127 Ky. 230 | Ky. Ct. App. | 1907
Lead Opinion
Opinion of the Court by
Affirming.
R. P. Townsend on February 4, 1885, took out a policy of insurance upon his life for $10,000. It was a 10-payment life policy, by which, in consideration of the annual payment in advance by the insured, R. P. Townsend, of $619.20 to the insurer, the Connecticut Mutual Life Insurance Company of Hartford, Conn., the latter undertook to pay to the beneficiaries named in the policy, upon the death of the insured, the sum of $10,000. The agreement was to pay the sum insured “to Emma.S. Townsend (the assured), wife of the said insured, for her sole use and benefit, or to her legal representatives? thirty days after due notice and satisfactory evidence of the death of the insured while this contract is in full force and effect; * * * if the said assured die before said insured, the said sum insured above shall be paid to his children, or to the then guardian if under age; or, if there be no such children or descendants of such children then living, the said sum insured
Some time after the insurance was affected, the assured, Emma S. Townsend, died, leaving one child, who is not living, a- daughter of R. P. Townsend. Subsequently R. P. Townsend married again, and by the second marriage- had issue, one daughter, living. His second wife is yet alive. The insured paid all of the premiums due upon the policy, and it is now fully paid up. On June 5, 1899, the insured, being indebted to the First National Bank of Nashville,
On June 24, 1903, the insured, having become largely indebted, executed a deed of general assignment for the benefit of his creditors. Appellant is the assignee.
On January 2, 1905, appellant filed an amended petition in the action which he had brought to settle the assigned estate, seeking to have the cash surrender value of the insurance policy paid over to him for the benefit of all the creditors of the insured, upon the theory that the insured’s interest in the policy had passed to his assignee under the deed. It was alleged that the policy at that time had a cash surrender value of $6,240; that the insured had the right under its terms to surrender it and receive that sum from the insurer; that his right was a right of property, which passed under the deed of assignment; and that appellant as assignee could exercise the option or privilege given by the policy, which he attempted in this manner to do. The insurance company, the Nashville Bank, the insured, and his two children were made defendants to this ancillary
The estate of the assignor embraced by the general deed of assignment is regulated by section 75, Ky. St. 1903, which reads in part: “The deqd of assignment shall be acknowledged by the assignor in the same manner as other deeds, and shall be recorded in the county clerk’s office of the county where the assignor resides, and where the business in respect of which the same is made is carried on, and in each county where a tract of land or the greater part thereof conveyed by the deed is situated; and the deed shall vest in the assignee the title to all the estate, real and personal, with all deeds, books and papers relating thereto belonging to the assignor at the time of the making of the assignment, except the property exempt by law shall not pass unless embraced in the deed.” We think it is first necessary to determine the rights of the parties to the contract of insurance, who are (1) the insurer, (2) the insured (E. P. Townsend), and (3) the assured, the beneficiaries named or described in the policy. At the time of the suit, and of the judgment, the latter were the children of E. P. Townsend. But, should other children be born to him, or should any of his children die in his lifetime leaving children, the clause in the policy naming its beneficiaries would open up to let them in. In Hopkins v. Hopkins’ Adm’r, 92 Ky. 324,
In the case at bar, there was no reservation in the policy of the right to change the beneficiary.' The only reservation to the insured was the right to surrender the policy at the end of the first 10 years,' or at the end of any subsequent 5 years, and to receive in cash its then cash surrender value. And this right continued only for 30 days immediately following the 10 and 5 year terms mentioned. Unless, then, this right was exercised at the time,- and in the manner expressed in the policy, the interest of the named beneficiaries continued' unaffected by it. Their interest was vested, subject to be defeated only (1) if they died before the insured, or (2) if he, at the time and in the manner expressed in the policy, exercised his option to- surrender it in exchange for its then cash surrender value. It was not within the power of the insured, or within his and the insurer’s power, to alter the terms of the contract so as to affect the interests of the beneficiaries. The insured had not
In addition, the attempted exercise of the power by the -insured was not done in the manner nor at the times specified in the contract. He must have surrendered up this policy to the insurer within 30 days after the termination of the 10 and 5 year periods, respectively, to wit, within 30 days after February 4, 1895, February 4,1900, February 4, 1905. As it affected the interests of others than the insured and insurer, time was of the essence of this contract.
Furthermore, the bank, though we should hold -it had the same right to exercise the power to disappoint the beneficiaries that the insured had, has never exercised that power. In whatever view the subject is looked at, the case always comes back to this point: The right reserved to the insured to surrender the policy at stated intervals in exchange for its cash surrender value has not been exercised, and therefore the vested interest of the beneficiaries remains unaffected by it.
