Case Title: Sand v. MERCHANTS NATIONAL BANK & TRUST COMPANY

Citation: 81 N.W.2d 748

Docket Number: 

State: north-dakota

Court: North Dakota Supreme Court

Date: 1957-03-04T00:00:00Z

Document:
81 N.W.2d 748 (1957) Prudence Gearey SAND, Plaintiff and Appellant. v. The MERCHANTS NATIONAL BANK and TRUST COMPANY, Executor of the Last Will and Testament of Alice B. Gearey, Deceased, and E. E. Simonson, Administrator with the Will Annexed of the Estate of Alice B. Gearey, Deceased, Defendants and Respondents. No. 7663. Supreme Court of North Dakota. March 4, 1957. Rehearing Denied March 29, 1957. *749 Wattam, Vogel, Vogel, Bright & Peterson, Fargo, for plaintiff and appellant. Nilles, Oehlert & Nilles, Fargo, for defendants and respondents. MORRIS, Judge. The plaintiff appeals from an order sustaining a demurrer to her complaint and from a judgment entered pursuant to that order. The complaint purports to set forth two causes of action. As to both causes it is alleged that the plaintiff is the sole heir at law of Alice B. Gearey, also known as Alice A. Gearey, the plaintiff's mother who died November 28, 1954 With respect to the first cause of action it is alleged that at the time of her death Alice B. Gearey was the owner of a policy of life insurance numbered 210059 issued by the Northwestern Mutual Life Insurance Company on the life of Hamilton W. Gearey, now deceased, and that the value of the avails of the policy at the time of the death of Alice B. Gearey was $7,405. This policy is further alleged to have been dated July 9, 1890, for the sum of $5,000 on the life of Hamilton W. Gearey, payable to his executors, administrators and assigns. It was thereafter, on September 22, 1896, assigned and transferred to Alice B. Gearey who remained the owner thereof. Alice B. Gearey executed the following direction to the life insurance company: This instrument is dated June 30, 1936, and bears a notation that it was received by the *750 claim department of the insurance company July 13, 1936. It is attached to and made a part of the complaint. It is further alleged that under the provisions of Section 26-1018, NDRC 1943, the avails of the life insurance contract passed to the plaintiff as sole heir at law of Alice B. Gearey and that such avails were not otherwise specially bequeathed in her last will and testament. It is also alleged that the avails were delivered to the Merchants National Bank and Trust Company, executor of the last will and testament of Alice B. Gearey, and that the defendants have on demand failed to deliver the avails of the policy to the plaintiff who is rightfully entitled thereto. In her second cause of action the plaintiff alleges that Alice B. Gearey at the time of her death was the owner of a policy of life insurance, number 467070, issued by the New York Life Insurance Company on the life of Hamilton W. Gearey, now deceased, and that the value of the avails of this policy was the sum of $7,354.21, which is being held by the New York Life Insurance Company under its contract account. This policy was dated July 20, 1892, in the sum of $5,000 on the life of Hamilton W. Gearey, payable to his executors, administrators and assigns. The policy was thereafter and on September 24, 1896, assigned and transferred to Alice B. Gearey, also known as Alice A. Gearey, who thereafter remained the owner thereof. The only direction given by Alice B. Gearey to the company is as follows: This instrument bears a notation that it was received by the Fargo branch of the life insurance company August 6, 1936. It is made a part of the complaint. In further allegations similar to those contained in the first cause of action the plaintiff claims to be entitled to the avails of this policy under the provisions of Section 26-1018, NDRC 1943. The statute upon which the plaintiff bases her right to recover under both causes of action, Section 26-1018, NDRC 1943, provides, insofar as it is pertinent to this controversy, as follows: The term "avails" as used in this statute is synonymous with "proceeds". In re Coughlin's Estate, 53 N.D. 188, 205 N.W. 14. Section 26-0312, NDRC 1943, provides that a policy of insurance upon life may pass by transfer. An assignment is a transfer. The effect of the assignments of these policies to Alice B. Gearey was to transfer title of the policies to her. When there is an assignment of a policy falling within the terms of Section 26-1018, NDRC 1943, the avails or proceeds of the policy are payable directly to the assignee upon the death of the person whose life is insured. Jorgensen v. DeViney, 57 N.D. 63, 222 N.W. 464; Richards on Insurance, Fifth Edition, Section 125; Insurance Law and Practice, Appleman, Section 1284; Edington v. Aetna Life Insurance Co., 13 Hun, N.Y., 543; Clark v. Equitable Life Assurance Society, C.C., 133 F. 816; Potter v. Northwestern Mutual Life Insurance Co., 216 Iowa 799, 247 N.W. 669. It is clear that Alice B. Gearey, as assignee, asserted her right to the avails of the life insurance policies here involved and received them pursuant to the options provided in the policies by having them held by the respective companies on deposit at interest subject to her withdrawal. Had Hamilton W. Gearey died prior to his assignment of the policies the proceeds thereof, being payable to his executors, administrators and assigns, would have constituted avails of the policy under Section 26-1018, NDRC 1943 and would have passed to his heirs pursuant to the terms of the statute. The plaintiff contends that when he assigned the policies to Alice B. Gearey she became the insured within the meaning of the statute and that the proceeds of the policies which were left on deposit with the companies pursuant to her direction were avails of those policies that