Planters' State Bank v. Willingham's Assignee

Opinion of the court by

JUDGE O’REAR

Reversing.

George M. Willingham was indebted to the Henderson Trust Company (which subsequently became merged in and assumed the name of appellee, Ohio Valley Banking- & Trust Company), in the sum of $6,140.82. He then held three policies of life insurance, payable to himself or his estate, for $2,000 each, on all of which he had made several annual payments. To secure the $'6,140.82 above named, he executed to his creditors this assignment: “Whereas, I, Geo. 21. Willingham, of Henderson county, Kentucky, am justly indebted to the Henderson Trust Co., either as principal, indorser, assignor, or guarantor, in the aggregate sum of about sixty-one hundred and forty dobars *67and eighty-two cents, a list or schedule of which indebtedness typewritten and indorsed by me, with my name1 for identification, is attached herein-and made a part hereof: Now, as collateral security for the payment of said indebtedness, 1 hereby assign, transfer, and deliver to said Henderson Trust Co. the following policies of insurance upon my life, namely: Policy No. 129790, issued by the Mutual Benefit Life Insurance Company, dated • May 24, 1886, for the sum of $2,000.00, payable to myself, my executors, administrators, or assigns: and also policy No. 135798, issued by the Mutual Benefit life Insurance Co., dated May 4, 1887, for the sum of $2,000.00, and payable to myself, my executors, administrators, or assigns; and also policy No. 193391, issued by the Hartford Life & Annuity Insurance Co., May 6, 1895, for the sum of $2,000.00, and payable to my legal representatives. A separate assignment of this date is made upon each policy, and said policies are delivered to, and left in the possession of, said; Henderson Trust Co. This assignment and agreement is in no wise whatever to affect my liability upon any of the paper evidencing said indebtedness, nor the Henderson Trust Co.’s right to take any steps for the collection' of said indebtedness, or any part thereof. The said policies are to be held by said Henderson Trust Co. as collateral for the final payment of the whole of said indebtedness, including any note or other obligation that may be given in renewal thereof, or of any part thereof. But six per cent, interest only is to be computed in estimating the-amount for which said policies are held a>s collateral. I am to keep the premium paid on all of said policies, and my failing to do so is to be regarded as my abandonment of them, in which case the Henderson Trust Co. may at its option, elect either to pay such premiums, or to surrender *68said policies and receive their cash value, and apply the same to said indebtedness. But in no event is said Trust Co. to retain of the proceeds of said policies more than the amount then due on said indebtedness to it, including six per cent, interest. Any balance of said proceeds is to be paid to my representatives. If said indebtedness is otherwise paid while said p'olicies are in force, they are to be returned to me. Any sum the said Trust Co. may pay out for premiums in said policies, or1 any of them, is to be added to said indebtedness, with 6 peri cent, interest thereon. Witness my signature this May 8, 1897. [Signed] G. M. Willingham. Witness: Malcolm Yeaman.” This assignment was executed May 3, 1897. On June 2d, thereafter, Willingham made a general deed of assignment to the same trust company for the benefit of 'all his creditors, he being insolvent and unable to pay all his indebtedness in full. In the suit by the assignee to settle the trust estate, certain creditors of Willingham, who are appellants here, entered a motion to require the assignee to account for the value of the insurance policies named above; it being, averred that the assignment of the policies to it on May 3, 1897, was while the debtor was insolvent, and made by him in contemplation of his insolvency, and with the design to prefer the trust company. It was sought by this proceeding to bring the proceeds of these insurance policies into the assigned estate for the benefit of all creditors under the deed of June 2d. Appellee trust company-responded to the rule, averring that it was the creditor of the assignee as stated, and that it had, since the assignment of the policies to it, in order to keep two of them alive, paid the1 premiums thereon, amounting to $180.55; that the policies were payable only at the death of the assured, who was alive; and that on July 27, 1897, it had *69“compromised with the Mutual Benefit Life Ins'iurance Company, and surrendered to it the two first named' pol- ' icies upon the payment to respondent of the sum of $942.50.” The response was held sufficient and the rule discharged, the judgment decreeing' that appellee was not required to account to the other creditors for any part of the $942.50 named. From that judgment the creditors prosecute this appeal.

