190 N.E. 490 | NY | 1934
Did section 55-a of the Insurance Law (Cons. Laws, ch. 28), effective March 31, 1927, apply to pre-existing creditors as well as pre-existing policies? On or about November 6, 1924, Arthur L. Selig made and delivered to Morton H. Meinhard twenty-five promissory notes, each in the sum of $1,000, payable annually thereafter over a period of twenty-five years, one note becoming due on November 6 of each year, commencing in 1925, and ending 1949. The first five notes became due and were paid. On November 12, 1930, Selig died, leaving twenty notes unpaid. At the time of his death Selig was insolvent, and had been for several years prior thereto. Consequently, the plaintiffs could not look to his estate for the payment of any part of the $20,000, and interest due thereon.
Selig, however, carried insurance on his life in the aggregate principal amount of at least $155,000, represented by several policies of insurance, all of which were issued prior to March 31, 1927, when section 55-a of the Insurance Law took effect.
The maintenance of these policies required the payment of net premiums largely in excess of $500 per annum, which premiums have always been paid by Selig out of his own personal estate, with the knowledge and consent of his wife. Selig's wife was named as beneficiary in these policies, but Selig had reserved the right to change the beneficiary in all the policies at any time. Not having exercised this privilege, however, the wife received at his death the proceeds, which created the net sum of at least $105,000 over and above the loans made to Selig in his lifetime.
On April 15, 1931, Meinhard died, and the plaintiffs, as his executors, have brought this action in a representative *278
capacity on behalf of themselves and all other creditors whose claims antedate the enactment of section 55-a of the Insurance Law, to recover the amounts reserved to them by the provisions of section
First, as to the construction of the act. The Domestic Relations Law (Laws of 1909, ch. 19, § 52) reads in part as follows: "Insurance of husband's life. A married woman may, in her own name, or in the name of a third person, with his consent, as her trustee, cause the life of her husband to be insured for a definite period, or for the term of his natural life. Where a married woman survives such period or term she is entitled to receive the insurance money, payable by the terms of the policy, as her separate property, and free from any claim of a creditor or representative of her husband, except, that where the premium actually paid annually out of the husband's property exceeds five hundred dollars, that portion of the insurance money which is purchased by excess of premium above five hundred dollars, is primarily liable for the husband's debts. * * *"
In Matter of Thompson (
The reference to the rights of creditors to insurance purchased by excess premiums, as a lien, was intended to convey the idea, no doubt, that the right was one of substance, an important part of the remedy afforded creditors to collect their debts, and that, as against the wife, the right was property of which the creditors could not be divested without due process of law or impaired by State legislation; that this remedy was a material part of their contract.
The Insurance Law, above referred to, section 55-a, in effect March 31, 1927, changed this right of creditors, and the only question before us is whether it applies to pre-existing creditors like the plaintiffs. Its provisions are: "Rights of creditors and beneficiaries under policies of life insurance. If a policy of insurance, whether heretofore or hereafter issued, is effected by any person on his own life or on another life, in favor of a person other than himself, or, except in cases of transfer with intent to *280 defraud creditors, if a policy of life insurance is assigned or in any way made payable to any such person, the lawful beneficiary or assignee thereof, other than the insured or the person so effecting such insurance, or his executors or administrators, shall be entitled to its proceeds and avails against the creditors and representatives of the insured and of the person effecting the same, whether or not the right to change the beneficiary is reserved or permitted, and whether or not the policy is made payable to the person whose life is insured if the beneficiary or assignee shall predecease such person * * *."
Note must be taken of the phraseology of the section. It makes no reference to pre-existing creditors although it does apply to a policy of insurance theretofore issued. This statute may be read so as to apply to pre-existing policies without affecting pre-existing creditors. In other words, it is quite reasonable to suppose that cases would arise where policies were existing prior to March 31, 1927, although the debts were not incurred until after that date. As to such subsequent creditors this section was valid. We give this section such a meaning, rather than one of doubtful legality, in making it apply to creditors in the plaintiffs' class. This no doubt is what this court had in mind when it said in United States Mortgage Trust Co. v. Ruggles
(
This interpretation has found support in Matter of Messinger
(
Should we read this statute so as to include pre-existing creditors we might be depriving them of that lien and property which we said in Matter of Thompson (supra) *282
was theirs under section
We, therefore, hold that section 55-a of the Insurance Law does not apply to the plaintiffs or to the class which they represent — pre-existing creditors — and that their complaint was improperly dismissed.
The judgment below should, therefore, be reversed, and the motion for judgment on the pleadings denied, with costs in all courts. (See
POUND, Ch. J., LEHMAN, O'BRIEN, HUBBS and CROUCH, JJ., concur; KELLOGG, J., not sitting.
Judgment reversed, etc. *283