13 Colo. App. 15 | Colo. Ct. App. | 1899
This is an action brought by a creditor of a deceased insolvent, for the purpose of subjecting to the payment of the latter’s debts the funds realized from life and accident
The complaint charges that while insolvent, the said Platt carried upon his life and obtained life and accident insurance in favor of the defendant as follows, to wit: A policy of life insurance for $25,000 in the New York Life Insurance Company of New York, dated January 9, 1890, No. 344,968, with an annual premium of $1,540, payable annually. Another policy of life insurance for $15,000 in the New York Life Insurance Company of New York, dated June 29, 1893, No-. 548,481, with a semi-annual premium of $391.20, payable semi-annually. Another policy of life insurance for $20,000 in the Massachusetts Benefit Association of Boston, Mass., dated, to wit,............., 1890, with an annual premium of $400, payable annually. Another policy of life insurance for $10,000 in the Provident Savings Life Assurance Society of New York, dated, to wit, A. D. 1887, with an annual premium of $275, payable annually. A policy of accident insurance for $10,000 in the Travelers Insurance Company of Hartford, Conn., dated, to wit, November 17,1893, with an annual premium of $50.00, payable annually. Another policy of accident insurance for $10,000 in the Fidelity and Casualty Company of New York, dated, to wit, A. D. 1890, with an annual premium of $42.00, payable annually. Another policy of accident insurance for $5,000 in the Preferred Accident Insurance Company of New York, dated, to wit, about A. D. .1887, with an annual premium of $12.00 per annum, payable annually. Another policy of accident insurance for $5,000 of the United States Mutual Accident Association of New York, dated about A. D. 1887, with an annual premium of $15.00 per annum, payable annually. Another policy of accident insurance for $10,000 of the Standard Accident Insurance Company of Michigan, dated about December, 1892, with an annual premium of $42.00, payable annually. That all of said insurance has been paid- to
The answer of the defendant denied, inter alia, that any insurance was effected or any premiums paid during the insolvency of the assured, and alleged that at all the times of such payments he was wholly solvent. The answer further alleges that at the time of his death the deceased was indebted to defendant in a large sum of money, which she had loaned to him about the time of their marriage in 1884, long prior to the contracting of this indebtedness and to any charge of insolvency, and that to insure her against the loss of said money, and 'also for her support and the support of their children, the deceased had agreed to keep his life fully insured in her behalf.
It appeared upon the trial that the policy of insurance for $10,000 in the Provident Savings Life Assurance Society of New York was not in favor of the defendant, but that the beneficiary therein was one Sarah A. Keeney, who was a creditor of the decedent, and who had collected the insurance due upon the policy, and after deducting therefrom the amount of the debt owing to her, had paid the balance to the defendant as executrix, and that the same had been accounted for to the estate of the decedent. This balance, amounting to something over $6,000, was credited by the defendant to the
The questions presented for determination are those of first impression in this jurisdiction, and it is scarcely necessary to say, are also of first importance. Impressed with this fact, the court has given to them the most thorough consideration, examination and study, in which work we have been most materially aided by the able, thorough and exhaustive arguments of counsel on both sides.
In the examination of the question as to hcrw far, in the absence of statute, the fund realized from insurance upon the life of an insolvent' debtor can be made chargeable with his debts, we are not aided by a very large number of authorities upon the direct proposition. There are, however, a number of well considered cases in which the question in its varying phases as presented has been considered and determined. The absence of a great ■ number of cases bearing upon the question may be accounted for by the fact that in the great majority of states the question is expressly regulated by statute. In this state, however, there is no statute except in regard to insurance on the assessment plan. As to the fund realized from this character of insurance only it is provided
By the authorities which have adjudicated the question independent of statute, we find three distinct propositions announced. First, that in the absence of actual fraud, the fund derived from insurance upon his own life by an insolvent debtor in favor of his wife or child or children, dependent upon him, cannot be reached by his creditors, and made subject to the payment of his debts, except possibly in certain contingencies which we will hereafter discuss, the amount of the premiums paid by the insolvent debtor during insolvency. In support of this doctrine either in whole or in part are: Bank v. Hume, 128 U. S. 195; Appeal of Elliott’s Executors, 50 Pa. 75; Bank v. U. S. Life Ins. Co. et al., 24 Fed. Rep. 770; Bank v. Hume, 3 Mackey, 360; Anderson’s Estate, 85 Pa. St. 202; Pence, Admr., v. Makepeace, 65 Ind. 345; Pinneo v. Goodspeed, 120 Ill. 536; State ex rel. Wright v. Tomlinson, 45 N. E. Rep. (Ind. App.) 1120; Holmes v. Gil-man, 138 N. Y. 369; Stigler v. Stigler, 77 Va. 77; 2 Bigelow, Frauds, p. 129. To this effect in principle are also, Forrester v. Gill, 11 Colo. App. 410, and McLean v. Hess et al., 106 Ind. 555.
