Opinion
No. 3721.
July 11, 1929. Rehearing Denied August 1, 1929.
Appeal from District Court, Gregg County; Reuben A. Hall, Judge.
Suit by Ida Jewell Killingsworth, by her guardian and next friend, Grace Killingsworth, and others, against the Rembert National Bank of Longview and another, in which the Longview Cotton Oil Company intervened. Judgment for defendants, and plaintiffs appeal. Affirmed.
Ike Killingsworth died testate December 6, 1928, leaving his wife, Ethel Killingsworth, his daughters, Pearlie May Burns, wife of Boyd Burns, and Hazel Latham, wife of Albert Latham, and his granddaughter, Ida Jewell Killingsworth, surviving him. At the time of his death Killingsworth was indebted to the Rembert National Bank and others in sums in excess, in the aggregate, of the value of the property he owned. His indebtedness to said bank was evidenced by promissory notes in sums amounting, including interest and attorney's fees stipulated for, to more than $16,000, the payment of which was secured by mortgages he had given on real and personal property he owned. To further secure his said indebtedness to said bank, exercising a right he had by terms of the policies, Killingsworth, on March 23, 1928, had the Great Southern Life Insurance Company to make said bank, instead of his wife, the beneficiary as its interest might appear in a policy he carried on his life in the sum of $5,000; and on April 2, 1928, had said insurance company to make said bank, instead of his wife, the beneficiary as its interest might appear in a policy he carried on his life for the sum of $10,000. It was stipulated in the written indorsements on the policies evidencing the change of beneficiaries that any balance of the proceeds of the policies remaining after the claim of the bank thereon had been satisfied should be paid to his said daughters and granddaughter, share and share alike. When Killingsworth died, said insurance company paid to said bank $11,646.41, the amount of said policies, less certain indebtedness of the insured to the company. The bank did not apply the fund as a payment on Killingsworth's indebtedness to it, but held possession of same unapplied, and was so holding same when this cause was tried. By his will dated June 13, 1928, duly probated, Killingsworth bequeathed to his said daughters, jointly, 200 acres of land; to his granddaughter 81 acres of land, and to his wife all other property owned by him. This suit was by Killingsworth's said daughters, Pearlie May Burns, joined by her husband, and Hazel Latham, joined by her husband, and his said granddaughter, Ida Jewell Killingsworth, minor, acting by Grace Killingsworth as her guardian and next friend, as plaintiffs, against said bank and said Ethel Killingsworth as administratrix of said Ike Killingsworth's estate, as defendants. It was to require a marshaling of assets and securities and to compel said bank "to (quoting the prayer in the plaintiffs' petition) enforce its liens and claims which it holds as security for its said indebtedness first against the property and funds upon which these plaintiffs have no lien or claim, and apply the proceeds thereof upon said indebtedness, and that they be permitted to resort to and apply the proceeds of said insurance policies upon said indebtedness only to the extent of any balance that may be remaining due thereafter, and that the balance of the proceeds of said insurance policies remaining after said bank has so enforced and applied its other securities to the payment of its indebtedness and so much of the proceeds of said insurance as may be necessary, if any, be adjudged to be the property of the plaintiffs."