From what has been said it follows that, if the insured could not assign the policy, in spite of its declaration that it was not assignable, and in spite of the vested interests of its beneficiaries, so as to secure a particular debt of his own, he could not assign it for the benefit of his creditors generally so as to vest his assignee with all the rights and power under it that the insured himself had.
Certain cases in this court have involved the rights of the creditors o.f the insured in policies of life insurance, where there was an assignment for the benefit of creditors-. Planters ’ State Bank v. Willingham’s Assignee, 111 Ky. 64, 23 Ky. Law Rep. 445, 63 S. W. 12; Larue’s Assignee v. Larue’s Adm’r, 96
“Sec. 654. A policy of insurance on the life of any person expressed to be for the benefit of, or duly assigned, transferred, or made payable to any married woman, or to any person in trust for her, or for her benefit, .by whomsoever such transfer may*242 be made, shall inure to her separate use and benefit, and that of her children, indepehdently of her husband or his creditors, or any other person effecting or transferring the same or his creditors. And a married woman may, without consent of her husband, contract, pay for, take out and hold a policy of insurance upon the life or health of her husband or children, or against loss by his or her disablement by accident, and the premiums paid on such policy shall be held to have been her separate estate, and such policy shall likewise inure to her separate use and benefit and that of her children, free from any claim of her husband or others. 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.” Ky. St. 1903.
“Sec. 655. When a policy of insurance is effected by any person on his own life, or on another life in favor of some person other than himself, having an insurable interest therein, the lawful beneficiary thereof, other than himself or his legal representatives, shall be entitled to its proceeds against the creditors and representatives of the person effecting the same : 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; but the company issuing the policy shall be discharged of all liability thereon by payment of its proceeds in accordance with its terms, unless, before such payment, the company shall have written notice by, or in behalf of, some creditor, with*243 specification of the amount claimed, claiming to recover for certain premiums paid in fraud of creditors. ’ ’
There is no claim in this case that the insured diverted an unreasonable amount of his estate to life insurance for the benefit of his family. At that time he was a very rich man. His creditors then had no right to complain. The policy was fully paid up years ago, and while he was still in affluent circumstances. There is no hint that he acted in any fraudulent sense in the matter. It was therefore allowable, without prejudicing his creditor’s rights, that he take out the policy for the benefit of his family as he did. It was to insure them against mishap in fortune as well as against his own premature death. Such insurance is made exempt, by the statutes quoted, from the debts of the insured. That it was competent for the Legislature to have done so is not open to question. That such insurance, honestly effected, is not liable for the debts of the insured, has been held in Hise v. Hartford Ins. Co., 90 Ky. 101, 11 Ky. Law Rep. 924, 13 S. W. 367, 29 Am. St. Rep. 358; Thompson v. Cundiff, 11 Bush, 567; Stokes v. Coffey, 8 Bush, 583; Hopkins v. Hopkins, supra; Wirgman v. Miller, 98 Ky. 620, 33 S. W. 937, 17 Ky. Law Rep. 1174; Morehead’s Adm’r v. Mayfield, 109 Ky. 51, 58 S. W. 473, 22 Ky. Law Rep. 580. Those cases, we concede, dealt with the question of the right of one indebted to insure his life for some members of his family, and to pay for it out of his means; while here the debtor insures his own life for the benefit of members of his family, but in case they die before he does, then for the benefit of his estate in that contingency, reserving to himself also the right to. anticipate the
Holding that the option to cash the policy has not been exercised, and that' the power is not assignable,it- is nevertheless such estate as that under a general’ deed of assignment will not pass by law to the assignee for creditors. His interest is remotely contingent, and incapable of being valued. It is so woven in with other considerations, such as his conception of duty to his children, and the exercise of judgment in their behalf and in his own, that there can be no certain way of estimating the value of that interest, or of disposing of it without destroying or endangering other interests under the policy which are primary to those of the insured. The option is, baldly, to let his children have this provision for their future support, or to take it himself. Whether he should take it himself involves the exercise of judgment, discretion, and his own conception of duty. No one else has the right to exercise it for Mm, nor against the children; no one else could be actuated by the same impulse. Suppose the case were that the insured merely had reserved the power to change the beneficiary. We have time and again held, since the Hopkins Case, supra, that such a power reserved in the policy was not affected by the statutes quoted above. Could he be required to. exercise it against his children, and in favor of his creditors! Or could he have been required to so exercise it as.to give it all to one child who was indebted, so that the creditors might get it, and so as to exclude the other child! Is this case different in principle from those supposed! We think not. If a debtor has a homestead exemption, or the two horses exempt from execution, could he be compelled to sell and convert
A statute of the United States (Bankr. Act duly 1, 1898, c. 541, 30 Stat. 544 [U. S. Comp. St. 1901, p, 3418]) provides that life policies of bankrupts shall be subject to administration by the trustee for the benefit of creditors. But this proceeding is not under that statute. Nor can it elucidate the principle under consideration to note the decisions of the federal court expounding that statute, although it might be noted, in passing, that Congress seems to have deemed it necessary to expressly include such policies, or they probably would not have passed under the bankrupt proceedings.
