148 N.Y.S. 200 | N.Y. Sup. Ct. | 1914
The plaintiff, claiming to be the owner of two policies of life insurance issued by the Northwestern Mutual Life Insur
In the year 1893 the husband was at work in a store in Rochester, and, a child having been born to them, he signed an application for life insurance in the name of his wife, upon which application policy No. 274,703 was issued by the defendant insurance company on January 21, 1893. This policy was what is called a semi-tontine policy, and by its terms, in consideration of the statements contained in the application and the quarterly payment of $7.60, said insurance company agreed to pay to plaintiff, as beneficiary, wife of Harry B. Grems, the insured, the sum of $1,000 in 60 days after due proof of the fact and cause of his death, provided, however, that if _said beneficiary should not survive the insured then such payment should be made to the personal representatives of said insured. The tontine dividend period fixed by the policy was 20 years, and it further provided that upon completion of the tontine dividend period the said assured should, without the consent of the beneficiary, have the option to withdraw in cash the accumulated. surplus, leaving the policy participating and full-paid for its face, or, if insured was in good health, to apply said surplus to the purchase of a nonforfeitable participating paid-up addition to the face of the policy, or, without proof of good health, to apply said surplus to ¡purchase an annuity, or to surrender the policy and receive therefor in cash its entire share of assets.
Later on and in the year 1898 the parties moved .to Watertown, and, having had another child born, after further talk upon the subject, the husband in his own name signed another application for insurance in the same company, upon which policy No. 407,265 was issued. This policy provided that, in consideration of the payment of an annual premium of $66.34 during the period of 20 years, said insurance company promised to pay to the plaintiff beneficiary, wife of Harry B. Grems, the insured, subject to right of the insured to change beneficiary as therein stated, the sum of $2,000 in 60 days after due proof of the fact and cause of his death, provided, however, if no beneficiary should survive the said insured, then such payment should be. made to his personal representatives. Said policy further provided that the insured might change the beneficiary at any time by filing a written request therefor duly acknowledged and accompanied by the said policy.
Said policies were delivered by the company to Grems, who took them home and handed them to his wife, stating that they were her property, and that she should hold and keep them as a matter of protection. The wife put them in her trunk or bureau drawer, and kept them there until- about the year 1908, when, Grems having rented a safe deposit box where he kept his valuable papers, these policies were put in said box for safe-keeping, and there remained down to the time this controversy arose. Following the execution of said policies the premiums thereon were paid by both Grems and his wife; such pay
About June 1, 1913, Grems filed a petition in bankruptcy, and thereafter the defendant, G. Le Roy Traver, was appointed his trustee in bankruptcy. The bankrupt caused to be made out and verified schedules in bankruptcy in which the policies in question were listed as securities. Later on, however, he filed with the trustee a claim of exemption as to said policies, which claim was disallowed by the trustee. Thereafter a controversy arose over the possession of said policies. The trustee claimed that they belonged to the bankrupt, and that he was entitled to them as such trustee, and threatened to surrender them to the Insurance Company and receive their present value as assets of the bankrupt estate. The plaintiff thereupon brought this action to restrain such disposition and for a decree adjudging her to be the owner of the same. The important question in the case, therefore, is, Who was the beneficial owner of the policies? for, if owned by the husband, they would go to the trustee as part of the assigned estate, otherwise, to the wife to be held for her future protection.
To remedy this condition and set the question at rest the Legislature enacted chapter 80, Laws of 1840, the first section of which act reads as follows:
“It shall be lawful for any married woman, by herself, and in her name, or in the name of any third person, with his assent, as her trustee, to cause to be insured, for her sole use, the life of her husband for any definite period, or for the term of his natural life; and in case of her surviving her husband, the sum or net amount of the insurance becoming due and payable, by the terms of the insurance, shall be payable to her, to and for her own use, free from the claims of the representatives of her husband, or of any of his creditors ; but such exemption shall not apply where the amount of premium annually paid shall exceed three hundred dollars.”
This statute of 1840 was thereafter amended from time to time in unimportant particulars so far' as the questions here involved are concerned, save that the amount of exemption was increased to $500 and made dependent upon premiums paid out of the property of the husband. Thus the statute continued until 1896, when it was substantially re-enacted in section 52 of the Domestic Relations Law (Consol. Laws, c. 14).
