Case Name: First Wisconsin National Bank of Milwaukee, Appellant, vs. Roehling and others, Respondents
Court: Wisconsin Supreme Court
Jurisdiction: Wisconsin
Decision Date: 1937-04-07
Citations: 224 Wis. 316
Docket Number: 
Parties: First Wisconsin National Bank of Milwaukee, Appellant, vs. Roehling and others, Respondents.
Judges: I am authorized to state that Mr. Justice Martin concurs in this dissent.
Reporter: Wisconsin Reports
Volume: 224
Pages: 316–332

Head Matter:
First Wisconsin National Bank of Milwaukee, Appellant, vs. Roehling and others, Respondents.
October 13, 1936
April 7, 1937.
For the appellant there were briefs by Corrigan, Backus, Sullivan & Backus, and oral argument by F. II. Parsons and Walter D. Corrigan, Sr., all of Milwaukee.
For the respondents there were briefs by James T. Guy, guardian ad litem for Patricia M. Roehling, Malcolm K. Whyte, executor of the estate of Herman Roehling, Lecher, Michael, Whyte & Spohn, attorneys for Louise Y. Roehling, and William E. Jones, attorney for the Northwestern Mutual Life Insurance Company, all of Milwaukee, and oral argument by Mr. Whyte.
A brief amici enrice (on motion for rehearing) was also filed by Bagley, Spohn, Ross & Stevens of Madison, attorneys for the First National Bank of Madison, and Edward J. Dempsey of Oshkosh, attorney for the First National Bank of Oshkosh.

Opinion:
The following opinion was filed November 10, 1936 :
Wickhem, J.
The insured, Herman Roehling, committed suicide on December 11, 1931. For some years prior to his death he had carried four policies of insurance issued by the defendant insurance company aggregating $70,000 in face amount. Three policies aggregating $50,000 were originally payable to Roehling's estate, but on September 29, 1931, Roehling executed a change of beneficiary substituting his wife, defendant Louise Roehling, as beneficiary, with Patricia Roehling as contingent beneficiary. These policies had always been listed in Roehling's financial statements to plaintiff bank as assets to the extent of the $8,000 cash surrender value. In such statements, however, he listed as liabilities notes payable to the Northwestern Mutual Life Insurance Company, $8,000, and referred to the policies as $70,000 face value of life insurance pledged as collateral. Thus, the statement of assets indicates that these policies were held as security for a loan which completely exhausted the cash surrender value. In these statements Roehling agreed to notify the bank promptly of any change materially reducing the pecuniary responsibility.
The facts with respect to the property of Roehling are substantially these: He had by inheritance a substantial fortune, which was invested for the most part either directly or through his company, the R-H ' Realty Company, in r.eal-estate equities. He was obligated either directly or as a guarantor on a number of mortgages on these properties. Commencing in 1930, these mortgages began to go into default, and the defaults continued until the time of his death, the estate ultimately losing nearly all of the property through foreclosure sales or voluntary conveyances to mortgagees. In other words, as was so frequently the case as the depression progressed, Roehling's equities were gradually shrinking and ultimately to all intents and purposes, disappeared. On October 8, 1931, plaintiff bank had a conference with Roehling, and among other things demanded an assignment of all his policies for their protection upon the loan here involved, his collateral having shrunk in value. Roehling declined to make this assignment, and did not notify the bank that nine days previous to this time he had changed the beneficiary under these policies from the estate to Louise Roehling and his daughter. The bank deferred action upon Roehling's engagement to secure a guarantor of the note in the person of his mother upon her return from Europe. On December 11th, Roehling committed suicide.
Plaintiff's action is based upon the contentions: (1) That Roehling was insolvent at the time of the change of beneficiary, rendering applicable sec. 242.04, Stats., which reads as follows:
"Every conveyance made and every obligation incurred by a person who is or will be thereby rendered insolvent is fraudulent as to creditors without regard to his actual intent if the conveyance is made or the obligation is incurred without a fair consideration."