In their petition the plaintiffs, appellants here, alleged that the bank had valid liens on property exclusive of the proceeds of the insurance policies, "far more than sufficient to fully pay off and satisfy" Killingsworth's indebtedness to it; and alleged, further, that, if the bank was "permitted (quoting) to satisfy its indebtedness out of the fund upon which these plaintiffs and the bank both have a claim, to-wit, the proceeds of the insurance," same "would be totally exhausted, leaving nothing whatever for these plaintiffs, and such would be inequitable and unjust to the plaintiffs; that the said defendant bank can, without injury, loss, damage or delay, fully satisfy and discharge the indebtedness held by it by enforcing the collection of its indebtedness from the other securities held by it, and in the event that the said securities were not sufficient to pay off and satisfy said bank they would do so to a great extent, and the said defendant could then resort to the proceeds of the insurance for whatever balance remained due on its indebtedness after exhausting its other securities, as aforesaid, thus leaving the fund or property upon which these plaintiffs have a valid lien to be applied at least in part to the payment of the claim of these plaintiffs." In their answer the bank and the administratrix, defendants in the court below and appellees here, among other things alleged that appellants' claim to the proceeds of the policies was without a valuable consideration to support it; that the decedent's estate was indebted to "various and sundry persons" in sums "aggregating more than $110,000 and was insolvent; and that the change specified in the beneficiaries named in the insurance policies was made "with the intention (quoting) on the part of said Killingsworth that the proceeds of said policies should first be applied to the payment of the indebtedness of said Killingsworth to said bank before said indebtedness or any part thereof should be enforced against any of the property of the said Ike Killingsworth or of his estate." The Longview Cotton Oil Company, an appellee here, intervened in the suit, alleging that it was an unsecured creditor of Killingsworth's estate in the sum of $1.850.30, and adopting as its own the pleadings of said bank and administratrix. The trial was to the court without a jury, and he found, among other things, that the decedent was insolvent at the time he had the insurance company to make the change in the beneficiaries in the policies, and at all times thereafter; that the intervener oil company was one of the decedent's creditors; that the indebtedness to it was unsecured and existed at the time said change was made in the beneficiaries in the policies; that the unsecured creditors of the estate would "lose (quoting) the greater portion or all of their claims against the estate if the proceeds of the insurance policies held by the Rembert National Bank are not applied to the indebtedness held by the bank against the estate;" that "if (quoting) such insurance is applied to the payment of the bank's debt without first requiring the bank to exhaust its liens on the lands and personal property the entire proceeds of the insurance will be required to pay the bank's indebtedness and the plaintiffs would receive nothing from such insurance;" that the security held by the bank was "sufficient (quoting) to realize the amount of the indebtedness Ike Killingsworth owed the bank at the time of his death, if the property covered by the lien is sold for its reasonable market value;" that "the bank (quoting) can establish its debts and liens existing by virtue of the chattel mortgage and deeds of trust and enforce the same through the probate court in which the administration of the estate is pending in the usual and customary manner of enforcing claims against the estate of deceased persons, in the usual and customary time required for such proceedings as required by law;" and that "it was the intention (quoting) of the said Ike Killingsworth at the time he executed the instruments naming new beneficiaries under said policies of insurance that the proceeds of said insurance policies should be first applied to his indebtedness to the Rembert National Bank before any of the proceeds of said insurance was paid to the plaintiffs." On the findings he made the trial court rendered judgment denying appellants relief of any kind and in favor of appellees for costs.
J. H. T. Bibb and Scott, Casey Hall, all of Marshall, for appellants.
P. O. Beard and Carey Abney, both of Marshall, and Young Stinchcomb and W. C. Shoults, all of Longview, for appellees.
The doctrine of marshaling invoked by appellants as applicable to their case and as supporting their contention that the trial court erred when he denied them relief they sought has been stated as follows: "If one party has a lien on, or interest in, two funds for a debt, and another party has a lien on, or interest in, one only of the funds for another debt, the latter has a right in equity to compel the former to resort to the other fund in the first instance for satisfaction, if that course is necessary for the satisfaction of the claims of both parties, whenever it will not trench upon the rights or operate to the prejudice of the party entitled to the double fund." 2 Story's Equity Jurisprudence (14th Ed.) 230; and see 5 Pomeroy's Equity Jurisprudence (2d Ed.) 5078; 38 C.J. 1365; 18 R.C.L. 454.
If appellants had a right to invoke the doctrine, it was because of the change made in the beneficiaries of the policies, evidenced by an endorsement thereon by the insurance company as follows: "The beneficiary under this policy has this day been changed from Ethel V. Killingsworth (wife) to Rembert National Bank, Longview, Texas (creditor), as their interest may appear, and the balance, if any, to Ida Jewell Killingsworth (granddaughter), Pearl Burns (daughter) and Hazel Latham (daughter), share and share alike, survivors or survivor," and because of the fact that the bank had liens on property other than the proceeds of the policies sufficient to pay Killingsworth's indebtedness to it.
