Court Opinion

ID: 7818440
Source: CourtListenerOpinion
Date Created: 2022-09-07 17:45:00.216356+00
Date Added: 2024-06-11T16:30:40.107912
License: Public Domain

Conley Byrd, Justice. Cleta Moore, wife of D. C. Moore, deceased, and appellee Betty Hansen, wife of appellee Larry Hansen, jointly purchased some beauty shop equipment for the purpose of operating a beauty shop. D. C. Moore arranged for a loan for the two wives at the Citizens Bank of Jonesboro. Larry Hansen and D. C. Moore signed the note as accommodation makers for their wives. D. C. Moore requested a credit life insurance policy in the amount of the indebtedness. The premium therefor was included in the note on which the wives were primarily liable. After two installments were made, D. C. Moore was killed in an auto collision. After some litigation, the credit life insurance company paid the bank the policy amount, which after payment of counsel fees left a balance due on the note of $359.49. Cleta,Moore paid this amount to the bank, received the note and assigned it to appellant. Appellant brought this action against Larry Hansen and Betty Hansen to recover one half of the balance due on ..the note before the insurance proceeds were applied. The trial court, upon stipulated facts, denied appellant any right of subrogation to the $5,132.48 paid by the insurance proceeds but did award him a judgment for one half of the $359.49 paid by Mrs. Cleta Moore. The latter portion of the judgment has been - satisfied. For reversal appellant contends that D. C. Moore was an accommodation maker and that appellant as Moore’s administrator is entitled to recover from the Hansens one half of the proceeds of the credit life insurance policy that were paid on the debt. A further contention is that he is entitled to recover under Ark. Stat. Ann. § 66-3204(2) (Repl. 1966). We find both contentions without merit. Appellant cannot recover as an accommodation maker unless he is subrogated to the rights of the creditor. The cases dealing with the issue make a distinction where the credit life insurance premiums are paid by the decedent and where the premiums are paid by another. See Miller v. Potter, 210 N. C. 268, 186 S. E. 350 (1936) and Hatley v. Johnson, 265 N. C. 73, 143 S. E. 2d 260 (1965). We think the distinction is valid. Neither appellant nor his decedent has paid anything and before he can become subrogated to the rights of the bank as a creditor he must have paid the debt, Haley v. Brewer, 220 Ark. 637, 249 S. W. 2d 128 (1952). It was stipulated that “D. C. Moore, Sr. and Larry Hansen were accommodation endorsers on the said note, receiving no direct benefits therefrom.” When it is considered that the credit life insurance policy here involved stood only as additional security for the loan, it becomes even more logical and practical that appellant should not be subrogated to the rights of the creditor—i. e., the debt in effect was paid by security that the principal obligors had already paid for. It is true that Ark. Stat. Ann. § 66-3204(2) permits a recovery by a decedent’s estate of proceeds of life insurance paid to an unauthorized party in violation of Ark. Stat. Ann. § 66-3204. Here, however, there was no violation of the statute which provides: “(1) Any individual of competent legal capacity may procure or effect an insurance contract upon his own life or body for the benefit of any person. But no person shall procure or cause to be procured any insurance contract upon the life or body of another individual unless the benefits under such contract are payable to the individual insured or his personal representatives, or to a person having, at the time when such contract was made, an insurable interest in the individual insured. * * * “(3) ‘Insurable interest’ with reference to personal insurance includes only interests as follows: . . . “(b) In the case of other persons, a lawful and substantial economic interest in having the life, health, or bodily safety of the individual insured continue, as distinguished from an interest which would arise only by, or would be enhanced in value by, the death, disablement or injury of the individual insured.” Obviously the bank as creditor had an insurable interest. Furthermore the decedent himself asked for the insurance. Appellees contend that the appeal should be dismissed because appellant accepted the benefits of the judgment entered. We disagree but because of the holding above the issue becomes moot. Affirmed. Harris, C. J. and Fogleman, J., dissent.