(2) That the change was made with actual intent to hinder, delay, or defraud creditors and void under the terms of sec. 242.07, Stats., which reads as follows:
"Every conveyance made and every obligation incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay or defraud either present or future creditors, is fraudulent as to both present and future creditors."
(3) That the change of beneficiary in a life insurance policy, irrespective of the existence of a cash surrender value at the time of change, is a conveyance within the meaning of the Uniform Fraudulent Conveyance Act and a fraudulent conveyance if made while the insured is insolvent or with actual intent to delay, hinder, or defraud creditors.
Sec. 242.01 (2), Stats., defines conveyance as follows:
" 'Conveyance' includes every payment of money, assignment, release, transfer, lease, mortgage or pledge of tangible or intangible property, and also the creation of any lien or incumbrance."
Upon demurrer, the trial court held that a change of beneficiary was a conveyance as defined by sec. 242.01 (2), Stats., and capable of being fraudulent. Upon the trial the court found, (1) that Roehling was not insolvent at the time the change of beneficiary was made; and (2) that the change was not made with actual intent to defraud creditors. Plaintiff claims that these findings are against the great weight and clear preponderance of the evidence, and that the ruling upon demurrer is not reviewable in the absence of a motion to review.
If this appeal were to turn upon the assignments of error here made, it would fail. The evidence was in conflict as to the values properly to be assigned to the various items of property, and the evidence admittéd of the findings made by the trial court as to solvency. The sa'me comment is applicable to the finding that Roehling had no actual intent to defraud creditors. However, we do not deem it necessary or profitable to labor these points because we consider that, except as to such cash surrender value as a policy of life insurance may have at the time of a change in beneficiary, the change does not constitute a conveyance capable of being fraudulent. Such a change is not literally within the definition of conveyance contained in sec. 242.01 (2), Stats., nol-is it a conveyance as that term is generally understood in the law. It is merely the appointment of a person to take property which arises only upon the death of the insured. It does not, standing alone, involve or include an assignment of the policy itself. Whatet'er the interest affected by the change, it puts out of reach of the creditors no property that could at the time of the transfer be reached by them. Since a mere change of beneficiary is not within the letter of sec. 242.01 (2) nor within the definition of conveyance as generally held, and since only the cash surrender value of the policy is presently available to creditors or reachable by them, we consider that such a change can only be within the act if and to the extent that a cash surrender value exists and is transferred. That there is a conflict in the cases on this subject is conceded. The cases are collected, and the conflict noted, in 6 A. L. R. 1173.
Not being concluded by any authority in this state, we are free to determine the matter upon principle, and we consider that the following statement by the Michigan court in Equitable Life Assur. Society v. Hitchcock, 270 Mich. 72, 258 N. W. 214, 216, sets out the sound principle:
"Although it is true that a policy is property, it is only so in a limited sense. It is clearly distinguishable from a promissory note payable at some future date. Outside of the cash surrender value, if there be any, an insurance policy represents a mere expectancy dependent upon the performance of certain conditions and the happening of a certain contingency. We therefore believe that until the death of the insured nothing except the cash surrender value of an insurance policy, the actual value of what was transferred, is property within the meaning of the statute declaring fraudulent conveyances and assignments void, and that the proper rule is to limit creditors to a recovery of the cash surrender value of the policy at the time of the transfer."
To the same effect, see also Coulter v. Willard, 156 Va. 79, 158 S. E. 724; Davis v. Cramer, 133 Ark. 224, 202 S. W. 239.
In connection with this, it may be profitable to give some consideration to secs. 246.09 and 272.18, Stats. Sec. 246.09 provides in substance that any person, whether her husband or not, effecting insurance on his own life may cause the same to be made payable or assign the policy to a married woman, and every such policy shall be the sole separate property of such married woman, and the proceeds of such insurance shall be payable to her free from the claims of creditors of the insured. It is further provided that,—
"the amount of any premiums for said insurance paid with intent to defraud creditors, with interest thereon, shall inure to their benefit from the proceeds of the policy."
