Central National Bank v. Hume

Mr. Justice Mac Arthur

delivered the opinion of the .court.

In the case of the Central National Bank of Washington against Hume, with which case three others are consolidated, the court has instructed me to announce its decision.

The suits are against four different insurance companies, and the object is to subject the proceeds of the policies to the payment of creditors and to include them among the assets of the deceased intestate.

• There are two or three preliminary questions which were discussed at some length during the hearing, and which can be disposed of without much observation. One relates to the parties. The Central National Bank, it appears, was the owner of three notes, perhaps four, and it is said all of these notes have been secured, and all of them have been paid but one, and that is secured by endorsement, and that, therefore, the Central National Bank cannot maintain a pure creditor’s bill where it holds security for its indebtedness. It was also argued that an administrator is estopped from attacking the transactions of his intestate as fraudulent.

Another point which was argued in this connection, relates to the consolidation of the suits, and a motion was made to rescind the order consolidating them, because the defendant alleges that. he is injured by that order, and that it was passed without his consent, and in his absence. The court have come to the conclusion, without discussing those points, to decide them all against the defendant and in favor of the plaintiffs.

The policies involved in this suit were issued by the Life Insurance Company of Virginia, on the 23d of April, 1812, for $10,000; by the Maryland Life Insurance Company, on February 17, 1881, for $10,000; by the Connecticut Mutual Life Insurance Company, June 9, 1881, for $10,000, and by the Hartford Life Annuity Company for $5,000. Two-of these instruments were made in the name of Mrs. Hume, and all were made for her benefit and payable to her.

The ground upon which the complainant proceeds is that Mr. Hume, at the time these policies were effected, was insolvent; that the premiums were paid out of his means, and that they, therefore, insured to the benefit of the creditors,' and came under the provision of 13th Elizabeth, which is the law of this District.

It is argued that a policy of insurance is a chose in action, and when issued to the husband belongs to his estate; and that it makes no difference as to creditors whether it is taken in his own name or that of his wife so long as he paid the premiums thereon. Numerous cases are cited to show that it is assignable and transferable like any other piece of property, and if transferred when insolvent, for the purpose of hindering, defrauding or delaying his creditors, it was subject precisely to the same course as any other property which he might have transferred for the same purpose.

The broad assertion that a policy of insurance upon which,/' premiums have been paid is a chose in action, is to be taken j with a good deal of limitation. Judges and courts haveil spoken of them commonly and generally as choses in action like bonds and promissory notes, going to his administrator j and assignable in the market during his life time. This is j scarcely so in an unlimited- sense. A promissory note represents an existing indebtedness. A bond does the same. A policy of insurance does not and cannot until the death of the assured party takes place.

The Supreme Court of the United States have recently decided that a policy of insurance cannot be assigned to any one not having an insurable interest in the life of the assured. The Supreme Court of the State of New York have decided that a policy of insurance effected for the benefit of the wife, is not assignable at all, holding under their statute that allows a husband to insure his life for the benefit of his wife and children free and clear from the claims of his creditors, that it would he against public policy to allow a wife to traffic in that which was consecrated to the benefit of the family.

Many of the States, indeed.most, all of them, have enacted laws by which a husband can assure his life for the benefit of his family free and clear from all liability to his creditors ; and I have no doubt that upon a proper construction of these statutes, the States where they have been passed will ultimately arrive at the same conclusion reached by the Court of Appeals of the State of New York. And the tendency of the decision in the Supreme Court of the United States, judging from the one to which I have just referred, is in that same direction.

So that we see a policy of insurance has many disabilities that do not belong to choses in action generally, and that it is the tendency of legislation, as well as of judicial construction, to invest it more and more with those attributes that will give it the eflect it was intended to subserve, to wit, the protection a.nd settlement of families.

I have stated that the policies here were effected for the benefit of the wife, and two of them made directly in her own name. What is the effect upon a policy of that description growing out of the fact that the husband at the time he undertakes to make the provision is in embarrassed circumstances ? That is the main question before us.

As I have stated, many cases have been referred to which establish the doctrine, that when the husband effects the policy in his own name, it goes to the benefit of his creditors, and it is sought to apply that principle to this case. But Mrs. Hume did not derive anything by assignment, nothing by transfer. What she claims under this policy never 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 are to the uniform conclusion that the moment á 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 h.as 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.

Can the fact that her husband paid the premiums deprive her of this vested right without any act on her part to forfeit it?

It is not pretended that Mrs. Hume was aware of her husband’s insolvency, or that he intended to hinder and delay' his creditors. She stands in the position of a perfectly innocent person, unaffected by anything corrupting the contract of insurance.

