
    BROWN v. HOME LIFE INS. CO. OF NEW YORK (COLVIN et al., Interveners).
    (District Court, E. D. Oklahoma.
    January 19, 1925.)
    No. 4469.
    
      (Syllabus by the Court.)
    
    
      t. Insurance <§=>586 — Beneficiary had no vested right where policy reserved to Insured the right to change beneficiary.
    Under a life insurance policy reserving to insured the right, without the consent of the beneficiary, to change the beneficiary, the original beneficiary had no vested right, but only a mere expectancy during the lifetime of the insured.
    2. Insurance <§=>587 — Equity will regard In-dorsement of change of beneficiary as completed where insured failed without valid reason to make indorsement.
    Where a policy of life insurance provides, “When the right of revocation has been reserved, the insured, if there be no existing assignment of the policy filed with the company as herein provided, may, while the policy is in force, designate a new beneficiary, with or without reserving the right of revocation, by filing written notice thereof at the homo office of the company, accompanied by the policy, for suitable endorsement thereon. Such change shall take effect upon the endorsement of the same on the policy by the company and not before,” and the insured submits to the home office the required notice on a blank furnished by the company for the purpose of changing the beneficiary and returns the policy, and the ■company fails and refuses to make the suitable indorsement for no valid reason, equity will regard the indorsement of the change of beneficiary as completed and entitle the new beneficiary to the proceeds of said policy.
    3. Bankruptcy <§=>396(1,3) — Exemptions left to state laws; proceeds of life policy payable to or for benefit of wife did not pass to husband’s trustee in bankrupty in view of state law.
    The matter of exemptions is left by Bankruptcy Act, § 6 (U. S. Comp. St. § 9590), to state laws. Under Compiled Oklahoma Statutes 1921, § 6727, life insurance policies payable to or for the benefit of a married woman are exempt from his debts, and the proceeds of such a policy do not pass to his trustee in bankruptcy.
    4. Interpleader <§=>32 — Court may require plaintiff to do equity if he is to prevail in action in which defendant entered plea in nature of bill of interpleader.
    Where an action originates at law, and the defendant assumes the position of a disinterested stakeholder and enters a plea in the nature of a bill of interpleader, and the only question before the court is the determination of the person entitled to the lender made by the defendant, it is within the power of the court to compel the plaintiff to do equity in the premises if he is to prevail in the action.
    At Law. Action by Gertrude F. Brown against the Home Life Insurance Company of New York, in which H. C. Colvin, trustee in bankruptcy of the estate of Curtis Brown, a bankrupt, and another, intervened.
    Decree for plaintiff, with condition.
    William S. Rogers, of Tulsa, Okl., for plaintiff.
    Kleinschmidt & Johnson, of Tulsa, Okl., for defendant.
    D. F. Gore and E. J. Lundy, both of Tulsa, Okl., and Julius Moses, of Chicago, Ill., for trustee.
   KENNAMER, District Judge.

Mrs. Gertrude F. Brown instituted this action against the Home Life Insurance Company, a corporation, to recover $40,000 alleged to he due upon two ordinary life insurance policies issued by the defendant company upon the life of Curtis C. Brown. Boone Williams, trustee in bankruptcy of Curtis Brown Company, a corporation, bankrupt and H. C. Colvin, trustee in bankruptcy of estate of Curtis C. Brown, bankrupt, have intervened in the action. The defendant insurance company has answered tendering the amount of the policies into court and assumed the position of a disinterested stakeholder of the proceeds due on the policies.

The material facts necessary to be considered in determining this cause are that on the 12th day of August, 1919, the Home Life Insurance Company of New York, in consideration of an annual premium of $724.40 paid by the Curtis Brown Company, executed and delivered to Curtis C. Brown an ordinary life insurance policy in writing in the sum of $20,000, policy No. 239366, in which Curtis Brown Company was named beneficiary. On the 31st- day of August, 1923, the defendant insurance company, in consideration of a premium of $755.40, executed and delivered an ordinary life insurance policy to Curtis C. Brown, insured, in the sum of $20,000, Policy No. 263476, in which the Curtis Brown Company, was named beneficiary.

On March 26, 1924, Curtis Brown Company was adjudged a bankrupt and Boone Williams was appointed trustee. Curtis Brown was president and managing officer of the Curtis Brown Company. The schedules attached to the petition filed in the bankruptcy proceedings of Curtis Brown Company listed tbe policies as assets of said company, and tbe petition was verified by Curtis Brown. On April 24, 1924, Curtis Brown being in possession and control of tbe insurance policies, returned tbe same to tbe bead office of the insurance company, together with written directions to change tbe beneficiary in tbe policies from tbe Curtis Brown Company to Gertrude F. Brown, bis wife.

