Petrie, C.J.
Plaintiff, Beverly M. Porter, appeals from a judgment declaring that she “has no ownership interest in or control over” a certain life insurance policy issued upon the life of her husband, Lynn A. Porter, several years before she and Lynn were married. The judgment also declares that she does not
have any right or interest in any dividends paid in
connection with said policy or cash surrender values accrued thereon or proceeds which may, in the future, be payable under the provisions thereof.
We affirm the judgment.
The policy was issued upon Lynn’s life by Provident Life Insurance Company on October 27,1969, when he was married to Jo Ann MacLeod, then Jo Ann Porter. Lynn and Jo Ann were divorced in 1970. He and Beverly were married in 1972, and thereafter all premiums have been paid from community funds of their marriage, but the record does not reflect the source of those funds. For reasons set forth below, however, the precise nature of the community funds used to pay premiums is not deemed to be critical.
Essentially, the policy requires payment of premiums in the approximate amount of $66 per month for 20 years with a right to participate in company dividends. Additional benefits provided by the policy are not material to this decision.
The policy designates Jo Ann as the owner and Paul Porter, minor child of Lynn and Jo Ann, as the primary beneficiary.
A “Child Custody-Property Settlement Agreement” incorporated into the 1970 divorce decree awards the policy to Jo Ann, requires Lynn to pay all premiums on the policy, and prohibits Jo Ann from changing the beneficiary. In 1970, the policy had no cash surrender value, and no dividends had accrued thereunder. Thereafter, the policy did develop a cash surrender value, and dividends which subsequently accrued have been “accumulative” in accordance with the policy application signed by Lynn and Jo Ann in 1969. In 1973, Lynn and Jo Ann stipulated that any money payable “upon the maturity” of the policy, irrespective of Lynn’s death, shall be Paul’s property.
Beverly asserts an ownership interest in the policy to the
extent community funds have contributed to the policy’s value since 1972, and she seeks, minimally, a declaratory judgment permitting her to exercise the policy option which provides that dividends may be applied to reduce premium payments. Additionally, she seeks a declaration of her right to exercise sufficient ownership control to prevent Jo Ann from unilaterally destroying or reducing the value of the policy.
We note, initially, that there has been no attempt by Jo Ann to destroy or reduce the value of the policy.
Thus, there are no mature seeds of an actual, present, and existing dispute between the parties. Accordingly, we find no justiciable controversy as to that portion of Beverly’s request for declaratory relief.
Diversified Indus. Dev. Corp. v. Ripley,
82 Wn.2d 811, 514 P.2d 137 (1973). We do find, however, a justiciable controversy which warrants our determination of the extent of Beverly’s ownership interest in the policy. As to that request there is an actual and present dispute between the two parties asserting substantial and opposing interests, a judicial determination of which will be final and conclusive.
Diversified Indus. Dev. Corp. v. Ripley, supra.
We note, additionally, that distribution of the right of ownership of the policy and the responsibility for payment of premiums under the 1970 decree of divorce constituted a division of property.
Lynch v. Lynch,
67 Wn.2d 84, 406 P.2d 621 (1965). The fact that the property had no immediate financial value in 1970 does not alter the nature and effect of the decree. We do not, however, view this present case as a collateral attack on that decree. Our concern, rather, is with the ownership of the enhanced value of the policy subsequent to 1972 to the extent that premiums were paid out of community funds.
We start with the fundamental concept that the decree of divorce completely divested Lynn of any right of ownership in or control over the policy.
United Benefit Life Ins.
Co.
v. Price,
46 Wn.2d 587, 283 P.2d 119 (1955). Specifically, he lost and Jo Ann acquired the contractual right to maintain the policy in force upon payment of the periodic premiums. Nevertheless, he was burdened with a continuing decretal obligation to pay the periodically recurring premiums on that policy as long as the owner deemed it necessary to maintain the policy in force. Thus, to a limited extent, Lynn entered the marriage in 1972 as an “encumbered spouse.”
See
H. Cross,
The Community Property Law in Washington,
49 Wash. L. Rev. 729, 830
et seq.
(1974).