It is further said that the controlling consideration is the intention of the Legislature, which is to be ascertained from the cause or necessity which led to the enactment of the statute. A strict and literal interpretation is not always to be adhered to, and where the case is brought within the intention of the lawmakers it is within the statute, although by a technical interpretation it is not within its letter. People v. Lacombe, 99 N. Y. 43, 49, 1 N. E. 599; Spencer v. Myers, 150 N. Y. 269, 275, 44 N. E. 942, 34 L. R. A. 175, 55 Am. St. Rep. 675. The latter case is an instructive authority upon the judicial construction of statutes. In that case the Legislature had enacted that all policies issued “within the state of New York” upon the lives of husbands for the benefit of their wives should be assignable, and it was held that policies issued without the state were within the meaning •and intention of the statute, and were therefore included in the same.
Furthermore, as the section above referred to from the Domestic Relations Law is a substantial re-enactment of the act of 1840, the decisions under that statute'will be found most useful in its construction. It has been repeatedly held by our courts that the act of 1840 applied to policies negotiated by the husband and made payable to the wife. In other words, it is held that when it appears that the insurance was intended by the husband as a protection to the wife, the case is brought within the equity of the statute, and the rights of the parties are to be determined by its provisions.
Thus in Wilson v. Lawrence, 13 Hun, 238, 241, where a policy was taken out by the husband, payable to his wife, it was held that it was apparent that the husband designed it as a provision for the support of his wife during widowhood, and therefore it was within the equity and controlled by the act of 1840. This case was affirmed by the Court of Appeals in 76 N. Y. 585. The same doctrine was held in Dannhauser v. Wallenstein, 52 App. Div. 312, 315, 65 N. Y. Supp. 219. This casé was reversed by the Court of Appeals, but upon another point; there being no dissent as to the doctrine above enunciated.
In Smillie v. Quinn, 90 N. Y. 492, 496, the policy was taken out
Nor do I think that the recent decision of the Court of Appeals in the case of Bradshaw v. Mutual Life Ins. Co., 187 N. Y. 347, 80 N. E. 203, 10 Ann. Cas. 266, establishes any contrary doctrine. In order to understand the Bradshaw decision we must have in mind the facts there before the court and the question that was up for decision. The controversy there arose over the power of the wife to dispose of the policy by will. The act of 1840 contained no provisions whatever upon that subject, and the same was added by amendment in 1873 (chapter 821). The court, therefore, was not called upon to construe the act of 1840, but only the added amendment of 1873. The facts were that the husband had taken out a policy of insurance payable to his wife, if living, and, if not living, to their children. The husband paid all the premiums, and they never had any children. The wife died before her husband, leaving a will by which she bequeathed away all her property. After her death, upon the application of the husband, the company made the policy payable to his estate. It was held by the Court of Appeals that, the policy having been taken out by the husband and he having paid all the premiums, and the policy on its face being payable to her if she survived her husband, otherwise to her children, and there being no children to take in the event of her decease, the title of the wife was conditioned upon her surviving the husband, and therefore, when she predeceased him, all her interest in the policy was terminated, and the right to dispose of the same by will did not exist; that under such circumstances the husband could not have intended the insurance should become part of her estate, instead of his own. It was further held that the provisions of the amendatory act of 1873, authorizing a married woman to dispose of such a policy by will, only applied to insurance she had herself placed on the life of her husband. In other words, that the statute did not include cases where the husband had himself taken out the insurance and paid all the premiums, and where, as the wife had predeceased her husband, there was no longer any necessity for the protection that the insurance was intended to furnish. There is nothing whatever in the Bradshaw Case at all in conflict with the authorities above cited. On the contrary, the court conceded that it was a valid contract of insurance as long as the wife lived, and that if the husband had died during her lifetime she could have collected the amount of the policy. The policies were, therefore, within the protection of the act of 1840 and section 52 of the Domestic Relations Law. Upon the wife surviving her husband, she would be
The case here presented is entirely unlike that of co-operative insurance, to which the above rule pertains. The policy of insurance in this case is not a membership benefit, but a contract obligation. Washington Central Bank v. Hume, 128 U. S. 205, 9 Sup. Ct. 41, 32 L. Ed. 370. It was procured by the husband as a protection to his wife and family in case of his possible death, and by the terms of the statute the wife is entitled to receive the amount of insurance upon the death of her husband free from all claims of creditors. Granted that by the policy the husband has the right to change the beneficiary without consent of the wife, this means nothing more than a right upon his part to terminate the security he had provided for his wife and family. If he dies in the meantime before making such change, the wife is entitled to the amount of the policy. Sangunitto v. Goldey, 88 App. Div. 79, 84 N. Y. Supp. 989.
