October 7, 1931. The opinion of the Court was delivered by There appears to be no controversy over the facts of this case, which are as follows:
In 1907 W.A. Yarborough took out a policy of insurance in the Southeastern Life Insurance Company for $1,000.00, upon his life, payable in the event of his death to his wife, the plaintiff, Susie B. Yarborough, if living, otherwise to his personal representative; the policy was upon what is termed the tontine plan, and provided that, if the insured survived the tontine period of twenty years, he should be entitled to elect one of several options offered him; the insured paid the premiums for 20 years, and in July, 1927, elected to accept the first option, which was "to surrender this policy and to receive a cash payment of $531.00."
A receipt was then executed, signed by both the insured and the beneficiary, acknowledging the receipt of $531.00, "which is the cash surrender value and in full settlement of all claims under Policy Number 1087 issued by the Southeastern Life Insurance Company insuring the life of William A. Yarborough, the said policy being now terminated by surrender thereof"; it was delivered to the company, which transmitted to the insured a check for that amount on the defendant bank; the check was made payable to both the insured and the beneficiary, and stated that it was "for account of cash surrender value" of the policy.
It does not appear that the beneficiary had anything to do with the negotiations between the insured and the company, except to sign the receipt above referred to. The insured indorsed the check, and deposited it to his credit in a Spartanburg bank, which was paid by the defendant bank through the Greenville clearing house.
It appears that later the insured and the beneficiary were divorced, and that she repudiated her signature upon the receipt as having been obtained by false pretenses, and had an indictment preferred against the insured upon which he was tried and acquitted in the Spartanburg Court. Nearly three years later the present action was instituted. It was *Page 335 tried before Judge Ansel of the County Court of Greenville County without a jury. He filed a decree, dated March 18, 1931, dismissing the complaint, from which the plaintiff has appealed.
It is impossible to sustain a judgment in favor of the plaintiff for any amount, under the cause of action alleged in the complaint, the basis of which is thus stated: "Said sum was the cash surrender value as of July 1, 1927, and plaintiff as the beneficiary of said policy wasentitled to receive said sum." She is now claiming the whole of the cash surrender value, $531.00, when as a matter of fact she was not entitled, under the policy, to a single cent of it. Ordinarily, when a check is payable jointly to two payees, each would be entitled to one-half of the proceeds. Such right under the check is not made the basis of the plaintiff's claim; she cannot recover upon a theory entirely different from that alleged in the complaint.
That the plaintiff cannot sustain the claim upon which the complaint is based, namely, that as beneficiary of the policy she is entitled to the whole of the cash surrender value, is conclusively adjudicated by the authorities.
The check was given to William Yarborough in payment of a policy of insurance upon which all premiums had been paid by him, which matured during his lifetime, and under which he was entitled to receive, and did receive, the "cash payment of $531.00." The plaintiff as beneficiary was not entitled to payment under the terms of the policy to anything unless her husband died before the maturity of thepolicy and she was then living.
When the insured elected to take the settlement given him by the policy, the money belonged to him; his wife, the plaintiff, had no interest therein, and the company had no right or power to change the status fixed by contract by giving a check payable to both. Since the money belonged to the insured, payment by the bank to him was properly *Page 336 made. Since the plaintiff had no interest in the check, the bank owes her nothing, and the decree denying her right to recover is correct.
"The rights of beneficiaries under policies payable to them in case of the insured's death during the term of the policy, but in case the insured survives the term to him, are subject to be defeated by the insured's surviving the term." 14 R.C.L., 1377.
See authorities cited in the decree of his Honor, Judge Ansel, and Miller v. Campbell, 140 N.Y., 457,35 N.E., 651; Gifford v. Gifford, 93 N.J. Eq., 299, 115 A., 654;Travelers' Ins. Co. v. Healey, 164 N.Y., 607,58 N.E., 1093; notes, 19 A.L.R., 654.
In Miller v. Campbell, 140 N.Y., 457, 35 N.E., 651, the Court held: "Where a policy was payable to the insured's wife for her sole use, if living, upon due notice and proof of his death during the continuance of the policy, but provided that if the insured survived the fifteen-year term the benefit should be payable to him, it was held that the interest of the wife ceased upon the insured surviving the term mentioned, and that the latter was entitled to the amount of the policy."
