Appeal from the Circuit Court of Franklin County; the Hon.
RANDALL S. QUINDRY, Judge, presiding. Reversed and remanded.
Plaintiff appeals from an order of the Circuit Court of Franklin County dismissing her complaint for failure to state a cause of action in a cause initiated in chancery against the beneficiaries named in a life insurance policy by plaintiff's deceased husband and against the insurer, to establish the equitable interest of the plaintiff in the proceeds of the policy.
In substance, the complaint alleges that the plaintiff and Richard M. Johnson were married on December 3, 1963, and continued to live together as husband and wife until Dr. Johnson's death on June 10, 1967. On or about December 20, 1963, Johnson named plaintiff beneficiary of an insurance policy on his life bearing No. L782342 issued by defendant, North American Life and Casualty Company and informed plaintiff of his designation of her as beneficiary.
In January of 1964, Johnson and the plaintiff opened a joint bank account for use in handling household expenses. A project to remodel the Johnsons' residence was commenced in March, 1964, and plaintiff "with the acquiescence of Richard M. Johnson and the knowledge both on the part of Richard M. Johnson and plaintiff that plaintiff was beneficiary on said policy of insurance, and would thereby be adequately protected," deposited her separate funds in the joint account from time to time and her total deposits exceeded $30,000.
In December of 1964, the plaintiff adopted the two minor children of the insured and the insured adopted plaintiff's two minor children.
Johnson had become ill in November of 1964 and his health progressively deteriorated until he died in June of 1967. During this period, plaintiff maintained the home, traveled with Dr. Johnson in search of medical treatment, and learned to operate a "kidney machine" and used it for the treatment of her husband, which required six hours of continuous attention twice a week for more than a year.
Prior to January 4, 1966, Johnson had from time to time borrowed sums from the Bank of Benton at Benton, Illinois, on his personal signature, but on January 4, 1966, when he applied for the loan of additional sums to defray forthcoming expenses, the officers of the bank requested that his note be secured by a mortgage on his home and that plaintiff join in the execution of the note. Plaintiff signed both the mortgage and the note and thereby became personally liable for $31,300.
"On January 3, 1966, the day preceding the date plaintiff executed the note . . ., Richard M. Johnson requested a `Change of Beneficiary' again naming plaintiff as the beneficiary of the insurance policy . . . and informed plaintiff that he had executed this instrument." The insurance policy has been in plaintiff's possession since on or about January 1, 1966.
The insured, in December, 1966, changed the beneficiary under the insurance policy to his minor natural children, Bruce C. Johnson and Beverly M. Johnson, without plaintiff's knowledge or consent. Also at that time, "the only assets of Richard M. Johnson consisted of the real estate . . . which was subject to a mortgage in favor of the Bank of Benton to secure the indebtedness of $31,300.00, his office equipment and his automobile, and at that time he knew that he would have continuing and heavy expenses for treatment of his illness with limited income available to him to defray such expenses, and at the time of death of said Richard M. Johnson his total indebtedness exceeded his assets and he was insolvent."
The complaint concludes with a prayer that the court decree that plaintiff is equitably entitled to the proceeds of the insurance policy. The policy in question, attached to the complaint by amendment contains a provision giving the insured the right to change beneficiaries successively.
Plaintiff-Appellant contends that the complaint shows the existence of a contract, express or implied, which obligated the insured to leave plaintiff as beneficiary and she thereby became vested with an equitable interest in the policy.
There is little doubt that equities may arise in favor of the beneficiary named in a life insurance policy which will deny the insured the right to change the beneficiary even though such right is reserved to the insured, as, for example, where the insured, for a valuable consideration, estops himself from changing his designation of the beneficiary. 29A Am Jur, § 1676. "The rule in this state is, that while the assured may, in the absence of intervening equities, change at will the beneficiary named in his insurance policy, equitable rights may be acquired in a beneficiary certificate of insurance which a court of equity will recognize and enforce." Columbian Circle v. Mudra, 298 Ill. 599, 601, 132 N.E. 213. In the Mudra case, supra, the Supreme Court affirmed the chancellor's determination that the insured was estopped from removing the plaintiff as beneficiary under a life insurance policy without plaintiff's consent where the evidence disclosed that the insured delivered the insurance policy to the plaintiff and, at his request, plaintiff paid the premiums thereafter.
Numerous other cases have recognized equitable relief where an agreement can be proven between the insured and the designated beneficiary whereby for a valuable consideration the beneficiary acquires a vested equitable interest in the insurance proceeds. Kiolbassa v. Polish Roman Catholic Union of America, 141 Ill. App. 297; Gillham v. Estes, ...