Appellants' view of the matter seems to be that the effect of naming them as beneficiaries in the policies was to make them the owners of the proceeds thereof, subject alone to a right in the bank to resort to same for the satisfaction of Killingsworth's indebtedness to it, if the other security it held was insufficient for the purpose. We think that is an incorrect view, and that the naming of appellants as beneficiaries entitled them to claim only the part of said proceeds in excess of Killingsworth's indebtedness to the bank; and, it appearing that the amount of the proceeds was less than the amount of that indebtedness, that appellants never became the owners of any part of the proceeds. It will be noted that the bank was made the beneficiary to the amount Killingsworth might owe it when the policies were paid, and that appellants were made the beneficiaries only of "the balance, if any," remaining after said indebtedness to the bank was satisfied. It is true, as argued by appellants, that the effect of so construing the provision in the policies will be to deprive them of a fund which, but for such construction, could not be treated as assets of Killingsworth's estate and subject same to the payment of Killingsworth's indebtedness. But as we see it that is not a reason why the provision should not be so construed. Such a construction will not operate to take from appellants anything they had, but will accomplish the evident intent of the decedent to make the proceeds of the policies assets of his estate so far as necessary to pay his indebtedness to the bank.
As we view it, the case on its material facts is more like Andrews v. Life Insurance Co., 92 Tex. 584, 50 S.W. 572, and 24 Tex. Civ. App. 425, 58 S.W. 1039, than it is like any other of the cases cited by the parties. In that case the provision in the policy was as follows: "Upon the death of the insured (W. L. Andrews), the company agrees to pay said amount of insurance to A. P. Dyke, creditor, as his interest may appear; otherwise, executors or assigns of the insured." It was held on the first appeal of the case that to the extent of the indebtedness of Andrews at the time of his death to Dyke "the policy (quoting) never became payable to the executor or administrator of Andrews, and the fund never became the property of the estate;" and on the second appeal, in affirming a Judgment denying the administrator of the insured a recovery of anything on the policy, the court said: "The company was primarily liable, and bound to pay Dyke the amount of the policy on the debt, and the estate had no interest in the policy until that debt was fully satisfied. If there had been a residue after payment of the debt for which the policy was issued at the time of the death of the insured, the estate would be entitled to it; but it is shown that the amount due by the policy did not overpay the debt, and hence the estate has no interest in the policy, and is entitled to nothing therefrom." And see Landrum v. Landrum, 186 Ky. 775, 218 S.W. 274. It is true it did not appear in the Andrews Case, and did appear in this one, that the creditor had other security than the policy for the indebtedness of the insured to him, but whether the creditor had other security or not we think was not important in determining the legal effect of naming the creditor as a beneficiary in the policy.
It seems the case most relied upon by appellants in support of their contention is Farracy v. Perry (Tex.Civ.App.) 12 S.W.2d 651. There the beneficiary named in the policies joined the insured in an assignment thereof to a creditor of the insured. The assignment was in writing and provided that the interest of the creditor assignee was "limited [quoting] to said assignee's valid pecuniary claim against the assignors existing at the time of settlement of the policy the remainder of said policy, if any, being unaffected by this assignment." The case was unlike this one in the fact that in that one no change was made in the beneficiary named in the policy. The Court of Civil Appeals said the assignment to the creditor "was [quoting] by no means equivalent to his designation of another beneficiary," and held — correctly, we think — that on the death of the insured the expectancy of the beneficiary named in the policies "became [quoting] a vested right to the entire proceeds of said policies, subject only to the rights of the bank" (the creditor), which it was further held had only a lien on the policies.
At the trial, over appellants' objection, the court admitted testimony of a witness as to declarations made by Killingsworth at the time he had the insurance company to make the change in the beneficiaries named in the policies, tending to show that his purpose in having the change made was to have the proceeds of the policies applied to the payment of his indebtedness to the bank so far as might be necessary to satisfy same, and in that way protect lands he owned from liens the bank had to secure the payment of such indebtedness. Whether it was error to admit such testimony need not be determined; for, if it was error, we think it should be treated as harmless. If the testimony had been excluded, we think the trial court properly could not have reached a conclusion different from the one he did reach.
The judgment is affirmed.