In Gifford v. Gifford, 93 N.J. Eq., 299, 115 A., 654, the Court held: "Where an endowment policy on a husband's life was payable to the wife if the insured died within the endowment period, but to the husband if he survived such period, and he in fact survived it, it was held that he was entitled to the entire benefit, although his wife had paid the premiums, but without any agreement that she should have a lien therefor, since the payment of the premiums by the wife was in the nature of a gift to the husband; and this was held true although he had wilfully deserted his wife, and she had obtained a divorce." Extract from note 19 A.L.R., 654.
In Travelers' Ins. Co. v. Healey, 164 N.Y., 607,58 N.E., 1093, the Court held: "Where a husband secured a policy *Page 337 insuring his life, payable upon his death to his wife if she should survive him, and, if not, to their children surviving him, and providing that the policy might be converted into cash at the option of the holder at any time after the expiration of fifteen years, it was held that, if the holder should exercise the option, he would become the beneficiary, and that the wife and children would cease to be beneficiaries."
In Robinson v. Ins. Co., 96 Kan., 237, 150 P., 564, it was held in the syllabus that insured was entitled to enforce a stipulation of the application made part of the policy that the reserve value of the policy at the end of twenty years should be paid to himself, even though the beneficiary refused to consent thereto.
The terms of the policy are sufficient to show that the plaintiff had no interest in the cash surrender value which the insured elected to accept. It provides that the policy was "payable at its Home Office to Susie B. Yarborough, his wife, if living, otherwise to his Executors, Administrators or Assigns, within sixty days after satisfactory proof of the death of the insured while this contract is in full force and effect, subject to the privileges and conditions stated on thesecond page hereof, which form a part of this contract asfully as if recited at length over the signatures hereto affixed."
Among the "privileges and conditions" set forth on the second page of the policy was the following: "This Policy is written on the Elective Investment Plan, and it is further agreed that at the end of the Twentieth Policy year, viz.: The First day of July, 1927, the Insured shall then be entitled, if living, and if the premiums have been duly paid in full, to elect and receive one of the five benefits following: First: To surrender this Policy and to receive a cash payment of $531.00 * * *" (followed by four other options payablein terms personally to the insured).
The plaintiff now abandons the claim upon which the complaint is based (that as beneficiary of the policy she is entitled to the whole of the cash *Page 338 surrender value), and in argument claims at least a half interest in the cash surrender value paid to the insured by reason of the facts that she signed the receipt along with the insured; that the check was made payable to the insured and the beneficiary jointly; that the insured only signed the endorsement of the check; and that the proceeds were paid (indirectly) to the insured alone.
Assuming that she is entitled under the complaint to rely upon this position, it is clear that, as she never had any interest in the cash surrender value, and acquired no interest by the receipt, her position cannot be sustained.
It appears that rights arising out of the payment of a check are quite different from those arising out of its acceptance or certification. A different theory is involved. Under the Negotiable Instruments Act (Civ. Code, 1922, § 3652 et seq.) debtor and creditor relations determine the rights of the payee. The bank owes its depositor the amount of his deposit, but, unless it accepts or certifies the check, it owes no duty to the payee. The act of the bank in accepting or certifying a check is, however, tantamount to a transfer of the deposit account by charging the amount of the check against the maker and agreeing to become responsible therefor to the payee. This is in effect the same as if the check had been debited to the maker and credited to the payee on the books of the bank. The unauthorized payment of the check to another than the holder cannot extinguish the obligation the bank owes to the maker of the check, nor can it be regarded as establishing a contractual relationship with the holder to become his debtor to the amount of the check. On the contrary, the very nature of the transaction assumes an intent on the part of the bank to extinguish the obligation rather than to create a new relationship of debtor and creditor in respect to it. National Bank of the Republic v.Millard, 10 Wall, 152, 19 L.Ed., 879; First National Bankv. Whitman, 94 U.S. 343, 24 L.Ed., 229; Baltimore *Page 339 O.R. Co. v. First National Bank, 102 Va., 753,47 S.E., 837; note (supported by citations of cases) in 14 A.L.R., 764, 766.
