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(99 Fed. 199.)
HOPKINS v. NORTHWESTERN LIFE ASSUR. CO.
(Circuit Court of Appeals, Third Circuit. January 23, 1900.)

No. 7.
LIFE INSURANCE-VESTED INTEREST IN BENEFICIARY.

The taking out of a policy of life insurance creates no vested interest
in the beneficiary named therein, where the policy permits a change of
beneficiaries by agreement between insured and insurer, without the
knowledge or consent of the beneficiary.1
In Error to the Circuit Court of the United States for the Eastern
District of Pennsylvania.

Bernard Gilpin, for plaintiff in error.
Alexander Simpson, Jr., for defendant in error.
Before ACHESON, DALLAS, and GRAY, Circuit Judges.

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GRAY, Circuit Judge. This was an action of contract, brought in the circuit court of the United States for the Eastern district of Pennsylvania to recover the sum of $10,000, with interest from August 8, 1898. The record discloses the following facts: On March 26, 1892, John S. Hopkins, of the city of Philadelphia, applied for membership in the Northwestern Masonic Aid Association, a corporation existing under the laws of the state of Illinois, for a policy of insurance on his life for $10,000, and on April 14, 1892, the said Masonic Aid Association issued its certificate or policy No. 53,477 on the life of the said John S. Hopkins, the beneficiaries named therein being "his wife, Emily V. Hopkins, if living; if not, to his children, or the survivors of them, equally, if living.” The said John S. Hopkins paid the premiums on said policy as they became due until the month of December, 1897. The said policy or certificate of membership No. 53,477 had indorsed thereon the following provision:

"Change of beneficiaries can be made at any time, without charge, upon complying with the by-laws."

1 See note at end of case.

40 C.C.A.-1

The by-laws referred to expressly provide that:

"Any member may secure a change of the beneficiaries named in his certificate upon surrendering said certificate to the secretary for cancellation, and stating to him in writing to whom in said classes of beneficiaries mentioned in said articles of incorporation he desires such benefits paid; whereupon the secretary shall change upon the records the name of such beneficiary, and issue a new certificate accordingly."

The act of the general assembly of Illinois under which defendant company was incorporated provided that:

“Membership in any such corporation shall give to any member thereof the right at any time, with the consent of such corporation, to make a change in his payee or payees or beneficiary or beneficiaries. without requiring the consent of such payee or beneficiary."

The certificate also provided that it should not be binding if the insured "shall suffer death in consequence of any violation by him of any penal law of any state or government." In June, 1896, by resolution of the board of trustees of the Northwestern Masonic Aid Association, and proceedings duly had thereunder, the name of the said association was changed to that of the Northwestern Life Assurance Company On December 8, 1897, said Northwestern Life Assurance Company, upon application of the said John S. Hopkins, canceled said policy No. 53,477, and issued in lieu thereof to him a new policy on his life for $10,000, numbered 117,132, payable on his death to "his wife, Emily V. Hopkins, if living; if not, to his surviving children, equally, if living"; said John S. Hopkins paying therefor, on December 2, 1897, the annual premium of $134.90. This was largely in excess of the premium on the old policy, which, in 1897, had been less than $250, but there were various provisions in the new policy or certificate which were claimed to make it more desirable than the old, such as extended insurance, cash surrender values, paid-up policy values, loan values, and the cessation of all payments after 20 years. Said policy or certificate No. 117,132, issued December 8, 1897, as aforesaid, contained, inter alia, the following stipulation:

"(9) If the insured shall die by his own hand or act, whether sane or insane, within two years from the date of this policy, or shall suffer death in consequence of the violation by him of any penal law of any state or government, then this policy shall be void, and shall cease to be binding upon said company, except for the amount which the insured has paid in premiums on ar count thereof."

The said John S. Hopkins died by his own hand on March 24, 1898 (the death occurring within two years of the date of the policy), the said Emily V. Hopkins, his wife, and the plaintiff below, surviving him. The company tendered before suit, and has paid into court, the premiums paid by John S. Hopkins. It is claimed by the plaintiff that, the surrender of the old certificate or policy No. 53,477 and the issuance of the new certificate or policy No. 117,132 having been accomplished by and between the said John S. Hopkins and the defendant company without the knowledge or consent of the said plaintiff, the beneficiary in both of said policies, the original certificate or policy was still in force at her option, and constituted the sole measure of the obligation existing on the death of John S. Hopkins between the plaintiff and defendant; and that, therefore, the said plaintiff was not bound by the stipulation of the substituted policy in regard to suicide above recited; that, in the absence of any such stipulation in the original policy or certificate, the fact of suicide constituted no defense to her claim, and that she was entitled to receive the amount to be secured to be paid to her on the death of her husband. In other words, the plaintiff claims that she had a vested interest as beneficiary in the original policy from the date that the contract of insurance was completed, which could not become devested or impaired by any agreement between her husband and the defendant company, made without her knowledge or consent.