■ There is a decision in Kentucky, that of Stokes & Son vs. Kobbe, 8 Bush, 534, where three policies of insurance were effected in the name of a married woman. With regard to one of them, the court came to the conclusion that it was an assignment in point of fact, although in her name, and gave the proceeds to the creditors of the husband who was insolvent.

With regard to another, they allowed the wife to take the money because it did not clearly appear that the husband was insolvent when he paid tlm premiums. But with regard to the smallest of the three, the court held that inasmuch as the husband had taken it out and paid the premiums himself, it stood the same as if it had been taken out in his own name, and they allowed the creditors to assert their claim to the proceeds of the policy.

But the effect of that decision is entirely neutralized by the fact that the same court, four years afterwards, in the case of Thompson vs. Cundiff, 11 Bush, 569, declared exactly the opposite doctriné. That was where an insolvent husband took out two policies of insurance in the name of his wife, and the court held that, in the absence of fraud on the part of both the husband and the wife, the interest in the policies vested in the wife as her sole and separate property, notwithstanding the fact that her husband was insolvent at-the time he effected them, and, to use their own words, they doubtingly gave the creditors the benefit of the premiums which he had paid during the period of his insolvency, together with interest thereon, which amount they charged on the widow. , , .

It is a curious fact that wherever it has been claimed that an insolvent debtor can do nothing for the protection of his family, the State legislatures have stepped in .immediately and enacted laws to the effect that a policy can be effected for the benefit of a married woman free and clear of any claim of her husband’s creditors. In some of the States, the amount"of the premiums is left at large, but in others they, have put limitations on the premiums, beyond which an insol rent husband cannot insure his life ■ for his family. In Kentucky when the supreme court announced this obnoxious doctrine, they passed a law of that description, and that law was passed during the interval between the two-cases which I have just alluded to; and the fact that the law is referred to by the court in the last case,’who say that they do not mean to determine that a policy void as to creditors at the time it was effected, is protected at all by the State l.aw, and so they proceed to decide the case upon principles applicable at common law, and hold the doctrine which I have last announced.

So far as Kentucky is concerned we have her last voice, and probably it will be the last as her legislation has ended all dispute on that subject.

At an early day the Supreme Court of Pennsylvania had-this same point before them in Elliott’s Appeal, 50 Penn., p. 15. There a husband had effected a policy in his own name, and assigned it to his wife when he was insolvent, and the court held that the assignment was void and the-creditors had the benefit of the policies. In closing that opinion, however, the court made a distinction, and they say;

“We are to be understood, in thus deciding this case, 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 creditors, and are not touched by this decision.”

The legislature in Pennsylvania, seeing that there might be uncertainty on this question, interposed within two years and'passed one of the acts to which I have just referred, and they declare that a policy taken in the name and for the benefit of a married woman is free and clear from all claims of all creditors of her husband.

Two cases in Pennsylvania follow that in which that statute was recognized, but in'which they give effect to. the obiter in Elliott’s Appeal, and in speaking of it they adopt it as a true exposition of the doctrines laid down so far as the policies for the benefit of the wife are concerned.

In the case of Pentz, administrator, against Makepeace, 65 Indiana, 3 ¡ 5, the first clause of the syllabus reads:

“An insurance policy issued upon the life of a husband for the benefit of his wife, is her property, and an effectual assignment and delivery thereof to another during the lifetime of the husband, can be made only by her.”

And in the opinion they hold the following language:

“ If, however, it were conceded (which we do not concede) that the creditors of the assured might in any case institute and maintain an action for the recovery of any part of the amount of a policy of insurance procured by an insolvent' debtor upon his own life, for the benefit of his wife or family, upon the ground that the premiums therefor were paid with money which ought to have been applied to the payment of the debts of the assured to such creditors, and that such payment of such premiums by the assured was a fraud upon the rights of such creditors, we are clearly of the opinion that the very utmost which the creditors could possibly recover in such action would be the aggregate amount of the premiums thus paid. The creditor could not, in any event, derive a profit from, or recover on, more than the sums of money actually paid by the debtor in premiums upon a policy of insurance upon his own life payable to or for the benefit of his wife or any member of his family.”

And such appears to be tbe whole current, both judicial and legislative, on this subject. . .

We are disposed to apjfiy that doctrine to this case. A considerable number of authorities were read upon the argument as to the sacredness of the claims of creditors, and as to the injustice of depriving them of the benefit of the property of their debtors, and such observations were undoubtedly justified by the cases in which they were pronounced. In' fact, we are all very familiar with the general strength of language in which the relation is discussed which exists between the creditor and the debtor. Many other relations, however, are equally important; the relations which a man hears to his wife and to his family, for instance. We do not, I am very sorry to say, generally find the courts so emphatic in regard to the latter species of relations as to the former. Perhaps that results from the fact that courts are more generally engaged in adjudicating pecuniary rights than those of a social character. But the rights which result from the family relations are certainly quite, equal to those which result from debtor and creditor. You might blot out every law and extinguish every right for the collection of debts, and the community would scarcely feel the shock. But if you abrogated the law of marriage and its relations, you would not only rupture the moral, but also the physical organization of society. Where, therefore, the two claims come in conflict, the courts should adjudicate between them with justice and fairness to both.