We conclude that the life policy in this suit was not assignable so as to affect the interests of the beneficiaries provided in it, that it did not pass to the assignee under the deed of assignment for creditors, and that therefore the assignee had no right of action upon it or to recover it.
Such was the judgment of the circuit court.
It is affirmed.
Dissenting Opinion
dissenting.)
In the application for the policy, which was made a part of it, there was this: “To whom is this insurance payable in case of loss? Emma S. Townsend. Relationship to the insured? Wife. To whom is it payable in ease the endowment insurance, if the person insured survives the term, and to whom if the policy be surrendered for a cash, value as herein provided? To myself.” The fundamental error in. the opinion, it seems to me, is, that it fails to recognize that an- option to collect $6,240 is a right to that much money, and therefore property. Few" insurance policies require the insured to accept the -cash surrender value, and, if the right to accept the- cash surrender yalue is not property, then in practically no cases would' the insurance policy pass io the assignee for the benefit of creditors, and the rule so often announced by this court that insurance policies having a cash surrender value pass to the assignee under a deed of assignment amounts to nothing-. Larue’s Assignee v. Larue’s Adm’r, 96 Ky. 326, 16 Ky. Law Rep. 641, 28 S. W. 790; Barbour’s Adm'r v. Larue’s Assignee, 106 Ky. 547, 51 S. W. 5, 21 Ky. Law Rep. 94; Planters’ Bank v. Willingham’s Assignee, 111 Ky. 64, 23 Ky. Law Rep. 345, 63 S. W. 12; Morehead’s Adm’r v. Mayfield, 109 Ky. 51, 58 S. W. 473, 22 Ky. Law Rep. 580. The effect of the ruling is that, although Townsend had assigned all his property for the benefit of his creditors, he still had $6,240 beyond the reach of his creditors, which he could collect at the end of the tontine period and put in his pocket to commence business on again. The fact that the money was not due at the date of
In disposing of the authorities under the United States bankruptcy act (Act July 1, 1898, e. 541, 30 Stat. 544 [U. S. Comp. St. 1901, p. 3418]), the court says:
“A statute of the United States (the bankruptcy act) provides that life policies of bankrupts shall be subject to administration by the trustee for the benefit of creditors. But this proceeding is not under that statute. Nor can it elucidate1 the principle under consideration to note the decisions of the federal court expounding that statute, although it might be noted, in passing, that Congress seems to. have deemed it necessary to expressly include such policies, or they probably would not have passed under the bankrupt proceedings.” It is- hard to understand how the court could say this in view of the authorities*248 which were before it. The bankruptcy statute is just like our statute, in that it vests in the trustee in bankruptcy all the property of the bankrupt. There then follows certain, exceptions of things which do not pass, and to one of these exceptions is attached this proviso: “Provided, that when any bankrupt shall have any insurance policy which has a cash surrender value payable to himself, his estate or personal rep'resentatives, he may, within thirty days after the cash surrender value has been ascertained and stated to the trustee by the company issuing the same, pay or secure to the trustee the sum so ascertained and stated, and continue to hold, own and carry such policy free from the claims participating in the distribution of his estate under the bankruptcy proceedings-, otherwise the policy shall pass to the trustee as asséts.” Construing this proviso in Holden v. Stratton, 198 U. S. 213, 25 Sup. Ct. 659, 49 L. Ed. 1018, the court said: “As section 70a deals only with property which, not being exempt, pas-ses to the trustee, the mission of the proviso, was in the interest of the perpetuation of policies of life insurance to provide a rule by which, where such policies passed to the trustee because they were not exempt, if they had a surrender value their future operation could be preserved by vesting the bankrupt with the privilege of paying such surrender value, whereby the policy would be withdrawn out of the category of an asset of the estate. That is-to say, the purpose of the proviso was to confer a benefit upon the insured bankrupt by limiting the character of the interest in a nonexempt life insurance policy which should pass to the trustee, and not to cause such a policy when exempt to become an asset of the estate.” In other words, the purpose of the proviso was just the*249 opposite to that indicated by this court. It does not enlarge the rights of the trustee. It simply gives the bankrupt