The two policies each provided for a surrender value in paid-up insurance after two full annual premiums had been paid, and the insured then failed to pay further' premiums. But there was no provision for a cash surrender value. However, after these policies were issued the insurance company issued general circulars, applicable to them as of a class, containing the following: “Nonforfeiture 'Provisions Indorsed on Policies. When, after two full annual premiums shall have been paid on this policy, it shall cease or become void solely by the non-payment of any premium when due, its entire net reserve by the American Experience Mortality, and ' interest at four per cent, yearly (provided there be no loan on the policy), shall be applied by the company as' a single premium, at the company’s rates published and in force at this date, either — First, to the purchase of nonparticipating term insurance for the full amount insured by this policy; or,- second, upon the written application by the owner of this policy, and the surrender thereof to the company at Newark within three months from such nonpayment of premium, to the purchase of a nonparticipating paid-up policy, payable at the time this policy would be payable if continued in force. Both kinds of insurance aforesaid will be subject to the same conditions, except as to payment of premiums, as those of this policy. Third, if preferred, the company will, on surrender of the policy, *70fully receipted, within the said three months, pay, as a cash surrender value, its entire net reserve' by the American Experience Mortality, and interest at four and one-half per cent, yearly, less a surrender charge equal to one per cent, of the sum’ insured by the policy. If there be any loan on the policy, such indebtedness! shall be paid off out of the cash surrender value, and the remainder paid in cash by the company, or a value win be allowed by the company in the form of extended or paid-up insurance as above provided; the amount to be applied to the purchase of such insurance being correspondingly reduced in the ratio of the indebtedness to the full cash surrender value.” It is earnestly argued for the appellee that, when the policies in question were assigned to it, their value was inchoate, indefinable, and problematical; that the insured could not have compelled their surrender, and payment of any cash value in return; and that therefore they were not that class of property thait would pass under a deed of assignment generally for the benefit of creditors. Appellant further argues that the policies were not subject to attachment or subjection by action, because the insurance company then owed insured nothing, and, unless certain conditions were complied with by him thereafter,, such as future and prompt annual payments of premiums, and perhaps certain disposition of his person in matters of employment and travel, it would never owe him anything on the policies. We are not now called upon to decide the questions raised by that argument, because here the insurer and the insured have reduced their contract to a liquidated state, free from the nice complications suggested by brief of appellee. The insured, by the written assignment given his favored creditor on May 3d, gave it the right to surrender the policies and take cash *71therefor. He thereby exercised the privilege now claimed for him as a personal one. When Willingham transfered the policy to appellee, it had “an appreciable value” in money, for he had the right to demand at least a “paid-up policy” for a given proportion of each of the two policies. Such a policy would have been the equivalent of the insurer’s bond to pay a sum definite at a time certain or upon .the happening of an inevitable contingency. It can not be said that such an obligation is without specific money value. It may be stated generally that any tangible, definable interest in property having a value, and not exempt by law, is subject to the owner’s debts,. A contract between the debtor and an insurance company whereby •the former procures for himself a policy of the investment species, which will result in the accumulation for ■himself either a sum certain to be paid in the future, or a provision for an annuity to be paid beginning at a period in future, creates such an interest as that, when it has come to have an ascertainable or tangible value, it will be liable for his. debts. Otherwise, it were possible for debtors so disposed to lay by, out of the means surely subject to their creditor’s demands, a fund or an annuity insuring their opulence despite their unpaid obligations. The case of Barbour’s Adm’r v. Larue’s Assignee 21 Ky. L. R., 94 (51 S. W., 5), while discussing various phases of life insurance policies, decided only that, when enough payments had not been made upon the insurance to give the policy a pecuniary or withdrawal value, it had no such appreciable value that it would pass by a deed of assignment to creditors. This we followed in the Morehead Case, 109 Ky., 51 (20 R., 580) (58 S. W., 173). The transfer of this asset, thirty days before general assignment, to secure antecedent debts owing appellee, was manifestly in contem*72plation of the assignor's insolvency, and with the design to prefer that creditor; and under our statute the; title to this asset passed under the general deed subsequently made to the trustee for the benefit of all creditors. (Section 84, Ky. St.) Of course, the payments of premiums made by appellee, together with interest, should be first repaid to it out of the fund realized out of the policies, and then appellee’s debts should share equally with other creditors in the pro rata distribution of the fund. The judgment below is reversed, and the cause remanded for proceedings consistent with this opinion.