In support of her contention that she may pursue her community interest into whatever insurance asset was purchased with it, Beverly directs our attention to a long series of insurance cases, beginning with
Occidental Life Ins. Co. v. Powers,
192 Wash. 475, 74 P.2d 27, 114 A.L.R. 531 (1937) and extending through
Chase v. Chase,
74 Wn.2d 253, 444 P.2d 145 (1968) and
Livingston v. Shelton,
85 Wn.2d 615, 537 P.2d 774 (1975), which restrict the husband, as a manager of the community estate, from depriving his wife of a right to an accumulating and proportionate interest in life insurance policies by paying premiums thereon with community assets.
Typical language used in reiterating the
Occidental Life
rule is contained in
Small v. Bartyzel,
27 Wn.2d 176, 180, 177 P.2d 391 (1947):
After a second marriage, Mr. Small earned the sums of money which were used to pay the premiums on the insurance policy. That money belonged to the community consisting of himself and Katherine G. Small. It follows that the insurance paid for by community funds was the property of the community, and that Mrs. Small was entitled to recover that property as an asset of her deceased husband’s estate.
Taken out of context, statements similar to the
Small
quotation can lead to an erroneous conclusion. Those pronouncements serve as guides toward answering the ques
tion: “What did the premium payer
purchase
with each payment?” In the case at bench, Lynn did not
purchase
Free access — add to your briefcase to read the full text and ask questions with AI
Petrie, C.J.
Plaintiff, Beverly M. Porter, appeals from a judgment declaring that she “has no ownership interest in or control over” a certain life insurance policy issued upon the life of her husband, Lynn A. Porter, several years before she and Lynn were married. The judgment also declares that she does not
have any right or interest in any dividends paid in
connection with said policy or cash surrender values accrued thereon or proceeds which may, in the future, be payable under the provisions thereof.
We affirm the judgment.
The policy was issued upon Lynn’s life by Provident Life Insurance Company on October 27,1969, when he was married to Jo Ann MacLeod, then Jo Ann Porter. Lynn and Jo Ann were divorced in 1970. He and Beverly were married in 1972, and thereafter all premiums have been paid from community funds of their marriage, but the record does not reflect the source of those funds. For reasons set forth below, however, the precise nature of the community funds used to pay premiums is not deemed to be critical.
Essentially, the policy requires payment of premiums in the approximate amount of $66 per month for 20 years with a right to participate in company dividends. Additional benefits provided by the policy are not material to this decision.
The policy designates Jo Ann as the owner and Paul Porter, minor child of Lynn and Jo Ann, as the primary beneficiary.
A “Child Custody-Property Settlement Agreement” incorporated into the 1970 divorce decree awards the policy to Jo Ann, requires Lynn to pay all premiums on the policy, and prohibits Jo Ann from changing the beneficiary. In 1970, the policy had no cash surrender value, and no dividends had accrued thereunder. Thereafter, the policy did develop a cash surrender value, and dividends which subsequently accrued have been “accumulative” in accordance with the policy application signed by Lynn and Jo Ann in 1969. In 1973, Lynn and Jo Ann stipulated that any money payable “upon the maturity” of the policy, irrespective of Lynn’s death, shall be Paul’s property.
Beverly asserts an ownership interest in the policy to the
extent community funds have contributed to the policy’s value since 1972, and she seeks, minimally, a declaratory judgment permitting her to exercise the policy option which provides that dividends may be applied to reduce premium payments. Additionally, she seeks a declaration of her right to exercise sufficient ownership control to prevent Jo Ann from unilaterally destroying or reducing the value of the policy.
We note, initially, that there has been no attempt by Jo Ann to destroy or reduce the value of the policy.
Thus, there are no mature seeds of an actual, present, and existing dispute between the parties. Accordingly, we find no justiciable controversy as to that portion of Beverly’s request for declaratory relief.
Diversified Indus. Dev. Corp. v. Ripley,
82 Wn.2d 811, 514 P.2d 137 (1973). We do find, however, a justiciable controversy which warrants our determination of the extent of Beverly’s ownership interest in the policy. As to that request there is an actual and present dispute between the two parties asserting substantial and opposing interests, a judicial determination of which will be final and conclusive.
Diversified Indus. Dev. Corp. v. Ripley, supra.
We note, additionally, that distribution of the right of ownership of the policy and the responsibility for payment of premiums under the 1970 decree of divorce constituted a division of property.
