decided: January 26, 1954; As Amended February 12, 1954.
Before GOODRICH, McLAUGHLIN and KALODNER, Circuit Judges.
This is an appeal from a Judgment of the United States District Court for the District of New Jersey denying a motion for summary judgment made by the subsequently described appellants.*fn* The undisputed facts are comprehensively detailed in the Opinion of the District Court.*fn1 For the purposes of this appeal they may be summarized as follows:
The Continental Assurance Company issued a $25,000 convertible term life insurance policy to Dr. John S. Conroy on July 12, 1929. The policy contained the following provisions respecting the insured's right to change his beneficiary:
"The Continental Assurance Company. * * * agrees to pay Twenty Five Thousand Dollars immediately upon receipt at its Home Office of due proof of the death * * * of John S. Conroy (hereinafter called the Insured) to The Estate of the Insured, (designated as Beneficiary with The right on the part of the Insured to change the Beneficiary) upon surrender of this policy properly released."*fn2
"Change of Beneficiary - When the right to change the beneficiary has been reserved, or in the event of the death of any beneficiary, the Insured may designate a new beneficiary, with or without reserving the right of change, by filing written notice thereof at the Home Office of the Company, accompanied by this policy for suitable endorsement. The rights of such new beneficiary shall be subject to any existing assignment of this policy made as herein provided."*fn3
On August 29, 1929, the insured executed his first change of beneficiary, naming Leona Conroy (his wife), John S. Conroy, 3rd, and Robert Conroy (his sons), and Lois Anne Conroy (his daughter), without expressing any reserved rights to change these beneficiaries. Thereafter, a number of changes of beneficiaries were made. In some of the changes a right to change the beneficiary was expressly reserved, while in others this right was not so reserved. On March 29, 1938, the insured assigned the policy to the First National Bank and Trust Company of Beverly, New Jersey and Howard Eastwood. This was followed on April 7, 1938, by having these two assignees designated as beneficiaries in the policy. The language of the application for this change of beneficiary was as follows:
"* * * the Insured hereby revokes all former designations of Beneficiary under said policy and, in lieu thereof * * * hereby changes the Beneficiary * * * to First National Bank and Trust Co., of Beverly, New Jersey and Howard Eastwood, co-trustees (assignees) under trust agreement (assignment) dated March 29th, 1938. * * * The change of Beneficiary hereby made is with the right of the Insured to make further change of Beneficiary * * *."
On April 18, 1938, the insured executed a declaration of trust in which the family of the insured, employees, and creditors were made beneficiaries of the trust created by the aforementioned assignment. Then, another series of changes of beneficiaries followed, culminating in the designation of named creditors and John S. Conroy, 3rd, on January 28, 1950. The insured died on March 30, 1951. Conflicting claims presented to the Continental Assurance Company resulted in its filing an interpleader action in the District Court.
The suit brought into collision two sets of claims. The appellants (the widow, daughter and Robert Conroy, a son of the insured) contended that since the insured failed to reserve the right to make further changes of beneficiary when he made his first substitution on August 29, 1929, any later designations were to no avail. Alternatively, the appellants claimed that the assignment of the policy to trustees for the benefit of appellants and others, accompanied by a change of beneficiary in favor of the trustees, cut off the power to make subsequent changes of beneficiary. Appellees are creditors of the insured, five of whom were designated as beneficiaries by the insured on January 28, 1950 and one by a substitution which occurred on October 21, 1948. The appellants' motion for summary judgment was denied, the District Court ruling (1) the insured's right to change beneficiaries was not lost through the failure to specifically reserve this right when he designated his wife and three children as beneficiaries on August 29, 1929, and (2) even after the assignment of the policy to the trustees, accompanied by the designation of such trustees as beneficiaries and the declaration of trust, the insured retained the right to change his beneficiaries.
Appellants here press their contention that when the insured, on August 29, 1929, substituted them as beneficiaries under the policy in place of his estate, without specifically reserving the right to make future changes, his right to substitute another beneficiary was ended. They cite Sampson v. United States, D.C.D.Mass.1932, 1 F.Supp. 95; Reed v. C.I.R., 1931, 24 B.T.A. 166; Brown v. Powell, 1923, 130 Miss. 496, 94 So. 457. The rationale behind these cases, which considered language quite similar to that found in the instant policy, is that the opening phrase of the policy which grants the right to the insured to change the beneficiary authorizes only one such change. Subsequent changes are permitted by the later appearing paragraph (in the present policy styled "Change of Beneficiary") only when the right to change is reserved in a prior substitution or in the event of the death of the designated beneficiary. A later decision of the Court of Appeals for the Seventh Circuit, Hintz v. Hintz, 1935, 78 F.2d 432, 433, is in conflict with these decisions. The policy involved in that case contained provisions almost identical to those found in the one now under consideration. The first clause read as follows:
"Central Life Assurance Society * * * Agrees to pay * * * upon receipt of due proof of the prior death of the Insured to William Howard Hintz beneficiary with right of revocation of Beneficiary reserved to the Insured."
Paragraph ten of the policy provided:
"When the right of revocation has been reserved, or in case of the death of any Beneficiary * * * the Insured * * * may designate * * * new Beneficiaries with or ...