244 F. 222 | E.D.S.C. | 1917
The bill of complaint in this case was filed on the 30th of March, 1917. All parties defendant have been duly served with process and have appeared and answered. The cause, being at issue, came on to be heard. The testimony has been taken, and counsel for all parties interested have been heard. The facts of the cáse appear to he that one S. R. Cockfield on the 5th February, 1916, took out a policy of insurance in the Volunteer State Life Insurance Company for $6,000, for which he was to pay the annual premium of $185.70. The policy was payable unto the executors, administrators, or assigns of the insured, and contained a provision that the insured might at any time while the policy was in force by written notice to the company at its home office' change the beneficiary or beneficiaries under the policy, such change to take effect only upon the indorsement of the same on the policy by the company. The first premium of $185.-70 was paid by S. R. Cockfield, and the next premium which became due on February 5, 1917, was also paid by him. From the evidence it appears that during the year 1916 S. R. Cockfield became indebted to the plaintiff, the Navassa Guano Company, herein, and also to a large number of other creditors, and was on the 5th day of February, 1917, when the second premium became due and was paid, wholly insolvent. Subsequent to the payment of the premium, a few days later only, that is to say, on the 9th day of February, 1917, S. R. Cockfield became very ill, and from that time was confined to his bed, his illness increasing in its desperate character until the 16th day of February, 1917, when lie died. Prior to his death he had executed a change of beneficiary under the policy by a written notice to the company at its home office. On flie 13th of February, 1917, three days before the death of S. R. Cockfield, the Volunteer State Life Insurance Company received from S. R. Cockfield a written notice inclosing his policy and notifying them to change the beneficiary and make the policy payable to Reamer L. Cockfield, related to him as brother. On the next clay, the 14th, the company seems to have answered him acknowledging the receipt of his notice, but requesting him to make the change upon certain printed forms of the company, which were inclosed to him for that purpose. This notice to the company of the change of beneficiary bears the date of February 9th. Whether or not it was really executed on February 9th from the testimony appears to be doubtful. If it had been executed on the 9Üi and mailed the same day, it should have been received by the company before the 13th, but at any rate the rveight of the testimony satisfies the court that whenever it was executed S. R. Cockfield had reason to believe that his disease was most likely to have but one termination — that is, deatii. The complainant now has brought this bill to subject the proceeds of this insurance policy, which the insurance con' -
“To hold that the moment a man became insolvent he became such a trustee for his creditors of his remaining assets that all dispositions of Ms funds, whether fraudulent or not, must be for their benefit, would be to upset all methods of business. It would be going too far to hold that such was the result, and that a man who once became insolvent must be presumed after that occurrence to make all his dealings and transactions simply as the agent for the creditors for whom he was trustee. The true rule in cases such as the present would be to apply the general doctrine that a man must not make donations without consideration out of his assets to the prejudice of his creditors for value at the time existing. If that be the rule, the question would be: To what extent was any donation made in the procuring of policies by payments of money, where no fraud is shown to exist, as in the case of a fraudulent transfer of property? And the logical answer to that would seem to be that the extent of the donation was the extent to which the assets .were actually diminished or lessened by the application of the funds to the purchase of the insurance whereby the donation was made. In the view the court takes of the matter, no court of any controlling authority decreeing equitable relief upon equitable principles has ever gone farther.”
That is the extent of the rule as this court understands it decided by the Supreme Court of the United States in the case of Central Bank of Washington v. Hume, 128 U. S. 195, 9 Sup. Ct. 41, 32 L. Ed. 370. There would, seem to be a distinction between the cases where the fraud which constitutes the basis for declaring a transfer null and void against creditors is only the inferential fraud arising from the transfer being a donation without consideration and the eases of actual fraud where the attempt has been made collusively, covertly, or otherwise to intentionally defraud creditors by transferring property so as to put it beyond their reach for the benefit of the debtor or his relatives. Many of the cases holding that the entire property purchased out of the debtor’s funds the transfer of which may be so annulled must be subjected to the claims of creditors are cases in which the transactions were tainted so to say by this element of intentional fraud. Equity does not regard favorably the action of unclean hands. Additional to this consideration is that of the peculiar character of the property embodied in a life insurance policy as to which the donation to be of any value must be followed by the death of the donor and the unlikelihood of any man intending a fraud which can only be made effective by his death. The true rule would seem to be that in the case of a life insurance policy transferred under the circumstances of the ,prese.nt case the only diversion of funds of which creditors have a right to
It is therefore ordered, adjudged, and decreed that the defendant the Volunteer State Life Insurance Company do within 20 days from the date of this decree pay into the registry of this court the sum of $6,000, with interest from the date of the receipt of the proofs of loss to wit, the 16th of March, 1917, as due upon the life insurance policy referred to in the bill of complaint and in answer of the said Volunteer State Life Insurance Company, and that upon such payment the said Volunteer State Life Insurance Company be relieved and discharged from any further liability or payment under tire said policy, and that upon the conclusion of this cause the said Volunteer State Life Insurance Company may apply to this court to have delivered to them duly canceled the original insurance policy filed herein as part of the testimony.
It is further ordered, adjudged, and decreed that out of the proceeds of the said policy there shall be paid the costs and expenses of these proceedings, and there shall then be deducted therefrom the sum of $185.70, with interest from the 5th day of February, 1916, and $185.-70, with interest from the 5th day of February, 1917, and the balance remaining after the said payments to be paid over to the defendant Reamer L- Cockfield.
It is further ordered, adjudged, and decreed that the said two amounts of $185.70, and interest, be paid to the defendants Ellen Nixon Cockfield and G. W. Dickson, as executors of the last will and testament of S. R. Cockfield, deceased, to be administered by them as assets of the said estate.