Another doctrine supported by some authority is that the procurement of such insurance by an insolvent is a voluntary conveyance or gift which is void as to existing creditors, though no fraud may have been intended, and that the whole of the insurance would be subject to the debts of the assured. The principal authorities in support of this doctrine to which we have been cited seem to be Fearn v. Ward, 80 Ala. 555, Transportation Co. v. Borland, 53 N. J. Eq. 282, and Stokes v. Goffey, 8 Bush, 533. Another line of authorities hold that in such cases the amount of the premiums paid by the insolvent and that alone of the proceeds can be reached by his creditors. We think that the weight of authority is in favor of the doctrine announced by the first line of authorities, and that it is better sustained upon reason and upon principle.
Again, the fund, which is the property against which the creditors seek to enforce their claims, has not come into existence, has not become property till after the death of the debtor. How then can it be said that he made a voluntary or fraudulent conveyance of that which did not exist during his life ? If a creditor’s rights would attach to any portion of the proceeds of the insurance, would it not be more reasonable to say that in such case, the right of recovery would be limited to the amount of funds so diverted, which in this instance would be the aggregate amount of premiums paid by the insolvent debtor ? This would be what he gave to or voluntarily expended for the benefit of his wife. The fund realized by her was not from the payment of the premiums only, but from and by reason of, in addition thereto, her insurable interest in his life, which he neither gave nor conveyed to her, and in which he had no interest. In this state, a married woman has a right to acquire, hold, manage and convey her own separate property, free from any claim of her husband or of his creditors. ■ Suppose that an insolvent husband should give to his wife $1,000, and that such a gift was under such circumstances as to make it manifestly fraudulent against his creditors, and suppose that his wife by prudent management of the money and by successful speculation should in course of time acquire property of the value of $5,000. Could it be successfully contended that the husband’s creditors could enforce their claims against this property to the full extent of its value ? Obviously not. Certainly, in the absence of actual fraud upon the part of the wife, their right would be limited to the amount of the original money gift with interest. This was what he gave in fraud of the creditors, — this is what he took from them. It became none the less her absolute property because she might afterwards
In Bank v. Hume, 128 U. S. supra, Chief Justice Fuller, speaking for a unanimous court, said, inter alia, “ Mr. Hume having been insolvent at the time the insurance was effected, and having paid the premiums himself, it is argued that these policies were within the provisions of 18 Elizabeth, chapter 5, and inure to the benefit of his creditors as equivalent to transfers of property with intent to hinder, delay and defraud. The object of the statute of Elizabeth was to prevent debtors from dealing with their property in any way to the prejudice of their creditors, but dealing with that which creditors, irrespective of such dealing, could not have touched, is within neither the letter nor the spirit of the statute. In the view of the law, credit is extended in reliance upon the ability of the debtor to pay, and in confidence that his possessions will not be diminished to the prejudice of those who trust him. This reliance is disappointed, and this confidence abused, if he divests himself of his property by giving it away after he had obtained credit. And where a person has taken out poli
“ The rule stands upon precisely*the same grounds as any other disposition of his property by the debtor; the defect of the disposition is that it removes the property of the debtor out of the reach of the creditors. Cornish v. Clark, L. R. 14 Eq. 184.