a right he would not otherwise have. Under it, the bankrupt estate gets what it would collect from the insurance company, and the insured at the same time preserves his insurance if he wishes to do so. Not only so, but under the old bankruptcy law, which did not contain this proviso, • where a policy had a cash surrender value, it was held to pass to the trustee. Holden v. Stratton, 198 U. S. 214, 25 Sup. Ct. 656, 49 L. Ed. 1018; In re Newland, 6 Ben. 342, Fed. Cas. No. 10,170; In re McKinney (D. C.) 15 Fed. 535. The United States courts also hold, under the present act, that policies pass to the trustee which have a real value, although they have no cash surrender value and are not' within the provisions of section 70a. In re Slinglutf (D. C.) 106 Fed. 154; In re Mertens (D. C.) 131 Fed. 972; Could v. N. Y. Life Ins. Co. (D. C.) 132 Fed. 927; In re Coleman, 136 Fed. 818, 69 C. C. A. 496; Van Kirk v. Vermont Slate Co. (D. C.) 140 Fed. 38. These courts further hold uniformly that an option to accept a cash surrender value is property and passes to the trustee in bankruptcy. In re Diack (D. C.) 100 Fed. 770; In re Boardman (D. C.) 103 Fed. 783; In re Holden, 113 Fed. 141, 51 C. C. A. 97; In re Mertens, 142 Fed. 445, 73 C. C. A. 561; Clark v. Equitable Life Assurance Society (C. C.) 143 Fed. 175; Hiscock v. Mertens, 205 U. S. 202, 27 Sup. Ct. 488, 51 L. Ed. 771. That this policy would pass to the trustee in bankruptcy under the rulings of the United States courts must be admitted. The ruling of this court can have only the effect to compel creditors to preserve their rights in bankruptcy courts, and what good will come from this is hard to see. The rules for the adminis*250 tration of an insolvent estate should he the same in both courts, so that confusion may be avoided.
The court quotes at length sections 654 and 655, Ky. St. 1903. These sections, so far as they pertain to.this case, are copied from the act of 1870. The facts as to that act are these: In Stokes v. Coffey, 8 Bush, 533, this court held that if an insolvent debto r insured his life for the benefit of his wife, so as to make an unreasonable provision for her, it was fraudulent as to antecedent creditors. To protect insurance of this character for the benefit of the wife, the Legislature passed the act referred to. Thompson v. Cundiff, 11 Bush, 567. The act applies to insurance for the benefit of the wife and children. It does not apply to insurance which the husband takes out for his own benefit. If the policy in question had not contained the provision that, in case the insured survived the term, the cash surrender value should be paid to him, the act would apply; but, so far as it is a contract to pay money to him, it is not within the language or the purpose of the statute. It has been supposed that our laws are so framed that human ingenuity could devise no plan by which a. man might hold property free from the claims of his creditors. The statute was not intended to contravene this principle, and there is nothing in the subsequent decisions justifying such a construction. The interest of the children in the policy in contest is not absolute. It is not an insurance for their benefit, for the insured may yet exercise his right to accept the. cash surrender value when he needs the money.
The case of Bottom v. Fultz, 124 Ky. 302, 98 S. W. 1037, 30 Ky. Law Rep. 479, has no application. The right of the husband to renounce the wife’s will is a purely personal privilege conferred on him by the
Every chose in action is assignable. Anything that is assignable may be pledged for debt. The tontine feature of the policy did not change its legal character. This was simply for the convenience of the insurance company. The clause in the policy forbidding its assignment was also solely for the company’s protection. If it was not affected, no one else could complain. The bank had a lien on the policy for its debt, and the right to surrender it pursuant to the policy and accept the cash surrender value. If it did not do so, Townsend could do so and receive himself the surplus over and above the bank debt. This right which he had to receive about $4,000 passed by his assignment for the benefit of his creditors. The policy had been fully paid up for years before the assignment was made. The fund was simply so much laid up by the insured for a rainy day. When he needed the money, he could surrender the policy and collect the cash surrender value. It is a novel idea that a man may have insurance which he may collect and use if he remains solvent, but that if he becomes insolvent his creditors cannot reach it. On the contrary, as settled by this court in
For these reasons, I dissent from the opinion of the court.