How, then, can it be said that the wife possesses no vested interest in the policy, when she has a right to collect the insurance money in case her husband dies? She possessed either a vested interest in the policy, or she had merely an expectancy or'inchoate right; and how can it be claimed that the mere right to terminate a contract operates to make its obligations a mere expectancy only? It is quite true that her rights may be terminated by the action of her husband; but that does not in my judgment create any expectancy, or make her interest in the policy a mere contingency. Her contract rights are vested and complete, and the power of the husband to terminate the same by a change of beneficiary is a mere conditional limitation, which, when exercised, terminates her rights, but does not make her interest in the policy any the less of a vested nature. 40 Cyc. 1643, 1663.
The counsel for the trustee in bankruptcy, however, strenuously urge that the power of the insured to change the beneficiary operates to deprive the wife of all of her interest in the policy, and they press upon my attention several decisions of the United States courts, made in bankruptcy cases, which they claim establish the above proposition. A complete analysis of these decisions would serve no useful purpose at this time. It is sufficient to say that they all proceed upon the theory that the policy gave the insured certain reserved rights that he could avail himself of without consent of the beneficiary, and therefore those rights were property interests in the bankrupt that passed to his trustee. It is only to the extent that the utilization of these rights operates to destroy the interest of the wife in the policy that the doctrine asserted has any support in the cases. Thus in the White Case, 174 Fed. 333, 98 C. C. A. 205, 26 L. R. A. (N. S.) 451, the policy reserved
It may also be said that the assertion in the White. Case that the protection afforded the wife by section 52 of the Domestic Relations Daw only extended to policies which she could dispose of by will or herself assign is not in accordance with the decisions in this state. The following cases are also to like effect: Matter of Herr (D. C.) 182 Fed. 716, 25 Am. Bankr. Rep. 142; Matter of Dolan (D. C.) 182 Fed. 949, 25 Am. Bankr. Rep. 145; Matter of O’Rear, 178 Fed. 632, 102 C. C. A. 78, 30 L. R. A. (N. S.) 990, 24 Am. Bankr. Rep. 343; Matter of Diack (D. C.) 100 Fed. 770; Matter of Boardman (D. C.) 103 Fed. 783; Matter of Becker (D. C.) 106 Fed. 54; Matter of Welling, 113 Fed. 189, 51 C. C. A. 151. See, also, Jacobs v. Strumwasser, 84 Misc. Rep. 28, 145 N. Y. Supp. 916. The converse of the rule above stated is also held, and that is, unless the policy is payable to the insured, or it has a surrender value payable by the terms of the policy to him alone, he has no interest that passes to the trustee. Matter of Buelow (D. C.) 98 Fed. 87; Matter of McDonnell (D. C.) 101 Fed. 239. A policy that does not assure to the bankrupt some actual value as an asset does not pass to the trustee. Gould v. N. Y. Life Ins. Co. (D. C.) 132 Fed. 927; Clark v. Equit. Life Ass. Co. (C. C.) 143 Fed. 175.
An examination of the‘policy in question will show that it does not contain any of the provisions essential to bring the case within the rules laid down by the United States courts. It was taken out for the especial benefit of the wife under an agreement that it should be held for her protection. It is not an endowment, but a limited payment straight life policy. There is no proof of the custom of the company as to allowing a cash surrender or paid-up value, and the only provision in the policy in relation to a cash surrender value is where, after five years’ payment or more, the company will, upon request of insured, with a full and valid surrender of the policy and of all claims thereunder, pay a cash surrender value as indicated in the table. The policy does not say that this shall be paid to or belong to the insured, or that it may be done without the consent of the beneficiary. On the contrary, it is manifest that such consent is necessary, as before the payment is made the policy and all claims thereunder must be surrendered to the company. A surrender under such circumstances by the assured without the consent of the beneficiary would be invalid and void. Whitehead v. N. Y. Life Ins. Co., 102 N. Y. 144, 6 N. E. 267 55 Am. Rep. 787; Garner v. Germania Life Ins. Co., 110 N. Y. 267, 18 N. E. 130, 1 L. R. A. 256; Schneider v. U. S. Life Ins. Co., 123 N. Y. 109, 113, 25 N. E. 321, 20 Am. St. Rep. 727.
The .most that can be claimed is that the insured had the right to terminate the wife’s insurance by making a change of beneficiaries. Assuming that he had the right to make himself a beneficiary, that
My conclusions are that no rights in the policies in question passed to the trustee in bankruptcy, and that the plaintiff possesses certain vested rights in the same which the courts will protect and enforce. The plaintiff is therefore entitled to a decree adjudging her interest in said policies as above set forth, and restraining the trustee in bankruptcy or her husband from disposing of the same or collecting the surrender value thereof, together with costs, "to be paid out of the bankrupt’s estate.
Findings may be prepared in accordance with this opinion, and, if mot agreed to, settled before me on five days’ notice.