were payable to Alice B. Gearey and upon her death passed as avails to the plaintiff as the sole heir of Alice B. Gearey who had become the insured by virtue of the assignments. In support of her position the plaintiff cites Section 26-0202, NDRC 1943, which provides: She argues that by the assignments Alice B. Gearey became the sole owner of the policies and the person indemnified and therefore must be considered to be the insured. Plaintiff's position presents two basic questions. First, did Alice B. Gearey become the insured upon the assignment to her of these policies that had been issued on the life of Hamilton W. Gearey who was the original insured? Second, were the funds held by the life insurance companies pursuant to the optional settlement provisions of the policies and held on deposit at interest subject to her order avails of the policies within the meaning of Section 26-1018, NDRC 1943? An analysis of Section 26-1018, NDRC 1943, discloses that unless Alice B. Gearey at the time of her death was the "insured" under the policies in question the statute has no application to the funds involved herein and the complaint does not state a cause of action. The argument that the assignments, transferring as they did ownership of the *752 policies to the assignee, Alice B. Gearey, worked a change in the policies themselves so that Alice B. Gearey, the assignee, became the "insured" is resourceful. However, this argument runs counter to the terms of the policies. It assumes that the "insured" must always be the owner and that a change in ownership brings about a change in the "insured". The insured in a life insurance policy means the person whose life is insured and whose death matures the obligation of the insurer to pay. The policies pleaded in the complaint furnished refutation of the appellant's argument. Since they are not set forth or pleaded in detail in the complaint we will assume that they conform to the standard policy forms prescribed by statute. A form is set out with respect to ordinary life or limited payment life policies in Section 26-0326, NDRC 1943. It in part provides: It is clear from the context of this form and of other statutory forms of life insurance policies, see Sections 26-0327, 26-0328, 26-0329, 26-0330 and 26-0331, NDRC 1943, that the term "insured" means the person whose life is insured and does not include an assignee who becomes the owner of the policy or acquires an interest therein by virtue of an assignment. When the legislature *753 used the term "insured" in Section 26-1018, NDRC 1943, it intended that term to have the same meaning as it had in the standard forms. For other instances of the legislative use of the term "insured" which clearly indicate by their context that the person whose life is insured is intended see Section 26-0335, NDRC 1943 and the amendment thereof shown in the 1953 Supplement NDRC setting forth provisions required in life insurance policies issued on other than standard forms and Section 26-0324, NDRC 1943, which provides that after a life insurance policy has been in force for one year it shall be no defense that the insured committed suicide. This meaning is also the same as that generally accepted and used in life insurance policies. Black's Law Dictionary, Fourth Edition, describes insured as "The person who obtains insurance on his property, or upon whose life an insurance is effected." Citing Healy v. Prudential Insurance Co. of America, Sup., 140 N.Y.S. 505, and Thompson v. Northwestern Mutual Life Insurance Co., 161 Iowa 446, 143 N.W. 518. Webster's New International Dictionary, Second Edition, defines the term as "A person whose life or property is insured." When Hamilton W. Gearey obtained the policies the issuing companies became the insurers and he became the insured. The policies by their terms were payable to his executors, administrators and assigns who were the designated beneficiaries. If there had been no assignments the executors or administrators, as the case might be, would have been the beneficiaries and at his death, in the absence of the statute, would have collected the avails or proceeds of the policies as assets of the estate. Section 26-1018 being applicable the avails would not have been subject to the debts of the insured and his representatives would have been obliged to distribute them without deduction to the heirs at law or legatees entitled thereto. But the insured Hamilton W. Gearey assigned the policies to Alice B. Gearey which made the proceeds payable to the assignee upon his death in accordance with the terms of the policies and not by virtue of the statute. As these policies were originally written Hamilton W. Gearey had a dual interest therein. One was a present interest which represented the actual cash value of the policy as an asset prior to his death. The other was a contingent beneficial interest which would accrue upon his death. The assignments transferred both of these interests to Alice B. Gearey. The transfers of both these interests to her by these assignments did not change the policies themselves other than to provide a different payee. The policies remained payable only on his death. He was the insured and so remained as long as the policies were in force. While the assignments vested in Alice B. Gearey the right to realize upon the cash value of the policies during his life and upon the contingent liability of the insurer which matured upon his death, she never became the insured either under the terms of the policies or within the meaning of the statute under consideration. It is clear that the statute has no application to the proceeds of these policies. The order and judgment appealed from are affirmed. GRIMSON, C. J., and SATHRE, JOHNSON and BURKE, JJ., concur.