Court Opinion

ID: 5760563
Source: CourtListenerOpinion
Date Created: 2022-01-12 17:13:48.548467+00
Date Added: 2024-06-11T08:41:32.535428
License: Public Domain

Rabin, J. (dissenting).
I dissent and vote to affirm the order under review insofar as appealed from, for the reasons set forth in the learned Special Term’s opinion (47 Misc 2d 77) and also on the ground set forth hereinbelow.
The policies here involved all had valid inceptions before the assured allegedly paid premiums thereon when he was insolvent or was thereby rendered insolvent. The policies constituted property purchased with the assured’s personal funds in which the defendants had acquired vested interests. Therefore, when the assured used the funds plaintiffs claim ivere theirs to pay premiums, he was not mingling plaintiffs’ funds with property of his own, but mingling it with property belonging to his wife and daughters who, so far as appears, were innocent of any wrongdoing (Cofin v. Shour, 246 App. Div. 263, 265, mod. 247 App. Div. 719). While plaintiffs were thereby deprived of so much of their property as was illegally invested in the policies, it does not necessarily follow that they are entitled to recover to the exclusion of the innocent beneficiaries of the policies. The rule to be applied is that the beneficiaries and plaintiffs are entitled to share in the proceeds of the policies in the proportion that the personal funds of the assured were used, free of the claims asserted by plaintiffs, and the moneys of which plaintiffs were fraudulently deprived each bear to the total premiums paid, limited, however, to the quantum of each plaintiff’s claim (Cofin v. Shour, supra, p. 265).
Plaintiffs could follow the full proceeds of the policies here involved only if the assured had used funds belonging to his creditors to pay the first and all succeeding premiums on the policies. In that event, plaintiffs could follow not only the amounts misappropriated but the full amount of the fund usurped “ and perhaps even * * * any excess (Holmes v. Gilman, supra, p. 385). This is upon the theory that the beneficiary had no right of property in the policies at the time the *265premiums were paid with converted funds. (Shaler v. Trowbridge, 28 N. J. Eq. 595.) The trustee in such a case does not commingle trust funds with any existing interest in the policy because the beneficiary acquired an interest only as the result of funds which were misapplied” (Coffin v. Shour, supra, pp. 264, 265).
Based on the principles just discussed, the learned Special Term properly concluded that plaintiffs could maintain no right to recovery upon their first and third causes of action, which sought judgment directing defendants to pay the amounts due to plaintiffs, as creditors, from the proceeds of the policies in suit, on the theory that the assured’s payments of premium rendered him insolvent and constituted a fraud on his creditors. He likewise properly concluded that plaintiffs could recover on their second and fourth causes of action, which sought judgment on the theory that the assured’s payments of premium constituted a misappropriation or conversion of creditors ’ funds and rendered the whole proceeds of the policies into a trust fund, only to the extent that plaintiffs can trace the misappropriated or converted moneys to premiums paid on the policies.
Ughetta, Acting P. J., Christ and Brennan, JJ., concur with Hopkins, J.; Babin, J., dissents in separate opinion.
Order of the Supreme Court, Queens County, dated July 26, 1965, reversed insofar as appealed from and defendants ’ motion to dismiss the four causes of action alleged in the amended complaint denied in toto, with one bill of $10 costs and disbursements, payable to plaintiffs jointly. The time to answer the amended complaint is extended until 20 days after entry of the order hereon.