Sec. 272.18, Stats., deals with property exempt from execution. It provides in sub. (19) that,—
"if a policy of insurance, whether heretofore or hereafter issued, is effected by any person on his own life or on another life, in favor of a person other than himself, or, except in cases of transfer with intent to defraud creditors, if a policy of life insurance is assigned or in any way made payable to any such person, the lawful beneficiary or assignee thereof, . . . shall be entitled to its proceeds and avails against the creditors and representatives of the insured . . . provided, that subject to the statute of limitations, the amount of any premiums for said insurance paid with intent to defraud creditors, . . . shall inure to their benefit from the proceeds of the policy."
These sections contain identical provisions to the effect that,—
"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 a creditor, of a claim to recover for transfer made or premiums paid with intent to defraud creditors, with specifications of the amount claimed."
It is the argument of plaintiff that the portion of sec. 272.18 (19), Stats., italicized indicates a statutory purpose to make assignments and changes of beneficiary the subject of fraudulent transfers. We cannot assent to such a contention. Sec. 272.18 (19) is not definitive of fraudulent conveyance, and no inference is to be drawn from this statute that a mere change of beneficiary upon a policy having no cash surrender value is a transfer capable of being fraudulent. It is as we hold capable of being fraudulent to the extent that its cash surrender value is transferred, and under sec. 272.18 (19), if the change of beneficiary operates to put out of the reach of the creditors the cash surrender value of the policy under such circumstances as to constitute a fraudulent transfer, the section is operative only as to this transfer and its proceeds. There is no such exception in sec. 246.09, dealing with policies made payable or assigned to a married woman, although as heretofore stated, it is provided that an insurance company that pays a policy in accordance with its terms is discharged in absence of written notice of a claim to recover "for transfer made" or premiums paid with intent to defraud creditors. It might be argued with nearly equal force that the absence of such a proviso as is contained in sec. 272.18 (19) would make impossible as a fraud to^ creditors a change designating a married woman as beneficiary even though the policy had a cash surrender value. Neither contention is sound for the reason that neither statute assumes to define fraudulent conveyances.
However, sec. 246.09, Stats., does thrpw light upon the present problem. In this case Roehling had no obligation to his creditors to keep in force the policies in question. They could not complain if he ceased paying premiums and permitted the policies to lapse. Had he done so, their only claim would have been to such cash surrender value as the policies had at that time. In this case there would be no claim because the cash surrender value was entirely hypothecated. Having permitted the policy to lapse, Roehling could have taken out an equal amount of life insurance payable to his wife and child, and under sec. 246.09 she would have taken the full proceeds unless it could be established that the payments of premiums or some portion of them constituted fraudulent conveyances, in which case the creditors would be limited in their recovery to the amount of such premiums. The Uniform Fraudulent Conveyance Act evidences no intent to protect the creditors against the loss by transfer of an interest so speculative, so remote, and so completely within the power of the insured to destroy, and the fact that the statutes permit the acquisition of insurance by a husband for the benefit of his wife free and clear from the claims of his creditors is further evidence of an intent that, aside from premiums and cash surrender value, neither the taking of life insurance payable to a married woman, nor its assignment to her, nor a change of beneficiary to make the polic)^ payable to her, constitutes a fraudulent conveyance.
The contention that in the absence of a motion to review, the matter discussed is not here for decision, is unsound. While the ruling of the court upon demurrer may not be here in the absence of a motion to review, the question whether, under the facts as proven and the applicable rules of law as we find them to exist, plaintiff is entitled to recover, is necessarily present upon any appeal from a judgment. This is not affected by the fact that the trial court found for defendants upon the facts after a ruling upon the law favorable to plaintiff. Defendants may support the judgment by relying on legal principles which wholly preclude a recovery, even though their contentions in respect to them were rejected by the trial court on demurrer. Armstrong v. Gibson, 31 Wis. 61; Van De Yacht v. Holland, 217 Wis. 455, 259 N. W. 604.
By the Court. — Judgment affirmed.