Court Opinion

ID: 9943915
Source: CourtListenerOpinion
Date Created: 2024-02-26 15:17:54.529114+00
Date Added: 2024-06-11T13:52:01.973368
License: Public Domain

This case concerns the disposition of the proceeds of life insurance policies and the related question of the application of our community property laws.
Henry Petterson and wife, Rosa Dill, were accidentally killed as the result of an automobile collision, though Patterson survived his wife by a period of some fifteen or thirty minutes. No children were born to this marriage, but each left surviving children by former marriages. Three policies of insurance on the life of the husband were in force at the time of his death. One is a group accident policy taken out during the last marriage, all premiums paid out of community funds. The second is an ordinary life policy issued before the last marriage, the greater portion of the premiumes paid prior thereto. Both of these policies were payable to the wife, Rosa Dill, if she survived, and if not to the estate of the insured. The third is a group life policy payable to the wife as beneficiary, and providing for certain 'Modes of Settlement' in the event she did not survive. The premiums were likewise paid out of community funds. In all three policies there was reserved to the insured the unrestricted right of change of beneficiary.
The Court of Civil Appeals held the proceeds of both group policies to be community property of the last marriage and directed that on-half be paid over to each of the administrators of the respective estates. The proceeds of the ordinary life policy were divided in proportion to te amount of premiums paid before and after the second marriage; that is to say, the portion attributed to the premiums paid before marriage were held to be the separate property of the husband and awarded to his administrator and that portion attributed to the premiums paid after the marriage were held to be community property and divided equally between the two administrators after the payment of a community debt. 272 S.W.2d 140.
Our problem here is to determine as between conflicting claims of the administrators of Patterson and wife whether the proceeds of these policies belong to the separate estate of the husband or to the community.
The Court of Civil Appeals, in holding that the proceeds of the group accident policy belong to the community estate, rested its decision principally upon our opinion in Sherman v. Roe, 153 Tex. 1, 262 S.W.2d 393, where the policy was on the life of the husband and payable to the wife if she survived, if not then to his estate, premiums paid out of community funds. In that case, however, the Court was dealing with the rare conjuncture where the husband and wife meet death so contemporaneously that it cannot be established which died first. We there interpreted the decision in Volunteer State Life Ins. Co. v. Hardin, 145 Tex. 245, 197 S.W.2d 105, 168 A.L.R. 337, to mean that such a policy prior to insured's death is not property in which the wife owns an interest, and further held that the estate of the wife is not entitled to claim one-half of the proceeds of the policy merely on the theory that the certificate was community property, therefore the proceeds must be community property. Sherman v. Roe based its decision that the proceeds constituted community property on the provisions of Article 4619, Vernon's Ann.Civ.St. '* * * 'all the effects which the husband and wife possess at the time the marriage may be dissolved shall be regarded as common effects or gains, unless the contrary be satisfactorily proved' * * *,' saying, 'we believe that since the facts as to survivorship cannot be proved, the proceeds thus held should, by reason of the statute quoted, be deemed community effects.' (153 Tex. 1, 262 S.W.2d 397.) The implication is drawn that otherwise a different result would have been reached. We think that the holding in Sherman v. Roe is not applicable here for the reason that Patterson survived his wife if only for a very short period of time. The proceeds could hardly be said to be possessed by the husband and wife at the time the marriage was dissolved.
We are of the opinion that the holding in the Volunteer State Life Ins. Co. v. Hardin case, supra, is more nearly in point and is *Page 483 
controlling here. In that case a policy on the life of the husband was payable to the wife. She predeceased her husband. Thereafter the husband named his sister as beneficiary. It was there held-as summarized by Justice Smedley in Sherman v. Roe-'that the wife, the beneficiary in a policy insuring her husband, with the right reserved to the husband to change the beneficiary, has prior to the death of the insured no vested interest in the policy or in the proceeds of it, even though the policy is taken out during marriage and all premiums are paid out of community funds, and that the insured may at will change the beneficiary and thereby divest a prior beneficiary of all interest in the proceeds of the policy. * * *' See also 1 DeFuniak, Principles of Community Property, Sec. 123, p. 354. Jones v. Jones, Tex.Civ.App., 146 S.W. 265; Rowlett v. Mitchell, 52 Tex. Civ. App. 589, 114 S.W. 845; Moore v. California-Western States Life Ins. Co., Tex.Civ.App., 67 S.W.2d 932.
Volunteer State Life squarely lays down and reaffirms the doctrine announced in Martin v. McAllister, 94 Tex. 567,63 S.W. 624, 56 L.R.A. 585,
 "* * * That where there is no intention on the part of the husband to defraud the wife, the proceeds of a policy on the life of the husband vest in the beneficiary named in the policy upon the death of the insured, even though the policy was taken out by the husband during coverture and the premiums were paid out of community funds." [145 Tex. 245, 197 S.W.2d 106.]
