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Kline v. Central Life Ins. Co.

March 29, 1939

KLINE
v.
CENTRAL LIFE INS. CO.



Appeal from the District Court of the United States for the Northern District of Illinois, Eastern Division; Wm. H. Holly, Judge.

Author: Treanor

Before EVANS, TREANOR, and KERNER, Circuit Judges.

TREANOR, Circuit Judge.

Plaintiff-appellant brought an action in the District Court pursuant to the Federal Declaratory Judgment Act.*fn1 The trial court granted the defendant's motion to dismiss plaintiff's complaint, the ground for dismissal being that the complaint disclosed the nonjoinder of an indispensable party, one George E. Yokom. The sole eror urged on appeal is that the District Court erred in sustaining defendant's motion to dismiss.

The suit involves an insurance policy which was originally issued by the Security Life Insurance Company of America. Security is now in receivership and the defendant, Central Life Insurance Company of Illinois, has assumed the policy obligations of Security upon the terms and conditions set out in a contract of reinsurance.

The policy involved in this appeal is one of life insurance in which M. E. Miller Realty Corporation is named as beneficiary. The policy also provides for payment of disability benefits to the insured in the event of his becoming totally disabled. The insured became disabled and the original insurer made payments of disability benefits from March 1, 1927, to April 18, 1932, on which date suit was commenced for the appointment of a receiver for the insurer. No payments of disability benefits have been made since April 18, 1932, although the insured has been ready and willing at all times to furnish the original insurer and the defendant reinsurer proof of his continued total disability.

At the time of the issuance of the policy the named beneficiary, M. E. Miller Realty Corp. agreed to pay premiums required to keep the policy in force until November 3, 1927. In August, 1926, one George E. Yokom, a resident and citizen of the state of Michigan, purchased all the assets of the Miller Corporation and assumed its obligation to pay the policy premiums. Thereafter the corporation's name was changed and in 1930 the corporation was dissolved under the laws of Michigan.

While plaintiff's claim for disability benefits was pending Yokom refused to continue making payments of premiums unless plaintiff would assign the policy to him. Plaintiff executed "certain assignments," the terms of which are not disclosed in the complaint, relying upon an understanding with Yokom that the policy would become the sole property of the plaintiff when Yokom received sufficient payments of disability benefits to reimburse for the amounts expended for payments of premiums. Yokom received from the original insurer enough disability payments to more than reimburse him for sums expended but refused to deliver the policy to plaintiff.

In addition to the foregoing facts and others which appear in the formal allegations of the complaint, there are material provisions in the policy, the pertinency of which will be disclosed in the course of our discussion.

On February 26, 1938, the plaintiff notified the defendant, Central Life Insurance Company of Illinois, that he was unable to secure the physical possession of the policy and requested the defendant to change the beneficiary under the policy to Clara H. Kline, his wife, but the defendant refused to make the change "on the ground that the plaintiff, James F. Kline, did not have the right to change the beneficiary under said policy."

The plaintiff prays for the following declaration of rights:

1. That the plaintiff is "the sole and absolute" owner of said policy No. 87246;

2. That the plaintiff has the right to change the beneficiary under said policy and that either Clara H. Kline, plaintiff's wife, or the plaintiff's administrator or executor is the present beneficiary under the policy;

3. What disability benefits plaintiff is entitled to receive, or will be entitled to receive, on account of past, present, and future total disability under ...


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