A claim by the holder of the check may, generally, be asserted against the drawee bank on the theory of conversion. See note and citation of cases in 14 A.L. R., at pages 764, 767; also, note in 69 A.L.R., at page 1078. Thus, in Fidelity Deposit Co. v. Bank of Charleston (C.C.A., 4th Circuit) 267 F., 367, 370, where the drawee bank had made payment with full knowledge that the indorsement was unauthorized, the right of action of the payee against the drawee bank was sustained; the decision being placed on grounds stated in the majority opinion of the Court, as follows: "When we come to consider the above authorities, we find that the Supreme Court of the United States has decided only that an action ex contractu on the check by payee against the bank before acceptance will not lie, but it did not decide that an action for conversioncould not be maintained. On the contrary, as in the Millard and Johnston [133 U.S. 566, 10 S.Ct., 390, 33 L.Ed., 683], cases, it is fair to infer that, if it had been shown the bank had charged this check on its books against he drawer, using that as a basis, plaintiff would be entitled to recover on a count for money had and received, and it should be remembered that in the Whitman case it is equally reasonable to infer that an action would lie against the bank, if it appeared that the bank knew the indorsement was unauthorized. Therefore the real question presented in this case has not been directly passed upon in any decision of the Supreme Court." (Italics added.)
If the owner of the check brings an action against the drawee bank based on conversion, the right of recovery unquestionably depends on the proof of damages. The recovery will, in such case, always be limited to the amount of damages established by the proof. *Page 340
The plaintiff's claim in this case, since it is sustainable only on the theory of conversion, must therefore depend on the showing made as to her damages; and, of course, damages will not be presumed.
In the case at bar, however, the payee was a beneficiary of the policy whose rights, under the terms of the policy, might be divested by the surrender of the policy by the insured in order to obtain its cash surrender value. The insurance company clearly had the right, under "The Elective Investment Plan" of the policy, to pay the cash surrender value of the policy to the insured without assent of the beneficiary to the payment. Of course, this would not preclude the making of separate independent agreements concerning the proceeds of the policy, nor the right of the insured to give any part of the proceeds of the policy to the beneficiary. The difficulty of the present case is, however, that there seems to be neither allegation nor proof of any agreement beyond that expressed in the policy. And there is neither allegation nor proof of instructions from the insured to the insurance company, that in the payment of the cash surrender value of the policy he desired the beneficiary to have a share of the proceeds. Even assuming (a questionable assumption) that the check would afford primafacies of intent communicated to the insurance company that the beneficiary should share in the payment, the circumstances of the delivery of the check (which does not appear even to have come into plaintiff's possession) do not carry the understanding into effect in such manner as to amount to a completed gift. 12 R.C.L., 934, 946; Caldwell v. Wilson, 2 Speers, 75; Baker's Adm'r v. Avant, 1 Nott McC., 218;Murdock v. McDowell, 1 Nott McC., 237, 9 Am Dec., 684. The plaintiff, therefore, under any view of the case, has not established any claim of right to a recovery of damages on account of the negligent act of the bank in paying the check without the proper indorsement. *Page 341
It may also be remarked that the plaintiff does not appear to be in much better position even if the Court goes beyond a strictly legal viewpoint to consider in a more personal way the merits of her claim. She knew of her husband's election to take the cash surrender value of the policy. She had signed the receipt under which the payment by check was sent on and the policy canceled. She and her husband were living together at this time, and the proceeds of the check were used in meeting living expenses. It was not until long after the money had been received and used, and differences had arisen between herself and her husband, that she questioned the manner in which payment of the check had been made. Her long delay in asserting any claim at all against the bank, for either the full sum or a share of the proceeds of the check, would seem a quite sufficient justification for the assumption that the payment to her husband and his use of the money had her implied consent and acquiescence, at least, if not her authorization.
In addition to this, the complaint in the case, when made after this long seeming acquiescence in the payment of the check by the bank, sought a recovery for the full amount of the check on the theory that it represented the cash surrender value of the policy, and that the plaintiff, as the beneficiary of the policy was entitled to receive the whole sum. The complaint, therefore, evidences within itself a reliance by plaintiff upon rights claimed under the policy rather than upon the rights claimed under a separate agreement or because of gift. There is nothing in the entire case which appears to indicate that she had any rights beyond those of a beneficiary under a policy which by its terms was clearly subject to the reserved right of the insured to surrender the policy and accept its cash surrender value.
The judgment of this Court is that the judgment of the Circuit Court be affirmed.
MESSRS. JUSTICES STABLER and BONHAM, and MR. ACTING ASSOCIATE JUSTICE R.E. WHITING concur. *Page 342