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New York Life Ins. Co. v. Rak

MARCH 22, 1961.

NEW YORK LIFE INSURANCE COMPANY, A CORPORATION, PLAINTIFF AND COUNTERDEFENDANT,

v.

LILLIAN RAK, ETC. ET AL., DEFENDANTS AND COUNTERDEFENDANTS. HELEN BERNOTES, DEFENDANT AND COUNTERDEFENDANT, APPELLEE. JOHN E. OWENS, SPECIAL ADMINISTRATOR OF THE ESTATE OF JOSEPH C. RAK, DECEASED, DEFENDANT AND COUNTERCLAIMANT, APPELLANT.



Appeal from the Superior Court of Cook county; the Hon. GROVER C. NIEMEYER, Judge, presiding. Affirmed in part; reversed in part and remanded with directions.

MR. JUSTICE MCCORMICK DELIVERED THE OPINION OF THE COURT.

The New York Life Insurance Company filed an interpleader suit whereby the proceeds of two policies of life insurance upon the life of Joseph Rak, deceased, in the face amounts of $25,000 and $50,000, respectively, were deposited with the clerk of the Superior Court to abide the determination of the court as to which rival claimant was entitled to receive such proceeds. The two beneficiaries named in the policies were Helen Bernotes and Moneta Turek. Moneta Turek had predeceased the insured. The insured left him surviving his widow, Lillian Rak.

In its complaint the New York Life Insurance Company set up that the rival claimants to the death benefits were Lillian Rak, in her capacity as administratrix of the estate of the insured, and Helen Bernotes, sister of the insured. Lillian Rak later intervened in her own proper person, and John E. Owens was substituted as special administrator in the place and stead of Lillian Rak as administratrix of the estate of Joseph C. Rak, the deceased insured. Owens filed a counterclaim in the case asking that the policies of insurance be reformed.

All the pleadings are in order. The court entered an interlocutory decree which recited that the New York Life Insurance Company had deposited the entire death benefit proceeds of the policies, amounting to $75,346.77, with the clerk of the court subject to the further order of the court; and the decree also provided, among other things, that it should be without prejudice to the hearing and disposition of the amended counterclaim of John E. Owens, special administrator of the estate of Joseph Rak, deceased, against the New York Life Insurance Company for reformation of the policies of insurance which are the subject matter of this interpleader, or to the claims of the rival claimants who have been interpleaded or are parties to the interpleader suit. It also dismissed out the New York Life Insurance Company, except with respect to the entry of relief prayed against it for reformation, and the insurance company was awarded its costs of $29.30 from the moneys on deposit with the clerk.

Joseph Rak on September 29, 1957 executed an application for whole life insurance with the New York Life Insurance Company for a policy in the amount of $75,000. In that application, under item 20 entitled "Beneficiary," the deceased directed that the beneficiaries in said policies were to be designated as follows: "Helen Bernotes, my sister and Moneta Turek, my sister, equally." The application contains the following provision: "It is Mutually Agreed That . . . (4) The Applicant's acceptance of any policy issued on the application shall constitute ratification of all representations and agreements made in writing as part of the application and of any amendments and corrections which the Company makes and refers to under item 25 above in connection with issuance of the policy." The referred to item 25 has above the blank space the words "Amendments and Corrections," and it contains the following statement:

"(51) Alternative policy for $50,000 written on the Whole Life Plan

"(51) Alternative policy for $25,000 written on the Whole Life Plan."

The New York Life Insurance Company issued two policies of insurance. One policy was issued on November 13, 1957 under effective date of October 23, 1957 in the face amount of $25,000 on the whole life plan. The other policy was issued on November 1, 1957 under effective date of November 1, 1957 in the face amount of $50,000 on the whole life plan. Both policies designated beneficiaries as follows: "Helen Bernotes and Moneta Turek, sisters of the insured, share and share alike, or the survivor."

The insured married Lillian Rak on August 30, 1958. He died on November 13, 1958. Moneta Turek, one of his sisters, died November 28, 1957.

After a hearing the trial court entered a decree finding the defendant Helen Bernotes to be entitled to the entire proceeds of the policies. John E. Owens, special administrator, hereafter referred to as the appellant, prosecutes this appeal from that portion of the decree failing to find that the estate of Joseph Rak, deceased, was entitled to one-half of the proceeds of the said policies. Subsequent to the filing of the notice of appeal the court entered an order that the clerk of the court, in partial performance of the decree, pay to the defendant Helen Bernotes the sum of $37,658.73 out of the fund of $75,317.47 on deposit with the clerk.

The appellant here contends that the New York Life Insurance Company, through inadvertence, error or oversight, (a) failed to issue the policies as applied for; (b) failed to correctly express or set forth the terms of the contract of insurance as provided in the application pursuant to which the contract was issued; (c) accepted the application as tendered in all respects, except for the changes noted under item 25 captioned "Amendments and Corrections," calling for two policies instead of one, but inadvertently issued said policies with an added provision which materially conflicted with the application as tendered by the insured and as accepted by the company. The appellant asks that the policies be reformed to conform with the beneficiary designation contained in the application.

Helen Bernotes, hereafter referred to as the appellee, contends that the policies, when accepted, constitute the contract; that the retention of the policies by the insured and the payment of the premiums evidence an acceptance of the policies as they were delivered to the insured; that the insurance policies as delivered correctly express the true intention of the decedent that the entire proceeds of the policies be payable to decedent's sisters in equal shares or all to the surviving sister; that there was not sufficient evidence to establish an intention other than that expressed in the policies; and that even if the policies were reformed so as to be payable as set out in the precise words of the application, nevertheless the surviving sister would be entitled to recover the full proceeds of the policies.

In order for the appellant to prevail in his suit for reformation of the insurance contract he must show by clear and convincing evidence that either through design or the mistake of the insurance company the policies as issued were not the policies applied for by the insured. Keith v. Globe Ins. Co., 52 Ill. 518. The appellant must show that had the policies been issued in accordance with the application presented by the insured the beneficiaries would not have had the right of survivorship.

The application as written provided that "Helen Bernotes, my sister and Moneta Turek, my sister, equally" would be beneficiaries. The question as to whether the right of survivorship would come into being had the policies been issued under the terms of the application may be determined by considering the terms "tenancy in common" and "joint tenancy" in respect to realty and at common law. Farr v. Trustees of Grand Lodge A.O.U.W., 53 N.W. 738, (Wis.), 18 L.R.A. 249. At common law a conveyance of real estate or a transfer of personal property to two or more persons, without adding any qualifying words, vested the title in such grantees or transferees as joint tenants with the right of survivorship. Svenson v. Hanson, 289 Ill. 242, 247, 124 N.E. 645, 647; 23 I.L.P. Joint Tenancy, sec. 2. Our statute concerning joint rights and obligations (chapter 76 of the Illinois Revised Statutes) provides that a conveyance of real estate or personal property to two or more persons, without adding any qualifying words, vests the title in the grantees as tenants in common and not as joint tenants. Section 2 of the statute, dealing with personal property, makes certain exceptions to the rule, among others, as to executors and trustees. It is not necessary for us to consider whether the statute could have any effect on an insurance contract such as this. The qualifying word "equally" has always been regarded as implying a tenancy in common in the grantees, donees etc. Taylor v. Stephens, 74 N.E. 980, 983 (Ind.). In Stetson v. ...


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