“ But the rule applies only to that which the debtor could have made available for the payment of his debts. For instance, the exercise of a general power of appointment might be fraudulent and void under the statute, but not the exercise of a limited or exclusive power, because, in the latter case, the debtor never had any interest in the property himself which could have been available to a creditor, or by which he could have obtained credit. May on Fraudulent Conveyances, 33.
“ It is true that creditors can obtain relief in respect to a fraudulent conveyance where the grantor cannot, but that relief only restores the subjection of the debtor’s property to the payment of his indebtedness as it existed prior to the conveyance. '* * * It is, indeed, the general rule that the policy and the money to become due under it apply the moment it is issued to the person or persons named in it as the beneficiary or beneficiaries, and that there is no power in the person procuring the insurance by any act of his, by deed or by will, to transfer to any other person the interest of the person named, * * * Conceding, then, in the case in hand, that Hume paid the premiums out of his own money when insolvent, yet as Mrs. Hume and the children survived him, and the con
Prior to its appeal to the supreme court of the United States, the same case was heard in the supreme court of the District of Columbia. That court in its opinion said: “ But Mrs. Hume (the beneficiary) did not derive anything by assignment, nothing by transfer. What she claims under this policynever belonged to the estate of her husband, never formed an asset or a basis of credit. The proceeds of the policies stand entirely in a different relation to his estate from a contract directly with himself. He never had any control of them; he never could assign or transfer them. The decisions point uniformly to the conclusion that the moment a policy of insurance is effected for the benefit of a wife upon the life of her husband, it becomes her property eo nomine, and nobody has control of it but herself. She may assign it unless there is some public policy against it, and it is just as much a vested right in the married woman as any other portion of her separate estate. * * * What right have the creditors to what never belonged to the estate? What right have they to a vested right in the married woman for her protection and that of her family ? What right have they to a species of property that never existed until after the death of her
In Elliott's Appeal, supra, the question before the court was upon the disposition of the proceeds of a policy originally issued in the name of the husband and payable to himself or his personal representatives, and while insolvent transferred by him to trustees for his wife’s benefit. The court held that this policy was properly a part of his estate, and that its transfer while insolvent was void as against creditors, but say, “ We are to be understood in thus deciding this ease that we do not mean to extend it to policies effected without fraud, directly and on their face for the benefit of the wife and payable to her. Such policies are not fraudulent as to the creditors, and are not touched’ by this decision.”
In McCutcheon's Appeal, 99 Pa. St. 187, the court reaffirmed the doctrine announced in Elliott's Appeal, which we have quoted above. This case, it is true, was based largely upon the construction of a statute of the state with reference to the exemption of the proceeds of insurance, but the court held that independent of statute, in case the wife was the beneficiary named in the policy of insurance on the life of her husband, there was no conflict between the statute and the letter or spirit of the statute of Elizabeth. The court said, “ There is no anomaly in this, nor any conflict with the letter or spirit of the statute of Elizabeth, because in such cases the policy would be at no time the property of the assured, and hence no question of fraud in its transfer could arise as to his creditors.”
In Pence v. Makepeace et al., supra, the court said, “ If, however, it were conceded — which we do not concede — that a creditor of the assured might in any case institute and main
In support of the doctrine contrary to that held by this most respectable array of authorities, the two leading eases to which we are cited are Transportation Co. v. Borland, supra, and Fearn v. Ward, supra. It would extend this opinion to an unwarrantable length and would serve no useful purpose to discuss in detail these opinions. For the reasons which we have ourselves given, and for those advanced by the courts which we have followed, we thin.lt that the doctrine laid down in Bank v. Hume, and like cases, is more in accordance with law, reason and justice, and neither the statutes nor judicial precedents in this state being in conflict with it, we prefer to follow it. We will only say that in reference to the New Jersey case, Transportation Co. v. Borland, supra, as the base of the argument is laid down the proposition that there can be no difference between the law applicable to the proceeds of a policy where an insolvent father pays the premiums upon a policy of insurance issued upon his life and payable to his child, and that of the proceeds of a policy originally issued in his own name, but assigned during insolvency to the child. This doctrine, as we have seen, is contrary to the vast preponderance of authority. In this case, too, the opinion was rendered upon a demurrer to the com
In Alabama, at the time when Fearn v. Ward was determined, there was a statute which provided in effect that insurance on the life of a husband in favor of his wife should be exempt from claims of creditors to the extent only of the amount that an annual premium of 1500 would purchase. Under this statute it had been held that if this limit was-exceeded the statute intervened and devoted the excess of insurance to the payment of the assured’s debts, on the ground that the statute fixed a limit beyond which the husband could not go in paying premiums from his own funds, which should be appropriated to his creditors. In Fearn v. Ward it was held that this judicial interpretation of the statute could be maintained only on the principle that without the statutory intervention and exemption the whole of the insurance would be subject to the payment of the debts of the husband. This would seem to have been considered by the court as a cogent reason in support of its conclusion.