When a man has made provision for his wife, the law recognizes that he has performed a social and moral duty. The state has a deep interest in having families of healthy children properly educated and settled in life, as well as to have creditors paid what is due, and whatever will promote that object should receive its due share of attention.

These remarks are made more especially because we can distinguish here between the rights of the creditors and the rights of the family, and do justice to both of them. What right have the creditors to what never belonged to the estate? What right have they to a vested right in a 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 the husband? We • presume that no creditor of Thomas L. Hume would dare to stand up and make the statement that he had been' misled by these policies, or that he had extended credit to him on their strength.

So that it strikes the court very forcibly, that where we can protect a settlement on a family, by giving back to the creditors all that has been taken from them, we are doing justice and equity to all, and the creditors have a right to demand no more. •

• There , are some considerations which lead to and justify this conclusion. It appears that Mrs.. Hume, at the time she became the wife of Mr. Hume, was the daughter of a man of considerable means, Mr. Pickrell, owning an estate near the city; that she is an only child, and that after the marriage Mr. Hume and his family lived mostly at that estate, scot free, unless he contributed from his grocery establishment something to his support. In fact the whole family lived there as if he had been born into it. Mr. Pickrell, and .ofter his death, Mrs. Pickrell and Mrs. Hume, placed in him the most unreserved confidence. Mr. Pickrell endorsed for him, and, after his death, Mr. Hume became his administrator; whatever he collected out of the estate for the benefit of Mrs. Pickrell, went into his business.

• I know it is said that Mr. Hume was guilty of dishonesty, if not crime. But it is to be remembered that he was not a wasteful man, .that he did not dissipate his time, that he appears to have been devoted to his business,- and that if he took anything, either from the estate of Mr. Pickrell or from anybody else, it was for the benefit of that business, and he did all he could to keep up the sinking- ship:

Having- these relations with the family, and having encroached somewhat, I will not say how extensively, upon the patrimony of the wife, I think without going very far we can find a proper motive that he had in effecting these in7 surances for his wife and family, and we do not think it is the duty of a court of equity to bring a telescope to examine his mind closely for some motive that would render these transactions void or fraudulent, when there is a motive so apparent on the face of it. The law recognizes the natural love and affection of a husband for his wife and family, and any settlements he makes upon them will be upheld, without any other consideration whatever, if they are free from fraud.

It is said that these insurances provided an unreasonable amount and exhibit clearly the recklessness with which the intestate disregarded the claims of his creditors. In this connection, we are also reminded that Mrs. Hume herself is a lady of fortune ; • that she is the heir of her father and her mother ; that her mother has a life estate in the property, and that she will inherit the whole of it upon her death, and inventories have been read to show that this.estate is one of very considerable value. Mrs, Hume has not obtained the estate yet, and perhaps that is a sufficient answer. Another is, that its value is prospective, and what will be its value at the termination of the life estate is difficult to determine at present. In addition to all that, there are endorsements of Mr. Pickrell outstanding, and what may be the fate of those endorsements, it is impossible to conjecture. So that the matter is not in any way clear that Mrs; Hume will have a large estate independent of the policies. But suppose she has a moderate fortune of her own, one that would amply support'her and her family by economy, is that any business of the creditors? What right have they to any portion of her separate estate to pay her husband’s claims? The law says that they have none whatever. Considerations of that character should not weigh in the final adjudication of this case, if we give these creditors all they are entitled to.

It must be admitted that Thomas Hume at the time he effected the last three policies of insurance was hopelessly insolvent. We think that is a very doubtful fact with regard to the first policy which was taken out in 1873, and by looking over the schedules furnished by counsel, we should say that his insolvency is not established at an earlier date than 1874; and from that time onward to the point of his death, Mr. Hume was undoubtedly unable to meet the claims of his creditors, and that from that time he had no right in law to take from his means any property for the benefit of his family, as a settlement. But we can give the creditors every just right, every dollar they are entitled to, and give the widow and the children the benefit of the contract which was made for them; and we have no more right to transfer the proceeds of these policies to the creditors than we would have to take Mrs. Hume’s interest in Tunlaw for the same purpose.

The money has been paid into court. The decree must be entered decreeing the money to Mrs. Hume, and charging her with the amount of all the premiums that were paid upon the three policies from February, 1874, which is the proper time to adopt as the period when Mr. Hume’s insolvency clearly appears.