Rebecca TYRE, Marian Josephson, Helen Zimmelman, Harriet Levens, Plaintiffs and Appellants, v. AETNA LIFE INSURANCE COMPANY, a corporation, Defendant and Respondent.*
This is an appeal by the plaintiffs from a judgment for defendant in an action on a life insurance policy. Plaintiffs are the widow, who is the primary beneficiary, and the children, who are the secondary beneficiaries, of the insured husband. The widow seeks to recover from defendant insurance company her community interest in the proceeds of the policy. The children of the insured join with the widow, their mother, in the relief sought. The appeal is upon an agreed statement, the clerk's transcript, the exhibits introduced into evidence, the widow's deposition and the findings of fact and opinion of the trial court.
There is no dispute as to the facts. Plaintiff, Rebecca Tyre, and the insured, Louis Tyre, were married at Los Angeles on January 14, 1917, and lived together as husband and wife in Los Angeles until the death of the insured on November 25, 1957. They were the parents of three adult daughters, who are the co-plaintiffs in this action.
On April 1, 1926, defendant company issued a life insurance policy on the life of the insured, calling for payment of $20,000 on his death. The original beneficiary was Tyre Bros. Glass Co., a corporation of which the insured was an owner and executive. On August 19, 1946, the beneficiary was changed to plaintiff widow, and the entire face amount of $20,000 was made payable to her in one lump sum. On March 17, 1950, pursuant to section 10 of the policy (allowing alternate settlement options), the insured executed a written change in the method of payment of benefits under the policy according to which the widow was to receive upon his death the sum of $123 per month for her life, but if she died within ten years after the insured, these monthly payments were to go to the three daughters in equal shares for the balance of the ten-year period only. As so amended, the policy continued in force for the remainder of the life of the insured and was in effect at the date of his death.
The change of method of payment was made without the knowledge, consent or approval of the widow. For several years before, and at the time of the death of the insured, the policy had been in the possession of the First National Bank of Malden, Malden, Massachusetts, as collateral security for a loan made to the insured. On January 20, 1958, the widow's attorney wrote to defendant requesting payment of the $20,000 face amount of the policy. On January 31, 1958, the original policy and a check for $369 (three monthly payments under the changed mode of payment) were mailed to the widow's attorney. Upon receipt, the attorney advised the widow of these facts, and this was the first she heard of the changed mode of payment. On February 4, 1958, her attorney wrote to defendant informing it that she was unaware of the election of payment in installments made by the insured and that she did not consent thereto, and requesting payment in a lump sum. Defendant refused to alter the method of payment and the widow, joined by the daughters, brought this action, praying for $10,000 (her community interest in the face amount of the policy) and a declaration that the remaining proceeds be paid in monthly installments of $61.50, according to the schedule executed by the insured.
On the death of the insured, the widow was 59 years and 8 months of age. It was stipulated that in accordance with the mortality tables established for use by the Inheritance Tax Department of the State of California, as appears in Title 18, California Administrative Code, Table D, page 141, a person 59 years of age has a life expectancy of 14 years. However, the widow had had three heart attacks. Because of her physical condition, she was advised by her doctor not to appear in court. She took tranquilizers to fortify herself for her deposition, which was admitted in evidence under section 2016(d) (3) of the Code of Civil Procedure, by reason of her inability to attend the trial. The trial court's findings of fact indicate that plaintiff widow may have had a life expectancy less than that of the average person her age. All premiums paid on the insurance policy in question came from community funds and earnings. The determinative issue is this: whether the insured husband in changing the method of payment under the policy without his wife's knowledge or consent exceeded his power to manage and control the community property (Civil Code, section 172) so as to deprive the widow of her community share of the proceeds, to which she is entitled under Probate Code section 201. We conclude: (1) that the indicated change in the method of payment of the insurance proceeds did not constitute a gift of community personalty or a disposition of the same without valuable consideration, (2) that the election of this method of payment was within the insured's managerial powers under section 172, and (3) that the judgment of the trial court must be affirmed.
A policy of insurance on the life of a married man, and the proceeds thereof, are community property if the premiums have been paid out of community funds. Blethen v. Pacific Mutual Life Insurance Co., 198 Cal. 91, 99, 243 P. 431; New York Life Insurance Co. v. Bank of Italy, 60 Cal.App. 602, 605, 214 P. 61; McBride v. McBride, 11 Cal.App.2d 521, 523, 54 P.2d 480; Grimm v. Grimm, 26 Cal.2d 173, 175, 157 P.2d 841. See also Travelers' Insurance Co. of Hartford, Conn. v. Fancher, 219 Cal. 351, 26 P.2d 482; Mundt v. Connecticut General Life Insurance Co., 35 Cal.App.2d 416, 421, 95 P.2d 966; In re Estate of Ettlinger, 73 Cal.App.2d 967, 167 P.2d 738; Mazman v. Brown, 12 Cal.App. 2d 272, 273, 274, 55 P.2d 539; 10 Cal.Jur. 2d 695, Community Property § 28, and cases cited therein.
Generally, the husband has the management and control of community personalty, together with the power to dispose of it, subject to certain restrictions designed to protect the wife. Civil Code, § 172. Aside from these restrictions, the husband has the same unqualified right to dispose of that portion of the community property which is subject to his management, control and disposition as he has with regard to his separate property. Grolemund v. Cafferata, 17 Cal.2d 679, 683, 111 P.2d 641; McMullin v. Lyon Fireproof Storage Co., 74 Cal.App. 87, 92, 239 P. 422; Beemer v. Roher, 137 Cal.App. 293, 297, 30 P.2d 547; Berniker v. Berniker, 30 Cal.2d 439, 446, 182 P.2d 557. See also 10 Cal.Jur.2d 741 et seq., Community Property, § 65, and cases cited therein.
