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Lain v. John Hancock Mutual Life Ins. Co.

OPINION FILED DECEMBER 4, 1979.

KENT ALAN LAIN, ADM'R OF THE ESTATE OF ELSIE H. LAIN, DECEASED, PLAINTIFF AND COUNTERDEFENDANT-APPELLEE,

v.

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, DEFENDANT AND COUNTERPLAINTIFF-APPELLANT. — (THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, DEFENDANT-COUNTERPLAINTIFF; MOHAMAD H. BAYZID, COUNTERDEFENDANT.)



APPEAL from the Circuit Court of Cook County; the Hon. ARTHUR SULLIVAN, Judge, presiding.

MR. JUSTICE PERLIN DELIVERED THE OPINION OF THE COURT:

Rehearing denied January 8, 1980.

This is an appeal from a summary judgment entered by the circuit court of Cook County in an interpleader action brought to determine the rightful claimant to the proceeds of a life insurance policy. Appeal is also taken from an order denying a motion to dismiss for failure to join a "necessary and indispensable" party.

The following issues are presented for review: whether the trial court abused its discretion when it failed to require the joinder of a "necessary and indispensable" party and whether the trial court erred when it entered summary judgment on the counterclaim of interpleader where one of the counterdefendants was served by publication.

For reasons hereinafter set forth, we reverse.

On August 23, 1933, the John Hancock Mutual Life Insurance Company (hereinafter referred to as Hancock) issued a policy on the life of William V.V. Lain (hereinafter referred to as the insured) in the amount of $50,000. Elsie H. Lain, his wife (hereinafter referred to as the insured's widow), was named as the beneficiary. On March 28, 1974, in Seville, Spain, the insured executed a document which listed eight life insurance policies, including the Hancock policy, and named as "sole beneficiary" thereof one Mohamad H. Bayzid (hereinafter referred to as Bayzid), a Syrian citizen who was then residing in Toremolinos (Malaga), Spain. In this document the insured declared that he was financially indebted to Bayzid and therefore granted to Bayzid, as security for the indebtedness, the right to assign, in any manner, the face value of the listed policies. On April 15, 1974, Bayzid forwarded a copy of this document to Hancock requesting confirmation of the change of beneficiary and of the amount of insurance provided by the policy. *fn1

The insured died in Malaga, Spain, on July 29, 1974. The insured's widow died soon thereafter on December 12, 1974. On June 7, 1976, Kent Alan Lain (hereinafter referred to as Lain) was appointed administrator of the estate of the insured's widow authorizing him to take possession of and to collect the estate. On December 6, 1976, Lain filed suit against Hancock to recover the proceeds of the policy. *fn2

Hancock filed a motion to dismiss Lain's complaint admitting liability for the net proceeds of the policy *fn3 but contending that it could not make payment of the proceeds to Lain because such payment, without a prior legal determination of Bayzid's claim, could expose Hancock to potential multiple liability. Hancock argued that the legal effect of the insured's assignment to Bayzid could not be determined, nor the proceeds disbursed, without Bayzid as a party to the litigation and that, therefore, Lain's complaint should be dismissed for failure to join a "necessary and indispensable" party or, in the alternative, that the proceedings should be stayed until such time as either Lain or Hancock could secure proper service of process upon Bayzid. The trial court denied Hancock's motion to dismiss.

Hancock filed an answer and a counterclaim of interpleader naming both Lain and Bayzid as counterdefendants. Hancock again admitted liability for the net proceeds of the policy to Lain but again asserted that it could not pay the proceeds of the policy to Lain because of the adverse claim of Bayzid. Hancock's counterclaim alleged that the net proceeds under the policy were $27,357.13 and requested leave to deposit said amount with the clerk of the court until such time as Bayzid could be personally served with process. The trial court granted Hancock leave to deposit the sum of $28,998.56 (net proceeds plus interest) with the clerk of the court on April 15, 1977, and said amount was, in fact, deposited on that date.

Hancock filed an affidavit of service by publication asserting that Bayzid resided out of State and that upon diligent inquiry Bayzid's place of residence could not be ascertained. Hancock alleged that it had employed independent investigators in Spain in an attempt to locate Bayzid. Service by publication was accomplished and a copy of the publication was mailed to Bayzid's last known address.

Lain filed a motion for summary judgment in the interpleader action alleging that Hancock had admitted its liability under the policy; that Hancock had deposited the net proceeds with the clerk of the court; that Hancock had effectuated service on Bayzid by publication; and that Lain's claim was uncontested because Bayzid failed to appear. Hancock replied to the motion for summary judgment arguing that Bayzid was a "necessary and indispensable" party to the litigation and that service by publication was insufficient to confer upon the trial court the in personam jurisdiction necessary to determine the rights of the parties to the disputed claim. Hancock further argued that if the trial court granted Lain's motion for summary judgment, then the trial court should fashion an equitable remedy to protect Hancock from potential multiple liability. Hancock suggested that Lain should tender a "good and sufficient indemnity bond with surety conditioned upon [Lain's] agreement that if Mohamad Bayzid makes a claim or in the future is found to be the rightful assignee of said policy proceeds that [Lain] will protect and indemnify [Hancock] from dual liability."

On December 20, 1978, the trial court granted Lain's motion for summary judgment, finding that diligent, but unsuccessful, efforts were made to locate Bayzid; that the court had jurisdiction over the parties and subject matter of the litigation; that the purported change of beneficiary and assignment was legally ineffective in that it did not conform to the provisions of the policy; and that Lain was entitled to the proceeds of the policy. The trial court entered judgment by default against Bayzid and judgment in Lain's favor in the amount of $28,998.56. The judgment further provided that Hancock was "* * * fully released and discharged of and from any and all liability, claims, demands and the like whether or not heretofore raised, or in the future, existing or asserted by the counterdefendants, Kent Alan Lain, Administrator of the Estate of Elsie H. Lain, Deceased, and Mohamad H. Bayzid, and each of them" and that "[t]he counterdefendants [Lain and Bayzid] and their heirs, assigns, personal representative and successors in interest are permanently and perpetually restrained and enjoined from making, asserting or prosecuting any suit or administrative proceeding in any court, agency or forum whatsoever on account of the subject policies of insurance and the death of William V.V. Lain." Hancock appeals.

I.

The first issue presented for review is whether the trial court abused its discretion when it failed to require the joinder of Bayzid in Lain's action to recover the proceeds of the policy. Hancock contends that Bayzid is a "necessary and indispensable" party and that "basic notions of due process forbid the entry of a decree affecting the interest of [such] a party [who is] not before the court." Lain argues that Bayzid is not a "necessary and indispensable" party.

The Civil Practice Act (Ill. Rev. Stat. 1975, ch. 110, pars. 1-94) establishes the boundaries within which a court operates in determining whether a party is "necessary ...


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