Two important questions are raised by this contention: (1) Has a beneficiary a “vested interest" when the certificate or policy itself, the association's by-laws, and the statute under which it was incorporated all provide that the payee or beneficiary may be changed "at any time” without requiring the consent of such payee or beneficiary? (2) If a beneficiary has such a "vested interest” as would have prevented, in this case, the substitution of a new policy for the old, without the plaintiff's consent, and thus enabled the plaintiff to successfully claim that the old policy alone was in force between her and the defendant, then did the contract between the defendant and John S. Hopkins, evidenced by this policy, having in it no express stipulation in regard to suicide, exclude death by his own voluntary act as a condition upon which the policy should becom due and payable? There was no evidence presented by the plaintiff touching the question of the sanity of John S. Hopkins at the time of his death, and the case was submitted to the jury by the judge below, as follows:

"The defendant's point, 'The verdict must be for the defendant,' is reserved. We instruct the jury to find in favor of the plaintiff for $10,400, subject to the reserved question whether there is any evidence to go to the jury in support of the plaintiff's claim. (Exception noted for defendant to the charge of the court, and to the refusal of defendant's point.)"

On June 7, 1899, the said court filed its opinion, entering judgment in favor of defendant on the question of law reserved on the trial of said cause, notwithstanding the said verdict. 94 Fed. 729.

As to the first question raised by the facts of this case, as disclosed in the record and stated above, we are of opinion that the taking out of the original policy by John S. Hopkins created no vested interest in his wife, Emily V. Hopkins, the beneficiary named in said policy, as was claimed by her in this suit, inasmuch as the contract of the original policy itself permitted a change of beneficiary by agreement between the insured and the company, without the knowledge or consent of the said plaintiff. Without passing upon the question as to whether, without such a stipulation, there is any tested interest in the beneficiary named in such a policy, such as cannot be disturbed by agreement between the insured and the company without the consent of such beneficiary, it suffices to say that in this case, where the policy contains the stipulation recited, there can be no such permanent or vested interest as is claimed by the plaintiff. The control over the contract of insurance given to the insured, independent of the will of the beneficiary, makes impossible the existence of such permanent or vested interest in such beneficiary during the lifetime of the insured. The right of the beneficiary is inchoate, and a mere expectancy, during such lifetime, and does not become vested until the death of the insured happens with the policy unchanged. In this view the original policy was effectually surrendered and canceled by the agreement of December 8, 1897, and the issuance of the new certificate or policy on that date, and said new policy, No. 117,132, was the only one subsisting at the time of the death of said John S. Hopkins, in March, 1898. This being so, there can be no recovery by the plaintiff on either policy, because it is not controverted that the stipulation contained in the new policy against liability where death of the insured is caused by his own voluntary act would prevent recovery by the plaintiff. On this ground, therefore, we think the court below was clearly right in directing judgment to be entered for the defendant upon the point reserved, notwithstanding the verdict. This conclusion renders unnecessary a consideration of the other question above stated, to the discussion of which the learned judge in the court below confined himself in his opinion filed in the case. The judgment entered in the court below is affirmed.

NOTE.

Change of Beneficiary in Policy or Certificate.

I. INTEREST OF BENEFICIARY. 1. In General.

[a] The beneficiary in a certificate of a mutual benefit order has no vested interest in the certificate during the life of assured, where the certificate itself, as well as the rules of the order, reserve to assured the ultimate right of cancellation and disposition of the certificate. —(U. S. C. C., Mo., 1895). Robinson v. Association, 68 Fed. 825; (Cal. Sup. 1896) Hoeft v. Supreme Lodge, 45 Pac. 185, 113 Cal. 91, 33 L.

R. A. 174; (III. Sup. 1896) Voigt v. Kersten, 45 N. E. 543, 164 Ill. 314; (App. 1897)

Delaney v. Delaney, 70 III. App. 130; (Iowa Sup. 1897) Carpenter v. Knapp, 70 N. W. 764, 101 Iowa, 712, 38

L. R. A. 128; (Kan. Sup. 1889) Titsworth v. Titsworth, 20 Pac. 213, 40 Kan. 571; (Mich. Sup. 1892) Insurance Co. v. O'Brien, 52 N. W. 1012, 92 Mich. 584; (Minn. Sup. 1895) Finch v. Order of Druids, 62 N. W. 381, 60 Minn. 308; (Mo. Sup. 1895) Wells v. Association, 29 S. W. 607, 126 Mo. 630; (N. H. Sup. 1888) Knights of Honor v. Watson, 15 Atl. 125. 64 N. H. 517;

(1895) Supreme Council v. Adams, 44 Atl. 380, 68 N. H. 236; (N. J. Ch. 1899) "Tepper v. Council of Royal Arcanum, 45 Atl. 111; (N. Y. App. 1892) Sabin v. Phinney, 31 N. E. 1087, 134 N. Y. 423, affirming

(1889) 8 N. Y. Supp. 185, 55 Hun, 603; (Tenn. Sup. 1897) Sofge v. Supreme Lodge, 39 S. W. 853, 98 Tenn. 446;

Lane v. Lane, 42 S. W. 1058, 99 Tenn. 639. [b] (Ill. App. 1897) The contract is between the society and the member, and the beneficiary acquires no vested right in the benefit fund until the death of the member.- Delaney v. Delaney, 70 Ill. App. 130.