On May 27, 1924, tbe insured, Curtis C. Brown was adjudged a bankrupt, and the following September H. C. Colvin was appointed trustee of tbe bankrupt estate of tbe insured. On May 2,1924, tbe defendant insurance company in writing acknowledged receipt of tbe policies and the written request of tbe. insured Curtis C. Brown to change tbe beneficiaries in tbe policies and sent to tbe insured blank forms of direction for change of benefieiary, which the insured Curtis C. Brown filled out and executed in accordance with tbe request of tbe insurance company and returned to it. Beeeipt of same were acknowledged on May 9, 1924. During tbe time from May 2 until May 9 the defendant insurance company received notice from Boone Williams, trustee in bankruptcy of tbe Curtis C. Brown Company estate, that the trustee claimed tbe policies as assets of tbe estate.

Tbe defendant insurance company on receiving this notice from tbe trustee of tbe Curtis Brown Company, bankrupt, notified tbe insured, Curtis C. Brown, that by reason of tbe claim having been made by tbe trustee it was deferring any action in reference to indorsing tbe name of new benefi-eiary pending an adjustment of tbe claim of Boone Williams, trustee in bankruptcy, to tbe policies. Without any-indorsement having been made as provided in tbe policies, this condition existed until tbe 6th day of August, 1924, when tbe insured, Curtis C. Brown died. Gertrude F. Brown claims tbe proceeds of tbe policies as tbe benefieiary asserting that tbe insured, Curtis C. Brown, having fully complied with all tbe requirements of the contract of insurance to accomplish a change of benefieiary in tbe policies, equity will regard tbe change as having been actually made. Also, tbe right to change beneficiary having been reserved in tbe application and the contracts of insurance tbe first named beneficiary, Curtis Brown Company, bad no vested right but only a mere expectancy during tbe life of tbe insured. Tbe intervener, H. C. Colvin, trustee in bankruptcy of tbe estate of Curtis C. Brown, contends that regardless of who tbe benefieiary may be, that be as such trustee is entitled to tbe cash surrender value of tbe policies in question under tbe provision of sections 6 and 70 of tbe Bankruptcy Act (Comp. St. §§ 9590, 9654). Tbe intervener, Boone Williams, trustee in bankruptcy of tbe Curtis Brown Company, contends be is entitled to tbe proceeds of tbe two insurance policies in question on tbe ground that tbe corporation was at all times the owner of tbe policies and also for tbe reason that it was tbe beneficiary therein, ' and that the alleged change of beneficiary was ineffectual.

In determining tbe controlling question in this ease it may be well to observe that the policies in controversy contained tbe following provision:

“When tbe right of .revocation has been reserved, tbe insured, if there be.no existing assignment of the policy filed with the company as herein provided, may, while tbe policy is in force, designate a new beneficiary, with or without reserving the right of revocation, by filing written notice thereof at tbe home office of tbe company, accompanied by tbe policy, for suitable indorsement thereon. Such change shall take effect upon tbe indorsement of tbe same on tbe policy by tbe company and not before. If any beneficiary, under either a revocable or irrevocable designation, shall die' before tbe insured, tbe interest of such beneficiary shall vest in tbe insured unless otherwise herein provided.”

Tbe application for tbe insurance policy also reserved to tbe insured tbe power to change beneficiary, which applications by reference were made a part of tbe policies.

It is plain tbe insured reserved the unqualified right to change tbe benefieiary. Tbe manner of effectuating such change was provided for by only requiring tbe insured to request such change by filing written notice thereof with tbe insurance company at its home office and upon returning tbe policies for proper indorsement. While it is provided that tbe change is to become effective when tbe designation of new beneficiary is indorsed on tbe policy by tbe company, it is clear tbe only purpose of this last provision of tbe taking effect of tbe change in beneficiary upon indorsement on tbe policy is for tbe protection of tbe company, and L cannot ágree that this provision required tbe assent of tbe company before tbe insured would have tbe right to exercise bis power of making a new appointment. It is well settled that where no reservation of a right to change beneficiary exists in an ordinary policy, the interest of the beneficiary is a vested interest, and the insured is without power by deed of assignment or will or any other acts of his to transfer to any other person the interest of the person so named as beneficiary. In such a policy the beneficiary, the moment it is issued, acquires a vested right, which cannot he affected by any right of the insured subsequent to the execution of the policy, except it be a breach of the condition. Washington Central Bank v. Hume, 128 U. S. 195, 9 S. Ct. 41, 32 L. Ed. 370; Mutual Benefit Life Insurance Co. v. Swett et al., 222 F. 200, 137 C. C. A. 640, Ann. Cas. 1917B, 298; City National Bank of Lawton v. Lewis, 73 Okl. 329, 176 P. 247; Supreme Council of Royal Arcanum v. Sue B. Behrend, 247 U. S. 394, 38 S. Ct. 522, 62 L. Ed. 1182, 1 A. L. R. 966.