While the facts in our case differ in certain respects, in that here the designation of an alternate beneficiary was made prior to the death of the wife and to his estate rather than to a named individual and the husband survived only fifteen or thirty minutes rather than a period of years, yet we think there is no substantial difference so far as the principle to be applied is concerned. The duration of the survivorship of the husband cannot be the determining factor and whether it lasted fifteen minutes or fifteen years has no legal significance.
If we accept as correct the rule in Volunteer State Life Ins. Co. v. Hardin that the proceeds of the policy on the life of the husband vest in the beneficiary named by him upon his death where no fraud is practiced upon the wife, then, under the facts of our case, it would seem that the proceeds of this group accident policy should be payable to the estate of the deceased husband. It could hardly be contended here that there was any intention on the part of the husband to defraud the wife. The policy was payable to her and if she had survived for any length of time the proceeds would have belonged to her separate estate. San Jacinto Bldg., Inc., v. Brown, Tex.Civ.App., 79 S.W.2d 164 (wr. ref.); Evans v. Opperman, 76 Tex. 293,13 S.W. 312.
Martin v. McAllister, 94 Tex. 567, 63 S.W. 624, 56 L.R.A. 585, cited in both Volunteer State Life Ins. Co. v. Hardin and Sherman v. Roe holds that the proceeds of a policy on the life of the wife payable to the husband become the separate property of the husband on the death of the wife even though the policy was taken out by the husband during coverture and the premium paid out of community funds. This result was reached on the statutory provision that the husband generally has the right of control of community property and that control cannot be interfered with unless it is exercised in fraud of the rights of the wife.
If Patterson, after the death of his wife, had survived long enough to have exercised his right of change of beneficiary by making the policy payable to his children, then the proceeds would belong to his children upon his death. We can see no substantial distinction in principle in alternatively making his estate the beneficiary in the event his wife did not survive him and thus preferring his children as the beneficiaries through that method. As between the children of the deceased parties there is no injustice done by the application of this rule. If the wife had survived for a *Page 484 
like period of fifteen or thirty minutes, her child would have eventually received all proceeds of the policy.
The complexities attendant upon dealing with life insurance proceeds and in the attempt to make them conform to our community property law are quite apparent. The decisions among the community property jurisdictions are not altogether in harmony nor even in our own state for that matter. It seems preferable, however, to distribute the funds in compliance with the terms of the insurance contract, absent fraud, than compound the difficulties by drawing fine distinctions. We conclude that the proceeds of the group accident policy belong to the separate estate of Henry Patterson. Nothing in this opinion, however, is to be construed as holding that in case of actual or constructive fraud upon the wife, beneficiary designations by the husband will preclude her or her estate from obtaining relief.
It has been decided in some community property states that where the husband takes out during the marriage insurance on his own life, payable at death to his estate, and the premiums are paid with community funds, at the dissolution of the marriage by the death of the husband the proceeds belong to the community estate. 'Community Property Rights as Applied to Life Insurance,' by Professor Huie, 17 Tex.Law Rev. 121. In Martin v. Moran, 1895, 11 Tex. Civ. App. 509,32 S.W. 904, endowment policies were issued to the husband on his life payable as directed by his will. The premiums were paid with community funds and the wife survived. In his will he designated his executors as beneficiaries of the policies. It was held that the proceeds were community property. If, as it seems to be, the basis of that decision was, that for the husband, under certain circumstances, to pay premiums out of community and to make the proceeds payable to his estate, amounts to fraud upon the wife, it would not necessarily run counter to that of Volunteer State Life.
In Blackmon v. Hansen, 140 Tex. 536, 169 S.W.2d 962, the Court concludes that the proceeds of life insurance policies issued on the life of the husband and payable to his wife, the premiums being paid with community funds were community, half belonged to the wife and therefore only half of the insurance proceeds was subject to the state inheritance tax under Article 7117, V.A.C.S. In that case the Court followed the decision in Lang v. Commissioner of Internal Revenue, 304 U.S. 264, 58 S.Ct. 880, 82 L.Ed. 1331, 118 A.L.R. 319, construing the Federal Statute similar to the one later adopted by our Legislature. The Court said (140 Tex. 536, 169 S.W.2d 964):
 "* * * The Texas statute having been literally taken from the Federal statute the presumption is that the Texas Legislature knew of the construction given such statute at the time of its adoption, and intended to adopt such statute as construed by the Federal courts; and such statute is to be considered by the courts of this State in the light of such construction. * * *"
We do not disagree with the Blackmon construction of the Texas Inheritance Tax Statute but aside from that decision holding that the proceeds for inheritance tax purposes are community, it has been rather thoroughly established in Texas, and in all community property states for that matter, that the proceeds of a policy on the husband's life payable to the wife as beneficiary upon the death of the insured belong to the wife as her separate property. San Jacinto Bldg., Inc., v. Brown, supra; Davis v. Magnolia Petroleum Co., 134 Tex. 201, 134 S.W.2d 1042. This result is said to be based upon the right of the husband to make a gift of community property. Evans v. Opperman, supra.
