156 S.W.2d 90 | Ky. Ct. App. | 1941
Reversing.
The appeal is by the widow and a daughter of the late J.T. Parks from a judgment for the benefit of his creditors of an amount equal to the sum total of premiums paid in cash or by the use of cash surrender values of policies of insurance on his life. The amount, with simple interest from the dates of payment, is about $9,000. The judgment covers premiums paid during ten years next preceding the filing of an amended petition of the executors seeking such recovery in a suit to settle the decedent's estate. The sole contention of the appellants is that the judgment should have covered only five *352 years. It is rested upon the proposition that the right to recover is the converse of "a liability created by statute" and within Section 2515, Kentucky Statutes, which stipulates five years as the period of limitations for such an action where no other time is fixed by the statute creating the liability. The appellees contend the cause of action did not arise until the death of their testator; also that the action is for relief for fraud and within the terms of Section 2519, Kentucky Statutes, providing that no action for fraud can be maintained after the lapse of five years front the date of its discovery and in no event after the lapse of ten years from the perpetration of the fraud. The chancellor found the creditors had not discovered, actually or constructively, that their debtor was carrying insurance in which his wife and child were beneficiaries until his death.
Section 654 of the Statutes declares that a life insurance policy for the benefit of or payable to a married woman "shall inure to her separate use and benefit, and that of her children, independently of her husband or his creditors." However, this provision is added:
"But if the premium on any policy in this section mentioned is paid by any person with intent to defraud his creditors, an amount equal to the premium so paid, with interest thereon, shall inure to the benefit of said creditors, subject, however, to the statute of limitations."
Section 655 has the same provision of exemption of proceeds when the policy is in favor of some person other than himself who has an insurable interest in his life subject to this condition:
"Provided, That, subject to the statute of limitations, the amount of any premiums for said insurance paid in fraud of creditors, with interest thereon, shall inure to their benefit from the proceeds of the policy."
There are similar statutes in many of the states. Some of them, as in Massachusetts, New Jersey and Illinois are practically identical with the Kentucky statute. 2 Couch on Insurance, Section 330, et seq. The first enactment of this kind seems to have been in Massachusetts in 1844. Bailey v. Wood,
The genesis of our current Statutes is an act entitled "An Act for the incorporation and regulation of life insurance companies," approved March 12, 1870. Acts of 1869-70, page 61. See Conn v. White,
The appellees submit that their cause of action accrued not when the premiums were paid but when the proceeds of the insurance became payable at the death of the insured, since there could not have been any recovery until then, and that the judgment may be affirmed upon this ground. At first impression it would seem the point is well made. But both analysis and authority compel a different ruling. The word "inure" in this connection is a prospective word, having the meaning of "to be or become operative; to serve to the use or benefit." Webster's New International Dictionary. *355
Significance must be given the specific condition that the right is subject to the statute of limitations. If nothing had been said the appropriate statute would have automatically applied to a cause of action arising when the proceeds were payable. It is an unusual declaration. The specification of the right being subject to the statute of limitations used in connection with the word "inure," we apprehend, was intended to have limitations begin as of the date of the payment of the premium. As stated in Smith's Adm'x v. Milton,
"True it is that the rights of creditors to recover the premiums does not arise until the death of the assured, but it does not follow as a legal sequence that the statute of limitations does not begin to run until the cause of action accrued, when by the very act which defines the right it is provided that upon the inchoate obligation of the beneficiary to account for the premiums, galvanized by the act into a legal duty, the statute is to operate. * * * The evident scheme of the Legislature was, and I entertain the notion that the restrictive terms in the proviso of the act were intended, to place a limit upon the amount the beneficiary was to pay for the exemption or immunity afforded her by the statute, gradually scaled down by the bar, and not in limitation of the right of action which was already assured her by the statute for the limitation of actions."
The payment of the premium gives rise to a cause of action, though recovery thereof is postponed until the benefit is available from the proceeds. Hence, limitation runs from the date of payment of each premium.
The question is, what statute of limitations is referred to? Do these provisos which permit recovery of *356
premiums create a liability and consequent right of action, or do they but declare and limit a right that existed at common law or under general equity principles applicable to the relief for fraud? If the former, five years is the limitation; if the latter, ten. The answer, of course, is to be found by ascertaining what the pre-existing law was and how the difference is to be regarded. We have not hitherto been called upon for a decision as to what statute of limitations applies, and the two foreign opinions in which the question seems to have been considered are not of much help. In Cole v. Marple,
Looking to the common law construed and applied in Kentucky before the enactment of the predecessor of the current statute (Section 654 and 655) it will be found the same principle or criterion of liability was applied, namely, fraud was imputed where a man, hopelessly insolvent, made a most unreasonable provision for his wife and wholly disregarded the claims of his creditors. But the measurement of recovery was radically different. In Stokes Sons v. Coffey,
There are other considerations supporting the concept of a new right and liability. We conceive conditions which would authorize creditors immediately upon payment to proceed to recover premiums paid an insurance company because such payment constituted a fraudulent conveyance. This statute protects the insurance company and the beneficiary of the policy by forbidding that and postponing collection until the proceeds are payable. Without it there would be no protection. Furthermore, as stated in Doyle v. Sleeper,
We have recognized that the liabilities and rights in such a case as this are not controlled by other statutes, namely, by either Sections 1906 and 1907, relating to fraudulent conveyances generally, or by Section 2128, requiring transfers of personal property between husband *358
and wife to be acknowledged and recorded in order to be valid against third persons. Smith's Adm'x v. Milton,
Finally, the plaintiffs do not rest their case upon the common law but expressly plead a right to recover under and by virtue of Section 654 of the Statutes.
We construe the provisions of Sections 654 and 655 of the Statutes which give a right of action for the recovery of premiums paid with an intent to defraud creditors as being within the terms of Section 2515 prescribing five years as the period of limitations for "an action upon a liability created by statute, when no other time is fixed by the statute creating the liability."
Wherefore the judgment is reversed.
Whole Court sitting.