Lynch v. Lynch,
67 Wn.2d 84, 406 P.2d 621 (1965). The fact that the property had no immediate financial value in 1970 does not alter the nature and effect of the decree. We do not, however, view this present case as a collateral attack on that decree. Our concern, rather, is with the ownership of the enhanced value of the policy subsequent to 1972 to the extent that premiums were paid out of community funds.
We start with the fundamental concept that the decree of divorce completely divested Lynn of any right of ownership in or control over the policy.
United Benefit Life Ins.
Co.
v. Price,
46 Wn.2d 587, 283 P.2d 119 (1955). Specifically, he lost and Jo Ann acquired the contractual right to maintain the policy in force upon payment of the periodic premiums. Nevertheless, he was burdened with a continuing decretal obligation to pay the periodically recurring premiums on that policy as long as the owner deemed it necessary to maintain the policy in force. Thus, to a limited extent, Lynn entered the marriage in 1972 as an “encumbered spouse.”
See
H. Cross,
The Community Property Law in Washington,
49 Wash. L. Rev. 729, 830
et seq.
(1974).
In support of her contention that she may pursue her community interest into whatever insurance asset was purchased with it, Beverly directs our attention to a long series of insurance cases, beginning with
Occidental Life Ins. Co. v. Powers,
192 Wash. 475, 74 P.2d 27, 114 A.L.R. 531 (1937) and extending through
Chase v. Chase,
74 Wn.2d 253, 444 P.2d 145 (1968) and
Livingston v. Shelton,
85 Wn.2d 615, 537 P.2d 774 (1975), which restrict the husband, as a manager of the community estate, from depriving his wife of a right to an accumulating and proportionate interest in life insurance policies by paying premiums thereon with community assets.
Typical language used in reiterating the
Occidental Life
rule is contained in
Small v. Bartyzel,
27 Wn.2d 176, 180, 177 P.2d 391 (1947):
After a second marriage, Mr. Small earned the sums of money which were used to pay the premiums on the insurance policy. That money belonged to the community consisting of himself and Katherine G. Small. It follows that the insurance paid for by community funds was the property of the community, and that Mrs. Small was entitled to recover that property as an asset of her deceased husband’s estate.
Taken out of context, statements similar to the
Small
quotation can lead to an erroneous conclusion. Those pronouncements serve as guides toward answering the ques
tion: “What did the premium payer
purchase
with each payment?” In the case at bench, Lynn did not
purchase
anything; he fulfilled an obligation which he was compelled to fulfill by reason of the divorce decree. The insurer could not compel him to maintain the policy in force by continuing the premium payments, but Jo Ann could compel the continued premium payments by her insistence that the policy remain in force.
The community funds were most certainly converted into an increasingly valuable asset, but they were
compelled
payments, not
voluntary
payments. Insofar as Lynn may have paid premiums from
his
earnings after marriage, Beverly had no traceable interest, because the funds were used to pay an antenuptial debt which her husband brought into the marriage. RCW 26.16.200/ Insofar as Lynn paid premiums from community funds not ordinarily reachable by an antenuptial creditor through compulsory process, there is an arguable question whether Beverly could raise the traceable issue. For purposes of this opinion we will assume that the premiums were paid from community funds which Jo Ann could not ordinarily reach through compulsory process,
i.e.,
Beverly’s “earnings and accumulations.”
We are impressed with the synthesized rule of law sug
gested by Professor Cross in 49 Wash. L. Rev. 729, at 763 (1974):
A workable rule, then, is that an asset acquired through a transaction
requiring
the payment of installments over a period of time has the ownership character of the initial obligation and the “time of acquisition” is when the initial obligation is incurred, regardless of when title actually passed. By ascertaining the character of ownership on the basis of the character of the initial obligation, this rule would put the risk of subsequent fluctuation in value on the original obligor (s) who, presumably, contemplated that risk. In contrast, an asset preserved by or having its source in periodic payments which cannot be compelled (directly or indirectly) by the payee is owned in separate and community proportions according to the character of the funds used to make the “voluntary” payments.
■ Applying that rule to the factual situation presented herein, it is apparent that the “initial obligation”
requiring
payment was incurred upon entry of the decree of divorce, long before Lynn and Beverly were married. Hence, the
Occidental
“apportionment” rule does not apply, and the policy .maintains its status as Jo Ann’s separate property despite the fact that recent premium payments were made with community funds.
Judgment affirmed.
Pearson and Reed, JJ., concur.