We have also been cited to Stokes & Son v. Coffey, 8 Bush (Ky.), 583, as maintaining a doctrine contrary to that in Bank v. Hume. As to what was determined by the court in this case, we leave to the court itself as stated by it in a subsequent opinion, Thompson v. Cundiff., 11 Bush, 570. In its opinion in this case, the court says: “ The right of a husband to make provision for his wife, even though he. be insolvent and in debt, was left an open question by this court in the cases of Doyle v. Sleeper, 1 Dana, 532, and Stokes & Son v. Coffey, 8 Bush, 533.”
We think it clear that the plaintiff in the case before us has no legal right to enforce a claim to the payment of its debt against the proceeds arising from any of the insurance upon the life of the deceased debtor, Col. Platt, unless it be to the
There was no evidence tending to show or to raise any legal presumption of Col. Platt’s insolvency prior to 1893, and hence our inquiry will be confined to the disposition of the premiums paid during the years 1893 and 1894. As to those paid during the previous years, this plaintiff can have no claim whatever. There was no evidence tending to show any fraudulent intent on the part of either Col. Platt or Mrs. Platt, in the payment of the premiums under consideration. Nor was the evidence sufficient to have supported a finding, considering the extensive business operations and large means of the assured, that these payments either caused his insolvency or that of his estate, if it occurred, or had any material or appreciable effect in bringing it about. Under these circumstances, the facts were not shown upon winch the law would raise a presumption of fraudulent intent, rendering necessary an inquiry into their motives. We might with great confidence then say, in the absence of proof of fraudulent intent, that the amount of these premiums could not be reached by the creditors, because the case would come within the rule announced in Bank v. Hume, supra. Whilst this is the result of our conclusion, we prefer, however, to base our decision upon broader and if possible more indisputable grounds. It clearly appears from the evidence that at the time of the death of the assured, he was and had been for a number of years previous, prior to 1893, indebted to his wife, the defendant herein and the beneficiary in all of these policies of insurance, in a large sum of money. The chief dispute between the parties is as to the amount of this indebtedness. We do not propose to go into the merits of this controversy, because as will be seen from the view which we take of it, the precise amount is not material. We think it shown beyond a doubt that it was at least equal to about $30,000, a sum far more than sufficient to have paid all of the premiums during these two disputed years; in fact, more than to have
But, say counsel, admitting that she was preferred as a creditor, she would equitably be entitled only to so much of the insurance fund as would discharge her debt and interest thereon, and the balance realized from the insurance should be accounted for by her to the estate of the decedent, and become charged with the payment of his other debts. Without entering into discussion as to whether this is in all cases the true rule for the disposition of insurance proceeds where the life of á debtor has been insured for the benefit of a creditor, we say that the rule is not applicable to the facts of this case, nor, indeed, as broadly stated, to the facts of any case where the creditor was also the wife, or a member of the assured's family, whom he was legally and morally bound to support. In such case, it will be assumed, unless there be some evidence to the contrary, that the insurance was carried for the double purpose of paying the debt and also to provide a fund for the support of the beneficiary. An ordinary creditor is enabled to insure his debtor’s life by virtue of his debt only. It might then with much reason be claimed that his insurable interest is limited to the amount of the debt and a reasonable amount added for the expenses of procuring and carrying the insurance. It could be urged with great force that to hold otherwise would in effect make the contract of insurance a wagering contract. This reason does not prevail, however, where the creditor is also the wife of the assured or a dependent member of his family. The insurable interest of such a person is not limited to any fixed amount. Insurance in such case may be procured to any amount to which
