trial court to adjudge in favor of the plaintiff in error for the proceeds of the policy as paid into the registry of the court, and for costs as against all defendants in error.

Mr. Justice Knous and Mr. Justice Jackson dissent.