The Court of Civil Appeals said in State v. Jones,290 S.W. 244, that a policy on the life of the deceased husband payable to his estate was community property, one-half of which belonged to the wife inasmuch as the premium was paid out of the community estate. The Supreme Court, however, in 5 S.W.2d 973, 974, reversed and held no inheritance *Page 485 
tax was due for the reason that the wife took under the will and what she got under the will amounted to less than her one-half community interest. It is to be noted that in both the Blackmon and Jones cases as well as in Lee v. Lee, 112 Tex. 392,247 S.W. 828, the wife survived the insured husband.
Life insurance-while to some extent and in some instances-is considered in the nature of an investment, yet primarily it is designed for the protection of dependents, to compensate for the loss of support and to pay debts and expenses. This seems to be true in our case. Only the ordinary life policy here carried a 'cash value'. The courts have recognized that strict application of the rules of community property would partially defeat this primary purpose. Martin v. McAllister; San Jacinto Bldg., Inc., v. Brown, both supra.
The Court of Civil Appeals found support for its decision in Martin v. Moran, supra, and Lee v. Lee, supra. It can be supported by the theory announced in Sherman v. Roe, supra, that, where it could not be determined which spouse died first, the deaths were presumed to be simultaneous and proceeds therefore were possessed at the time of the dissolution of the marriage.
We recognize that in other community property jurisdictions a contrary view to our solution prevails. For instance, In re Castagnola's Estate, 1924, 68 Cal.App. 732, 230 P. 188, under facts quite similar to those presented here, held the proceeds to be community property and divided them equally between the parents of the deceased husband and wife. But California applies the community property law to insurance proceeds more strictly than does Texas. Generally speaking, California takes the view that where the premium on a policy insuring the husband's life is taken out during marriage and paid for with community funds, the proceeds are community assets and this seems to be true regardless of the question as to who may be the named beneficiary in the policy except where the policy is on the life of the husband payable to the wife. Travelers' Ins. Co. of Hartford, Conn. v. Fancher, 219 Cal. 351,26 P.2d 482; Grimm v. Grimm, 26 Cal.2d 173, 157 P.2d 841; Bazzell v. Endriss, 41 Cal.App.2d 463, 107 P.2d 49; Mundt v. Connecticut General Life Ins. Co., 35 Cal.App.2d 416, 95 P.2d 966; New York Life Ins. Co. v. Bank of Italy, 60 Cal.App. 602, 214 P. 61.
In California and Washington the rule of proportionate ownership of the proceeds based on the premiums paid before and after marriage is applied.1
The clearly expressed ruling in Volunteer State Life Ins. Co. v. Hardin, supra, however, seems to preclude any claim for reimbursement to the community estate for the premiums paid during the marriage out of community funds in this case. In passing on this question the Court had this to say (145 Tex. 245,197 S.W.2d 107):
 "Since the contract for insurance was lawfully made by the husband as the manager of the community estate, the community estate was not entitled to be reimbursed for the community funds lawfully used in paying the premiums on the policies. Rowlett v. Mitchell, 52 Tex. Civ. App. 589, 114 S.W. 845; Whiteselle v. Northwestern Mutual Life Ins. Co., Tex.Com.App., 221 S.W. 575. (The case last cited was overruled in Womack v. Womack, supra, but not on the point for which it is here cited.) * * *"
We therefore say that the administrator of the deceased wife is not entitled here to reimbursement for any portion of the premiums paid during the marriage out of community funds.
The question as to the rights of the parties in any cash surrender values of these policies is not raised and is not therefore passed upon in this opinion.
The third policy, the group life, designated the wife as beneficiary without naming any alternate beneficiary. The *Page 486 
'Modes of Settlement' clause has been held to be for the benefit and protection of the insurer in paying a death claim and is not determinative of the legal rights of persons entitled to receive those proceeds. Blanchett v. Willis,161 S.C. 83, 159 S.E. 469, 75 A.L.R. 1428; Uptegrove v. Metropolitan Life Ins. Co. of New York, 145 Neb. 51,15 N.W.2d 220. On this point we agree with the Court of Civil Appeals and reject the holding to the contrary in Potter v. Young,193 Ark. 957, 104 S.W.2d 802.
What we said above we think applies with equal force to this group life policy-the only distinction being that no alternate beneficiary was named by the insured, but the proceeds were not 'possessed' at the time the marriage was dissolved by the death of the wife. We therefore hold that the proceeds were the separate property of the deceased husband and are to be distributed in accordance with the laws of descent and distribution.
The guardian of the Patterson children naturally aligns himself with Patterson's administrator on the whole case, but prays that the proceeds be awarded to him directly instead of to the administrator in the interest of economy in costs of court. While the children will ultimately benefit we think he proceeds payable to the estate must go to the administrator first regardless of the additional costs involved.
The judgments of both the trial court and the Court of Civil Appeals are therefore reversed and rendered in favor of petitioner, the temporary administrator of the estate of Buckner H. Patterson, deceased.
1 Community Property Life Insurance by Professor Huie, 17 Tex.Law Rev. 146.
GARWOOD, SMITH and WILSON, JJ., dissenting.