It is insisted, however, by plaintiff that the amount of insurance carried by the deceased in favor of defendant was so large as to be unreasonable and to raise a presumption of fraud, whether viewed in the aspect of insurance carried for the benefit of a creditor, or of his wife and family, or of both and that it would be inequitable for her to retain all of the proceeds. We do not think so. The policies on which were realized three fourths of the whole amount received by defendant were taken out, and the title thereto had become vested in her, long prior to any pretense of Col. Platt’s insolvency, and prior to any indebtedness by him to this plaintiff, and as to these it does not concern plaintiff whether the amount was large or small. If it had been three times as large as it was, we cannot see upon what principle a creditor, especially a subsequent creditor, could complain. Neither in the view which we take of this case will it avail plaintiff to make inquiry into the reasonableness of the amount of insurance secured by premiums paid by the assured during the two years
Even if we consider the whole amount realized, it is not sufficient in our opinion to raise any presumption of fraudulent intent or constructive fraud, when we look at the facts of this case and the character of the insurance. Of the $100,000 realized $40,000 was from accident insurance. This is the simplest form of insurance, and the principles which control and apply to it are quite different from those controlling and applying to life insurance. The latter is based upon the assured’s expectancy of life, calculated upon Ms age, physical condition, etc., and matures upon the happening of an event which is certain, namely, the ultimate death of the assured. In the former class of insurance the expectancy of life is not a controlling factor, nor is the age or physical condition of the assured. Primarily, it is intended to indemnify the assured personally against loss of time, medical attendance, etc., in case of suffering accidental physical injuries, which incapacitate him from attending to his business. In this respect it may be said to be in the interest of his creditors, because if disabled from carrying on Ms business Ms earning capacity is at least lost for a time, and his expenses while so disabled must of necessity come from his estate. Such a policy fully matures only upon the happening of an event which may never take place, namely, the death from accidental causes of the assured. In fact, the presumption is that the event will not occur. The percentage of chances against it is very great; otherwise, companies could not furnish such insurance at the cheap rate they do. We are not prepared to say, therefore, that when a man in
The last contention of plaintiff is that in any event the two policies issued by the New York Life Insurance Company were fraudulent and void as to the creditors of the assured, and were to be subjected to the payment of his debts because of certain provisions in the policies. The $15,000 policy provided among its conditions that if the assured was living at the expiration of twenty years from the date of its issuance, at which date the accumulation period of the policy was to end, he should have the privilege of continuing the policy and receiving the value of the dividends in one of certain forms specified, or to exchange the policy for its entire value, it being guaranteed that this entire value should be, in ease the assured elected to receive it in a single cash payment, not less than $6,311, a sum which as will be seen is less than one half of the sum which would have been paid in case of his death at any time. The assured also had an option, at the expiration of this twenty-year period, to exchange the policy for a paid-up policy, payable after death in twenty equal installments. The $25,000 policy recited that it was issued on the distribution policy plan, the particulars of which, so far as material to notice, are that the distribution period should be completed iu twenty years, and that no dividend or surplus would be allowed or paid upon the policy unless the assured should
We are fully aware that the questions which we have decided are debatable, and for this reason we have given to them most earnest and thorough investigation. We fail to find any adjudications directly in point, but we believe that our conclusions are in accord with the principles laid down in the later cases of highest authority, with the spirit of the law, with public policy, and especially with the policy of the law in Colorado. It is true that Bank v. Hume, supra, is not an authority binding absolutely upon the courts of this state, but upon questions like these, which are not settled in this state either by statute or by prior adjudications, it is certainly very high authority, and we should hesitate before we refused to follow it, especially when, as in the present instance, the opinion was rendered by a unanimous court, and the doctrines enunciated are in accord with our own views.
For the reasons given, the judgment will be affirmed.
Affirmed.