Upon the death of either spouse, one-half of the community property vests in the surviving spouse and the other half is subject to the testamentary disposition of the decedent. Probate Code, § 201. During the lifetime of the spouses, the husband's powers of management and control are limited by the proviso that he ‘can not make a gift of [the] community personal property, or dispose of the same without a valuable consideration, * * * without the written consent of the wife.’ Civ.Code, § 172; and see Blethen v. Pacific Mutual Life Insurance Co., supra, 198 Cal. 91, 99, 243 P. 431; New York Life Insurance Co. v. Bank of Italy, supra, 60 Cal. App. 602, 605, 214 P. 61; Grolemund v. Cafferata, supra, 17 Cal.2d 679, 683, 111 P.2d 641; McMullin v. Lyon Fireproof Storage Co., supra, 74 Cal.App. 87, 92, 239 P. 422; Beemer v. Roher, supra, 137 Cal.App. 293, 297, 30 P.2d 547; Berniker v. Berniker, supra, 30 Cal.2d 439, 446, 182 P.2d 557.
In accordance with these rules, it is well settled that when a policy of insurance issued on the husband's life is community property because the premiums have been paid out of community funds, he cannot make a gift of the proceeds thereof by designating someone other than his wife as beneficiary, without her written consent. New York Life Insurance Co. v. Bank of Italy, supra, passim; Mundt v. Connecticut General Life Insurance Co., supra, 35 Cal.App.2d 416, 421, 95 P.2d 966; McBride v. McBride, supra, 11 Cal.App.2d 521, 523–524, 54 P.2d 480. See also 10 Cal. Jur.2d 754, Community Property, § 74, and cases cited therein. And even if the husband's contract with the insurer gives him the right to change the beneficiary without his wife's consent, he cannot defeat her community interest by changing the beneficiary without her consent and without a valuable consideration. Blethen v. Pacific Mutual Life Insurance Co., supra; Grimm v. Grimm, supra, 26 Cal.2d 173, 175, 157 P.2d 841. However, such a gift by the husband is not void, but merely voidable as to the wife's community interest. Blethen v. Pacific Mutual Life Insurance Co., supra, 198 Cal. at page 101, 243 P. at page 435; Grimm v. Grimm, supra; Beemer v. Roher, supra, 137 Cal.App. 293, 297, 30 P.2d 547. She may attack the gift after the death of the husband and recover one-half of the proceeds (New York Life Insurance Co. v. Bank of Italy, supra; Mundt v. Connecticut General Life Insurance Co., supra), but the remainder of the gift is valid (Beemer v. Roher, supra, 137 Cal.App. at pages 293–294, 30 P.2d 547; McBride v. McBride, supra). And if the gift exceeds one-half of the proceeds and the wife is one of the beneficiaries, she must elect whether to take under the policy or to assert her community property rights. Mazman v. Brown, supra, 12 Cal.App.2d at pages 275–276, 55 P.2d at pages 540–541.
In the case at bar, the insured husband, in the exercise of his statutory powers of management of the community personalty, elected to provide for his wife, the primary beneficiary under his life insurance policy, by contracting with defendant company to pay out the proceeds of the policy in installments, rather than in one lump sum. Clearly, there was no donative intent, as to third persons, attached to this act. The arrangement between the insured and defendant was obviously supported by consideration. Had the contract provided only for installment payments to the widow with no provision for the daughters of the insured, there would clearly be no question but that there was no ‘gift’ of the proceeds undermining the community interest of the widow. It is therefore difficult to comprehend in what manner the contingent provision for payment to the daughters defeats the wife's statutory rights. The cases cited by appellants are readily distinguishable in that they all concern situations in which the insured husband sought to make third persons beneficiaries of more than 50% of the proceeds of policies purchased with community funds. In the instant case, the concern of the insured was for his wife. It was quite evidently his belief that she would be better provided for by regular monthly installments than by payment of a lump sum. The total amount which she receives under the policy is governed by the length of her life. She may receive more than one-half of the original face amount of the policy, or more than 100% of the original face amount, or she may receive less. In the event that she does not live ten years longer than her husband, the adult children will receive certain payments in her stead, not as a gift from their father, but as a continuation of his contractual relation with defendant. The crux of the instant case is that appellants apparently believe that the insured's contract with defendant will ultimately inure to defendant's benefit because of the allegedly shortened life expectancy of the widow. This may be the case, but since the insured's arrangement with defendant constituted a valid contract, supported by a valuable consideration, it was within his powers under Civil Code section 172, and it cannot be defeated.
Nothing in our holding here violates the rule of Probate Code, section 201 that ‘[u]pon the death of either husband or wife, one-half of the community property belongs to the surviving spouse’. The community property involved in the case at bar is the insurance contract. The contractual rights and duties of the insurer and insured and the rights of the beneficiaries are fixed by the terms of the contract. The widow's rights were neither disregarded nor given away; under the mode of payment selected she was made the primary beneficiary. There is no claim that the widow's community rights were fraudulently invaded or impaired, and there is nothing in the transaction that resembles a gift of community property.
It would seem that the widow's rights with respect to this insurance contract, and with respect to the payments which the insurer is required to make thereunder, are not essentially different from the rights which she would have with respect to a contract made by her husband in his lifetime providing for the sale of a community automobile. If the contract called for payment of the purchase price in small monthly payments over a long period of time, she might reasonably regard the contract as unsatisfactory or improvident from her point of view as the surviving widow, but in the absence of fraud or some other tenable ground of attack upon the contract's validity, she would have to be content to assert her community rights with respect to the contract as written.
FOX, P. J., and ASHBURN, J., concur.