Anderson v. Northern Dakota Trust Co. , 67 N.D. 458 ( 1937 )

I concur in what is said in the majority opinion concerning the matters upon which reversal is predicated, but I am unable to agree with the construction which my associates place upon chapter 149 of the Session Laws of 1929.

Section 8719 of the Compiled Laws of North Dakota for 1913, as construed by the decisions of this court cited in the majority opinion, provided that the avails of a life insurance policy payable to the personal representatives of a deceased, his heirs, or estate, passed to the heirs at law of the insured by contract and not by descent, and that such avails did not become a part of the estate of the deceased. That section provided that such avails "shall not be subject to the debts of the decedent except by special contract, but shall be inventoried and distributed to the heirs or the heirs at law of such decedent." In 1927 the legislature amended and re-enacted the above section (chapter 255 of the Session Laws of North Dakota for 1927) so as to provide that such avails "shall not be subject to the debts of the decedent, except by special contract, but such avails shall be inventoried as part of the estate of the deceased and shall be distributed without deduction, and pass to the heirs at law orlegatees of the deceased, in due course of administration, inaccordance with the laws of succession or will, as the case maybe. . . ." Chapter 149 of the Session Laws of 1929 is broader in its scope of applicability than the 1927 act, in that it applies to additional classes of policies, but both acts contain the language above quoted and involve the same question of disposition of avails. It is my view that the marked departure from the text of the old statute, as indicated by the above italicization, denotes a definite intention to treat such avails as a part of the estate for purposes of distribution.

The avails of the life insurance policies in this case constitute a fund which came into existence upon the death of the insured and as a result of a contract between the insured and the insurer. It was not a part of the assets of the insured during his lifetime. Prior to his death his creditors acquired no interest in this fund. A statute which excludes creditors of the insured from participating in such fund after the death of the insured is not an exemption statute within the contemplation of § 208 of the North Dakota Constitution, the purpose of which is to secure the "right of the debtor to enjoy the comforts and necessaries of life." Under the decisions of this court construing § 8719 of the Compiled Laws of 1913, the right of the legislature to provide that such avails pass to the heirs by contract, to the exclusion of the creditors, has already been recognized. There can be no question but that the legislature might make such avails a part of the general assets of the estate. I think that it is also within the power of the legislature to make such avails a part of the estate for purposes of distribution, but withhold from creditors the right to subject them to the debts of the decedent, and that the exercise of such legislative power does not contravene § 208 of the State Constitution providing for exemption for debtors, or § 111 vesting in the county court exclusive original jurisdiction in probate and testamentary matters. Cass County v. Nixon, 35 N.D. 601, 161 N.W. 204, L.R.A. 1917C, 897; Farmers State Bank v. Smith, 36 N.D. 225, 162 N.W. 302.

The practical difference between my view and that of the majority of the court may be summed up in a few words. According to the majority opinion, the avails pass into the hands of the executor and are listed by him in the inventory. They do not become part of the estate, but are paid out to the heirs unless the intention to dispose of such avails by will appears therein in clear and unmistakable terms. This construction of the law gives rise to but leaves unsettled the important questions as to whether the avails in the hands of the executor are protected by his official bond, and to whom they would be distributed in event there were no heirs. Under my view of the statute the avails go into the hands of the executor, are listed in the inventory, and for purposes of distribution become a part of the estate protected by the bond and subject to the determination of the county court as to the respective rights of the heirs and legatees. They are not subject to the debts of the deceased or costs of administration, but must be accounted for and distributed as assets of the estate "and pass to the heirs at law or legatees of the deceased, in due course of administration, in accordance with the laws of succession or will as the case may be."