[c] (Iowa Sup. 1896) As between the assured and the insurer, a policy of life insurance is a contract for the benefit of the beneficiary, who takes by contract, rather than by inheritance or bequest, though the naming of the beneficiary partakes of the nature of a bequest.—Phillips v. Carpenter, 44 N. W. 898, 79 Iowa, 600.

(d) (Ky. App. 1887) A. had certificates in several associations, all payable to his wife, she being empowered to trade as a feme sole. Becoming indebted, he in his last illness canceled those certificates, and took out new ones, payable to his wife in trust for herself and children. Held, that this was no fraud on the wife's creditors, as she had no vested rights under the original certificates that the husband could not control; it appearing from the charters of the associations that their chief object was to provide a fund for the families of deceased members, and that the member, after designating in his certificate who should receive the benefit on his death, might surrender that and obtain a new certificate payable to some other person.-Schillinger v. Boes, 3 S. W. 427, 85 Ky. 357.

[e] (Mo. App. 1898) The interest of a beneficiary in the certificate on the life of a member of a fraternal beneficial association is a mere expectancy before the death of the member, after which event it becomes vested.—Grand Lodge v. Reneau, 75 Mo. App. 402.

[1] (Wash. Sup. 1895) In the absence of a showing to the contrary, it will be presumed that a member of a benevolent society has power to change the certificate of membership.-Thomas v. Grand Lodge, 41 Pac. 882, 12 Wash. 500. 2. Under By-Laws Permitting Change.

[a] (Ga. Sup. 1897) A policy payable to the wife of the assured, which stipulates that it "is issued and accepted upon express conditions that” the assured "may, with the consent of the company, at any time assign it, or, before assignment, change the beneficiaries therein," may, with the company's assent, be surrendered, and in its stead a paid-up policy taken, payable to a person other than the wife, she having paid none of the premiums.—Bilbro v. Jones, 29 S. E. 118, 102 Ga. 161.

(b} (lowa Sup. 1890) A member of a benefit association delivered his certificate to his daughter, the plaintiff, who was named therein as beneficiary. Afterwards he obtained possession of the certificate through fraud, and had another beneficiary named therein. A by-law of the association provided that any member holding a certificate, and desiring to make a change of direction as to its payment, might do so by authorizing such change in writing on the back of the certificate. Laws 21st Gen. Assem. c. 65, 87, provides that a member of a benefit association, with the consent of such organization, may change the name of the beneficiary without the latter's consent. Held, that plaintiff had no such vested right in the avails of the certificate as could prevent her father's changing the beneficiary.-Brown v. Grand Lodge, 45 N. W. 884, 80 Iowa, 287.

[c] (X. Y. Sup. 1889) The laws of the mutual benefit association of which deceased was a member provided that the member might change the beneficiary of the relief fund certificate, and a new certificate be issued on surrender of the old one. By Laws 1883, c. 175, $ 18, the right to effect such a change is made obligatory on the association, and the right is given to make such change without consent of the beneficiary. Held, that plaintiff, who was named in the first certificate issued to decedent, which was afterwards annulled and a new one issued, had no vested right in the certificate.—Luhrs v. Supreme Lodge, 7 N. Y. Supp. 487, 54 Hun, 636.

(d) (Pa. Sup. 1888) A benefit certificate on the life of a son was made payable to his mother, to whom it was delivered. Having married, the son afterwards obtained the certificate, and without his mother's knowledge or consent surrendered it for one payable to his wife, to whom he delivered it. Afterwards, without the knowledge or consent of the wife, he obtained the second certificate, and procured its cancellation, and the issue of another payable to the mother. The rules of the association allowed the surrender of a certificate and the issue of a new one. Held that, though the certificate was delivered as a gift to the wife, it was subject to the condition attached that assured might at any time surrender it, and name another beneficiary, and that the wife had no right to the fund.-Appeal of Beatty, 15 Atl. 861, 122 Pa. St. 428. 3. Where Right Becomes Vested.

(a) (Ark. Sup. 1892) A holder of a mutual benefit certificate had three sons and a daughter, and made the "children” the beneficiaries, but afterwards

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