But in an ordinary life insurance policy where the right is reserved to change the beneficiary by the insured, and the insured has substantially complied with all the requirements of the contract of insurance to accomplish a change of beneficiary in the policy, such change of beneficiary cannot be defeated by the failure of the insurance company to indorse the change upon the policy when no valid reason exists why such endorsement was not made, but in such situation equity will regard that as done which ought to have been done. In determining the right of the last-named beneficiary to the proceeds of the contract of insurance, equity will treat the change as having been accomplished. In reaching this conclusion, the court is not unmindful of the rule adhered to by many authorities that, where the insured enters into a contract with third persons to name such persons as beneficia- * ries in an insurance policy upon the expressed condition that such third person will pay the premiums on the policy, equity will not recognize any change of beneficiary under such circumstances; but in the instant case there is no evidence establishing such an agreement on the part of the insured with the Curtis Brown Corporation.

The only evidence in this regard in the record is that Curtis Brown, who owned the controlling interest in the corporation, agreed with another stockholder that it would be well to take out on each of their lives an insurance policy for the benefit of the corporation. Prom such evidence I do not believe the inference may be drawn that there existed a contract between Curtis Brown Corporation and the insured, Curtis Brown, that in consideration of the insured securing insurance and the payment of the premium by the corporation that the insured Curtis Brown obligated himself not to change the beneficiary in the event such corporation became bankrupt and ceased to exist as á going concern. In this case the Curtis Brown Corporation" had the benefit of the protection afforded by the two insurance policies as long as it was a going corporation.

In the case of Supreme Council of the Royal Arcanum v. Behrend, supra, Justice Brandeis said:

“The mere fact that she paid some, and possibly all, of the assessments, prior to the change of beneficiary, even if paid out of her separate estate, raises no legal claim. Perhaps there was not even a moral claim; since throughout the period during which she paid assessments, she enjoyed full protection which the order agreed to furnish; and for this alone payments were made.”

With regard to the claim of H. C. Colvin, trustee of the estate of Curtis Brown, bankrupt, that under section 70 of the Bankruptcy Act, the trustee is entitled to the cash surrender value of the insurance policies, I deem it sufficient to say that the statute of Oklahoma, section 6727, Compiled Statutes 1921, provides:

“Every policy of life insurance made payable to or for the benefit of a married woman, or which after its issue is assigned, transferred, or in any way made payable to a married woman, or to any person in trust for her or for her benefit, whether procured by herself, her husband or by any other person, and whether the assignment or transfer is made by her husband or by any other person, shall inure to her separate use and benefit, subject to the provisions of the preceding section relating to premiums paid in fraud of creditors, and subject to any indebtedness on account of the policy: Provided, that the insured, under such policy shall not he denied the right to change the beneficiary where this right is expressly reserved in the policy.”

And that according to the provisions of this section of the Oklahoma statute, the beneficiary, Gertrude Brown, the wife ox the deceased, is entitled to the proceeds of the policies, including the cash surrender value. The proceeds of the policies are exempt under the statute and do not pass to the trustee in bankruptcy for the benefit of the creditors of the bankrupt estate.

This question as here involved has been decided adversely to the contention of counsel for Colvin, trustee, in the cases of Mag-nuson v. Wagner, 1 F.(2d) 99, decided by the Eighth Circuit Court of Appeals, August 11, 1924; Ralph v. Cox, 1 F.(2d) 435, Eighth Circuit Court of Appeals, September 9, 1924.

This, action originated as a law action against the' insurance company, but the insurance company having tendered the amount of the policies into court, now occupies the position of an interpleader, and as suggested by counsel in oral argument the proceeding now is in the nature of an action in equity to determine respective claims of the parties as who is the rightful owner of the funds. United States, to use of Morris v. Richardson et al., 223 F. 1010; 139 C. C. A. 386.

Therefore the court is of the opinion that the plaintiff is entitled to the proceeds of the two policies of insurance, and in granting to the plaintiff the relief for which she prays, it will be upon the condition that she return to the trustee in bankruptcy of the Curtis Brown Company the amount of the premiums paid by the company, together with 6 per cent, interest, and that the cost of this action be taxed equally to the plaintiff and to the trustee in bankruptcy of the Curtis Brown Company.

It is ordered that the decree be entered accordingly.  