Court Opinion

ID: 7136618
Source: CourtListenerOpinion
Date Created: 2022-07-24 15:24:37.704001+00
Date Added: 2024-06-11T16:14:38.972201
License: Public Domain

(Hobson, J.,
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 *247the assignment no more exempts it from the claims of the assignee than the fact that a note or other obligation was not due would exempt it. Our statute provides that all the property of the assignor shall vest in the assignee. It does not except anything except the exempt property. Ky. St. 1903, section 75. There is no1 exception in the statute of the property held by the assignor in insurance policies. The deed of assignment in this case transferred to the assignee all of the assignor’s property, real and personal, “also all notes, stocks, bonds, choses in action, and all other property of every kind and description.” When the court refuses to adjudge the money in controversy to the assignee, it goes without saying that the assignor may collect' his $6,240 when he gets ready, and if such a right is not included by the words “choses in action and all other property of any .kind and description,” it is difficult to understand what these words would include.
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 *248which 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 *249opposite 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*250tration 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 *251statute to protect him from injustice by the will of the wife. It is not property which the creditors can subject to their debts. To so hold would be to defeat the purpose of the statute. This doctrine is not applicable to rights created by contract which are property. When the husband does not within the year allowed him renounce the will of the wife, the rights of the devises become absolute. Here the insured may in future, when he wishes to, turn in the policy and accept the cash surrender value. The rights of the children under the policy are not absolute as long as he lives.
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 *252a long line of decisions, the law is that a man cannot have property which is beyond the reach of his creditors, and that he cannot, by providing in the deed or settlement that his rights shall not be assignable, tie the hands of creditors. There is no reason that money payable by an insurance company should stand differently from money payable under other engagements or settlements.
For these reasons, I dissent from the opinion of the court.
Lassing and Barker, JJ., concur in this dissent.